WEBVTT - Surveillance: Inflation Debate With Dan Fuss 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.920 Bloomberg dot Com, and of course, on the Bloomberg Daniel 0:00:27.920 --> 0:00:31.440 Foss joined us from loomas Sales, their vice chairman and 0:00:31.520 --> 0:00:36.400 truly someone who invented the modern bond business. Dan Foss, 0:00:36.440 --> 0:00:40.760 you are the one that told us to forget about yield. 0:00:40.760 --> 0:00:46.000 By depressed price bonds, there will be credit improvement and 0:00:46.040 --> 0:00:50.319 the bonds will appreciate for total return. You can't do 0:00:50.400 --> 0:00:57.640 that anymore, can you. Well, um, that's right, But all 0:00:57.680 --> 0:00:59.720 I can do is agree with what you just said 0:00:59.720 --> 0:01:03.800 to Um. It's a tough road to whole right now 0:01:03.920 --> 0:01:08.479 in the bod world. Uh, you can make some money. 0:01:09.319 --> 0:01:13.640 You can ride the old curve at too short end. UM. 0:01:13.680 --> 0:01:17.280 I don't recommend it, but you can. You can buy 0:01:17.319 --> 0:01:20.960 a slice of each of the new high yield coming 0:01:21.000 --> 0:01:25.560 out and you've got some yield. UM. Or you can 0:01:25.640 --> 0:01:28.160 be a bit smarter about it and you can say, well, 0:01:28.160 --> 0:01:29.959 I'm not going to buy a slice of each one 0:01:30.000 --> 0:01:32.319 of them, but I'm going to buy the ones I 0:01:32.440 --> 0:01:37.800 like and try to keep my maturities entirely short. And 0:01:37.840 --> 0:01:39.720 then people say to me, and they said, well, that's 0:01:39.720 --> 0:01:41.560 all well and good Dan, but you know, I just 0:01:41.600 --> 0:01:44.520 can't raid a seven the yelder and the portfolios to 0:01:44.600 --> 0:01:47.000 me and a half. And so what do you expect 0:01:47.120 --> 0:01:49.640 us to do about this? Get rid of you? And 0:01:49.720 --> 0:01:51.720 I said, well, I don't like it to get rid 0:01:51.760 --> 0:01:55.120 of me, but I have to be honest with you 0:01:55.360 --> 0:01:59.080 and tell you it's that type of the old environment. 0:01:59.480 --> 0:02:04.480 And uh so if you're discounting at seven um and 0:02:04.560 --> 0:02:08.800 the yields you're getting our three or poor even, uh, 0:02:09.080 --> 0:02:12.200 you've got a problem. And I can't solve that one 0:02:12.280 --> 0:02:17.320 for you. Uh. Now, last year we were lucky. Prices 0:02:17.360 --> 0:02:21.120 went up some more, the total return looks nice, and 0:02:21.240 --> 0:02:25.040 people say, geez, that's really very nice. You've done it again, 0:02:25.280 --> 0:02:29.080 and you say, uh, huh, listen, that was luck and 0:02:29.200 --> 0:02:32.440 by this time, uh, you know, the marketers will never 0:02:32.560 --> 0:02:36.360 let you in another meeting. But that's the reality of 0:02:36.440 --> 0:02:38.320 life down I want to jump in, if that's okay. 0:02:38.400 --> 0:02:40.400 So I want to talk about the experience through the 0:02:40.480 --> 0:02:43.000 last few cycles, beyond just what we've gone through in 0:02:43.000 --> 0:02:45.320 the last twelve months, but over the last couple of decades. 0:02:45.360 --> 0:02:47.799 What is it about the way we recover and roll 0:02:47.919 --> 0:02:51.600 over through these cycles that leads to lower highs on 0:02:51.639 --> 0:02:54.440 a ten year bond yield and lower lows each and 0:02:54.480 --> 0:02:56.880 every time, each and every time? What's going gone down? 0:02:56.880 --> 0:02:59.400 What's that dynamic? And do we repeat that in this 0:02:59.440 --> 0:03:03.600 recovery about to go through as well? Well? Number one, 0:03:03.639 --> 0:03:08.280 I don't know the future. Number two, Um, I think 0:03:08.320 --> 0:03:11.360 what we're in right now, Jonathan is in a period 0:03:11.400 --> 0:03:15.680 of rather low rates for quite a period of time. Now. 0:03:16.200 --> 0:03:18.600 I am not in the camp that say they are 0:03:18.680 --> 0:03:21.720 down they're going to stay down in the US. And 0:03:21.800 --> 0:03:25.519 I don't think we're going through the popular praise these 0:03:25.600 --> 