WEBVTT - What Happens to Economic Growth if Trumponomics Is Trampled? 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.120 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. All right, 0:00:32.159 --> 0:00:35.400 talking about lower than projections, let's talk about downgrades to 0:00:35.440 --> 0:00:37.960 the US economy. We have Carl rick O donaghy is 0:00:37.960 --> 0:00:41.320 our chief US economist for Bloomberg Intelligence and he joins 0:00:41.360 --> 0:00:44.320 us here in our eleven three oh studio. Carl, always 0:00:44.320 --> 0:00:48.280 a pleasure downgrading the US economy. Give us some details. Yes, So, 0:00:48.800 --> 0:00:53.680 we are just this morning published our updated mid year projections, 0:00:53.760 --> 0:00:58.520 and we're not changing our outlook for We see the 0:00:58.520 --> 0:01:02.000 economy growing at about two point or present. However, we 0:01:02.080 --> 0:01:07.200 did mark down our forecasts. Now, ordinarily that would be 0:01:07.280 --> 0:01:10.440 more troubling as it would have broader implications. Uh. You know, 0:01:10.600 --> 0:01:12.800 clearly you would say, while you're seeing a weaker economy, 0:01:13.360 --> 0:01:17.480 but really the reason for our downgrade of eighteen was 0:01:17.959 --> 0:01:22.160 basically erasing Trump and omics from the landscape. Uh. And 0:01:22.240 --> 0:01:27.160 so we've now assessed that given the prioritization of non 0:01:27.360 --> 0:01:31.959 economic measures, let's say healthcare repeal UH, and certainly these 0:01:31.959 --> 0:01:35.480 have economic consequences, but not direct economic policy. So the 0:01:35.520 --> 0:01:41.040 focus on healthcare, border security, travel bands, etcetera. Is squandering 0:01:41.200 --> 0:01:46.120 political capital and also valuable days on the legislative calendar, 0:01:46.560 --> 0:01:50.760 which means that we now are seeing less likelihood of 0:01:50.800 --> 0:01:54.520 things like comprehensive tax reform at both the household and 0:01:54.840 --> 0:02:01.400 corporate levels, massive infrastructure spending. Those economic pillars of our 0:02:01.520 --> 0:02:06.160 main pillars of trumponomics, I think are in serious jeopardy. 0:02:06.280 --> 0:02:07.960 So I would love to see them come back on 0:02:08.000 --> 0:02:10.840 the table and we would mark our growth forecast up accordingly. 0:02:11.360 --> 0:02:13.280 But it just doesn't look like that's going to be 0:02:13.320 --> 0:02:15.800 the reality, you know, Carl, I'm struck by the fact 0:02:15.840 --> 0:02:19.840 that you had priced in some of those uh legislative 0:02:19.880 --> 0:02:23.720 advances earlier in the year, and I'm wondering, as an economist, 0:02:24.120 --> 0:02:27.079 how difficult is it to come up with some kind 0:02:27.080 --> 0:02:31.200 of projection when clearly these proposals apparently would have had 0:02:31.240 --> 0:02:34.600 a very significant impact on how much the country would grow. Absolutely, 0:02:34.639 --> 0:02:37.240 so there was tremendous uncertainty as to whether or not 0:02:37.400 --> 0:02:41.440 they would be issues that they were clearly major themes 0:02:41.440 --> 0:02:45.080 on the campaign trail, and it looked like initially there 0:02:45.160 --> 0:02:47.240 was going to be a lot of motivation to pursue 0:02:47.680 --> 0:02:52.040 those agenda items. However, the administration pivoted and uh, and 0:02:52.080 --> 0:02:55.120 certainly we knew that healthcare and border security were going 0:02:55.160 --> 0:02:58.480 to be priorities as well, but you know, there was 0:02:58.520 --> 0:03:03.320 a chance that a businessman president would pursue uh, the 0:03:03.360 --> 0:03:07.200 economic priorities first. Uh, there's reasons for them to go 0:03:07.240 --> 0:03:10.680 after healthcare because if there are budget savings through healthcare reform, 0:03:10.720 --> 0:03:15.079 they could incorporate that into their adjustments to budget measures 0:03:15.080 --> 0:03:18.799 and tax policy. But you know, for whatever reason, they 0:03:18.800 --> 0:03:21.760 went went the direction they did. And now the discord 0:03:22.360 --> 0:03:25.840 uh seems to be increasing it certainly among Democrats but 