1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,640 Speaker 1: and of course on the Bloomberg terminal. It was one 6 00:00:30,640 --> 00:00:33,480 Speaker 1: of the toughest acts to follow in economics, Ed Hyman 7 00:00:33,600 --> 00:00:35,960 Speaker 1: on the high ground at c J. Lawrence. This is 8 00:00:36,000 --> 00:00:39,279 Speaker 1: a million years ago, and the guy that replaced him 9 00:00:39,440 --> 00:00:42,280 Speaker 1: was the same or frankly, some would say even better 10 00:00:42,600 --> 00:00:45,440 Speaker 1: at Yar. Danny out of pen brought a huge excuse 11 00:00:45,440 --> 00:00:49,240 Speaker 1: me out of Yale, brought a huge acuity of linking 12 00:00:49,400 --> 00:00:52,600 Speaker 1: economics to the markets at c J. Lawrence and onto 13 00:00:52,680 --> 00:00:55,240 Speaker 1: a storied career. He joins us this morning. As I 14 00:00:55,280 --> 00:00:58,800 Speaker 1: mentioned earlier, moving the market's green by just I'm showing up. 15 00:00:59,040 --> 00:01:02,440 Speaker 1: What's the character of this bull market at Yard Denny, Well, 16 00:01:02,520 --> 00:01:06,279 Speaker 1: it's been very broad based. Every now and then people 17 00:01:06,319 --> 00:01:09,560 Speaker 1: freak out because it looks like it's very narrow uh 18 00:01:09,600 --> 00:01:13,040 Speaker 1: And and we find along the way that the groups 19 00:01:13,080 --> 00:01:15,399 Speaker 1: that tend to lead the market at some points start 20 00:01:15,480 --> 00:01:17,959 Speaker 1: to lag and the laggards catch up. I mean, we 21 00:01:18,000 --> 00:01:21,440 Speaker 1: saw that earlier this year where the NASDAK had a 22 00:01:21,440 --> 00:01:24,760 Speaker 1: ten percent correction and the overall market held up pretty well. 23 00:01:24,840 --> 00:01:28,959 Speaker 1: We saw value beat growth starting September of last year. 24 00:01:29,000 --> 00:01:32,319 Speaker 1: So we just have this constant rapid rotation going on 25 00:01:32,400 --> 00:01:35,199 Speaker 1: in the market, and the market keeps moving higher, new 26 00:01:35,360 --> 00:01:37,280 Speaker 1: to new record hives. And then we saw a correction 27 00:01:37,440 --> 00:01:40,440 Speaker 1: of the correction last month that we saw tech out perform, 28 00:01:40,520 --> 00:01:43,080 Speaker 1: the banks on the perform a little bit against the SNP, 29 00:01:43,440 --> 00:01:45,559 Speaker 1: and then into the bond market, the yield curve twos 30 00:01:45,600 --> 00:01:47,920 Speaker 1: tends was flattered by twenty three basis points. And this 31 00:01:47,960 --> 00:01:50,360 Speaker 1: is your world, let's go there, the bond market. What 32 00:01:50,480 --> 00:01:54,440 Speaker 1: is it tell me anymore? What it tends to tell me? I? 33 00:01:54,840 --> 00:01:57,760 Speaker 1: I think that it's one of the reasons it's hard 34 00:01:57,800 --> 00:02:00,680 Speaker 1: to get a significant correction in the stock market. I 35 00:02:00,680 --> 00:02:03,160 Speaker 1: hope I didn't just drink it by saying so. But 36 00:02:03,520 --> 00:02:07,040 Speaker 1: there's a five trillion dollars in them, two more now 37 00:02:07,080 --> 00:02:09,640 Speaker 1: than there was just before the pandemic. So there's a 38 00:02:09,680 --> 00:02:13,680 Speaker 1: tremendous amount of liquidity. And with regards to the bottom market, uh, 39 00:02:14,160 --> 00:02:15,960 Speaker 1: you know, whenever the body wills go up. I get 40 00:02:15,960 --> 00:02:18,280 Speaker 1: a call from somebody in the press asking the u 41 00:02:18,680 --> 00:02:21,680 Speaker 1: is that the bondage landings are they back? As you 42 00:02:21,720 --> 00:02:27,040 Speaker 1: recall A coined that phrase back and for the during 43 00:02:27,040 --> 00:02:29,920 Speaker 1: the nineties and two thousand's they were basically nowhere to 44 00:02:29,960 --> 00:02:33,480 Speaker 1: be seen because inflation kept coming down. Uh, And suddenly 45 00:02:33,520 --> 00:02:36,600 Speaker 1: they come and came back late last year, earlier this year, 46 00:02:36,600 --> 00:02:39,600 Speaker 1: and now they seemed to be taking a cs to again. Look, 47 00:02:39,800 --> 00:02:42,440 Speaker 1: I think it's hard to talk about a bond market 48 00:02:43,360 --> 00:02:45,760 Speaker 1: markets are free. This is not a free bond market. 49 00:02:46,040 --> 00:02:49,040 Speaker 1: This is one where the Federal Reserved is clearly rigging 50 00:02:49,080 --> 00:02:53,320 Speaker 1: the market on a daily basis with its purchases. At 51 00:02:53,320 --> 00:02:56,280 Speaker 1: four thirty easton, LASA will be busy looking at the 52 00:02:56,320 --> 00:02:58,840 Speaker 1: Central Fank fantasy for the Federal Reserve? Where is it now? 53 00:02:58,919 --> 00:03:01,480 Speaker 1: LASA I trillly and pushed nine eight point one eight 54 00:03:01,480 --> 00:03:05,440 Speaker 1: point one trillion? How powerful is that balance sheet? Going 55 00:03:05,480 --> 00:03:08,480 Speaker 1: to Bay through the whole of the psycho eight nine 56 00:03:08,480 --> 00:03:11,840 Speaker 1: trillion dollars? Well trillion here, a trillion there adds up 57 00:03:11,840 --> 00:03:15,360 Speaker 1: to some series. And we haven't even talked about the 58 00:03:15,400 --> 00:03:17,080 Speaker 1: e C B and the b O J, which is 59 00:03:17,160 --> 00:03:20,960 Speaker 1: have also been UH doing quantitative easy. So we've got 60 00:03:20,960 --> 00:03:25,359 Speaker 1: a tremendous increase in the balance sheets of the central banks. Um. 61 00:03:25,960 --> 00:03:29,600 Speaker 1: Their their fingerprints are all over the global economy and 62 00:03:29,639 --> 00:03:33,079 Speaker 1: the financial markets. UM. It's a huge amount of money, 63 00:03:33,120 --> 00:03:37,920 Speaker 1: and they continue to accumulate these assets. I think though 64 00:03:38,000 --> 00:03:41,040 Speaker 1: clearly we're we're heading towards an environment where they have 65 00:03:41,160 --> 00:03:43,840 Speaker 1: to consider taper and let's cut back folks. I mean, 66 00:03:43,960 --> 00:03:46,600 Speaker 1: for example, housing, We've got a booming housing market, and 67 00:03:46,680 --> 00:03:49,440 Speaker 1: so what are they still buying mortgage backed securities? Where 68 00:03:49,440 --> 00:03:52,040 Speaker 1: does that make any sense? And whenever they talk about 69 00:03:52,080 --> 00:03:55,320 Speaker 1: their tapering, they said, well, it's it creates financial market stability. 