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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in

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Speaker 1: Business with Barry Ritholts on Bloomberg Radio.

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Speaker 2: This week on the podcast, another extra special guest Neil

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Speaker 2: Dudda with a tour to fource explanation on what a

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Speaker 2: market economist is, how it's their job to take all

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Speaker 2: of the academic and somewhat esoteric economic research and take

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Speaker 2: it from the five yard line into the end zone.

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Speaker 2: Why it's so important to put stuff into context that

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Speaker 2: investors can use or focus on, not just merely the

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Speaker 2: economic data, but what it means for different sectors of

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Speaker 2: the economy, what means for different companies. I always find

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Speaker 2: Neil fascinating to listen to. He has a really great

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Speaker 2: track record forecasting things in a way that is occasionally

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Speaker 2: out of consensus. So when he's talking about inflation in

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Speaker 2: twenty twenty one, or FED hikes in twenty twenty two,

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Speaker 2: or why we weren't going to see a recession in

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Speaker 2: that same year, it's always fascinating to see somebody whose

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Speaker 2: thought processes detailed and interesting and out of consensus, but

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Speaker 2: also right. I thought this conversation was fascinating, and I

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Speaker 2: think you will also with no further ado my conversation

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Speaker 2: with head of an economic research at Renmack Neil Datta.

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Speaker 2: So last time we were here, we talked about a

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Speaker 2: bunch of things that you got right. I know your

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Speaker 2: views have evolved. Will get to some of those, but

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Speaker 2: let's just go over your background a little bit. Bachelor's

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Speaker 2: and economics and political science from New York University. From

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Speaker 2: NYU was the original career plan to go into finance.

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Speaker 3: Uh No, I mean, you know, when you go to college,

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Speaker 3: you have no you don't know that jobs like the

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Speaker 3: one I'm in currently even exist. It's like, you mean

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Speaker 3: to tell me, I get to write about economics and

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Speaker 3: talk all day long and someone will pay me for it,

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Speaker 3: no manual labor. Yeah, And so you know I had

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Speaker 3: no idea. I mean, I knew that I had an

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Speaker 3: interest in economics, I had an interest in political science.

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Speaker 3: The original plan was actually, you know, maybe to go

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Speaker 3: to law school. But I ended up, you know, just

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Speaker 3: not doing as well as I thought I was going

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Speaker 3: to on the l SAT. So my senior year of college,

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Speaker 3: I was kind of scrambling because I didn't want to

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Speaker 3: go to school for another three years, but I wanted

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Speaker 3: to stay in the city, and I was just like,

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Speaker 3: let me just try to get into Merrill Lynch, or

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Speaker 3: it's not at Merrill Lynch. I mean I got into

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Speaker 3: Mary Lynch. But any of the bulge bracket banks in

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Speaker 3: the city, right.

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Speaker 2: All had good back in the day, they all had

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Speaker 2: good training program.

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Speaker 3: Yes, So that was that was the goals to get

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Speaker 3: into one of the analyst programs at the bult Record Bank.

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Speaker 3: So I got into to Merrow Lynch. I actually started

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Speaker 3: off there as a compensation analyst.

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Speaker 2: And meaning studying studying labor, studying salaries and things all.

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Speaker 3: Right, Yeah, I mean a lot of what the job was,

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Speaker 3: in the amount of time that I had done, it was,

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Speaker 3: I mean a lot of it is just benchmarking the

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Speaker 3: employees of the firm to the market to make sure

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Speaker 3: that you're paying people to market.

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Speaker 2: Meaning internally Lynch.

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Speaker 3: Yeah, and managing the year end bonus pools. So that

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Speaker 3: was the whole process in and of itself. But one

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Speaker 3: of the good things about working in HR is that

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Speaker 3: you kind of so I got my foot in the door.

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Speaker 3: I mean I was just happy to have something at

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Speaker 3: that point. I remember I showed my mother my offer letter.

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Speaker 3: I still have it saved from Meryl Lynch where they

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Speaker 3: were paying me fifty thousand dollars with a ten thousand

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Speaker 3: dollars signing bonus. And I showed that to my mom

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Speaker 3: and she was like, why would they be paying you

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Speaker 3: this much money? And I was like, well, oh, we'll

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Speaker 3: find out. Yeah, we'll find out what I'm going to

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Speaker 3: be doing. But the benefit of working in HR in

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Speaker 3: particular is that you kind of know where all the

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Speaker 3: jobs are and where the opening open positions are in

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Speaker 3: the firm. And there was an open position on David

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Speaker 3: Rosenberg's team at you know, at Merrill Lynch, and so

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Speaker 3: then I joined his firm, sorry, his team. That was

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Speaker 3: in early lado six or early two thousand and seven,

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Speaker 3: So you know, right when Rosie was really killing it.

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Speaker 3: I mean, you know, he was like a marketing machine.

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Speaker 3: He was like the guy like number one in II.

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Speaker 3: All these things are happening, you know, I mean, and

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Speaker 3: so it was really exciting to be on his team.

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Speaker 3: So it was really it was like it was like

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Speaker 3: a very quick education. I mean, there was a real

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Speaker 3: education being on his team during that time.

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Speaker 2: To say nothing of what happened over the next few

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Speaker 2: years eight oh nine in the Great Financial crisis was

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Speaker 2: right around the corner.

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Speaker 3: Yeah, I mean I definitely think that, you know, one

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Speaker 3: of the things that I've always has come to believe,

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Speaker 3: now they haven't been in the business for a long time,

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Speaker 3: is that as you know, like our like the financial

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Speaker 3: industry is very cyclical, right, Like everyone knows someone who's

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Speaker 3: been laid off, let go, you know, has gone through

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Speaker 3: spells of just not having a job, right. And I

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Speaker 3: do think it says something about you if you've been

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Speaker 3: able to survive these crises.

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Speaker 2: Yea, the very least. Where was Barons in your career history?

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Speaker 2: You were an analyst at the weekly Dow Jones publication.

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Speaker 3: Yes, that was that was That was more of a

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Speaker 3: When I was in college, I worked for Gene Epstein.

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Speaker 3: Oh really, yes, noted libertarian. You know, kind of gave

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Speaker 3: me my first taste of like a lot of the

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Speaker 3: tools that we use now in in sort of the

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Speaker 3: business economic space, like Haver analytics. I actually got my

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Speaker 3: first taste of that working with Gene at Barons and

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Speaker 3: you know, getting my you know, sort of first sense

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Speaker 3: of you know, trying to analyze data looking at you know,

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Speaker 3: I mean he had he had sort of a weekly

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Speaker 3: column on the economy, but a lot of the interesting

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Speaker 3: pieces that he wrote would happen on you know, days

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Speaker 3: of like the employment report or you know, summarizing the

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Speaker 3: ism data and like what it might mean for the

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Speaker 3: economy and the outlook. So it kind of gave me

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Speaker 3: my first taste of what a business economist, uh would

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Speaker 3: do on a basis.

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Speaker 2: I've noticed you used the phrase market economists, ye, business

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Speaker 2: economists all the time. How does that differ from the

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Speaker 2: traditional economists for lack of the better.

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Speaker 3: Word, Well, I don't have like formal PhD training, So

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Speaker 3: I think you know what, that to me is like

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Speaker 3: an important distinction. You know, you have business economists on

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Speaker 3: the street that have PhDs, but I don't think a

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Speaker 3: PhD is required to be a business economist. And to me,

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Speaker 3: it's like also just a way to respect the academic profession, right,

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Speaker 3: I mean you have people here that are really studying

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Speaker 3: a specific Nietzsche area their entire careers, right, I mean

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Speaker 3: you think about like behavioral economics and like financial economics.

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Speaker 3: I mean they are economists that are just looking at

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Speaker 3: that and they're doing it for decades, right, because that's

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Speaker 3: what they do.

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Speaker 2: And I think a Hyman Minsky looking at the narrow

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Speaker 2: subtopic of stability and instability and economic systems and toiling

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Speaker 2: away for decades until eventually the market hits a tipping

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Speaker 2: point and suddenly all of this research that seems like

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Speaker 2: a quiet backwater, yeah, it becomes front page news.

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Speaker 3: I mean we're like, you know, strategic trade theory. I mean,

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Speaker 3: these are these are all sorts of things that have

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Speaker 3: I think, and you could say maybe in you know,

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Speaker 3: like the academics take you basically to the five yard

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Speaker 3: five yard line, and as a business economists, your job

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Speaker 3: is to kind of run it in for a touchdown

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Speaker 3: and tell, you know, the investor community, like, why is

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Speaker 3: this important to what you're doing right now?

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Speaker 2: That's very interesting script.

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Speaker 3: So so that that's that's sort of the way I

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Speaker 3: kind of view it. I mean, obviously you lean a

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Speaker 3: lot of their work throughout your career. I mean, you know,

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Speaker 3: I mean, this had this had gotten a lot of

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Speaker 3: play earlier in the cycle. But ed Leemer wrote a

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Speaker 3: paper once called housing is the Business Cycle? Right? I mean,

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Speaker 3: and that was you.

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Speaker 2: Know, professor at Harvard or George.

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Speaker 3: I think it was in the University of California if

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Speaker 3: I'm mistaken, But at any rate, I mean, that was

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Speaker 3: a that was a piece of research that had gotten

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Speaker 3: a lot of attention over the years. You know, when

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Speaker 3: when housing was melting down back in twenty twenty two,

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Speaker 3: a lot of people were leaning on that paper again,

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Speaker 3: So it's important. I mean, so to me, it's like,

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Speaker 3: I make that distinction because a I don't have a PhD.

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Speaker 3: And I'm not doing the same thing. What I'm basically

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Speaker 3: trying to do is look at all the different sort

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Speaker 3: of pieces of economic information that come out and on

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Speaker 3: the US economy. There's always something going on, right, I mean,

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Speaker 3: in terms of data, it's some some of its marketing movements,

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Speaker 3: some of it's not, and try to kind of formulate

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Speaker 3: an economic outlook that is useful for investors. That is

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Speaker 3: not what academics tend to do, right.

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Speaker 2: Sure, for sure. So when you were at Bank America

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Speaker 2: Merrill Lynch, you were doing a weekly note you authored.

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Speaker 2: How did that help carve out your own space and

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Speaker 2: expertise and how did that ultimately lead to your job

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Speaker 2: at Renmack.

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Speaker 3: Well, So, I mean, obviously Merril was was an interesting

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Speaker 3: time because I was sort of coming up the ranks,

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Speaker 3: and you know, by two thousand and nine, Rosie had left,

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Speaker 3: and so it was sort of this weird time where

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Speaker 3: it was like a very important time in the economy

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Speaker 3: because we were just transitioning from recession to expansion. But

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Speaker 3: Merrill's economic team was kind of without a leader, right,

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Speaker 3: so we didn't really have So it was I was

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Speaker 3: able to do a lot at that time just by

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Speaker 3: default because there was no one else really doing it.

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Speaker 3: So I would I would be writing a lot for

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Speaker 3: the you know, especially for the equity market desk.

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Speaker 2: You had to be pretty young back in all.

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Speaker 3: Yeah, I was. I was very young. I might have

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Speaker 3: been like, oh god, I don't know, like not even thirty,

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Speaker 3: so at any rate. So I mean, it's one of

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Speaker 3: these things where you if if it's just you and

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Speaker 3: like a couple of other people, you don't you're doing

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Speaker 3: a lot more than you otherwise would be doing had

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Speaker 3: there been like a chief, a formal chief economist. So

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Speaker 3: I remember the summer of nine vividly because we had,

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Speaker 3: you know, like the team had gotten like a big

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Speaker 3: reputation for being very bearish because obviously because Rosie, because

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Speaker 3: of Rosie, but still bash Yeah, but bye bye by

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Speaker 3: March but bye by the time he had left and

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Speaker 3: by the second quarter of O nine, it was becoming

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Speaker 3: increasingly clear that things were kind of turning around, right,

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Speaker 3: I mean, you know, credit markets had turned. It looked like,

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Speaker 3: you know, housing wasn't getting any worse, right, Inventories had

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Speaker 3: basically been cut to the bone. They couldn't go any lower.

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Speaker 3: And and so we had written a piece basically talking

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Speaker 3: about how, you know, the recession's over like that that's it,

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Speaker 3: And that had gotten a lot of attention from our

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Speaker 3: from our sales desk. But you know that's to me, like,

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Speaker 3: you know, you talk about writing. One of the things

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Speaker 3: that I've noticed, like recently is just it's just ubiquitous, right,

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Speaker 3: Like everyone's writing, Like it's just stack. Yes, it's like

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Speaker 3: come view me on my substack. And like, you know,

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Speaker 3: there's like all this research. But to me, like what's

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Speaker 3: important in the research sales business, because that's ultimately what

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Speaker 3: I'm in, right, It's about knowing when to say something,

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Speaker 3: you know, you know, and there's just a lot of

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Speaker 3: like filler research that comes out.

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Speaker 2: I love the word filler because it's literally all it.

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Speaker 3: Is and the and and there's some important I mean,

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Speaker 3: I do think it's important for clients to kind of

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Speaker 3: see that continuity, but it doesn't have to be some

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Speaker 3: written products. So to me, one of the things I've

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Speaker 3: learned is like when you write something, make sure that

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Speaker 3: it has some depth and it serves a purpose, right,

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Speaker 3: And so.

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Speaker 2: As opposed to just cranking something out daily a weekly.

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Speaker 3: Because it's just it's like that eventually, like you know,

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Speaker 3: that turns into spam, right, I mean from the perspective

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Speaker 3: of your client. So there's there's there's many ways to

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Speaker 3: kind of touch people in terms of accounts like your

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Speaker 3: client base that are paying for your your research and

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Speaker 3: your views and your analysis and that could you know,

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Speaker 3: and some of that's written, some of that could be presentations,

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Speaker 3: some of that could be podcasts, some of that could

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Speaker 3: you know, it could be it's it's that to me

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Speaker 3: is what's important. So you know, writing in the beginning

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Speaker 3: was important. But I think one of the things I

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Speaker 3: learned very early on is that it's important to kind

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Speaker 3: of say something that has meaning. And that's not always

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Speaker 3: going to be the case, right, Like people don't need

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Speaker 3: to hear from me every day, they need to hear

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Speaker 3: for me when my views on something are working out

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Speaker 3: or not.

