1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,160 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:26,520 Speaker 2: can also watch the show live on YouTube. Visit the 6 00:00:26,520 --> 00:00:31,280 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 7 00:00:31,280 --> 00:00:34,320 Speaker 2: mornings from seven to ten am Eastern from our global 8 00:00:34,360 --> 00:00:39,000 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 9 00:00:39,360 --> 00:00:42,920 Speaker 2: or anywhere else you listen and always i Bloomberg Radio, 10 00:00:43,080 --> 00:00:47,080 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. The first 11 00:00:47,120 --> 00:00:49,760 Speaker 2: print here off Lisa's Great data check is up five 12 00:00:49,920 --> 00:00:53,360 Speaker 2: ninety five on the doll. What a perfect moment to 13 00:00:53,360 --> 00:00:57,080 Speaker 2: speak to mister Eisman with Newberger Berman acclaimed in a 14 00:00:57,120 --> 00:00:59,240 Speaker 2: movie of a few years ago. Look for the new 15 00:00:59,440 --> 00:01:04,240 Speaker 2: Eisman Hollywood property. I think it's a Memorial Day, Paul. 16 00:01:04,400 --> 00:01:06,480 Speaker 2: You know, Memorial Day's a good open. Sure, you know, yes, 17 00:01:06,560 --> 00:01:09,240 Speaker 2: it's very good. Look for Bear Squeeze. You're gonna see 18 00:01:09,240 --> 00:01:13,520 Speaker 2: that Memorial Day twenty twenty five, Steve, is this just 19 00:01:13,560 --> 00:01:15,839 Speaker 2: one big short cover? We got the wall of money 20 00:01:15,840 --> 00:01:18,440 Speaker 2: out there. Lawrence McDonald, who has been brilliant on this 21 00:01:18,560 --> 00:01:22,520 Speaker 2: with the action yesterday. Is it an indirect short cover 22 00:01:22,680 --> 00:01:22,960 Speaker 2: going on? 23 00:01:24,760 --> 00:01:28,240 Speaker 3: That's too sophisticated for me. I mean, I find the 24 00:01:28,319 --> 00:01:33,280 Speaker 3: whole incredible amount of energy that people spend on the 25 00:01:33,319 --> 00:01:38,560 Speaker 3: FED day more amusing than informative. You know, think about 26 00:01:38,600 --> 00:01:40,880 Speaker 3: it for a second. How much ink was spilt about 27 00:01:40,880 --> 00:01:43,600 Speaker 3: whether the Fed with lower twenty five or fifty? All right, 28 00:01:43,600 --> 00:01:46,160 Speaker 3: so they lowered fifty, and then what happened? The market 29 00:01:46,240 --> 00:01:49,600 Speaker 3: had no reaction, just went up and down. Nobody knew 30 00:01:49,640 --> 00:01:55,000 Speaker 3: what to do. And today the market's up huge, but 31 00:01:55,160 --> 00:01:59,680 Speaker 3: rates are higher, so you know, you put it all together. 32 00:02:00,840 --> 00:02:02,840 Speaker 3: I tried not to spend too much time trying to 33 00:02:02,880 --> 00:02:06,160 Speaker 3: figure it out. All I care about is the general 34 00:02:06,200 --> 00:02:09,840 Speaker 3: direction of the FED is lower. How much lower? I 35 00:02:09,840 --> 00:02:12,880 Speaker 3: don't particularly care. I don't think that's particularly important. The 36 00:02:12,919 --> 00:02:16,480 Speaker 3: more important question is how's the economy. Economy is slowed, 37 00:02:16,480 --> 00:02:18,919 Speaker 3: But the data seems to indicate that the economy is fine, 38 00:02:18,960 --> 00:02:20,919 Speaker 3: and that's all that really matters. 39 00:02:21,080 --> 00:02:23,480 Speaker 4: So what other than you or I guess in the 40 00:02:23,520 --> 00:02:26,200 Speaker 4: context of the economy, what are the drivers for kind 41 00:02:26,240 --> 00:02:29,000 Speaker 4: of whether you're bullish or bearish, what's some of the 42 00:02:29,040 --> 00:02:30,040 Speaker 4: big variables that you've find. 43 00:02:30,360 --> 00:02:35,400 Speaker 3: I've gotten thematic more thematic in the last bunch of years. 44 00:02:35,480 --> 00:02:40,360 Speaker 3: And I think that there are two great equity themes 45 00:02:40,400 --> 00:02:44,639 Speaker 3: of our time, and we try and focus our portfolios 46 00:02:44,680 --> 00:02:48,080 Speaker 3: as much as reasonable on those themes, and those are AI, 47 00:02:48,200 --> 00:02:55,720 Speaker 3: slash tech and infrastructure. And I think those themes will 48 00:02:55,800 --> 00:02:58,200 Speaker 3: last for years. They'll be variations, you know, on the 49 00:02:58,200 --> 00:03:01,480 Speaker 3: infrastructure side there you know, politics do matter, but the 50 00:03:01,560 --> 00:03:02,800 Speaker 3: overall theme will continue. 51 00:03:02,919 --> 00:03:04,800 Speaker 2: Paul, let me interrupt with the data check here as 52 00:03:04,840 --> 00:03:07,320 Speaker 2: a market surge, Dow up five hundred and sixty six 53 00:03:07,360 --> 00:03:10,600 Speaker 2: points on a percentage basis, the market lifts here at 54 00:03:10,680 --> 00:03:14,480 Speaker 2: nine thirty three, greater than futures NaSTA cup two point 55 00:03:14,480 --> 00:03:17,720 Speaker 2: three percent as Paul predicted, the vis comes in sixteen 56 00:03:18,200 --> 00:03:19,440 Speaker 2: point four zero on. 57 00:03:19,400 --> 00:03:22,840 Speaker 4: The AI trade, Steve, how do you suggest people play it? 58 00:03:22,880 --> 00:03:24,600 Speaker 4: I think the first name people kind of jumped on 59 00:03:24,720 --> 00:03:26,680 Speaker 4: was in Vidia for good reason, because they put up 60 00:03:26,480 --> 00:03:29,320 Speaker 4: that big revenue prints a couple of years ago. How 61 00:03:29,360 --> 00:03:30,720 Speaker 4: else are you trying to play this? 62 00:03:31,560 --> 00:03:34,480 Speaker 3: So, I mean the way we play it is where 63 00:03:34,520 --> 00:03:37,440 Speaker 3: most people are playing it. In Vidia, some other chip companies, 64 00:03:39,240 --> 00:03:44,440 Speaker 3: the very large companies with massive databases, you know, then 65 00:03:44,480 --> 00:03:47,760 Speaker 3: the question becomes, you know, what apps and who's going 66 00:03:47,800 --> 00:03:49,560 Speaker 3: to create them are going to work? And I think 67 00:03:49,560 --> 00:03:52,320 Speaker 3: that is so early right now that it's really not 68 00:03:52,400 --> 00:03:53,200 Speaker 3: worth talking about. 69 00:03:53,320 --> 00:03:53,480 Speaker 2: You know. 70 00:03:53,600 --> 00:03:57,240 Speaker 3: Just as an example, the part of the business of 71 00:03:57,360 --> 00:04:01,000 Speaker 3: accenture that is doing extremely well is not the consulting side, 72 00:04:01,040 --> 00:04:03,640 Speaker 3: which would do when companies are spending a lot of 73 00:04:03,680 --> 00:04:07,480 Speaker 3: money on AI. It's the outsourcing side. And the reason 74 00:04:07,480 --> 00:04:11,400 Speaker 3: why the outsourcing side is doing well is that most 75 00:04:11,440 --> 00:04:15,760 Speaker 3: S and P companies do not have their data sufficiently 76 00:04:16,040 --> 00:04:19,160 Speaker 3: in one place, structured appropriately to even do anything with 77 00:04:19,200 --> 00:04:22,359 Speaker 3: respect to AI. So it's very very early in the 78 00:04:22,400 --> 00:04:28,240 Speaker 3: AI story. The one longer term theme that we've been 79 00:04:28,240 --> 00:04:31,760 Speaker 3: thinking about, although it's so long term I don't know 80 00:04:31,839 --> 00:04:33,760 Speaker 3: quite what to do with it yet, is I think 81 00:04:33,760 --> 00:04:37,640 Speaker 3: there's a good argument to be made that we have 82 00:04:37,800 --> 00:04:43,200 Speaker 3: seen hardware rerate up and software somewhat de rate, and 83 00:04:43,279 --> 00:04:46,600 Speaker 3: I think it's possible that AI could cause that to continue, 84 00:04:46,800 --> 00:04:51,080 Speaker 3: because it's possible that the cost of creating software because 85 00:04:51,120 --> 00:04:54,239 Speaker 3: of AI is going to plummet. And if that's the case, 86 00:04:54,600 --> 00:04:58,680 Speaker 3: some of the iconic software companies out there may not 87 00:04:58,800 --> 00:05:01,000 Speaker 3: have motes around their business that are quite as high 88 00:05:01,040 --> 00:05:01,400 Speaker 3: as they. 89 00:05:01,360 --> 00:05:04,000 Speaker 2: Used to be within the skill set that you've earned. 90 00:05:04,320 --> 00:05:08,640 Speaker 2: And at Newburger Berman, do you people believe the capex 91 00:05:08,760 --> 00:05:15,320 Speaker 2: expenditure of technology is being done intelligently and efficiently or 92 00:05:15,400 --> 00:05:18,480 Speaker 2: is there wasted money being squandered away on AI? 93 00:05:20,080 --> 00:05:22,800 Speaker 3: I mean, I'm sure both. It's you know, we won't know. 94 00:05:22,960 --> 00:05:24,960 Speaker 3: We won't know the answer to that question for years, 95 00:05:24,960 --> 00:05:27,120 Speaker 3: so I don't think it's worth trying to figure that 96 00:05:27,120 --> 00:05:27,839 Speaker 3: out at this point. 97 00:05:28,560 --> 00:05:30,520 Speaker 5: So how else do you think? I mean, it's. 98 00:05:32,040 --> 00:05:34,039 Speaker 4: Are you A lot of folks are concerned about this 99 00:05:34,080 --> 00:05:35,560 Speaker 4: mag seven is concentration risk? 100 00:05:35,640 --> 00:05:37,000 Speaker 5: Just as a market concern? 101 00:05:37,240 --> 00:05:39,480 Speaker 4: Do you have this market structure concern that so much 102 00:05:39,520 --> 00:05:42,000 Speaker 4: of this market is weighted towards these MAG seven ors 103 00:05:42,000 --> 00:05:44,400 Speaker 4: that beyond kind of well, I think. 