70 00:03:55,400 --> 00:03:58,360 Speaker 1: What that means is that they've been successful in pegging 71 00:03:58,440 --> 00:04:00,680 Speaker 1: the bodyield and keeping it from going higher if it 72 00:04:00,760 --> 00:04:02,280 Speaker 1: wasn't for them. I think the bond deal will be 73 00:04:02,280 --> 00:04:03,920 Speaker 1: a two percent today. I think it's going to go 74 00:04:04,000 --> 00:04:05,880 Speaker 1: there by the end of the year because I think 75 00:04:05,920 --> 00:04:08,680 Speaker 1: tapering is coming all right. So tapering, you think even 76 00:04:08,720 --> 00:04:11,920 Speaker 1: the beginning of pairing back the billion dollars of purchases 77 00:04:12,400 --> 00:04:16,719 Speaker 1: of securities, you think could send the tenure yield too? Yes, 78 00:04:16,760 --> 00:04:19,919 Speaker 1: I do. UM. I think once the market starts to 79 00:04:19,920 --> 00:04:23,440 Speaker 1: to to get a schedule from the FED. I think 80 00:04:23,440 --> 00:04:25,080 Speaker 1: the feder will discuss it at the FO and C 81 00:04:25,240 --> 00:04:28,120 Speaker 1: meeting in July, and I think in September. The implement 82 00:04:28,200 --> 00:04:31,520 Speaker 1: that they have to the economy is booming. Um inflationary 83 00:04:31,560 --> 00:04:34,560 Speaker 1: pressures have been pretty intense. Some of them are base effect, 84 00:04:34,880 --> 00:04:37,640 Speaker 1: some of them are maybe a little bit more permanent. 85 00:04:37,720 --> 00:04:41,200 Speaker 1: So I think tapering is coming, and then the market 86 00:04:41,240 --> 00:04:43,800 Speaker 1: is gonna look at its schedule and say, well, you know, 87 00:04:43,920 --> 00:04:47,039 Speaker 1: after tapering, once they're done tapering, which could be the 88 00:04:47,080 --> 00:04:49,719 Speaker 1: first half of next year, they'll start raising the interest rates, 89 00:04:49,760 --> 00:04:54,159 Speaker 1: and that that plot keeps drifting towards increasing interest rates 90 00:04:54,160 --> 00:04:58,440 Speaker 1: in twenty two instead of three. So it's it's coming, 91 00:04:58,480 --> 00:05:01,159 Speaker 1: and I think the bottom markets gonna be somewhat freer 92 00:05:01,720 --> 00:05:04,920 Speaker 1: to express an opinion on the fact that the economy 93 00:05:05,000 --> 00:05:07,920 Speaker 1: is strong and inflations over two percent. And I'm sympathetic 94 00:05:07,960 --> 00:05:10,240 Speaker 1: to this idea that treasury yield will rise when the 95 00:05:10,240 --> 00:05:14,560 Speaker 1: Federal Reserve decides to buy fewer of those securities each month. However, 96 00:05:14,760 --> 00:05:16,600 Speaker 1: when they took a more hawkish tone at least, but 97 00:05:16,839 --> 00:05:19,800 Speaker 1: as reflected in the dots earlier this month, the actual 98 00:05:19,880 --> 00:05:22,839 Speaker 1: the long end went down. You actually say, yields drop 99 00:05:22,960 --> 00:05:26,320 Speaker 1: price higher. How do you understand that and extrapolate that 100 00:05:26,400 --> 00:05:29,880 Speaker 1: forward as to the market response to potential tapering. Well, again, 101 00:05:29,920 --> 00:05:33,839 Speaker 1: I think it's really hard to psychoanalyze the bond market 102 00:05:34,400 --> 00:05:38,240 Speaker 1: when you know the psychiatrist is I don't know if 103 00:05:38,240 --> 00:05:40,160 Speaker 1: I like this analogy that much, but you know what 104 00:05:40,240 --> 00:05:42,760 Speaker 1: I'm saying. I mean, the FED just keeps buying a 105 00:05:42,800 --> 00:05:46,120 Speaker 1: treasury and mortgage backed securities, and I think that's why 106 00:05:46,160 --> 00:05:49,320 Speaker 1: we've been holding here around one point five on the 107 00:05:49,320 --> 00:05:53,040 Speaker 1: bond market. But once they I mean they've already started 108 00:05:53,080 --> 00:05:56,560 Speaker 1: to hint that they're going to taper. For example, they're 109 00:05:56,560 --> 00:05:59,279 Speaker 1: not backing up the corporate bond market. They don't have to, 110 00:05:59,400 --> 00:06:03,719 Speaker 1: so they're backing off on that. They increased the rates 111 00:06:03,720 --> 00:06:06,320 Speaker 1: in the very short end of the marketplace because I 112 00:06:06,360 --> 00:06:09,080 Speaker 1: can't really have negative interest rates and not put the 113 00:06:09,080 --> 00:06:12,240 Speaker 1: money market funds out of business. So I think they're 114 00:06:12,240 --> 00:06:14,479 Speaker 1: already moving in there in that in the direction, and 115 00:06:14,520 --> 00:06:16,920 Speaker 1: I think that the bond markets will reflective. Look, the 116 00:06:17,000 --> 00:06:19,880 Speaker 1: yield curve is behaving actually pretty normally. If you look 117 00:06:19,880 --> 00:06:23,800 Speaker 1: at over the past year or so, it's been ascending, steepening, 118 00:06:23,920 --> 00:06:27,200 Speaker 1: and I think it continues to steepen. UH. Usually it's 119 00:06:27,200 --> 00:06:29,720 Speaker 1: steepens to the point of three basis points. We're only 120 00:06:29,760 --> 00:06:32,480 Speaker 1: halfway there. Do you think that the stocks can continue 121 00:06:32,560 --> 00:06:36,240 Speaker 1: rallying even as the FED eases the pedal from from 122 00:06:36,240 --> 00:06:40,120 Speaker 1: its monthly bond purchases. I do, because as as the 123 00:06:40,120 --> 00:06:43,560 Speaker 1: FED becomes less stimulative, there's still a tremendous amount of 124 00:06:43,560 --> 00:06:46,320 Speaker 1: stimulus that's just kind of sitting there in the in 125 00:06:46,400 --> 00:06:50,000 Speaker 1: liquid assets UM. Again, MP two is over over five 126 00:06:50,040 --> 00:06:54,400 Speaker 1: trillion dollars since UH the pandemic started, and that liquidity 127 00:06:54,480 --> 00:06:57,920 Speaker 1: can if you look at the MP two divided by 128 00:06:57,960 --> 00:07:00,599 Speaker 1: g d P, you know that that's the flip side velocity, 129 00:07:00,600 --> 00:07:02,760 Speaker 1: which is not my favorite variable. But if you look 130 00:07:02,800 --> 00:07:05,159 Speaker 1: at then two relative to GDP, we've got something like 131 00:07:05,200 --> 00:07:08,760 Speaker 1: a year's worth of M two relative to GDP. So 132 00:07:08,800 --> 00:07:11,800 