0:03:33.880 days the Japanification of inflation in the markets. I don't 0:03:33.919 --> 0:03:37.680 buy that. And but maybe it will happen. I doubt it. 0:03:38.080 --> 0:03:42.080 That's a whole different world there, uh. I think what 0:03:42.120 --> 0:03:46.520 we're in right now is an excess of liquidity finding 0:03:46.560 --> 0:03:49.480 its way into the bondom market. Now, there are a 0:03:49.560 --> 0:03:53.360 couple of indicators. If you look at what's happening with 0:03:53.480 --> 0:03:56.560 the E t f s for example, you look at 0:03:56.680 --> 0:04:01.640 you know, say, oh, cheapers, the highli T s Uh, 0:04:02.200 --> 0:04:05.920 they're not really growing anymore. A matter of fact, it's 0:04:06.120 --> 0:04:12.320 seemed as reported to have flattened out. O. Um, that's 0:04:12.400 --> 0:04:15.360 one indication. And then you look at what the new 0:04:16.320 --> 0:04:21.120 issues coming out are being used for. Um, a good 0:04:21.200 --> 0:04:24.159 chunk of them are being used to refinance the older ones. 0:04:24.279 --> 0:04:27.680 You're bringing down your coupons to adjust to the you 0:04:27.720 --> 0:04:34.040 know that smart financial management. Uh. And Uh, the underlying 0:04:34.080 --> 0:04:37.920 fundamentals on a lot of the issuers on some are 0:04:38.080 --> 0:04:43.120 are quite good. On many more, Uh, they're de degree 0:04:44.520 --> 0:04:49.760 and so here you have a floppier credit environment, you 0:04:49.920 --> 0:04:53.960 have lower yields. Yeah. And and basically this goes to 0:04:54.000 --> 0:04:56.000 the point that you made recently dead in an interview 0:04:56.040 --> 0:04:58.599 with Bloomberg News, where you said there's no outstanding value 0:04:58.920 --> 0:05:02.400 in the fixed income markets. And I'm wondering, Dan, as 0:05:02.440 --> 0:05:04.760 one of the fathers of the bond market as we 0:05:04.800 --> 0:05:07.680 know it today, where do you go if there is 0:05:07.760 --> 0:05:12.040 no outstanding value in the fixed income market. Well, you 0:05:12.680 --> 0:05:14.920 do what you did, and I'm going to go back 0:05:14.960 --> 0:05:17.400 in history. You do what you did at a little 0:05:17.440 --> 0:05:22.039 different level of yield in the sixties. You start to 0:05:22.160 --> 0:05:26.560 work with the old curve and and your patient. But 0:05:26.880 --> 0:05:29.240 it's easier to see immunity. See if you were running 0:05:29.279 --> 0:05:32.520 Ammuni portfolio, you'd say, oh good, I'm going to buy 0:05:32.560 --> 0:05:34.640 the five year and I'm going to roll it back 0:05:34.680 --> 0:05:38.479 out after two years have gone by or three years whatever. 0:05:38.920 --> 0:05:43.120 That was a pretty steady positive curve. Corporates are are different, 0:05:43.560 --> 0:05:46.719 and there's a spread between bidden ask, but if you 0:05:46.800 --> 0:05:49.920 stick to the higher quality and work with the old curve, 0:05:50.040 --> 0:05:53.880 you can be adding some value, not a lot. And 0:05:53.920 --> 0:05:59.480 then you watch for the occasional anomaly anomaly um and 0:06:00.120 --> 0:06:03.360 on the credit side, and they do come along, not 0:06:03.480 --> 0:06:07.800 many and not big, and they don't last long, but 0:06:07.880 --> 0:06:11.039 you can find them. But the one thing I discourage 0:06:11.120 --> 0:06:16.000 people from doing is saying, well, listen, uh, this economic 0:06:16.080 --> 0:06:19.159 rebound is going to be ferocious and everything is going 0:06:19.200 --> 0:06:21.800 to be back to normal. Well maybe that will happen. 0:06:22.000 --> 0:06:25.400 I hope so. I sure hope so. But I wouldn't 0:06:25.480 --> 0:06:30.120 bet that way, and I would not bet against the 0:06:30.200 --> 0:06:36.200 return of inflation because I think Milton Friedman had some 0:06:36.279 --> 0:06:40.560 things right. And when you follow the growth of them too, 0:06:40.760 --> 0:06:43.360 and the rate that it's growing at, or use any 0:06:43.360 --> 0:06:45.880 other procts that you want, go look at the stock 0:06:45.960 --> 0:06:50.599 market where there is excess liquidity, and it is in 0:06:50.720 --> 0:06:54.840 this system and we and the FED is caught because 0:06:54.920 --> 0:06:58.560 we are fighting a war right now against the pandemic. 