104 00:05:44,200 --> 00:05:48,039 Speaker 3: One interesting aspect of that it'll come to that is 105 00:05:48,080 --> 00:05:54,279 Speaker 3: that many active managers, probably more on the institutional side, 106 00:05:55,839 --> 00:06:00,520 Speaker 3: underperform because their risk parameters don't allow them to overweight 107 00:06:00,640 --> 00:06:07,240 Speaker 3: the MEG seven because the megs so big, and it's 108 00:06:07,279 --> 00:06:10,520 Speaker 3: probably going to continue. I don't think we will really 109 00:06:10,560 --> 00:06:14,880 Speaker 3: see a broadening out until we see apps come out 110 00:06:15,120 --> 00:06:17,240 Speaker 3: so that some of the middle more middle companies can 111 00:06:17,279 --> 00:06:18,640 Speaker 3: do that. But that's we're ways away from that. 112 00:06:18,800 --> 00:06:20,719 Speaker 2: Do you have a favorite mag seven? 113 00:06:21,040 --> 00:06:22,480 Speaker 3: Is there one where you I don't want to talk 114 00:06:22,520 --> 00:06:25,839 Speaker 3: about individual stocks. I'm just not gonna do that, right, 115 00:06:25,880 --> 00:06:27,560 Speaker 3: I get into my firm gets me into trouble. 116 00:06:28,440 --> 00:06:30,320 Speaker 5: The firm gets you into trouble. You don't get yourself 117 00:06:30,360 --> 00:06:33,200 Speaker 5: into trouble. Okay, I got it on the list. 118 00:06:34,880 --> 00:06:37,760 Speaker 4: On the infrastructure theme, yes, do I go out there 119 00:06:37,800 --> 00:06:40,600 Speaker 4: and just buy like Cummings and engines and. 120 00:06:40,800 --> 00:06:44,120 Speaker 3: Well, let's let me talk about that because politics are important. Okay. 121 00:06:44,960 --> 00:06:48,480 Speaker 3: So I think that there are four mega infrastructure themes, 122 00:06:48,600 --> 00:06:53,960 Speaker 3: and then there's a fifth. The four are on shoring. 123 00:06:54,920 --> 00:06:59,720 Speaker 3: The second is you know, improvement of the grid yep. 124 00:07:00,160 --> 00:07:03,000 Speaker 3: Third is everything having to do with actually building the 125 00:07:03,040 --> 00:07:06,040 Speaker 3: data centers and that is overlapp there with the grid. 126 00:07:06,520 --> 00:07:09,000 Speaker 3: And then there's then there's gratification, and then there's all 127 00:07:09,000 --> 00:07:12,040 Speaker 3: the bills that Guiden passed to shove money into all 128 00:07:12,080 --> 00:07:16,680 Speaker 3: four boxes. You know where the politics can become important 129 00:07:17,000 --> 00:07:21,120 Speaker 3: is you know I'll do to extreme cases. If Trump sweeps, 130 00:07:21,760 --> 00:07:26,600 Speaker 3: gratifications are going to get de emphasized, and if Harris sweeps, 131 00:07:26,960 --> 00:07:30,400 Speaker 3: you know, gratification will get re emphasized. So that's important. 132 00:07:30,560 --> 00:07:32,040 Speaker 3: So the politics here are important. 133 00:07:32,320 --> 00:07:34,560 Speaker 2: Steve Weisman with us, and we will continue here. Let 134 00:07:34,640 --> 00:07:36,240 Speaker 2: me do a data check here with the markets and 135 00:07:36,280 --> 00:07:41,200 Speaker 2: the move SPX, Dow records, Dow up five and forty 136 00:07:41,240 --> 00:07:44,360 Speaker 2: points to the solid forty two thousand print in the 137 00:07:44,400 --> 00:07:49,040 Speaker 2: Dow fifty seven hundred, SPX up eighty six points, Nasdaq 138 00:07:49,200 --> 00:07:52,440 Speaker 2: one two point with Steve Weison. 139 00:07:52,600 --> 00:07:55,320 Speaker 5: Steve, how you, how concerned are you if at all? 140 00:07:55,520 --> 00:07:58,080 Speaker 3: We're not on right now? What's on? We're We're on, 141 00:07:58,080 --> 00:07:59,880 Speaker 3: We're on Ali's far radio. It's hard to tell you. 142 00:08:00,040 --> 00:08:02,520 Speaker 5: Yeah, with the red light. You make it easy. The 143 00:08:02,520 --> 00:08:05,840 Speaker 5: red light. Yes, that's for me. 144 00:08:06,120 --> 00:08:07,400 Speaker 3: I've just learned something. 145 00:08:07,200 --> 00:08:08,960 Speaker 5: Exactly, all right, valuation. 146 00:08:09,080 --> 00:08:12,400 Speaker 4: How concerned are you, if at all about this market broadly? 147 00:08:13,000 --> 00:08:17,320 Speaker 3: You know, I think I learned this lesson in the 148 00:08:17,360 --> 00:08:20,440 Speaker 3: dot com bust. So you know, when when dot com 149 00:08:20,520 --> 00:08:23,400 Speaker 3: was rocking and rolling, everybody was yelling and screaming about evaluation. 150 00:08:24,080 --> 00:08:29,640 Speaker 3: But that didn't matter until there was a recession and 151 00:08:29,720 --> 00:08:31,640 Speaker 3: it turned out that a lot of these companies had 152 00:08:31,640 --> 00:08:36,960 Speaker 3: actually fundamental problems. So I don't spend I mean, generally speaking, 153 00:08:37,040 --> 00:08:38,800 Speaker 3: I'm not going to invest in a company that sells 154 00:08:38,800 --> 00:08:41,000 Speaker 3: at a thousand PE. That's just not what I do. 155 00:08:41,520 --> 00:08:46,040 Speaker 3: But we'll invest in some high PE stocks. I just 156 00:08:46,120 --> 00:08:49,680 Speaker 3: don't feel like it's as long as the economy is fine. 157 00:08:49,720 --> 00:08:53,440 Speaker 3: It's not. It's more of an academic exercise than anything else. 158 00:08:53,760 --> 00:08:55,760 Speaker 4: So the economy, I mean, from what we're hearing from you, 159 00:08:55,920 --> 00:09:00,439 Speaker 4: the economy really is underpinning almost everything you foundation. I 160 00:09:00,480 --> 00:09:03,520 Speaker 4: guess of how you view investments correct? Okay, how about 161 00:09:03,559 --> 00:09:05,440 Speaker 4: on the fixed income side, what do we do there? 162 00:09:05,640 --> 00:09:07,160 Speaker 4: I mean I can sit in it to your treasury. 163 00:09:07,200 --> 00:09:09,600 Speaker 4: I used to get five percent. I'm still getting three 164 00:09:09,600 --> 00:09:12,240 Speaker 4: point six percent. That's not bad for you know, like 165 00:09:12,320 --> 00:09:12,880 Speaker 4: no risk? 166 00:09:13,240 --> 00:09:14,760 Speaker 5: What do I got there? And takes my credit risk? 167 00:09:14,800 --> 00:09:15,200 Speaker 5: Do you think? 168 00:09:16,920 --> 00:09:21,120 Speaker 3: Look, we do some corporate bond investing, but mostly what 169 00:09:21,200 --> 00:09:24,600 Speaker 3: we do is equities. Okay, I'm I don't have a 170 00:09:24,679 --> 00:09:27,640 Speaker 3: strong view on fixed income right now, one way or 171 00:09:27,640 --> 00:09:28,640 Speaker 3: the other. I really don't. 172 00:09:28,920 --> 00:09:31,320 Speaker 5: You have alternatives in your portfolio. 173 00:09:31,360 --> 00:09:34,160 Speaker 3: I don't have alternatives either. I'm just a stock jockey, 174 00:09:34,200 --> 00:09:36,800 Speaker 3: stock jobs, stock and I always have been. 175 00:09:36,880 --> 00:09:39,120 Speaker 2: Okay, we got to talk banks here in Financial with 176 00:09:39,200 --> 00:09:42,920 Speaker 2: Steve Iceman. Here's a quote. So, yeah, I met with 177 00:09:42,960 --> 00:09:45,760 Speaker 2: this retail banker yesterday, and I'm supposed to be getting 178 00:09:45,800 --> 00:09:48,560 Speaker 2: him to invest in her fun but instead I start 179 00:09:48,600 --> 00:09:51,800 Speaker 2: grilling him about our overdraft penalties. And now was bank, 180 00:09:51,880 --> 00:09:55,040 Speaker 2: let's a customer write ten twelve checks before they tell 181 00:09:55,120 --> 00:09:58,199 Speaker 2: them they're overdrawn. And this creep is making billions off 182 00:09:58,240 --> 00:09:59,440 Speaker 2: of screwing over people. 183 00:09:59,760 --> 00:10:03,120 Speaker 3: This way script that sounds like a much younger version 184 00:10:03,160 --> 00:10:07,080 Speaker 3: of me. It's from the script A very angry young man, 185 00:10:07,360 --> 00:10:08,480 Speaker 3: A very angry. 186 00:10:08,200 --> 00:10:12,199 Speaker 2: Young man from twenty fifteen. Can you buy New York 187 00:10:12,400 --> 00:10:16,080 Speaker 2: big bank? Can you buy the future of Bank of America? 188 00:10:16,120 --> 00:10:18,840 Speaker 2: You know, not individual stocks, but can you buy the 189 00:10:18,840 --> 00:10:20,520 Speaker 2: big bank success of the future. 190 00:10:22,080 --> 00:10:24,959 Speaker 3: So let's talk about what the positives are. The positives 191 00:10:25,000 --> 00:10:29,040 Speaker 3: are that the regulators did a very very good job 192 00:10:29,280 --> 00:10:34,720 Speaker 3: post Dodd Frank led by vice chair Daniel Torulo, truly 193 00:10:34,760 --> 00:10:39,760 Speaker 3: one of the unsung heroes of the financial system. The 194 00:10:39,880 --> 00:10:42,880 Speaker 3: leverage in the banks is cut by more than half. 195 00:10:43,240 --> 00:10:47,400 Speaker 3: Even within that leverage, they have been de risked. So 196 00:10:47,640 --> 00:10:50,560 Speaker 3: the financial system of the United States, as far as 197 00:10:50,640 --> 00:10:53,199 Speaker 3: I'm concerned, is very very safe, and I don't lose 198 00:10:53,240 --> 00:10:54,920 Speaker 3: any sleep about it. And by the way, I sleep 199 00:10:55,000 --> 00:11:00,559 Speaker 3: very well. But do I think there's a great story 200 00:11:00,640 --> 00:11:04,160 Speaker 3: to invest in some of the very large banks. Not really. 201 00:11:04,559 --> 00:11:07,000 Speaker 3: I just don't think there's a story there one way 202 00:11:07,040 --> 00:11:07,280 Speaker 3: or the other. 203 00:11:07,360 --> 00:11:09,160 Speaker 2: It's too important. I got to get this in lex 204 00:11:09,440 --> 00:11:13,320 Speaker 2: in the Ft today, blistering about private equity and the 205 00:11:13,360 --> 00:11:17,600 Speaker 2: ability not to cash out. Do you see potential problems 206 00:11:17,640 --> 00:11:19,840 Speaker 2: within the illiquidity of private equity? 