Speaker 1: there's a tremendous amount of liquidity that can go either 133 00:07:11,920 --> 00:07:15,000 Speaker 1: to the economy or the financial markets, or real estate 134 00:07:15,080 --> 00:07:17,120 Speaker 1: or all of the above. All of the above is 135 00:07:17,160 --> 00:07:18,920 Speaker 1: my choice. And did you ever think with be in 136 00:07:18,920 --> 00:07:21,840 Speaker 1: a world where unemployment would have a five handle and 137 00:07:21,920 --> 00:07:24,520 Speaker 1: a ten year would be subone fifty did you ever 138 00:07:24,640 --> 00:07:27,800 Speaker 1: envision that kind of world? Well, well, it's it's it's 139 00:07:27,800 --> 00:07:30,160 Speaker 1: hard to imagine a world like that without the FED 140 00:07:30,800 --> 00:07:34,400 Speaker 1: being so interventionist in the bottom market. You know, there's 141 00:07:34,760 --> 00:07:38,640 Speaker 1: various relationships like the copper gold ratio and the bond yield, 142 00:07:38,840 --> 00:07:40,880 Speaker 1: which you've actually worked pretty well in the past, and 143 00:07:40,920 --> 00:07:44,080 Speaker 1: that relationship says that the bond deal should be a 144 00:07:44,120 --> 00:07:46,760 Speaker 1: closer to two and a half percent than to one 145 00:07:46,760 --> 00:07:49,559 Speaker 1: and a half percent. But the relationship hasn't worked because 146 00:07:49,600 --> 00:07:55,280 Speaker 1: of all that intervention. Um. But I think these things 147 00:07:55,360 --> 00:07:58,040 Speaker 1: don't stay out of kilter for very long. I think 148 00:07:58,080 --> 00:08:02,320 Speaker 1: the divergences will can virgin I do is going higher. 149 00:08:02,840 --> 00:08:04,640 Speaker 1: That's the cold It's gonna hate from you at an 150 00:08:04,760 --> 00:08:14,200 Speaker 1: any that you have any research precedent. Conson Hunter is going, 151 00:08:14,280 --> 00:08:17,400 Speaker 1: what are they talking about? She's with KPMG, their chief economists, 152 00:08:18,480 --> 00:08:22,000 Speaker 1: and joins us this morning. Well, your Yankees fan, well 153 00:08:22,040 --> 00:08:25,720 Speaker 1: you know, please what Doug cass Indian constants I mean 154 00:08:25,760 --> 00:08:28,120 Speaker 1: for you. We can't talk Yankees red Sox right now, 155 00:08:28,360 --> 00:08:31,960 Speaker 1: but we can't talk claims to jobs. Does this claims 156 00:08:32,040 --> 00:08:37,240 Speaker 1: number adjust your job's outlook tomorrow? Not really? And I 157 00:08:37,280 --> 00:08:39,840 Speaker 1: just want to say, with regard to the state map 158 00:08:39,920 --> 00:08:42,559 Speaker 1: that you put up, Um, what we have in our 159 00:08:42,640 --> 00:08:45,880 Speaker 1: latest chart book, is that same map overlaid with the 160 00:08:46,000 --> 00:08:49,360 Speaker 1: vaccination rates, because we think that this is a big 161 00:08:49,400 --> 00:08:52,880 Speaker 1: thing that is keeping people on those continuing claims. So 162 00:08:52,920 --> 00:08:58,000 Speaker 1: when thinking about the impact of the cutoff of pandemic 163 00:08:58,040 --> 00:09:02,679 Speaker 1: unemployment insurance supplemental UH dollars in certain states, we need 164 00:09:02,760 --> 00:09:05,440 Speaker 1: to look at the continuing claims and we need to 165 00:09:05,480 --> 00:09:08,440 Speaker 1: look at what's going on with vaccination rates in those states, 166 00:09:08,480 --> 00:09:13,040 Speaker 1: because we still have over of working age adults have 167 00:09:13,160 --> 00:09:17,240 Speaker 1: not received even one vaccine, and we think this, combined 168 00:09:17,280 --> 00:09:20,959 Speaker 1: with childcare, are the things that are really holding back 169 00:09:21,040 --> 00:09:23,320 Speaker 1: people going back to the labor force. Is this why 170 00:09:23,320 --> 00:09:26,600 Speaker 1: people keep bringing up September constants the date in the 171 00:09:26,640 --> 00:09:29,080 Speaker 1: diary on the calendar for this year, that some of 172 00:09:29,080 --> 00:09:33,040 Speaker 1: these issues might get resolved or begin to resolve them. Yeah. Sure, 173 00:09:33,080 --> 00:09:35,920 Speaker 1: if we go back to in person school and we 174 00:09:35,960 --> 00:09:40,199 Speaker 1: are working on vaccinating young people, so um that those 175 00:09:40,200 --> 00:09:44,880 Speaker 1: odds keep going up if we keep getting those vaccines distributed. Um. 176 00:09:44,880 --> 00:09:47,280 Speaker 1: But I should point out for a few young children 177 00:09:47,280 --> 00:09:50,120 Speaker 1: that aren't yet in school, Um, we have eight and 178 00:09:50,160 --> 00:09:53,760 Speaker 1: a half fewer daycare workers than prior to the pandemic. 179 00:09:54,240 --> 00:09:57,600 Speaker 1: So um daycare if you have young children, is very 180 00:09:57,679 --> 00:10:00,160 Speaker 1: very difficult to find as well, So it's off the 181 00:10:00,200 --> 00:10:03,360 Speaker 1: problem for everybody who has school aged children. It doesn't 182 00:10:03,360 --> 00:10:06,600 Speaker 1: solve the problem for very young children. Constance, let's extrapolate 183 00:10:06,640 --> 00:10:08,800 Speaker 1: out and build on this, and particularly with respect to 184 00:10:08,800 --> 00:10:12,040 Speaker 1: this argument over whether to end the enhanced employment benefits 185 00:10:12,040 --> 00:10:16,440 Speaker 1: earlier rather than later. Are there any detrimental effects from 186 00:10:16,600 --> 00:10:20,800 Speaker 1: ending them now? Based on what you're saying, Well, if 187 00:10:20,840 --> 00:10:26,079 Speaker 1: you believe that the supplemental unemployment insurance has limited economic scarring, 188 00:10:26,440 --> 00:10:29,600 Speaker 1: and data certainly suggests that it has, right, So we 189 00:10:29,679 --> 00:10:33,520 Speaker 1: see personal bankruptcies are down, the linquency rates are down, um, 190 00:10:33,640 --> 00:10:36,480 Speaker 1: we see savings up. So we know that household balance 191 00:10:36,480 --> 00:10:40,120 Speaker 1: sheets have benefited from the supplemental unemployment insurance and that 192 00:10:40,120 --> 00:10:43,640 Speaker 1: that should limit economic scarring. So as we enter the 193 00:10:43,720 --> 00:10:47,880 Speaker 1: recovery phase, people will be in a better position to consume, 194 00:10:48,320 --> 00:10:51,000 Speaker 1: and that of course will help the recovery. I do 195 00:10:51,120 --> 00:10:53,320 Speaker 1: think we're far enough along that that a lot of 196 00:10:53,320 --> 00:10:56,720 Speaker 1: that scarring should begin to dissipate as the economy continues 197 00:10:56,760 --> 00:10:59,680 Speaker 1: to reopen, as people continue to get vaccinated, as we 198 00:10:59,720 --> 00:11:02,120 Speaker 1: get children back in school, and the fall all these 199 00:11:02,160 --> 00:11:05,160 Speaker 1: sorts of things there's good momentum, but what we really 200 00:11:05,200 --> 00:11:07,360 Speaker 1: don't know is how much of this is related to 201 00:11:07,480 --> 00:11:11,520 Speaker 1: vaccination rates. And we can look internationally interestingly, you see 202 00:11:11,559 --> 00:11:15,760 Speaker 1: the same phenomenon globally, especially in developed economies that you 203 00:11:15,800 --> 00:11:19,520 Speaker 1: see here. Leisure and hospitality workers really reconsidering is this 204 00:11:19,640 --> 00:11:21,360 Speaker 1: a is this a field I want to be in? 205 00:11:21,400 --> 00:11:23,800 Speaker 1: Are there other options that I could be doing? If 206 00:11:23,840 --> 00:11:26,840 Speaker 1: we go back in history and look at previous pandemics 207 00:11:26,880 --> 00:11:31,120 Speaker 1: back five hundred years, UM, we observe something really interesting 208 00:11:31,120 --> 00:11:33,640 Speaker 1: when we compare wars and pandemics, right, because both have 209 00:11:33,760 --> 00:11:37,440 Speaker 1: loss of life um, pandemics, there is an increase in 210 00:11:37,520 --> 00:11:41,440 Speaker 1: real wages after the pandemic, and it seems like there 211 00:11:41,520 --> 00:11:44,200 Speaker 1: is some hesitancy to go back to in person work 212 00:11:44,600 --> 00:11:47,560 Speaker 1: after pandemics, and that you see in the JULT data 213 00:11:47,559 --> 00:11:50,200 Speaker 1: as well. You see all this churn. People reevaluate what 214 00:11:50,280 --> 00:11:52,640 Speaker 1: is it that I want to be doing with my life? Okay, Constance, 215 00:11:52,679 --> 00:11:56,800 Speaker 1: we got wages up, I mean, Morgan Stanley really emphasizes 216 00:11:56,840 --> 00:11:59,160 Speaker 1: that they call it wage gaining potential. I get it. 217 00:11:59,640 --> 00:12:02,640 Speaker 1: I all so have inflation up right now, I've got 218 00:12:02,640 --> 00:12:05,840 Speaker 1: a massive negative real wage growth. Do I get to 219 00:12:05,920 --> 00:12:10,160 Speaker 1: a positive inflation adjusted wage growth. I think by this 220 00:12:10,200 --> 00:12:13,040 Speaker 1: time next year you absolutely do um, but we're not. 221 00:12:13,280 --> 00:12:16,280 Speaker 1: We're looking for a two point three percent inflation this 222 00:12:16,320 --> 00:12:18,920 Speaker 1: time next year, so we're expecting to dissipate, but we're 223 00:12:18,920 --> 00:12:22,640 Speaker 1: still expecting pretty healthy inflation. With that said, we're also 224 00:12:22,679 --> 00:12:25,800 Speaker 1: looking for a growth rate that's close to five. So 225 00:12:25,800 --> 00:12:28,400 Speaker 1: so when you combine these two things together, I think 226 00:12:28,440 --> 00:12:30,800 Speaker 1: that we will see real wage growth. And the question 227 00:12:30,840 --> 00:12:33,680 Speaker 1: is which segment of the labor market. So right now, 228 00:12:33,720 --> 00:12:36,000 Speaker 1: we're seeing the wage growth in the segment of the 229 00:12:36,080 --> 00:12:38,720 Speaker 1: labor market that has to work from their job site, 230 00:12:39,120 --> 00:12:41,920 Speaker 1: and that unemployment rate is about six and a half percent. 231 00:12:42,400 --> 00:12:47,360 Speaker 1: But the increased demand for wages, the reservation wage, the 232 00:12:47,400 --> 00:12:50,240 Speaker 1: wage at which people are willing to work, has gone 233 00:12:50,320 --> 00:12:54,320 Speaker 1: up for people without a bachelor's degree, so that's a 234 00:12:54,360 --> 00:12:56,199 Speaker 1: lot of the people that have to work at their 235 00:12:56,280 --> 00:12:59,360 Speaker 1: job site are those people who can work from home. 236 00:12:59,760 --> 00:13:03,320 Speaker 1: The uemployment raised two point seven and if you imagine 237 00:13:03,360 --> 00:13:06,200 Speaker 1: that this is going to be a recovery, that's five years. 238 00:13:06,800 --> 00:13:09,400 Speaker 1: I would see if you look a year or two out, 239 00:13:09,679 --> 00:13:13,520 Speaker 1: it's the it's that people with bachelor's degrees that can 240 00:13:13,559 --> 00:13:15,440 Speaker 1: work from home that are that are already in a 241 00:13:15,480 --> 00:13:17,520 Speaker 1: tight labor market where you're going to see the bulk 242 00:13:17,520 --> 00:13:21,880 Speaker 1: of the wage inflation throughout this cycle. That's a really 243 00:13:21,880 --> 00:13:27,160 Speaker 1: interesting final point, Constance, thank you constant from home chief economist. 244 00:13:27,400 --> 00:13:29,240 Speaker 1: And we did that home for about four months. It 245 00:13:29,360 --> 00:13:31,800 Speaker 1: worked out. How did that did not work out? Well, 246 00:13:33,360 --> 00:13:36,599 Speaker 1: let's recapitulate that at midyear here. Thanks to our technical 247 00:13:36,640 --> 00:13:41,280 Speaker 1: team who jumped through massive hoops, massive hoops to get 248 00:13:41,320 --> 00:13:43,000 Speaker 1: that done and to get us back. You know, it 249 00:13:43,080 --> 00:13:44,679 Speaker 1: was a tough time. Go on, Lisa, Can I just 250 00:13:44,720 --> 00:13:46,960 Speaker 1: say I want to offer thanks to my two boys 251 00:13:46,960 --> 00:13:51,280 Speaker 1: who sat on the couch eating breakfast while I was broadcasting, 252 00:13:51,320 --> 00:13:52,719 Speaker 1: just to give you a sense thank you of the 253 00:13:52,840 --> 00:13:56,880 Speaker 1: childcare and the working from home situation. Can I also 254 00:13:56,920 --> 00:14:00,640 Speaker 1: say I'd like to thank that Bell incount the Oscar 255 00:14:00,679 --> 00:14:10,079 Speaker 1: speeches right now, we always read the documents from Joseph 256 00:14:10,160 --> 00:14:14,720 Speaker 1: Lavornia with the taxas CIB their chief Economists of America's Joe, 257 00:14:14,760 --> 00:14:17,880 Speaker 1: what have you tweaked recently? What's the