Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: you want to us now, I'm pleased to say. Is
Speaker 1: Alan Ruskin, Deutsche Bank chief international strategist. Good morning to
Speaker 1: Allen on this payrolls Friday morning, John, what are you
Speaker 1: looking for? The estimate and our survey a hundred and
Speaker 1: ninety thousand for the month of April they call at
Speaker 1: Deutsche Bank one sixty thousand strong basically for this point
Speaker 1: in the cycle. Really, I don't want to emphasize that
Speaker 1: it's you know, weaken in the prime month or anything
Speaker 1: like that. This is strong data all around. Women into
Speaker 1: the show. I've gotta get the juvenile question out the way.
Speaker 1: It's good data good news today, or it's good data
Speaker 1: bad news good question always. Really, I think, you know,
Speaker 1: we don't want too good a data, right, So we
Speaker 1: don't really want strong enough data that it tests the
Speaker 1: FEDS patients. Yeah, so a number, say, for example, like
Speaker 1: to seventy five k like the a DP number. I
Speaker 1: think would be in the realms where people start to
Speaker 1: have to think, wait a minute, we're pricing in rate
Speaker 1: cuts when we maybe should be thinking about rate hikes.
Speaker 1: I thought I was in charge of driven questions. Well,
Speaker 1: I just thought to get it out of the way, Okay,
Speaker 1: please continue. Federal Reserve speakers through the day really really busy,
Speaker 1: including Vice Chairman Richard Clarada. What do we need to
Speaker 1: hear from Mr Clarada today? Clarification? I had hesitated to say, really,
Speaker 1: I think clarification of the comments that chair and Powell
Speaker 1: put out really in a way, so you know, he
Speaker 1: took a very non doctrinaire approach to things, with a
Speaker 1: little fuzzy in terms of what would provoke a rate cut.
Speaker 1: Didn't want to get pushed into the terrain of saying,
Speaker 1: look here, if coinflation is below target for X number
Speaker 1: of my etcetera, we'll have to respond. I think you're
Speaker 1: going to get the same message from Richard Clarida, but
Speaker 1: I think it would be useful for the market. You see,
Speaker 1: they're on the same John Neils yesterday frankly as well, folks.
Speaker 1: I can't say enough, folks, how important this cycle of
Speaker 1: speeches is eleanor we one step away from the Vice
Speaker 1: chairman or anybody else is gonna say, you know what,
Speaker 1: this is all wrong. We're going to lift rate when
Speaker 1: we go next and we get a tantrum. I mean,
Speaker 1: that's the arch fear of institutional Wall Street. No, so
Speaker 1: I think we're not going to get there very quickly,
Speaker 1: not certainly, not today. I thought that if you got
Speaker 1: anything from Chairman Powell's comments, it was very sharply neutral.
Speaker 1: I mean he really said that not there's not a
Speaker 1: strong case for rate hike or rate cut. You know,
Speaker 1: that is very different of course from what's been priced
Speaker 1: in the marketplace, but it's also a long way from
Speaker 1: a rate hike. Well, what I'm looking for from the
Speaker 1: very long list of Federal Reserve speakers through today, there
Speaker 1: is a conference happening, the Hoover Institute Policy Conference, so
Speaker 1: look out for it all through the damp leaf that
Speaker 1: Mr Clarada will be speaking at eleven thirty Eastern time. Personally,
Speaker 1: what I'm looking for Alan is to whether there is
Speaker 1: any daylight between the chairman and the people closest to him,
Speaker 1: because there are some people out there listening that think
Speaker 1: there might be do you and there might be some
Speaker 1: daylight to the extent that I think both Clarada and Williams,
Speaker 1: I think, take perhaps as somewhat more theoretical approach to
Speaker 1: things in terms of and and and sort of lay
Speaker 1: things out in theoretical terms in a way which the
Speaker 1: chair the chairman doesn't. So I think there's sometimes differences
Speaker 1: that come through there. They're largely nuanced. I don't think
Speaker 1: right now there would have a different view on what
Speaker 1: policy should be. But as for signals going on in
Speaker 1: the future, yes, there's there's a there's a hint to daylight. Ellan,
Speaker 1: you are so diplomatic. I thought that was incredibly diplomatical.
Speaker 1: The State Department with Mr let me translate what Sir
Speaker 1: Alan Ruskin just said. Powell's not a PhD economists. These
Speaker 1: guys have underlying theories and piles basically saying, yeah, right, okay,
Speaker 1: what is the theory of the pH d economists right now?
Speaker 1: Is a traditional Phillips curve? Is it completely data depending?
Speaker 1: I mean at a graduate level, what is their theory
Speaker 1: right now? I think the problem, Tom is that the
Speaker 1: theory in terms of creation of inflation has nowhere better
Speaker 1: to really turn than some sort of output gap framework.
Speaker 1: But as we know, the Phillips curve looks extraordinary flat.
Speaker 1: We may be at the point where there's a little
Speaker 1: kink where it gets a little you know, steeper, but
Speaker 1: we don't know. And that's all we have to hang
Speaker 1: our hats on in a sense. And that that's a big, big,
Speaker 1: extremely well said. But the issue I there, Ferrell is
Speaker 1: better at this, I am is the output gap has plugins.
Speaker 1: Some of them are accountable and tangible. In what German Pilcher,
Speaker 1: Yelling and the rest are dealing with is so many
Speaker 1: of those plugins are almost intangible, aren't they? Maybe even
Speaker 1: worse than that time, I think we'll do a better
Speaker 1: job using inflation to forecast the output gap where we
Speaker 1: are in the output gap, that we use the output
Speaker 1: gap to forecast inflation. Thank you, Well, let's talk about
Speaker 1: the reaction function after FED you've pointed out yourself, we
Speaker 1: spent months looking at this evolving policy reaction function. The
Speaker 1: place is greater emphasis on a symmetric inflation target. That's
Speaker 1: why so many people were expecting a rate cut, because
Speaker 1: they thought the Federal Reserve was setting us up for
Speaker 1: slowly adjusting the reaction function of policy do you think
Speaker 1: that is still the effort, the underlying effort of the
Speaker 1: effortm C to take us somewhere in that directional it.
