1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,560 --> 00:00:38,960 Speaker 1: The President saying he plans to announce his selection to 11 00:00:39,040 --> 00:00:41,559 Speaker 1: lead the Federal Reserve early in the new year, possibly 12 00:00:41,640 --> 00:00:43,959 Speaker 1: this giving rise to berts that the Fed is going 13 00:00:44,000 --> 00:00:47,080 Speaker 1: to cut rights rates more aggressively, which is fed into 14 00:00:47,120 --> 00:00:51,159 Speaker 1: this expectation of a bigger deficit and potentially what's going 15 00:00:51,200 --> 00:00:53,200 Speaker 1: to be happening on both the monetary side of things 16 00:00:53,240 --> 00:00:55,480 Speaker 1: and the fiscal side of things, which is the reason 17 00:00:55,480 --> 00:00:58,680 Speaker 1: why we are looking at the fiscal deficit. President Trump 18 00:00:58,720 --> 00:01:02,760 Speaker 1: once again suggesting revenue could replace federal income taxes and 19 00:01:02,880 --> 00:01:06,000 Speaker 1: reduce the national debt. Mayamaguinnis of the Committee for for 20 00:01:06,080 --> 00:01:09,840 Speaker 1: Responsible Federal Budget writing, despite all of the promises made 21 00:01:10,000 --> 00:01:12,800 Speaker 1: on deficit reduction in twenty twenty five, we're heading into 22 00:01:12,840 --> 00:01:15,200 Speaker 1: twenty twenty six with a little to show as far 23 00:01:15,240 --> 00:01:18,360 Speaker 1: as fiscal improvements. MAYA can join us now, Maya thank 24 00:01:18,360 --> 00:01:19,880 Speaker 1: you so much for being with us. I want to 25 00:01:19,920 --> 00:01:22,840 Speaker 1: start with what you make of the recent discussions of 26 00:01:22,880 --> 00:01:25,160 Speaker 1: the AEPA case in front of the Supreme Court of 27 00:01:25,280 --> 00:01:29,280 Speaker 1: potential companies clawing back some of the revenues that they 28 00:01:29,280 --> 00:01:30,400 Speaker 1: paid to the United States. 29 00:01:30,600 --> 00:01:32,560 Speaker 3: Are you taking that seriously. 30 00:01:32,080 --> 00:01:34,400 Speaker 1: As a potential hit to revenues that otherwise have been 31 00:01:34,440 --> 00:01:35,000 Speaker 1: penciled in. 32 00:01:36,360 --> 00:01:39,560 Speaker 4: Absolutely, I think everybody should be taking seriously the potential 33 00:01:39,600 --> 00:01:42,360 Speaker 4: that there's going to be major shifts on what happens 34 00:01:42,360 --> 00:01:46,720 Speaker 4: with the tariff revenue, both going forward and potentially if 35 00:01:46,720 --> 00:01:49,080 Speaker 4: some of that money has to be paid back. Listen, 36 00:01:49,120 --> 00:01:51,960 Speaker 4: I have no legal expertise at all, but having talked 37 00:01:51,960 --> 00:01:55,280 Speaker 4: to many people, I'm less concerned that people are going 38 00:01:55,320 --> 00:01:57,040 Speaker 4: to have to pay it back, which would be immensely 39 00:01:57,040 --> 00:02:00,800 Speaker 4: disruptive to companies and distortive to the sense that you 40 00:02:00,840 --> 00:02:04,840 Speaker 4: can make negotiations on foreign policy and economic policy. But 41 00:02:04,920 --> 00:02:06,840 Speaker 4: I do think it's likely that they will find that 42 00:02:06,880 --> 00:02:10,520 Speaker 4: those tariffs are illegal. In their present structure, the tariffs 43 00:02:10,520 --> 00:02:13,480 Speaker 4: are projected to raise about two and a half trillion 44 00:02:13,520 --> 00:02:16,280 Speaker 4: dollars over the next decade and reduce the debt by 45 00:02:16,320 --> 00:02:19,000 Speaker 4: as much as three trillion because of interest savings. This 46 00:02:19,120 --> 00:02:22,240 Speaker 4: would be a huge hit to the fiscal picture, which 47 00:02:22,280 --> 00:02:24,880 Speaker 4: is already in deep, deep trouble. So I think one 48 00:02:24,919 --> 00:02:26,880 Speaker 4: of the big questions is if we do find that 49 00:02:26,880 --> 00:02:29,680 Speaker 4: that TEARFF revenue doesn't remain in place, and let's be honest, 50 00:02:29,680 --> 00:02:31,880 Speaker 4: it's unlikely to remain in place in the current structure 51 00:02:31,880 --> 00:02:35,240 Speaker 4: no matter what, because the President enjoys changing those tariffs around. 52 00:02:35,760 --> 00:02:38,840 Speaker 4: But if they are pulled back and unable to go 53 00:02:38,880 --> 00:02:42,799 Speaker 4: as planned, we should be thinking about a smarter, more efficient, 54 00:02:43,320 --> 00:02:47,280 Speaker 4: more pro growth revenue approach that would replace them, so 55 00:02:47,320 --> 00:02:49,080 Speaker 4: we wouldn't lose all of that money and make the 56 00:02:49,120 --> 00:02:50,359 Speaker 4: deficit even worse. 57 00:02:50,840 --> 00:02:52,919 Speaker 5: MAYA when it comes to potentially well can get done 58 00:02:52,919 --> 00:02:54,959 Speaker 5: by the end of the year. What are you hearing 59 00:02:55,000 --> 00:02:56,120 Speaker 5: and what do you think it's going to do the 60 00:02:56,120 --> 00:03:00,320 Speaker 5: fiscal picture? If there is an extension of the AMA 61 00:03:00,320 --> 00:03:04,880 Speaker 5: Care health credits enhance this This was. 62 00:03:04,880 --> 00:03:07,200 Speaker 4: A really interesting part of the discussion about how to 63 00:03:07,200 --> 00:03:10,919 Speaker 4: open the government. Which was the big ask was that 64 00:03:10,960 --> 00:03:15,560 Speaker 4: we extend the subsidies for Obama healthcare, and that would 65 00:03:15,560 --> 00:03:18,680 Speaker 4: have all told to cost three hundred and fifty billion dollars. 