thing you're you're 258 00:14:17,880 --> 00:14:22,600 Speaker 1: tweaking here at a media review? Uh? Not interestingly enough, 259 00:14:22,680 --> 00:14:24,640 Speaker 1: Jonathan was talking about two cents and you said, why 260 00:14:24,640 --> 00:14:27,160 Speaker 1: did the Curvis flattened so much. I want to just 261 00:14:27,200 --> 00:14:30,400 Speaker 1: talk about that for a minute time. And that's been 262 00:14:30,480 --> 00:14:33,600 Speaker 1: due to the markets expectation of the terminal FED funds 263 00:14:33,680 --> 00:14:38,000 Speaker 1: rate coming down significantly and uh on your Bloomberg terminally, 264 00:14:38,000 --> 00:14:39,520 Speaker 1: you can pull up your five year five year oh 265 00:14:39,600 --> 00:14:42,240 Speaker 1: I s and that's rally from about two hundred and 266 00:14:42,320 --> 00:14:44,320 Speaker 1: forty basis points, which was the peak and the funds 267 00:14:44,360 --> 00:14:47,040 Speaker 1: right in the last cycle, to around hundred and seventy 268 00:14:47,040 --> 00:14:50,600 Speaker 1: basis points. So we've basically had a seventy basis point 269 00:14:50,680 --> 00:14:53,680 Speaker 1: rally since April and where the market thinks the terminal 270 00:14:53,760 --> 00:14:56,280 Speaker 1: rate will end this cycle, and that accounts for the 271 00:14:56,360 --> 00:15:00,000 Speaker 1: substantial flattening. And yes, you don't have much inflation fracture 272 00:15:00,040 --> 00:15:02,440 Speaker 1: in the system. I'm I'm thrilled you went there, Joe. 273 00:15:02,520 --> 00:15:05,240 Speaker 1: Let's focus on this now. And it's Joseph Lavorne of 274 00:15:05,320 --> 00:15:08,960 Speaker 1: New Texas, Jana Hantius of Golden Sex and others saying 275 00:15:09,040 --> 00:15:12,360 Speaker 1: we're going back under three percent. Do you agree with that, Joe, 276 00:15:12,640 --> 00:15:16,000 Speaker 1: that the terminal value of our economic growth is under 277 00:15:16,040 --> 00:15:19,040 Speaker 1: three percent? Whether it's Farole is under two percent or 278 00:15:19,120 --> 00:15:22,440 Speaker 1: hats is under three percent, it doesn't it doesn't have 279 00:15:22,520 --> 00:15:24,480 Speaker 1: to be that way, Tom, But that seems to be 280 00:15:24,520 --> 00:15:27,400 Speaker 1: the consensus of forecasters, and even in the Biden budget 281 00:15:27,800 --> 00:15:31,120 Speaker 1: they're forecasting GDP at one point nine percent. So it 282 00:15:31,160 --> 00:15:34,760 Speaker 1: does seem like the consensus of forecasters is shifting down 283 00:15:34,800 --> 00:15:37,280 Speaker 1: to a to a sub two percent world. I would 284 00:15:37,320 --> 00:15:39,760 Speaker 1: love to see three percent, and it's possible we can 285 00:15:39,800 --> 00:15:42,320 Speaker 1: get three percent. I'm not I'm not a pessimist on 286 00:15:42,400 --> 00:15:46,200 Speaker 1: long term productivity growth. It is very possible that this crisis, 287 00:15:46,400 --> 00:15:50,440 Speaker 1: h this pandemic, was an accelerant the productivity growth. We're 288 00:15:50,440 --> 00:15:53,040 Speaker 1: gonna find these great new ways of doing business actually 289 00:15:53,040 --> 00:15:55,960 Speaker 1: long term could lead to higher productivity. What I could 290 00:15:55,960 --> 00:15:57,880 Speaker 1: tell you in the short term is the economy is 291 00:15:57,880 --> 00:15:59,920 Speaker 1: booming this year. It's got a tremendous amount of sem 292 00:16:00,120 --> 00:16:02,920 Speaker 1: that's that's that's the reason why the equity markets up 293 00:16:02,920 --> 00:16:05,840 Speaker 1: five straight quarters. The economy is doing well. Next year, 294 00:16:05,880 --> 00:16:08,520 Speaker 1: it will slow, but where it goes beyond next year 295 00:16:08,560 --> 00:16:11,080 Speaker 1: time will be a function I believe of regulatory policy 296 00:16:11,080 --> 00:16:14,040 Speaker 1: and fiscal policy, and if we get the right program 297 00:16:14,080 --> 00:16:16,440 Speaker 1: in place, I don't see why growth can't be much 298 00:16:16,480 --> 00:16:18,520 Speaker 1: faster than two percent. I want to taste that a 299 00:16:18,560 --> 00:16:20,400 Speaker 1: cup of scenario. It has given what you have just said, 300 00:16:20,760 --> 00:16:23,080 Speaker 1: and maybe take out the last bit. What's the chance 301 00:16:23,120 --> 00:16:25,520 Speaker 1: can you envistion a scenario where the Federals get stuck 302 00:16:25,560 --> 00:16:29,800 Speaker 1: down hit? Oh? Absolutely, I've I've done a few interviews 303 00:16:29,800 --> 00:16:32,280 Speaker 1: with some other sources saying I believe the fedists is 304 00:16:32,280 --> 00:16:34,960 Speaker 1: stuck in a box. Uh. And I say that because, 305 00:16:35,040 --> 00:16:38,080 Speaker 1: simply put, if the FED can't taper the economy when 306 00:16:38,080 --> 00:16:41,040 Speaker 1: GDP is wrinning at least seven percent maybe eight percent 307 00:16:41,160 --> 00:16:43,480 Speaker 1: this year, how is it going to taper next year 308 00:16:44,200 --> 00:16:47,840 Speaker 1: when the economy is downshifted massively in inflation is moving lower. 309 00:16:48,080 --> 00:16:50,680 Speaker 1: They have a real time and consistency problem. I don't 310 00:16:50,680 --> 00:16:52,560 Speaker 1: see them being able to do it. And in the 311 00:16:52,640 --> 00:16:55,000 Speaker 1: last cycle took them seven years from the last rate 312 00:16:55,040 --> 00:16:57,560 Speaker 1: cut to the first rate height, and I believe it 313 00:16:57,600 --> 00:16:59,880 Speaker 1: was four years from the time they begin to tape. 314 00:17:00,120 --> 00:17:02,320 Speaker 1: So they're not going to move anywhere in here as 315 00:17:02,360 --> 00:17:04,639 Speaker 1: quickly as they think they are. Buil deutly out with 316 00:17:04,680 --> 00:17:07,120 Speaker 1: the pace on the Blimpbog terminal this morning on blimpbog 317 00:17:07,160 --> 00:17:09,640 Speaker 1: dot com on blombag Opinion saying the FED will tape, 318 00:17:09,640 --> 00:17:11,720 Speaker 1: but don't freak count Joe, do you think it is 319 00:17:11,760 --> 00:17:14,240 Speaker 1: that easy, that simple, that straightforward. No, I don't. I 320 00:17:14,240 --> 00:17:16,080 Speaker 1: don't the market. I would argue, if you look at 321 00:17:16,359 --> 00:17:18,879 Speaker 1: the forward