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Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Do

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Speaker 1: you want to us now, I'm pleased to say. Is

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Speaker 1: Alan Ruskin, Deutsche Bank chief international strategist. Good morning to

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Speaker 1: Allen on this payrolls Friday morning, John, what are you

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Speaker 1: looking for? The estimate and our survey a hundred and

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Speaker 1: ninety thousand for the month of April they call at

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Speaker 1: Deutsche Bank one sixty thousand strong basically for this point

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Speaker 1: in the cycle. Really, I don't want to emphasize that

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Speaker 1: it's you know, weaken in the prime month or anything

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Speaker 1: like that. This is strong data all around. Women into

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Speaker 1: the show. I've gotta get the juvenile question out the way.

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Speaker 1: It's good data good news today, or it's good data

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Speaker 1: bad news good question always. Really, I think, you know,

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Speaker 1: we don't want too good a data, right, So we

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Speaker 1: don't really want strong enough data that it tests the

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Speaker 1: FEDS patients. Yeah, so a number, say, for example, like

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Speaker 1: to seventy five k like the a DP number. I

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Speaker 1: think would be in the realms where people start to

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Speaker 1: have to think, wait a minute, we're pricing in rate

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Speaker 1: cuts when we maybe should be thinking about rate hikes.

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Speaker 1: I thought I was in charge of driven questions. Well,

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Speaker 1: I just thought to get it out of the way, Okay,

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Speaker 1: please continue. Federal Reserve speakers through the day really really busy,

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Speaker 1: including Vice Chairman Richard Clarada. What do we need to

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Speaker 1: hear from Mr Clarada today? Clarification? I had hesitated to say, really,

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Speaker 1: I think clarification of the comments that chair and Powell

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Speaker 1: put out really in a way, so you know, he

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Speaker 1: took a very non doctrinaire approach to things, with a

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Speaker 1: little fuzzy in terms of what would provoke a rate cut.

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Speaker 1: Didn't want to get pushed into the terrain of saying,

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Speaker 1: look here, if coinflation is below target for X number

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Speaker 1: of my etcetera, we'll have to respond. I think you're

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Speaker 1: going to get the same message from Richard Clarida, but

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Speaker 1: I think it would be useful for the market. You see,

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Speaker 1: they're on the same John Neils yesterday frankly as well, folks.

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Speaker 1: I can't say enough, folks, how important this cycle of

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Speaker 1: speeches is eleanor we one step away from the Vice

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Speaker 1: chairman or anybody else is gonna say, you know what,

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Speaker 1: this is all wrong. We're going to lift rate when

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Speaker 1: we go next and we get a tantrum. I mean,

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Speaker 1: that's the arch fear of institutional Wall Street. No, so

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Speaker 1: I think we're not going to get there very quickly,

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Speaker 1: not certainly, not today. I thought that if you got

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Speaker 1: anything from Chairman Powell's comments, it was very sharply neutral.

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Speaker 1: I mean he really said that not there's not a

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Speaker 1: strong case for rate hike or rate cut. You know,

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Speaker 1: that is very different of course from what's been priced

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Speaker 1: in the marketplace, but it's also a long way from

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Speaker 1: a rate hike. Well, what I'm looking for from the

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Speaker 1: very long list of Federal Reserve speakers through today, there

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Speaker 1: is a conference happening, the Hoover Institute Policy Conference, so

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Speaker 1: look out for it all through the damp leaf that

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Speaker 1: Mr Clarada will be speaking at eleven thirty Eastern time. Personally,

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Speaker 1: what I'm looking for Alan is to whether there is

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Speaker 1: any daylight between the chairman and the people closest to him,

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Speaker 1: because there are some people out there listening that think

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Speaker 1: there might be do you and there might be some

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Speaker 1: daylight to the extent that I think both Clarada and Williams,

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Speaker 1: I think, take perhaps as somewhat more theoretical approach to

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Speaker 1: things in terms of and and and sort of lay

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Speaker 1: things out in theoretical terms in a way which the

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Speaker 1: chair the chairman doesn't. So I think there's sometimes differences

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Speaker 1: that come through there. They're largely nuanced. I don't think

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Speaker 1: right now there would have a different view on what

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Speaker 1: policy should be. But as for signals going on in

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Speaker 1: the future, yes, there's there's a there's a hint to daylight. Ellan,

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Speaker 1: you are so diplomatic. I thought that was incredibly diplomatical.

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Speaker 1: The State Department with Mr let me translate what Sir

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Speaker 1: Alan Ruskin just said. Powell's not a PhD economists. These

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Speaker 1: guys have underlying theories and piles basically saying, yeah, right, okay,

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Speaker 1: what is the theory of the pH d economists right now?

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Speaker 1: Is a traditional Phillips curve? Is it completely data depending?

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Speaker 1: I mean at a graduate level, what is their theory

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Speaker 1: right now? I think the problem, Tom is that the

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Speaker 1: theory in terms of creation of inflation has nowhere better

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Speaker 1: to really turn than some sort of output gap framework.

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Speaker 1: But as we know, the Phillips curve looks extraordinary flat.

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Speaker 1: We may be at the point where there's a little

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Speaker 1: kink where it gets a little you know, steeper, but

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Speaker 1: we don't know. And that's all we have to hang

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Speaker 1: our hats on in a sense. And that that's a big, big,

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Speaker 1: extremely well said. But the issue I there, Ferrell is

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Speaker 1: better at this, I am is the output gap has plugins.

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Speaker 1: Some of them are accountable and tangible. In what German Pilcher,

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Speaker 1: Yelling and the rest are dealing with is so many

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Speaker 1: of those plugins are almost intangible, aren't they? Maybe even

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Speaker 1: worse than that time, I think we'll do a better

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Speaker 1: job using inflation to forecast the output gap where we

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Speaker 1: are in the output gap, that we use the output

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Speaker 1: gap to forecast inflation. Thank you, Well, let's talk about

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Speaker 1: the reaction function after FED you've pointed out yourself, we

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Speaker 1: spent months looking at this evolving policy reaction function. The

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Speaker 1: place is greater emphasis on a symmetric inflation target. That's

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Speaker 1: why so many people were expecting a rate cut, because

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Speaker 1: they thought the Federal Reserve was setting us up for

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Speaker 1: slowly adjusting the reaction function of policy do you think

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Speaker 1: that is still the effort, the underlying effort of the

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Speaker 1: effortm C to take us somewhere in that directional it.

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Speaker 1: I think there's some genuine attempt to emphasize the idea

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Speaker 1: of a symmetry. I think the symmetric argument made an

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Speaker 1: awful lot of sense at the turn of the year,

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Speaker 1: insomuch as I think the FED looked over the abbess

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Speaker 1: and they saw, wait a minute, you know, we've got

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Speaker 1: inflation that is barely a target really, and now we

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Speaker 1: have we could be into the downswing and that's the peak,

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Speaker 1: and you know, therefore we're definitely going down to zero

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Speaker 1: rates again. Inflation is really peaked, and I think that's

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Speaker 1: that's a problem. The zero bounding rates is really you know,

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Speaker 1: creating a lot of the problems. So underpending the big

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Speaker 1: ralliant risk assets was undoubtedly the Federal Reserve pivot back

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Speaker 1: three or four months ago. There was a belief that

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Speaker 1: maybe the Federal Reserve was making a policy mistake by

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Speaker 1: hiking interest rates FED back away. I'm going to test

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Speaker 1: the extreme end of this narrative right now. Alan, So

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Speaker 1: I forgive me. Do you think there are some pockets

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Speaker 1: of this market groups of investors substantial enough to have

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Speaker 1: an impact that believe that if the FED does not

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Speaker 1: cut interest rates, that is equally a policy mistake. Have

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Speaker 1: we gone that far? Now? Put it this way, I

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Speaker 1: think there's enough uncertainty out there just talking to clients,

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Speaker 1: and there are enough people who think that the FED

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Speaker 1: is signal that the next move would be a rate cut,

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Speaker 1: obviously premised on inflation remaining low. But I think they'd

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Speaker 1: be quite disappointed if you didn't get that. So that

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Speaker 1: changes if in the coming days months the market has

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Speaker 1: to readjust the reality that the next move may well

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Speaker 1: be an increase. What happens to this market? How does

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Speaker 1: price adjust? How do risk assets with risk respond to that? Well,

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Speaker 1: I think we're first going to adjust to the idea

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Speaker 1: of neutrality. Really, so FED is on hold for a

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Speaker 1: long period of time. If we jumped from rate cut

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Speaker 1: expectations to rate hike expectations, I think I'd be usually disruptive.

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Speaker 1: But I think if we slowly take back the fifteen

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Speaker 1: beaps of rate cuts that we have for two thousand

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Speaker 1: and nineteen, then I think it's gonna be too disruptive.