Speaker 1: I think there's some genuine attempt to emphasize the idea
Speaker 1: of a symmetry. I think the symmetric argument made an
Speaker 1: awful lot of sense at the turn of the year,
Speaker 1: insomuch as I think the FED looked over the abbess
Speaker 1: and they saw, wait a minute, you know, we've got
Speaker 1: inflation that is barely a target really, and now we
Speaker 1: have we could be into the downswing and that's the peak,
Speaker 1: and you know, therefore we're definitely going down to zero
Speaker 1: rates again. Inflation is really peaked, and I think that's
Speaker 1: that's a problem. The zero bounding rates is really you know,
Speaker 1: creating a lot of the problems. So underpending the big
Speaker 1: ralliant risk assets was undoubtedly the Federal Reserve pivot back
Speaker 1: three or four months ago. There was a belief that
Speaker 1: maybe the Federal Reserve was making a policy mistake by
Speaker 1: hiking interest rates FED back away. I'm going to test
Speaker 1: the extreme end of this narrative right now. Alan, So
Speaker 1: I forgive me. Do you think there are some pockets
Speaker 1: of this market groups of investors substantial enough to have
Speaker 1: an impact that believe that if the FED does not
Speaker 1: cut interest rates, that is equally a policy mistake. Have
Speaker 1: we gone that far? Now? Put it this way, I
Speaker 1: think there's enough uncertainty out there just talking to clients,
Speaker 1: and there are enough people who think that the FED
Speaker 1: is signal that the next move would be a rate cut,
Speaker 1: obviously premised on inflation remaining low. But I think they'd
Speaker 1: be quite disappointed if you didn't get that. So that
Speaker 1: changes if in the coming days months the market has
Speaker 1: to readjust the reality that the next move may well
Speaker 1: be an increase. What happens to this market? How does
Speaker 1: price adjust? How do risk assets with risk respond to that? Well,
Speaker 1: I think we're first going to adjust to the idea
Speaker 1: of neutrality. Really, so FED is on hold for a
Speaker 1: long period of time. If we jumped from rate cut
Speaker 1: expectations to rate hike expectations, I think I'd be usually disruptive.
Speaker 1: But I think if we slowly take back the fifteen
Speaker 1: beaps of rate cuts that we have for two thousand
Speaker 1: and nineteen, then I think it's gonna be too disruptive.
Speaker 1: Let's go to Sonoda synodal dampening functions. If dragging has
Speaker 1: a dampening function where he does nothing out to whenever,
Speaker 1: if you're suggesting Powell and whoever after him has a
Speaker 1: dampening function of rate out to forever. Is that French
Speaker 1: for lethargy? I mean, are we really talking here about
Speaker 1: lethargic policy and a lethargic American economy? Look, I think
Speaker 1: actually one of the big mistakes of the dot was
Speaker 1: the idea that you hiked interest rates and then the
Speaker 1: dots sort of you know, peaked elements and stayed at equilibrium.
Speaker 1: We know that the Fed Funds doesn't behave like that.
Speaker 1: There's a cycle out there. We go up and we overshoot,
Speaker 1: and then we go down and undershoot, and I don't
Speaker 1: think the cycle is going to be any different really,
Speaker 1: So there's a cycle out there. Great to catch you
Speaker 1: up with you one that was a little sophisticated. Your
Speaker 1: bank chief International on this payrolls Friday get rights. In
Speaker 1: the Wall Street Journal today, Narrianna coach O Dakota of
Speaker 1: Rochester and Minneapolis writes of Steven Moore today, why don't
Speaker 1: we listen to our conversation yesterday? To Mr Moore, this
Speaker 1: is gonna be probably a three month process, so a lot,
Speaker 1: you know what, what the situation today, I think it's
Speaker 1: gonna be a lot of different three months from now
Speaker 1: when I go before the Senate and the Banking Committee
Speaker 1: and the full Senate. So I'm not too concerned about
Speaker 1: this UM. I actually think if we can steer the
Speaker 1: UH the discussion away from things I wrote five years
Speaker 1: ago and more towards what I believe in terms of
Speaker 1: the economy and FED policy and how to create growth
Speaker 1: and stable prices, I think I'm going to win a
Speaker 1: big majority. Stephen Moore, if we fill the punch bowl
Speaker 1: to the peak, if we get half or all of
Speaker 1: the rate cut that the President demands, what will that
Speaker 1: do to dollars stability? And what will that do to
Speaker 1: price stability? Now that's a good question. I think I
Speaker 1: could make a case for having UH, you know, repealed
Speaker 1: the rate hike in that took place in December. I
Speaker 1: remember I was the one who one of the first
Speaker 1: people although there are many who called that a tragic mistake,
Speaker 1: and of course now everyone acknowledges that it was a
Speaker 1: big mistake. You know, I would probably be in favor
Speaker 1: of repealing that rate hike, which was what I think,
Speaker 1: twenty five basis points. I'm not so sure I I
Speaker 1: agree with the White House that we should cut race
Speaker 1: by an entire percentage point. I mean I don't. I
Speaker 1: just don't see the case for that right now. Stephen
Speaker 1: Moore yesterday, and of course events afterwards, John I, I
Speaker 1: don't know two hours later, an hour and a half later,
Speaker 1: if he was either he stepped aside or whatever. We'll
Speaker 1: go away from that soap proper. We're advantaged to do
Speaker 1: it now with Jeffrey Sachs. He's university professor. Columbia University
Speaker 1: has any number of topics we could talk on for
Speaker 1: the next three hours, So we're gonna squeeze it in
Speaker 1: here in three minutes. What would happen if the President
Speaker 1: got his hundred basis point rate cut. Take us into
Speaker 1: the classroom freshman year, you know you're there. You've got
Speaker 1: a young turk up at Harvard, Alberta, Elasina or Michael
Speaker 1: Berta or whatever. How do you teach a hundred basis
Speaker 1: point rate cut. Well, you don't put the FED in
Speaker 1: the hands of politicians and expect to come out with
Speaker 1: the stable economy. So that's the basic point. We need
Speaker 1: a professional FED, we need an independent central bank, and
Speaker 1: we need a monetary policy that is not at the
Speaker 1: whim of any politician. Frankly, do you think we're putting
Speaker 1: something that is what do you believe to be quite precious?