market, as I highlighted the outset, the market 322 00:17:18,920 --> 00:17:21,000 Speaker 1: does not believe the FED is going to taper. The 323 00:17:21,040 --> 00:17:24,639 Speaker 1: problem is the Fed last year, of all treasuries, they 324 00:17:24,680 --> 00:17:28,400 Speaker 1: were the single single biggest buyer and and and their 325 00:17:28,400 --> 00:17:32,320 Speaker 1: balance sheet is approaching g d P. Their ability to 326 00:17:32,440 --> 00:17:36,119 Speaker 1: navigate the taper is significantly more difficult today than it 327 00:17:36,240 --> 00:17:38,959 Speaker 1: was eight years ago. So I think to say that 328 00:17:39,000 --> 00:17:41,040 Speaker 1: they could do it and it's it's going to be seamless, 329 00:17:41,080 --> 00:17:44,480 Speaker 1: they think it's very very naive. Joe, what's the tailwind 330 00:17:44,680 --> 00:17:46,520 Speaker 1: that the economy is getting at this point from the 331 00:17:46,520 --> 00:17:49,399 Speaker 1: FED policy remaining this easy and an aspis as you 332 00:17:49,440 --> 00:17:51,280 Speaker 1: talk about the FED being stuck in a box and 333 00:17:51,320 --> 00:17:55,359 Speaker 1: possibly not being able to raise rates. I mean the 334 00:17:55,400 --> 00:17:58,240 Speaker 1: policy has basically been the I'd argue, the time is 335 00:17:58,280 --> 00:18:01,640 Speaker 1: pretty healthy. In February point money we reopened, We've got 336 00:18:01,640 --> 00:18:05,439 Speaker 1: a V shaped recovery. It was overlaid with tremendous sisal stimulus. 337 00:18:05,640 --> 00:18:08,280 Speaker 1: We've had not over five trillion dollars of just COVID 338 00:18:08,320 --> 00:18:11,600 Speaker 1: related spending. The Fed's been real easy and You've got 339 00:18:11,640 --> 00:18:14,399 Speaker 1: this demand boom. Supply has been slow to catch up. 340 00:18:14,440 --> 00:18:17,199 Speaker 1: That's why you've had the inflation. But the economy is, 341 00:18:17,440 --> 00:18:19,639 Speaker 1: you know, resurgencey is just so much pent up demand. 342 00:18:20,080 --> 00:18:22,760 Speaker 1: It will moderate, But essentially it's economy that I would 343 00:18:22,840 --> 00:18:24,719 Speaker 1: argue if you leave it, if you leave it alone, 344 00:18:24,760 --> 00:18:28,440 Speaker 1: it'll be fine. But certainly both dial systemal, monetary or 345 00:18:28,480 --> 00:18:31,320 Speaker 1: full tilt. And that's why the economy is improving, and 346 00:18:31,359 --> 00:18:34,480 Speaker 1: it was generally healthy, so we're in good shape. I 347 00:18:34,520 --> 00:18:37,200 Speaker 1: just don't see the FED being able to uh to 348 00:18:37,200 --> 00:18:39,920 Speaker 1: to to do anything on the on the rate hike side, 349 00:18:39,920 --> 00:18:42,959 Speaker 1: And if you've got fiscal stimulus, it may actually ironically 350 00:18:43,000 --> 00:18:45,920 Speaker 1: cause them to did their ability to do anything that 351 00:18:46,000 --> 00:18:47,920 Speaker 1: may fall even more. In other words, who's gonna be 352 00:18:47,920 --> 00:18:50,159 Speaker 1: buying all this debt if we get more stimulus from here, 353 00:18:50,200 --> 00:18:52,440 Speaker 1: which is what the ministration is trying to do. How 354 00:18:52,480 --> 00:18:54,680 Speaker 1: important is the job's number that we're gonna be getting 355 00:18:54,720 --> 00:18:58,879 Speaker 1: tomorrow in order to determine FED policy. It's important in 356 00:18:58,880 --> 00:19:01,240 Speaker 1: the sense that if it comes and softer than expected, 357 00:19:01,320 --> 00:19:03,880 Speaker 1: and we're gonna get a soft reports sometime soon, it's 358 00:19:03,880 --> 00:19:05,960 Speaker 1: gonna squeeze the shorts in the market. You're gonna see 359 00:19:06,000 --> 00:19:08,320 Speaker 1: two s tends flatten even more. But in terms of 360 00:19:08,320 --> 00:19:10,520 Speaker 1: the bigger picture, I don't. I don't think the employment 361 00:19:10,560 --> 00:19:13,280 Speaker 1: numbers matter that much. If it's weak, people will say 362 00:19:13,280 --> 00:19:16,560 Speaker 1: it's because of labor shortages. Um, I don't think it 363 00:19:16,600 --> 00:19:19,119 Speaker 1: really matters. I think the inflation numbers is what's driving 364 00:19:19,160 --> 00:19:22,480 Speaker 1: Main Street and what's driving most investment decisions. I don't 365 00:19:22,480 --> 00:19:24,200 Speaker 1: think it's a problem, but I don't think employment is 366 00:19:24,200 --> 00:19:27,040 Speaker 1: a big deal at the moment. Joe, the equity markets, 367 00:19:27,040 --> 00:19:30,640 Speaker 1: it's chapter twenty three a Manque, chapter twenty three, Krogman, 368 00:19:30,960 --> 00:19:35,800 Speaker 1: Olivia Blanchard, whatever. How do you observe the equity markets 369 00:19:35,920 --> 00:19:39,960 Speaker 1: in your economics? This run of a great bullmarket? How 370 00:19:40,000 --> 00:19:45,520 Speaker 1: does it translate into Lavournia economics? I try to you 371 00:19:45,560 --> 00:19:47,800 Speaker 1: mentioned three people, one of them I definitely don't try 372 00:19:47,840 --> 00:19:51,840 Speaker 1: to read. I won't see who that is. But shade there, 373 00:19:51,920 --> 00:19:55,840 Speaker 1: John Lavarnia, little Chippy. This summary, well, think what do 374 00:19:55,880 --> 00:19:58,360 Speaker 1: you would say? Think what you would say about Catherine 375 00:19:58,359 --> 00:20:02,879 Speaker 1: Man carry on? Very wonderful woman has actually worked with 376 00:20:02,920 --> 00:20:05,600 Speaker 1: my old duck colleague at Peter Huber. But anyway, leaving 377 00:20:05,640 --> 00:20:09,320 Speaker 1: that aside, the on the equity side, what we've seen 378 00:20:09,359 --> 00:20:13,960 Speaker 1: really is a tremendous increase of profitability, and that reflects 379 00:20:14,000 --> 00:20:15,959 Speaker 1: the fact that well, the US has recovered time, so 380 00:20:16,000 --> 00:20:18,840 Speaker 1: as the global economy, and even with the lockdowns, the 381 00:20:18,880 --> 00:20:22,680 Speaker 1: sporadic lockdowns in Europe and the COVID cases in South America, 382 00:20:22,760 --> 00:20:24,959 Speaker 1: we've seen the p m I s in Brazil, in 383 00:20:25,000 --> 00:20:29,239 Speaker 1: the UK, Germany, Italy, France, Japan, they've all recovered. So 384 00:20:29,280 --> 00:20:33,240 Speaker 1: it's been a huge