66 00:03:18,919 --> 00:03:21,280 Speaker 4: You'll notice there was not a single discussion of how 67 00:03:21,320 --> 00:03:24,119 Speaker 4: we might offset those costs. So again, here's another plan 68 00:03:24,160 --> 00:03:26,760 Speaker 4: that would increase the deficit. We're not going to see 69 00:03:26,760 --> 00:03:29,320 Speaker 4: them extended permanently, and so the cost will be less 70 00:03:29,320 --> 00:03:32,040 Speaker 4: because it will only be for a few years. There 71 00:03:32,120 --> 00:03:34,480 Speaker 4: is some chance that this will happen for one or 72 00:03:34,520 --> 00:03:36,840 Speaker 4: two years before the end of this year, but I 73 00:03:36,880 --> 00:03:39,840 Speaker 4: think it's likely. It seems as though the momentum for 74 00:03:39,840 --> 00:03:43,080 Speaker 4: getting this done is starting to slow down. But to 75 00:03:43,160 --> 00:03:45,160 Speaker 4: your point, no matter what happens at the end of 76 00:03:45,200 --> 00:03:47,520 Speaker 4: this year, we'll either see nothing, which will just keep 77 00:03:47,520 --> 00:03:50,720 Speaker 4: a very bad fiscal picture in place, or there is 78 00:03:50,800 --> 00:03:53,200 Speaker 4: a possibility that there'll be a trade and a worsening 79 00:03:53,200 --> 00:03:56,600 Speaker 4: of the fiscal picture. Let's extend those subsidies, and it's 80 00:03:56,600 --> 00:03:59,880 Speaker 4: no comment in the policy. They might be a smart policy, no, 81 00:04:00,000 --> 00:04:01,920 Speaker 4: but he's talking about how to offset them. But there 82 00:04:02,000 --> 00:04:04,600 Speaker 4: might be a trade where you extend them unpaid for 83 00:04:04,600 --> 00:04:07,720 Speaker 4: for other policies that are also unpaid for. Which is 84 00:04:07,760 --> 00:04:10,680 Speaker 4: often what happens in that Christmas tree fiscal rush at 85 00:04:10,720 --> 00:04:11,800 Speaker 4: the end of the calendar year. 86 00:04:12,040 --> 00:04:15,560 Speaker 5: Well, when it comes to these enhanced subsidies, this was 87 00:04:15,600 --> 00:04:17,800 Speaker 5: at as you mentioned, the heart of the government shutdown. 88 00:04:17,920 --> 00:04:21,120 Speaker 5: Have you any seen any impact that is going to 89 00:04:21,160 --> 00:04:23,600 Speaker 5: be long term of the government shutdown on the fiscal 90 00:04:23,600 --> 00:04:24,520 Speaker 5: healthy United States? 91 00:04:25,680 --> 00:04:29,039 Speaker 4: The government shutdown itself will not have an overall massive 92 00:04:29,080 --> 00:04:31,960 Speaker 4: fiscal impact. There is a slowing and spending during that 93 00:04:32,000 --> 00:04:35,440 Speaker 4: period and take a small hit on GDP usually which 94 00:04:35,480 --> 00:04:36,440 Speaker 4: is made up in. 95 00:04:36,400 --> 00:04:37,280 Speaker 3: The following months. 96 00:04:37,320 --> 00:04:40,040 Speaker 4: So we usually just see a shift of growth and 97 00:04:40,120 --> 00:04:42,240 Speaker 4: overall effects fysical effects from the shutdown. 98 00:04:42,560 --> 00:04:45,400 Speaker 3: What it does do is causes us to be. 99 00:04:45,320 --> 00:04:47,920 Speaker 4: A laughing stock around the world when our government can't 100 00:04:48,000 --> 00:04:50,600 Speaker 4: keep the lights on. Really, it is a punchline, and 101 00:04:50,640 --> 00:04:54,760 Speaker 4: it is the huge sign of an inability to govern 102 00:04:54,800 --> 00:04:58,160 Speaker 4: at the most basic level, and it presents weaknesses and 103 00:04:58,200 --> 00:05:00,840 Speaker 4: sort of a distraction from the big issues that are 104 00:05:00,880 --> 00:05:03,000 Speaker 4: going on around the globe right now. So I think 105 00:05:03,240 --> 00:05:06,160 Speaker 4: any country that's not aligned with the US looks at 106 00:05:06,200 --> 00:05:08,560 Speaker 4: us and says they can't get their act together, and 107 00:05:08,600 --> 00:05:10,440 Speaker 4: our allies are a little bit concerned too, So I 108 00:05:10,440 --> 00:05:14,240 Speaker 4: would say it has far more of global foreign policy 109 00:05:14,480 --> 00:05:17,520 Speaker 4: ramifications that it does on the actual bottom line, which 110 00:05:17,560 --> 00:05:19,520 Speaker 4: is more of a shift of when money is spent. 111 00:05:19,720 --> 00:05:22,000 Speaker 4: There'll be small savings in the short term, but they'll 112 00:05:22,040 --> 00:05:23,800 Speaker 4: be pushed out into the subsequent months. 