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Speaker 1: Let's go to Sonoda synodal dampening functions. If dragging has

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Speaker 1: a dampening function where he does nothing out to whenever,

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Speaker 1: if you're suggesting Powell and whoever after him has a

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Speaker 1: dampening function of rate out to forever. Is that French

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Speaker 1: for lethargy? I mean, are we really talking here about

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Speaker 1: lethargic policy and a lethargic American economy? Look, I think

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Speaker 1: actually one of the big mistakes of the dot was

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Speaker 1: the idea that you hiked interest rates and then the

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Speaker 1: dots sort of you know, peaked elements and stayed at equilibrium.

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Speaker 1: We know that the Fed Funds doesn't behave like that.

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Speaker 1: There's a cycle out there. We go up and we overshoot,

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Speaker 1: and then we go down and undershoot, and I don't

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Speaker 1: think the cycle is going to be any different really,

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Speaker 1: So there's a cycle out there. Great to catch you

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Speaker 1: up with you one that was a little sophisticated. Your

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Speaker 1: bank chief International on this payrolls Friday get rights. In

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Speaker 1: the Wall Street Journal today, Narrianna coach O Dakota of

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Speaker 1: Rochester and Minneapolis writes of Steven Moore today, why don't

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Speaker 1: we listen to our conversation yesterday? To Mr Moore, this

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Speaker 1: is gonna be probably a three month process, so a lot,

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Speaker 1: you know what, what the situation today, I think it's

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Speaker 1: gonna be a lot of different three months from now

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Speaker 1: when I go before the Senate and the Banking Committee

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Speaker 1: and the full Senate. So I'm not too concerned about

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Speaker 1: this UM. I actually think if we can steer the

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Speaker 1: UH the discussion away from things I wrote five years

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Speaker 1: ago and more towards what I believe in terms of

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Speaker 1: the economy and FED policy and how to create growth

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Speaker 1: and stable prices, I think I'm going to win a

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Speaker 1: big majority. Stephen Moore, if we fill the punch bowl

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Speaker 1: to the peak, if we get half or all of

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Speaker 1: the rate cut that the President demands, what will that

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Speaker 1: do to dollars stability? And what will that do to

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Speaker 1: price stability? Now that's a good question. I think I

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Speaker 1: could make a case for having UH, you know, repealed

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Speaker 1: the rate hike in that took place in December. I

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Speaker 1: remember I was the one who one of the first

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Speaker 1: people although there are many who called that a tragic mistake,

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Speaker 1: and of course now everyone acknowledges that it was a

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Speaker 1: big mistake. You know, I would probably be in favor

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Speaker 1: of repealing that rate hike, which was what I think,

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Speaker 1: twenty five basis points. I'm not so sure I I

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Speaker 1: agree with the White House that we should cut race

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Speaker 1: by an entire percentage point. I mean I don't. I

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Speaker 1: just don't see the case for that right now. Stephen

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Speaker 1: Moore yesterday, and of course events afterwards, John I, I

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Speaker 1: don't know two hours later, an hour and a half later,

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Speaker 1: if he was either he stepped aside or whatever. We'll

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Speaker 1: go away from that soap proper. We're advantaged to do

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Speaker 1: it now with Jeffrey Sachs. He's university professor. Columbia University

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Speaker 1: has any number of topics we could talk on for

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Speaker 1: the next three hours, So we're gonna squeeze it in

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Speaker 1: here in three minutes. What would happen if the President

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Speaker 1: got his hundred basis point rate cut. Take us into

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Speaker 1: the classroom freshman year, you know you're there. You've got

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Speaker 1: a young turk up at Harvard, Alberta, Elasina or Michael

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Speaker 1: Berta or whatever. How do you teach a hundred basis

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Speaker 1: point rate cut. Well, you don't put the FED in

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Speaker 1: the hands of politicians and expect to come out with

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Speaker 1: the stable economy. So that's the basic point. We need

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Speaker 1: a professional FED, we need an independent central bank, and

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Speaker 1: we need a monetary policy that is not at the

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Speaker 1: whim of any politician. Frankly, do you think we're putting

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Speaker 1: something that is what do you believe to be quite precious?

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Speaker 1: Do you think we're putting that under risk at the moment. Well,

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Speaker 1: the disdain for this institution the President Trump has shown

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Speaker 1: in his direct attacks, in his flagrant violation of the

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Speaker 1: norms of how monetary policy is considered and should be discussed,

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Speaker 1: and in his proposals for FED governors has been really dismaying,

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Speaker 1: but not unlike what we're seeing across the board in

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Speaker 1: our federal institutions were they're falling apart in a lot

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Speaker 1: of ways because they're treated with disdain, because the people

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Speaker 1: that are filling them are not qualified to fill them,

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Speaker 1: because everything has become hyper political rather than professional. Before

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Speaker 1: Kine and More, we actually had some quite conventional nominations

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Speaker 1: from this administration. In fact, it was what I considered

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Speaker 1: by most of our guests that they had nominated really

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Speaker 1: good candidates for the Federal Reserve. Two of them didn't

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Speaker 1: even get a hearing. Has something changed within the administration

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Speaker 1: where we've gone from the likes of good Friend and

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Speaker 1: others to the likes of Canaan More. I am not

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Speaker 1: an insider to this administration to say the least, but

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Speaker 1: it does seem that the president is more more in

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Speaker 1: in control. He's not listening to advisers. I presume that

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Speaker 1: this is what this is, but definitely we're seeing a

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Speaker 1: deterioration in policy making in general. I don't this is

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Speaker 1: not a secret. There is no policy because there's whims,

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Speaker 1: there's tweets, and Jeff this is important. What John brings

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Speaker 1: up is really really important. Take us into the American

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Speaker 1: Economic Association meetings, and the fact is Jeffrey Sachs is

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Speaker 1: on the same page with John Taylor Stanford or Marvin

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Speaker 1: good Friend of Carnegie Mellon much more than people think.

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Speaker 1: The media loves to show the liberal and conservative polarity,

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Speaker 1: but Marvin good Friend is one example. Would be some

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Speaker 1: form of a centrist a candidate, wouldn't. I think the

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Speaker 1: key actually is professionalism, because when you have trained professionals

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Speaker 1: that are not hacks, they sit around, they talk, they

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Speaker 1: analyze the data. They may not agree on everything, but

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Speaker 1: it really is the way that a complex twenty trillion

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Speaker 1: dollar economy should be addressed, not by these wild swings

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Speaker 1: of whim and it's a little bit frightening what's happening

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Speaker 1: to our institutions across the board. Again, I think the

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Speaker 1: FED is just one dramatic case. It's a stark case

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Speaker 1: because the world depends on FED stability, because we have

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Speaker 1: seen already what goes wrong when monetary policy goes wrong.

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Speaker 1: The whole world goes into crisis. We're out of time.

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Speaker 1: What we'd love to do a professor secs John, and

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Speaker 1: I would love to get you back for an entire

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Speaker 1: hour to talk about five, six or seven themes. I

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Speaker 1: will be absolutely you know that I will be happy

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Speaker 1: to be here anytime, Jess, Thank you so much. University Professor,

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Speaker 1: Columbia University. We all know this, Ellen Zentner, Morgan Stanley

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Speaker 1: joining us right now. Ellen, like all of us, has

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Speaker 1: an email incoming box that has junk emails. John Farroh

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Speaker 1: just got the mother of all junk emails. John, This

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Speaker 1: is brilliant and it really points to a Farrell like future.

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Speaker 1: This is beautiful. This is from LinkedIn, and every now

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Speaker 1: and then they send me my top jump picks. These

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Speaker 1: are sometimes Morgan Stanley comes up picks for you this week,

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Speaker 1: Private Equity Associate, Strategy associate McKenzie, etcetera, etcetera. And then

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Speaker 1: Governor of the Bank of England. Come comes up on

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Speaker 1: my top job picks because I've got three company alumni

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Speaker 1: at work there. I mean, come on, what's the alt

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Speaker 1: go behind there? Ye all go behind that? I don't know.

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Speaker 1: It's Ellen Zentner's fall. Let's bring in the chief economists

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Speaker 1: of Morgan Stanley. Ellen enter doing a wonderful job on

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Speaker 1: framing the path of the American economy and once again

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Speaker 1: dead on about the sustained low rates and inflation as well. Ellen,

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Speaker 1: you got an opportunity for John Farrell this morning at

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Speaker 1: Morgan Stanley. Yeah, you know what, John, comes see me.

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Speaker 1: You can work for me. I'll do the summer internship

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Speaker 1: with you, guy. You can you can work for me,

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Speaker 1: my coffee boy, coffee boy for the rest of the

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Speaker 1: show today. Coffee boy, Ellen, let me get this out

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Speaker 1: of the way, because there's so much important to talk

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Speaker 1: about your You're one of the great market economists out there.