0:03:25.880 --> 0:03:28.720 also among Republicans. Uh. And so what we had to 0:03:28.720 --> 0:03:32.680 reassess the likelihood of those measures being incorporated and and 0:03:32.840 --> 0:03:36.680 you revise of the outlook accordingly. And UH, you know 0:03:36.720 --> 0:03:39.440 we are not alone in doing this. The FED has 0:03:39.640 --> 0:03:42.839 continued to grapple with the degree to which they would 0:03:42.880 --> 0:03:46.080 incorporate the changes to fiscal policy into their forecast. Some 0:03:46.080 --> 0:03:49.600 some FED members did, some didn't. But now they seem to, 0:03:49.800 --> 0:03:53.480 at least based on the minutes of the May FOMC meeting, UH, 0:03:53.520 --> 0:03:57.760 they are shifting back towards UH, anticipating less of a 0:03:57.840 --> 0:04:00.400 change to fiscal policy. Well, Carl, I just want maybe 0:04:00.480 --> 0:04:02.920 just pick up on something that that Lisa mentioned and 0:04:03.000 --> 0:04:06.240 maybe just go one step further, which is the details, 0:04:06.280 --> 0:04:09.400 the actual numerical details of many of these things that 0:04:09.440 --> 0:04:13.400 you described, rather than the broad brush strokes. Have we 0:04:13.480 --> 0:04:17.320 seen any details that would allow an economist or any 0:04:17.400 --> 0:04:20.760 kind of analytical work done on what this would all 0:04:20.800 --> 0:04:24.719 mean for the economy? Things were presented with broadbrush strokes, 0:04:25.000 --> 0:04:28.359 as you note, so why it becomes a best guess 0:04:28.520 --> 0:04:33.000 type of scenario. We knew the objective for the infrastructure 0:04:33.040 --> 0:04:36.159 package would be about one trillion dollars spread over ten years, 0:04:36.160 --> 0:04:38.719 so you can kind of calculate how long it would 0:04:38.760 --> 0:04:41.119 take for that to get underway. Obviously it doesn't happen 0:04:41.480 --> 0:04:44.000 with a flip of a switch, so that is something 0:04:44.080 --> 0:04:47.719 you could at least to some rudimentary level UH model 0:04:47.760 --> 0:04:51.360 for GDP purposes. And then there were also some parameters 0:04:51.400 --> 0:04:54.279 laid out in terms of what tax policy would like 0:04:54.600 --> 0:04:57.799 look like, in what the implications would be just quickly 0:04:57.839 --> 0:05:02.000 give you twenty seconds PPI producer, Uh inflation, what do 0:05:02.040 --> 0:05:05.560 we get? P p I is telling us that there's 0:05:06.320 --> 0:05:10.240 still only moderate price pressures in the inflation pipeline, and 0:05:10.320 --> 0:05:13.160 this is something policymakers are going to be considering at 0:05:13.240 --> 0:05:18.160 the meeting as a core inflation. Consumer inflation has disappointed 0:05:18.160 --> 0:05:20.280 in the last two months, and now it looks like 0:05:20.400 --> 0:05:23.679 that two percent target maybe a little harder to achieve 0:05:23.800 --> 0:05:26.200 than they thought earlier this year. All right, I want 0:05:26.200 --> 0:05:28.640 to thank you very much, Carl Rickadona. Of course, our 0:05:28.720 --> 0:05:33.600 chief US economist for Bloomberg Intelligence, a downgrade to US 0:05:33.680 --> 0:05:39.479 economic performance in twenty eighteen because of well, the disappearance 0:05:39.560 --> 0:05:43.520 of the Trump Economic Agenda from the possibility of having 0:05:43.520 --> 0:05:59.080 that passed in Congress. Sears Canada suffered its worst stock 0:05:59.120 --> 0:06:03.000 decline ever after acknowledging significant doubt about its ability to 0:06:03.080 --> 0:06:06.880 keep operating, leading the troubled department store chain to consider 0:06:06.960 --> 0:06:11.400 a sale or restructuring. Also today, Sears is cutting four 0:06:11.480 --> 0:06:15.480 hundred jobs at its Hoffman Estates headquarters. Here to tell 0:06:15.560 --> 0:06:18.919 us more about retail and also Sears is Mark Cohen. 