207 00:11:22,160 --> 00:11:24,000 Speaker 3: You know, you could spend any bad tail you want. 208 00:11:24,040 --> 00:11:26,520 Speaker 3: I don't know. There's just not enough data on what's 209 00:11:26,559 --> 00:11:29,320 Speaker 3: in private expert to really know one way or the other. 210 00:11:29,880 --> 00:11:30,520 Speaker 2: You can't make that. 211 00:11:30,760 --> 00:11:31,800 Speaker 3: I can't make that judgment. 212 00:11:31,960 --> 00:11:36,600 Speaker 2: See that. You know his lawyers love him, you know, 213 00:11:36,640 --> 00:11:37,440 Speaker 2: won't do individuals. 214 00:11:37,800 --> 00:11:38,720 Speaker 3: My lawyers love me. 215 00:11:38,800 --> 00:11:38,960 Speaker 1: You know. 216 00:11:39,520 --> 00:11:42,640 Speaker 3: One time, in this quick story in the nineties, Oppenheimer 217 00:11:42,720 --> 00:11:44,880 Speaker 3: got I was a Oppenheimer, and Oppenheimer got sued over 218 00:11:44,960 --> 00:11:48,560 Speaker 3: something that I had written, and and there was you know, 219 00:11:48,559 --> 00:11:50,920 Speaker 3: it was discovery, and the lawyers called me and said, 220 00:11:50,920 --> 00:11:52,920 Speaker 3: send us everything you have on this company that you 221 00:11:52,960 --> 00:11:55,480 Speaker 3: wrote about. And I sent it to them, which was 222 00:11:55,520 --> 00:11:58,480 Speaker 3: only the reports that I had written. And the lawyer 223 00:11:58,520 --> 00:12:01,080 Speaker 3: called me and said, what about your notes? And I said, 224 00:12:01,640 --> 00:12:04,280 Speaker 3: I don't have notes. I don't take notes. He goes, 225 00:12:04,400 --> 00:12:08,120 Speaker 3: I love you. 226 00:12:06,520 --> 00:12:08,760 Speaker 2: Guys, thank you so much. We love you too. I 227 00:12:08,880 --> 00:12:12,960 Speaker 2: greatly appreciate it. Streisman is with Newburger Berman some perspectives 228 00:12:12,960 --> 00:12:28,800 Speaker 2: there given most interesting times. Julian Emmanuel joins us. Right now, 229 00:12:28,960 --> 00:12:32,200 Speaker 2: can you send thanks to Edward Heiman ed Heiman and 230 00:12:32,280 --> 00:12:36,240 Speaker 2: tell him thank you for appearing generously ten eleven, twelve 231 00:12:36,320 --> 00:12:38,520 Speaker 2: days ago and then coming in with your redo call 232 00:12:39,240 --> 00:12:42,080 Speaker 2: he cast aspersion on you. What did you say to 233 00:12:42,360 --> 00:12:45,280 Speaker 2: ed Heyman to get him to switch a view from 234 00:12:45,920 --> 00:12:50,520 Speaker 2: recession difficulty into the soft landing we're celebrating this morning. 235 00:12:50,720 --> 00:12:52,840 Speaker 6: Well, I think if you go back and think about it, Tom, 236 00:12:52,920 --> 00:12:56,040 Speaker 6: what it does is, you know our business first of all, 237 00:12:56,080 --> 00:12:59,680 Speaker 6: forecasting things is difficult whether you're an economist or a strategist. 238 00:13:00,120 --> 00:13:02,840 Speaker 6: But as part of the process again, you know, Kin's 239 00:13:02,920 --> 00:13:06,400 Speaker 6: is famous for the statement when the facts change, I change, 240 00:13:06,440 --> 00:13:07,080 Speaker 6: what do you do? 241 00:13:07,240 --> 00:13:07,440 Speaker 2: Sir? 242 00:13:08,559 --> 00:13:11,400 Speaker 6: We went through that same thing ourselves at midyear in 243 00:13:11,520 --> 00:13:14,000 Speaker 6: terms of taking our price target up to six thousand, 244 00:13:15,280 --> 00:13:21,320 Speaker 6: essentially recognizing that this environment is totally different than anything 245 00:13:21,520 --> 00:13:23,000 Speaker 6: right any of us have ever seen. 246 00:13:23,080 --> 00:13:26,840 Speaker 2: And with immense respect to CJ. Lawrence and what Edheimen 247 00:13:26,960 --> 00:13:33,320 Speaker 2: invented years ago is the distinction pandemic, fiscal stimuli or 248 00:13:33,400 --> 00:13:36,839 Speaker 2: is it a new productivity we don't understand well? 249 00:13:36,880 --> 00:13:40,880 Speaker 6: And the kicker is is that it could well be 250 00:13:41,520 --> 00:13:45,320 Speaker 6: the new productivity we don't understand. And clearly, you know, 251 00:13:46,000 --> 00:13:49,439 Speaker 6: you wouldn't have seen the announcement of this massive deal 252 00:13:49,960 --> 00:13:54,920 Speaker 6: for building AI, you know, power plant type build out 253 00:13:55,280 --> 00:13:57,960 Speaker 6: that we've seen in the last couple of days if 254 00:13:58,000 --> 00:14:01,319 Speaker 6: there were not the belief and we share that belief 255 00:14:01,720 --> 00:14:06,520 Speaker 6: that AI is absolutely going to underpin productivity in the 256 00:14:06,559 --> 00:14:07,120 Speaker 6: long run. 257 00:14:07,120 --> 00:14:09,800 Speaker 4: Here, what did you make yesterday of our fetter reserve 258 00:14:09,840 --> 00:14:12,360 Speaker 4: and kind of what they're messaging was, what'd you take 259 00:14:12,360 --> 00:14:12,800 Speaker 4: away from that? 260 00:14:13,160 --> 00:14:18,160 Speaker 6: Well, it really was an example of again getting the 261 00:14:18,240 --> 00:14:23,400 Speaker 6: dual mandate back squarely in focus, but also reinforcing the 262 00:14:23,440 --> 00:14:28,040 Speaker 6: message we're cutting because we can not because we have to, 263 00:14:28,160 --> 00:14:32,280 Speaker 6: and this whole idea that they know something that we 264 00:14:32,400 --> 00:14:37,600 Speaker 6: don't with regard to economic weakness completely discredit that. But 265 00:14:37,680 --> 00:14:40,880 Speaker 6: yet at the same time it's also an implicit message 266 00:14:41,040 --> 00:14:44,720 Speaker 6: that if the data does weaken, and particularly if we 267 00:14:44,840 --> 00:14:49,080 Speaker 6: have the kind of election volatility that we had, say 268 00:14:49,160 --> 00:14:53,240 Speaker 6: in the Hanging Chad year of two thousand, where stocks 269 00:14:53,280 --> 00:14:57,960 Speaker 6: were similarly expensive, the economy was starting to slow and 270 00:14:58,000 --> 00:14:59,800 Speaker 6: then all of a sudden you couldn't figure out who 271 00:14:59,800 --> 00:15:03,680 Speaker 6: the resident was, and that soured the mood and soured 272 00:15:03,680 --> 00:15:06,960 Speaker 6: asset markets. The FED is prepared to act. The FED 273 00:15:07,080 --> 00:15:09,880 Speaker 6: did not act in two thousand and that's part of 274 00:15:09,880 --> 00:15:12,480 Speaker 6: why you got a recession in early one. 275 00:15:13,280 --> 00:15:16,120 Speaker 4: So, given what we've heard from the Fed yesterday, given 276 00:15:16,160 --> 00:15:18,280 Speaker 4: what we know about I guess earnings, is it full 277 00:15:18,320 --> 00:15:20,200 Speaker 4: speed ahead on risk assets? 278 00:15:20,200 --> 00:15:22,800 Speaker 5: And if so, or do you see the opportunities? 279 00:15:23,280 --> 00:15:29,600 Speaker 6: So we do continue to be very positive into year end, 280 00:15:29,640 --> 00:15:33,360 Speaker 6: and so far twenty five looks good to us as well. 281 00:15:34,720 --> 00:15:38,840 Speaker 6: You know, part of this narrative again is the FEDS 282 00:15:38,920 --> 00:15:43,680 Speaker 6: behind us. We have earnings that will once again when 283 00:15:43,840 --> 00:15:47,480 Speaker 6: the reports start in a couple of weeks, confirm the 284 00:15:47,520 --> 00:15:50,760 Speaker 6: fact that second quarter was not an anomaly. That yes, 285 00:15:51,280 --> 00:15:53,800 Speaker 6: the other four hundred and ninety three stocks in the 286 00:15:53,840 --> 00:15:57,320 Speaker 6: S and P five hundred are growing their earnings. And 287 00:15:57,680 --> 00:16:02,160 Speaker 6: that combination along with the statistic that we quote and 288 00:16:02,440 --> 00:16:06,240 Speaker 6: we really like six out of six presidential election years 289 00:16:06,440 --> 00:16:10,200 Speaker 6: where you were up double digits on labor day, every 290 00:16:10,240 --> 00:16:12,240 Speaker 6: single one of them finished higher by year end. 291 00:16:12,320 --> 00:16:14,080 Speaker 2: What does the I do to go to you know, 292 00:16:14,320 --> 00:16:16,880 Speaker 2: Edwards in and of course I start with trucking statistics 293 00:16:16,920 --> 00:16:20,160 Speaker 2: because that's what he's doing. But what what is the 294 00:16:20,280 --> 00:16:25,240 Speaker 2: dynamics of corporate and business investment given the madness of 295 00:16:25,280 --> 00:16:27,880 Speaker 2: the last twenty four hours, Well. 296 00:16:27,760 --> 00:16:32,040 Speaker 6: It's got to be plus plus it is. And again 297 00:16:33,240 --> 00:16:35,960 Speaker 6: we've been doing this while and we try to tempt 298 00:16:36,040 --> 00:16:40,240 Speaker 6: you know, it's curb your enthusiasm the legendary comedy show, 299 00:16:40,640 --> 00:16:43,680 Speaker 6: because part of what you don't ever really want to 300 00:16:43,720 --> 00:16:46,640 Speaker 6: do emotionally in the last twenty four hours is a 301 00:16:46,680 --> 00:16:51,600 Speaker 6: perfect example of this, because the initial reaction was disappointment 302 00:16:52,040 --> 00:16:54,880 Speaker 6: to weigh to way the market traded, and then all 303 00:16:54,920 --> 00:16:58,240 Speaker 6: of a sudden this morning we've reassessed and it's full 304 00:16:58,280 --> 00:17:01,360 Speaker 6: steam ahead. We want to be temp but the fact 305 00:17:01,480 --> 00:17:05,199 Speaker 6: is is that we are in one of those unique 306 00:17:05,280 --> 00:17:09,280 Speaker 6: situations where because the economy looks like it's going to 307 00:17:09,400 --> 00:17:13,440 Speaker 6: soft land at having changed his forecast, you are in 308 00:17:13,600 --> 00:17:17,520 Speaker 6: one of these win win scenarios where companies are likely 309 00:17:17,680 --> 00:17:22,880 Speaker 6: going to be more incentivized to increase cappex, to take 310 00:17:22,960 --> 00:17:26,160 Speaker 6: on M and A, you know, regardless of the fact 311 00:17:26,240 --> 00:17:27,400 Speaker 6: that valuation. 