global rebound. The SNP has significant 385 00:20:33,240 --> 00:20:36,200 Speaker 1: exposure to the global economy. With the US booming, it's 386 00:20:36,240 --> 00:20:39,080 Speaker 1: really been about earnings and going forward, you have to 387 00:20:39,119 --> 00:20:42,919 Speaker 1: assume that this performance is pulling from future activity. But 388 00:20:43,080 --> 00:20:45,800 Speaker 1: Lavorne economics is, look, if there's no recession in sight, 389 00:20:45,880 --> 00:20:48,600 Speaker 1: and I don't see one, even if the economy slows 390 00:20:49,000 --> 00:20:51,440 Speaker 1: rays stay low, inflation is gonna moderate, and we're still 391 00:20:51,440 --> 00:20:53,960 Speaker 1: gonna get positive warm connectivity returns, and we still have 392 00:20:54,080 --> 00:20:56,440 Speaker 1: not seen the peak in stock market. So I'm still 393 00:20:56,600 --> 00:21:00,600 Speaker 1: I'm still I'm still an optimist. Larry Peblo taught me well, Joe, 394 00:21:00,720 --> 00:21:03,239 Speaker 1: final question from me, and I won't go there right there. 395 00:21:03,680 --> 00:21:05,840 Speaker 1: In terms of the cycle as it starts to really 396 00:21:05,840 --> 00:21:08,960 Speaker 1: pick up, are you surprised that hasn't engineered a Wika dollar. 397 00:21:10,720 --> 00:21:12,800 Speaker 1: Uh A little bit to me that there's been a 398 00:21:12,880 --> 00:21:15,080 Speaker 1: lot of people have been very short rates. They packed 399 00:21:15,119 --> 00:21:18,320 Speaker 1: kurb steepeners on and they've been very short dollars. So 400 00:21:18,480 --> 00:21:20,160 Speaker 1: I think that's part of the reason why the dollar 401 00:21:20,200 --> 00:21:23,600 Speaker 1: hasn't leaked in much. And then peripherally, because the US 402 00:21:23,600 --> 00:21:26,680 Speaker 1: has sort of come out of the of this pandemic 403 00:21:26,760 --> 00:21:29,919 Speaker 1: quicker than many of our trading partners in other industrialized countries, 404 00:21:29,960 --> 00:21:32,680 Speaker 1: it's kept the dollar better bid than and otherwise would 405 00:21:32,680 --> 00:21:36,160 Speaker 1: be especially related to these massive twin deficits, the combination 406 00:21:36,200 --> 00:21:38,280 Speaker 1: of the budget depth sit in the trade depths. So 407 00:21:38,320 --> 00:21:40,840 Speaker 1: it doesn't totally surprise me. Joe, it's gonna see you. 408 00:21:41,000 --> 00:21:43,760 Speaker 1: I missed the continent. Thank you. It's great to get 409 00:21:43,800 --> 00:21:46,760 Speaker 1: a flavor of it from Jolifornia and the Texas Economist 410 00:21:47,000 --> 00:21:56,200 Speaker 1: of the Americus right now, not downtown but in midtown 411 00:21:56,359 --> 00:21:59,679 Speaker 1: was the reaffirmation of all the Dana Telsey believes in 412 00:21:59,760 --> 00:22:03,600 Speaker 1: Dana tels is definitive and fashion and the study the 413 00:22:03,680 --> 00:22:07,400 Speaker 1: security analysis of what we buy and wear every day 414 00:22:07,440 --> 00:22:11,240 Speaker 1: and Dana it was Mark Jacobs at the Public Library, 415 00:22:11,320 --> 00:22:13,960 Speaker 1: and as Vanessa said in the New York Times. There 416 00:22:13,960 --> 00:22:17,600 Speaker 1: were hugs and kisses. What is the symbolism of New 417 00:22:17,720 --> 00:22:21,840 Speaker 1: York's finest? Mr Jacobs doing a show here in the 418 00:22:21,840 --> 00:22:25,879 Speaker 1: heat of New York City summer. I think it's about 419 00:22:25,920 --> 00:22:29,560 Speaker 1: the reopening and the recovery that's just beginning, the fact 420 00:22:29,640 --> 00:22:32,919 Speaker 1: that vaccinations have been given, that there's more to go, 421 00:22:33,320 --> 00:22:36,560 Speaker 1: that there's a safe way for people to socialize and gather. 422 00:22:36,920 --> 00:22:39,680 Speaker 1: It's been over a year, and I think everyone's missed it. 423 00:22:40,080 --> 00:22:42,119 Speaker 1: And that's why what you and you, Tom and I 424 00:22:42,200 --> 00:22:45,640 Speaker 1: have talked is it's a time period of supercharge change. 425 00:22:46,040 --> 00:22:49,119 Speaker 1: What's so important here? Dana's Anrie Harden down in Washington 426 00:22:49,200 --> 00:22:53,160 Speaker 1: for Bloomberg News was killing at this morning wearing Mark 427 00:22:53,240 --> 00:22:57,119 Speaker 1: Jacobs in pink. Lady Gaga says, pink as this summer's color. 428 00:22:57,240 --> 00:23:01,000 Speaker 1: Are we going to refill our closets with pink? I 429 00:23:01,040 --> 00:23:05,640 Speaker 1: think we are already filling our closets were filling with fashion. Basically, 430 00:23:05,680 --> 00:23:09,360 Speaker 1: everyone wants optimism. What is optimism? Show that you can 431 00:23:09,400 --> 00:23:12,600 Speaker 1: go out in there and people can be together again. 432 00:23:12,880 --> 00:23:16,160 Speaker 1: So I think these trends, I think they're going to continue. 433 00:23:16,480 --> 00:23:19,280 Speaker 1: I think consumers of money in their pocket and we're 434 00:23:19,359 --> 00:23:22,760 Speaker 1: going to have a super holiday season if companies can 435 00:23:22,800 --> 00:23:26,280 Speaker 1: only get the inventory. And keep in mind, we're seeing 436 00:23:26,359 --> 00:23:29,840 Speaker 1: so much change out there. We're seeing companies overall look 437 00:23:29,920 --> 00:23:35,160 Speaker 1: for ways to better serve the consumer in all different areas. Tom, 438 00:23:35,240 --> 00:23:38,199 Speaker 1: where do you find out style trends? Where do I 439 00:23:38,240 --> 00:23:41,920 Speaker 1: find them out? I read Dana Telsea and Joe Feld Group. 440 00:23:42,119 --> 00:23:45,399 Speaker 1: I don't see any pink discussion in her note, Dana 441 00:23:46,000 --> 00:23:52,280 Speaker 1: Lady Gaga's all over just alright, moving forward, Dana, aside 442 00:23:52,320 --> 00:23:55,720 Speaker 1: from the pink call, and you talked about how consumers 443 00:23:55,760 --> 00:23:58,639 Speaker 1: are dealing with their orders in a different way the 444 00:23:58,760 --> 00:24:01,800 Speaker 1: online world and how that has affected brick and mortar. 