Speaker 1: Do you think we're putting that under risk at the moment. Well,
Speaker 1: the disdain for this institution the President Trump has shown
Speaker 1: in his direct attacks, in his flagrant violation of the
Speaker 1: norms of how monetary policy is considered and should be discussed,
Speaker 1: and in his proposals for FED governors has been really dismaying,
Speaker 1: but not unlike what we're seeing across the board in
Speaker 1: our federal institutions were they're falling apart in a lot
Speaker 1: of ways because they're treated with disdain, because the people
Speaker 1: that are filling them are not qualified to fill them,
Speaker 1: because everything has become hyper political rather than professional. Before
Speaker 1: Kine and More, we actually had some quite conventional nominations
Speaker 1: from this administration. In fact, it was what I considered
Speaker 1: by most of our guests that they had nominated really
Speaker 1: good candidates for the Federal Reserve. Two of them didn't
Speaker 1: even get a hearing. Has something changed within the administration
Speaker 1: where we've gone from the likes of good Friend and
Speaker 1: others to the likes of Canaan More. I am not
Speaker 1: an insider to this administration to say the least, but
Speaker 1: it does seem that the president is more more in
Speaker 1: in control. He's not listening to advisers. I presume that
Speaker 1: this is what this is, but definitely we're seeing a
Speaker 1: deterioration in policy making in general. I don't this is
Speaker 1: not a secret. There is no policy because there's whims,
Speaker 1: there's tweets, and Jeff this is important. What John brings
Speaker 1: up is really really important. Take us into the American
Speaker 1: Economic Association meetings, and the fact is Jeffrey Sachs is
Speaker 1: on the same page with John Taylor Stanford or Marvin
Speaker 1: good Friend of Carnegie Mellon much more than people think.
Speaker 1: The media loves to show the liberal and conservative polarity,
Speaker 1: but Marvin good Friend is one example. Would be some
Speaker 1: form of a centrist a candidate, wouldn't. I think the
Speaker 1: key actually is professionalism, because when you have trained professionals
Speaker 1: that are not hacks, they sit around, they talk, they
Speaker 1: analyze the data. They may not agree on everything, but
Speaker 1: it really is the way that a complex twenty trillion
Speaker 1: dollar economy should be addressed, not by these wild swings
Speaker 1: of whim and it's a little bit frightening what's happening
Speaker 1: to our institutions across the board. Again, I think the
Speaker 1: FED is just one dramatic case. It's a stark case
Speaker 1: because the world depends on FED stability, because we have
Speaker 1: seen already what goes wrong when monetary policy goes wrong.
Speaker 1: The whole world goes into crisis. We're out of time.
Speaker 1: What we'd love to do a professor secs John, and
Speaker 1: I would love to get you back for an entire
Speaker 1: hour to talk about five, six or seven themes. I
Speaker 1: will be absolutely you know that I will be happy
Speaker 1: to be here anytime, Jess, Thank you so much. University Professor,
Speaker 1: Columbia University. We all know this, Ellen Zentner, Morgan Stanley
Speaker 1: joining us right now. Ellen, like all of us, has
Speaker 1: an email incoming box that has junk emails. John Farroh
Speaker 1: just got the mother of all junk emails. John, This
Speaker 1: is brilliant and it really points to a Farrell like future.
Speaker 1: This is beautiful. This is from LinkedIn, and every now
Speaker 1: and then they send me my top jump picks. These
Speaker 1: are sometimes Morgan Stanley comes up picks for you this week,
Speaker 1: Private Equity Associate, Strategy associate McKenzie, etcetera, etcetera. And then
Speaker 1: Governor of the Bank of England. Come comes up on
Speaker 1: my top job picks because I've got three company alumni
Speaker 1: at work there. I mean, come on, what's the alt
Speaker 1: go behind there? Ye all go behind that? I don't know.
Speaker 1: It's Ellen Zentner's fall. Let's bring in the chief economists
Speaker 1: of Morgan Stanley. Ellen enter doing a wonderful job on
Speaker 1: framing the path of the American economy and once again
Speaker 1: dead on about the sustained low rates and inflation as well. Ellen,
Speaker 1: you got an opportunity for John Farrell this morning at
Speaker 1: Morgan Stanley. Yeah, you know what, John, comes see me.
Speaker 1: You can work for me. I'll do the summer internship
Speaker 1: with you, guy. You can you can work for me,
Speaker 1: my coffee boy, coffee boy for the rest of the
Speaker 1: show today. Coffee boy, Ellen, let me get this out
Speaker 1: of the way, because there's so much important to talk
Speaker 1: about your You're one of the great market economists out there.
Speaker 1: How do you synthesize the struggle we are in? Filling
Speaker 1: slot for Governor of the Federal Reserve System how do
Speaker 1: you in the trenches, UM process what we observed yesterday?
Speaker 1: Uh well, you know, I look at it from the
Speaker 1: thirty thousand foot levels, So I try not to get
Speaker 1: dragged down into uh you know, discussions of whether someone
Speaker 1: is qualified or not to be a board governor. Um.
Speaker 1: You know. And sometimes you can sit back and look
Speaker 1: at this with amusement, and sometimes you can look at
Speaker 1: back at it in horror and watch as it as
Speaker 1: it plays out. But UM, certainly some relief that the
Speaker 1: nomination um was pulled. Uh you know, I'd like to
Speaker 1: see more qualified people uh nominated to the board governors.
Speaker 1: I think it's not necessary. We've been working too shy
Speaker 1: to positions, shy of a full uh deck for you know,
Speaker 1: a decade now. UM, So it's not necessary to get
Speaker 1: two more board governors appointed. UM. So we don't have
Speaker 1: to rush it. UM. But I would like to see actual,
Speaker 1: viable nominations of people that could actually do the job. Um.
Speaker 1: You know, because the questions I get from clients that
Speaker 1: I feel most often is how would this person shape
Speaker 1: monetary policy? Uh? You know, would they get on the
Speaker 1: board and just immediately the stance on rates would change?