312 00:17:27,400 --> 00:17:30,240 Speaker 2: To take on new technology, yep, it's understated. 313 00:17:30,320 --> 00:17:32,040 Speaker 4: How about old technology I mean here in a two 314 00:17:32,080 --> 00:17:34,280 Speaker 4: year treasure, we've gone from five percent yield down to 315 00:17:34,320 --> 00:17:38,240 Speaker 4: three sixty During that period of time, stuff like utilities 316 00:17:38,280 --> 00:17:40,480 Speaker 4: and roots have done well. Are they more to go 317 00:17:40,600 --> 00:17:42,080 Speaker 4: or to take some profits there? 318 00:17:42,160 --> 00:17:46,320 Speaker 6: So so from our point of view, we've trusted in 319 00:17:46,359 --> 00:17:49,840 Speaker 6: what we call the Fed rate cut Playbook, and basically 320 00:17:50,320 --> 00:17:53,800 Speaker 6: what it says is that a lot of the move 321 00:17:54,359 --> 00:17:58,720 Speaker 6: on the long end of yields is done. You know, frankly, 322 00:17:59,160 --> 00:18:02,120 Speaker 6: you've come in one hundred basis points on the ten 323 00:18:02,200 --> 00:18:05,200 Speaker 6: year yield. If you're not having a recession. We don't 324 00:18:05,200 --> 00:18:09,879 Speaker 6: think you're having a recession. And the best of inflation 325 00:18:10,600 --> 00:18:13,360 Speaker 6: is just recently passed. Not to say that inflation won't 326 00:18:13,359 --> 00:18:18,320 Speaker 6: continue lower. That to us means the yield story is 327 00:18:18,480 --> 00:18:20,840 Speaker 6: likely higher, and that's where you want to sort of 328 00:18:20,880 --> 00:18:24,440 Speaker 6: trim your holdings on places like rets and utility. 329 00:18:24,160 --> 00:18:26,040 Speaker 2: Single point SPX twelve months. 330 00:18:25,840 --> 00:18:30,000 Speaker 6: Out, well, come on, I can't do that until we 331 00:18:30,040 --> 00:18:34,080 Speaker 6: put out the year ahead. But frankly, you know, we 332 00:18:34,160 --> 00:18:39,200 Speaker 6: do think, particularly if you think about past valuation paradigms, 333 00:18:39,480 --> 00:18:42,760 Speaker 6: we're expensive at twenty four times, but we're nowhere near 334 00:18:43,080 --> 00:18:45,880 Speaker 6: the twenty eight to thirty times. We've seen in prior peaks, 335 00:18:46,000 --> 00:18:48,879 Speaker 6: and the feed is with us and productivity is with us. 336 00:18:48,920 --> 00:18:51,360 Speaker 2: Juan Emmanuel, thank you so much for that. Hymen Evercoret 337 00:18:52,680 --> 00:19:00,440 Speaker 2: this morning, let's talk to a bond guy. Sure that's great. 338 00:19:00,600 --> 00:19:03,640 Speaker 2: What an equity response we see here? Joining us now, 339 00:19:03,720 --> 00:19:06,359 Speaker 2: Jim Caron, he's at Morgan Stanley for an extended period. 340 00:19:06,400 --> 00:19:10,400 Speaker 2: He'll join us across his half hour. So Jason Furman's 341 00:19:10,440 --> 00:19:16,080 Speaker 2: out yesterday and he's got his offspring, a teenager, emailing 342 00:19:16,200 --> 00:19:18,280 Speaker 2: dad in the middle of the FED meetings saying you 343 00:19:18,320 --> 00:19:21,560 Speaker 2: were wrong. I was wrong. I didn't say what my 344 00:19:21,600 --> 00:19:25,200 Speaker 2: opinion was because nobody cares full disclosure. I was looking 345 00:19:25,240 --> 00:19:28,920 Speaker 2: for twenty five I was wrong. You were wrong. Why 346 00:19:28,960 --> 00:19:29,720 Speaker 2: were we wrong? 347 00:19:30,880 --> 00:19:32,679 Speaker 7: I think we were thinking too logically about it. 348 00:19:32,680 --> 00:19:36,040 Speaker 8: And by the way, Jason Furman's offspring's response is probably 349 00:19:36,080 --> 00:19:38,160 Speaker 8: what my offspring would love to say to me as 350 00:19:38,160 --> 00:19:43,480 Speaker 8: often as possible. So look, I mean, fifty basis points 351 00:19:43,520 --> 00:19:46,919 Speaker 8: is absolutely a justifiable number. It was a close call. 352 00:19:47,960 --> 00:19:51,119 Speaker 8: I think why we were wrong is that there was 353 00:19:51,160 --> 00:19:55,119 Speaker 8: a component of Powell wanted to probably cut interest rates 354 00:19:55,200 --> 00:19:56,879 Speaker 8: in July, and I think if you look at the 355 00:19:56,880 --> 00:19:59,560 Speaker 8: dot plot and you look at the makeup of this decision. 356 00:19:59,600 --> 00:20:01,760 Speaker 8: I think he kind of strong arm the committee and 357 00:20:01,800 --> 00:20:04,159 Speaker 8: he said, look, we're going fifty. We didn't do July. 358 00:20:04,520 --> 00:20:07,320 Speaker 8: It was a mistake and I need you guys to 359 00:20:07,359 --> 00:20:08,440 Speaker 8: get behind me on this one. 360 00:20:08,680 --> 00:20:11,919 Speaker 7: And I think that's that's why it was such a 361 00:20:11,920 --> 00:20:12,560 Speaker 7: close call. 362 00:20:12,600 --> 00:20:14,439 Speaker 8: And I think it was a judgment call, but I 363 00:20:14,440 --> 00:20:16,520 Speaker 8: think there was a bit of strong arming that came 364 00:20:16,560 --> 00:20:17,080 Speaker 8: through there. 365 00:20:17,480 --> 00:20:19,720 Speaker 7: So that's hard. You know, that can break either way. 366 00:20:20,359 --> 00:20:23,119 Speaker 5: We had a dissenting vote there, and that's no visual. 367 00:20:23,160 --> 00:20:25,480 Speaker 5: What does that tell to you? Is that what does 368 00:20:25,480 --> 00:20:26,399 Speaker 5: that telegres. 369 00:20:26,080 --> 00:20:28,400 Speaker 8: You know, it's been like nineteen years since we've had 370 00:20:28,400 --> 00:20:31,600 Speaker 8: a descent on something like this, you know, during like 371 00:20:31,680 --> 00:20:35,240 Speaker 8: a rate cut. Like look, look, I mean it tells 372 00:20:35,280 --> 00:20:37,320 Speaker 8: me that Again, I'm going to go back to. 373 00:20:37,320 --> 00:20:37,960 Speaker 7: The dot plot. 374 00:20:38,119 --> 00:20:41,080 Speaker 8: If you look at the dot plot for twenty twenty four, 375 00:20:41,280 --> 00:20:44,120 Speaker 8: there's a lot of cohesiveness. Okay, we've got a contristraates, 376 00:20:44,119 --> 00:20:45,560 Speaker 8: you know, we've got to get on the move here. 377 00:20:46,000 --> 00:20:47,840 Speaker 8: When you start to go out to twenty twenty five 378 00:20:48,040 --> 00:20:50,919 Speaker 8: and out to twenty twenty six, there's a huge amount 379 00:20:50,960 --> 00:20:55,280 Speaker 8: of dispersion of opinions across the whole thing. So I 380 00:20:55,320 --> 00:20:57,720 Speaker 8: don't think this is just a done deal where the 381 00:20:57,800 --> 00:20:59,320 Speaker 8: Fed Okay, that's it. We don't have to worry about 382 00:20:59,320 --> 00:21:01,920 Speaker 8: it anymore. Gordon cut two hundred and fifty basis points. 383 00:21:01,960 --> 00:21:04,120 Speaker 8: The market's got that price. Let's all just sit back 384 00:21:04,119 --> 00:21:06,800 Speaker 8: and relax. Although that's what the markets are doing today. 385 00:21:07,640 --> 00:21:11,440 Speaker 8: But you know, the question for me, and the thing 386 00:21:11,520 --> 00:21:14,600 Speaker 8: that gets me the most on this whole number is 387 00:21:14,640 --> 00:21:17,840 Speaker 8: the unemployment rate component. Right, everything is hinged upon a 388 00:21:17,960 --> 00:21:21,760 Speaker 8: number that has been so terrible over the last couple 389 00:21:21,800 --> 00:21:24,359 Speaker 8: of years, really since COVID. There's not a lot of 390 00:21:24,359 --> 00:21:28,480 Speaker 8: certainty in the number in the jobs reports. They're heavily revised. 391 00:21:28,600 --> 00:21:31,280 Speaker 8: Yet we're basing all of this monetary policy on a 392 00:21:31,320 --> 00:21:35,000 Speaker 8: four point four percent, which is offense unemployment rate target. 393 00:21:35,560 --> 00:21:35,960 Speaker 7: I don't know. 394 00:21:36,040 --> 00:21:37,760 Speaker 8: I mean, like, look, if the economy is really slowing, 395 00:21:37,760 --> 00:21:39,560 Speaker 8: I would imagine that the employment rate goes up. 396 00:21:39,600 --> 00:21:42,080 Speaker 2: And you know, you're not going to get my opinion here, folks, 397 00:21:42,080 --> 00:21:43,480 Speaker 2: but I am going to say what I'm going to 398 00:21:44,240 --> 00:21:46,800 Speaker 2: observe around what Jim Kurrn just said is a three 399 00:21:46,800 --> 00:21:50,280 Speaker 2: month moving average of non farm payrolls. David Kelly over 400 00:21:50,280 --> 00:21:52,679 Speaker 2: at JP Morgan, that's another bank. I don't know if 401 00:21:52,680 --> 00:21:55,199 Speaker 2: you're familiar with them. David Kelly says, look, you're going 402 00:21:55,280 --> 00:21:57,400 Speaker 2: to get a vector to a three month moving average. 403 00:21:57,560 --> 00:21:59,560 Speaker 2: It could be a negative statistic and that would be 404 00:21:59,560 --> 00:22:03,720 Speaker 2: the shock Jim's talking about. Okay, physics envy here, Boden Guy, 405 00:22:04,240 --> 00:22:07,480 Speaker 2: I took from point twenty five out to five point 406 00:22:07,520 --> 00:22:10,040 Speaker 2: five zero. Bob since taught me how to do this 407 00:22:10,160 --> 00:22:13,920 Speaker 2: strap of Fibonacci to get a central central tendency two 408 00:22:14,000 --> 00:22:17,560 Speaker 2: and seven eighths would be this roughly central in the 409 00:22:17,600 --> 00:22:22,400 Speaker 2: middle and neutral. We have ten twenty five measured rate 410 00:22:22,480 --> 00:22:26,440 Speaker 2: cuts to get to normality as well. The reason he 411 00:22:26,560 --> 00:22:29,200 Speaker 2: was bold and strong armed him because he knows he's 412 00:22:29,200 --> 00:22:33,280 Speaker 2: got massive room to move to quote unquote normal. 