0:06:59.480 --> 0:07:03.599 And and that's the case. Everybody has to get in 0:07:03.760 --> 0:07:07.119 and support the work. Don't forgive me for jumping and said, 0:07:07.240 --> 0:07:10.000 if you can, fantastic to catch out with you. Thank 0:07:10.080 --> 0:07:11.400 for giving us some of your time, and don't be 0:07:11.400 --> 0:07:13.200 a stranger. Don't leave us so long. Next time down 0:07:13.240 --> 0:07:26.200 fuss that of limits sales. Lori Kelvisine is at RBC 0:07:26.320 --> 0:07:30.280 Capital Markets and they've got a really, really, really interesting 0:07:30.440 --> 0:07:36.000 exercise they go through every earning season called transcript tagging. Laurie, 0:07:36.080 --> 0:07:40.840 what's transcript tagging? And what have you learned? So basically 0:07:40.920 --> 0:07:43.520 transcript tagging. As we go through on my team all 0:07:43.520 --> 0:07:46.760 of the earnings called transcripts of SMP five companies. It's 0:07:46.760 --> 0:07:50.560 a pretty manual, labor intensive process and we just frankly 0:07:50.600 --> 0:07:53.160 want to see what companies are talking about. UM. We 0:07:53.240 --> 0:07:55.240 try to gauge the tone. We look at what they're 0:07:55.240 --> 0:07:59.160 saying on things like cash, the outlook, the tone. Actually 0:07:59.200 --> 0:08:02.480 the surprised me wasn't as robust as I thought it 0:08:02.480 --> 0:08:04.320 would be. So we know that companies are coming in 0:08:04.360 --> 0:08:07.000 and beating left and right on numbers, But when they're 0:08:07.000 --> 0:08:09.560 talking about the forward outlook, they're really kind of two camps. 0:08:09.880 --> 0:08:13.280 There's one that's expressing some optimism over the vaccine rollout, 0:08:13.320 --> 0:08:16.600 and there's a second that's been really pushing the narrative 0:08:16.680 --> 0:08:20.200 of things are still uncertain. Um, so it's it wasn't 0:08:20.240 --> 0:08:22.520 as biased towards kind of that bullish look at the 0:08:22.560 --> 0:08:24.680 vaccine rollout as I would have thought. Talked to me 0:08:24.720 --> 0:08:28.760 about the performance post earnings, Laurie, what's the takeaway? So 0:08:28.840 --> 0:08:30.920 this is something else that's really been interesting. You know, 0:08:30.960 --> 0:08:33.000 depending on what which day you update the data, but 0:08:33.040 --> 0:08:36.520 about half of companies that have posted results so far 0:08:36.559 --> 0:08:39.800 in this reporting season have gone down one percent or 0:08:39.840 --> 0:08:42.400 more in the one day trading session after the results. 0:08:42.400 --> 0:08:44.319 Now that stat's gotten a little bit better as we've 0:08:44.360 --> 0:08:47.080 gone through reporting season, but I think it's a testament 0:08:47.080 --> 0:08:50.720 to how high expectations were coming into this reporting season. 0:08:51.000 --> 0:08:54.360 So kind of this, you know, kind of one mediocre, Yeah, 0:08:54.400 --> 0:08:57.120 maybe things will get better, we don't really know. That's 0:08:57.120 --> 0:08:59.839 not cutting it and you're not seeing one is some 0:09:00.000 --> 0:09:02.160 ss really go up in a meaningful way. I've been 0:09:02.160 --> 0:09:04.240 trying to work out. Just sorry to jump in. I've 0:09:04.240 --> 0:09:05.600 been trying to work out where the spot on the 0:09:05.600 --> 0:09:07.839 calendar is where a lot of this starts to manage 0:09:07.840 --> 0:09:09.880 just a little bit more, because I think some people 0:09:09.880 --> 0:09:12.400 are still quite forgiving of any downside surprises, whether it's 0:09:12.440 --> 0:09:15.280 the earnings or the negative economic data, because they're hoping, 0:09:15.320 --> 0:09:18.000 believing things get better in the future. What's the test 0:09:18.040 --> 0:09:20.560 state for you? The test date for me is going 0:09:20.600 --> 0:09:22.400 to be April. And the reason I say that is 0:09:22.440 --> 0:09:24.360 we're going to kind