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Speaker 1: How do you synthesize the struggle we are in? Filling

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Speaker 1: slot for Governor of the Federal Reserve System how do

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Speaker 1: you in the trenches, UM process what we observed yesterday?

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Speaker 1: Uh well, you know, I look at it from the

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Speaker 1: thirty thousand foot levels, So I try not to get

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Speaker 1: dragged down into uh you know, discussions of whether someone

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Speaker 1: is qualified or not to be a board governor. Um.

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Speaker 1: You know. And sometimes you can sit back and look

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Speaker 1: at this with amusement, and sometimes you can look at

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Speaker 1: back at it in horror and watch as it as

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Speaker 1: it plays out. But UM, certainly some relief that the

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Speaker 1: nomination um was pulled. Uh you know, I'd like to

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Speaker 1: see more qualified people uh nominated to the board governors.

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Speaker 1: I think it's not necessary. We've been working too shy

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Speaker 1: to positions, shy of a full uh deck for you know,

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Speaker 1: a decade now. UM, So it's not necessary to get

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Speaker 1: two more board governors appointed. UM. So we don't have

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Speaker 1: to rush it. UM. But I would like to see actual,

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Speaker 1: viable nominations of people that could actually do the job. Um.

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Speaker 1: You know, because the questions I get from clients that

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Speaker 1: I feel most often is how would this person shape

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Speaker 1: monetary policy? Uh? You know, would they get on the

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Speaker 1: board and just immediately the stance on rates would change?

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Speaker 1: And and we're sort of missing the forest for the

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Speaker 1: for the trees. You know, there's a reason why monetary

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Speaker 1: policy is made by committee so that no one person

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Speaker 1: has outsized influence. And so you know, if we if

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Speaker 1: we do get someone that maybe not as so qualified

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Speaker 1: to be a board governor, at least we can take

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Speaker 1: comfort and the fact that they'll be in discussions with

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Speaker 1: a with a broad committee. Uh, and it's not just

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Speaker 1: solely up to them. Well, and then I think you've

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Speaker 1: touched on something really important. The process in the system

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Speaker 1: in place at the moment works. It stops people from

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Speaker 1: the while unqualified, getting gone to the federal reserve, and

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Speaker 1: even if they do get there, it's gonna be very

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Speaker 1: difficult for them to have influence, isn't it. Yeah? Yeah,

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Speaker 1: And so I think that's what we've seen play out

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Speaker 1: um with both the Cane nomination um and the more

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Speaker 1: nomination um. You nominate and give a period of time

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Speaker 1: for people to react to that, and you're able to

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Speaker 1: gauge whether they actually have a chance of passing a

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Speaker 1: uh Senate getting to Senate confirmation. And if it looks

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Speaker 1: like it's just a no go, then either the president

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Speaker 1: or the the nominee themselves pull that nomination. Uh, And

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Speaker 1: so you know, sometimes that's for good reasons, in the

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Speaker 1: case of Cain and Moore. Sometimes it's for not so

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Speaker 1: good reasons, like the case of Nellie Ling, who would

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Speaker 1: have been a phenomenal Board governor but would not have

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Speaker 1: been able to pass Uh you know the gut word

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Speaker 1: that she was not able to pass Senate confirmation. So

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Speaker 1: you certainly don't want to continue going down that road.

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Speaker 1: So if your clients have confusion about the prospect of

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Speaker 1: a main of a cane more FED, how do they

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Speaker 1: feel about the Fed? We have gone, what have we

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Speaker 1: learned this week? And what you tell them about what

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Speaker 1: Chairman pounded just a couple of days ago. Yeah, So

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Speaker 1: I think it's a mixed bag for clients. I mean

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Speaker 1: I have uh, you know, clients that I talked to

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Speaker 1: that are frustrated, um at mixed messages that they feel

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Speaker 1: like they're getting out of the FED. You know that, Uh,

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Speaker 1: that Evans and Caplan sending a message that inflation is

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Speaker 1: low and they could be considering insurance cuts. You could

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Speaker 1: throw Cleared into that mix. And then you get chair

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Speaker 1: Pal that sounds like they are so far from consensus

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Speaker 1: on it now. Uh. You know if you're a Fed watcher,

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Speaker 1: we knew that there was there were nowhere near consensus

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Speaker 1: on an insurance cut. And if you if you step

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Speaker 1: back and just read or listen to what all four

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Speaker 1: of those men have said, Um, they're all saying the

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Speaker 1: same thing. Inflation is low. We're frustrated by it. If

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Speaker 1: it persists at at these very low levels or moves lower,

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Speaker 1: we would certainly be concerned and would need to adjust

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Speaker 1: policy around that. All four sent to consent a consistent message. UM.

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Speaker 1: I think what I've noticed is missing from Pal's uh,

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Speaker 1: from the conversations that Pal has with us and with

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Speaker 1: the markets, is that and this goes back to when

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Speaker 1: he was communicating around the balance sheet as well. He's

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Speaker 1: missing that standard boilerplate language that monetary policy makers historically

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Speaker 1: have used those if then scenarios. Here's our baseline, here's

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Speaker 1: what we expect to do. If the data comes in

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Speaker 1: worse than we expect, we would we would cut. If

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Speaker 1: the data comes in better than expect, we could hike.

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Speaker 1: And it's it's a simple, it's a fact. It's boilerplate language.

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Speaker 1: But just saying that would give people more comfort on

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Speaker 1: this job today. Ellen sent here with Morgan Stanley is

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Speaker 1: where us Ellen. There's a point with every frontline economist

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Speaker 1: where they become oh, who's that? And with you long

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Speaker 1: ago and far away. It was productivity analysis the efficiency

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Speaker 1: of the American economy. So if I look at capital dynamics,

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Speaker 1: labor dynamics, and everything else piled into this new and

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Speaker 1: proved productivity that we see, of my audience doesn't buy it.

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Speaker 1: They don't buy the new improved productivity. Are we more

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Speaker 1: efficient now? Are we more productive? Or is it just

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Speaker 1: smoking mirrors? Well, the way I would put it, Thomas,

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Speaker 1: that we're more productive, but in a way that it's

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Speaker 1: not counted in the in the data like the old

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Speaker 1: productive days of your Where is it a gilded age

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Speaker 1: and we're being more productive? For Jeff Bezos and Warren Buffett, Well, yes, frankly.

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Speaker 1: So what we're seeing is a lot of the capex

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Speaker 1: that's going on, a lot of the capital capital deepening

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Speaker 1: is all in software. It's an AI, it's an improving

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Speaker 1: warehouse processes, UH and the like, And we just don't

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Speaker 1: produce as high of a rate of productivity when we're

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Speaker 1: investing in services or it's coming from the service sector

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Speaker 1: as it is when we're coming when it's coming from

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Speaker 1: the manufacturing sector. And so what I would call a

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Speaker 1: new day for productivity by the fact that productivity is

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Speaker 1: picked up, it's picked up to what is a very

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Speaker 1: low underlying trend. And it's just the truth of it. Um.

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Speaker 1: We are a service sector led economy, and the service

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Speaker 1: side of the economy is not associated with very high

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Speaker 1: rates of productivity. Now, on the one hand, that's how

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Speaker 1: we can get so many people employed. Uh that we

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Speaker 1: we have such a low unemployment rate and we're creating

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Speaker 1: two hundred thousand jobs a month on a pretty steady basis.

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Speaker 1: You know, we're doing that because productivity is not you know,

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Speaker 1: to three like it was when we were manufacturing led economy.

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Speaker 1: Productivity to the run rate for productivity we believe is

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Speaker 1: more one. And before we let you go, we need

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Speaker 1: the Morgan Stanley Guide to pay Rolls in about thirty

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Speaker 1: four minutes time. Please what should we be looking for?

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Speaker 1: So we're going to be focused on private payrolls. That's

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Speaker 1: where everyone should focus their attention. We're looking for one

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Speaker 1: ninety four, that's a bit above consensus headline. There's no

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Speaker 1: telling where headline comes in. There's going to be a

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Speaker 1: census impact um. It could be twenty thousand, like Jim O'Sullivan,

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Speaker 1: who's a fantastic forecaster, is expecting. It could be closer

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Speaker 1: as we're expecting. But you've got to strip out any

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Speaker 1: sense of effects over the next several months and just

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Speaker 1: look at private payrolls and you see there's some of

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Speaker 1: the granularity that the pros are looking at as we

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Speaker 1: look at simple statistics like the unemployment. Do you like

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Speaker 1: milk with your coffee on? Almond milk? Almond milk? You

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Speaker 1: drink almond milk, almond milk? Try any sugar? Absolutely, no sugar.