413 00:22:33,920 --> 00:22:36,200 Speaker 7: Right, So look, we can think of this. 414 00:22:36,520 --> 00:22:38,560 Speaker 8: You know, the fed's decision is almost like a talk 415 00:22:38,600 --> 00:22:40,439 Speaker 8: about physics, a three dimensional problem. 416 00:22:40,520 --> 00:22:40,639 Speaker 1: Right. 417 00:22:40,640 --> 00:22:43,280 Speaker 7: The first dimension is where is that neutral rate? 418 00:22:43,359 --> 00:22:45,919 Speaker 8: Now you just highlighted a two point eight seven five percent, 419 00:22:46,080 --> 00:22:47,119 Speaker 8: Let's call it three percent. 420 00:22:47,320 --> 00:22:48,800 Speaker 7: Finally, let's just make that three percent. 421 00:22:49,280 --> 00:22:51,680 Speaker 8: The second question is how quickly do you want to 422 00:22:51,720 --> 00:22:55,080 Speaker 8: get there? And the third dimension of this whole thing 423 00:22:55,200 --> 00:22:58,399 Speaker 8: is the unemployment component. Right, if the unemployment rate rises fast, 424 00:22:58,440 --> 00:22:59,800 Speaker 8: then they're going to move fast. 425 00:22:59,840 --> 00:23:00,000 Speaker 3: Right. 426 00:23:00,480 --> 00:23:03,040 Speaker 7: So what my view is is that if we. 427 00:23:03,000 --> 00:23:05,840 Speaker 8: Are in an inflationary environment, and I still believe that 428 00:23:05,880 --> 00:23:08,920 Speaker 8: we are in one inflation stable for now, then that 429 00:23:09,000 --> 00:23:12,439 Speaker 8: means that the Fed does not have a free shot 430 00:23:12,640 --> 00:23:16,200 Speaker 8: at just cutting interest rates as aggressively without inflation picking up, 431 00:23:16,400 --> 00:23:18,360 Speaker 8: and that could slow their rate of heightens Can we. 432 00:23:18,320 --> 00:23:19,359 Speaker 2: Just spherical geometry? 433 00:23:20,359 --> 00:23:20,560 Speaker 7: Do it? 434 00:23:20,600 --> 00:23:23,639 Speaker 2: For George Struick of MIT years ago? But the bottom 435 00:23:23,720 --> 00:23:26,320 Speaker 2: line is the elasticities of the x, y and Z 436 00:23:26,520 --> 00:23:29,760 Speaker 2: axis there are different I agree with you that the 437 00:23:29,760 --> 00:23:33,639 Speaker 2: mother of all elasticities for your post election is the 438 00:23:33,720 --> 00:23:35,920 Speaker 2: labor economy and the unemployment. 439 00:23:35,400 --> 00:23:39,119 Speaker 8: Right right, Yeah, And so my suspicion here again this 440 00:23:39,240 --> 00:23:41,560 Speaker 8: is a suspicion, is that one of the things that 441 00:23:41,600 --> 00:23:44,520 Speaker 8: triggered the Fed to move as aggressively as they did 442 00:23:44,640 --> 00:23:48,960 Speaker 8: is that they may may think that the employment situation 443 00:23:49,080 --> 00:23:51,200 Speaker 8: is worse than what the data is actually telling us, 444 00:23:51,400 --> 00:23:53,200 Speaker 8: and that they do need to move quickly today. 445 00:23:53,240 --> 00:23:54,000 Speaker 3: So this goes back to. 446 00:23:54,040 --> 00:23:55,800 Speaker 8: The thought that if they go fifty, what are they 447 00:23:55,800 --> 00:23:58,440 Speaker 8: telling the markets? Should we be nervous. I'm a little 448 00:23:58,480 --> 00:24:00,480 Speaker 8: concerned here and I want to be very clear about that. 449 00:24:00,520 --> 00:24:02,840 Speaker 8: I want to admit that that I think the unemployment 450 00:24:02,960 --> 00:24:06,840 Speaker 8: rate is probably really higher than what is actually being 451 00:24:06,880 --> 00:24:10,080 Speaker 8: forecasted in the data. And remember this data gets revised 452 00:24:10,240 --> 00:24:13,879 Speaker 8: all the time, and I think, as David Kelly was saying, 453 00:24:14,240 --> 00:24:18,199 Speaker 8: from that other bank, I think it's another bank. You know, 454 00:24:18,240 --> 00:24:20,439 Speaker 8: he may be correct about this, right, you know, you 455 00:24:20,440 --> 00:24:21,200 Speaker 8: could get into. 456 00:24:21,080 --> 00:24:23,160 Speaker 5: A period of time that data is maybe not as accurate. 457 00:24:23,359 --> 00:24:26,199 Speaker 8: So look, I mean all of the statistics that have 458 00:24:26,240 --> 00:24:27,679 Speaker 8: been coming through, well, first of all, we had an 459 00:24:27,720 --> 00:24:30,720 Speaker 8: eight hundred and forty thousand revision to payrolls, you know, 460 00:24:30,880 --> 00:24:33,000 Speaker 8: lower than what we thought, right, So, like the run 461 00:24:33,080 --> 00:24:34,840 Speaker 8: rate is much lower, we. 462 00:24:34,760 --> 00:24:36,399 Speaker 7: Got that, we got that last month. 463 00:24:37,920 --> 00:24:40,680 Speaker 8: We have a significant amount of immigration, right, so we're 464 00:24:40,680 --> 00:24:42,600 Speaker 8: still trying to calculate all of the people. Like the 465 00:24:42,680 --> 00:24:45,680 Speaker 8: labor force grew. When the labor force grows when the 466 00:24:45,720 --> 00:24:48,160 Speaker 8: economy is really strong and the unemployment rates three point 467 00:24:48,200 --> 00:24:51,359 Speaker 8: five percent, that's great. When things start to slow down, 468 00:24:51,400 --> 00:24:54,679 Speaker 8: a really large labor force is actually can actually be 469 00:24:54,720 --> 00:24:56,560 Speaker 8: a little bit of a dead weight drag on the 470 00:24:56,600 --> 00:24:58,840 Speaker 8: economy because what that means is that you have a 471 00:24:58,880 --> 00:25:01,520 Speaker 8: lot of people looking for a and less jobs available. 472 00:25:01,560 --> 00:25:03,560 Speaker 8: That unemployment rate can go up quite a bit. So 473 00:25:03,600 --> 00:25:08,040 Speaker 8: that reflexivity argument that Tom's making is actually extremely important. 474 00:25:08,040 --> 00:25:10,520 Speaker 8: Like if the unemployment rate today was five point two percent, 475 00:25:10,560 --> 00:25:12,160 Speaker 8: were having a different discussion right now. 476 00:25:12,160 --> 00:25:15,399 Speaker 2: So go mertiner telleb on you. The point here, folks, 477 00:25:15,400 --> 00:25:18,399 Speaker 2: of all this blather, which only Jim Karen can do 478 00:25:18,480 --> 00:25:23,880 Speaker 2: with this prodigious physics ability, is there's an assume belief 479 00:25:23,920 --> 00:25:27,360 Speaker 2: that we have a resilience what the physics world will 480 00:25:27,400 --> 00:25:32,560 Speaker 2: be tensile strength to withstand these shocks. Blooney, we don't 481 00:25:32,880 --> 00:25:36,840 Speaker 2: nobody listening except for old farts understands it. A five 482 00:25:36,880 --> 00:25:40,000 Speaker 2: percent unemployment rate changes the dialogue. 483 00:25:40,160 --> 00:25:41,320 Speaker 7: Yeah, absolutely. 484 00:25:41,400 --> 00:25:43,399 Speaker 8: I mean look, I mean you know, you know this 485 00:25:43,480 --> 00:25:46,200 Speaker 8: is where the markets really start to lose steam. And 486 00:25:46,400 --> 00:25:48,000 Speaker 8: I think this is what the FED is worried about 487 00:25:48,040 --> 00:25:51,120 Speaker 8: the most. So what they're communicating is that they will 488 00:25:51,119 --> 00:25:54,240 Speaker 8: be very aggressive in order to defend that four point 489 00:25:54,240 --> 00:25:57,080 Speaker 8: four percent unemployment rate level. And that's what we have 490 00:25:57,119 --> 00:25:59,679 Speaker 8: to watch because it may be difficult for them to defend. 491 00:26:00,720 --> 00:26:02,560 Speaker 5: Jim, you're sticking around, You're not going ahead. 492 00:26:02,680 --> 00:26:04,280 Speaker 8: I still want to talk Jets Patriots, by the way, 493 00:26:04,280 --> 00:26:05,280 Speaker 8: it's their best game of the night. 494 00:26:05,359 --> 00:26:06,920 Speaker 7: It's the best game of the Whost season, by the way. 495 00:26:06,960 --> 00:26:09,800 Speaker 2: Wait wait wait, wait, wait wait wait. Larian came in yesterday 496 00:26:09,880 --> 00:26:12,200 Speaker 2: because he got tickets to the Jets. Is that why 497 00:26:12,240 --> 00:26:12,960 Speaker 2: you're here today? 498 00:26:12,960 --> 00:26:15,480 Speaker 7: You're going I'm a Patriots fan. No, I'm not. 499 00:26:16,800 --> 00:26:19,359 Speaker 2: I'm just beside. Take a note. We got to get 500 00:26:19,400 --> 00:26:22,240 Speaker 2: Jim Carron and Muhammad Hlarian together. Yes, I just got 501 00:26:22,280 --> 00:26:26,280 Speaker 2: an emil from Boston. Enough of the Jets. Now, Sweeney 502 00:26:26,280 --> 00:26:29,359 Speaker 2: won't talk about this because the future Tom Brady's a 503 00:26:29,480 --> 00:26:32,480 Speaker 2: U n C guy exactly, But I mean, you got 504 00:26:32,560 --> 00:26:36,760 Speaker 2: Jacoby and this guy from UNC. Is it a rebuilding 505 00:26:36,840 --> 00:26:39,760 Speaker 2: year for the Patriots or is it? Like, let's go now. 506 00:26:39,800 --> 00:26:41,120 Speaker 7: I think it's a rebuilding year. 507 00:26:41,160 --> 00:26:43,280 Speaker 8: Look, I mean the Patriots have had some you know, 508 00:26:43,600 --> 00:26:45,399 Speaker 8: has had a tough go of it. But this why 509 00:26:45,440 --> 00:26:48,280 Speaker 8: I'm excited about the Jets game, right, because the Jets. 510 00:26:48,680 --> 00:26:50,639 Speaker 8: It's always kind of random with the Jets, right, you 511 00:26:50,680 --> 00:26:52,280 Speaker 8: just never know what you're gonna get. I know, their 512 00:26:52,280 --> 00:26:54,280 Speaker 8: favorite to win, their favorite to win by about six. 513 00:26:54,600 --> 00:26:56,359 Speaker 8: I think the total points score in the game is 514 00:26:56,400 --> 00:26:58,720 Speaker 8: just under forty points, so it's gonna be a relatively 515 00:26:58,800 --> 00:27:02,040 Speaker 8: low scoring So it could be very interesting to very 516 00:27:02,080 --> 00:27:02,760 Speaker 8: evenly matched. 