0:06:19.000 --> 0:06:22.159 He is a director of Retail Studies, adjunct Professor of 0:06:22.240 --> 0:06:25.640 Business at Columbia University School of Business, and he is 0:06:25.720 --> 0:06:29.679 also the former chief executive of Sears Canada. Mark Cohen, 0:06:29.720 --> 0:06:32.360 thank you very much for being with us. I wonder 0:06:32.400 --> 0:06:34.400 if you could just give people a little of your background, 0:06:34.480 --> 0:06:37.200 because if if you don't know what's going on in retail, 0:06:37.240 --> 0:06:40.880 nobody does. Because you've been doing this quite a while. Okay, 0:06:40.920 --> 0:06:43.479 I've been in the retail business most of my adult life. 0:06:43.520 --> 0:06:48.040 I started to day and s in the early nineteen seventies, UH. 0:06:48.440 --> 0:06:52.080 Getting a little closer to date, I was the chief 0:06:52.120 --> 0:06:55.320 marketing officer and president of soft lines for several years 0:06:55.400 --> 0:06:59.039 at Sears Roebuck in Chicago, and then the chairman and 0:06:59.240 --> 0:07:03.760 CEO is Canada from two thousand and one through mid 0:07:03.760 --> 0:07:09.840 two thousand and four. The companies have been in serial decline. 0:07:10.600 --> 0:07:13.600 In the case of Sears Roebuck, that decline started in 0:07:13.760 --> 0:07:19.280 two thousand UH when Alan Lacey became CEO, and after 0:07:19.360 --> 0:07:23.320 five years of failing, he turned the company more or 0:07:23.400 --> 0:07:27.400 less over to Eddie Lampert, the well known hedge fund 0:07:27.480 --> 0:07:33.000 operator who has been hollowing both companies out ever since. 0:07:33.600 --> 0:07:37.120 And so the the ongoing bad news both in the 0:07:37.200 --> 0:07:42.800 United States and Canada is no surprise retail businesses. Frankly, 0:07:42.880 --> 0:07:48.600 no business can operate with consecutive losses of enormous consequence 0:07:48.960 --> 0:07:53.320 with cash flow that only um comes from asset sales. Well, 0:07:53.360 --> 0:07:55.760 you know, I just want to get a sense when 0:07:55.800 --> 0:07:58.520 you left Series who were fired right in two thousand 0:07:58.600 --> 0:08:02.920 and four, was the departure over? Was it because you 0:08:02.960 --> 0:08:05.240 just didn't see a future anymore? Or is it because 0:08:05.760 --> 0:08:07.920 they just weren't going to take some of the steps 0:08:08.120 --> 0:08:09.840 that they needed to in order to make it a 0:08:09.920 --> 0:08:13.760 viable business. Well, you know, this is obviously my view, 0:08:13.800 --> 0:08:19.280 but I thought the Sears Roebuck CEO was incompetent, and 0:08:19.440 --> 0:08:21.960 he was reasonably convinced that I was trying to take 0:08:22.000 --> 0:08:27.120 away his job. I had no ability to do that, 0:08:27.440 --> 0:08:31.240 but certainly someone should have taken away his job. And 0:08:31.320 --> 0:08:33.880 so there in lies the conflict that occurred. In the 0:08:33.920 --> 0:08:37.400 summer of two thousand and four, he had spent six 0:08:37.679 --> 0:08:41.520 d and five million dollars in cash buying fifty one 0:08:41.600 --> 0:08:46.640 kmarts from Lampert's newly acquired kmart. And this was the 0:08:46.679 --> 0:08:51.040 support of strategy which was called Sears Brand, which was 0:08:51.280 --> 0:08:54.680 a catastrophe and which he was trying to get me 0:08:54.760 --> 0:08:58.480 to support. In Canada more or less to help legitimize it. 0:08:59.200 --> 0:09:04.600 So I thought the acquisition of this real estate was nesperious, 0:09:04.760 --> 0:09:07.480 if you will. And as it turned out, in a 0:09:07.559 --> 0:09:11.120 matter of speaking, Lampert turned around and used that six 0:09:11.679 --> 0:09:16.120 five million dollars along with the inflated valuation of his 0:09:16.200 --> 0:09:21.160 own kmart portfolio, and took possession of Sears Roebuck. So 0:09:22.400 --> 0:09:25.680 you know, this is a This is a bad ending 0:09:25.800 --> 0:09:31.240 to a series of really bad events. UM businesses can 0:09:31.400 --> 0:09:35.120 get into trouble for relatively brief periods of time and 0:09:35.240 --> 0:09:39.840 extract themselves, but both of these businesses have done nothing 0:09:39.960 --> 0:09:42.800 on their own behalf to be able to do that. Mark, 0:09:43.200 --> 0:09:46.640 can you describe whether this in your view, has this 0:09:46.760 --> 0:09:49.680 been a strategy to build the wealth of any lamport 0:09:49.800 --> 0:09:52.480 or has it been a strategy to build the health 0:09:52.960 --> 0:09:59.960 and wealth of Sears. I really can't comment about Lampert's 0:10:00.080 --> 0:10:05.000 underlying motivation. Maybe for some period of time he did 0:10:05.080 --> 0:10:07.960 have a view that he could run these businesses in 0:10:08.000 --> 0:10:10.679 an unconventional way and be successful in his own right. 