Speaker 1: And and we're sort of missing the forest for the
Speaker 1: for the trees. You know, there's a reason why monetary
Speaker 1: policy is made by committee so that no one person
Speaker 1: has outsized influence. And so you know, if we if
Speaker 1: we do get someone that maybe not as so qualified
Speaker 1: to be a board governor, at least we can take
Speaker 1: comfort and the fact that they'll be in discussions with
Speaker 1: a with a broad committee. Uh, and it's not just
Speaker 1: solely up to them. Well, and then I think you've
Speaker 1: touched on something really important. The process in the system
Speaker 1: in place at the moment works. It stops people from
Speaker 1: the while unqualified, getting gone to the federal reserve, and
Speaker 1: even if they do get there, it's gonna be very
Speaker 1: difficult for them to have influence, isn't it. Yeah? Yeah,
Speaker 1: And so I think that's what we've seen play out
Speaker 1: um with both the Cane nomination um and the more
Speaker 1: nomination um. You nominate and give a period of time
Speaker 1: for people to react to that, and you're able to
Speaker 1: gauge whether they actually have a chance of passing a
Speaker 1: uh Senate getting to Senate confirmation. And if it looks
Speaker 1: like it's just a no go, then either the president
Speaker 1: or the the nominee themselves pull that nomination. Uh, And
Speaker 1: so you know, sometimes that's for good reasons, in the
Speaker 1: case of Cain and Moore. Sometimes it's for not so
Speaker 1: good reasons, like the case of Nellie Ling, who would
Speaker 1: have been a phenomenal Board governor but would not have
Speaker 1: been able to pass Uh you know the gut word
Speaker 1: that she was not able to pass Senate confirmation. So
Speaker 1: you certainly don't want to continue going down that road.
Speaker 1: So if your clients have confusion about the prospect of
Speaker 1: a main of a cane more FED, how do they
Speaker 1: feel about the Fed? We have gone, what have we
Speaker 1: learned this week? And what you tell them about what
Speaker 1: Chairman pounded just a couple of days ago. Yeah, So
Speaker 1: I think it's a mixed bag for clients. I mean
Speaker 1: I have uh, you know, clients that I talked to
Speaker 1: that are frustrated, um at mixed messages that they feel
Speaker 1: like they're getting out of the FED. You know that, Uh,
Speaker 1: that Evans and Caplan sending a message that inflation is
Speaker 1: low and they could be considering insurance cuts. You could
Speaker 1: throw Cleared into that mix. And then you get chair
Speaker 1: Pal that sounds like they are so far from consensus
Speaker 1: on it now. Uh. You know if you're a Fed watcher,
Speaker 1: we knew that there was there were nowhere near consensus
Speaker 1: on an insurance cut. And if you if you step
Speaker 1: back and just read or listen to what all four
Speaker 1: of those men have said, Um, they're all saying the
Speaker 1: same thing. Inflation is low. We're frustrated by it. If
Speaker 1: it persists at at these very low levels or moves lower,
Speaker 1: we would certainly be concerned and would need to adjust
Speaker 1: policy around that. All four sent to consent a consistent message. UM.
Speaker 1: I think what I've noticed is missing from Pal's uh,
Speaker 1: from the conversations that Pal has with us and with
Speaker 1: the markets, is that and this goes back to when
Speaker 1: he was communicating around the balance sheet as well. He's
Speaker 1: missing that standard boilerplate language that monetary policy makers historically
Speaker 1: have used those if then scenarios. Here's our baseline, here's
Speaker 1: what we expect to do. If the data comes in
Speaker 1: worse than we expect, we would we would cut. If
Speaker 1: the data comes in better than expect, we could hike.
Speaker 1: And it's it's a simple, it's a fact. It's boilerplate language.
Speaker 1: But just saying that would give people more comfort on
Speaker 1: this job today. Ellen sent here with Morgan Stanley is
Speaker 1: where us Ellen. There's a point with every frontline economist
Speaker 1: where they become oh, who's that? And with you long
Speaker 1: ago and far away. It was productivity analysis the efficiency
Speaker 1: of the American economy. So if I look at capital dynamics,
Speaker 1: labor dynamics, and everything else piled into this new and
Speaker 1: proved productivity that we see, of my audience doesn't buy it.
Speaker 1: They don't buy the new improved productivity. Are we more
Speaker 1: efficient now? Are we more productive? Or is it just
Speaker 1: smoking mirrors? Well, the way I would put it, Thomas,
Speaker 1: that we're more productive, but in a way that it's
Speaker 1: not counted in the in the data like the old
Speaker 1: productive days of your Where is it a gilded age
Speaker 1: and we're being more productive? For Jeff Bezos and Warren Buffett, Well, yes, frankly.
Speaker 1: So what we're seeing is a lot of the capex
Speaker 1: that's going on, a lot of the capital capital deepening
Speaker 1: is all in software. It's an AI, it's an improving
Speaker 1: warehouse processes, UH and the like, And we just don't
Speaker 1: produce as high of a rate of productivity when we're
Speaker 1: investing in services or it's coming from the service sector
Speaker 1: as it is when we're coming when it's coming from
Speaker 1: the manufacturing sector. And so what I would call a
Speaker 1: new day for productivity by the fact that productivity is
Speaker 1: picked up, it's picked up to what is a very
Speaker 1: low underlying trend. And it's just the truth of it. Um.
Speaker 1: We are a service sector led economy, and the service
Speaker 1: side of the economy is not associated with very high
Speaker 1: rates of productivity. Now, on the one hand, that's how
Speaker 1: we can get so many people employed. Uh that we
Speaker 1: we have such a low unemployment rate and we're creating
Speaker 1: two hundred thousand jobs a month on a pretty steady basis.
Speaker 1: You know, we're doing that because productivity is not you know,
Speaker 1: to three like it was when we were manufacturing led economy.
Speaker 1: Productivity to the run rate for productivity we believe is
Speaker 1: more one. And before we let you go, we need
Speaker 1: the Morgan Stanley Guide to pay Rolls in about thirty
Speaker 1: four minutes time. Please what should we be looking for?