of get out of this year 0:09:24.360 --> 0:09:27.320 ahead outlook season. We'll start to hear the early reporters, 0:09:27.600 --> 0:09:29.559 you know, kind of talk about what the full year 0:09:29.600 --> 0:09:32.920 outlook really is. And also stocks have been marching along 0:09:32.920 --> 0:09:36.560 the two thousand recovery path, and if you look back 0:09:36.559 --> 0:09:38.760 at that history, April is when you did get a 0:09:38.760 --> 0:09:41.160 pull back in the market of significant size. And we 0:09:41.240 --> 0:09:44.120 also have pointed out that about ten months into recovery 0:09:44.160 --> 0:09:47.040 trades post recession, you do typically get a big bout 0:09:47.040 --> 0:09:49.600 of consolidation, and we've seen this over the last three 0:09:49.600 --> 0:09:53.400 economic cycles. So you know that April time frame is 0:09:53.440 --> 0:09:55.440 perhaps when we will finally get that pullback a lot 0:09:55.440 --> 0:09:57.960 of people have been looking for before that LORI. Next 0:09:58.040 --> 0:10:00.439 week in Washington, d C. We're gonna be getting those 0:10:00.480 --> 0:10:03.439 hearings about what happened with game Stop and AMC and 0:10:03.559 --> 0:10:06.800 some of these other big share moves that we saw 0:10:06.840 --> 0:10:08.840 that really were attributed to retail but had a lot 0:10:08.880 --> 0:10:12.840 of other institutional players. How much does this affect your focus, 0:10:12.840 --> 0:10:15.680 which is small caps and the indexes that track these 0:10:15.760 --> 0:10:17.760 kinds of shares. I mean, how big of a concern 0:10:17.960 --> 0:10:21.360 is it that this type of activity could wildly distort 0:10:21.480 --> 0:10:25.439 both returns as well as money allocation if it persists. 0:10:26.320 --> 0:10:28.000 So it's a great question, and I have, you know, 0:10:28.080 --> 0:10:29.959 kind of two critical thoughts here is one. I don't 0:10:29.960 --> 0:10:33.320 think retail investor participation and some of the less liquid 0:10:33.400 --> 0:10:36.000 names in small cap is necessarily a bad thing. Of course, 0:10:36.040 --> 0:10:38.360 we want it done in a way that's not bringing 0:10:38.440 --> 0:10:41.280 excess at risk upon those individuals. Um But you know, 0:10:41.320 --> 0:10:43.640 I think that the door has been opened to some extent. 0:10:43.720 --> 0:10:45.720 So unless the regulators really kind of come in and 0:10:45.720 --> 0:10:47.680 close it down, and I don't think they will, you know, 0:10:47.720 --> 0:10:50.000 I think retail is probably here to stay and keep 0:10:50.080 --> 0:10:52.880 fishing in the small cap pond for a while. Second thing, though, 0:10:52.920 --> 0:10:56.400 I would tell you from an institutional community perspective. UM, 0:10:56.440 --> 0:10:59.240 there was no one more unhappy about this Reddit issue 0:10:59.280 --> 0:11:02.120 to start the year small cap value managers, and the 0:11:02.200 --> 0:11:04.560 reason why was that they did not own the kinds 0:11:04.559 --> 0:11:07.960 of names like GameStop that retail was going after, and 0:11:07.960 --> 0:11:10.319 it created big performance holes in their benchmark. If you 0:11:10.320 --> 0:11:12.920 look at the last week of January, only nine percent 0:11:13.040 --> 0:11:15.760 of small cap value managers beat their benchmark. They were 0:11:15.800 --> 0:11:17.680 not willing to go in and buy these stocks, but 0:11:17.679 --> 0:11:19.880 they were definitely curious to know if everyone else was. 0:11:20.160 --> 0:11:22.400 So this raises a really interesting question, Laurie. If it's 0:11:22.440 --> 0:11:24.240 not going away, how do they play this? Do they 0:11:24.240 --> 0:11:27.640 start following Reddit and just going along with the crowd. Well, look, 0:11:27.679 --> 0:11:29.800 I think that we have just sort of an inherent 0:11:29.920 --> 0:11:33.120 problem and active management, which is that you know, even 0:11:33.280 --> 0:11:36.200 value managers, everyone's kind of got these quality biases and 0:11:36.240 --> 0:11:38.320 has sort of veered over to the same side of 0:11:38.320 --> 0:11:41.760 the quality trade, and these kind of lower quality names 0:11:42.120 --> 0:11:44.440 UM have really kind of been ignored, you know, are 0:11:44.480 --> 0:11:46.360 sort of orphans in the market so to speed. And 0:11:46.360 --> 0:11:48.640 I think we just need to recognize that this kind 0:11:48.640 --> 0:11:51.719 of situation where everybody in the institutional community is going 0:11:51.760 --> 0:11:53.600 to sit on the same side of the boat. It 0:11:53.720 --> 0:11:56.480 is just not going to be allowed to exist. And 0:11:56.520 --> 0:11:58.440 definitely so they do need to fish more in that 0:11:58.520 --> 0:12:03.439 side of the pond. I think I've missed you until 0:12:03.480 --> 0:12:06.040 I've really missed you. What John, what she just said 0:12:06.080 --> 0:12:09.920 there is extraordinarily important. I mean, this is the act 0:12:09.960 --> 0:12:13.199 of do you buy passive small cap? Do you buy 0:12:13.200 --> 0:12:17.280 an active? It's important, Laurie, it's been a long long time. 0:12:17.679 --> 0:12:19.440 Can we do a shout out to baby Emmett? How 0:12:19.559 --> 0:12:22.480 is baby Emmett? Baby Emmett is great. He just got 0:12:22.480 --> 0:12:24.520 his first tooth and he's sleeping through the nights, so 0:12:24.720 --> 0:12:28.200 he's been baby. Did he get any bumble shares? Oh 0:12:28.240 --> 0:12:33.680 my god, no no, but my five year old did 0:12:33.679 --> 0:12:39.440 try to talk me into letting him trade some stocks. Laurie, 0:12:39.480 --> 0:12:42.560 I'm sure I'm not alone. Wall Streets missed you. Welcome back. 0:12:42.559 --> 0:12:46.280 It's going to catch up of OURBC capital markets. Just 0:12:46.360 --> 0:12:58.199 fantastic research. What we knowing for certain here team surveillance, 0:12:58.200 --> 0:13:01.440 folks on radio until elevision is a fancy guy in 0:13:01.480 --> 0:13:04.280 a fancy suit with a fancy bow tie. We'll go 0:13:04.360 --> 0:13:07.800 get a second vaccination. At eleven am this morning, the 0:13:07.920 --> 0:13:12.200 national disgrace that we have is a distribution pretty much 0:13:12.679 --> 0:13:15.360 is for the fancy people. Dwight Evans is living this 0:13:15.840 --> 0:13:19.320 in Philadelphia. He is a Democrat from Pennsylvania, where thrilled 0:13:19.360 --> 0:13:22.720 he could join us this morning. You know, Congressman Evans, 0:13:22.720 --> 0:13:26.160 and it's a disgrace the way we've distributed the vaccine. 0:13:26.600 --> 0:13:29.360 The key word here is fast. What do you need 0:13:29.480 --> 0:13:34.160 from President Biden and Congress so that we fast distribute 0:13:34.160 --> 0:13:38.680 the vaccine to all who need it. There's no question 0:13:38.960 --> 0:13:42.320 that the programs started started as a failure at this 0:13:42.400 --> 0:13:46.160 particular point. But I believe President Biden and we're working 0:13:46.200 --> 0:13:50.640 together to address those issues. There is no question as 0:13:50.640 --> 0:13:54.680 senior citizens, the essential workers, people of color are having 0:13:54.679 --> 0:13:57.960 a very difficult that I'm giving access to the program 0:13:58.040 --> 0:14:01.520 and that is wrong. So we us changed that, and 0:14:01.559 --> 0:14:04.640 I believe that we're moving in the right direction. And 0:14:04.760 --> 0:14:07.960 I think it's clear we ultimately around April should get 0:14:07.920 --> 0:14:10.680 in the right place. Tell us in the trenches of 0:14:10.720 --> 0:14:16.560 your legislation, what we're doing about educating people and particularly 0:14:16.679 --> 0:14:20.560 people that don't have an acute science background. We seem 0:14:20.600 --> 0:14:24.520 to be so far behind. How do we educate and 0:14:24.560 --> 0:14:29.560 again educate fast? Well, there's no question that you know, 0:14:30.080 --> 0:14:32.360 you know, there's no use I can talk about what 0:14:32.480 --> 0:14:34.240 has happened in the past, but we need to talk 0:14:34.240 --> 0:14:37.720 about the future. There's no question right around this particular much. 0:14:37.960 --> 0:14:41.520 It's been a year that we have faced this pandemic 0:14:41.720 --> 0:14:44.880 and this global pandemic, and it's not that we created. 