0:10:11.200 --> 0:10:15.200 I think early on he discovered that that wasn't viable 0:10:15.360 --> 0:10:19.240 and has been propping these businesses up for his own 0:10:19.280 --> 0:10:23.840 benefit and for the benefit of his um investment cohorts. 0:10:23.960 --> 0:10:30.640 Ever since it has benefit, hasn't it? It remains to 0:10:30.679 --> 0:10:34.360 be seen, when all is said and done, what his 0:10:34.720 --> 0:10:38.400 net net investment proceeds will be for all of this 0:10:39.280 --> 0:10:41.760 effort and for for over all of this time. I 0:10:41.800 --> 0:10:44.440 really don't know whether he's going to quote unquote come 0:10:44.440 --> 0:10:48.520 out ahead or not. But it's clear that both businesses 0:10:48.840 --> 0:10:53.959 are are in terrible shape, continue to be struggling, with 0:10:54.080 --> 0:10:58.440 no possibility of remediation anytime in the future. You know, 0:10:58.679 --> 0:11:00.800 I'm struck by the fact that people have been saying 0:11:00.840 --> 0:11:03.440 Series is going to die for about a decade. Why 0:11:03.559 --> 0:11:05.200 isn't it just going to die? Do you think that 0:11:05.240 --> 0:11:06.800 there will be anything that will kind of force it 0:11:06.880 --> 0:11:08.839 to some kind of denu mall? Or well, are we 0:11:08.960 --> 0:11:11.560 to see it strung along for another decade? And well, 0:11:11.559 --> 0:11:15.160 it might very well string along. The US business might 0:11:15.240 --> 0:11:17.240 very well string along for some period of time. I 0:11:17.280 --> 0:11:21.760 don't know that Canada has that capacity, because the US 0:11:21.840 --> 0:11:28.120 business still does have some substantial UM assets that can 0:11:28.200 --> 0:11:31.200 yet be sold off. I mean, the US does still 0:11:31.240 --> 0:11:36.520 possess a reasonably large portfolio of real estate. The best 0:11:36.600 --> 0:11:40.760 stores of long ago been um sold off. Cash has 0:11:40.840 --> 0:11:45.760 long ago been given, ended into Lampard's pockets or used 0:11:45.800 --> 0:11:50.800 to prop up the company. Um Uh, at some point 0:11:51.040 --> 0:11:55.160 you do run out of fuel and uh that may 0:11:55.200 --> 0:11:58.000 be soon or it may be somewhere in the future, 0:11:58.000 --> 0:12:00.199 but it's clear that both of these business is that 0:12:00.360 --> 0:12:03.320 completely lost their viability. Thank you so much for joining us. 0:12:03.520 --> 0:12:05.960 It's good to get a good inside look at what's 0:12:06.000 --> 0:12:08.240 going on there. Marko and as director of Retail Studies 0:12:08.360 --> 0:12:11.319 and a Magic Professor of Business at Columbia University Business School, 0:12:11.320 --> 0:12:27.640 also former Sears Marketing Chief and head of Sears Canada. 0:12:28.400 --> 0:12:31.400 We hear a lot from investors who are turning their 0:12:31.440 --> 0:12:34.160 attention more to Europe than the U S, at least 0:12:34.160 --> 0:12:37.440 when it comes to equity markets. But CEO is clearly 0:12:37.520 --> 0:12:40.320 have their views set on the US. I want to 0:12:40.320 --> 0:12:43.600 bring in John V. Meyer. He's Global Chairman of KPMG 0:12:43.880 --> 0:12:47.640 International based in New York. UH and KPMG just released 0:12:48.640 --> 0:12:52.240 CEO Outlook report and wow, John, a lot of optimism 0:12:52.360 --> 0:12:54.679 and a lot of focus on the U S. Can 0:12:54.679 --> 0:12:57.360 you sort of start by spelling out what you think 0:12:57.440 --> 0:13:00.719 are the main takeaways from this survey? Sure? Thanks for 0:13:00.760 --> 0:13:02.880 having me on, Lisa, And you know, I think we 0:13:02.960 --> 0:13:06.120 start with confidence levels, and one thing that's interesting about 0:13:06.120 --> 0:13:09.960 our survey we intentionally try and focus on the next 0:13:10.040 --> 0:13:12.480 three years, so it's intended to be a longer term 0:13:12.559 --> 