Speaker 1: So we're going to be focused on private payrolls. That's
Speaker 1: where everyone should focus their attention. We're looking for one
Speaker 1: ninety four, that's a bit above consensus headline. There's no
Speaker 1: telling where headline comes in. There's going to be a
Speaker 1: census impact um. It could be twenty thousand, like Jim O'Sullivan,
Speaker 1: who's a fantastic forecaster, is expecting. It could be closer
Speaker 1: as we're expecting. But you've got to strip out any
Speaker 1: sense of effects over the next several months and just
Speaker 1: look at private payrolls and you see there's some of
Speaker 1: the granularity that the pros are looking at as we
Speaker 1: look at simple statistics like the unemployment. Do you like
Speaker 1: milk with your coffee on? Almond milk? Almond milk? You
Speaker 1: drink almond milk, almond milk? Try any sugar? Absolutely, no sugar.
Speaker 1: It's evil shook his evil finding out a lot about
Speaker 1: my boss. An know they're really bad news. Here coffee
Speaker 1: boy is Mrs Keen is listening to this. There's a
Speaker 1: fifty five gallon oil drum of almond milk in the refrigerator.
Speaker 1: We find that so much about this is like Google.
Speaker 1: I can see the I p O. James Gorman is
Speaker 1: going to do a secondary offering for Morgan's. It's going
Speaker 1: to demand the top. Sugar is evil and lovely. To
Speaker 1: Chief US economist Jeff Rosenberg, City of Port filure manager
Speaker 1: on black Rock, systematic fixed income t great to catch
Speaker 1: up with you, Jeff you first read on the payrolls report, please,
Speaker 1: great to see you as well. Guys. The first read is,
Speaker 1: you know, it's a it's a strong report. It continues
Speaker 1: to tell the story of strong growth in the labor
Speaker 1: market without pressuring inflation. That's a little bit of a
Speaker 1: weaker number UH point two versus point three expectations in
Speaker 1: terms of hourly earnings UH year over year three point
Speaker 1: two percent. So you have these strong numbers in terms
Speaker 1: of payroll growth without really pushing up the acceleration. I
Speaker 1: think this just continues a sequence of strong reports in
Speaker 1: the labor market and not really pressuring on the inflation.
Speaker 1: Tom you mentioned in a minute ago about you know,
Speaker 1: the inflation narrative. I think Powell put a pin in
Speaker 1: that earlier this week, and certainly nothing out of this
Speaker 1: report is gonna is going to raise concerns on that.
Speaker 1: Why is there an insatiable desire? You know, we always
Speaker 1: look at yielding price and that, but Jeffrey Rosenberg, the
Speaker 1: fact is people are issuing paper and the demand for it,
Speaker 1: I'm going to use a nonpro word is insatiable That
Speaker 1: keeps yields down. Let's begin with square one. Why is
Speaker 1: there an insatiable demand for fixed income paper? Well, there's
Speaker 1: a lot of reasons behind that time. I mean, you
Speaker 1: you have a you have a supply demand issue, and
Speaker 1: it's it's not new, It's been going on for a
Speaker 1: long time. And it's not just about the US. This
Speaker 1: is about global savings, is about a global demand for
Speaker 1: fixed income. That's a secular trend. Part of that is
Speaker 1: driven by demographics, part of it is driven by the
Speaker 1: lack of yield in the rest of the world. Pursuing
Speaker 1: zero and negative interest rate policies. It makes our yield
Speaker 1: level is very attractive. Do you have a yield call?
Speaker 1: And I mean that's seriously and that you're not in
Speaker 1: the forecasting business working at buyside black Rock, but two
Speaker 1: point five six And it feels like an economy that
Speaker 1: says three point zero zero to me, And yet we're
Speaker 1: not there, are we? What's your what's your call? Twelve
Speaker 1: months out on tenure yield? So I think that what
Speaker 1: we are in in this environment, and I think the
Speaker 1: more important data around today's report is on the inflation
Speaker 1: side rather than the headline. Where is the debate. The
Speaker 1: debate is centered around the inflation outlook, so today is
Speaker 1: a little bit helpful. It doesn't accelerate the inflation outlook,
Speaker 1: uh and it and it certainly helps to stem some
Speaker 1: of the concerns about too little inflation. But that's the
Speaker 1: environment that we've been in and we've been talking about
Speaker 1: and we'll talk about later today in the Hoover Institute.
Speaker 1: And we get the headlines from policymakers discussion about changing
Speaker 1: the framework to how do you deal with very low
Speaker 1: inflation in that kind of environment? The reason for such
Speaker 1: low levels of interest rate says, there's an expectation that
Speaker 1: central bank policymakers are gonna be much more willing to
Speaker 1: cut interest rates than they are to raise interest rates
Speaker 1: because of the fear of inflation going downward. And that's
Speaker 1: what's pushing downward interest rates. I think that as we
Speaker 1: get through you as twelve months outlook, as we get
Speaker 1: through this low level, one and a half percent is
Speaker 1: where inflation is running. Our forecast see that not in
Speaker 1: the near term, not in the next three months, but
Speaker 1: by the end of the year we're gonna be around
Speaker 1: one eight one nine on that favored measure by the
Speaker 1: Fed core PC. And in that kind of environment, you
Speaker 1: could pick up modestly higher in terms of interest rates.
Speaker 1: Jeffrey Rosenberg with concern. Jeffrey Rosenberg with a black rock,
Speaker 1: and we continue. I can't say enough, folks, if you
Speaker 1: don't have a Bloomberg terminal, you will get one only
Speaker 1: for t live go. It is outstanding in the esteem
Speaker 1: Scott Landman right now, right in there, jeff Rosenberg, This
Speaker 1: puts the historic perspective on the moment. The jabist rate
Speaker 1: falls to a fresh year low of three point six percent.