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Speaker 1: It's evil shook his evil finding out a lot about

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Speaker 1: my boss. An know they're really bad news. Here coffee

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Speaker 1: boy is Mrs Keen is listening to this. There's a

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Speaker 1: fifty five gallon oil drum of almond milk in the refrigerator.

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Speaker 1: We find that so much about this is like Google.

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Speaker 1: I can see the I p O. James Gorman is

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Speaker 1: going to do a secondary offering for Morgan's. It's going

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Speaker 1: to demand the top. Sugar is evil and lovely. To

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Speaker 1: Chief US economist Jeff Rosenberg, City of Port filure manager

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Speaker 1: on black Rock, systematic fixed income t great to catch

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Speaker 1: up with you, Jeff you first read on the payrolls report, please,

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Speaker 1: great to see you as well. Guys. The first read is,

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Speaker 1: you know, it's a it's a strong report. It continues

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Speaker 1: to tell the story of strong growth in the labor

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Speaker 1: market without pressuring inflation. That's a little bit of a

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Speaker 1: weaker number UH point two versus point three expectations in

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Speaker 1: terms of hourly earnings UH year over year three point

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Speaker 1: two percent. So you have these strong numbers in terms

428
00:24:48,119 --> 00:24:52,560
Speaker 1: of payroll growth without really pushing up the acceleration. I

429
00:24:52,600 --> 00:24:56,320
Speaker 1: think this just continues a sequence of strong reports in

430
00:24:56,359 --> 00:24:59,400
Speaker 1: the labor market and not really pressuring on the inflation.

431
00:24:59,480 --> 00:25:01,560
Speaker 1: Tom you mentioned in a minute ago about you know,

432
00:25:01,600 --> 00:25:03,879
Speaker 1: the inflation narrative. I think Powell put a pin in

433
00:25:03,920 --> 00:25:06,919
Speaker 1: that earlier this week, and certainly nothing out of this

434
00:25:07,000 --> 00:25:09,239
Speaker 1: report is gonna is going to raise concerns on that.

435
00:25:09,359 --> 00:25:12,280
Speaker 1: Why is there an insatiable desire? You know, we always

436
00:25:12,280 --> 00:25:15,720
Speaker 1: look at yielding price and that, but Jeffrey Rosenberg, the

437
00:25:15,800 --> 00:25:19,520
Speaker 1: fact is people are issuing paper and the demand for it,

438
00:25:20,240 --> 00:25:24,360
Speaker 1: I'm going to use a nonpro word is insatiable That

439
00:25:24,480 --> 00:25:28,359
Speaker 1: keeps yields down. Let's begin with square one. Why is

440
00:25:28,400 --> 00:25:32,840
Speaker 1: there an insatiable demand for fixed income paper? Well, there's

441
00:25:32,840 --> 00:25:34,480
Speaker 1: a lot of reasons behind that time. I mean, you

442
00:25:34,640 --> 00:25:36,960
Speaker 1: you have a you have a supply demand issue, and

443
00:25:37,000 --> 00:25:39,359
Speaker 1: it's it's not new, It's been going on for a

444
00:25:39,400 --> 00:25:41,639
Speaker 1: long time. And it's not just about the US. This

445
00:25:41,680 --> 00:25:44,879
Speaker 1: is about global savings, is about a global demand for

446
00:25:44,960 --> 00:25:48,320
Speaker 1: fixed income. That's a secular trend. Part of that is

447
00:25:48,400 --> 00:25:52,879
Speaker 1: driven by demographics, part of it is driven by the

448
00:25:53,000 --> 00:25:56,440
Speaker 1: lack of yield in the rest of the world. Pursuing

449
00:25:56,520 --> 00:25:59,639
Speaker 1: zero and negative interest rate policies. It makes our yield

450
00:25:59,720 --> 00:26:02,400
Speaker 1: level is very attractive. Do you have a yield call?

451
00:26:02,480 --> 00:26:04,159
Speaker 1: And I mean that's seriously and that you're not in

452
00:26:04,160 --> 00:26:07,760
Speaker 1: the forecasting business working at buyside black Rock, but two

453
00:26:07,800 --> 00:26:11,600
Speaker 1: point five six And it feels like an economy that

454
00:26:11,680 --> 00:26:14,440
Speaker 1: says three point zero zero to me, And yet we're

455
00:26:14,480 --> 00:26:17,240
Speaker 1: not there, are we? What's your what's your call? Twelve

456
00:26:17,240 --> 00:26:20,880
Speaker 1: months out on tenure yield? So I think that what

457
00:26:20,960 --> 00:26:23,439
Speaker 1: we are in in this environment, and I think the

458
00:26:23,560 --> 00:26:27,560
Speaker 1: more important data around today's report is on the inflation

459
00:26:27,640 --> 00:26:30,960
Speaker 1: side rather than the headline. Where is the debate. The

460
00:26:30,960 --> 00:26:34,080
Speaker 1: debate is centered around the inflation outlook, so today is

461
00:26:34,080 --> 00:26:37,000
Speaker 1: a little bit helpful. It doesn't accelerate the inflation outlook,

462
00:26:37,320 --> 00:26:39,399
Speaker 1: uh and it and it certainly helps to stem some

463
00:26:39,480 --> 00:26:42,600
Speaker 1: of the concerns about too little inflation. But that's the

464
00:26:42,720 --> 00:26:45,359
Speaker 1: environment that we've been in and we've been talking about

465
00:26:45,480 --> 00:26:48,000
Speaker 1: and we'll talk about later today in the Hoover Institute.

466
00:26:48,160 --> 00:26:52,560
Speaker 1: And we get the headlines from policymakers discussion about changing

467
00:26:52,560 --> 00:26:55,440
Speaker 1: the framework to how do you deal with very low

468
00:26:55,520 --> 00:26:58,720
Speaker 1: inflation in that kind of environment? The reason for such

469
00:26:58,840 --> 00:27:01,919
Speaker 1: low levels of interest rate says, there's an expectation that

470
00:27:02,480 --> 00:27:06,000
Speaker 1: central bank policymakers are gonna be much more willing to

471
00:27:06,040 --> 00:27:09,119
Speaker 1: cut interest rates than they are to raise interest rates

472
00:27:09,160 --> 00:27:12,200
Speaker 1: because of the fear of inflation going downward. And that's

473
00:27:12,200 --> 00:27:15,320
Speaker 1: what's pushing downward interest rates. I think that as we

474
00:27:15,440 --> 00:27:17,760
Speaker 1: get through you as twelve months outlook, as we get

475
00:27:17,800 --> 00:27:20,879
Speaker 1: through this low level, one and a half percent is

476
00:27:20,880 --> 00:27:24,159
Speaker 1: where inflation is running. Our forecast see that not in

477
00:27:24,200 --> 00:27:26,040
Speaker 1: the near term, not in the next three months, but

478
00:27:26,160 --> 00:27:28,040
Speaker 1: by the end of the year we're gonna be around

479
00:27:28,040 --> 00:27:31,199
Speaker 1: one eight one nine on that favored measure by the

480
00:27:31,200 --> 00:27:34,280
Speaker 1: Fed core PC. And in that kind of environment, you

481
00:27:34,280 --> 00:27:37,040
Speaker 1: could pick up modestly higher in terms of interest rates.

482
00:27:37,119 --> 00:27:40,320
Speaker 1: Jeffrey Rosenberg with concern. Jeffrey Rosenberg with a black rock,

483
00:27:40,359 --> 00:27:43,040
Speaker 1: and we continue. I can't say enough, folks, if you

484
00:27:43,080 --> 00:27:46,080
Speaker 1: don't have a Bloomberg terminal, you will get one only

485
00:27:46,200 --> 00:27:49,800
Speaker 1: for t live go. It is outstanding in the esteem

486
00:27:49,800 --> 00:27:52,639
Speaker 1: Scott Landman right now, right in there, jeff Rosenberg, This

487
00:27:52,760 --> 00:27:56,720
Speaker 1: puts the historic perspective on the moment. The jabist rate

488
00:27:56,760 --> 00:28:03,040
Speaker 1: falls to a fresh year low of three point six percent.