0:13:15.040 view on the part of the CEO, since we think 0:13:15.120 --> 0:13:18.560 that mirrors their investment cycle, hiring cycle, and everything else. 0:13:19.160 --> 0:13:21.920 UM confidence levels, I would say are a little more 0:13:21.960 --> 0:13:26.360 subdued from the survey last year, but still relatively high. 0:13:26.520 --> 0:13:29.520 And frankly, the US is the one market in the 0:13:29.559 --> 0:13:33.400 world where confidence levels are higher than what was reflected 0:13:33.400 --> 0:13:36.800 in our survey last year, UH, which is a very 0:13:36.840 --> 0:13:40.120 positive sign, you know from a US standpoint, But frankly, 0:13:40.160 --> 0:13:43.840 as you look around Asia, some real um drops frankly 0:13:44.040 --> 0:13:46.040 in confidence levels of c e o s as they 0:13:46.040 --> 0:13:48.440 look out over the next two years in some places 0:13:48.480 --> 0:13:52.240 like Japan, Australia, other places in Asia Pacific. So real 0:13:52.320 --> 0:13:56.640 mixed bag, depending upon UH where you're based. Well, you 0:13:56.679 --> 0:13:58.880 mentioned mixed bag, and I want to follow up at 0:13:58.920 --> 0:14:02.120 that having to do with globalization and the ability of 0:14:02.480 --> 0:14:05.840 companies to compete around the world, and one if you 0:14:05.840 --> 0:14:09.240 could speak to that topic and do you believe that 0:14:09.280 --> 0:14:13.280 the current political climate in the United States will thwart 0:14:13.880 --> 0:14:16.800 that ongoing trend? Well, you know, it's interesting we ask 0:14:16.920 --> 0:14:20.600 in our survey a fair number of questions that get 0:14:20.680 --> 0:14:24.520 you down a geopolitical path, and that is still viewed, 0:14:24.600 --> 0:14:28.080 I think as a key risk as c e O 0:14:28.200 --> 0:14:31.480 s look out into the marketplace. UH. And some of 0:14:31.480 --> 0:14:36.360 the specific feedback we got about geopolitical risk were number 0:14:36.360 --> 0:14:40.080 one sentiment that over half the CEO is believed that 0:14:40.200 --> 0:14:44.360 the impact of geopolitical risks on their business are higher 0:14:44.400 --> 0:14:49.720 today than they ever remember. UH. Secondly, this UM a 0:14:49.800 --> 0:14:52.560 question about protectionism that we tried to get a sense 0:14:52.600 --> 0:14:55.160 of given how much you know, discussion there is in 0:14:55.160 --> 0:14:58.200 the marketplace around and discussion on things like Twitter where 0:14:58.200 --> 0:15:02.960 you have elected officials using a public platform to name companies. Yeah, 0:15:03.000 --> 0:15:05.800 there's a high percentage over of the c e O 0:15:05.920 --> 0:15:11.360 s UH indicated that they believe protection ism will be 0:15:11.440 --> 0:15:14.680 increasing in the near term and over the next three years, 0:15:15.240 --> 0:15:17.760 which is again concerning given the levels where it already 0:15:17.880 --> 0:15:21.640 is today, and that's having an impact on decisions CEO 0:15:21.800 --> 0:15:24.480 s UM say they're evaluating in terms of where to 0:15:24.520 --> 0:15:29.280 locate operations, and all of these geopolitical factors I think 0:15:29.280 --> 0:15:33.400 are weighing into investment decisions more now today than they 0:15:33.400 --> 0:15:35.720 have been at any time that many of these CEOs 0:15:35.760 --> 0:15:37.960 can remember. Yeah, although one thing that I thought was 0:15:38.000 --> 0:15:41.640 really notable was on the micro level, and CEOs looked 0:15:41.640 --> 0:15:44.480 at their businesses, their own businesses, they saw the need 0:15:44.560 --> 0:15:47.480 to hire more people. And you say that in the survey, 0:15:47.560 --> 0:15:50.840 it showed that U S CEOs expect had contill grow 0:15:50.920 --> 0:15:54.000 over the next three years, with eighty percent reporting their 0:15:54.040 --> 0:15:57.440 investing in recruitment. Uh. This to me is fascinating and 0:15:57.480 --> 0:16:00.280 speaks to this tight labor market that we keep talking about. 