Speaker 1: That wasn't in your textbooks at Carnegie Mellon. What is
Speaker 1: the three point six unemployment rate mean to President Trump? Well,
Speaker 1: it's it's obviously very good news. Now the details around
Speaker 1: that unemployment rate, he had a big drop in terms
Speaker 1: of the workforce, and you know some people will will
Speaker 1: certainly highlight you know that maybe technically driven, but the
Speaker 1: fact is is we are at historic low levels of unemployment,
Speaker 1: as low as they've been since the nineteen sixties. And
Speaker 1: it's indicative of where this economy is. A very strong
Speaker 1: labor markets, very extended cycle in terms of the economic expansion,
Speaker 1: but without the inflationary consequences that we saw in that
Speaker 1: last period of very low unemployment rate's mid nineteen sixties,
Speaker 1: inflation d anchored, and you had, you know, the origin
Speaker 1: story of the FED, uh, you know, popping the bubble
Speaker 1: of inflation expectations. A very different story for very different
Speaker 1: reasons this time around. But that's what the utlow unimportant,
Speaker 1: you know. And then within tie life, go Jeff Rosenberg,
Speaker 1: and I know you've been on TI life go written
Speaker 1: up with your comments many times. The gentleman Torsten Slack
Speaker 1: of Deutsche Bank. He's got a three a three words
Speaker 1: sentence here of analysis. Powell was right. If Powell was right,
Speaker 1: why is he getting so much grief from the President
Speaker 1: of the United States. Well, he was wrong before he
Speaker 1: was right, Okay, thank you. Will said expected that the
Speaker 1: December move was a policy mistake, so he was right
Speaker 1: to pivot. I think it's what Torsen is talking about,
Speaker 1: and that's that's what has occurred here, and that is correct.
Speaker 1: And you certainly see the market and the economy responding
Speaker 1: to the easing in financial conditions from the pivot from
Speaker 1: Powell back on January fourth, after recognition recognizing belatedly with
Speaker 1: the market's help, that the the increase in descent was
Speaker 1: was misplaced and Alan Setner, our team putting out that
Speaker 1: Census Bureau blip here that we see this month, and
Speaker 1: private payrolls is ma Zentner at Morgan Stanley mentioned is
Speaker 1: important was still a buoyant two thirty six thousand. We
Speaker 1: are thrilled. Jeffrey Rosenberg's with us with Black Rock. This
Speaker 1: is a joy and this is a celebration. As you know,
Speaker 1: at Bloomberg Surveillance, we get informed in seventy two books
Speaker 1: a day and another one comes in. Yeah yeah, another
Speaker 1: guy that's made in another book, Yeah, yeah, yeah. And
Speaker 1: the brilliant that we saw a year and a half ago.
Speaker 1: I Love Capitalism an American story of Kenneth Land Gone
Speaker 1: with the image on the cover of a young t
Speaker 1: shirted holes ripped in his blue jeans land gown with
Speaker 1: his home depot shovel ready to dig a ditch. A
Speaker 1: few years ago we celebrate ken Land going I Love
Speaker 1: Capitalism out for Beach reading with a paperback out on
Speaker 1: I Love Capitalism. I can't say enough Ken. The book
Speaker 1: was such a joy. It's almost James Clavill like, it's
Speaker 1: all dialogue in all what you said to people. I
Speaker 1: want to start with something and this goes to chapter
Speaker 1: one of your book, which is right now, and this
Speaker 1: is classic land going. You've just said your n y
Speaker 1: U Medical school. These doctors need the way to finance
Speaker 1: off their backs. Tell us what you're doing to help
Speaker 1: the kids that are smart enough to get into n
Speaker 1: y U Medical how you're helping them with tuition. Well,
Speaker 1: it's very simple. We made a decision. It took us
Speaker 1: eleven years to raise the money to get there, but
Speaker 1: we made a decision that every kid we accept comes
Speaker 1: tuition free, every single one of them, including the ones
Speaker 1: that haven't finished their study. So if you've got two
Speaker 1: years or three years left, that's free to and we
Speaker 1: we really felt like it was the right thing to do.
Speaker 1: More importantly, on Nation has confronted with a shortage of
Speaker 1: roughly a hundred and twenty thousand doctors in the year
Speaker 1: two thousand and thirty. That's only eleven years from now.
Speaker 1: Uh fifty sixty thousand primary care physicians, thousand pediatritions and
Speaker 1: twenty five thousand O B g U I N. These
Speaker 1: are fields that don't pay as well as some of
Speaker 1: your more commanding neurosurgery and dermatology and so and it's
Speaker 1: eighties seven thousand all in it anyway, you medical living
Speaker 1: costs at all that subway fees of our it's a
Speaker 1: it's a lot of my tuitions about seventy thousand. So
Speaker 1: you got to add on top of that you wandered
Speaker 1: into Bucknell hundred dollars a year. And and you know,
Speaker 1: for your parents this was a huge stress. You know,
Speaker 1: within the time that we've got today, give us a
Speaker 1: window into what it was like the first day at
Speaker 1: Bucknell where you were not one of the fancy kids.
Speaker 1: I remember on a Friday night, my first Friday night,
Speaker 1: they are being in front of the library and looking
Speaker 1: out over the Buffalo Valley and I couldn't believe I
Speaker 1: was there, and I just I was. It was something
Speaker 1: I never imagined would happen. What did you learn at
Speaker 1: buck now that helped you when you built home depot?
Speaker 1: How to get along with people, how to respect people. Uh. Yeah,
Speaker 1: the studies, the academic studies are important, no doubt about that.
Speaker 1: But it was an environment where we were thrown in
Speaker 1: with each other, and it was one where you knew
Speaker 1: you would do better. The better you did in dealing
Speaker 1: with friends and professors and so forth. And I can
Speaker 1: never ever adequately express my gratitude to buck Now for
Speaker 1: what it did for me. So Ken, one of the
Speaker 1: themes in your book is that free enterprise and capitalism
Speaker 1: is kind of the key to giving everyone a leg
Speaker 1: up at an opportunity. Do you think that still holds
Speaker 1: today to that? Maybe to the same degree, more so,
Speaker 1: more so more so. We today we celebrate ownership home
Speaker 1: depot for example, and the number I love to brag about,
Speaker 1: we have police. We have three thousand kids that came
Speaker 1: with us eighteen years old, fresh out of high school,
Speaker 1: no college, started entry level in the parking lot, pushing
Speaker 1: carts in three thousand on multiminion. Yes, today capitalism works.
Speaker 1: Look what you guys all right here today? Look at
Speaker 1: Mike Bloomberg. I mean, look at this. Damn it. The
Speaker 1: system works. Is it? Is it unfair at times? Yes?