445 00:24:02,080 --> 00:24:04,359 Speaker 1: What are you expecting, particularly in the second half of 446 00:24:04,400 --> 00:24:07,480 Speaker 1: the year in terms of the distribution between e commerce 447 00:24:07,680 --> 00:24:11,280 Speaker 1: and brick and mortar is more people get vaccinated. So 448 00:24:11,359 --> 00:24:15,359 Speaker 1: what we're seeing is even the stores are reopening, online 449 00:24:15,400 --> 00:24:19,119 Speaker 1: sales remains solid. And I think, if anything, the super 450 00:24:19,240 --> 00:24:22,640 Speaker 1: charge change that's gone on, I think the COVID crisis 451 00:24:22,680 --> 00:24:26,400 Speaker 1: created innovation, leading to the acceleration of so many things 452 00:24:26,400 --> 00:24:28,800 Speaker 1: that would have taken three to five years to achieve. 453 00:24:29,200 --> 00:24:31,399 Speaker 1: So what you're seeing out there is an accelerator of 454 00:24:31,440 --> 00:24:35,160 Speaker 1: new business model capabilities. I think stores recover. They may 455 00:24:35,160 --> 00:24:38,320 Speaker 1: not get the same traffic because you have purposeful purchasing. 456 00:24:38,560 --> 00:24:43,440 Speaker 1: What you are getting is you're getting more customization. Consumers 457 00:24:43,440 --> 00:24:46,159 Speaker 1: are going in there converting, and you know what we're seeing. 458 00:24:46,320 --> 00:24:50,440 Speaker 1: We're seeing every category being disrupted by change. And there's 459 00:24:50,480 --> 00:24:53,360 Speaker 1: like a seat change every ten years. So it used 460 00:24:53,400 --> 00:24:56,199 Speaker 1: to be the category killers of the nineteen eighties and 461 00:24:56,280 --> 00:24:59,840 Speaker 1: nine nineties are now the disruptors. You think about it, 462 00:24:59,840 --> 00:25:02,720 Speaker 1: and so many of these companies are still private, whether 463 00:25:02,720 --> 00:25:06,800 Speaker 1: it be Warby Parker in specialty retail, Forward in healthcare, 464 00:25:07,240 --> 00:25:12,000 Speaker 1: Birdies or roth The's in footwear, glossiering cosmetics, Polly in 465 00:25:12,040 --> 00:25:16,000 Speaker 1: the auto performance aftermarket, I think company a lot of 466 00:25:16,080 --> 00:25:19,439 Speaker 1: runway in the DTC market, Dana, how much pricing power 467 00:25:19,560 --> 00:25:23,280 Speaker 1: do these consumer facing companies have given the fact that 468 00:25:23,280 --> 00:25:25,560 Speaker 1: we're seeing input costs rise to the degree they are, 469 00:25:26,920 --> 00:25:30,600 Speaker 1: I think inventory levels of a lean supply change and disrupted. 470 00:25:30,840 --> 00:25:34,280 Speaker 1: We're seeing better merchandise margins than we've seen in years, 471 00:25:34,320 --> 00:25:36,400 Speaker 1: and I think that we're going to continue to see 472 00:25:36,440 --> 00:25:39,240 Speaker 1: solid margins going forward. Are we going to get back 473 00:25:39,240 --> 00:25:42,560 Speaker 1: to promotions? I think we will. But the extension of 474 00:25:42,600 --> 00:25:45,439 Speaker 1: what these slays are. I'm here and you won't get 475 00:25:45,440 --> 00:25:48,720 Speaker 1: normalized inventories until nearly the end of the year and 476 00:25:48,720 --> 00:25:52,520 Speaker 1: into two. Dana mores value and luxury. Right now, somebody 477 00:25:52,520 --> 00:25:55,679 Speaker 1: wants to buy the usual names LVMH, Gucci, Carring the 478 00:25:55,720 --> 00:25:58,520 Speaker 1: rest of them. Hey, is, well, is there any value there? 479 00:25:58,520 --> 00:26:02,239 Speaker 1: They just over there, They just is to perfection. I 480 00:26:02,280 --> 00:26:04,879 Speaker 1: think there's still more value there. I don't think you 481 00:26:04,920 --> 00:26:07,879 Speaker 1: can look at the history before two thousand nineteen. I 482 00:26:07,920 --> 00:26:10,400 Speaker 1: think we have to go forward, and I think the 483 00:26:10,480 --> 00:26:14,320 Speaker 1: engagement of consumers do with with luxury. You have the 484 00:26:14,440 --> 00:26:18,240 Speaker 1: Chinese that are staying in China. When tourism comeback comes back, 485 00:26:18,320 --> 00:26:20,679 Speaker 1: it's going to accelerate the rest of the world. And 486 00:26:20,720 --> 00:26:23,840 Speaker 1: you have locals find in the US. Keep in mind, Tom, 487 00:26:23,840 --> 00:26:28,000 Speaker 1: look how Channel raised their prices. We're hearing increasing in 488 00:26:28,040 --> 00:26:31,359 Speaker 1: the space. Yeah, Dania, thanks for bringing up a sore point. 489 00:26:31,680 --> 00:26:35,040 Speaker 1: Joe Felban crushes it on Amazon as well. Link your 490 00:26:35,040 --> 00:26:38,320 Speaker 1: world into Joe Felban's world. Is Amazon out front on 491 00:26:38,440 --> 00:26:42,880 Speaker 1: fashion vers Bezos going down in flames? I think Amazon 492 00:26:43,320 --> 00:26:46,040 Speaker 1: zan is out there in so many categories. I think 493 00:26:46,080 --> 00:26:49,600 Speaker 1: they can be for essentials and you're seeing other types 494 00:26:49,640 --> 00:26:52,679 Speaker 1: of companies be very singular in nature in terms of 495 00:26:52,720 --> 00:26:55,439 Speaker 1: what they're able to do with categories. That's why I 496 00:26:55,520 --> 00:26:59,800 Speaker 1: say category killers. DTC companies like the ones I mentioned 497 00:27:00,200 --> 00:27:04,000 Speaker 1: are gonna gonna be able to resonate against Amazon. You're 498 00:27:04,040 --> 00:27:09,560 Speaker 1: seeing vintage in all different categories be very relevant. Dana, 499 00:27:09,640 --> 00:27:13,080 Speaker 1: thanks so much, Go away Chanel's lumber price. That's what 500 00:27:13,160 --> 00:27:16,480 Speaker 1: I learned, Dana, Telsea, thank you so much. Selseie advisor 501 00:27:16,520 --> 00:27:20,440 Speaker 1: and grew up as well. This is the Bloomberg Surveillance Podcast. 502 00:27:20,680 --> 00:27:24,080 Speaker 1: Thanks for listening. Join us live weekdays from seven to 503 00:27:24,160 --> 00:27:28,200 Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television 504 00:27:28,560 --> 00:27:32,560 Speaker 1: each day from six to nine am for insight from 505 00:27:32,600 --> 00:27:37,159 Speaker 1: the best in economics, finance, investment, and international relations. And 506 00:27:37,240 --> 00:27:42,400 Speaker 1: subscribe to the Surveillance podcast on Apple, podcast, SoundCloud, Bloomberg 507 00:27:42,440 --> 00:27:45,760 Speaker 1: dot com, and of course, on the terminal. I'm Tom 508 00:27:45,840 --> 00:27:48,199 Speaker 1: keene In. This is Bloomberg