489
00:28:03,440 --> 00:28:06,520
Speaker 1: That wasn't in your textbooks at Carnegie Mellon. What is

490
00:28:06,520 --> 00:28:12,000
Speaker 1: the three point six unemployment rate mean to President Trump? Well,

491
00:28:12,040 --> 00:28:15,840
Speaker 1: it's it's obviously very good news. Now the details around

492
00:28:15,840 --> 00:28:18,040
Speaker 1: that unemployment rate, he had a big drop in terms

493
00:28:18,080 --> 00:28:20,320
Speaker 1: of the workforce, and you know some people will will

494
00:28:20,359 --> 00:28:24,920
Speaker 1: certainly highlight you know that maybe technically driven, but the

495
00:28:24,960 --> 00:28:29,960
Speaker 1: fact is is we are at historic low levels of unemployment,

496
00:28:30,160 --> 00:28:32,720
Speaker 1: as low as they've been since the nineteen sixties. And

497
00:28:32,760 --> 00:28:35,720
Speaker 1: it's indicative of where this economy is. A very strong

498
00:28:36,119 --> 00:28:41,360
Speaker 1: labor markets, very extended cycle in terms of the economic expansion,

499
00:28:41,880 --> 00:28:46,440
Speaker 1: but without the inflationary consequences that we saw in that

500
00:28:46,640 --> 00:28:49,920
Speaker 1: last period of very low unemployment rate's mid nineteen sixties,

501
00:28:49,960 --> 00:28:53,480
Speaker 1: inflation d anchored, and you had, you know, the origin

502
00:28:53,640 --> 00:28:56,720
Speaker 1: story of the FED, uh, you know, popping the bubble

503
00:28:56,760 --> 00:29:00,000
Speaker 1: of inflation expectations. A very different story for very different

504
00:29:00,080 --> 00:29:03,840
Speaker 1: reasons this time around. But that's what the utlow unimportant,

505
00:29:04,360 --> 00:29:06,920
Speaker 1: you know. And then within tie life, go Jeff Rosenberg,

506
00:29:06,960 --> 00:29:08,640
Speaker 1: and I know you've been on TI life go written

507
00:29:08,720 --> 00:29:11,960
Speaker 1: up with your comments many times. The gentleman Torsten Slack

508
00:29:12,000 --> 00:29:15,120
Speaker 1: of Deutsche Bank. He's got a three a three words

509
00:29:15,200 --> 00:29:20,240
Speaker 1: sentence here of analysis. Powell was right. If Powell was right,

510
00:29:20,600 --> 00:29:22,800
Speaker 1: why is he getting so much grief from the President

511
00:29:23,160 --> 00:29:28,200
Speaker 1: of the United States. Well, he was wrong before he

512
00:29:28,360 --> 00:29:32,760
Speaker 1: was right, Okay, thank you. Will said expected that the

513
00:29:32,880 --> 00:29:35,560
Speaker 1: December move was a policy mistake, so he was right

514
00:29:35,640 --> 00:29:38,520
Speaker 1: to pivot. I think it's what Torsen is talking about,

515
00:29:38,600 --> 00:29:41,680
Speaker 1: and that's that's what has occurred here, and that is correct.

516
00:29:41,720 --> 00:29:44,880
Speaker 1: And you certainly see the market and the economy responding

517
00:29:44,960 --> 00:29:49,280
Speaker 1: to the easing in financial conditions from the pivot from

518
00:29:49,400 --> 00:29:54,000
Speaker 1: Powell back on January fourth, after recognition recognizing belatedly with

519
00:29:54,160 --> 00:29:57,840
Speaker 1: the market's help, that the the increase in descent was

520
00:29:58,080 --> 00:30:01,520
Speaker 1: was misplaced and Alan Setner, our team putting out that

521
00:30:01,760 --> 00:30:05,240
Speaker 1: Census Bureau blip here that we see this month, and

522
00:30:05,440 --> 00:30:09,080
Speaker 1: private payrolls is ma Zentner at Morgan Stanley mentioned is

523
00:30:09,160 --> 00:30:13,360
Speaker 1: important was still a buoyant two thirty six thousand. We

524
00:30:13,440 --> 00:30:30,120
Speaker 1: are thrilled. Jeffrey Rosenberg's with us with Black Rock. This

525
00:30:30,280 --> 00:30:33,040
Speaker 1: is a joy and this is a celebration. As you know,

526
00:30:33,200 --> 00:30:35,960
Speaker 1: at Bloomberg Surveillance, we get informed in seventy two books

527
00:30:36,000 --> 00:30:38,440
Speaker 1: a day and another one comes in. Yeah yeah, another

528
00:30:38,920 --> 00:30:43,160
Speaker 1: guy that's made in another book, Yeah, yeah, yeah. And

529
00:30:43,320 --> 00:30:45,600
Speaker 1: the brilliant that we saw a year and a half ago.

530
00:30:46,000 --> 00:30:50,760
Speaker 1: I Love Capitalism an American story of Kenneth Land Gone

531
00:30:51,200 --> 00:30:53,320
Speaker 1: with the image on the cover of a young t

532
00:30:53,560 --> 00:30:56,880
Speaker 1: shirted holes ripped in his blue jeans land gown with

533
00:30:57,040 --> 00:30:59,640
Speaker 1: his home depot shovel ready to dig a ditch. A

534
00:30:59,720 --> 00:31:02,840
Speaker 1: few years ago we celebrate ken Land going I Love

535
00:31:02,920 --> 00:31:06,600
Speaker 1: Capitalism out for Beach reading with a paperback out on

536
00:31:06,800 --> 00:31:09,320
Speaker 1: I Love Capitalism. I can't say enough Ken. The book

537
00:31:09,400 --> 00:31:12,360
Speaker 1: was such a joy. It's almost James Clavill like, it's

538
00:31:12,440 --> 00:31:16,440
Speaker 1: all dialogue in all what you said to people. I

539
00:31:16,560 --> 00:31:18,680
Speaker 1: want to start with something and this goes to chapter

540
00:31:18,800 --> 00:31:21,160
Speaker 1: one of your book, which is right now, and this

541
00:31:21,360 --> 00:31:25,080
Speaker 1: is classic land going. You've just said your n y

542
00:31:25,240 --> 00:31:28,880
Speaker 1: U Medical school. These doctors need the way to finance

543
00:31:29,280 --> 00:31:32,280
Speaker 1: off their backs. Tell us what you're doing to help

544
00:31:32,320 --> 00:31:34,960
Speaker 1: the kids that are smart enough to get into n

545
00:31:35,080 --> 00:31:38,360
Speaker 1: y U Medical how you're helping them with tuition. Well,

546
00:31:38,400 --> 00:31:40,680
Speaker 1: it's very simple. We made a decision. It took us

547
00:31:40,760 --> 00:31:43,800
Speaker 1: eleven years to raise the money to get there, but

548
00:31:43,920 --> 00:31:47,000
Speaker 1: we made a decision that every kid we accept comes

549
00:31:47,080 --> 00:31:50,560
Speaker 1: tuition free, every single one of them, including the ones

550
00:31:50,640 --> 00:31:53,040
Speaker 1: that haven't finished their study. So if you've got two

551
00:31:53,120 --> 00:31:57,120
Speaker 1: years or three years left, that's free to and we

552
00:31:57,400 --> 00:32:00,080
Speaker 1: we really felt like it was the right thing to do.

553
00:32:01,160 --> 00:32:05,320
Speaker 1: More importantly, on Nation has confronted with a shortage of

554
00:32:05,400 --> 00:32:08,600
Speaker 1: roughly a hundred and twenty thousand doctors in the year

555
00:32:08,680 --> 00:32:11,640
Speaker 1: two thousand and thirty. That's only eleven years from now.

556
00:32:12,920 --> 00:32:21,080
Speaker 1: Uh fifty sixty thousand primary care physicians, thousand pediatritions and

557
00:32:21,160 --> 00:32:24,640
Speaker 1: twenty five thousand O B g U I N. These

558
00:32:24,680 --> 00:32:27,320
Speaker 1: are fields that don't pay as well as some of

559
00:32:27,400 --> 00:32:33,680
Speaker 1: your more commanding neurosurgery and dermatology and so and it's

560
00:32:33,720 --> 00:32:36,240
Speaker 1: eighties seven thousand all in it anyway, you medical living

561
00:32:36,320 --> 00:32:41,000
Speaker 1: costs at all that subway fees of our it's a

562
00:32:41,360 --> 00:32:44,840
Speaker 1: it's a lot of my tuitions about seventy thousand. So

563
00:32:44,880 --> 00:32:47,160
Speaker 1: you got to add on top of that you wandered

564
00:32:47,200 --> 00:32:51,880
Speaker 1: into Bucknell hundred dollars a year. And and you know,

565
00:32:52,000 --> 00:32:54,520
Speaker 1: for your parents this was a huge stress. You know,

566
00:32:54,600 --> 00:32:56,720
Speaker 1: within the time that we've got today, give us a

567
00:32:56,840 --> 00:32:59,040
Speaker 1: window into what it was like the first day at

568
00:32:59,080 --> 00:33:02,120
Speaker 1: Bucknell where you were not one of the fancy kids.