517 00:27:02,840 --> 00:27:04,159 Speaker 2: Well, we didn't want to talk to you about this. 518 00:27:04,280 --> 00:27:07,000 Speaker 2: I want to know who's doing better, Brady or Belichick. 519 00:27:08,240 --> 00:27:10,000 Speaker 2: Brady's doing better, Yeah, I think so. 520 00:27:10,119 --> 00:27:12,760 Speaker 4: I hope You've had a whole generation of Patriots fans 521 00:27:12,760 --> 00:27:15,600 Speaker 4: that have only known winning and winning Super Bowls. 522 00:27:15,600 --> 00:27:17,919 Speaker 8: What's the mindset for the folks depends how all that 523 00:27:17,960 --> 00:27:20,920 Speaker 8: Patriots are, Okay, because I have like maybe twenty years 524 00:27:20,920 --> 00:27:25,120 Speaker 8: of really really bad memories, right right, So yeah, very true. 525 00:27:25,440 --> 00:27:28,000 Speaker 2: Let us continue here with Jim Karen and Morgan Stanley 526 00:27:28,080 --> 00:27:32,320 Speaker 2: and and where we are yesterday. A lot of smart people, 527 00:27:32,920 --> 00:27:37,600 Speaker 2: we're talking the Jim Karen dialogue. They're watching spreads. Tell 528 00:27:37,680 --> 00:27:40,760 Speaker 2: me you're mortals, now, how odd your bond market is 529 00:27:41,480 --> 00:27:45,320 Speaker 2: in what spreads will do given the Powell's soft landing. 530 00:27:45,760 --> 00:27:48,600 Speaker 8: So this is this is positive for risky assets and 531 00:27:48,640 --> 00:27:52,280 Speaker 8: credit spreads. Just broadly speaking, Powell is basically saying that 532 00:27:52,320 --> 00:27:55,119 Speaker 8: he is going to stand behind and support this market. 533 00:27:55,119 --> 00:27:57,520 Speaker 8: If we look at default rates, default rates have been 534 00:27:57,520 --> 00:28:01,680 Speaker 8: coming down, specifically Tom default rates have been coming down 535 00:28:01,800 --> 00:28:04,320 Speaker 8: even in the triple C space, So even in the 536 00:28:04,359 --> 00:28:06,680 Speaker 8: part of the credit market that people are worried about 537 00:28:06,720 --> 00:28:10,080 Speaker 8: the most, so the lower credit echelons, triple c's, those 538 00:28:10,119 --> 00:28:13,520 Speaker 8: spreads have actually started to come in as as well. Now, 539 00:28:13,640 --> 00:28:15,840 Speaker 8: if that starts to happen, then what you're going to 540 00:28:15,840 --> 00:28:19,680 Speaker 8: see is a decline in the overall yield for high yield, 541 00:28:19,680 --> 00:28:22,879 Speaker 8: and it makes it a very positive setup for these assets. 542 00:28:22,880 --> 00:28:24,479 Speaker 8: And let's not just talk about high yield. We can 543 00:28:24,480 --> 00:28:27,000 Speaker 8: also talk about private credit, private assets, all of these 544 00:28:27,000 --> 00:28:30,960 Speaker 8: other things all are competing with each other for for returns. 545 00:28:31,040 --> 00:28:33,720 Speaker 8: So as these bond yields and these credit spreads start 546 00:28:33,800 --> 00:28:37,919 Speaker 8: to come in, money is going to start to follow it. 547 00:28:37,960 --> 00:28:40,040 Speaker 8: And I think this becomes positive not just for bonds, 548 00:28:40,040 --> 00:28:41,000 Speaker 8: but also frequities. 549 00:28:41,360 --> 00:28:43,280 Speaker 4: I mean, I'm looking at the iend go function on 550 00:28:43,280 --> 00:28:46,440 Speaker 4: the Bloomberg terminal, the Bloomberg Bloomberg Index browser. Boy, the 551 00:28:46,480 --> 00:28:48,880 Speaker 4: best return has been in that US corporate high yield 552 00:28:48,960 --> 00:28:51,760 Speaker 4: market up seven point five percent year to data. I mean, 553 00:28:51,760 --> 00:28:55,280 Speaker 4: that is really strong, particularly given the brutal twenty twenty two. 554 00:28:55,320 --> 00:28:57,360 Speaker 4: The fixed income market dealt with a little bit of 555 00:28:57,360 --> 00:28:59,960 Speaker 4: it thanks to November December twenty twenty four. 556 00:29:00,360 --> 00:29:02,960 Speaker 5: Twenty three came out okay, but issue looks pretty solid. 557 00:29:03,280 --> 00:29:05,800 Speaker 8: Yeah, So fortunately I'm happy to say that we've been 558 00:29:05,840 --> 00:29:08,240 Speaker 8: overweight high yield all year or so, even counter to 559 00:29:08,400 --> 00:29:09,960 Speaker 8: popular you know views. 560 00:29:09,680 --> 00:29:10,400 Speaker 7: At some points. 561 00:29:11,480 --> 00:29:13,880 Speaker 8: So look, high yield has two things going forward. Number one, 562 00:29:14,000 --> 00:29:16,480 Speaker 8: the majority of the high yield index is actually the 563 00:29:16,560 --> 00:29:19,600 Speaker 8: higher quality is actually double bees, which means that high 564 00:29:19,680 --> 00:29:22,520 Speaker 8: yields has a longer duration, so they have more interest 565 00:29:22,560 --> 00:29:26,640 Speaker 8: rate sensitivity built into them. So as rates start to 566 00:29:26,680 --> 00:29:29,480 Speaker 8: come down, high yield is also getting the benefit of 567 00:29:29,520 --> 00:29:32,640 Speaker 8: the decline and interest rates in addition to the decline 568 00:29:32,680 --> 00:29:36,920 Speaker 8: and default risks, particularly in the lower credit segments of 569 00:29:36,960 --> 00:29:38,200 Speaker 8: that overall index. 570 00:29:37,960 --> 00:29:39,280 Speaker 7: Which is which are the triple c's. 571 00:29:39,640 --> 00:29:42,720 Speaker 8: So put those two things together, and high yield starts 572 00:29:42,760 --> 00:29:45,880 Speaker 8: to look very attractive, or it's looked very attractive. It's 573 00:29:45,960 --> 00:29:48,800 Speaker 8: it's becoming, you know, maybe a bit more pricey right now. 574 00:29:49,160 --> 00:29:51,200 Speaker 8: But there's no reason to believe that you're not going 575 00:29:51,240 --> 00:29:54,440 Speaker 8: to really get that coupon minus some of that default risk. 576 00:29:54,480 --> 00:29:56,320 Speaker 8: And that's what the markets are betting on right now. 577 00:29:56,640 --> 00:29:58,960 Speaker 4: You know, as a former investment banker, I pay attention 578 00:29:59,040 --> 00:30:01,080 Speaker 4: to new new issues and the equity markets, and in 579 00:30:01,160 --> 00:30:04,480 Speaker 4: the bond market, boy, the bond market, they've been issue 580 00:30:04,520 --> 00:30:06,640 Speaker 4: has been coming to market like crazy do you guys 581 00:30:06,680 --> 00:30:07,880 Speaker 4: pick up the phone when they call you. 582 00:30:08,320 --> 00:30:11,840 Speaker 8: Look absolutely and talk about issuance and technicals and supply. 583 00:30:12,320 --> 00:30:14,440 Speaker 8: One of the things that's been interesting about high yield 584 00:30:14,440 --> 00:30:16,480 Speaker 8: is that the technicals are so positive that the net 585 00:30:16,640 --> 00:30:19,880 Speaker 8: supply of high yield is negative, meaning that you know, 586 00:30:19,920 --> 00:30:22,360 Speaker 8: so there's been gross issuance in the high yield market, 587 00:30:22,560 --> 00:30:26,400 Speaker 8: but on net there's been more things maturing and you know, 588 00:30:26,520 --> 00:30:29,200 Speaker 8: versus what's been being issued, so on net the supply 589 00:30:29,320 --> 00:30:30,920 Speaker 8: is actually negative. So not only do you have some 590 00:30:30,960 --> 00:30:34,479 Speaker 8: positive fundamentals support from Powell, but you also have supply 591 00:30:34,600 --> 00:30:36,760 Speaker 8: technicals that have been very strong, and like you said, 592 00:30:36,760 --> 00:30:38,680 Speaker 8: you know you're putting up some pretty good numbers this year. 593 00:30:38,880 --> 00:30:39,160 Speaker 2: Wow. 594 00:30:39,320 --> 00:30:44,240 Speaker 5: So what do we do here? I guess, you know, 595 00:30:44,480 --> 00:30:45,600 Speaker 5: think about total risk here? 596 00:30:45,600 --> 00:30:46,080 Speaker 3: Where do I go? 597 00:30:46,160 --> 00:30:49,560 Speaker 4: Where is it better equities, fixed income, alternative investments? Where 598 00:30:49,560 --> 00:30:51,440 Speaker 4: do you guys see the best opportunities? And I guess 599 00:30:51,440 --> 00:30:53,800 Speaker 4: what is a solidly declining interest rate environment? 600 00:30:53,880 --> 00:30:57,800 Speaker 8: So so let me say that we're also overweight equities at 601 00:30:57,840 --> 00:30:59,400 Speaker 8: this point. We have more of a risk on until 602 00:30:59,440 --> 00:31:01,920 Speaker 8: towards EC The thing that we have to recognize here 603 00:31:02,080 --> 00:31:04,200 Speaker 8: is that if you look at twenty twenty five full 604 00:31:04,280 --> 00:31:07,040 Speaker 8: year earnings for equities, it's around two hundred and eighty dollars. 605 00:31:07,440 --> 00:31:07,600 Speaker 3: Now. 606 00:31:07,640 --> 00:31:09,560 Speaker 8: The view there is that you would get a PE 607 00:31:09,680 --> 00:31:12,440 Speaker 8: multiple decline, it would come into like nineteen nineteen and 608 00:31:12,480 --> 00:31:15,160 Speaker 8: a half, and that would suggest that, you know, maybe 609 00:31:15,680 --> 00:31:18,200 Speaker 8: earnings come down as well and you get a lower 610 00:31:18,200 --> 00:31:20,560 Speaker 8: equity price. But what's starting to happen right now is 611 00:31:20,560 --> 00:31:23,200 Speaker 8: that two hundred and eighty dollars earnings number for twenty 612 00:31:23,200 --> 00:31:26,440 Speaker 8: twenty five is becoming more believable. People are assigning a 613 00:31:26,520 --> 00:31:28,040 Speaker 8: twenty or even a twenty. 