113 00:05:24,040 --> 00:05:25,760 Speaker 1: A lot of people have said, look, this could have 114 00:05:25,760 --> 00:05:28,120 Speaker 1: been said for a long time. We've had the irresponsible 115 00:05:28,160 --> 00:05:31,960 Speaker 1: fiscal budget deficit for quite a while. It has gotten worse, 116 00:05:32,000 --> 00:05:34,520 Speaker 1: but right now markets are not freaking out. In fact, 117 00:05:34,720 --> 00:05:37,240 Speaker 1: we have a whole host of different projections for twenty 118 00:05:37,279 --> 00:05:39,920 Speaker 1: twenty six coming out of Wall Street expecting a bias 119 00:05:40,000 --> 00:05:42,640 Speaker 1: to lower yields by the end of next year, even 120 00:05:42,680 --> 00:05:45,640 Speaker 1: on the longer denominations. Why do you think the market 121 00:05:45,760 --> 00:05:49,880 Speaker 1: hasn't been particularly concerned even with everything that you're laying out. 122 00:05:50,839 --> 00:05:53,640 Speaker 4: Yeah, I mean this is a long term challenge, the 123 00:05:53,640 --> 00:05:56,760 Speaker 4: fiscal situation, because it's not in the US about oh, 124 00:05:56,800 --> 00:05:59,920 Speaker 4: we might have a fiscal crisis in the immediate short term, 125 00:06:00,160 --> 00:06:03,040 Speaker 4: because we are the reserve currency, because countries around the 126 00:06:03,040 --> 00:06:06,159 Speaker 4: world and savors domestically want US treasuries. There are lots 127 00:06:06,200 --> 00:06:09,520 Speaker 4: of reasons that rates don't pop up immediately. What it 128 00:06:09,560 --> 00:06:12,240 Speaker 4: is is a slowing kind of erosion of our role 129 00:06:12,279 --> 00:06:14,800 Speaker 4: in the world and faith in the US, and so 130 00:06:14,880 --> 00:06:17,880 Speaker 4: that when there is kind of a moment of reckoning, 131 00:06:18,279 --> 00:06:20,480 Speaker 4: it will be so much harder to fix. We will 132 00:06:20,520 --> 00:06:24,120 Speaker 4: have ten trillion twenty trillion more in debt than we 133 00:06:24,160 --> 00:06:26,279 Speaker 4: would have if we had gotten ahead of the problem. 134 00:06:26,520 --> 00:06:28,680 Speaker 4: That's one big issue. The second issue I'd say is 135 00:06:29,040 --> 00:06:32,200 Speaker 4: markets aren't the best predictors of when things turn bad. 136 00:06:32,279 --> 00:06:35,640 Speaker 4: There's a lot of kind of frothy optimism that comes 137 00:06:35,640 --> 00:06:38,839 Speaker 4: out of markets momentum that's built in it, and it's 138 00:06:38,839 --> 00:06:39,720 Speaker 4: almost like a bubble. 139 00:06:40,000 --> 00:06:41,200 Speaker 3: Many people understand that. 140 00:06:41,400 --> 00:06:44,240 Speaker 4: Most people understand the fiscal fundamentals of the US are 141 00:06:44,600 --> 00:06:47,920 Speaker 4: nothing short of terrible, but that doesn't mean there isn't 142 00:06:47,960 --> 00:06:49,839 Speaker 4: money to be made in the short term as long 143 00:06:49,880 --> 00:06:52,400 Speaker 4: as things kind of continue with the momentum they currently have. 144 00:06:53,000 --> 00:06:54,680 Speaker 4: And when it comes to time, people don't want to 145 00:06:54,680 --> 00:06:56,920 Speaker 4: pull money out of the market or make abrupt changes 146 00:06:56,960 --> 00:06:57,599 Speaker 4: too quickly. 147 00:06:58,400 --> 00:07:03,640 Speaker 3: So there's a refusal to acknowledge that the fundamentals are 148 00:07:03,680 --> 00:07:05,839 Speaker 3: bad and hope that kind of the top line. 149 00:07:05,720 --> 00:07:08,240 Speaker 4: Numbers will continue to look good for as long as possible. 150 00:07:08,480 --> 00:07:11,200 Speaker 2: Stay with US. Mulpleinpeg Savanna's coming. 151 00:07:10,960 --> 00:07:12,000 Speaker 3: Up off to this. 152 00:07:21,040 --> 00:07:23,560 Speaker 1: Here's a view from Wall Street. Stocks inching higher as 153 00:07:23,640 --> 00:07:27,200 Speaker 1: risk sentiment appears to be improving. Dana Dioria of Investment 154 00:07:27,280 --> 00:07:31,400 Speaker 1: Solutions writing, the current bout of market difficulty doesn't presage 155 00:07:31,440 --> 00:07:34,400 Speaker 1: a bear market. It's better to see wild buying tamed 156 00:07:34,440 --> 00:07:37,480 Speaker 1: now than to witness a major bubble. Developed data joins 157 00:07:37,520 --> 00:07:39,160 Speaker 1: us now from more Dana, thank you so much for 158 00:07:39,200 --> 00:07:41,480 Speaker 1: being with us. This to me really is the question, 159 00:07:41,600 --> 00:07:44,000 Speaker 1: is this a healthy sell off or is this a sign, 160 00:07:44,120 --> 00:07:47,000 Speaker 1: especially with what we're seeing, for example, coming out of 161 00:07:47,000 --> 00:07:49,960 Speaker 1: Oracle CDs, a sign that there really are some significant 162 00:07:50,000 --> 00:07:51,080 Speaker 1: worries that are developing. 163 00:07:52,280 --> 00:07:54,440 Speaker 3: Well, I think there've always been significant worries. 