569
00:33:03,240 --> 00:33:06,400
Speaker 1: I remember on a Friday night, my first Friday night,

570
00:33:06,440 --> 00:33:08,400
Speaker 1: they are being in front of the library and looking

571
00:33:08,440 --> 00:33:11,960
Speaker 1: out over the Buffalo Valley and I couldn't believe I

572
00:33:12,080 --> 00:33:15,720
Speaker 1: was there, and I just I was. It was something

573
00:33:15,800 --> 00:33:19,080
Speaker 1: I never imagined would happen. What did you learn at

574
00:33:19,120 --> 00:33:21,840
Speaker 1: buck now that helped you when you built home depot?

575
00:33:22,080 --> 00:33:26,000
Speaker 1: How to get along with people, how to respect people. Uh. Yeah,

576
00:33:26,040 --> 00:33:28,960
Speaker 1: the studies, the academic studies are important, no doubt about that.

577
00:33:29,920 --> 00:33:32,800
Speaker 1: But it was an environment where we were thrown in

578
00:33:32,960 --> 00:33:36,440
Speaker 1: with each other, and it was one where you knew

579
00:33:36,480 --> 00:33:38,640
Speaker 1: you would do better. The better you did in dealing

580
00:33:38,720 --> 00:33:43,000
Speaker 1: with friends and professors and so forth. And I can

581
00:33:43,120 --> 00:33:46,720
Speaker 1: never ever adequately express my gratitude to buck Now for

582
00:33:46,840 --> 00:33:48,960
Speaker 1: what it did for me. So Ken, one of the

583
00:33:49,080 --> 00:33:52,480
Speaker 1: themes in your book is that free enterprise and capitalism

584
00:33:52,600 --> 00:33:55,520
Speaker 1: is kind of the key to giving everyone a leg

585
00:33:55,640 --> 00:33:58,320
Speaker 1: up at an opportunity. Do you think that still holds

586
00:33:58,480 --> 00:34:00,960
Speaker 1: today to that? Maybe to the same degree, more so,

587
00:34:01,240 --> 00:34:06,600
Speaker 1: more so more so. We today we celebrate ownership home

588
00:34:06,720 --> 00:34:10,160
Speaker 1: depot for example, and the number I love to brag about,

589
00:34:10,239 --> 00:34:13,080
Speaker 1: we have police. We have three thousand kids that came

590
00:34:13,120 --> 00:34:16,720
Speaker 1: with us eighteen years old, fresh out of high school,

591
00:34:16,760 --> 00:34:20,240
Speaker 1: no college, started entry level in the parking lot, pushing

592
00:34:20,280 --> 00:34:25,200
Speaker 1: carts in three thousand on multiminion. Yes, today capitalism works.

593
00:34:25,719 --> 00:34:27,680
Speaker 1: Look what you guys all right here today? Look at

594
00:34:27,719 --> 00:34:31,120
Speaker 1: Mike Bloomberg. I mean, look at this. Damn it. The

595
00:34:31,280 --> 00:34:35,640
Speaker 1: system works. Is it? Is it unfair at times? Yes?

596
00:34:36,320 --> 00:34:39,160
Speaker 1: Is it brutal at times? Yes? Every time I've had

597
00:34:39,880 --> 00:34:43,520
Speaker 1: it's brutal. Okay, I'll go with that. Michael Bloomberg folks

598
00:34:43,640 --> 00:34:46,400
Speaker 1: unfair and brutal. He is a principal owner of Bloomberg

599
00:34:46,440 --> 00:34:50,600
Speaker 1: ELP and one of the most philanthropic men on this Well, okay,

600
00:34:50,640 --> 00:34:52,600
Speaker 1: I want to talk about the business environment. We see

601
00:34:52,640 --> 00:34:54,279
Speaker 1: three M blowing up right now. I want to talk

602
00:34:54,320 --> 00:34:58,040
Speaker 1: about complexity. First, Nestley had to do a reorg. Uni

603
00:34:58,160 --> 00:35:00,520
Speaker 1: Lever had to do a reorder. Three E M has

604
00:35:00,600 --> 00:35:03,319
Speaker 1: rolled over. It's really under performing. Is there a point

605
00:35:03,400 --> 00:35:07,200
Speaker 1: where a business becomes too complex? It's just becomes too

606
00:35:07,360 --> 00:35:12,200
Speaker 1: cute for its own good No, look, styles and taste change.

607
00:35:13,800 --> 00:35:18,320
Speaker 1: A thriving business is dynamic. It changes with its market.

608
00:35:19,040 --> 00:35:22,000
Speaker 1: Home depot today is not the home depot of forty

609
00:35:22,080 --> 00:35:24,920
Speaker 1: two years or forty one years ago. For example, we

610
00:35:25,040 --> 00:35:28,319
Speaker 1: have a much greater emphasis on security products. There are

611
00:35:28,440 --> 00:35:31,640
Speaker 1: there are changes in construction styles, there are changes in

612
00:35:32,200 --> 00:35:36,120
Speaker 1: in fashion. We if we don't change with the market,

613
00:35:36,680 --> 00:35:40,480
Speaker 1: we be rendered were rented obsolete. So the key I mean,

614
00:35:40,520 --> 00:35:43,680
Speaker 1: I'll give you a good. For instance, Eastern Kodak no

615
00:35:43,880 --> 00:35:47,960
Speaker 1: longer exists for one reason and one reason alone. Digital

616
00:35:48,040 --> 00:35:51,879
Speaker 1: photography showed up and they decided they wanted no part

617
00:35:51,920 --> 00:35:55,399
Speaker 1: of it because they wanted to protect those little yellow boxes. Well,

618
00:35:55,440 --> 00:35:58,520
Speaker 1: now they've got nothing to protect. Kodak was one of

619
00:35:58,600 --> 00:36:02,239
Speaker 1: the fifty most admired and invested companies in them It

620
00:36:02,320 --> 00:36:07,719
Speaker 1: was in the fifty fifty fifty Great Companies. Kodak's gone

621
00:36:08,800 --> 00:36:12,920
Speaker 1: why management didn't change with the times. Management didn't change

622
00:36:12,960 --> 00:36:16,680
Speaker 1: with its market. You go where your customer wants to go,

623
00:36:16,960 --> 00:36:19,520
Speaker 1: you don't go. You don't tell your customers this is

624
00:36:19,560 --> 00:36:22,160
Speaker 1: where you're coming. Are we seeing some of that now?

625
00:36:22,280 --> 00:36:26,160
Speaker 1: And just the US retail landscape, you know, the Amazon effect,

626
00:36:26,200 --> 00:36:29,000
Speaker 1: everything e commerce and or it seems like some great names,

627
00:36:29,000 --> 00:36:32,200
Speaker 1: whether it's the Macy's of the world or whatever, really struggling. Look,

628
00:36:32,600 --> 00:36:37,000
Speaker 1: convenience is becoming a much more important factor of life.

629
00:36:37,080 --> 00:36:40,320
Speaker 1: And the other thing is all this noise about content

630
00:36:40,480 --> 00:36:45,359
Speaker 1: and television and streaming. People are spending more time at home.

631
00:36:45,800 --> 00:36:48,080
Speaker 1: They don't want to go out and shop for bread

632
00:36:48,320 --> 00:36:51,800
Speaker 1: or milk or Hamburgers or whatever. Home Depot is spending

633
00:36:52,040 --> 00:36:55,799
Speaker 1: eleven billion dollars in the next three years on being

634
00:36:56,280 --> 00:36:59,480
Speaker 1: relevant in online sales. How we do it, how we

635
00:36:59,560 --> 00:37:02,720
Speaker 1: reach the customer, the convenience to the customer. So there's

636
00:37:02,719 --> 00:37:06,680
Speaker 1: an example. The world has changed. Amazon was a pioneer.

637
00:37:07,480 --> 00:37:09,560
Speaker 1: I want you to do an NBA right now. Paul

638
00:37:09,640 --> 00:37:11,759
Speaker 1: Sweeney was at Fukuo down to Duke, and there's many

639
00:37:11,800 --> 00:37:15,640
Speaker 1: others listening all the different you know NBA's guys. Right now,

640
00:37:16,400 --> 00:37:18,840
Speaker 1: what does Kim Lan going think of the words scale.

641
00:37:19,239 --> 00:37:22,680
Speaker 1: It's so in right now. This word it's like synergy.

642
00:37:22,760 --> 00:37:26,800
Speaker 1: A couple of years ago. We're scaling up. We need scale.

643
00:37:27,080 --> 00:37:30,239
Speaker 1: You I see the landgoing face over there but ready

644
00:37:30,280 --> 00:37:33,759
Speaker 1: to get hit between the eyes. One number. Name your book.