614 00:31:27,760 --> 00:31:29,160 Speaker 7: One PE multiple to that. 615 00:31:29,480 --> 00:31:32,120 Speaker 8: So you're getting numbers that are getting up towards that 616 00:31:32,160 --> 00:31:34,479 Speaker 8: fifty eight hundred and fifty nine hundred, and I know 617 00:31:34,520 --> 00:31:37,200 Speaker 8: that's you know, obviously what's going on today, all of 618 00:31:37,240 --> 00:31:37,560 Speaker 8: that is. 619 00:31:37,480 --> 00:31:38,440 Speaker 7: Getting pulled forward. 620 00:31:38,480 --> 00:31:40,720 Speaker 8: That's my concern with equities right now is that we're 621 00:31:40,760 --> 00:31:43,760 Speaker 8: pulling forward all of that twenty twenty five potential good news, 622 00:31:44,040 --> 00:31:47,480 Speaker 8: and it's happening right now. So now as we go forward, 623 00:31:47,480 --> 00:31:49,480 Speaker 8: it's going to be about show me, show me the data, 624 00:31:49,560 --> 00:31:52,120 Speaker 8: show me the numbers as we move through the fourth quarter, 625 00:31:52,200 --> 00:31:54,640 Speaker 8: as we move through the first quarter, and you know, 626 00:31:54,800 --> 00:31:56,400 Speaker 8: we're priced, I don't want to say to perfection, but 627 00:31:56,800 --> 00:31:57,240 Speaker 8: pretty close. 628 00:31:57,320 --> 00:32:00,840 Speaker 2: So what if we pull forward buns, price up, yelled down, 629 00:32:01,000 --> 00:32:04,280 Speaker 2: spreads it, you know, odd levels to say it's the 630 00:32:04,320 --> 00:32:05,760 Speaker 2: same thing in bonds. I'm sorry. 631 00:32:05,800 --> 00:32:08,360 Speaker 8: So you're absolutely right, and that's why we're underweight fixing. 632 00:32:08,520 --> 00:32:11,040 Speaker 8: We're underweight duration here even though the Fed's cutting and 633 00:32:11,040 --> 00:32:13,800 Speaker 8: we expect because the markets have already priced this in right, 634 00:32:13,840 --> 00:32:15,880 Speaker 8: we're already looking at a ten year note that's around 635 00:32:15,880 --> 00:32:18,040 Speaker 8: three point seventy five percent, a two year that is 636 00:32:18,120 --> 00:32:21,800 Speaker 8: not three point six percent. You know, if the yelkur steepens, 637 00:32:21,800 --> 00:32:23,560 Speaker 8: I mean, how much further can these bond. 638 00:32:23,440 --> 00:32:25,280 Speaker 7: Yees go down? Even if the FED goes to three percent? 639 00:32:25,320 --> 00:32:27,720 Speaker 7: I mean, how much further can foniles go down? 640 00:32:27,840 --> 00:32:30,600 Speaker 2: Can we link our ute? Let's do this now with 641 00:32:30,720 --> 00:32:33,920 Speaker 2: James Karen. I went up to Orno where they have 642 00:32:33,960 --> 00:32:37,320 Speaker 2: a black bear to see a total eclipse of the 643 00:32:37,400 --> 00:32:40,400 Speaker 2: sun as a wreck at my father was in and 644 00:32:40,440 --> 00:32:43,520 Speaker 2: we had to stop at Boden and stare at one 645 00:32:43,600 --> 00:32:47,640 Speaker 2: hundred and thirty two year old observatory. It was like 646 00:32:47,680 --> 00:32:52,320 Speaker 2: the original thing. A student died in a rock climbing 647 00:32:52,480 --> 00:32:56,240 Speaker 2: accident and his father put up the money to rebuild 648 00:32:56,240 --> 00:32:59,560 Speaker 2: that puppy in Boden. Did you go into that observatory 649 00:32:59,560 --> 00:33:00,720 Speaker 2: as a kid in physics? 650 00:33:01,040 --> 00:33:03,719 Speaker 7: Absolutely, it was a right of passage. Yeah, you had 651 00:33:03,760 --> 00:33:04,360 Speaker 7: to get joy it. 652 00:33:04,680 --> 00:33:08,720 Speaker 8: Yes, I mean now it's such a historic thing. Absolutely, Yeah, 653 00:33:08,720 --> 00:33:12,520 Speaker 8: there's no question. And that eclipse was pretty interesting this 654 00:33:12,640 --> 00:33:13,160 Speaker 8: time around. 655 00:33:13,480 --> 00:33:16,880 Speaker 2: Yeah, it was great. But the Boaden what's explained to 656 00:33:16,960 --> 00:33:19,680 Speaker 2: our audience. What's it like to be a brady nineteen 657 00:33:19,760 --> 00:33:22,080 Speaker 2: year old in physics and you got to sit there 658 00:33:22,120 --> 00:33:24,640 Speaker 2: and put your eye up and say, oh, that's the 659 00:33:24,640 --> 00:33:27,080 Speaker 2: moons of Jupiter. Mean, it gets you right back to 660 00:33:27,080 --> 00:33:28,080 Speaker 2: the sixteen hundreds. 661 00:33:28,120 --> 00:33:30,920 Speaker 8: It's humbling it, There's no question. It's a humbling experience 662 00:33:31,040 --> 00:33:33,960 Speaker 8: when you're surrounded by so many smart people and you 663 00:33:34,040 --> 00:33:37,200 Speaker 8: realize that you know as much as you want to, 664 00:33:37,240 --> 00:33:37,920 Speaker 8: you know, think, you. 665 00:33:37,920 --> 00:33:38,840 Speaker 7: Know, think of yourself. 666 00:33:39,760 --> 00:33:41,840 Speaker 8: You realize that there's a bigger universe around you, and 667 00:33:41,880 --> 00:33:43,320 Speaker 8: it gives you a lot of perspective. And I think 668 00:33:43,360 --> 00:33:45,000 Speaker 8: that's the one thing that I really learned and took 669 00:33:45,000 --> 00:33:45,560 Speaker 8: away from that. 670 00:33:45,640 --> 00:33:47,080 Speaker 2: We got to do you and l Area and at 671 00:33:47,080 --> 00:33:49,320 Speaker 2: some point your patriots and just Jip Careen thank you 672 00:33:49,400 --> 00:34:03,240 Speaker 2: so much. With Morgan Stanley really informative there. If you 673 00:34:03,280 --> 00:34:06,840 Speaker 2: look at somebody's Razumi on LinkedIn, you can say, well, 674 00:34:06,880 --> 00:34:08,680 Speaker 2: this was easy, you know, you know, you drop by 675 00:34:08,719 --> 00:34:11,319 Speaker 2: the Treasury and you do some John Taylor kind of 676 00:34:11,800 --> 00:34:14,920 Speaker 2: Johnstone International stuff, and then you go to the White 677 00:34:14,920 --> 00:34:17,719 Speaker 2: House and the worst coffee in the world. They serve 678 00:34:17,800 --> 00:34:20,920 Speaker 2: coffee and styrofoam cups at the White House. Everybody goes 679 00:34:20,960 --> 00:34:23,440 Speaker 2: out to Charbucks. Then you go over to the Feller 680 00:34:23,440 --> 00:34:26,240 Speaker 2: Reserve and he Echoes building and you polish the table 681 00:34:26,280 --> 00:34:29,080 Speaker 2: for the governors and the presidents. And then if you 682 00:34:29,120 --> 00:34:33,880 Speaker 2: get lucky, you become chief us economist for Bloomberg. And 683 00:34:33,920 --> 00:34:38,160 Speaker 2: it starts somewhere. For Anim Wong, it started with one 684 00:34:38,200 --> 00:34:41,920 Speaker 2: of my favorite people. He defined the study of gold 685 00:34:42,000 --> 00:34:45,799 Speaker 2: with golden fetters a number of decades ago, Bury King 686 00:34:45,880 --> 00:34:49,600 Speaker 2: Green at Berkeley. What was it like in a lecture hall? 687 00:34:49,880 --> 00:34:52,719 Speaker 2: How intimidating was it with Ke and Green? 688 00:34:54,160 --> 00:34:59,680 Speaker 1: It was actually a small seminar. So even worse, he's 689 00:34:59,719 --> 00:35:03,680 Speaker 1: not an intimidating at all. He's just a sweet historian. 690 00:35:04,200 --> 00:35:08,680 Speaker 1: He's very into details and very meticulous in his impairicle. 691 00:35:08,120 --> 00:35:11,359 Speaker 2: Work, in the empirical work. Bring that forward to where 692 00:35:11,400 --> 00:35:14,719 Speaker 2: you are with a question the most influential call in 693 00:35:14,800 --> 00:35:18,200 Speaker 2: American economics that you forget about our started Williams. That's 694 00:35:18,239 --> 00:35:23,120 Speaker 2: old news birth debt in our misguess on the labor economy, 695 00:35:23,400 --> 00:35:25,200 Speaker 2: how oft the mark are we right now? 696 00:35:25,600 --> 00:35:30,239 Speaker 1: I think my estimate is that every month the non 697 00:35:30,280 --> 00:35:33,359 Speaker 1: farm payroll is overstating by an average of ninety one 698 00:35:33,400 --> 00:35:37,480 Speaker 1: thousand per month. So if the three month average moving 699 00:35:37,520 --> 00:35:42,360 Speaker 1: average from June, July and August is one hundred and 700 00:35:42,360 --> 00:35:45,880 Speaker 1: sixteen thousand, I mentioned that yesterday though, so basically the 701 00:35:45,960 --> 00:35:49,320 Speaker 1: true underlying pace is probably closer to twenty thousand. 702 00:35:49,480 --> 00:35:52,160 Speaker 2: Does that migrate to a negative statistic as David Kelly 703 00:35:52,239 --> 00:35:53,640 Speaker 2: and JP Morgan talks. 704 00:35:53,360 --> 00:35:55,920 Speaker 1: About, Well, I think that would be very close to 705 00:35:56,040 --> 00:36:00,160 Speaker 1: saw speed. So if the FETs an estimate of a 706 00:36:00,280 --> 00:36:03,960 Speaker 1: even pace of job growth required to stabilize unemployment rate 707 00:36:04,040 --> 00:36:07,279 Speaker 1: is about two hundred thousand, and the economy is only 708 00:36:07,320 --> 00:36:11,080 Speaker 1: producing twenty thousand per month, yeah, then that that. 709 00:36:11,040 --> 00:36:14,280 Speaker 2: Was well, that's jargon. Small speed is what the Boston 710 00:36:14,360 --> 00:36:15,839 Speaker 2: Red Sox are doing right now? 711 00:36:15,840 --> 00:36:19,759 Speaker 5: Continue Why are the overcounting again? What's the miscalculation? Right? 712 00:36:19,800 --> 00:36:22,960 Speaker 1: So, in an economic downturn, there's just a lot of 713 00:36:23,400 --> 00:36:28,520 Speaker 1: firms going, you know, bankrupt piling Chapter eleven, and we 714 00:36:28,600 --> 00:36:32,200 Speaker 1: have seen as a mid year a thirty one percent 715 00:36:32,320 --> 00:36:36,239 Speaker 1: rise in Chapter eleven filings and at the same time 716 00:36:36,280 --> 00:36:40,520 Speaker 1: business formations is slowing. So as a result, the BLS 717 00:36:41,040 --> 00:36:45,040 Speaker 1: estimate the job growth from net birth and death firms 718 00:36:45,120 --> 00:36:48,960 Speaker 1: right because they tend to get these data only a 719 00:36:49,040 --> 00:36:49,640 Speaker 1: year later. 