164 00:07:54,480 --> 00:07:56,880 Speaker 6: I think the market has, you know, kind of plowed 165 00:07:56,920 --> 00:07:58,800 Speaker 6: ahead throughout the course of the year in spite of 166 00:07:58,840 --> 00:07:59,360 Speaker 6: what we all know. 167 00:07:59,560 --> 00:08:01,200 Speaker 3: One of the main head winds, of course, being just 168 00:08:01,320 --> 00:08:02,800 Speaker 3: valuations being so high. 169 00:08:03,160 --> 00:08:05,880 Speaker 6: Another major head wind being that it's a pretty narrow 170 00:08:05,960 --> 00:08:08,120 Speaker 6: story that's kind of driving all of this, right, It's 171 00:08:08,200 --> 00:08:10,840 Speaker 6: this AI story, and narrow and only in the sense 172 00:08:10,880 --> 00:08:13,200 Speaker 6: that we don't know yet when AI is going to 173 00:08:13,200 --> 00:08:15,880 Speaker 6: pay off. We don't really know yet other than paying 174 00:08:15,920 --> 00:08:18,080 Speaker 6: off for the NVIDIAs of the world, and kind of 175 00:08:18,080 --> 00:08:20,520 Speaker 6: the producers if you will, but when will it actually 176 00:08:20,560 --> 00:08:22,520 Speaker 6: pay off for the rest of the economy. And so 177 00:08:22,800 --> 00:08:26,160 Speaker 6: you know, transformative technologies that of course are good bets 178 00:08:26,200 --> 00:08:28,760 Speaker 6: in a long term sense, don't necessarily pay off in 179 00:08:28,800 --> 00:08:30,400 Speaker 6: the short term at all, and it's really hard to 180 00:08:30,400 --> 00:08:32,640 Speaker 6: see how that's going to disperse throughout the economy. So 181 00:08:32,760 --> 00:08:35,400 Speaker 6: all being said, I think the market has kind of 182 00:08:35,559 --> 00:08:38,240 Speaker 6: gone through all of that and pushed hard ahead throughout 183 00:08:38,280 --> 00:08:39,720 Speaker 6: the course of the air in spite of some of 184 00:08:39,720 --> 00:08:42,840 Speaker 6: these existing concerns, and so yes, to see a little 185 00:08:42,840 --> 00:08:45,320 Speaker 6: bit of a pullback, to see some consideration around Hey, 186 00:08:45,320 --> 00:08:48,920 Speaker 6: there's a lot of concentration here. This whole capex AI 187 00:08:49,840 --> 00:08:53,640 Speaker 6: you know cycle is sort of a little bit circuitous, 188 00:08:53,720 --> 00:08:55,360 Speaker 6: and you know, maybe we should back off a little 189 00:08:55,400 --> 00:08:57,720 Speaker 6: I think is normal and you know, kind of to 190 00:08:57,760 --> 00:09:00,320 Speaker 6: be expected and maybe probably even a little on what 191 00:09:00,360 --> 00:09:00,800 Speaker 6: it could be. 192 00:09:01,200 --> 00:09:03,680 Speaker 1: So Dana, going forward, what's going to get people to 193 00:09:03,720 --> 00:09:06,920 Speaker 1: reverse that skepticism to actually come in and buy again. 194 00:09:07,000 --> 00:09:10,200 Speaker 1: Even the valuations, yes, they've come off, still are pretty elevated. 195 00:09:11,200 --> 00:09:13,000 Speaker 3: Well, certainly you've got the FED rate cut. 196 00:09:13,040 --> 00:09:14,840 Speaker 6: I mean, I think everybody you know what you're seeing, 197 00:09:14,880 --> 00:09:16,199 Speaker 6: even in the market is now a little bit of 198 00:09:16,640 --> 00:09:19,680 Speaker 6: you know, TechEd kind of recovery. 199 00:09:19,720 --> 00:09:21,920 Speaker 3: A little is based on that, right, It's. 200 00:09:21,840 --> 00:09:24,000 Speaker 6: Based on the bad news is good news kind of 201 00:09:24,000 --> 00:09:27,239 Speaker 6: storyline where we're still going to see some softness and employment. 202 00:09:27,480 --> 00:09:29,600 Speaker 6: That softness and employment will be enough that the FED 203 00:09:29,640 --> 00:09:32,040 Speaker 6: will actually cut rates in December as expected. 204 00:09:32,760 --> 00:09:34,840 Speaker 3: My view is and has been that. 205 00:09:34,760 --> 00:09:37,240 Speaker 6: They will cut, regardless of kind of some of the 206 00:09:37,400 --> 00:09:39,520 Speaker 6: rhetoric and ups and downs that we've seen in the 207 00:09:39,520 --> 00:09:40,160 Speaker 6: futures market. 208 00:09:40,240 --> 00:09:41,480 Speaker 3: I think a cut is coming. 209 00:09:41,800 --> 00:09:43,800 Speaker 6: I think there's enough concern about the soft patch in 210 00:09:43,800 --> 00:09:44,600 Speaker 6: the economy that. 211 00:09:44,559 --> 00:09:45,520 Speaker 3: They will do that. 212 00:09:46,360 --> 00:09:48,160 Speaker 6: I think some of what they've said is an assertion 213 00:09:48,320 --> 00:09:50,880 Speaker 6: of independence and you know, don't get ahead of yourselves 214 00:09:50,960 --> 00:09:51,360 Speaker 6: kind of thing. 215 00:09:51,360 --> 00:09:52,960 Speaker 3: But at the end of the day, they will cut, and. 216 00:09:52,960 --> 00:09:54,199 Speaker 6: So I think that will be good, and I think 217 00:09:54,200 --> 00:09:55,680 Speaker 6: it will be good for areas of the market that 218 00:09:55,720 --> 00:09:57,959 Speaker 6: we want to see, you know, kind of do better, 219 00:09:58,040 --> 00:10:00,959 Speaker 6: such as small caps, you know, more straight sensitive areas 220 00:10:00,960 --> 00:10:04,000 Speaker 6: in the market where if you want breadth in the market, 221 00:10:04,120 --> 00:10:06,000 Speaker 6: which we do, right, we want to get beyond this 222 00:10:06,280 --> 00:10:09,240 Speaker 6: large cap tech only type of a trade. We want 223 00:10:09,280 --> 00:10:11,120 Speaker 6: to see those areas of the market that maybe are 224 00:10:11,160 --> 00:10:14,080 Speaker 6: more reliant on capital markets be able to come back more. So, 225 00:10:14,400 --> 00:10:16,240 Speaker 6: you know, I think a FED rate cut is the 226 00:10:16,320 --> 00:10:17,599 Speaker 6: right thing, and I think we'll get it, and I 227 00:10:17,640 --> 00:10:20,040 Speaker 6: think that that is what the market is seeing right now. 228 00:10:20,160 --> 00:10:22,960 Speaker 5: Is it cut in December enough though, for that burdening 229 00:10:22,960 --> 00:10:24,720 Speaker 5: out you're talking about, or is it that going to 230 00:10:24,760 --> 00:10:26,600 Speaker 5: have to continue this into twenty twenty six? 231 00:10:27,320 --> 00:10:28,640 Speaker 3: You know, I do think you're right. 