645
00:37:33,800 --> 00:37:38,520
Speaker 1: I love scale. The title I wanted was capitalism and

646
00:37:38,600 --> 00:37:41,080
Speaker 1: me a love affair because you know what it really

647
00:37:41,320 --> 00:37:44,200
Speaker 1: was and it is. They thought it was a better top. Yeah,

648
00:37:44,239 --> 00:37:48,480
Speaker 1: I love capitalism means it sounds like Avengers scale scale

649
00:37:49,920 --> 00:37:53,240
Speaker 1: ten years ago. N Why you had sixty seven neurologists

650
00:37:53,280 --> 00:37:57,439
Speaker 1: on staff today we have two hundred and thirteen neurologists

651
00:37:57,440 --> 00:38:00,640
Speaker 1: on staff. Why our market has grown and we're growing

652
00:38:00,719 --> 00:38:04,840
Speaker 1: with our market. You've got to the key to business

653
00:38:05,680 --> 00:38:08,000
Speaker 1: is to make sure you're relevant to the market you're

654
00:38:08,040 --> 00:38:11,040
Speaker 1: trying to reach. If you do that, you'll get scale

655
00:38:11,120 --> 00:38:13,920
Speaker 1: home deep over this past year had a hundred and

656
00:38:14,000 --> 00:38:17,640
Speaker 1: eight billion dollars in revenues that scale and look at

657
00:38:17,680 --> 00:38:19,640
Speaker 1: what we're able to do. We're able to spend eleven

658
00:38:19,719 --> 00:38:23,279
Speaker 1: billion dollars in the next three years on technology. We

659
00:38:23,320 --> 00:38:25,560
Speaker 1: couldn't do that if we didn't have scale. We're waiting

660
00:38:25,600 --> 00:38:28,080
Speaker 1: for Lawrence Cudlow at the White house with John Ferrell.

661
00:38:28,120 --> 00:38:30,400
Speaker 1: But right now we are thrilled and honored to have

662
00:38:30,520 --> 00:38:34,200
Speaker 1: with us. It's an American story. I love capitalism. Kenneth

663
00:38:34,280 --> 00:38:37,600
Speaker 1: ln going the hardcover did extremely well, and he dashes

664
00:38:37,640 --> 00:38:41,880
Speaker 1: out for beach, reading the water sealed paperback that Hampton's

665
00:38:41,920 --> 00:38:48,680
Speaker 1: will be covered with. One of the things we've seen

666
00:38:48,760 --> 00:38:51,040
Speaker 1: this year twenty nineteen has been built by a lot

667
00:38:51,040 --> 00:38:52,560
Speaker 1: of people. As g the year of the I p O.

668
00:38:52,640 --> 00:38:54,239
Speaker 1: We've had so many big tech I p o s,

669
00:38:54,320 --> 00:38:56,640
Speaker 1: but they're not all working. It seems like you take

670
00:38:56,680 --> 00:38:59,520
Speaker 1: a look at some of these new technologies that the

671
00:38:59,680 --> 00:39:02,480
Speaker 1: right sharing company lifts, we're gonna have Uber coming. Some

672
00:39:02,560 --> 00:39:04,400
Speaker 1: of those are struggling in the marketplace. Is this the

673
00:39:04,480 --> 00:39:07,319
Speaker 1: market saying we need to see some path of profitability.

674
00:39:07,320 --> 00:39:09,600
Speaker 1: You can't just give us some great pipe dream about

675
00:39:09,600 --> 00:39:13,200
Speaker 1: a big market. Now. The market's discreet, The market's gonna look.

676
00:39:13,239 --> 00:39:16,080
Speaker 1: I have a company that I invested in a short

677
00:39:16,239 --> 00:39:18,320
Speaker 1: four or five years ago called shock Wave with the

678
00:39:18,440 --> 00:39:24,040
Speaker 1: technology for the heart uh and and it came public

679
00:39:24,080 --> 00:39:26,799
Speaker 1: and around sixteen bucks two months ago, and it's at

680
00:39:26,880 --> 00:39:30,799
Speaker 1: forty one a share. To they why it's it's identified

681
00:39:30,880 --> 00:39:34,440
Speaker 1: a market, it's it's got the technology, and the belief

682
00:39:34,600 --> 00:39:37,520
Speaker 1: is it will have significant growth because of what it does.

683
00:39:38,560 --> 00:39:40,759
Speaker 1: One of the things we all need to have in

684
00:39:40,960 --> 00:39:46,520
Speaker 1: life is the discipline of profits. For how long can

685
00:39:46,600 --> 00:39:50,080
Speaker 1: you keep going back to the marketplace for capital to

686
00:39:50,239 --> 00:39:53,799
Speaker 1: take care of the capital you've lost and eroded by

687
00:39:53,960 --> 00:40:00,440
Speaker 1: virtue of losing money? You know? Look home Deep today

688
00:40:01,719 --> 00:40:04,840
Speaker 1: pays five dollars and forty four cents to share and dividends.

689
00:40:04,880 --> 00:40:07,640
Speaker 1: And by the way, as a reference point, if you

690
00:40:07,760 --> 00:40:14,759
Speaker 1: board our stock in nineteen, the adjusted cost is four

691
00:40:14,880 --> 00:40:18,960
Speaker 1: cents to share. So do the math yield on your court.

692
00:40:20,080 --> 00:40:22,440
Speaker 1: We can only do that because we make money. You

693
00:40:22,560 --> 00:40:25,840
Speaker 1: make profit. Lord to say it, LS say it's about profit.

694
00:40:25,960 --> 00:40:28,120
Speaker 1: You've gotta make profits. What does kid Land going to

695
00:40:28,200 --> 00:40:31,680
Speaker 1: think about all the new Silicon Valley rage, which is

696
00:40:31,719 --> 00:40:37,040
Speaker 1: an extrapolation of huge revenue growth, zero profit, zero cash flow,

697
00:40:37,400 --> 00:40:41,360
Speaker 1: and out there somewhere will be profit one day. What

698
00:40:41,480 --> 00:40:45,200
Speaker 1: do you think of those guys? Well, I think number one,

699
00:40:45,880 --> 00:40:48,960
Speaker 1: the market is agreeing with them, that the market they're addressed. Well,

700
00:40:48,960 --> 00:40:50,840
Speaker 1: look at Fair, look at look at Amazon. Take a

701
00:40:50,960 --> 00:40:54,399
Speaker 1: look at Amazon's numbers. They're staggering. Look at Google, look

702
00:40:54,440 --> 00:40:59,120
Speaker 1: at Mike. Look at Microsoft, look at Facebook. They hit

703
00:40:59,280 --> 00:41:03,839
Speaker 1: on something. At some point the market is going to demand. Hey, guys,

704
00:41:03,960 --> 00:41:06,880
Speaker 1: we've given you enough lead time, we've given you enough runway.

705
00:41:07,280 --> 00:41:09,399
Speaker 1: Now when are we gonna start getting some money back?

706
00:41:09,760 --> 00:41:12,120
Speaker 1: I don't know when that happened. Right do you agree

707
00:41:12,160 --> 00:41:13,800
Speaker 1: with Mr Buffet that you can load the boat on

708
00:41:13,880 --> 00:41:16,600
Speaker 1: Amazon right now? I did a chart today two decade

709
00:41:16,640 --> 00:41:20,280
Speaker 1: regression of Amazon and extrapolated it out to troop twenty

710
00:41:20,840 --> 00:41:23,640
Speaker 1: to two thousand thirty nine when Ken Lang going, We'll

711
00:41:23,760 --> 00:41:26,480
Speaker 1: join us two thousand thirty nine, with the follow up,

712
00:41:26,680 --> 00:41:30,279
Speaker 1: I love planned to be there, but if it's gonna

713
00:41:30,320 --> 00:41:33,400
Speaker 1: be seventy eight thousand dollars to share is a log extrapolation.

714
00:41:33,880 --> 00:41:36,200
Speaker 1: I'll be hud and four years old. That's good. I

715
00:41:36,360 --> 00:41:39,640
Speaker 1: like it. But but within that and out that far?

716
00:41:40,280 --> 00:41:44,400
Speaker 1: Can you extrapolate out Amazon and feel good about the

717
00:41:44,440 --> 00:41:47,120
Speaker 1: profit potential? Let me tell you what I know about Amazon.

718
00:41:47,239 --> 00:41:49,200
Speaker 1: I had the good fortune to be invited to have

719
00:41:49,400 --> 00:41:52,759
Speaker 1: lunch with Jeff Bezos. Frank Blake and I either tied

720
00:41:52,800 --> 00:41:54,440
Speaker 1: sham and a depot and I went out and had

721
00:41:54,560 --> 00:41:57,279
Speaker 1: lunch with him about a year and a half ago

722
00:41:57,480 --> 00:42:02,919
Speaker 1: at home you've got two critical ingredients of success. He's

723
00:42:02,960 --> 00:42:07,480
Speaker 1: smart and he's humble. Okay, and he hit on something

724
00:42:08,080 --> 00:42:11,960
Speaker 1: that is exciting. Tell us about that well, online selling

725
00:42:12,920 --> 00:42:16,080
Speaker 1: the cloud. Look at the things he's a Look at

726
00:42:16,120 --> 00:42:20,400
Speaker 1: his numbers. I mean, this thing makes money, it coins money.