Speaker 1: Is it brutal at times? Yes? Every time I've had
Speaker 1: it's brutal. Okay, I'll go with that. Michael Bloomberg folks
Speaker 1: unfair and brutal. He is a principal owner of Bloomberg
Speaker 1: ELP and one of the most philanthropic men on this Well, okay,
Speaker 1: I want to talk about the business environment. We see
Speaker 1: three M blowing up right now. I want to talk
Speaker 1: about complexity. First, Nestley had to do a reorg. Uni
Speaker 1: Lever had to do a reorder. Three E M has
Speaker 1: rolled over. It's really under performing. Is there a point
Speaker 1: where a business becomes too complex? It's just becomes too
Speaker 1: cute for its own good No, look, styles and taste change.
Speaker 1: A thriving business is dynamic. It changes with its market.
Speaker 1: Home depot today is not the home depot of forty
Speaker 1: two years or forty one years ago. For example, we
Speaker 1: have a much greater emphasis on security products. There are
Speaker 1: there are changes in construction styles, there are changes in
Speaker 1: in fashion. We if we don't change with the market,
Speaker 1: we be rendered were rented obsolete. So the key I mean,
Speaker 1: I'll give you a good. For instance, Eastern Kodak no
Speaker 1: longer exists for one reason and one reason alone. Digital
Speaker 1: photography showed up and they decided they wanted no part
Speaker 1: of it because they wanted to protect those little yellow boxes. Well,
Speaker 1: now they've got nothing to protect. Kodak was one of
Speaker 1: the fifty most admired and invested companies in them It
Speaker 1: was in the fifty fifty fifty Great Companies. Kodak's gone
Speaker 1: why management didn't change with the times. Management didn't change
Speaker 1: with its market. You go where your customer wants to go,
Speaker 1: you don't go. You don't tell your customers this is
Speaker 1: where you're coming. Are we seeing some of that now?
Speaker 1: And just the US retail landscape, you know, the Amazon effect,
Speaker 1: everything e commerce and or it seems like some great names,
Speaker 1: whether it's the Macy's of the world or whatever, really struggling. Look,
Speaker 1: convenience is becoming a much more important factor of life.
Speaker 1: And the other thing is all this noise about content
Speaker 1: and television and streaming. People are spending more time at home.
Speaker 1: They don't want to go out and shop for bread
Speaker 1: or milk or Hamburgers or whatever. Home Depot is spending
Speaker 1: eleven billion dollars in the next three years on being
Speaker 1: relevant in online sales. How we do it, how we
Speaker 1: reach the customer, the convenience to the customer. So there's
Speaker 1: an example. The world has changed. Amazon was a pioneer.
Speaker 1: I want you to do an NBA right now. Paul
Speaker 1: Sweeney was at Fukuo down to Duke, and there's many
Speaker 1: others listening all the different you know NBA's guys. Right now,
Speaker 1: what does Kim Lan going think of the words scale.
Speaker 1: It's so in right now. This word it's like synergy.
Speaker 1: A couple of years ago. We're scaling up. We need scale.
Speaker 1: You I see the landgoing face over there but ready
Speaker 1: to get hit between the eyes. One number. Name your book.
Speaker 1: I love scale. The title I wanted was capitalism and
Speaker 1: me a love affair because you know what it really
Speaker 1: was and it is. They thought it was a better top. Yeah,
Speaker 1: I love capitalism means it sounds like Avengers scale scale
Speaker 1: ten years ago. N Why you had sixty seven neurologists
Speaker 1: on staff today we have two hundred and thirteen neurologists
Speaker 1: on staff. Why our market has grown and we're growing
Speaker 1: with our market. You've got to the key to business
Speaker 1: is to make sure you're relevant to the market you're
Speaker 1: trying to reach. If you do that, you'll get scale
Speaker 1: home deep over this past year had a hundred and
Speaker 1: eight billion dollars in revenues that scale and look at
Speaker 1: what we're able to do. We're able to spend eleven
Speaker 1: billion dollars in the next three years on technology. We
Speaker 1: couldn't do that if we didn't have scale. We're waiting
Speaker 1: for Lawrence Cudlow at the White house with John Ferrell.
Speaker 1: But right now we are thrilled and honored to have
Speaker 1: with us. It's an American story. I love capitalism. Kenneth
Speaker 1: ln going the hardcover did extremely well, and he dashes
Speaker 1: out for beach, reading the water sealed paperback that Hampton's
Speaker 1: will be covered with. One of the things we've seen
Speaker 1: this year twenty nineteen has been built by a lot
Speaker 1: of people. As g the year of the I p O.
Speaker 1: We've had so many big tech I p o s,
Speaker 1: but they're not all working. It seems like you take
Speaker 1: a look at some of these new technologies that the
Speaker 1: right sharing company lifts, we're gonna have Uber coming. Some
Speaker 1: of those are struggling in the marketplace. Is this the
Speaker 1: market saying we need to see some path of profitability.
Speaker 1: You can't just give us some great pipe dream about
Speaker 1: a big market. Now. The market's discreet, The market's gonna look.
Speaker 1: I have a company that I invested in a short
Speaker 1: four or five years ago called shock Wave with the
Speaker 1: technology for the heart uh and and it came public
Speaker 1: and around sixteen bucks two months ago, and it's at
Speaker 1: forty one a share. To they why it's it's identified
Speaker 1: a market, it's it's got the technology, and the belief
Speaker 1: is it will have significant growth because of what it does.
Speaker 1: One of the things we all need to have in
Speaker 1: life is the discipline of profits. For how long can
Speaker 1: you keep going back to the marketplace for capital to
Speaker 1: take care of the capital you've lost and eroded by
Speaker 1: virtue of losing money? You know? Look home Deep today
Speaker 1: pays five dollars and forty four cents to share and dividends.
Speaker 1: And by the way, as a reference point, if you
Speaker 1: board our stock in nineteen, the adjusted cost is four
Speaker 1: cents to share. So do the math yield on your court.
Speaker 1: We can only do that because we make money. You
Speaker 1: make profit. Lord to say it, LS say it's about profit.
Speaker 1: You've gotta make profits. What does kid Land going to
Speaker 1: think about all the new Silicon Valley rage, which is
Speaker 1: an extrapolation of huge revenue growth, zero profit, zero cash flow,
Speaker 1: and out there somewhere will be profit one day. What
Speaker 1: do you think of those guys? Well, I think number one,
Speaker 1: the market is agreeing with them, that the market they're addressed. Well,
Speaker 1: look at Fair, look at look at Amazon. Take a
Speaker 1: look at Amazon's numbers. They're staggering. Look at Google, look
Speaker 1: at Mike. Look at Microsoft, look at Facebook. They hit
Speaker 1: on something. At some point the market is going to demand. Hey, guys,
Speaker 1: we've given you enough lead time, we've given you enough runway.