232 00:10:28,720 --> 00:10:31,400 Speaker 6: I think the cutton December, of course will make everyone happy. 233 00:10:31,920 --> 00:10:35,800 Speaker 6: Perhaps we'll have our Santa Claus rally, but you're absolutely right. 234 00:10:35,840 --> 00:10:38,040 Speaker 6: I think we will need to continue to see at 235 00:10:38,080 --> 00:10:41,360 Speaker 6: least some cutting in the new year. I also think 236 00:10:41,400 --> 00:10:43,960 Speaker 6: though you know, twenty twenty six, I don't have a 237 00:10:44,160 --> 00:10:46,679 Speaker 6: negative outlook, right. I mean, as we go into the 238 00:10:46,679 --> 00:10:51,120 Speaker 6: next year, I think we do have a. 239 00:10:50,720 --> 00:10:53,280 Speaker 3: Situation where you've got stimulus coming. 240 00:10:54,040 --> 00:10:56,440 Speaker 6: You still do have what I think is a good 241 00:10:56,520 --> 00:10:58,320 Speaker 6: storyline around AI and Capex. 242 00:10:58,320 --> 00:10:59,760 Speaker 3: I don't think it's going anywhere. 243 00:11:00,000 --> 00:11:02,000 Speaker 6: I mean, look at the bond markets and the interests 244 00:11:02,040 --> 00:11:06,120 Speaker 6: that these companies have, and you know, getting credit for 245 00:11:06,520 --> 00:11:10,920 Speaker 6: some of these purchases. There's credit a wash for their needs, 246 00:11:11,400 --> 00:11:13,200 Speaker 6: and so I think there's a lot still there. 247 00:11:13,400 --> 00:11:15,800 Speaker 3: I don't think we're ready to sort of back off. 248 00:11:15,600 --> 00:11:18,240 Speaker 6: On where the market can be in twenty twenty six, 249 00:11:18,360 --> 00:11:20,079 Speaker 6: but I think we just want to see more breadth. 250 00:11:20,200 --> 00:11:22,360 Speaker 5: We're going to get ADP report today, We're going to 251 00:11:22,360 --> 00:11:26,560 Speaker 5: get PCs very stale on Friday. We're not getting jobs 252 00:11:26,640 --> 00:11:29,400 Speaker 5: data from the US government until after the FED meets. 253 00:11:29,760 --> 00:11:32,040 Speaker 5: Does it unnerve you that we're going into the end 254 00:11:32,080 --> 00:11:35,679 Speaker 5: of the year with really a fog out of the 255 00:11:35,760 --> 00:11:36,440 Speaker 5: data story? 256 00:11:38,360 --> 00:11:38,920 Speaker 3: For sure? 257 00:11:39,200 --> 00:11:40,880 Speaker 6: And I think it unnerves the FED, And I think 258 00:11:40,920 --> 00:11:44,280 Speaker 6: that's why you're seeing such pushback we have And really 259 00:11:44,280 --> 00:11:46,520 Speaker 6: what's going on with the FED that's super interesting, of course, 260 00:11:46,600 --> 00:11:50,120 Speaker 6: is that you're getting a lot of different types of feedback. 261 00:11:50,160 --> 00:11:52,360 Speaker 3: You know that you're not seeing go to this monolith 262 00:11:52,440 --> 00:11:53,600 Speaker 3: and how they talk about things. 263 00:11:54,000 --> 00:11:57,959 Speaker 6: Different FED governors have very different viewpoints, and it tells 264 00:11:57,960 --> 00:11:59,679 Speaker 6: you something, right, It tells you they're not kidding when 265 00:11:59,679 --> 00:12:01,640 Speaker 6: they say that very FED or the excuse me, they're 266 00:12:01,760 --> 00:12:04,560 Speaker 6: very data dependent. The FED is very data dependent, and 267 00:12:04,600 --> 00:12:07,199 Speaker 6: they look to that data and they really make their decisions, 268 00:12:07,240 --> 00:12:09,600 Speaker 6: and they try to make the decisions notwithstanding all the 269 00:12:09,600 --> 00:12:12,320 Speaker 6: politics surrounding it. I really do think they try to 270 00:12:12,320 --> 00:12:15,080 Speaker 6: make those decisions as dispassionately as they can. 271 00:12:15,440 --> 00:12:16,600 Speaker 3: And so when the data is. 272 00:12:16,679 --> 00:12:20,120 Speaker 6: Missing, which to your point very much is and has 273 00:12:20,160 --> 00:12:22,400 Speaker 6: been now for a bit, it makes it harder for 274 00:12:22,440 --> 00:12:24,320 Speaker 6: them to do their jobs. It makes it harder for 275 00:12:24,360 --> 00:12:26,920 Speaker 6: them to feel confident, because of course, what happens, right 276 00:12:26,960 --> 00:12:29,680 Speaker 6: if we do lower rates too quickly and there is 277 00:12:29,720 --> 00:12:32,079 Speaker 6: a rebound in inflation, I mean nothing would sort of 278 00:12:32,080 --> 00:12:33,439 Speaker 6: be a worse occurrence. 279 00:12:33,520 --> 00:12:36,400 Speaker 3: I think for this FED in particular, given the. 280 00:12:36,480 --> 00:12:39,000 Speaker 6: Nine percent inflation that we got to a couple of 281 00:12:39,040 --> 00:12:42,319 Speaker 6: years ago, for the FED to let inflation rebound in 282 00:12:42,360 --> 00:12:44,280 Speaker 6: any kind of big way would be a huge fail. 283 00:12:44,640 --> 00:12:47,400 Speaker 6: And so I think it's real the concerns and consideration. 284 00:12:47,480 --> 00:12:49,000 Speaker 6: Like I say, Net and Net, I think we will 285 00:12:49,040 --> 00:12:51,400 Speaker 6: get it. But I do think it's problematic to not 286 00:12:51,520 --> 00:12:53,360 Speaker 6: have the data to support what you're trying to do. 287 00:12:53,400 --> 00:12:55,600 Speaker 6: I mean, you're running an entire economy here, right, You're 288 00:12:55,679 --> 00:13:00,440 Speaker 6: running interest rates and monetary policy for you just the 289 00:13:00,480 --> 00:13:02,480 Speaker 6: benefit not only of people in the stock market, but 290 00:13:02,520 --> 00:13:05,600 Speaker 6: of everybody sort of living with affordability issues. 291 00:13:05,280 --> 00:13:08,280 Speaker 3: And everything else that we've been talking about. So not 292 00:13:08,320 --> 00:13:10,280 Speaker 3: having data is a serious issue. 293 00:13:10,440 --> 00:13:13,880 Speaker 2: Stay with us. Mulplinpex Savanas coming up off to this. 294 00:13:23,280 --> 00:13:25,760 Speaker 3: I guess the potential FED chair is here too. 295 00:13:25,920 --> 00:13:28,280 Speaker 4: I don't know we shall allowed to say. 296 00:13:28,120 --> 00:13:32,720 Speaker 7: That potential is a respected person that I can tell you, 297 00:13:33,080 --> 00:13:33,840 Speaker 7: Thank you Kevin. 298 00:13:34,120 --> 00:13:36,719 Speaker 1: The presidential praise only boosting bets that White House a 299 00:13:36,720 --> 00:13:39,959 Speaker 1: NEC director Kevin Hassett will be the next Federal Reserve chair. 300 00:13:40,000 --> 00:13:43,280 Speaker 1: Former Kansas City FED President Thomas ohneg joins us. Now 301 00:13:43,320 --> 00:13:45,960 Speaker 1: for more, Thomas, what do you think of this sort 302 00:13:46,000 --> 00:13:48,920 Speaker 1: of bachelor style a race for the next FED chair? 303 00:13:49,040 --> 00:13:50,840 Speaker 1: Do you think that it has framed it correctly in 304 00:13:50,920 --> 00:13:51,839 Speaker 1: terms of what's at stake? 305 00:13:52,520 --> 00:13:55,480 Speaker 7: Well, I think it's been framed well as far as 306 00:13:55,760 --> 00:13:58,080 Speaker 7: this is a big deal and they better picked well 307 00:13:59,080 --> 00:14:01,439 Speaker 7: the and the five mandidates they originally had. We're all 308 00:14:01,520 --> 00:14:05,439 Speaker 7: qualified as it is coming out as the top runner. 309 00:14:05,480 --> 00:14:08,000 Speaker 7: But I don't know if that's a trial balloon they 310 00:14:08,120 --> 00:14:10,320 Speaker 7: want to test it or not. That's all has to 311 00:14:10,360 --> 00:14:13,800 Speaker 7: be decided. Kevin certainly qualified, and if he were chosen, 312 00:14:14,200 --> 00:14:16,040 Speaker 7: I can tell you the world will be watching his 313 00:14:16,280 --> 00:14:19,360 Speaker 7: or whomever has chosen his first speech with great intensity 314 00:14:19,400 --> 00:14:22,160 Speaker 7: because there's so much at stake going forward, with the 315 00:14:22,200 --> 00:14:25,640 Speaker 7: FED changing, lots of call for reform. Who's going to 316 00:14:25,720 --> 00:14:28,040 Speaker 7: lead that it's going to be on everyone's mind, so 317 00:14:28,080 --> 00:14:28,800 Speaker 7: it's a big deal. 318 00:14:28,960 --> 00:14:31,400 Speaker 1: A big question is not just how much influence the 319 00:14:31,440 --> 00:14:33,960 Speaker 1: FED has over the front end of the yield curve, 320 00:14:34,040 --> 00:14:35,600 Speaker 1: but really what they can do for the tenure in 321 00:14:35,600 --> 00:14:37,840 Speaker 1: the thirty year Given the fact that there has been 322 00:14:37,880 --> 00:14:41,000 Speaker 1: a focus on home affordability and mortgage rates, what are 323 00:14:41,040 --> 00:14:44,280 Speaker 1: you watching for to understand what tools they could potentially 324 00:14:44,280 --> 00:14:47,960 Speaker 1: deploy to lower ten year yields, not just the very 325 00:14:48,000 --> 00:14:48,520 Speaker 1: front end. 326 00:14:49,080 --> 00:14:51,680 Speaker 7: Well if they, I mean, they always have the choice 327 00:14:51,720 --> 00:14:54,600 Speaker 7: of trying to manage the yield curve through their monetary 328 00:14:54,840 --> 00:14:58,600 Speaker 7: operations by which government securities they buy and the pressure 329 00:14:58,600 --> 00:15:01,360 Speaker 7: they put on there. However, one of the issues is 330 00:15:01,440 --> 00:15:03,840 Speaker 7: should they be doing that, should they be pulling away 331 00:15:03,920 --> 00:15:06,600 Speaker 7: let the market take it. They do monetary policy and 332 00:15:06,640 --> 00:15:09,840 Speaker 7: focus on the short end treasure yields and let the 333 00:15:09,840 --> 00:15:11,920 Speaker 7: market take care of itself. That'll be a big debate 334 00:15:11,960 --> 00:15:14,280 Speaker 7: I think within the FED, whomever the new chairman is, 335 00:15:14,320 --> 00:15:18,200 Speaker 7: because it is so important financial conditions overall are easing. 336 00:15:18,280 --> 00:15:21,600 Speaker 7: The fedest part of that, and that will be as 337 00:15:21,680 --> 00:15:25,160 Speaker 7: much influence on the tenure as trying to manage that 338 00:15:25,240 --> 00:15:27,600 Speaker 7: you occur, which I think will create uncertainty as much 339 00:15:27,600 --> 00:15:31,080 Speaker 7: as it will help help mortgages, so they have some 340 00:15:31,120 --> 00:15:32,360 Speaker 7: big choices to make ahead. 341 00:15:32,520 --> 00:15:35,560 Speaker 1: Has monetary policy ever been as confusing during your tenure 342 00:15:35,680 --> 00:15:39,440 Speaker 1: in terms of both the dual mandate of FED in 343 00:15:39,520 --> 00:15:42,680 Speaker 1: terms of inflation as well as the labor market and 344 00:15:42,760 --> 00:15:46,320 Speaker 1: also the transmission mechanism. Are financial conditions easy or are 345 00:15:46,360 --> 00:15:46,840 Speaker 1: they tight? 346 00:15:47,720 --> 00:15:50,880 Speaker 7: Well? Things are confusing, and you can see that within 347 00:15:50,920 --> 00:15:55,280 Speaker 7: the debate within the FMC itself. Doves hawks seeming to 348 00:15:55,320 --> 00:15:58,600 Speaker 7: be really at odds right now. So now, I haven't 349 00:15:58,600 --> 00:16:00,680 Speaker 7: seen it like that before. I've seen it similar to 350 00:16:00,720 --> 00:16:04,360 Speaker 7: that before, and it is tough, and they've got this 351 00:16:04,480 --> 00:16:06,480 Speaker 7: new mandate and they're going to argue about it. But 352 00:16:06,600 --> 00:16:09,960 Speaker 7: I know inflation is three percent, that's way above their target. 353 00:16:10,680 --> 00:16:13,040 Speaker 7: But they're worried about employment, and I've heard and you 354 00:16:13,400 --> 00:16:15,040 Speaker 7: they will say it. I'm just as sure as I'm 355 00:16:15,040 --> 00:16:15,640 Speaker 7: sitting here. 356 00:16:15,800 --> 00:16:15,960 Speaker 1: You know. 357 00:16:16,160 --> 00:16:18,440 Speaker 7: Should we make this cut as an insurance policy to 358 00:16:18,440 --> 00:16:21,000 Speaker 7: make sure the economy moves forward. That's all going to 359 00:16:21,040 --> 00:16:23,240 Speaker 7: be in next week's meeting. I'm confident of that. 360 00:16:23,520 --> 00:16:25,880 Speaker 5: When it comes to potentially a Kevin Hassett chair, do 361 00:16:25,920 --> 00:16:27,960 Speaker 5: you think it would harden the views of the Hawks 362 00:16:27,960 --> 00:16:30,480 Speaker 5: and the committee because he is so close to the president. 363 00:16:32,880 --> 00:16:37,360 Speaker 7: Not well, maybe give given the diversity on that committee 364 00:16:37,440 --> 00:16:40,280 Speaker 7: right now, they could harden, but I think I think 365 00:16:40,320 --> 00:16:43,760 Speaker 7: basically they want to get the right the right balance 366 00:16:43,920 --> 00:16:46,720 Speaker 7: in the in the policy academ so they'll be willing 367 00:16:46,760 --> 00:16:50,360 Speaker 7: to discuss it and I think come to conclusions. I 368 00:16:50,360 --> 00:16:53,960 Speaker 7: think it will really depend on how whoever leads, if Kevin, 369 00:16:54,680 --> 00:16:58,240 Speaker 7: how careful they are in terms of making their points, 370 00:16:58,400 --> 00:17:02,360 Speaker 7: how they lead the system words consensus. That is an art, 371 00:17:02,720 --> 00:17:05,240 Speaker 7: and if he's good at it, they'll come to consensus. 372 00:17:05,280 --> 00:17:07,760 Speaker 7: If not, you'll see this split continuing because I think 373 00:17:08,320 --> 00:17:12,280 Speaker 7: the difference between inflationary goals and the employment goals will 374 00:17:12,320 --> 00:17:13,840 Speaker 7: continue to haunt them going forward. 375 00:17:13,920 --> 00:17:16,480 Speaker 5: Do you think it's peculiar that current Fed chair J. 376 00:17:16,640 --> 00:17:19,320 Speaker 5: Powell hasn't announced whether or not he's going to give 377 00:17:19,359 --> 00:17:22,760 Speaker 5: up his governorship when he leads the leaves the chair post. 378 00:17:23,160 --> 00:17:26,199 Speaker 7: I think, yeah, I would be surprised if he stayed on. 379 00:17:26,359 --> 00:17:28,959 Speaker 7: It's possible, but it would be surprised. But it wouldn't 380 00:17:28,960 --> 00:17:30,960 Speaker 7: be his advantage to announce one way or the other. 381 00:17:31,040 --> 00:17:36,000 Speaker 7: So he's just keeping his mouth quiet because it would 382 00:17:36,040 --> 00:17:40,080 Speaker 7: do nothing. But I think confusings even further. So he's 383 00:17:40,160 --> 00:17:43,840 Speaker 7: playing out his term as chairman. That's what matters to him, 384 00:17:44,119 --> 00:17:47,040 Speaker 7: and he'll make that decision whether to stay on much later. 385 00:17:47,080 --> 00:17:49,000 Speaker 7: But I would be very surprised if he stayed on. 386 00:17:49,400 --> 00:17:51,680 Speaker 1: We've been talking all morning about potential cost of living 387 00:17:51,680 --> 00:17:54,760 Speaker 1: concerns and fiscal stimulus that could be coming from the 388 00:17:54,760 --> 00:17:57,440 Speaker 1: White House earlier next year, and I just wonder how 389 00:17:57,480 --> 00:18:01,560 Speaker 1: that factors into any potential to decision by the Federal Reserve. 390 00:18:02,000 --> 00:18:04,640 Speaker 1: Would that be something that could be inflationary or would 391 00:18:04,680 --> 00:18:09,440 Speaker 1: that be so small as to be negligible to those discussions. 392 00:18:09,520 --> 00:18:11,520 Speaker 7: Well, I think the Fed should be looking ahead to 393 00:18:11,560 --> 00:18:15,520 Speaker 7: that issue because it's small in some ways, but the 394 00:18:15,600 --> 00:18:19,760 Speaker 7: national spending of over seven trallion versus the revenues coming 395 00:18:19,800 --> 00:18:22,480 Speaker 7: in just over five trade and that's a huge deficit. 396 00:18:22,520 --> 00:18:26,159 Speaker 7: That's a huge new issuance of debt to fund that, 397 00:18:26,560 --> 00:18:29,439 Speaker 7: and you know that's going to affect the economy, and 398 00:18:29,480 --> 00:18:34,119 Speaker 7: it's going to affect how monetary policy, how effective it 399 00:18:34,200 --> 00:18:36,240 Speaker 7: is going forward, and they're going to be under a 400 00:18:36,240 --> 00:18:39,240 Speaker 7: lot of pressures to make sure that the interest rates 401 00:18:39,240 --> 00:18:42,440 Speaker 7: don't rise if the debt continues amount and there's not 402 00:18:42,600 --> 00:18:44,800 Speaker 7: the demand for it that they would otherwise want. So 403 00:18:44,840 --> 00:18:47,320 Speaker 7: that's going to be facing the FED. I'm a little 404 00:18:47,359 --> 00:18:51,520 Speaker 7: disappointed that at least the FED itself isn't publicly recognizing 405 00:18:51,600 --> 00:18:53,760 Speaker 7: that as a challenge that they have to be ready for, 406 00:18:53,880 --> 00:18:56,200 Speaker 7: because it will be a big challenge going forward. 407 00:18:56,320 --> 00:18:58,240 Speaker 1: Do you think that the reason why they're not is 408 00:18:58,280 --> 00:19:00,359 Speaker 1: because there has been this political pressure, sure, and this 409 00:19:00,359 --> 00:19:04,760 Speaker 1: would only reignite some of that pressure and potential accusations 410 00:19:04,800 --> 00:19:06,040 Speaker 1: of being politically motivated. 411 00:19:06,480 --> 00:19:09,320 Speaker 7: I think political pressure is part of it. You know, 412 00:19:09,359 --> 00:19:11,280 Speaker 7: why engage in a fight if you can avoid it. 413 00:19:12,280 --> 00:19:13,800 Speaker 7: But at the same time, they're going to have to 414 00:19:13,840 --> 00:19:16,400 Speaker 7: face it at some point because the data is continuing 415 00:19:16,440 --> 00:19:18,520 Speaker 7: to grow. It is a challenge that the FED will 416 00:19:18,560 --> 00:19:21,119 Speaker 7: have to have to deal with. And remember they're in 417 00:19:21,119 --> 00:19:24,400 Speaker 7: the middle of the past, the middle now of changing 418 00:19:25,440 --> 00:19:29,400 Speaker 7: policy frameworks to this ample reserve system and they try 419 00:19:29,400 --> 00:19:32,679 Speaker 7: and figure out what is the right number for ample reserves? Uh, 420 00:19:32,760 --> 00:19:34,760 Speaker 7: they got that going on, there will be pressure to 421 00:19:34,960 --> 00:19:40,680 Speaker 7: bring that ample reserve number up. So there confusing times, 422 00:19:40,680 --> 00:19:43,199 Speaker 7: but difficult times for sure for the FORMC. 423 00:19:43,520 --> 00:19:46,640 Speaker 5: Do you think there has been a weakness in terms 424 00:19:46,640 --> 00:19:51,480 Speaker 5: of FED independence, You know, like if they're not willing 425 00:19:51,480 --> 00:19:53,280 Speaker 5: to come out and say something that you think is 426 00:19:53,320 --> 00:19:56,560 Speaker 5: so obvious because of political pressure, does that show that 427 00:19:56,960 --> 00:20:00,760 Speaker 5: on the margins at minimum there has been some weakness. 428 00:20:01,520 --> 00:20:04,959 Speaker 7: Weakness is sensitivity is the right word, because look at 429 00:20:05,000 --> 00:20:09,080 Speaker 7: the FED has been under political pressure almost since the start. 430 00:20:09,560 --> 00:20:12,439 Speaker 7: But in modern times we all know the history of 431 00:20:12,440 --> 00:20:16,560 Speaker 7: the FEDS. UH, Nixon years, Johnson efforts and so forth. 432 00:20:16,840 --> 00:20:21,040 Speaker 7: That's that hasn't changed. And so they're trying to be careful. 433 00:20:21,080 --> 00:20:23,240 Speaker 7: They don't want to get into a fight before they 434 00:20:23,240 --> 00:20:25,560 Speaker 7: need to uh. And I think that's part of it. 435 00:20:25,600 --> 00:20:29,000 Speaker 7: Although political pressure is part of their thinking, there's no 436 00:20:29,160 --> 00:20:32,119 Speaker 7: question about that. It has to be. They are They 437 00:20:32,160 --> 00:20:36,320 Speaker 7: are in the middle of a political series here and there. 438 00:20:36,560 --> 00:20:38,800 Speaker 7: They have to play in that in that arena. 439 00:20:40,040 --> 00:20:43,600 Speaker 2: This is the Bloomberg Surveandmons podcast, bringing you the best 440 00:20:43,600 --> 00:20:46,920 Speaker 2: in markets, economics, antient politics. You can watch the show 441 00:20:46,960 --> 00:20:49,919 Speaker 2: live on Bloomberg TV weekday mornings from six am to 442 00:20:50,040 --> 00:20:53,840 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 443 00:20:53,960 --> 00:20:56,200 Speaker 2: or anywhere else you listen, and as always on the 444 00:20:56,200 --> 00:20:58,600 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.