727
00:42:21,840 --> 00:42:24,680
Speaker 1: But guess what it's always about the people. I want

728
00:42:24,719 --> 00:42:27,120
Speaker 1: to fold this back into your book. I love capitalism,

729
00:42:27,200 --> 00:42:30,720
Speaker 1: which is Amazon started in America. When I go to Paris,

730
00:42:30,880 --> 00:42:35,680
Speaker 1: they desperately want the entrepreneurship of landgown and bezos in

731
00:42:35,840 --> 00:42:38,439
Speaker 1: Paris everywhere else. What is it in the pixie dust

732
00:42:38,560 --> 00:42:41,880
Speaker 1: of America that allows us to find a bezos in

733
00:42:41,920 --> 00:42:47,719
Speaker 1: a station wagon moving books? The incentive of succeeding that

734
00:42:47,840 --> 00:42:50,960
Speaker 1: if we work our asses off, if we address an issue,

735
00:42:51,040 --> 00:42:54,080
Speaker 1: if we have a human want that we've satisfied, or

736
00:42:54,120 --> 00:42:56,880
Speaker 1: a human need that we've addressed, and we do it

737
00:42:57,000 --> 00:43:01,920
Speaker 1: out of course conscious basis will make money. Now, let

738
00:43:01,960 --> 00:43:04,440
Speaker 1: me tell you a very exciting thing about home Depot

739
00:43:04,560 --> 00:43:08,760
Speaker 1: and Apple Apple Grade Gun. Apple went public in December

740
00:43:08,800 --> 00:43:13,000
Speaker 1: of nineteen eighty and the aggregate return on Apple is

741
00:43:13,040 --> 00:43:18,520
Speaker 1: about forty two thousand percent. Home Depot went public in

742
00:43:18,680 --> 00:43:22,920
Speaker 1: September of nineteen one nine months later and the aggregate

743
00:43:23,040 --> 00:43:28,280
Speaker 1: return is six hundred and thirty two thousand percent. Hamazon

744
00:43:28,400 --> 00:43:34,880
Speaker 1: Saws versus exotic devices find a need address. The biggest

745
00:43:34,920 --> 00:43:38,719
Speaker 1: thing that we did was to recognize the importance of

746
00:43:38,800 --> 00:43:41,320
Speaker 1: the people that work with us, not for us, but

747
00:43:41,480 --> 00:43:44,480
Speaker 1: with us. These kids in the stores, these are this

748
00:43:44,640 --> 00:43:46,279
Speaker 1: is a secret weapon of home. Do you go to

749
00:43:46,360 --> 00:43:49,320
Speaker 1: a home Depot store, you expect an attentive kid. You

750
00:43:49,440 --> 00:43:52,120
Speaker 1: expect the polite kid. I say, kid, if you're under

751
00:43:52,160 --> 00:43:55,320
Speaker 1: Rady three, you're a kid one. Okay, you expect the

752
00:43:55,400 --> 00:43:58,680
Speaker 1: kid that knows what he's talking about. That's what it's

753
00:43:58,680 --> 00:44:02,080
Speaker 1: all about. To depot ten PM, a couple of nights ago,

754
00:44:02,440 --> 00:44:05,560
Speaker 1: desperate for one little thing to keep afterthoughts, you know,

755
00:44:05,760 --> 00:44:08,239
Speaker 1: things going there. It was there, it was they had

756
00:44:08,560 --> 00:44:12,000
Speaker 1: had and the person you go up to randomly, it's

757
00:44:12,080 --> 00:44:14,759
Speaker 1: just amazing. It's got to be time when I got

758
00:44:14,760 --> 00:44:17,000
Speaker 1: to somebody at home Depot, where is such and such?

759
00:44:17,640 --> 00:44:20,480
Speaker 1: I'le seven in the back on the or Okay, so

760
00:44:20,680 --> 00:44:24,400
Speaker 1: I will walk down to if they and then they

761
00:44:24,480 --> 00:44:26,759
Speaker 1: did walk me back there. I want to We're waiting

762
00:44:26,800 --> 00:44:29,560
Speaker 1: for Cudlow at the White House with John Farrell, Kerolyn going.

763
00:44:29,719 --> 00:44:32,560
Speaker 1: How do you respond to President Trump who says immigrants

764
00:44:32,600 --> 00:44:35,880
Speaker 1: are bad for his home? Depot was built and people

765
00:44:35,920 --> 00:44:38,640
Speaker 1: that wanted to get up early from other nations and

766
00:44:38,920 --> 00:44:42,040
Speaker 1: where that where that bib. I'm gonna get a little

767
00:44:42,239 --> 00:44:45,440
Speaker 1: excitement in this interview. He didn't say it's bad for us.

768
00:44:45,680 --> 00:44:47,279
Speaker 1: He said, if they want to come here, let him

769
00:44:47,320 --> 00:44:50,759
Speaker 1: come here through an orderly, lawful process. That's what he said.

770
00:44:51,160 --> 00:44:54,319
Speaker 1: My grandparents were immigrants. I can tell you right now.

771
00:44:54,840 --> 00:44:57,720
Speaker 1: This country was built on the back of immigrants, including

772
00:44:57,760 --> 00:45:01,800
Speaker 1: my grandparents. We're in nation of immigrants. Every one of

773
00:45:01,880 --> 00:45:04,480
Speaker 1: us came from someplace else except for the American Indian.

774
00:45:05,800 --> 00:45:08,120
Speaker 1: Guess what we have. I'm glad you brought it up.

775
00:45:08,600 --> 00:45:12,480
Speaker 1: We have a national crisis in America, big time national crisis.

776
00:45:12,920 --> 00:45:15,560
Speaker 1: Let's fix all laws that we could have an orderly

777
00:45:15,680 --> 00:45:17,839
Speaker 1: way for all these people who want to come here

778
00:45:18,560 --> 00:45:21,000
Speaker 1: to come. How does the president then, someone you know, well,

779
00:45:21,080 --> 00:45:23,799
Speaker 1: how does Donald I know him well, I know he knows.

780
00:45:24,560 --> 00:45:27,719
Speaker 1: How does he change his rhetoric and discourse so he

781
00:45:27,800 --> 00:45:31,600
Speaker 1: can meet the other side in the middle. Maybe he won't,

782
00:45:31,680 --> 00:45:34,680
Speaker 1: and maybe he can. But guess what, maybe it's his

783
00:45:34,800 --> 00:45:38,760
Speaker 1: rhetoric that's driving these results. Look at these numbers this morning,

784
00:45:38,840 --> 00:45:44,120
Speaker 1: three point six percent unemployment. It is amazing. Now all

785
00:45:44,239 --> 00:45:46,440
Speaker 1: better than that, I can tell you. It was a businessman.

786
00:45:47,120 --> 00:45:51,880
Speaker 1: The hobble of regulation in this country was staggering, and

787
00:45:51,960 --> 00:45:54,759
Speaker 1: it was crazy, and it did nobody any good. Were

788
00:45:54,840 --> 00:45:56,880
Speaker 1: you in the minimum ways? We're up to fifteen dollars

789
00:45:56,920 --> 00:45:58,759
Speaker 1: an hour? Does Kenlyn going want to go to twenty

790
00:45:58,800 --> 00:46:01,719
Speaker 1: two so they can spend it all at home depot? Well,

791
00:46:01,800 --> 00:46:06,279
Speaker 1: I have one simple rule that I live with. Pay

792
00:46:06,440 --> 00:46:10,359
Speaker 1: people what they're worth. Pay them what they are worth,

793
00:46:10,600 --> 00:46:13,439
Speaker 1: because if you don't, somebody else will. Here's gonna Ken's

794
00:46:13,440 --> 00:46:15,799
Speaker 1: gonna take a pause. We're gonna continue, Ester Lango, We've

795
00:46:15,800 --> 00:46:18,319
Speaker 1: got lots to talk about. You're in radio. He'll join

796
00:46:18,400 --> 00:46:20,960
Speaker 1: us on Bloomberg Television as well. Look for a special

797
00:46:21,040 --> 00:46:26,279
Speaker 1: podcast we're gonna do as well. Thanks for listening to

798
00:46:26,360 --> 00:46:30,840
Speaker 1: the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on

799
00:46:30,920 --> 00:46:36,759
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

800
00:46:36,840 --> 00:46:40,080
Speaker 1: on Twitter at Tom Keane. Before the podcast, you can

801
00:46:40,160 --> 00:46:43,319
Speaker 1: always catch us worldwide. I'm Bloomberg Radio