0:16:00.360 --> 0:16:04.840 Does this, in your opinion, point to salary increases which 0:16:04.840 --> 0:16:09.080 people have been waiting for. You know, that's a complicated question, 0:16:09.200 --> 0:16:11.840 I think frankly, Lisa Um, I think the good news 0:16:11.960 --> 0:16:16.280 is that, again mirroring the confidence levels when we compare 0:16:16.480 --> 0:16:20.440 the CEOs responses this year till last year, a little 0:16:20.520 --> 0:16:24.520 less optimism about employment level growth over the next three years, 0:16:24.760 --> 0:16:28.760 but still I think a pretty good degree of confidence 0:16:28.800 --> 0:16:31.640 on the part of CEOs that they will be hiring. Uh, 0:16:31.640 --> 0:16:34.800 and that and that significant levels over six percent growth 0:16:34.800 --> 0:16:37.920 in their employee levels. The reason that your question is 0:16:37.920 --> 0:16:40.040 a little complicated is I think it really gets to 0:16:40.080 --> 0:16:42.920 what kind of skills are we talking about? There is 0:16:43.000 --> 0:16:48.840 clearly a shortage in the statistic use cited around actively recruiting. 0:16:49.120 --> 0:16:52.760 That's true, but they're actively recruiting for very specific skills, 0:16:52.840 --> 0:16:57.200 technology based skills, things like that, where UM like coding 0:16:57.360 --> 0:16:59.360 or is it something? Is it? Is it pretty broad 0:16:59.480 --> 0:17:02.000 within the tech anology space. I think it's broader. It 0:17:02.080 --> 0:17:07.359 gets to ability to analyze data, utilize data and analytics 0:17:07.480 --> 0:17:12.360 UM take advantage of some of the cognitive UH technologies 0:17:12.400 --> 0:17:16.760 that companies are now deploying in their organization data scientists 0:17:16.760 --> 0:17:19.359 to help them synthesize and think through all of this. 0:17:20.000 --> 0:17:22.960 And uh so, what I'm hearing you saying, it's almost 0:17:23.080 --> 0:17:27.720 like a split between people with higher education and people not. 0:17:28.280 --> 0:17:31.680 In other words, people who have have some training with 0:17:31.800 --> 0:17:35.560 respect to you know, things that are usually taught in 0:17:36.200 --> 0:17:39.480 college or later in high school. Not necessarily the blue 0:17:39.480 --> 0:17:41.880 collar jobs, although you know. One of the things that's 0:17:41.960 --> 0:17:46.000 interesting and frankly surprised me in the survey results is 0:17:46.040 --> 0:17:49.040 when we asked a specific question about do you believe 0:17:49.119 --> 0:17:53.000 cognitive technology is going to increase or decrease you're hiring 0:17:53.119 --> 0:17:57.240 over the next three years, it was overwhelmingly an increase, 0:17:57.560 --> 0:17:59.639 which I think is counterintuitive to what a lot of 0:17:59.640 --> 0:18:03.000 people are thinking, and and that was across a fairly 0:18:03.040 --> 0:18:10.040 wide range of job skills, a lot of traditional finance, marketing, sales. 0:18:10.760 --> 0:18:14.480 And I think what that talks to is companies looking 0:18:14.520 --> 0:18:17.439 today to see how am I going to deploy some 0:18:17.520 --> 0:18:22.200 of these disruptive technologies most effectively to benefit my customer 0:18:22.960 --> 0:18:26.879 And that's going to take people, uh, helping them figure 0:18:26.920 --> 0:18:28.439 that out and do that. So I think in the 0:18:28.520 --> 0:18:31.200 near term this may not be a long term kind 0:18:31.200 --> 0:18:34.280 of dynamic, but certainly in the near term it appears 0:18:34.280 --> 0:18:38.200 that some of these disruptive technologies are actually um leading 0:18:38.200 --> 0:18:41.960 companies to believe they will be increasing headcount. John V. Mar, 0:18:42.119 --> 0:18:44.480 thank you very much for being with US Global Chairman 0:18:44.640 --> 0:18:51.480 KPMG speaking about kpmg CEO Outlook report. It was a 0:18:51.600 --> 0:18:55.440 survey of four d US and global A chief executives 0:18:55.440 --> 0:18:58.479 for their views on their top priorities over the next 0:18:58.560 --> 0:19:13.520 three years. Turn our attention now to what's going on 0:19:13.600 --> 0:19:16.439 with markets, and we have James Paulson. He is a 0:19:16.480 --> 0:19:20.560 former chief investment strategist and economist Wells Capital Management. No, 0:19:20.800 --> 0:19:26.159 he is you still are three fifty billion dollars previous 0:19:26.200 --> 0:19:31.240 under management MINT based in Minneapolis, Jim Paulson, You've written 0:19:31.480 --> 0:19:35.200 that there's a whole lot of consensus opinion, what we 0:19:35.280 --> 0:19:39.159 might term conventional wisdom, and then you debunk it. I'm 0:19:39.160 --> 0:19:43.360 wondering if you could just go through some of those topics. Well, yeah, 0:19:43.440 --> 0:19:45.800 I think it's always sort of important to keep an 0:19:45.840 --> 0:19:49.080 eye on, uh any kind of thoughts that are really 0:19:49.080 --> 0:19:52.960 strongly and widely held, because it's often they're right, but 0:19:53.000 --> 0:19:55.880 if they're ever wrong, as you know, you create quite 0:19:55.920 --> 0:19:59.680 a market change, and so always sort of stay focused 0:19:59.720 --> 0:20:03.760 in some of those Um overall, I think, um one 0:20:03.800 --> 0:20:06.880 of them that I find interesting is the idea that's 0:20:06.880 --> 0:20:10.840 been prevalent throughout this recovery Kim that that wage wage 0:20:10.880 --> 0:20:14.520 games have been so uh tepid um and that this 0:20:14.600 --> 0:20:17.720 implies that boy labor is not doing very well and 0:20:17.760 --> 0:20:20.800 that the consumer must be weak and vulnerable, leaving the 0:20:20.960 --> 0:20:24.960 leaving the recovery itself in question. And it is true 0:20:25.000 --> 0:20:27.280 that while nominal wage games have been very low in 0:20:27.280 --> 0:20:31.600 this recovery, real wage games, what's really important, the purchasing 0:20:31.680 --> 0:20:34.720 power of labor has really done quite well. It's gone 0:20:34.800 --> 0:20:38.159 up one point seven percent per annum since the end 0:20:38.200 --> 0:20:40.320 of the last recovery, and that's been one of the 0:20:40.359 --> 0:20:42.680 stronger games from real purchasing power that we've had since 0:20:42.720 --> 0:20:46.960 the nineteen sixties. So I think that that explains a 0:20:46.960 --> 0:20:50.040 lot better to me why the consumer has done fairly 0:20:50.040 --> 0:20:53.679 well in this recovery. It's been leading the recovery, the 0:20:53.760 --> 0:20:59.040 consumer discretionary stocks that lead the stock market. Overall, consumer 0:20:59.119 --> 0:21:02.120 confidence is high. The dovetails, I think, with a much 0:21:02.160 --> 0:21:07.200 better uh, real wage growth than what recognized. You know, Jim, 0:21:07.240 --> 0:21:10.880 I'm struck by the complacency in the market, paired with 0:21:11.000 --> 0:21:13.639 this idea of the perceived complacency, paired with this idea 0:21:13.680 --> 0:21:17.800 expressed in the Bank of America Merrill lynch Uh survey 0:21:17.840 --> 0:21:21.399 of fund managers showing that nearly half of fund managers 0:21:21.480 --> 0:21:24.679 think that there is bubble like condition. There is a 0:21:24.720 --> 0:21:28.480 bubble like condition in text stocks. And Jim, over your 0:21:28.600 --> 0:21:32.440 decades of work at Wells Capital Management, which you left 0:21:32.800 --> 0:21:36.280 earlier this year, have you ever seen another period of 0:21:36.320 --> 0:21:40.440 time similar to this one, and which one would you identify? Well, 0:21:40.560 --> 0:21:43.560 I think I think there's been some similar but not 0:21:44.080 --> 0:21:48.199 quite like this. You know, Certainly a concentrated move in 0:21:48.320 --> 0:21:52.200 one section of the market does occur in different times. 0:21:52.160 --> 0:21:54.520 I mean that's certainly in nifty fifty and the early seventies, 0:21:55.119 --> 0:21:58.840 the dot com move, other times in the late seventies, 0:21:58.840 --> 0:22:03.919 early asianal move and energy stocks, a small cap stocks 0:22:03.960 --> 0:22:07.200 sometimes in the sixties. I mean, there's there's been concentrated 0:22:07.760 --> 0:22:10.800 movements like we've had in this but I think this 0:22:11.680 --> 0:22:15.600 stands out is unique and that I don't remember something 0:22:15.640 --> 0:22:18.679 being it's not even so much concentrate to a sector 0:22:18.760 --> 0:22:22.000 lease as it is concentrated to just a handful of names, 0:22:23.000 --> 0:22:26.800 uh that make up a very large portion of the marketplace. 