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Speaker 2: I like to say, nobody really cares about ism or

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Speaker 2: fill in the blank, whatever your least favorite economic data point.

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Speaker 3: Is, right, I mean, and also these days, right like,

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Speaker 3: the market reaction to it is immediate, so you can

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Speaker 3: pretty much tell right away whether the number was good

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Speaker 3: or bad or whatever else. Right, So what do I

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Speaker 3: need to read your analysis for? And so it's you know,

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Speaker 3: you kind of have to pick your spots about when

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Speaker 3: to you know, try to chime in and provide some

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Speaker 3: kind of useful context for these data points.

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Speaker 2: So there's a little bit of a void in two

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Speaker 2: thousand and nine after the head of the economics coverage

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Speaker 2: from Merrill Lynch departs and you somewhat fill that void

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Speaker 2: nine ten eleven. What leads you to join Renmack in

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Speaker 2: twenty twelve.

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Speaker 3: Well, so by the fall of nine we had Ethan

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Speaker 3: Harris Sure from from Lehman joined the you know, he

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Speaker 3: started was named the chief US Economist UH basically uh.

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Speaker 3: And and he obviously he was from a like a

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Speaker 3: like a fixed income shop, I mean, Leman was a

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Speaker 3: huge fixed incomes you know, Ethan was a fed economist,

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Speaker 3: so his passion was really more towards the fixed income markets.

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Speaker 3: And so but obviously Merrill was like a huge, like

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Speaker 3: a legacy equity shop. Yeah, and so I kind of

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Speaker 3: got a lot of my like cut my teeth with

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Speaker 3: the equity salesforce and what I tried to do. And

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Speaker 3: one of the things you do find out in in

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Speaker 3: the research business is that fixed income doesn't pay for research.

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Speaker 3: It's just it's just that's what it is, right. I mean,

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Speaker 3: you look at.

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Speaker 2: Well the margins are smaller the basically what verto Yeah, you.

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Speaker 3: Think about like the biggest names in research sales over

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Speaker 3: the last number of decades. You think about people like

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Speaker 3: Ed Hyman, Nancy Lazar, Right, you think they're writing about

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Speaker 3: like like rates. No, they're writing about like how economics

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Speaker 3: can be tied into a stock market call. And Rosie,

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Speaker 3: to his credit, was great at that. And that's kind

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Speaker 3: of what I tried to do when Ethan was running things,

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Speaker 3: because he didn't really he didn't really do that, you know,

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Speaker 3: and so he kind of let me run with it,

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Speaker 3: and he kind of gave me a lot of latitude

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Speaker 3: to kind of come up with my own ideas and

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Speaker 3: try to tell, you know, an equity salesforce like why

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Speaker 3: is this important for your clients? Like and and because

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Speaker 3: Merrill had so many equity analysts. There there was like

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Speaker 3: a like a wealth of opportunity, right, Like, so let's

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Speaker 3: say we wanted to write a piece on business investment, right, Like,

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Speaker 3: so why is that important for equities? Well, because a

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Speaker 3: lot of EPs comes from cabex. And now you can

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Speaker 3: go talk to your like you can talk to your

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Speaker 3: industrials analysts, you can talk to the machinery analysts and say, like,

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Speaker 3: you know, are you guys bullish or bearish on your names? Like,

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Speaker 3: and if you can come up with a scenario where

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Speaker 3: a macro view can tie into a specific stock sector view,

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Speaker 3: for an equity salesperson, that's a home run, right, And

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Speaker 3: so it just makes their life a lot easier. The

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Speaker 3: worst thing you could do, especially at a bulge bracket firm,

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Speaker 3: right is well, your economist is really really negative. But

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Speaker 3: like you know, this guy is telling me like by caterpillar,

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Speaker 3: like how does that work? Like and like whenever, as

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Speaker 3: a salesperson, like having to deal with that question from

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Speaker 3: a client is annoying, you know what I mean. So

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Speaker 3: whenever you can come up with ways to tie a

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Speaker 3: macroeconomic view into and this goes back to the business economics, right,

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Speaker 3: I mean tie a macro view to a market call.

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Speaker 3: That's a home run, right, No one cares what your

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Speaker 3: GDP growth view is, Like, I mean, you have all

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Speaker 3: these like you go you look at through the Wall

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Speaker 3: Street research and it's like in the back there's like

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Speaker 3: my GDP forecast. You have this big forecast table, and

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Speaker 3: that's kind of what they're talking off of, right, But

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Speaker 3: that's not really why I think people for research. People pay,

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Speaker 3: you know, the people pay for having an economics view

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Speaker 3: that can be aligned with a market's call.

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Speaker 2: So let's talk about that economic view aligned with a

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Speaker 2: couple of market calls. At least we'll look at the

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Speaker 2: twenty twenties, because oh, nine, ten to eleven seems like

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Speaker 2: it's so long ago. Let's fast forward a couple of decades.

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Speaker 2: Late in twenty twenty one. I very vividly remember most

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Speaker 2: economists were fairly sanguine about inflation. FED chair Jerome Palell

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Speaker 2: had said we're gonna let inflation run hot the previous

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Speaker 2: Jackson hole, and you made a very out of consensus call.

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Speaker 2: You had said in late twenty twenty one economists were

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Speaker 2: too sanguine about inflation that the f OMC would have

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Speaker 2: to raise rates, and you said at least four times,

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Speaker 2: and that turned out to be very precient. We started

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Speaker 2: with four seventy five bit raises before we add two

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Speaker 2: at fifty and then a sort of after thought at

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Speaker 2: twenty five. Tell us what you were looking at in

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Speaker 2: twenty twenty one that so many other economists missed.

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Speaker 3: Well, thank you for saying that. I mean, in hindsight,

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Speaker 3: I feel like I wasn't hawkish enough.

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Speaker 2: You know, you were so much more hawkish than the

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Speaker 2: more than the Yeah, I mean, hey, you know, everybody,

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Speaker 2: most people forget sticking the landing. Most people missed the pool.

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Speaker 2: You you managed to at least put give your clients

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Speaker 2: a heads up of FED tightening is about to stop.

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Speaker 3: Yeah, I mean right, I mean I caught the the swing.

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Speaker 3: I mean, I think and then you know, eventually I

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Speaker 3: kind of came around to the idea that they'd have

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Speaker 3: to do a lot more than what was priced. But

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Speaker 3: I think, yeah, I think, thank you for saying that.

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Speaker 3: I did kind of catch that. But you know, to me,

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Speaker 3: it was just like a rapidly accelerating economy. To me,

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Speaker 3: it was so basically the call. I think that the

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Speaker 3: main issue there was. It was one call that you

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Speaker 3: got right that kind of led to everything else. Right,

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Speaker 3: So basically what I saw at the time was a

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Speaker 3: V shape recovery. And so since there was a V

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Speaker 3: shape recovery, that was going to have ramifications for all

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Speaker 3: the other macro calls that people make, like whether that's

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Speaker 3: the fed rates stocks, you know. And so basically what

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Speaker 3: I what I said, was we're gonna have a V

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Speaker 3: shape recovery. You could see it in the data. They

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Speaker 3: basically turned the lights off, turned it on, and threw

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Speaker 3: a bunch of money out the problem.

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Speaker 2: Two dollars solves a lot of headaches.

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Speaker 3: Well, it's sort of you know, they they kind of

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Speaker 3: they fought the last war, right, I mean, they essentially

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Speaker 3: they they diagnosed the problem as a it was basically

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Speaker 3: a supply shock. It was a negative It was a

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Speaker 3: very large negative supply shock that they treated as a

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Speaker 3: big demand shock. And so when you have a demand

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Speaker 3: side stimulus with a you know what is basically a

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Speaker 3: supply shock, be surprised if you.

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Speaker 2: Get like inflation, trillion dollars in money coursing into the

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Speaker 2: system and everybody stuck at home. Guess what they're gonna

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Speaker 2: do with that money?

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Speaker 3: And it's it's not just uh and it wasn't just

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Speaker 3: fed pumping, right, it was. It was a fiscal stimulus,

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Speaker 3: you know. And so so I think it's and and

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Speaker 3: also just like the behavior of of of people at

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Speaker 3: the time. I mean, you know, typically in a bad

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Speaker 3: economic situation, you don't see people going out and like

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Speaker 3: get like taking out mortgage loans. But that's exactly what

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Speaker 3: was happening at the time, right. So you know, housing

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Speaker 3: is like one of these irreversible decisions, so you have

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Speaker 3: to be really confident in things in order to buy one.

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Speaker 3: And so when I started to see people like you know,

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Speaker 3: mortgage purchase apps are like basically v bottoming, like it's

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Speaker 3: just going straight up, like they're signal there. And at

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Speaker 3: the time, like everyone was thinking the bottom was going

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Speaker 3: to fall out, it was the opposite, and it was

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Speaker 3: and and I remember at the time, I mean in

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Speaker 3: April of I think in April of twenty twenty, in

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Speaker 3: the middle of April of twenty twenty, I said, we bottomed,

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Speaker 3: it's over. There was whatever whatever one two week recession

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Speaker 3: that we had, it's over. And I remember I got

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Speaker 3: so much hate. I remember at the time, like you know,

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Speaker 3: you had prominent economists telling like it's going to get

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Speaker 3: a lot worse. Like the bottom still not in but

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Speaker 3: it was just sort of It's one of these things

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Speaker 3: in business economics where it's like up is up right,

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Speaker 3: Like markets care about they don't care about whether things

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Speaker 3: are good or bad. They care about whether things are

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Speaker 3: getting better or worse. And so you know, you can

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Speaker 3: say it's not good, but hey, guess what, Like at

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Speaker 3: the margin, we had more door dash deliveries in the

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Speaker 3: third week of April than we did in the first

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Speaker 3: week of a.

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Speaker 2: Free I don't remember if it was Ned Davis or

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Speaker 2: it might have even been Ed Hyman who had said,

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Speaker 2: don't look for when the economy is great or terrible.

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Speaker 2: Look where when it goes from terrible to bad, Like

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Speaker 2: that's your first sign that you're making a bottom. Hey,

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Speaker 2: this is really not a great economic data point, but

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Speaker 2: it's so much better than it was last month. Maybe

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Speaker 2: things were turning like that approach is when it goes

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Speaker 2: from terrible to fair, you're moving in the right direct.

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Speaker 3: Yeah, and also like the I mean to me, honestly,

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Speaker 3: like looking back on it, that whole period was probably

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Speaker 3: was the easiest call I had to I made. Huh,

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Speaker 3: And it's interesting because it was kind of out of consent.

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Speaker 3: I was out of consensus at the time, but I

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Speaker 3: thought that it was so easy. I mean you had

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Speaker 3: the I mean especially like from a market's perspective, right,

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Speaker 3: I mean.

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Speaker 2: Stops was straight up after that.

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Speaker 3: Well, not only that, are like are we no longer

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Speaker 3: going to have cruise lines? Are we no longer gonna

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Speaker 3: have airlines and hotels? Like it was just so obvious, like, Okay,

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Speaker 3: these are like generational buying opportunities. You better just put

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Speaker 3: everything you have into these names and just ride it

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Speaker 3: out because anyway, I just thought. But to me, I

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Speaker 3: think what I learned there is just you know, it's

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Speaker 3: it's just important to kind of just pick a bunch

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Speaker 3: of like indicators and see like is it getting better

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Speaker 3: or worse? And it was clearly getting better, right, I

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Speaker 3: mean you can't go down after you know you've gone down.

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Speaker 3: I mean in some of these indicators, it's like you

435
00:23:18,240 --> 00:23:20,800
Speaker 3: can't just keep falling, right, And so there was stability,

436
00:23:20,840 --> 00:23:22,439
Speaker 3: and by the second week of April, I think it

437
00:23:22,480 --> 00:23:24,680
Speaker 3: was it was pretty obvious that things were turning around.

438
00:23:24,680 --> 00:23:28,040
Speaker 3: And also the nature of the policy response, like right,

439
00:23:28,080 --> 00:23:31,359
Speaker 3: it was huge, biggest GD well not only that, but

440
00:23:31,400 --> 00:23:33,159
Speaker 3: the way they were doing it right, like the phased

441
00:23:33,200 --> 00:23:35,640
Speaker 3: in approach. So like, okay, so this week, like ten

442
00:23:35,680 --> 00:23:39,120
Speaker 3: percent of the economies open, and then next week we're

443
00:23:39,119 --> 00:23:41,200
Speaker 3: gonna we're gonna take it. We're gonna expand it out

444
00:23:41,240 --> 00:23:44,199
Speaker 3: to gyms and restaurants, and then we're gonna expand it

445
00:23:44,240 --> 00:23:46,359
Speaker 3: out to department stores and things like you know, you

446
00:23:46,400 --> 00:23:48,560
Speaker 3: know what I mean. So like every week they were

447
00:23:48,640 --> 00:23:52,520
Speaker 3: kind of flipping on a bunch of on switches, right,

448
00:23:52,560 --> 00:23:57,960
Speaker 3: and so obviously that was gonna keep the economic momentum going.

449
00:23:58,280 --> 00:24:00,919
Speaker 2: So let's talk about another out of census call you

450
00:24:00,960 --> 00:24:05,439
Speaker 2: made the following year. Very few economists were calling for

451
00:24:05,520 --> 00:24:10,240
Speaker 2: no recession in twenty twenty two. Most were pretty bearish,

452
00:24:10,280 --> 00:24:12,720
Speaker 2: and of course they looked at the FED hikes that

453
00:24:12,760 --> 00:24:15,960
Speaker 2: they had missed the previous year. You were one of

454
00:24:15,960 --> 00:24:18,320
Speaker 2: the few people that were saying no recession in twenty

455
00:24:18,320 --> 00:24:21,879
Speaker 2: twenty two. Was it simply that v recovery and just

456
00:24:21,920 --> 00:24:24,440
Speaker 2: the robust momentum that was in the economy.