720 00:36:49,719 --> 00:36:52,320 Speaker 9: With the QCW. Powell mentioned qc. 721 00:36:52,520 --> 00:36:56,520 Speaker 1: W yesterday, I predict that the qc W will be 722 00:36:56,520 --> 00:37:00,600 Speaker 1: the next CPI supercore Like now that Powell has mentioned 723 00:37:00,600 --> 00:37:04,040 Speaker 1: that he's going to mentally adjust the non farm payrolls 724 00:37:04,360 --> 00:37:08,319 Speaker 1: according to qc W, everybody would be paying attention to 725 00:37:08,480 --> 00:37:12,279 Speaker 1: the next qc W update, which we would be for 726 00:37:12,320 --> 00:37:16,080 Speaker 1: the second quarter. We estimate that the second quarter actually 727 00:37:16,080 --> 00:37:19,839 Speaker 1: did see a sharp rise in bankruptcies and slowed down 728 00:37:19,880 --> 00:37:23,919 Speaker 1: in job formation. That was a quarter when non farm 729 00:37:23,960 --> 00:37:27,120 Speaker 1: payroll in April was probably negative once you adjust for 730 00:37:27,239 --> 00:37:29,120 Speaker 1: the adjustment. 731 00:37:29,360 --> 00:37:33,759 Speaker 4: Well, is the Fed now behind behind behind dealing with 732 00:37:33,800 --> 00:37:36,000 Speaker 4: the labor market, do you think? And that may be 733 00:37:36,040 --> 00:37:37,799 Speaker 4: one of the reasons why he went fifty basis points 734 00:37:37,800 --> 00:37:38,480 Speaker 4: in not twenty five. 735 00:37:38,840 --> 00:37:42,040 Speaker 1: So Powell did not acknowledge that, but but I think 736 00:37:42,040 --> 00:37:43,080 Speaker 1: they are now back. 737 00:37:42,880 --> 00:37:45,520 Speaker 9: On the curve. They used to be behind. Now they're 738 00:37:45,560 --> 00:37:47,000 Speaker 9: back when. 739 00:37:47,160 --> 00:37:50,040 Speaker 2: You look at the Let's bring this back to English. Okay, 740 00:37:50,120 --> 00:37:54,560 Speaker 2: let's move away from your you mentioned Imperial professor Eichingreen. 741 00:37:55,040 --> 00:37:58,400 Speaker 2: Let's move it to English model what you just said 742 00:37:58,600 --> 00:38:02,000 Speaker 2: over to the tip point. Mentally, in the country of 743 00:38:02,200 --> 00:38:07,279 Speaker 2: four point x five point x unemployment rate, when do 744 00:38:07,360 --> 00:38:11,879 Speaker 2: we emotionally get into stall speed on the unemployment rate? 745 00:38:13,080 --> 00:38:18,360 Speaker 1: That is the hardest question I've ever heard, emotional stall speed. 746 00:38:18,680 --> 00:38:21,239 Speaker 2: You know Austin, Goldsby and Booth would have done that. 747 00:38:21,400 --> 00:38:24,600 Speaker 2: You know, come on, I mean, when does the unemployment 748 00:38:24,680 --> 00:38:26,759 Speaker 2: rate become politically painful in this nation? 749 00:38:27,000 --> 00:38:27,080 Speaker 1: Hi? 750 00:38:27,200 --> 00:38:30,080 Speaker 2: Ana Wong? Is it four point five point one per 751 00:38:30,320 --> 00:38:31,480 Speaker 2: do I gotta wait for six? 752 00:38:31,760 --> 00:38:31,920 Speaker 9: Well? 753 00:38:32,000 --> 00:38:34,160 Speaker 1: Four point eight is there already? In fact, now is 754 00:38:34,160 --> 00:38:37,960 Speaker 1: already there. You talk to anyone on the street, they 755 00:38:38,000 --> 00:38:40,680 Speaker 1: will tell you not Wall Street, Main Street. They would 756 00:38:40,680 --> 00:38:43,440 Speaker 1: tell you that it's hard to find a full time job. 757 00:38:43,719 --> 00:38:45,879 Speaker 1: They can only find part time jobs, and they have 758 00:38:45,960 --> 00:38:48,080 Speaker 1: to find a lot of hard time jobs in order 759 00:38:48,120 --> 00:38:50,560 Speaker 1: to pay the bill. And in fact, this will show 760 00:38:50,640 --> 00:38:52,759 Speaker 1: up in the household survey data if you're drill into 761 00:38:52,800 --> 00:38:57,080 Speaker 1: the details. So micro Micro's data shows that, in fact, 762 00:38:57,120 --> 00:39:00,400 Speaker 1: the reason why prime age employment is at peak was 763 00:39:00,440 --> 00:39:03,480 Speaker 1: because a lot of Native workers are working part time, 764 00:39:03,600 --> 00:39:07,480 Speaker 1: not full time as in a typical healthy labor market cycle. 765 00:39:07,840 --> 00:39:12,680 Speaker 4: What is the immigration policies or experience over the past 766 00:39:12,680 --> 00:39:15,000 Speaker 4: two or three years with a lot of the migration 767 00:39:15,040 --> 00:39:17,120 Speaker 4: coming in on the southern border, how does that affect Again, 768 00:39:17,200 --> 00:39:20,680 Speaker 4: what's the analysis showing you how's that affecting the labor market? 769 00:39:20,960 --> 00:39:23,600 Speaker 1: Yeah, so, our estimate is that the unemployment rate of 770 00:39:23,640 --> 00:39:26,839 Speaker 1: the new immigrants who came in since twenty twenty two 771 00:39:26,920 --> 00:39:31,040 Speaker 1: is about eleven percent right now, So I think they 772 00:39:31,640 --> 00:39:34,440 Speaker 1: it takes time to integrate them in the labor market, 773 00:39:34,560 --> 00:39:37,640 Speaker 1: and during this transition period is when they could push 774 00:39:37,719 --> 00:39:38,799 Speaker 1: up the unemployment rate. 775 00:39:39,080 --> 00:39:40,160 Speaker 9: So it really. 776 00:39:39,920 --> 00:39:43,239 Speaker 1: Depends on whether the labor market is healthy enough to 777 00:39:43,360 --> 00:39:44,640 Speaker 1: quickly absorb them. 778 00:39:45,120 --> 00:39:47,400 Speaker 2: Okay, I got time for one more question because you 779 00:39:47,440 --> 00:39:50,319 Speaker 2: didn't answer my last question. You went around it like 780 00:39:50,360 --> 00:39:55,480 Speaker 2: a pro. The answer is when does the unemployment rate 781 00:39:55,719 --> 00:40:00,520 Speaker 2: become stressful for all including the Central bank? Near that 782 00:40:00,920 --> 00:40:03,399 Speaker 2: or does Anaalog frame that out to June of next 783 00:40:03,480 --> 00:40:06,520 Speaker 2: year or even out farther. How close are we to 784 00:40:06,719 --> 00:40:07,719 Speaker 2: labor stress? 785 00:40:09,120 --> 00:40:12,759 Speaker 1: So if you think that four point eight percent is 786 00:40:12,800 --> 00:40:17,719 Speaker 1: when people are obviously alarmed about the possibility of recession. 787 00:40:18,280 --> 00:40:22,960 Speaker 1: Then I think in the November payrolls, it's possible that 788 00:40:23,040 --> 00:40:25,439 Speaker 1: you could see the unemployment eight rising to four point 789 00:40:25,520 --> 00:40:26,280 Speaker 1: five for sec. 790 00:40:26,200 --> 00:40:28,480 Speaker 2: Here November, first week in November, first. 791 00:40:28,280 --> 00:40:30,840 Speaker 1: Week of December, November one, so that would be the 792 00:40:30,880 --> 00:40:35,760 Speaker 1: October payrolls. It's possible that that, judging by the unemployment flows, 793 00:40:35,840 --> 00:40:37,520 Speaker 1: that could show four point five percent. 794 00:40:37,719 --> 00:40:40,440 Speaker 2: I rarely do this, Paul. I'm going to editorialize that 795 00:40:40,520 --> 00:40:43,279 Speaker 2: Powell set these people down at the FED and he 796 00:40:43,360 --> 00:40:46,560 Speaker 2: said we got to get out front of the November 797 00:40:46,920 --> 00:40:50,840 Speaker 2: October payrolls, November first week in November, right around the election. 798 00:40:50,920 --> 00:40:52,640 Speaker 4: At that point, what's the greatest risk here to this 799 00:40:52,719 --> 00:40:53,720 Speaker 4: economy right today? 800 00:40:53,760 --> 00:40:54,680 Speaker 5: Is it the labor marketing? 801 00:40:55,600 --> 00:40:57,520 Speaker 9: It is both labor market and the election. 802 00:40:58,040 --> 00:41:01,719 Speaker 2: Ah me go there next time I drag icon Green 803 00:41:01,760 --> 00:41:02,799 Speaker 2: in here, you gotta show up. 804 00:41:03,120 --> 00:41:07,600 Speaker 9: You know, definitely Advisor, we got we gotta get. 805 00:41:07,440 --> 00:41:11,200 Speaker 2: You both in here. He's been huge support for decades 806 00:41:11,239 --> 00:41:13,680 Speaker 2: for me and his paper at Jackson Hole. Last year 807 00:41:13,680 --> 00:41:17,279 Speaker 2: on debt and deficit was outstanding. It was really got 808 00:41:17,280 --> 00:41:20,880 Speaker 2: some splash animog. It's August I can't call you the 809 00:41:20,920 --> 00:41:23,520 Speaker 2: Economist of the Year yet. It's too early. It's like 810 00:41:23,600 --> 00:41:26,600 Speaker 2: the oscars. I gotta wait. But you're killing it. ANAMG 811 00:41:26,680 --> 00:41:32,359 Speaker 2: for Bloomberg Economics and with a team around her internationally extraordinary. 812 00:41:32,400 --> 00:41:34,279 Speaker 2: We're doing great work. Of all. How do you get 813 00:41:34,280 --> 00:41:36,480 Speaker 2: a job at Bloomberg and work out of Barcelona? 814 00:41:36,760 --> 00:41:37,600 Speaker 3: What is that about? 815 00:41:38,160 --> 00:41:40,320 Speaker 5: Let me know if you figured out Madrid. 816 00:41:40,440 --> 00:41:43,920 Speaker 2: I mean, you know, it's like it's unreal. Animong there 817 00:41:43,960 --> 00:41:47,439 Speaker 2: on your labor economy into the end of the year. 818 00:41:48,160 --> 00:41:51,400 Speaker 2: This is a Bloomberg Surveillance podcast, bringing you the best 819 00:41:51,400 --> 00:41:56,120 Speaker 2: in economics, finance, investment, and international relations. You can also 820 00:41:56,239 --> 00:42:00,279 Speaker 2: watch the show live on YouTube. 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