0:22:27.880 --> 0:22:30.800 Outsize portion by just a handful of stocks is something 0:22:30.840 --> 0:22:33.879 that's kind of unique. So if you do have I 0:22:33.920 --> 0:22:36.000 think the overall market is not in that bad of 0:22:36.080 --> 0:22:40.240 shape from evaluation perspective, but if it's being dominated by 0:22:40.400 --> 0:22:43.639 you know, five or six stocks that make up a 0:22:43.680 --> 0:22:48.480 really sizeable portion that are extended, then it can become 0:22:48.480 --> 0:22:51.080 a market event in a way that it really hasn't 0:22:51.440 --> 0:22:54.320 in the past. Certainly when we had the nifty fifty 0:22:54.440 --> 0:22:57.160 that was somewhat like that, but a lot of other 0:22:57.200 --> 0:23:01.040 stocks are also I think extended words day, it's really 0:23:01.080 --> 0:23:04.240 concentrated just among a few. There's not a real precedent 0:23:04.320 --> 0:23:08.040 to have so much valuation risk concentrated amongst so few. 0:23:08.600 --> 0:23:11.160 Can you speak a little bit, Jim about the historic 0:23:11.320 --> 0:23:16.159 levels of valuation for let's say the SMP. Yeah, I 0:23:16.200 --> 0:23:20.119 think that's great pointing another survey way that caught my 0:23:20.200 --> 0:23:23.000 eye this morning. So there was another Bank American survey 0:23:23.040 --> 0:23:28.960 that said some record setting proportion of of investors think 0:23:29.000 --> 0:23:32.200 the market is overvalued by you know, extensively overvalued today, 0:23:32.200 --> 0:23:36.480 And I think that's interesting. Um uh, if you will. 0:23:36.520 --> 0:23:39.680 But what I've seen one of the most popular long 0:23:39.760 --> 0:23:43.679 term valuation methodologies is put out by Robert Schiller. The 0:23:43.960 --> 0:23:48.199 cape price earnings multiple goes back to eighteen seventy, I believe, 0:23:49.000 --> 0:23:52.200 And what I find interesting is that in the last 0:23:52.240 --> 0:23:56.560 quarter century, going back to last twenty five years, based 0:23:56.560 --> 0:24:01.120 on that really popular cape P motible, that thing has 0:24:01.160 --> 0:24:06.160 been above it's long term average like percent of the time. 0:24:07.080 --> 0:24:11.359 It's actually been above the nine percentile evaluation in the 0:24:11.440 --> 0:24:17.360 last year, uh about half the time. So this has 0:24:17.400 --> 0:24:20.280 been It is a highly valued market today, and people 0:24:20.320 --> 0:24:23.800 perceive it that way. But I'm really starting to question 0:24:23.840 --> 0:24:27.880 it because if something has been overvalued accessively for twenty 0:24:27.920 --> 0:24:32.560 five years, at what point do you suggest that this 0:24:32.560 --> 0:24:34.760 this isn't just a one off. It's going to correct, 0:24:35.400 --> 0:24:40.320 but maybe we're in a new evaluation situation. Jim. I'm 0:24:40.320 --> 0:24:42.160 struck by how bullish you are, because this is all 0:24:42.160 --> 0:24:46.040 basically casting some doubts on the pessimism that we're seeing 0:24:46.080 --> 0:24:48.399 in these surveys and by the increasing amount of cash 0:24:48.400 --> 0:24:54.360 and people's portfolios. Yeah, it is. I get the valuation risk. 0:24:54.440 --> 0:24:57.159 I think there's this real valuation risk, but that won't 0:24:57.200 --> 0:25:02.040 be realized until probably the next recession, and I don't 0:25:02.080 --> 0:25:05.560 think that's close. I think it's a ways off. So 0:25:05.640 --> 0:25:08.680 I think this valuation risk could get more extreme. And 0:25:09.680 --> 0:25:11.760 I love the fact that we've got a record number 0:25:11.760 --> 0:25:14.760 of people saying that the markets over valued, that we've 0:25:14.760 --> 0:25:19.080 got record cash holdings on the sidelines out there, that 0:25:19.160 --> 0:25:22.679 we have this perpetual there's one tagline for this bowl, 0:25:23.320 --> 0:25:26.040 it's that it's forever climb the perpetual wall of worry 0:25:26.080 --> 0:25:29.280 that is still there today. I think there's more upside yet, 0:25:29.480 --> 0:25:34.000 in part because we don't have enough people playing it 0:25:34.080 --> 0:25:36.520 in this part. Jim, thank you so much for joining us. 0:25:36.760 --> 0:25:39.760