0:14:44.920 --> 0:14:48.720 It's a question of how it's been managed. So we 0:14:48.720 --> 0:14:50.480 can need to point fingers that we can find a 0:14:50.560 --> 0:14:55.040 pathway to address it. I believe that the President United States, 0:14:55.400 --> 0:14:59.000 in conjunction with the House and the Senate as a partnership, 0:14:59.320 --> 0:15:04.080 does the attempt need to address this pandemic. So Congressman, 0:15:04.120 --> 0:15:06.200 let's talk about the future, and let's talk about the 0:15:06.240 --> 0:15:09.840 current stimulus plan. When you discuss with fellow Democrats what 0:15:10.000 --> 0:15:13.080 to approve, how big to go, how much? Are people 0:15:13.120 --> 0:15:15.880 talking about the political will to follow it up with 0:15:15.920 --> 0:15:18.720 an infrastructure spending bill, as Joe Biden will be talking 0:15:18.720 --> 0:15:22.080 about today in Washington, d C. Well, you go by 0:15:22.240 --> 0:15:25.040 the chairman of the Feather Reserve. You said a long 0:15:25.080 --> 0:15:27.520 time ago that we need to go big, and we 0:15:27.600 --> 0:15:30.560 need to go bold, and right now is a very 0:15:30.640 --> 0:15:33.560 appropriate time because you look at the aspect of barring. 0:15:33.720 --> 0:15:37.040 Barring is very low and very appropriate. So those tools 0:15:37.080 --> 0:15:39.560 are available. So I believe that we have to use 0:15:39.600 --> 0:15:42.360 all the tools that are available, and I believe that 0:15:42.480 --> 0:15:46.320 people are ready, they are ready for a type of change. 0:15:46.320 --> 0:15:48.480 We've gotta build it back better. So we have to 0:15:48.600 --> 0:15:52.840 crush the virus of coruss that first and foremost. Secondly, 0:15:52.920 --> 0:15:57.880 make the necessary fatigue event, reopen our schools, reinvest in 0:15:57.880 --> 0:16:01.720 our infrastructure, work with our small businesses. These are all 0:16:01.760 --> 0:16:04.920 the things that we have to do. So it's not easy, 0:16:05.000 --> 0:16:08.160 but we can do it well. But but you believe that, 0:16:08.240 --> 0:16:10.520 and a lot of people do believe that a part 0:16:10.520 --> 0:16:13.680 of the Democratic Party, but even among the Democrats, there 0:16:13.800 --> 0:16:16.320 is some disagreement about how big to go and how 0:16:16.400 --> 0:16:19.000 much to follow this up with, and the idea that 0:16:19.040 --> 0:16:21.440 Republicans are getting a little bit more concerned about the 0:16:21.480 --> 0:16:24.400 debt pile. I mean, how concerned are you that if 0:16:24.440 --> 0:16:27.560 you pass a big and bold stimulus package right now, 0:16:28.000 --> 0:16:31.680 it will withdraw any political support for getting that infrastructure 0:16:31.680 --> 0:16:35.160 spending done that you're saying is crucial. Well, I think 0:16:35.320 --> 0:16:38.280 it's important to understand that in the House, we just 0:16:38.360 --> 0:16:42.440 had a hearing uh in their Ways and Means Committee, 0:16:42.520 --> 0:16:46.440 and the chairman of the committee is very confident in 0:16:46.560 --> 0:16:49.400 terms of where we are. We understand the concerns that people, 0:16:49.400 --> 0:16:52.120 but we realize this is something we can do. We 0:16:52.200 --> 0:16:54.960 cannot afford not to do it, so we have to 0:16:54.960 --> 0:16:57.640 take that. Actually, I believe that we're in the majority 0:16:57.640 --> 0:17:00.600 in the Senate and with the houseworking together that I 0:17:00.640 --> 0:17:03.280 think that you will see a new, different day. So 0:17:03.320 --> 0:17:07.639 I'm very optimistic that we can achieve this. Joy Evans 0:17:07.720 --> 0:17:12.200 tell us the the the forward motion of the Congressional 0:17:12.280 --> 0:17:16.679 Black Caucus. It has been a four year challenge, without question, 0:17:16.720 --> 0:17:20.040 I think anybody of any political persuasion can agree on that. 0:17:20.320 --> 0:17:23.320 Tell us about the new effort by a Congressional Black 0:17:23.359 --> 0:17:29.960 Caucus in Congress. Well, you know, um Joyce Baby from 0:17:29.960 --> 0:17:33.840 Ohio is the new chairperson. Fact, she's on the Financial 0:17:33.880 --> 0:17:36.560 Service Committee. I work very closely it being on the 0:17:36.560 --> 0:17:39.160 ways and means committed. So I share with you with 0:17:39.200 --> 0:17:44.040 a leadership taking place of Karen Bass from California, that 0:17:44.160 --> 0:17:47.359 she will not miss a step. You have some very 0:17:47.400 --> 0:17:51.080 good new members, new blood, new energy, who are ready 0:17:51.119 --> 0:17:53.840 to take this challenge on. So, in spite of what 0:17:53.880 --> 0:17:56.679 a lot of people said, I believe that the Congressional 0:17:56.720 --> 0:18:00.399 Black Caucus ready for this challenge. Congressman Waved love to 0:18:00.400 --> 0:18:02.480 have you back, saying please stay close. That would be 0:18:02.480 --> 0:18:05.440 a stranger to this program. Congressman Wide Evan's that wank. 0:18:16.560 --> 0:18:20.960 Diane Swart joins from Grant Thorton. Just wonderful about calibrating 0:18:21.240 --> 0:18:23.920 the pulse of that equation. Why I will see plus 0:18:24.040 --> 0:18:27.080 I plus G plus n x, Diane Swark? Right now, 0:18:27.119 --> 0:18:31.280 the mystery to me is a persistent six five g 0:18:31.440 --> 0:18:35.040 d P and we get out into Q one, maybe 0:18:35.080 --> 0:18:38.639 into Q two, and then there's a mystery. What is 0:18:38.680 --> 0:18:44.520 your clarity on Q three and Q four of this year? Well, 0:18:44.560 --> 0:18:47.239 certainly the hope is that we see this unleashed pent 0:18:47.359 --> 0:18:50.040 up demand lift us even higher and get to the 0:18:50.160 --> 0:18:52.160 end of the year. Ours is a little bit more 0:18:52.240 --> 0:18:54.840 muted because the multipliers, we think are more muted on 0:18:55.000 --> 0:18:58.040 services coming back than they are on goods coming back. 0:18:58.080 --> 0:19:00.719 This is a very unique reset and where you do 0:19:00.800 --> 0:19:03.040 unleashed pen up demand. But how many times do you 0:19:03.080 --> 0:19:05.240 eat up out in a day? How many haircuts do 0:19:05.280 --> 0:19:07.320 you get to make up for what we lost? So 0:19:07.359 --> 0:19:09.959 it's a different kind of unleashed pen up demand. But 0:19:10.000 --> 0:19:13.000 we could easily see the strongest year since nine four. 0:19:13.320 --> 0:19:18.240 That is important as we go into two thousand twenty two. 0:19:18.400 --> 0:19:21.280 What's also important is how do we manage the virus. 0:19:21.320 --> 0:19:24.040 I mean, we're talking about not eradicating the virus, but 0:19:24.160 --> 0:19:27.280 managing it so that it's not a significant part of 0:19:27.280 --> 0:19:31.600 our everyday lives. But that process of going from eradicating 0:19:31.680 --> 0:19:35.080 her community just flipping a switch, to managing the virus 0:19:35.320 --> 0:19:37.920 is a very different economic equation as well, in terms 0:19:37.960 --> 0:19:40.560 of how fast we can ramp up all showing up 0:19:40.600 --> 0:19:45.440 at big theaters and sporting events in crowds and congregating 0:19:45.720 --> 0:19:48.399 in the way many of us would like to dance swank. 0:19:48.480 --> 0:19:51.600 We spoke with Heidi Sheerholes out of your University of 0:19:51.640 --> 0:19:56.159 Michigan the other day. She is expert, expert expert on 0:19:56.280 --> 0:19:58.959 the dearth of jobs that job GEP that we have 0:19:59.480 --> 0:20:05.480 with a aren't economy? Do we close that job? Get Yeah, 0:20:05.480 --> 0:20:07.480 it's a great question. One of the things we're really 0:20:07.480 --> 0:20:09.760 worried about it in Heidi is as well, She's great 0:20:09.800 --> 0:20:13.040 at this is the dichotomy between high wage jobs have 0:20:13.240 --> 0:20:16.080 come back and in fact, in some sectors they're reporting 0:20:16.160 --> 0:20:18.560 labor market shortages. Of course, we all know that anyone 0:20:18.600 --> 0:20:21.159 doing anything with their house right now cannot find a 0:20:21.200 --> 0:20:24.600 skilled carpenter. But beyond that, you've got in the low 0:20:24.640 --> 0:20:28.480 wage sector jobs that are being replaced by automation and digitation. 0:20:28.600 --> 0:20:32.240 Even thinking about things like the peloton and doing fitness 0:20:32.280 --> 0:20:37.679 and home that allows one person to personally train a 0:20:37.760 --> 0:20:40.440 lot of people. Reduces the cost of some of these 0:20:40.480 --> 0:20:44.159 inflation fears I think are overstated, but it also reduces 0:20:44.240 --> 0:20:48.080 some jobs that might be coming back otherwise. Also cashiers, 0:20:48.160 --> 0:20:51.280 anything that can be automated in terms of getting out 0:20:51.320 --> 0:20:53.399 of a store, not having that extra touch, and the 0:20:53.440 --> 0:20:56.520 world we manage the virus rather than just contain it. 0:20:56.880 --> 0:20:58.640 All of those things mean it's going to be even 0:20:58.680 --> 0:21:01.320 harder for some of these workers that have been displaced 0:21:01.359 --> 0:21:04.560 to come back without reskilling. And that's before we get 0:21:04.600 --> 0:21:08.320 to the last educational component of We've now got many 0:21:08.440 --> 0:21:11.680 low wage household suffering, not only our math scores suffering, 0:21:11.680 --> 0:21:14.640 which need in person care and elementary schools, but low 0:21:14.680 --> 0:21:18.560 wage household suffering dropouts not getting access to online education, 0:21:19.000 --> 0:21:23.720 and it really is exacerbating inequalities and diminishing that labor poort. 0:21:23.960 --> 0:21:26.360 Going forward, Let's pick up on that word inequality. There 0:21:26.359 --> 0:21:28.800 the structural issues. Let's talk about some of the cyclical 0:21:28.880 --> 0:21:33.000 slack this feed has been conditioned to understand. Now, Chairman 0:21:33.040 --> 0:21:35.800 pal chair yelling, now, Secretary yelling. They need to run 0:21:35.800 --> 0:21:38.840 this a whole lot longer to really reduce and eradicate 0:21:38.840 --> 0:21:40.879 any cyclical slack that is left. They learned that in 0:21:40.880 --> 0:21:43.879 the last cycle. They're applying that conditioning to this cycle. 0:21:43.920 --> 0:21:46.600 And Dan, I wonder how difficult this is going to 0:21:46.680 --> 0:21:49.000 be to calibrate, because if the Federal Reserve is committed 0:21:49.000 --> 0:21:52.120 to doing that, then as a market participant, I'm committed 0:21:52.160 --> 0:21:54.359 to allocating to risk assets as well. So how on 0:21:54.400 --> 0:21:56.960 earth do you close that gap if monetary policy is 0:21:57.000 --> 0:22:01.040 one of the tools you're using to do it. Yeah, 0:22:01.119 --> 0:22:04.280 it's really Monetary policy is such a crude tool on this, 0:22:04.440 --> 0:22:07.520 and I think fiscal policy is so much better at 0:22:07.560 --> 0:22:11.560 removing the hurdles to inequality. We're gonna need summer schools 0:22:11.600 --> 0:22:13.960 to make up for some of this inequality. We're gonna 0:22:14.000 --> 0:22:16.600 need to re engage students that have dropped out of 0:22:16.640 --> 0:22:19.480 college twice the pace they've dropped out in households earning 0:22:19.560 --> 0:22:22.720 less than seventy five thousand dollars a year. So all 0:22:22.800 --> 0:22:26.000 of that requires more fiscal policy than monetary policy, and 0:22:26.040 --> 0:22:28.720 monetary policy kind of running that, you know, sort of 0:22:28.760 --> 0:22:31.639 and you allude to it, Yes, low rates for a 0:22:31.680 --> 0:22:34.879 long time if you overshoot what you thought was full employment. 0:22:34.920 --> 0:22:37.720 And Powell has really embraced this idea to run the 0:22:37.720 --> 0:22:40.359 economy hot, to bring in more of those workers that 0:22:40.359 --> 0:22:43.160 are now most damaged, narrow that gap between the black 0:22:43.240 --> 0:22:46.560 unemployment rate and the white unemployment rate, in particular, looking 0:22:46.600 --> 0:22:50.359 at different employment to population ratios, trying to think of 0:22:50.400 --> 0:22:53.159 this much more nuanced um in terms of what is 0:22:53.160 --> 0:22:55.520