457
00:24:24,720 --> 00:24:26,199
Speaker 3: Well, I don't know that, I said, I mean, I

458
00:24:26,240 --> 00:24:29,040
Speaker 3: definitely understood where the recession call was coming from. I

459
00:24:29,080 --> 00:24:32,840
Speaker 3: think for me, the bigger gap with the consensus was

460
00:24:32,880 --> 00:24:37,400
Speaker 3: really going into twenty twenty three, and I said, there

461
00:24:37,400 --> 00:24:41,639
Speaker 3: wasn't going to be a recession. And I think first

462
00:24:41,760 --> 00:24:44,359
Speaker 3: it's important to understand why people were kind of latching

463
00:24:44,400 --> 00:24:47,080
Speaker 3: onto the recession call back then. It was basically because

464
00:24:47,080 --> 00:24:49,400
Speaker 3: the FED told you so, right, I mean, the FED

465
00:24:49,520 --> 00:24:54,160
Speaker 3: was basically saying, we need a recession to deal with inflation.

466
00:24:54,680 --> 00:24:56,960
Speaker 3: That's what they were saying. When power like pain will

467
00:24:57,000 --> 00:25:00,720
Speaker 3: be required, that that's what he means, right, And so.

468
00:25:00,200 --> 00:25:03,000
Speaker 2: What did Larry Summer come out and say. Summers came

469
00:25:03,040 --> 00:25:08,000
Speaker 2: out and said ten percent unemployment to fight inflation turned

470
00:25:08,000 --> 00:25:11,480
Speaker 2: out to be a little uh to nineteen seventies.

471
00:25:11,119 --> 00:25:13,960
Speaker 3: Ish, Well, well, sure, I mean it was. And what

472
00:25:14,080 --> 00:25:16,760
Speaker 3: was the other thirty percent chance of stagflation? Thirty percent

473
00:25:16,840 --> 00:25:20,240
Speaker 3: chance of this thirty I don't know whatever, But I

474
00:25:20,280 --> 00:25:22,240
Speaker 3: think part of the reason, I mean, this is part

475
00:25:22,280 --> 00:25:24,000
Speaker 3: of the way these models work, Right, if you have

476
00:25:24,040 --> 00:25:26,679
Speaker 3: a period of inflation, the model's going to assume that

477
00:25:26,680 --> 00:25:29,320
Speaker 3: you need recession in order to kind of get it

478
00:25:29,359 --> 00:25:31,320
Speaker 3: back to target. Right. So I think it's at some

479
00:25:31,520 --> 00:25:36,119
Speaker 3: level like one of the driving one of the reasons

480
00:25:36,200 --> 00:25:39,040
Speaker 3: driving the recession views on the street back in twenty

481
00:25:39,080 --> 00:25:41,760
Speaker 3: twenty two was because the FED was basically telling you

482
00:25:41,800 --> 00:25:44,000
Speaker 3: that's what they thought they needed to get inflation down. Now,

483
00:25:44,240 --> 00:25:46,600
Speaker 3: by the end of twenty twenty two, I think it

484
00:25:46,640 --> 00:25:49,160
Speaker 3: was becoming increasingly clear to me that we weren't going

485
00:25:49,160 --> 00:25:52,240
Speaker 3: to have a recession. And again I kind of put

486
00:25:52,240 --> 00:25:55,240
Speaker 3: on my business economics hat, right, Like, So, if you

487
00:25:55,280 --> 00:25:58,160
Speaker 3: go back to that period, we had the Russian invasion

488
00:25:58,200 --> 00:26:01,879
Speaker 3: of Ukraine that sent energy prices through the roof. By

489
00:26:01,920 --> 00:26:05,600
Speaker 3: the end of the year, gas prices had basically round tripped,

490
00:26:05,720 --> 00:26:07,920
Speaker 3: and the labor markets were strong. So we were going

491
00:26:07,960 --> 00:26:11,280
Speaker 3: into twenty twenty three with upward momentum and real incomes. Okay,

492
00:26:11,280 --> 00:26:15,560
Speaker 3: so that's good, that's just support consumer spending. Next, despite

493
00:26:16,160 --> 00:26:19,640
Speaker 3: massive FED hikes, like the FED was going seventy five

494
00:26:19,640 --> 00:26:22,840
Speaker 3: BIPs a meeting by the end of the year, what

495
00:26:22,960 --> 00:26:25,520
Speaker 3: was going on with home building stocks? They were actually

496
00:26:25,520 --> 00:26:28,959
Speaker 3: turning around. Right. Homebuilder sentiment was getting better. Right, builders

497
00:26:28,960 --> 00:26:31,959
Speaker 3: were in a much better balance sheet position. They were

498
00:26:32,000 --> 00:26:35,080
Speaker 3: able to buy their buyers down in terms of mortgage

499
00:26:35,119 --> 00:26:35,720
Speaker 3: rate buy downs.

500
00:26:35,800 --> 00:26:39,520
Speaker 2: Right, so had massive shortage of single family home exactly.

501
00:26:39,560 --> 00:26:43,960
Speaker 3: So, so housing was doing well despite hikes. You had

502
00:26:44,080 --> 00:26:46,960
Speaker 3: governments spending a lot of money, Like state and local

503
00:26:46,960 --> 00:26:49,560
Speaker 3: governments were flushed with cash, right, they got all this

504
00:26:49,640 --> 00:26:53,840
Speaker 3: COVID money, So you had government spending, and then everyone

505
00:26:53,960 --> 00:26:56,119
Speaker 3: was prime for recession, right. I mean, if it's what

506
00:26:56,280 --> 00:26:59,840
Speaker 3: it's like, this expectations, you know element of it, If

507
00:27:00,400 --> 00:27:02,200
Speaker 3: you know, one of the ways I think recession happens

508
00:27:02,240 --> 00:27:06,400
Speaker 3: is through surprise. If people think, you know, things are

509
00:27:06,400 --> 00:27:08,040
Speaker 3: going to be okay, and then they're not, then that

510
00:27:08,080 --> 00:27:10,800
Speaker 3: prompts the clearing out of inventories and investment and so forth.

511
00:27:10,840 --> 00:27:13,119
Speaker 3: And then but if if the opposite it's true, then

512
00:27:13,280 --> 00:27:15,320
Speaker 3: then that'll happen. Right, So if everyone is prime for

513
00:27:15,400 --> 00:27:18,200
Speaker 3: recession and it doesn't happen, then there's going to be

514
00:27:18,240 --> 00:27:19,800
Speaker 3: a period where you have to kind of gear up

515
00:27:19,840 --> 00:27:23,680
Speaker 3: and invest in inventories and hiring and so forth. And

516
00:27:24,520 --> 00:27:27,720
Speaker 3: so based on those four factors, to me, it was like,

517
00:27:27,760 --> 00:27:29,520
Speaker 3: by the end of twenty twenty two, it's like, yeah,

518
00:27:29,520 --> 00:27:31,479
Speaker 3: we're not going to have a recession. Real incomes are

519
00:27:31,520 --> 00:27:33,520
Speaker 3: growing too rapidly in order for that to happen, and

520
00:27:33,560 --> 00:27:36,080
Speaker 3: the housing market's doing well. Like if you can get

521
00:27:36,119 --> 00:27:39,359
Speaker 3: that right, if housing is working in the US and

522
00:27:39,480 --> 00:27:42,520
Speaker 3: labor markets and real incomes are growing you're not getting

523
00:27:42,560 --> 00:27:46,320
Speaker 3: a recession, so you know, and so to me it

524
00:27:46,359 --> 00:27:48,280
Speaker 3: was like a really easy market call because a lot

525
00:27:48,280 --> 00:27:50,439
Speaker 3: of the weakness in the market was just predicated on

526
00:27:50,680 --> 00:27:53,919
Speaker 3: recession risk, and so to like this, the more obvious

527
00:27:53,960 --> 00:27:57,199
Speaker 3: it became that that wasn't the case. It was, you know,

528
00:27:57,240 --> 00:27:59,840
Speaker 3: to me, it was very clear that you know that

529
00:28:00,119 --> 00:28:01,560
Speaker 3: equities we're strong by.

530
00:28:03,760 --> 00:28:07,520
Speaker 2: So you've talked a little bit about the Street predicting

531
00:28:08,080 --> 00:28:11,160
Speaker 2: four to six rate cuts this year. They've been predicting

532
00:28:11,200 --> 00:28:14,800
Speaker 2: that pretty much since twenty twenty two and have consistently

533
00:28:14,960 --> 00:28:18,760
Speaker 2: been way too dubvish. What do you think the Street

534
00:28:18,800 --> 00:28:21,200
Speaker 2: has been missing over the past, you know, two or

535
00:28:21,240 --> 00:28:21,800
Speaker 2: three years.

536
00:28:23,840 --> 00:28:25,800
Speaker 3: Well, I mean, I think the main story over the

537
00:28:25,880 --> 00:28:29,199
Speaker 3: last two years, and you know, I'm a little bit

538
00:28:29,240 --> 00:28:31,240
Speaker 3: more cautious now, but I do think the main story

539
00:28:31,280 --> 00:28:32,960
Speaker 3: of the last couple of years has just been how

540
00:28:33,040 --> 00:28:39,280
Speaker 3: resilient the US economy is. And you know, that's basically

541
00:28:39,280 --> 00:28:41,440
Speaker 3: been the main stories that We've had very very strong

542
00:28:41,480 --> 00:28:46,040
Speaker 3: income growth. You know, we've had obviously a lot of

543
00:28:46,040 --> 00:28:48,880
Speaker 3: state and local government spending, a lot of federal spending,

544
00:28:49,360 --> 00:28:52,120
Speaker 3: but the main story I think has been, you know,

545
00:28:52,280 --> 00:28:54,640
Speaker 3: very strong growth and real incomes, which has been supporting

546
00:28:54,640 --> 00:28:57,600
Speaker 3: household consumption. And if you get the consumer right in

547
00:28:57,600 --> 00:28:59,760
Speaker 3: the US, pretty much everything else will fall into place.

548
00:29:00,160 --> 00:29:03,600
Speaker 2: So when we look out at the world today, we've

549
00:29:03,600 --> 00:29:08,360
Speaker 2: seen a lot of volatility in policy. I hate the

550
00:29:08,360 --> 00:29:12,960
Speaker 2: word uncertainty, but at least a lack of clarity, which

551
00:29:12,960 --> 00:29:17,800
Speaker 2: seems to be affecting people's long term travel plans, corporate

552
00:29:17,880 --> 00:29:22,840
Speaker 2: capex plans. How significant is all of the back and

553
00:29:22,880 --> 00:29:26,680
Speaker 2: forth on various policy issues out of the White House

554
00:29:27,200 --> 00:29:29,320
Speaker 2: impacting your analysis?

555
00:29:30,720 --> 00:29:34,960
Speaker 3: Well, I do think that when uncertainty is high, it

556
00:29:35,160 --> 00:29:37,320
Speaker 3: just makes sense to kind of double down and look

557
00:29:37,360 --> 00:29:39,560
Speaker 3: at the data as it's coming in, right. I mean,

558
00:29:39,600 --> 00:29:42,160
Speaker 3: it's what you shouldn't try to make a big sweeping

559
00:29:42,200 --> 00:29:45,360
Speaker 3: forecast if the uncertainty is high, but you should kind

560
00:29:45,400 --> 00:29:47,760
Speaker 3: of think about what's just look at what's happening in

561
00:29:47,800 --> 00:29:50,440
Speaker 3: front of you. And that's kind of what I've been

562
00:29:50,440 --> 00:29:53,239
Speaker 3: trying to do. And you know, when I look at

563
00:29:53,280 --> 00:29:56,920
Speaker 3: what's happening right now, I mean I don't get a

564
00:29:56,960 --> 00:30:00,080
Speaker 3: lot of optimism. I mean have it looks like the

565
00:30:00,120 --> 00:30:01,960
Speaker 3: labor markets are continuing to cool.

566
00:30:01,760 --> 00:30:05,720
Speaker 2: Off, still positive, but certainly at much lower levels than

567
00:30:05,760 --> 00:30:07,000
Speaker 2: we saw two three years ago.

568
00:30:07,400 --> 00:30:09,920
Speaker 3: I mean, I think, to me, momentum matters. Right, we

569
00:30:09,960 --> 00:30:12,000
Speaker 3: talk about better or worse, right, I mean, the labor

570
00:30:12,000 --> 00:30:15,480
Speaker 3: markets are clearly getting worse. And you know, is it

571
00:30:15,520 --> 00:30:18,720
Speaker 3: is it nonlinear? No, it's not. But you know, you know,

572
00:30:18,760 --> 00:30:20,320
Speaker 3: one of the points that I've been making this year

573
00:30:20,400 --> 00:30:24,800
Speaker 3: is that all recessions begin with a slowdown. Not all

574
00:30:24,840 --> 00:30:27,360
Speaker 3: slowdowns and in recession, but we know that all recessions

575
00:30:27,400 --> 00:30:29,880
Speaker 3: start with a slowdown. And it's pretty clear that the

576
00:30:29,960 --> 00:30:33,360
Speaker 3: labor markets are slowing down. You have a very narrow

577
00:30:33,680 --> 00:30:38,080
Speaker 3: kind of breath of industries adding employee jobs. A lot

578
00:30:38,080 --> 00:30:41,040
Speaker 3: of it is in kind of acyclical industries like education

579
00:30:41,160 --> 00:30:43,920
Speaker 3: and health, so sort of the cyclical areas of labor

580
00:30:43,920 --> 00:30:46,120
Speaker 3: market are slowing down. You're seeing weakness in like white

581
00:30:46,160 --> 00:30:52,080
Speaker 3: collar professional services, recruiting intensities low. So the labor markets

582
00:30:52,080 --> 00:30:55,640
Speaker 3: I think are To me, that's been my big my

583
00:30:55,640 --> 00:30:57,640
Speaker 3: big theme for this year is that it's it's far

584
00:30:57,680 --> 00:31:02,760
Speaker 3: more concerning. And then the consensus seems to appreciate, and

585
00:31:02,800 --> 00:31:05,760
Speaker 3: I think also for the Fed. I mean, they keep

586
00:31:05,800 --> 00:31:09,920
Speaker 3: talking about how the labor market is solid and and

587
00:31:10,000 --> 00:31:12,120
Speaker 3: what they're I mean, to me, that's basically a very

588
00:31:12,160 --> 00:31:14,560
Speaker 3: like surface level analysis, like they're looking at, Okay, the

589
00:31:14,640 --> 00:31:17,200
Speaker 3: unemployment rate is four point one percent, and therefore the

590
00:31:17,240 --> 00:31:19,800
Speaker 3: labor markets are solid. But I think you can make

591
00:31:19,840 --> 00:31:22,479
Speaker 3: a very strong case that the that the unemployment rate

592
00:31:22,520 --> 00:31:25,360
Speaker 3: of four point one percent is really overstating the degree

593
00:31:25,360 --> 00:31:27,320
Speaker 3: of health in the in the job market. Right, Like,

594
00:31:27,360 --> 00:31:29,240
Speaker 3: when the unemployment rate is four point one percent, you

595
00:31:29,280 --> 00:31:33,320
Speaker 3: typically don't see like the hiring rate as low as

596
00:31:33,320 --> 00:31:35,160
Speaker 3: it is, you don't see the quits rate as low

597
00:31:35,160 --> 00:31:37,560
Speaker 3: as it is, you don't see consumer confidence in the

598
00:31:37,640 --> 00:31:39,880
Speaker 3: job market as bad as it is. You don't see

599
00:31:41,160 --> 00:31:43,960
Speaker 3: you know, even wage growth is slowing down, right, So if.

600
00:31:43,800 --> 00:31:46,400
Speaker 2: But it's still it's slowing down from a pretty high level.

601
00:31:46,400 --> 00:31:48,880
Speaker 2: Where what is wage growth now about four percent?

602
00:31:48,960 --> 00:31:50,920
Speaker 3: Is that? Well, it's actually slownging a bit more than that,

603
00:31:51,040 --> 00:31:52,600
Speaker 3: I mean, it's it's running. If you look at over

604
00:31:52,600 --> 00:31:54,520
Speaker 3: the last three months or so, it's around you know,

605
00:31:54,600 --> 00:31:58,520
Speaker 3: three three and a half percent. But huh, but if

606
00:31:58,640 --> 00:32:01,280
Speaker 3: if that, but again, like if the labor markets were

607
00:32:01,320 --> 00:32:05,040
Speaker 3: tight or tightening, then you wouldn't expect to see wage

608
00:32:05,040 --> 00:32:10,760
Speaker 3: growth continuing to slow down and you have ongoing increases

609
00:32:10,800 --> 00:32:13,320
Speaker 3: in like the number of discouraged workers. Right, you have

610
00:32:13,320 --> 00:32:16,440
Speaker 3: a lot of people exiting the workforce're going straight from

611
00:32:16,520 --> 00:32:18,720
Speaker 3: unemployment out of the labor force. I mean, these are

612
00:32:18,760 --> 00:32:21,800
Speaker 3: not things that happen in a healthier, solid job market.

613
00:32:22,040 --> 00:32:25,440
Speaker 2: How much of this is driven by the past five

614
00:32:25,560 --> 00:32:30,760
Speaker 2: whacky years, including the pandemic and a giant decrease in

615
00:32:31,240 --> 00:32:35,760
Speaker 2: people working, the recovery in people returning, plus the entire

616
00:32:35,800 --> 00:32:39,080
Speaker 2: fiscal stimulus making its way through the system. It's not

617
00:32:39,160 --> 00:32:42,640
Speaker 2: like twenty twenty five is just one in a series

618
00:32:42,720 --> 00:32:46,040
Speaker 2: of normal years. It's one in a series of very

619
00:32:46,520 --> 00:32:50,880
Speaker 2: unusual situations, including what five hundred and twenty five basis

620
00:32:50,880 --> 00:32:55,200
Speaker 2: points of FED hikes in eighteen months or so. So

621
00:32:55,360 --> 00:32:59,240
Speaker 2: how do you contextualize this slow down as the pig

622
00:32:59,280 --> 00:33:00,800
Speaker 2: works way through the python?

623
00:33:02,560 --> 00:33:04,240
Speaker 3: I mean, so this is sort of the argument that,

624
00:33:04,280 --> 00:33:06,800
Speaker 3: like the whole thing was just one giant like bull whip,

625
00:33:06,840 --> 00:33:08,680
Speaker 3: and we've kind of, you know, now we're just we're

626
00:33:08,680 --> 00:33:12,680
Speaker 3: still normalizing from all of it. You know, I think

627
00:33:12,800 --> 00:33:17,080
Speaker 3: to me, it's that's possible. But it's just again, like

628
00:33:17,280 --> 00:33:19,960
Speaker 3: the sectors that are slowing down are not the ones

629
00:33:20,000 --> 00:33:23,600
Speaker 3: you want to see slow down, right, I mean, you

630
00:33:23,640 --> 00:33:26,320
Speaker 3: know you're at a point now where it looks like

631
00:33:26,360 --> 00:33:29,800
Speaker 3: housing market conditions are continuing to deteriorate, right, Like prices

632
00:33:29,840 --> 00:33:32,720
Speaker 3: are slowing. They're slowing in the in the markets where

633
00:33:32,960 --> 00:33:36,960
Speaker 3: builders make homes. That's going to probably lead to job

634
00:33:37,000 --> 00:33:38,720
Speaker 3: losses in the construction industry.

635
00:33:39,840 --> 00:33:41,880
Speaker 2: They're not getting any help from the FED in terms

636
00:33:41,920 --> 00:33:43,360
Speaker 2: of rates at least no time sting.

637
00:33:43,440 --> 00:33:45,560
Speaker 3: Well, no, right, I mean to the extent that the

638
00:33:45,560 --> 00:33:51,360
Speaker 3: housing market is working, it's basically because the sellers are capitulating, right,

639
00:33:51,440 --> 00:33:53,640
Speaker 3: I mean, they're they're listing homes for market, they're willing

640
00:33:53,680 --> 00:33:56,600
Speaker 3: to take price concessions. That's pushing up transaction volumes to

641
00:33:56,600 --> 00:33:59,280
Speaker 3: some extent, right, So that's that's that's been okay. I mean,

642
00:33:59,400 --> 00:34:01,480
Speaker 3: you see, you have a little bit more elasticity coming

643
00:34:01,520 --> 00:34:05,640
Speaker 3: into the housing market, you know. But the fact that

644
00:34:05,640 --> 00:34:07,880
Speaker 3: the labor markets are cooling down, what does that mean?

645
00:34:08,320 --> 00:34:13,800
Speaker 3: Primarily that's going to weigh on consumer spending and that

646
00:34:14,280 --> 00:34:17,200
Speaker 3: kind of sets in motion like a below trend growth outlook.

647
00:34:17,400 --> 00:34:20,120
Speaker 2: So let me ask you what I think is one

648
00:34:20,160 --> 00:34:24,080
Speaker 2: of the most perplexing issues. Consumer spending pretty close to

649
00:34:24,239 --> 00:34:27,520
Speaker 2: record highs right now, and at the same time, consumer

650
00:34:27,600 --> 00:34:30,840
Speaker 2: sentiment pretty much still in the dumper off the lows

651
00:34:30,920 --> 00:34:36,160
Speaker 2: but still historically low. How do we reconcile the robust

652
00:34:36,200 --> 00:34:40,080
Speaker 2: spending with the terrible sentiment are one of those indicators

653
00:34:40,080 --> 00:34:41,480
Speaker 2: one of those measures broken?

654
00:34:43,719 --> 00:34:46,040
Speaker 3: Well, I don't know that. So this is like the

655
00:34:46,120 --> 00:34:48,800
Speaker 3: vibe session kind of story.

656
00:34:48,960 --> 00:34:54,440
Speaker 2: And I definitely are you a vibe session person or no?

657
00:34:54,440 --> 00:34:58,560
Speaker 3: No, I mean I think consumer sentiment. To me, what's

658
00:34:58,640 --> 00:35:01,560
Speaker 3: really interesting about what's happened with consumer sentiment is how

659
00:35:02,400 --> 00:35:07,640
Speaker 3: the link between consumer sentiment and labor market views basically

660
00:35:07,800 --> 00:35:13,560
Speaker 3: completely detached following twenty twenty one twenty two, right, I

661
00:35:13,560 --> 00:35:18,080
Speaker 3: mean once inflation started going So for most of my career,

662
00:35:19,800 --> 00:35:22,279
Speaker 3: if you basically got like the labor market view, right

663
00:35:22,360 --> 00:35:24,400
Speaker 3: you pay you more or less, would get the consumer

664
00:35:24,440 --> 00:35:26,919
Speaker 3: sentiment number, right, you know what I mean, like no more,

665
00:35:27,080 --> 00:35:29,680
Speaker 3: no more, right, I mean. So it's just it's one

666
00:35:29,680 --> 00:35:35,319
Speaker 3: of these things where when you ask someone like how

667
00:35:35,360 --> 00:35:38,200
Speaker 3: do you rate the economy, It'll be like something like

668
00:35:38,239 --> 00:35:39,800
Speaker 3: it will be a very low number. How do you

669
00:35:39,880 --> 00:35:41,760
Speaker 3: rate the labor market? It'll be a very strong number.

670
00:35:41,800 --> 00:35:44,759
Speaker 3: That's very perplexing, But it's just it just it demonstrates

671
00:35:44,760 --> 00:35:47,520
Speaker 3: that people don't look at the economy solely through the

672
00:35:47,560 --> 00:35:48,640
Speaker 3: prism of the job market.

673
00:35:48,880 --> 00:35:51,680
Speaker 2: What else is kind of fascinating is if you ask

674
00:35:51,719 --> 00:35:54,680
Speaker 2: people how do you rate the economy and they're like, mah,

675
00:35:54,719 --> 00:35:57,640
Speaker 2: how do you rate your personal economy? Oh, I'm doing fine.

676
00:35:58,000 --> 00:35:59,440
Speaker 2: It's like, how do you think of Congress?

677
00:35:59,480 --> 00:35:59,600
Speaker 3: Oh?

678
00:35:59,600 --> 00:36:02,439
Speaker 2: Congress, this is terrible? What about your congressman? Oh, he's great?

679
00:36:02,520 --> 00:36:03,000
Speaker 3: Totally.

680
00:36:03,920 --> 00:36:07,200
Speaker 2: So all of this brings me back to the question

681
00:36:07,320 --> 00:36:10,800
Speaker 2: is sentiment broken? When we look at the Michigan consumer

682
00:36:10,880 --> 00:36:15,000
Speaker 2: sentiment worse than the pandemic, worse than the GFC, worse

683
00:36:15,040 --> 00:36:18,320
Speaker 2: than nine to eleven in the dot com implosion, worse

684
00:36:18,360 --> 00:36:21,080
Speaker 2: than the eighty seven crash, it kind of makes me

685
00:36:21,120 --> 00:36:24,920
Speaker 2: stop and think, are all of us missing how terrible

686
00:36:24,960 --> 00:36:29,720
Speaker 2: things are? Or is just this methodology of asking people

687
00:36:29,920 --> 00:36:33,160
Speaker 2: in twenty twenty five what they think just doesn't work anymore.

688
00:36:33,160 --> 00:36:35,879
Speaker 3: Well, the methodology for the umish number in particular, did change.

689
00:36:35,920 --> 00:36:38,359
Speaker 3: I think they moved online. But so I just saw

690
00:36:38,480 --> 00:36:40,960
Speaker 3: to me, it's like, consumer sentiment is basically a function

691
00:36:41,040 --> 00:36:45,359
Speaker 3: of what stocks are doing, what inflation's doing, and what

692
00:36:45,440 --> 00:36:49,879
Speaker 3: jobs are doing. And if you think about it that way,

693
00:36:50,080 --> 00:36:53,480
Speaker 3: the drop in consumer sentiment made a lot of sense

694
00:36:53,560 --> 00:36:57,040
Speaker 3: because inflation went really through the roof, right, and so

695
00:36:57,080 --> 00:37:00,880
Speaker 3: that's why sentiment went down. Since then, you've some stability

696
00:37:00,920 --> 00:37:06,800
Speaker 3: and inflation, and you know now that the stock markets

697
00:37:06,800 --> 00:37:10,800
Speaker 3: back to all time highs. Essentially you've seen some recovery

698
00:37:10,800 --> 00:37:15,480
Speaker 3: and consumer sentiment not surprisingly. But what I'm what I've

699
00:37:15,480 --> 00:37:19,640
Speaker 3: been focusing on, it's, you know, there's this big debate about,

700
00:37:19,719 --> 00:37:23,359
Speaker 3: you know, how useful survey measures of economic data are,

701
00:37:23,560 --> 00:37:29,200
Speaker 3: like consumer sentiment is m versus like hard economic data

702
00:37:29,280 --> 00:37:33,560
Speaker 3: like manufacturing production, jobs growth. So to me, I think

703
00:37:33,560 --> 00:37:35,759
Speaker 3: the bigger question for people in my field is like

704
00:37:35,800 --> 00:37:39,400
Speaker 3: how much do you want to weigh survey measures of

705
00:37:39,440 --> 00:37:43,120
Speaker 3: economic data in your process? And to me, there is

706
00:37:43,160 --> 00:37:45,640
Speaker 3: still useful information in these surveys, right, Like, so when

707
00:37:45,680 --> 00:37:48,160
Speaker 3: you when you look at the conference board data, for example,

708
00:37:48,160 --> 00:37:50,880
Speaker 3: it's another consumer confidence number. If you look at like

709
00:37:50,880 --> 00:37:53,200
Speaker 3: the labor differential, So what are consumers telling you about

710
00:37:53,200 --> 00:37:56,160
Speaker 3: how how plentiful jobs are? How are jobs hard to

711
00:37:56,160 --> 00:38:00,640
Speaker 3: get or are they plentiful? That number still does a

712
00:38:00,680 --> 00:38:05,239
Speaker 3: reasonably good job telling you or informing you about like

713
00:38:07,080 --> 00:38:10,120
Speaker 3: tightness in the job market. Right, So if I mean,

714
00:38:10,200 --> 00:38:11,800
Speaker 3: and if consumers are telling you that things are a

715
00:38:11,800 --> 00:38:15,319
Speaker 3: little bit more slack. You should probably believe them. So

716
00:38:16,360 --> 00:38:19,840
Speaker 3: to me, it's about looking at which pieces of survey

717
00:38:19,920 --> 00:38:22,000
Speaker 3: data are important and which ones aren't. Even in you know,

718
00:38:22,080 --> 00:38:25,200
Speaker 3: regional manufacturing data. Right, you get asked, they ask the

719
00:38:25,239 --> 00:38:29,040
Speaker 3: purchasing managers about their capex intentions. Again, it's another indicator.

720
00:38:29,239 --> 00:38:32,480
Speaker 3: It does a reasonably good job like mirroring the broad

721
00:38:32,560 --> 00:38:35,800
Speaker 3: ups and downs in business investment like cor durable goods.

722
00:38:35,840 --> 00:38:40,080
Speaker 2: So I think the purchasing manager seems to be that

723
00:38:40,160 --> 00:38:43,400
Speaker 2: survey seems to be a little less out of sync

724
00:38:43,880 --> 00:38:48,080
Speaker 2: with spending than consumer sentiment is with either labor or

725
00:38:48,160 --> 00:38:50,200
Speaker 2: consumer spending. Fair statement.

726
00:38:50,840 --> 00:38:53,080
Speaker 3: Yeah, I mean the consumer sentiment number doesn't look like

727
00:38:53,120 --> 00:38:58,880
Speaker 3: consumer spending. I mean that. But that's that, that is true.

728
00:38:59,080 --> 00:39:01,880
Speaker 3: That is true. They're elements within the consumer sentiment stuff.

729
00:39:01,880 --> 00:39:04,920
Speaker 3: That kind of makes sense. But you know, broadly speaking,

730
00:39:05,000 --> 00:39:09,240
Speaker 3: you're right, consumer sentiment is dramatically understating how much consumers

731
00:39:09,239 --> 00:39:12,240
Speaker 3: have been spending. That's true.

732
00:39:12,440 --> 00:39:16,840
Speaker 2: So, so we're talking about all these different US data series.

733
00:39:17,160 --> 00:39:20,640
Speaker 2: How do you incorporate global macro trends and global economic

734
00:39:20,719 --> 00:39:23,520
Speaker 2: data into your models.

735
00:39:24,719 --> 00:39:26,400
Speaker 3: I'm gonna be honest with you. I don't spend a

736
00:39:26,400 --> 00:39:28,400
Speaker 3: lot of time focusing on the rest of the world.

737
00:39:28,719 --> 00:39:32,200
Speaker 3: Really that's probably to my own, to my own, I mean,

738
00:39:32,280 --> 00:39:33,080
Speaker 3: especially for.

739
00:39:33,160 --> 00:39:36,640
Speaker 2: These days with Europe outperforming the US and emerging markets

740
00:39:36,680 --> 00:39:40,600
Speaker 2: doing well after underperforming the US for fifteen years.

741
00:39:40,800 --> 00:39:42,719
Speaker 3: Yeah, I mean what's interesting is that you look at

742
00:39:43,640 --> 00:39:46,440
Speaker 3: you know, it's right, I mean that that has been notable,

743
00:39:46,480 --> 00:39:48,840
Speaker 3: Like they're the outperformance of the euro You don't really

744
00:39:48,920 --> 00:39:53,800
Speaker 3: see much outperformance and growth dynamics, so it kind of

745
00:39:53,840 --> 00:39:58,040
Speaker 3: tells you, like, you know, like sentiment in these towards

746
00:39:58,080 --> 00:40:00,200
Speaker 3: Europe has been so depressed, so like it's been like

747
00:40:00,239 --> 00:40:03,560
Speaker 3: some incremental improvements, some incremental narrowing and growth differentials, and

748
00:40:03,600 --> 00:40:05,960
Speaker 3: everyone's thinking that, like Europe is off to the races,

749
00:40:06,000 --> 00:40:07,920
Speaker 3: But I don't really see that in the data that

750
00:40:07,960 --> 00:40:09,320
Speaker 3: we look at. I mean, if you look at purchasing

751
00:40:09,320 --> 00:40:12,640
Speaker 3: managers surveys, for example, in Germany, I mean they're still

752
00:40:12,640 --> 00:40:14,640
Speaker 3: well below I mean they're still below fifty. I mean

753
00:40:14,680 --> 00:40:17,120
Speaker 3: German manufacturing, French manufacturing have been in the kind of

754
00:40:17,200 --> 00:40:18,400
Speaker 3: dumps for for a while.

755
00:40:18,200 --> 00:40:21,600
Speaker 2: And Germany is in the middle of economic contraction, right.

756
00:40:22,480 --> 00:40:24,160
Speaker 3: Yeah, I mean it's you know, there's been a lot

757
00:40:24,160 --> 00:40:27,520
Speaker 3: of it seems like a lot of like hopium based

758
00:40:27,560 --> 00:40:31,600
Speaker 3: on like defense spending and fiscal reflation and so forth.

759
00:40:31,960 --> 00:40:36,320
Speaker 2: Huh, really really interesting. Let's talk a little bit about

760
00:40:36,400 --> 00:40:41,720
Speaker 2: the possibility of a recession in twenty five or twenty six.

761
00:40:42,120 --> 00:40:46,239
Speaker 2: What do you think is the most significant macroeconomic risk

762
00:40:46,680 --> 00:40:48,720
Speaker 2: facing the United States right now?

763
00:40:50,960 --> 00:40:53,080
Speaker 3: Well, I mean, obviously the one that's getting the most

764
00:40:53,080 --> 00:40:58,000
Speaker 3: attention is a radic trade policy, But I don't think

765
00:40:58,040 --> 00:41:01,440
Speaker 3: that by itself is what's going to cause a recession.

766
00:41:01,480 --> 00:41:05,480
Speaker 3: I think it's primarily like monetary policies too tight. You

767
00:41:05,560 --> 00:41:10,399
Speaker 3: have essentially you have nominal GDP slowing, and the Fed

768
00:41:10,440 --> 00:41:13,920
Speaker 3: funds rate is not doing anything. It's basically flat at

769
00:41:13,920 --> 00:41:16,160
Speaker 3: four and a half percent. So to me, that represents

770
00:41:16,200 --> 00:41:19,520
Speaker 3: a passive tightening of monetary policy, and that will continue

771
00:41:19,560 --> 00:41:22,480
Speaker 3: to build pressure on the economy, particularly on the labor market.

772
00:41:22,600 --> 00:41:25,200
Speaker 3: So you know, kind of go down the list, right.

773
00:41:26,239 --> 00:41:28,640
Speaker 3: I do think that their left tail risk of the

774
00:41:28,680 --> 00:41:34,200
Speaker 3: distribution has gone up, you know number one. I mean,

775
00:41:34,280 --> 00:41:37,279
Speaker 3: labor markets are cooling and income growth is slowing. That's

776
00:41:37,360 --> 00:41:41,000
Speaker 3: probably going to weigh on consumer spending. That was true

777
00:41:41,040 --> 00:41:46,400
Speaker 3: even before tariffs came into force. If you look at housing,

778
00:41:48,360 --> 00:41:52,759
Speaker 3: residential investment is probably slowing because home prices are now declining,

779
00:41:54,880 --> 00:41:57,520
Speaker 3: particularly in the places where the builders are making the

780
00:41:57,600 --> 00:42:01,080
Speaker 3: homes right, which is like the South Florida Tech Arizona.

781
00:42:01,840 --> 00:42:10,600
Speaker 3: That's weighing on construction activity. If you look at business investment,

782
00:42:10,719 --> 00:42:14,560
Speaker 3: it's probably welcome that they just passed this tax law

783
00:42:14,680 --> 00:42:17,759
Speaker 3: and that gives some certainty around the tax outlook. But

784
00:42:17,800 --> 00:42:22,400
Speaker 3: at the same time, you know, some of that effect

785
00:42:22,440 --> 00:42:26,200
Speaker 3: is going to be blunted by what's going on with trades.

786
00:42:26,239 --> 00:42:29,960
Speaker 3: So you haven't really seen much in terms of Yeah,

787
00:42:29,960 --> 00:42:35,080
Speaker 3: outside of AI, business investment has been quite sluggish. So

788
00:42:35,560 --> 00:42:39,359
Speaker 3: I stay in local governments cutting back right, So it's

789
00:42:39,400 --> 00:42:43,399
Speaker 3: just sort of it's a very unstable kind of equilibrium

790
00:42:43,440 --> 00:42:47,920
Speaker 3: in my opinion. And I do think that, you know,

791
00:42:47,960 --> 00:42:52,560
Speaker 3: if as consumer spending is slowing, that creates risks for

792
00:42:52,600 --> 00:42:53,520
Speaker 3: the US economy.

793
00:42:54,120 --> 00:42:58,960
Speaker 2: So is your base case that recession in second half

794
00:42:58,960 --> 00:43:03,560
Speaker 2: of twenty twenty five sometime in twenty six likely probable?

795
00:43:03,960 --> 00:43:05,920
Speaker 3: I have it on the board. I mean, I definitely

796
00:43:05,960 --> 00:43:12,200
Speaker 3: think that our recession is more likely than not. And specifically,

797
00:43:12,280 --> 00:43:14,880
Speaker 3: I think you'll see a period of you know, a

798
00:43:14,960 --> 00:43:17,840
Speaker 3: quarter or two where you get a series of negative

799
00:43:17,880 --> 00:43:23,400
Speaker 3: employment reports, and and I think that'll push up the

800
00:43:23,480 --> 00:43:26,799
Speaker 3: unemployment rate and probably bring in the FED to tart

801
00:43:26,880 --> 00:43:27,600
Speaker 3: more aggressively.

802
00:43:27,760 --> 00:43:30,319
Speaker 2: So unemployment rate ticks up to four and a half

803
00:43:30,360 --> 00:43:32,360
Speaker 2: five percent. Where do you see this going five and

804
00:43:32,360 --> 00:43:32,840
Speaker 2: a quarter.

805
00:43:32,960 --> 00:43:34,279
Speaker 3: I don't know it goes up that high, but I

806
00:43:34,320 --> 00:43:36,040
Speaker 3: can easily see it getting it close to four to

807
00:43:36,080 --> 00:43:38,120
Speaker 3: five percent at some point over the next twelve months.

808
00:43:38,120 --> 00:43:42,319
Speaker 2: Sure, and that forces the FED to So let's talk

809
00:43:42,360 --> 00:43:46,640
Speaker 2: about the FED for a second. You know, once the

810
00:43:46,960 --> 00:43:50,279
Speaker 2: first Cares Act, which was what two trillion dollars ten

811
00:43:50,320 --> 00:43:54,080
Speaker 2: percent of GDP, the biggest fiscal stimulus since World War Two.

812
00:43:54,120 --> 00:43:57,680
Speaker 2: Once that was passed, it seemed like the FED was

813
00:43:57,840 --> 00:44:01,759
Speaker 2: increasingly behind the curve. Inflation start to tick up in

814
00:44:01,800 --> 00:44:05,759
Speaker 2: twenty but really take off in twenty one, and they

815
00:44:05,840 --> 00:44:08,320
Speaker 2: kind of sat on their hands until when did the

816
00:44:08,360 --> 00:44:12,879
Speaker 2: cycle start? March or April of twenty twenty two, And

817
00:44:13,280 --> 00:44:16,400
Speaker 2: by then by June it was inflation peaked and started

818
00:44:16,400 --> 00:44:19,359
Speaker 2: heading down. And so it seems like they were late

819
00:44:19,400 --> 00:44:23,120
Speaker 2: to recognize inflation, they were late to tighten. Now it

820
00:44:23,200 --> 00:44:27,120
Speaker 2: seems like they're late to start cutting. At least in

821
00:44:27,560 --> 00:44:32,360
Speaker 2: your assessment, is the FED just a big, slow, ponderous institution,

822
00:44:32,880 --> 00:44:34,719
Speaker 2: and they're always going to be behind the.

823
00:44:34,640 --> 00:44:35,959
Speaker 3: Count like Trump too late.

824
00:44:36,719 --> 00:44:39,760
Speaker 2: Now, by the way, you're the first person ever accused

825
00:44:39,760 --> 00:44:44,840
Speaker 2: me of that. But to be fair, hold aside the

826
00:44:45,520 --> 00:44:49,960
Speaker 2: beef between Trump and Powell. For my entire professional career

827
00:44:50,000 --> 00:44:53,280
Speaker 2: in finance, it has felt like the FED is always

828
00:44:53,360 --> 00:44:59,720
Speaker 2: late to the party. Yeah, I mean, I think they're

829
00:44:59,760 --> 00:45:03,319
Speaker 2: just conservative and slow, and they would rather be late

830
00:45:03,400 --> 00:45:04,480
Speaker 2: than mistaken.

831
00:45:04,760 --> 00:45:06,560
Speaker 3: I think is affect you know, I mean, you know

832
00:45:06,600 --> 00:45:11,120
Speaker 3: there are times when they're I mean, even by Powells

833
00:45:11,120 --> 00:45:13,880
Speaker 3: on admission, like last year he said that when they

834
00:45:13,880 --> 00:45:16,120
Speaker 3: went fifty in September that even that was a little

835
00:45:16,160 --> 00:45:19,400
Speaker 3: bit late. So yeah, I mean, you know, it's a

836
00:45:19,440 --> 00:45:23,319
Speaker 3: consensus building institution. You have to kind of corral your

837
00:45:23,640 --> 00:45:26,839
Speaker 3: your colleagues to your view and so that that to

838
00:45:26,880 --> 00:45:30,400
Speaker 3: me might be one reason why it's a little bit slow.

839
00:45:31,480 --> 00:45:32,800
Speaker 3: But as I say, I mean.

840
00:45:36,400 --> 00:45:40,320
Speaker 2: So we've talked a little bit about, or you brought

841
00:45:40,400 --> 00:45:44,880
Speaker 2: up how much uncertainty there seems to be around the

842
00:45:44,960 --> 00:45:51,840
Speaker 2: tariff policy, especially on again off again. What are the

843
00:45:51,960 --> 00:45:55,080
Speaker 2: risks from the tariff policy? Could this be a factor

844
00:45:55,120 --> 00:45:58,160
Speaker 2: in the recession, what other knock on effects do you

845
00:45:58,200 --> 00:45:59,879
Speaker 2: see from from this new pop.

846
00:46:00,320 --> 00:46:02,240
Speaker 3: I think the main effect is that it freezes business

847
00:46:02,239 --> 00:46:04,279
Speaker 3: investment in place, right. I mean that to me is

848
00:46:04,280 --> 00:46:04,880
Speaker 3: the big story.

849
00:46:04,960 --> 00:46:07,360
Speaker 2: Nobody wants to commit hundreds of millions of billions of

850
00:46:07,360 --> 00:46:09,680
Speaker 2: dollars till they know what the polomy.

851
00:46:09,440 --> 00:46:12,120
Speaker 3: Trading relationships will be with all these other countries. Sometimes

852
00:46:12,120 --> 00:46:16,800
Speaker 3: you're announcing terrorists with countries we may already have trading agreement.

853
00:46:16,400 --> 00:46:18,200
Speaker 2: South Korea we have twenty twelve.

854
00:46:18,760 --> 00:46:20,400
Speaker 3: Korea is a good example.

855
00:46:20,600 --> 00:46:22,200
Speaker 2: Sort of bizarre we don't we have?

856
00:46:22,400 --> 00:46:25,520
Speaker 3: So yeah, I mean, and you know, look like this,

857
00:46:25,520 --> 00:46:27,400
Speaker 3: this to me is like it's the return of like

858
00:46:27,440 --> 00:46:29,600
Speaker 3: the Trump collar strategy, right. I mean one of the

859
00:46:29,600 --> 00:46:35,480
Speaker 3: things that we thought very early on was that you know,

860
00:46:35,600 --> 00:46:37,799
Speaker 3: essentially he's going to be testing the market, right, I

861
00:46:37,840 --> 00:46:42,480
Speaker 3: mean if the market gets you know, it's it's sort

862
00:46:42,520 --> 00:46:45,320
Speaker 3: of bounded in a way, right, a strong stock market,

863
00:46:46,840 --> 00:46:49,319
Speaker 3: maybe he pushes the trade dial up a little bit.

864
00:46:49,600 --> 00:46:52,000
Speaker 3: Then if the market sells off, maybe he'll back off. Right.

865
00:46:52,040 --> 00:46:54,920
Speaker 3: So it's it's sort of he's trying to find an

866
00:46:54,960 --> 00:46:58,880
Speaker 3: equilibrium for himself that he's comfortable with. And you know

867
00:46:59,000 --> 00:47:04,000
Speaker 3: that to me for businesses, right, Like to me, It's

868
00:47:04,000 --> 00:47:09,439
Speaker 3: as simple as part of his stick is chaos, and

869
00:47:09,719 --> 00:47:14,360
Speaker 3: the business community doesn't like uncertainty. So that's a fundamental tension.

870
00:47:15,239 --> 00:47:17,520
Speaker 3: But I think so that's going to weigh on investment spending.

871
00:47:17,560 --> 00:47:19,200
Speaker 3: But I think in the background, you still have this

872
00:47:19,280 --> 00:47:21,799
Speaker 3: kind of slow bleeding in the job market. You have

873
00:47:21,920 --> 00:47:26,400
Speaker 3: this ongoing cooling and consumer spending. You have this slow

874
00:47:26,800 --> 00:47:29,360
Speaker 3: sort of bleeding out bleeding out in the housing market

875
00:47:29,719 --> 00:47:33,279
Speaker 3: that's weighing on construction. So and you have you know,

876
00:47:33,320 --> 00:47:36,320
Speaker 3: state in local governments cutting back, so you just don't

877
00:47:36,360 --> 00:47:40,240
Speaker 3: have as many drivers for growth, and ultimately that becomes

878
00:47:40,239 --> 00:47:40,760
Speaker 3: a problem.

879
00:47:41,120 --> 00:47:44,840
Speaker 2: So what is going to finally push the FED into

880
00:47:45,000 --> 00:47:48,280
Speaker 2: beginning cutting rates? What do you think is the most

881
00:47:48,280 --> 00:47:52,680
Speaker 2: important data series they're looking at. I really don't imagine

882
00:47:52,680 --> 00:47:55,920
Speaker 2: anyone cares whether inflation is two or two in a quarter.

883
00:47:56,560 --> 00:48:01,240
Speaker 2: But if we see, as you mentioned, a negative payrolls print,

884
00:48:01,640 --> 00:48:04,160
Speaker 2: that has to get their attention, doesn't it. Yeah, I

885
00:48:04,200 --> 00:48:07,080
Speaker 2: would think, so what else might get their attention and

886
00:48:07,120 --> 00:48:08,880
Speaker 2: start a new rate cycle?

887
00:48:09,000 --> 00:48:11,240
Speaker 3: To me, the most important thing is seeing what happens

888
00:48:11,280 --> 00:48:15,480
Speaker 3: with you know, essentially labor markets slack, right, I mean,

889
00:48:15,600 --> 00:48:21,120
Speaker 3: if if wage growth continues to slow, down, then the

890
00:48:21,200 --> 00:48:28,200
Speaker 3: ability for households to essentially absorb tariffs is non existent,

891
00:48:28,560 --> 00:48:30,759
Speaker 3: which makes it very difficult to see where you get

892
00:48:30,760 --> 00:48:33,760
Speaker 3: inflation from. So right now they've been kind of making

893
00:48:33,800 --> 00:48:36,279
Speaker 3: this point that the labor markets are not a source

894
00:48:36,280 --> 00:48:39,080
Speaker 3: of inflationary pressure. If you get further slack in the

895
00:48:39,160 --> 00:48:41,439
Speaker 3: labor market at this point, like at that point, maybe

896
00:48:41,560 --> 00:48:44,680
Speaker 3: inflate the labor markets become a source of disinflationary pressure.

897
00:48:45,120 --> 00:48:46,640
Speaker 3: And so I think that's something they have to keep

898
00:48:46,680 --> 00:48:47,080
Speaker 3: an eye on.

899
00:48:47,680 --> 00:48:51,439
Speaker 2: What else might capture the Fed's attention and say, hey,

900
00:48:51,440 --> 00:48:54,799
Speaker 2: we're really behind the curve. How what what do you

901
00:48:54,840 --> 00:48:57,719
Speaker 2: look at in the housing market, Is it just new

902
00:48:57,719 --> 00:48:59,000
Speaker 2: home starts or what?

903
00:48:59,160 --> 00:49:01,839
Speaker 3: Prices are slowing right? I mean not to me, so it's.

904
00:49:01,800 --> 00:49:04,640
Speaker 2: But they're still they're not negative and most especially in

905
00:49:04,680 --> 00:49:07,800
Speaker 2: the coasts, in in the big cities and in in.

906
00:49:08,680 --> 00:49:10,680
Speaker 3: Well, prices aren't negative in the northeast. But if you

907
00:49:10,719 --> 00:49:13,800
Speaker 3: look at like California, like Inland County, Florida, also prices

908
00:49:13,840 --> 00:49:19,799
Speaker 3: are down. They're they're contracting outright, and in places like Texas, Florida, Inland, California, Arizona.

909
00:49:20,280 --> 00:49:23,280
Speaker 2: But they've experienced giant booms over the past five years

910
00:49:23,320 --> 00:49:23,759
Speaker 2: they have.

911
00:49:23,880 --> 00:49:25,520
Speaker 3: But at the same I mean, I would just that

912
00:49:25,680 --> 00:49:27,800
Speaker 3: that's true. But to me, again, it's about what's happening

913
00:49:27,840 --> 00:49:30,840
Speaker 3: at the margin. At the margin, prices are contracting and

914
00:49:30,880 --> 00:49:37,239
Speaker 3: that matters, and that matters, and inventories arising, and you know,

915
00:49:37,320 --> 00:49:40,160
Speaker 3: to me, that's the main asset on the most households

916
00:49:40,200 --> 00:49:42,440
Speaker 3: balance sheet. And if you look at home prices, I

917
00:49:42,440 --> 00:49:44,640
Speaker 3: mean there is an important link between home prices and

918
00:49:44,719 --> 00:49:47,759
Speaker 3: actual price inflation, right, I mean you can just look

919
00:49:47,800 --> 00:49:50,440
Speaker 3: at the data. You know, the the cities across the

920
00:49:50,440 --> 00:49:54,279
Speaker 3: country that are experiencing the most home price deflation are

921
00:49:54,320 --> 00:49:57,680
Speaker 3: also the places where you don't see much consumer price inflation.

922
00:49:57,960 --> 00:49:59,240
Speaker 3: So I think that's notable.

923
00:49:59,640 --> 00:50:02,239
Speaker 2: So when one of your more recent research pieces you

924
00:50:02,320 --> 00:50:06,920
Speaker 2: talked about the importance of the US dollar, Why is

925
00:50:06,960 --> 00:50:10,600
Speaker 2: this such a huge factor on a macro level? What

926
00:50:10,680 --> 00:50:12,880
Speaker 2: do we down ten percent year to date in the dollar?

927
00:50:13,520 --> 00:50:17,200
Speaker 2: How significant is the dollar to the rest of the economy.

928
00:50:19,120 --> 00:50:21,000
Speaker 2: And let me know if i'm if I get if

929
00:50:21,040 --> 00:50:25,200
Speaker 2: I'm talking, If you didn't say that, I have so

930
00:50:25,280 --> 00:50:27,160
Speaker 2: much stuff in my head I can't keep it all straight.

931
00:50:27,280 --> 00:50:31,600
Speaker 3: Well, I mean, the dollar is important. You know, typically

932
00:50:32,160 --> 00:50:36,320
Speaker 3: when you have a weeker dollar, right, I mean you

933
00:50:36,360 --> 00:50:39,840
Speaker 3: should assume that you get some upward pressure on core inflation.

934
00:50:40,520 --> 00:50:42,560
Speaker 3: I think what's notable about what's happened with the dollar

935
00:50:42,600 --> 00:50:44,360
Speaker 3: is that it kind of went the other way in

936
00:50:44,440 --> 00:50:47,480
Speaker 3: terms of what people thought. Right, Remember the big line.

937
00:50:47,600 --> 00:50:49,680
Speaker 3: The line was that you know, we're gonna put these

938
00:50:49,760 --> 00:50:51,840
Speaker 3: tariffs on a lot of the shock is going to

939
00:50:51,880 --> 00:50:53,960
Speaker 3: be neutralized because the dollar is going to get stronger.

940
00:50:54,680 --> 00:50:57,160
Speaker 3: Didn't actually happen. Yeah, Well, I mean it did for

941
00:50:57,239 --> 00:51:01,480
Speaker 3: a day, mainly against EM but most of the weakness

942
00:51:01,480 --> 00:51:03,960
Speaker 3: and the dollar actually was against G ten FX. So

943
00:51:05,280 --> 00:51:08,919
Speaker 3: but at any rate, yeah, I mean, so.

944
00:51:08,840 --> 00:51:12,880
Speaker 2: It's the significant of the dollar to the economic cycle.

945
00:51:12,960 --> 00:51:17,040
Speaker 2: The things like foreigners buying US homes is a big

946
00:51:17,120 --> 00:51:21,920
Speaker 2: driver in a lot of cities. How significant is a

947
00:51:21,960 --> 00:51:26,640
Speaker 2: dollar to either a recession, coal inflation, or real estate?

948
00:51:27,440 --> 00:51:30,640
Speaker 3: Well, so, I mean I think it depends how I mean,

949
00:51:30,680 --> 00:51:32,600
Speaker 3: So it's interesting how you how you're framing this question.

950
00:51:32,680 --> 00:51:36,800
Speaker 3: I mean, I think in remember, in macro like, everything

951
00:51:36,840 --> 00:51:40,080
Speaker 3: is correlated, right, so if if the dollar, to me,

952
00:51:40,120 --> 00:51:42,440
Speaker 3: it's really about why the dollar's moving the way it is.

953
00:51:43,080 --> 00:51:45,319
Speaker 3: So if we were actually if I let's say I'm right,

954
00:51:45,360 --> 00:51:47,879
Speaker 3: and we go into recession, I would assume the dollar

955
00:51:47,920 --> 00:51:50,880
Speaker 3: to be strengthening in that environment, right, because it's a

956
00:51:50,920 --> 00:51:54,239
Speaker 3: safety play, right, So if the US economy's weakening, then

957
00:51:54,360 --> 00:51:56,440
Speaker 3: you know, people are going to seek out safety, and

958
00:51:56,440 --> 00:51:58,000
Speaker 3: that should push the dollar value up.

959
00:51:59,360 --> 00:52:02,200
Speaker 2: You mentioned in April that it was potentially your worst

960
00:52:02,239 --> 00:52:07,400
Speaker 2: case scenario, and in that month, after the big trade

961
00:52:07,560 --> 00:52:12,960
Speaker 2: policy TAFF policy announcement on April second, we saw bond's weekend,

962
00:52:13,120 --> 00:52:17,000
Speaker 2: we saw stocks weekend, we saw the dollar week in sort.

963
00:52:16,760 --> 00:52:18,600
Speaker 3: Of he'll sell America trade. But if you if you

964
00:52:18,680 --> 00:52:20,680
Speaker 3: go back to that though, right, Barry, I mean, if

965
00:52:20,680 --> 00:52:24,080
Speaker 3: you look at the number of times where that combination

966
00:52:25,560 --> 00:52:28,719
Speaker 3: of things happened, I mean you could probably count on

967
00:52:28,719 --> 00:52:31,000
Speaker 3: one hand, right how many days that happened. So it

968
00:52:31,040 --> 00:52:34,040
Speaker 3: was like it was one of these things where the

969
00:52:34,160 --> 00:52:36,480
Speaker 3: narrative kind of got way out in front of what

970
00:52:36,520 --> 00:52:40,680
Speaker 3: was actually happening. And now here we sit a couple

971
00:52:40,719 --> 00:52:43,680
Speaker 3: of months later, and we're talking about US equities at

972
00:52:43,680 --> 00:52:45,640
Speaker 3: all time highs, and you know, so, I mean I

973
00:52:45,640 --> 00:52:48,520
Speaker 3: think it, you know, maybe part of it is maybe

974
00:52:48,520 --> 00:52:50,960
Speaker 3: there's a little bit more enthusiasm around what's going on

975
00:52:51,040 --> 00:52:53,080
Speaker 3: in Europe, right. I mean Europe is taking steps to

976
00:52:53,080 --> 00:52:57,400
Speaker 3: reflate their economy. That's good for the euro you know,

977
00:52:57,560 --> 00:53:00,399
Speaker 3: you have at the margin, like people are a little

978
00:53:00,400 --> 00:53:03,880
Speaker 3: bit more optimistic about emerging markets. Emerging market currencies have

979
00:53:03,960 --> 00:53:09,279
Speaker 3: been doing better, so you know, there's this train of

980
00:53:09,320 --> 00:53:11,960
Speaker 3: thought that, like the dollars, is purely a function of

981
00:53:12,000 --> 00:53:16,600
Speaker 3: like the the Trump more on risk premium. But that,

982
00:53:16,719 --> 00:53:20,440
Speaker 3: to me, does I don't think that goes That might

983
00:53:20,480 --> 00:53:22,399
Speaker 3: be some of it, but I don't think that's nearly

984
00:53:22,480 --> 00:53:22,960
Speaker 3: all of it.

985
00:53:23,040 --> 00:53:26,080
Speaker 2: That is, I've heard taco. I can't say I've heard

986
00:53:26,840 --> 00:53:30,640
Speaker 2: more on risk premia before. That's a new phrase. Don't

987
00:53:30,680 --> 00:53:33,960
Speaker 2: send your hate mail to me. Let me throw a

988
00:53:34,040 --> 00:53:37,400
Speaker 2: curveball question at you before we get to our favorite questions.

989
00:53:38,120 --> 00:53:41,279
Speaker 2: What do you think investors are not talking about but

990
00:53:41,440 --> 00:53:46,560
Speaker 2: perhaps should be And it could be any topic, assets, geography, policy,

991
00:53:46,960 --> 00:53:51,080
Speaker 2: What data point is getting overlooked but is important and

992
00:53:51,120 --> 00:53:52,400
Speaker 2: people should be paying attention to.

993
00:53:52,440 --> 00:53:55,319
Speaker 3: Well. I think what's interesting is this sort of the

994
00:53:55,400 --> 00:53:58,399
Speaker 3: Trump Apprentice show with the fed chair. I think that's

995
00:53:58,400 --> 00:54:02,640
Speaker 3: becoming I mean Scott right, I mean there's this there's

996
00:54:02,680 --> 00:54:05,880
Speaker 3: this whole talk about shadow feed chair. But if you

997
00:54:05,920 --> 00:54:11,320
Speaker 3: get into a situation where by Trump doing what he's doing,

998
00:54:13,920 --> 00:54:18,839
Speaker 3: do you actually get him naming a chairman in name

999
00:54:18,880 --> 00:54:22,640
Speaker 3: only because Kevin yeah or no? But basically, in other words,

1000
00:54:22,680 --> 00:54:24,879
Speaker 3: what I'm saying is these guys are trying to get

1001
00:54:24,920 --> 00:54:28,920
Speaker 3: this done early, essentially to kind of create a condition

1002
00:54:29,000 --> 00:54:31,720
Speaker 3: for some sort of shadow fed shair right with.

1003
00:54:31,600 --> 00:54:34,240
Speaker 2: No authority, no power, no ability to rates.

1004
00:54:34,440 --> 00:54:37,440
Speaker 3: Well that but also maybe someone that's But then if

1005
00:54:37,480 --> 00:54:40,800
Speaker 3: this person ends up becoming the chair, does he actually

1006
00:54:40,880 --> 00:54:43,759
Speaker 3: become a chair in name only? Because Powell is still

1007
00:54:43,760 --> 00:54:44,480
Speaker 3: sticking around?

1008
00:54:45,320 --> 00:54:45,480
Speaker 1: Right?

1009
00:54:45,520 --> 00:54:47,760
Speaker 3: I mean that that to me is what's interesting.

1010
00:54:47,360 --> 00:54:49,000
Speaker 2: Is when does Powell's term end?

1011
00:54:49,440 --> 00:54:51,680
Speaker 3: Well, his term is chair ends next May, but his

1012
00:54:51,800 --> 00:54:54,080
Speaker 3: term as a governor doesn't end for another two years

1013
00:54:54,080 --> 00:54:57,280
Speaker 3: after that. Oh really, So that to me is something

1014
00:54:57,600 --> 00:55:02,399
Speaker 3: that you know, that's a pretty uh, that's a card

1015
00:55:02,400 --> 00:55:05,319
Speaker 3: he can play, right, And the way they go they're

1016
00:55:05,320 --> 00:55:09,239
Speaker 3: going about this, you know you talk about you know,

1017
00:55:09,280 --> 00:55:12,080
Speaker 3: we talk about like Supreme Court justices and like litmus

1018
00:55:12,120 --> 00:55:14,239
Speaker 3: tests when you name right, like there's they have a

1019
00:55:14,280 --> 00:55:17,400
Speaker 3: litmus test for judges. Trump is creating a litmus test

1020
00:55:18,000 --> 00:55:20,839
Speaker 3: in a way for FED, for monetary policy officials, right.

1021
00:55:20,880 --> 00:55:22,200
Speaker 3: He wants someone that's going to cut.

1022
00:55:22,120 --> 00:55:25,000
Speaker 2: Rates, someone who's not going to be independent exactly.

1023
00:55:25,160 --> 00:55:30,280
Speaker 3: And so if so, I do think that this desire

1024
00:55:30,360 --> 00:55:34,000
Speaker 3: to have this kind of like big show like the

1025
00:55:34,040 --> 00:55:40,080
Speaker 3: Apprentice Monetary Policy edition and this sort of like you know,

1026
00:55:40,440 --> 00:55:44,440
Speaker 3: shadow fed chair, you know, trying to kind of undercut

1027
00:55:44,719 --> 00:55:49,680
Speaker 3: Powell before he's done with this term, that could potentially

1028
00:55:49,719 --> 00:55:52,560
Speaker 3: backfire in them because it would just mean that it's

1029
00:55:52,600 --> 00:55:54,840
Speaker 3: possible that if they put in it, if they actually

1030
00:55:54,840 --> 00:55:58,520
Speaker 3: get whoever they want across the finish line, once they're there,

1031
00:55:58,560 --> 00:56:01,400
Speaker 3: they're actually quite they're very weak chair because Powell decides

1032
00:56:01,400 --> 00:56:02,000
Speaker 3: to stick around.

1033
00:56:03,120 --> 00:56:06,040
Speaker 2: That's really quite fascinating. I haven't heard anybody talk about that.

1034
00:56:06,160 --> 00:56:10,040
Speaker 2: So that is very much an under the radar answer.

1035
00:56:10,120 --> 00:56:12,080
Speaker 2: So let's let's in our last few minutes, let's talk

1036
00:56:12,080 --> 00:56:16,480
Speaker 2: about our five favorite questions. We ask all of our guests,

1037
00:56:17,160 --> 00:56:19,680
Speaker 2: starting with tell us what you're streaming these days? What

1038
00:56:19,680 --> 00:56:21,440
Speaker 2: are you listening to? We're watching?

1039
00:56:22,239 --> 00:56:24,920
Speaker 3: M hmm, what am I watching? I just finished The

1040
00:56:24,920 --> 00:56:28,399
Speaker 3: Handmaid's Tale? Oh really that they had their last.

1041
00:56:29,719 --> 00:56:31,400
Speaker 2: Did it hold up through all these seasons?

1042
00:56:32,080 --> 00:56:34,239
Speaker 3: I thought? I thought the last season was actually pretty good,

1043
00:56:35,280 --> 00:56:39,040
Speaker 3: So I I like that. I just watched Netflix The

1044
00:56:39,080 --> 00:56:40,600
Speaker 3: Poop Cruise. That was pretty fun.

1045
00:56:40,840 --> 00:56:43,040
Speaker 2: Oh really, that's people stuck on the boat in the

1046
00:56:43,040 --> 00:56:45,600
Speaker 2: beginning of Yeah, it was a good like it's such

1047
00:56:45,640 --> 00:56:46,640
Speaker 2: a horrible title.

1048
00:56:46,640 --> 00:56:48,680
Speaker 3: It was a quick it was a quick documentary. But

1049
00:56:48,719 --> 00:56:52,799
Speaker 3: I but I kind of enjoyed it. And yeah, those

1050
00:56:52,800 --> 00:56:54,320
Speaker 3: are those are the two things that are tests that

1051
00:56:54,360 --> 00:56:55,360
Speaker 3: are top of mind for me.

1052
00:56:55,640 --> 00:57:01,200
Speaker 2: Those are those are very eclectic, little similar. I walked

1053
00:57:01,239 --> 00:57:04,840
Speaker 2: in on my wife watching The Gilded Age, and somehow

1054
00:57:04,840 --> 00:57:07,839
Speaker 2: I got sucked into this. And it's really quite fascinating

1055
00:57:08,120 --> 00:57:12,120
Speaker 2: because all the issues that we argue about today, wealth

1056
00:57:12,120 --> 00:57:17,320
Speaker 2: inequality and new money versus all money and economic strata

1057
00:57:17,720 --> 00:57:23,080
Speaker 2: and economic mobility, themes of the Gilded Age one hundred

1058
00:57:23,080 --> 00:57:26,320
Speaker 2: and fifty years ago. It's amazing that everything's changed and

1059
00:57:26,400 --> 00:57:29,800
Speaker 2: nothing's changed, right, It's kind of kind of fascinating. Let's

1060
00:57:29,840 --> 00:57:32,720
Speaker 2: talk about mentors. Who were some of your early mentors

1061
00:57:32,720 --> 00:57:34,640
Speaker 2: who helped shape your career.

1062
00:57:35,440 --> 00:57:40,040
Speaker 3: You know, it's interesting. I mean I think about that.

1063
00:57:40,040 --> 00:57:41,600
Speaker 3: I mean, I remember you asked me this question the

1064
00:57:41,640 --> 00:57:45,400
Speaker 3: last time I was on and I probably said, you know,

1065
00:57:45,440 --> 00:57:48,760
Speaker 3: Ethan Harris, right, I think I'd put Drumatis in that

1066
00:57:48,840 --> 00:57:52,440
Speaker 3: category of mentor. But I'm also at the point now

1067
00:57:52,480 --> 00:57:54,280
Speaker 3: I feel like in my career where the people that

1068
00:57:54,320 --> 00:57:57,240
Speaker 3: I idolized early on are now actually like my rivals, right,

1069
00:57:57,240 --> 00:58:00,040
Speaker 3: they're my competitors in some respects, right, I mean we

1070
00:58:00,080 --> 00:58:01,960
Speaker 3: talk about Rosie. I mean, he and I are both

1071
00:58:01,960 --> 00:58:04,320
Speaker 3: in the research business, you know, I mean, so it's

1072
00:58:04,320 --> 00:58:07,040
Speaker 3: sort of it's interesting.

1073
00:58:07,360 --> 00:58:11,080
Speaker 2: If you're bearish the same year he's bearish, or at

1074
00:58:11,160 --> 00:58:16,680
Speaker 2: least the same quarter. That's an unusual alignment because for

1075
00:58:16,720 --> 00:58:18,880
Speaker 2: as long as that might be true right now, because

1076
00:58:18,920 --> 00:58:24,000
Speaker 2: for fifteen years you've been fairly yeah, fairly constructive, and

1077
00:58:24,240 --> 00:58:27,000
Speaker 2: you can't say the same of Rosie. This could be

1078
00:58:27,080 --> 00:58:29,360
Speaker 2: the first time, second half twenty twenty five.

1079
00:58:29,240 --> 00:58:32,240
Speaker 3: We're aligned, right, But you know that just means.

1080
00:58:32,040 --> 00:58:34,000
Speaker 2: You've shifted because he's been sort of.

1081
00:58:34,000 --> 00:58:37,360
Speaker 3: But so now it's more about like not so much mentors,

1082
00:58:37,400 --> 00:58:39,360
Speaker 3: but like who am I Who am I talking to

1083
00:58:39,360 --> 00:58:42,040
Speaker 3: to kind of help me work through my process as

1084
00:58:42,080 --> 00:58:46,320
Speaker 3: like an analyst and yeah, I mean some names that

1085
00:58:46,360 --> 00:58:50,520
Speaker 3: come to mind, like connorson your Blueberg Blueberg opinion colleague.

1086
00:58:50,640 --> 00:58:54,040
Speaker 3: I like talking to him about about the economic outlook.

1087
00:58:54,040 --> 00:58:55,800
Speaker 3: We sort of think about and come out come at

1088
00:58:55,800 --> 00:59:01,560
Speaker 3: things the same way. Luke Kawa is another one. I like,

1089
00:59:02,760 --> 00:59:05,360
Speaker 3: so these are sort of like, you know, I guess

1090
00:59:05,400 --> 00:59:07,960
Speaker 3: you could call them like geriatric millennials, like myself, like

1091
00:59:08,000 --> 00:59:12,320
Speaker 3: we sort of another periatric millennials.

1092
00:59:12,440 --> 00:59:14,440
Speaker 2: Again, another phrase I've never heard before.

1093
00:59:14,840 --> 00:59:16,880
Speaker 3: Scanda im or not is another one. I mean, he's

1094
00:59:16,920 --> 00:59:19,080
Speaker 3: sort of in like more of like the public policy space.

1095
00:59:19,200 --> 00:59:22,760
Speaker 3: But I mean I'm kind of glad he doesn't do it,

1096
00:59:22,800 --> 00:59:26,840
Speaker 3: but he he'd make a great business economist himself. But

1097
00:59:26,920 --> 00:59:28,560
Speaker 3: I mean, these are people that I just like talk

1098
00:59:28,640 --> 00:59:30,640
Speaker 3: to to kind of stress test my own views. And

1099
00:59:30,680 --> 00:59:33,520
Speaker 3: I think that's at this point in my career, Like

1100
00:59:33,560 --> 00:59:36,880
Speaker 3: that's what I need more than than mentors, is sort

1101
00:59:36,920 --> 00:59:39,600
Speaker 3: of smart people that will help me, you know, kind

1102
00:59:39,640 --> 00:59:43,880
Speaker 3: of think through an outlook and stress test. Yeah, or

1103
00:59:44,200 --> 00:59:47,240
Speaker 3: just like where are you wrong? Like like why what

1104
00:59:47,280 --> 00:59:48,240
Speaker 3: are you? What are you missing?

1105
00:59:49,680 --> 00:59:50,320
Speaker 2: That's interesting.

1106
00:59:50,320 --> 00:59:52,440
Speaker 3: So that that's sort of how I think about it.

1107
00:59:52,520 --> 00:59:54,600
Speaker 2: Now, let's let's talk about books. What are some of

1108
00:59:54,640 --> 00:59:56,200
Speaker 2: your favorites? What are you reading currently?

1109
00:59:57,960 --> 00:59:59,160
Speaker 3: You know, I don't read books.

1110
00:59:59,760 --> 01:00:01,640
Speaker 2: I'm a book reads.

1111
01:00:01,960 --> 01:00:06,360
Speaker 3: We did I read the news? I read. I can

1112
01:00:06,400 --> 01:00:08,640
Speaker 3: tell you who are the people that I like reading?

1113
01:00:11,360 --> 01:00:16,120
Speaker 3: You know, in journalism like Nick timros Wall Street love

1114
01:00:16,160 --> 01:00:17,360
Speaker 3: reading his stuff.

1115
01:00:17,600 --> 01:00:19,320
Speaker 2: Fed Whisper these days too.

1116
01:00:19,680 --> 01:00:21,280
Speaker 3: Well. I mean it's not just that, but he has

1117
01:00:21,320 --> 01:00:23,400
Speaker 3: like a very like you know, I mean he's he

1118
01:00:23,720 --> 01:00:26,000
Speaker 3: thinks about things very thoughtfully too, and he and he

1119
01:00:26,080 --> 01:00:28,000
Speaker 3: you know, he does a little data watching himself, so

1120
01:00:28,120 --> 01:00:31,280
Speaker 3: I kind of like reading what he has to say.

1121
01:00:33,800 --> 01:00:39,240
Speaker 3: Jonathan Levin Bloomberg Opinion. So you know those are the

1122
01:00:39,840 --> 01:00:42,760
Speaker 3: your colleague, Josh Brown. I read his stuff, so.

1123
01:00:42,880 --> 01:00:44,280
Speaker 2: He's a very thoughtful writer.

1124
01:00:46,480 --> 01:00:49,560
Speaker 3: So to me, it's really it's really I I you know,

1125
01:00:49,560 --> 01:00:51,360
Speaker 3: I don't have time to read books because I'm too

1126
01:00:51,360 --> 01:00:56,400
Speaker 3: busy like reading, uh you know, read reading the news,

1127
01:00:56,440 --> 01:00:59,320
Speaker 3: reading opinion pieces. The most interesting FED paper that I

1128
01:00:59,400 --> 01:01:03,000
Speaker 3: came across recently is just you know, we talked a

1129
01:01:03,040 --> 01:01:05,480
Speaker 3: little bit about ed Leamer before, but the FED recently

1130
01:01:05,480 --> 01:01:07,880
Speaker 3: published a paper just looking at the housing channel of

1131
01:01:08,160 --> 01:01:10,520
Speaker 3: consumer spending, right like, so they were basically making a

1132
01:01:10,560 --> 01:01:14,320
Speaker 3: fairly obvious point that if housing transactions or new home

1133
01:01:14,360 --> 01:01:16,360
Speaker 3: sales are down, like, that's going to have effects on

1134
01:01:16,800 --> 01:01:19,360
Speaker 3: housing related consumer spending. And that's something that we should

1135
01:01:19,360 --> 01:01:19,760
Speaker 3: be thinking of.

1136
01:01:19,680 --> 01:01:21,720
Speaker 2: Glurable goods Gross Board.

1137
01:01:21,840 --> 01:01:22,000
Speaker 3: Yeah.

1138
01:01:22,000 --> 01:01:26,240
Speaker 2: Absolutely, housing has always been a big driver of the economy.

1139
01:01:26,280 --> 01:01:30,680
Speaker 2: What's been so shocking about this economy is we've seen

1140
01:01:30,720 --> 01:01:35,360
Speaker 2: home transactions drop significantly just because there's no supply, but

1141
01:01:35,440 --> 01:01:38,240
Speaker 2: the economy has been so resilient. It's really been kind

1142
01:01:38,240 --> 01:01:39,760
Speaker 2: of fascinating watching that happen.

1143
01:01:39,840 --> 01:01:41,360
Speaker 3: Yeah, I mean it's interesting. I mean so again, like

1144
01:01:41,400 --> 01:01:43,240
Speaker 3: housing is one of the reasons why I'm cautious on

1145
01:01:43,280 --> 01:01:46,560
Speaker 3: the economic outlook. And you know, I think what's different

1146
01:01:46,680 --> 01:01:49,520
Speaker 3: about this time with respect to housing versus you know,

1147
01:01:49,600 --> 01:01:54,680
Speaker 3: early twenty twenty two, is that now units under construction

1148
01:01:54,720 --> 01:01:57,240
Speaker 3: are coming down. You're in a situation where starts are

1149
01:01:57,320 --> 01:02:01,720
Speaker 3: running below completions, which means that units under I mean

1150
01:02:01,920 --> 01:02:04,960
Speaker 3: essentially units under construction will have to keep falling. And

1151
01:02:06,280 --> 01:02:13,240
Speaker 3: that's not what you had last time. Right back then,

1152
01:02:13,400 --> 01:02:17,200
Speaker 3: units under construction were going up. So to me, that

1153
01:02:17,240 --> 01:02:22,080
Speaker 3: construction piece of it is different this time versus last time.

1154
01:02:22,440 --> 01:02:25,400
Speaker 2: Our final two questions, what sort of advice would you

1155
01:02:25,440 --> 01:02:28,520
Speaker 2: give to a recent grad interested in a career in

1156
01:02:28,560 --> 01:02:30,320
Speaker 2: either economics or investing.

1157
01:02:32,720 --> 01:02:34,160
Speaker 3: I mean, to me, it's just get a foot in

1158
01:02:34,200 --> 01:02:37,280
Speaker 3: the door, you know, figure out the details later. You know,

1159
01:02:37,480 --> 01:02:41,640
Speaker 3: it's sort of it never works out. The way you think,

1160
01:02:42,160 --> 01:02:44,240
Speaker 3: But you just have to put yourself in a position

1161
01:02:44,280 --> 01:02:46,680
Speaker 3: where you have the best chance of succeeding. And that,

1162
01:02:46,760 --> 01:02:48,280
Speaker 3: to me is the most is the best advice I

1163
01:02:48,320 --> 01:02:51,240
Speaker 3: can give someone. So in my case, that manifested itself

1164
01:02:51,280 --> 01:02:53,600
Speaker 3: and get your foot in the door at a bulge

1165
01:02:53,640 --> 01:02:54,440
Speaker 3: record from.

1166
01:02:54,560 --> 01:02:57,200
Speaker 2: I mean you literally were working in HR before you

1167
01:02:57,240 --> 01:02:57,760
Speaker 2: moved into.

1168
01:02:58,480 --> 01:03:01,360
Speaker 3: Yeah, it doesn't like to me, it's about again, it's

1169
01:03:01,360 --> 01:03:04,040
Speaker 3: about putting in yourself in a position where you can succeed.

1170
01:03:04,240 --> 01:03:06,640
Speaker 3: And and I think that that's definitely true. I mean

1171
01:03:06,680 --> 01:03:08,640
Speaker 3: for me, it's a number of ways that happened. Right,

1172
01:03:08,960 --> 01:03:11,200
Speaker 3: I went to n YU. I went to n YU

1173
01:03:11,320 --> 01:03:13,240
Speaker 3: because I knew that if I stayed in New York

1174
01:03:13,520 --> 01:03:16,280
Speaker 3: I'd probably have a better chance at things than if

1175
01:03:16,280 --> 01:03:22,400
Speaker 3: I left. And and it's just you know, I mean NYU.

1176
01:03:23,040 --> 01:03:24,760
Speaker 3: You know, it's not like the best school. It's not

1177
01:03:24,800 --> 01:03:25,960
Speaker 3: like Princeton or Harvard, but.

1178
01:03:26,000 --> 01:03:26,640
Speaker 2: Pretty good school.

1179
01:03:26,720 --> 01:03:28,880
Speaker 3: It's a pretty good school, and it's a business stern.

1180
01:03:29,720 --> 01:03:33,760
Speaker 3: And if you're in New York, you're gonna there recruiters

1181
01:03:33,760 --> 01:03:35,880
Speaker 3: are gonna come after you. If he went to n YU, right, right,

1182
01:03:35,880 --> 01:03:37,120
Speaker 3: It's just that simple.

1183
01:03:36,840 --> 01:03:38,680
Speaker 2: And you just need one hundred k Ye.

1184
01:03:39,240 --> 01:03:41,280
Speaker 3: Well yeah, I mean it wasn't that much when I

1185
01:03:41,360 --> 01:03:45,200
Speaker 3: was going. But but my advice would just be you

1186
01:03:45,240 --> 01:03:47,120
Speaker 3: have to put yourself in a position to succeed and

1187
01:03:47,160 --> 01:03:49,120
Speaker 3: just let the chips fall where they may. I mean

1188
01:03:49,160 --> 01:03:50,920
Speaker 3: that that to me is you know, and if that

1189
01:03:50,960 --> 01:03:54,560
Speaker 3: means taking a job that maybe not the best job,

1190
01:03:54,600 --> 01:03:56,200
Speaker 3: but it's at a firm that you have a lot

1191
01:03:56,240 --> 01:03:58,480
Speaker 3: of you know, respect for, or it's a good firm,

1192
01:03:58,520 --> 01:03:59,280
Speaker 3: good brand name.

1193
01:03:59,800 --> 01:04:02,800
Speaker 2: To make it our final question, what do you know

1194
01:04:02,840 --> 01:04:05,360
Speaker 2: about the world of investing today you wish you knew

1195
01:04:05,800 --> 01:04:09,120
Speaker 2: twenty twenty five years ago when you were first starting out.

1196
01:04:11,720 --> 01:04:16,960
Speaker 3: Ah, that's a tough one. I mean, I think my

1197
01:04:17,080 --> 01:04:19,600
Speaker 3: favorite thing, I mean, to me, what's important is and

1198
01:04:19,720 --> 01:04:22,000
Speaker 3: just trying to relay this back to my seat, is

1199
01:04:22,080 --> 01:04:25,120
Speaker 3: it's important to understand the time horizon of the person

1200
01:04:25,120 --> 01:04:27,560
Speaker 3: that you're talking to and you're providing analysis for because

1201
01:04:27,560 --> 01:04:30,880
Speaker 3: a lot of people live in the short run. But

1202
01:04:31,040 --> 01:04:35,440
Speaker 3: if you're sort of a typical investor, you can you

1203
01:04:35,440 --> 01:04:36,960
Speaker 3: can tune out a lot of the stuff that we're

1204
01:04:36,960 --> 01:04:39,920
Speaker 3: talking about, to be perfectly honest, because to quote my

1205
01:04:39,960 --> 01:04:42,760
Speaker 3: friend Sam row Stock, to usually just go up and

1206
01:04:42,840 --> 01:04:46,360
Speaker 3: so you know, it's sort of you see all this

1207
01:04:46,400 --> 01:04:48,440
Speaker 3: analysis that comes out on the street, like after the

1208
01:04:48,480 --> 01:04:51,680
Speaker 3: ism goes to forty to forty, you know, usually the

1209
01:04:51,760 --> 01:04:54,280
Speaker 3: stock markets higher six months later and twelve months later.

1210
01:04:54,320 --> 01:04:55,960
Speaker 3: We'll yeah, obviously because the.

1211
01:04:55,960 --> 01:05:00,560
Speaker 2: Stuff that's defaults depending on the decade. Looking at it's

1212
01:05:00,560 --> 01:05:01,960
Speaker 2: three out of four or four out of five.

1213
01:05:02,040 --> 01:05:06,760
Speaker 3: Yeah, So to me, it's sort of yeah. I would

1214
01:05:06,800 --> 01:05:09,720
Speaker 3: tell myself back then, like, don't worry so much about

1215
01:05:09,760 --> 01:05:13,400
Speaker 3: making big market calls. Just give people your thought process.

1216
01:05:14,240 --> 01:05:17,960
Speaker 2: Really really interesting. Neil, thank you for being so generous

1217
01:05:18,040 --> 01:05:21,280
Speaker 2: with your time. We have been speaking with Neil Dutta,

1218
01:05:21,680 --> 01:05:26,000
Speaker 2: head of economic research at Renmac. If you enjoy this conversation,

1219
01:05:26,440 --> 01:05:28,680
Speaker 2: well check out any of the five hundred and fifty

1220
01:05:28,720 --> 01:05:32,720
Speaker 2: we've done over the past eleven years. You can find

1221
01:05:32,760 --> 01:05:37,240
Speaker 2: those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your

1222
01:05:37,280 --> 01:05:40,120
Speaker 2: favorite podcast. And be sure and check out my new

1223
01:05:40,120 --> 01:05:44,640
Speaker 2: book How Not to Invest The Bad ideas, numbers and

1224
01:05:44,720 --> 01:05:48,640
Speaker 2: behavior that destroys wealth and how to avoid them How

1225
01:05:48,680 --> 01:05:52,560
Speaker 2: Not to Invest at your favorite bookseller right now. I

1226
01:05:52,600 --> 01:05:54,640
Speaker 2: would be remiss if it I did not thank the

1227
01:05:54,680 --> 01:05:59,120
Speaker 2: crack team who helps me put these conversations together each week.

1228
01:05:59,480 --> 01:06:04,000
Speaker 2: My audio engineer is Peter Nicolino. Anna Luke is my producer.

1229
01:06:04,200 --> 01:06:08,520
Speaker 2: Jean Russo is my researcher. I'm Barry Ruscholtz. You've been

1230
01:06:08,560 --> 01:06:15,600
Speaker 2: listening to Masters in Business on Bloomberg Radio.