Speaker 1: Now when are we gonna start getting some money back?
Speaker 1: I don't know when that happened. Right do you agree
Speaker 1: with Mr Buffet that you can load the boat on
Speaker 1: Amazon right now? I did a chart today two decade
Speaker 1: regression of Amazon and extrapolated it out to troop twenty
Speaker 1: to two thousand thirty nine when Ken Lang going, We'll
Speaker 1: join us two thousand thirty nine, with the follow up,
Speaker 1: I love planned to be there, but if it's gonna
Speaker 1: be seventy eight thousand dollars to share is a log extrapolation.
Speaker 1: I'll be hud and four years old. That's good. I
Speaker 1: like it. But but within that and out that far?
Speaker 1: Can you extrapolate out Amazon and feel good about the
Speaker 1: profit potential? Let me tell you what I know about Amazon.
Speaker 1: I had the good fortune to be invited to have
Speaker 1: lunch with Jeff Bezos. Frank Blake and I either tied
Speaker 1: sham and a depot and I went out and had
Speaker 1: lunch with him about a year and a half ago
Speaker 1: at home you've got two critical ingredients of success. He's
Speaker 1: smart and he's humble. Okay, and he hit on something
Speaker 1: that is exciting. Tell us about that well, online selling
Speaker 1: the cloud. Look at the things he's a Look at
Speaker 1: his numbers. I mean, this thing makes money, it coins money.
Speaker 1: But guess what it's always about the people. I want
Speaker 1: to fold this back into your book. I love capitalism,
Speaker 1: which is Amazon started in America. When I go to Paris,
Speaker 1: they desperately want the entrepreneurship of landgown and bezos in
Speaker 1: Paris everywhere else. What is it in the pixie dust
Speaker 1: of America that allows us to find a bezos in
Speaker 1: a station wagon moving books? The incentive of succeeding that
Speaker 1: if we work our asses off, if we address an issue,
Speaker 1: if we have a human want that we've satisfied, or
Speaker 1: a human need that we've addressed, and we do it
Speaker 1: out of course conscious basis will make money. Now, let
Speaker 1: me tell you a very exciting thing about home Depot
Speaker 1: and Apple Apple Grade Gun. Apple went public in December
Speaker 1: of nineteen eighty and the aggregate return on Apple is
Speaker 1: about forty two thousand percent. Home Depot went public in
Speaker 1: September of nineteen one nine months later and the aggregate
Speaker 1: return is six hundred and thirty two thousand percent. Hamazon
Speaker 1: Saws versus exotic devices find a need address. The biggest
Speaker 1: thing that we did was to recognize the importance of
Speaker 1: the people that work with us, not for us, but
Speaker 1: with us. These kids in the stores, these are this
Speaker 1: is a secret weapon of home. Do you go to
Speaker 1: a home Depot store, you expect an attentive kid. You
Speaker 1: expect the polite kid. I say, kid, if you're under
Speaker 1: Rady three, you're a kid one. Okay, you expect the
Speaker 1: kid that knows what he's talking about. That's what it's
Speaker 1: all about. To depot ten PM, a couple of nights ago,
Speaker 1: desperate for one little thing to keep afterthoughts, you know,
Speaker 1: things going there. It was there, it was they had
Speaker 1: had and the person you go up to randomly, it's
Speaker 1: just amazing. It's got to be time when I got
Speaker 1: to somebody at home Depot, where is such and such?
Speaker 1: I'le seven in the back on the or Okay, so
Speaker 1: I will walk down to if they and then they
Speaker 1: did walk me back there. I want to We're waiting
Speaker 1: for Cudlow at the White House with John Farrell, Kerolyn going.
Speaker 1: How do you respond to President Trump who says immigrants
Speaker 1: are bad for his home? Depot was built and people
Speaker 1: that wanted to get up early from other nations and
Speaker 1: where that where that bib. I'm gonna get a little
Speaker 1: excitement in this interview. He didn't say it's bad for us.
Speaker 1: He said, if they want to come here, let him
Speaker 1: come here through an orderly, lawful process. That's what he said.
Speaker 1: My grandparents were immigrants. I can tell you right now.
Speaker 1: This country was built on the back of immigrants, including
Speaker 1: my grandparents. We're in nation of immigrants. Every one of
Speaker 1: us came from someplace else except for the American Indian.
Speaker 1: Guess what we have. I'm glad you brought it up.
Speaker 1: We have a national crisis in America, big time national crisis.
Speaker 1: Let's fix all laws that we could have an orderly
Speaker 1: way for all these people who want to come here
Speaker 1: to come. How does the president then, someone you know, well,
Speaker 1: how does Donald I know him well, I know he knows.
Speaker 1: How does he change his rhetoric and discourse so he
Speaker 1: can meet the other side in the middle. Maybe he won't,
Speaker 1: and maybe he can. But guess what, maybe it's his
Speaker 1: rhetoric that's driving these results. Look at these numbers this morning,
Speaker 1: three point six percent unemployment. It is amazing. Now all
Speaker 1: better than that, I can tell you. It was a businessman.
Speaker 1: The hobble of regulation in this country was staggering, and
Speaker 1: it was crazy, and it did nobody any good. Were
Speaker 1: you in the minimum ways? We're up to fifteen dollars
Speaker 1: an hour? Does Kenlyn going want to go to twenty
Speaker 1: two so they can spend it all at home depot? Well,
Speaker 1: I have one simple rule that I live with. Pay
Speaker 1: people what they're worth. Pay them what they are worth,
Speaker 1: because if you don't, somebody else will. Here's gonna Ken's
Speaker 1: gonna take a pause. We're gonna continue, Ester Lango, We've
Speaker 1: got lots to talk about. You're in radio. He'll join
Speaker 1: us on Bloomberg Television as well. Look for a special
Speaker 1: podcast we're gonna do as well. Thanks for listening to
Speaker 1: the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane. Before the podcast, you can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio