WEBVTT - Surveillance: Soft Landings with Carpenter 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.799 To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.160 and of course on the Bloomberg terminal. We are honored 0:00:30.280 --> 0:00:33.320 to give you the chief Global Economist at Morgan Stanley. 0:00:33.360 --> 0:00:36.520 They have a heritage which is defined by Stephen Roach 0:00:36.600 --> 0:00:40.680 and others over the years. Seth Carpenter joins us this morning. Seth, 0:00:40.720 --> 0:00:43.040 I'm gonna go to the Morgan Stanley way, which is 0:00:43.080 --> 0:00:48.120 you guys under roaches, leadership, codified, a vision, visible argument. 0:00:48.560 --> 0:00:51.320 What is the number one thing your team is arguing 0:00:51.360 --> 0:00:55.760 about as we enter two thousand twenty three. Gosh, what 0:00:55.880 --> 0:00:57.760 sorts of things that were not arguing about. Let me 0:00:57.960 --> 0:01:00.240 say I I heard you all just the where the 0:01:00.280 --> 0:01:04.759 segment talking about the ADP data and the labor market 0:01:04.840 --> 0:01:06.800 and whether or not the economy is slowing in one 0:01:06.840 --> 0:01:10.559 place where we have um tried to hold our ground. 0:01:10.600 --> 0:01:12.800 Ellen Sander, as you know, as our chief US economist, 0:01:13.120 --> 0:01:15.720 she and I have been steadfast and saying we think 0:01:15.720 --> 0:01:18.880 the economy is clearly slowing, but boy, we're not calling 0:01:18.920 --> 0:01:23.160 for a recession in three. We're still there. I don't 0:01:23.200 --> 0:01:25.520 think we're actually in the majority with that view, but 0:01:25.600 --> 0:01:28.160 the fact that the economy is holding up is part 0:01:28.160 --> 0:01:33.240 of our view. There you mentioned the initial jobless claims data. Uh, 0:01:33.280 --> 0:01:35.160 what we're thinking is going to happen, and this is 0:01:35.160 --> 0:01:37.960 consistent with the anecdotes from the minutes, is that businesses 0:01:37.959 --> 0:01:41.400 will try to hoard labor, and so what we're likely 0:01:41.440 --> 0:01:43.920 to see is slower and slower and slower. Non farm 0:01:43.959 --> 0:01:47.160 perils will get tomorrow's data obviously where we're looking for 0:01:47.240 --> 0:01:51.040 about five thousand UM, but we're looking for us slowing 0:01:51.080 --> 0:01:53.840 down and hiring. We're not looking for a wave of 0:01:55.000 --> 0:01:57.640 picking out that territory is going to be is where 0:01:57.640 --> 0:02:00.080 we've been. We've alluded to the seventies. You two on 0:02:00.200 --> 0:02:03.120 to remember the embarrassing Lapel's Michael McKee and I wore 0:02:03.280 --> 0:02:08.640 years ago. What actually happens to our economy, frankly, the 0:02:08.639 --> 0:02:12.040 global economy. If we got a Neil cash cary five 0:02:12.080 --> 0:02:16.480 point four percent, a board six point seven whatever percent, 0:02:16.880 --> 0:02:18.919 do we all fall apart and die? Or I mean 0:02:19.040 --> 0:02:22.960 we we move forward, right, I mean, I do think 0:02:23.000 --> 0:02:26.120 we move forward, but you know, we are looking for 0:02:26.160 --> 0:02:29.120 a soft ish landing, if I can steal that phrase 0:02:29.160 --> 0:02:31.880 from share pol. I do believe that the committee right 0:02:31.919 --> 0:02:35.880 now is feeling their way. They are close to being 0:02:36.000 --> 0:02:38.440 as restrictive as they need to be. It'll be up 0:02:38.480 --> 0:02:41.040 to the next several data points to figure out exactly 0:02:41.080 --> 0:02:45.160 when they call it quits on hiking. But then it's 0:02:45.160 --> 0:02:47.560 going to be a question for them how long to 0:02:47.680 --> 0:02:50.359 stay restrictive like that. And I think that's the part 0:02:50.360 --> 0:02:53.440 that the market really needs to internalize, is that the 0:02:53.480 --> 0:02:57.040 FETE is not trying to trash the economy now to 0:02:57.080 --> 0:03:01.360 bring inflation down next year. They're trying to slow the 0:03:01.400 --> 0:03:04.040 economy down over a multi year process, and that really 0:03:04.120 --> 0:03:06.160 is going to be the difference I think between now 0:03:06.639 --> 0:03:08.959 uh and the seventies. And for the record, I was 0:03:09.000 --> 0:03:12.880 alive for all of thee that there is this issue 0:03:13.200 --> 0:03:15.480 of how much do you actually listen to what FED 0:03:15.520 --> 0:03:18.160 officials say and do what they say, versus take that 0:03:18.200 --> 0:03:20.280 as signaling that's playing some game theory to try to 0:03:20.280 --> 0:03:22.120 get the market to a place so that they can 0:03:22.160 --> 0:03:24.280 then say, look, we're all good and we don't have 0:03:24.320 --> 0:03:26.600 to raise rates as much as we previously thought. I 0:03:26.639 --> 0:03:29.560 say this as Kansas City FEDS esther George speaks and 0:03:29.600 --> 0:03:32.240 start talking about how she raised her forecasts for our 0:03:32.280 --> 0:03:34.520 FEDS rates will ultimately end up. This is kind of 0:03:34.520 --> 0:03:37.440 what Neil Kushkari was talking about a bit yesterday. Does 0:03:37.480 --> 0:03:40.200 that guide you in any capacity? Do you trust them 0:03:40.440 --> 0:03:41.960 or do you push back against them with the rest 0:03:42.000 --> 0:03:45.440 of the market. Uh So I trust them in the 0:03:45.520 --> 0:03:48.480 in the following sense, they are talking about what they 0:03:48.880 --> 0:03:52.280 think they would do based on the availability of information 0:03:52.440 --> 0:03:54.800 right now. Uh. And so then what we have to 0:03:54.800 --> 0:03:57.480 do is overlay well we think is actually going to 0:03:57.560 --> 0:04:01.320 happen with the actual data, what's going to happen with jobs, 0:04:01.320 --> 0:04:04.800 what's going to happen with inflation? And if inflation keeps 0:04:04.840 --> 0:04:07.680 coming off as it has been, and if job creation 0:04:07.760 --> 0:04:10.800 continues to slow, then I think what they're going to 0:04:10.840 --> 0:04:13.720 say is, Wow, we have got the traction that we 0:04:13.760 --> 0:04:17.760 wanted from restrictive policy, and we were seeing this sloan 0:04:17.839 --> 0:04:19.760 that we want, so we'll be able to step back. 0:04:19.800 --> 0:04:21.200 So I don't think they're going to get to the 0:04:21.240 --> 0:04:24.080 heights with the funds rate that some of the members 0:04:24.120 --> 0:04:27.640 of the Committee have pointed to because I think the 0:04:27.720 --> 0:04:29.760 data will slow enough to give the core of the 0:04:29.760 --> 0:04:32.520 committee that sort of comfort that they can stop. The 0:04:32.560 --> 0:04:34.960 problem is is that the data on the goods inflation 0:04:35.040 --> 0:04:38.480 has slowed, that you are seeing some disinflation there, but 0:04:38.520 --> 0:04:40.520 you're not seeing that in jobs. And this is where 0:04:40.520 --> 0:04:43.520 we go. Let's let's really end where we began here. 0:04:43.839 --> 0:04:46.920 This is the big dilemma. Will the Fed keep hiking 0:04:47.000 --> 0:04:49.320 rates in the face of strong labor market data even 0:04:49.320 --> 0:04:52.719 if there are signs of disinflation elsewhere? Yeah, I think 0:04:52.720 --> 0:04:56.840 if it is continued very strong labor market, then then 0:04:56.880 --> 0:04:59.680 I think they keep going. You know, we're looking for 0:05:00.000 --> 0:05:04.359 another step down tomorrow. The ADP data came in. I 0:05:04.400 --> 0:05:06.120 tend not to look at their numbers, but I do 0:05:06.320 --> 0:05:09.440 spend time looking at the commentary that comes through, and 0:05:09.520 --> 0:05:11.640 they are pointing to a little bit of easing of 0:05:11.720 --> 0:05:14.120 wage pressures as well. So I do think we are 0:05:14.160 --> 0:05:16.400 seeing signs that were going in the right direction, that 0:05:16.480 --> 0:05:19.560 things are slowing. But there's no sense in which right 0:05:19.600 --> 0:05:21.520 now things are weak. If we went back up to 0:05:21.600 --> 0:05:23.560 three hundred thousand jobs per month and stay and then 0:05:23.640 --> 0:05:26.159 there's no question they keep hiking Before we let you go, Seth. 0:05:26.440 --> 0:05:29.760 I want to mark a funeral for negative fielding debt. 0:05:30.040 --> 0:05:32.320 It is gone, it is dead. It is over. The 0:05:32.400 --> 0:05:35.839 last negative field in coupon has gone. Well, the consequences 0:05:36.080 --> 0:05:38.560 of the end of the negative yielding era be born 0:05:38.680 --> 0:05:41.560 out over the next decade, over the next year, or 0:05:41.560 --> 0:05:45.159 have we already seen it in what we experienced last year? Oh? 0:05:45.200 --> 0:05:47.880 I think there's I think there's any number of repercussions 0:05:47.880 --> 0:05:50.000 to come. And if if we're right and the feed 0:05:50.120 --> 0:05:52.240 is able to stick with their strategy of not just 0:05:52.720 --> 0:05:55.360 hiking until they're restrictive, but staying there for at least 0:05:55.400 --> 0:05:58.760 the balance of this year, then then those higher rates 0:05:58.760 --> 0:06:00.720 are going to be have have an effect for some 0:06:00.800 --> 0:06:03.480 time to come. I think the other interesting question that 0:06:03.560 --> 0:06:05.760 will come up and will be a topic of discussion 0:06:05.839 --> 0:06:10.240 is going to be one of fiscal sustainability because as 0:06:10.279 --> 0:06:13.520 those interest rates go open player and governments have increased 0:06:13.520 --> 0:06:16.320 their dead totally entertainment that they're making is going to 0:06:16.400 --> 0:06:18.120 have to go up as well. So I've been nice 0:06:18.120 --> 0:06:20.280 at Ollen Sentner, you know, but just you know, New 0:06:20.320 --> 0:06:23.200 Year's resolution, don't be so argumented like Steve Roach was 0:06:23.320 --> 0:06:27.080 years ago. Seth carpenter of the fractures Margan Stanley team 0:06:27.160 --> 0:06:33.080 as well. Here's the line from Anon Sender right from 0:06:33.080 --> 0:06:37.159 Morgan Stanley, financial conditions aren't too easy, reflecting a misperception 0:06:37.200 --> 0:06:40.200 among investors of the fetes reaction function. Let's get Russ 0:06:40.200 --> 0:06:42.040 cos tricks view on that. The portfolio manager for the 0:06:42.040 --> 0:06:44.599 black Rock Global Allocation Fund Russ. Would you agree with 0:06:44.600 --> 0:06:48.760 that line from Annon Sentmocan Stanley, Well, good morning, Jonathan. 0:06:48.839 --> 0:06:51.640 I think i'd agree with the fact that there's clearly 0:06:51.720 --> 0:06:54.640 this tension right now within the Federal Reserve. This is 0:06:54.680 --> 0:06:56.320 not a new thing. This is what you rail the 0:06:56.360 --> 0:06:59.840 market back in August, where you're concerned about the market 0:07:00.000 --> 0:07:03.359 eating ahead of itself, whether that's a function of the 0:07:03.400 --> 0:07:06.520 stock market going too high, credit markets getting too tight. 0:07:07.000 --> 0:07:09.960 There is that concern that the financial conditions ease off 0:07:10.000 --> 0:07:13.280 too much. Is that going to hamper their fight against inflation? 0:07:14.680 --> 0:07:17.640 And I look for us where we are, and we 0:07:17.680 --> 0:07:20.520 have to piece this together. You have the responsibility to 0:07:20.560 --> 0:07:26.200 piece it together with portfolio allocation. How are you reallocating? 0:07:27.440 --> 0:07:30.160 So honestly, you know, Tom, we are pretty much going 0:07:30.200 --> 0:07:32.600 into twenty three the way we left twenty two up. 0:07:32.960 --> 0:07:35.400 We're not making a major change right now. So what 0:07:35.440 --> 0:07:39.480 does the portfolio look like. We're underweight equities, were underweight bonds. 0:07:39.800 --> 0:07:43.160 Were emphasizing carrying the portfolio because in a market that's 0:07:43.280 --> 0:07:45.400 range bound, we want to be able to earn some 0:07:45.480 --> 0:07:49.800 income for our clients. We're focused on quality stocks. Now. 0:07:49.880 --> 0:07:52.600 I do think we're gonna get to a point later 0:07:52.640 --> 0:07:55.640 in the year, probably in the first half, were closer 0:07:55.680 --> 0:07:59.040 to a FED pivot. At that point, evaluations are where 0:07:59.040 --> 0:08:00.960 they are a bit lower. I think you can get 0:08:01.000 --> 0:08:03.800 a very good tradeable bottom. But this is not the 0:08:03.920 --> 0:08:06.160 point where I think you want to load up on risks. 0:08:06.360 --> 0:08:09.040 Are the the cost cutting is going to be efficacious 0:08:09.120 --> 0:08:12.640 as every corporation and every sector goes out and recalibrates. 0:08:12.680 --> 0:08:15.000 Here as we see from tech and all that. I 0:08:15.000 --> 0:08:18.360 don't mean to micro call it, but are thinking to 0:08:18.440 --> 0:08:21.240 be efficacious and helping their margins, are they actually going 0:08:21.280 --> 0:08:24.080 to have impact? Well, let's over a couple of things. 0:08:24.120 --> 0:08:25.640 I mean, tell him, I think you raised a very 0:08:25.680 --> 0:08:28.240 important point. You know, a few minutes ago, you know 0:08:28.680 --> 0:08:32.680 Big check is ridiculously profitable. You know, if you look 0:08:32.760 --> 0:08:35.439 at most of the companies in the NASTAC one hundred, 0:08:35.480 --> 0:08:39.360 particularly the megacap tech names, their cash flow, their profitability 0:08:39.400 --> 0:08:42.440 is enormous. Margins just still close to a record high. 0:08:42.800 --> 0:08:45.960 So yes, companies are gonna trying to manage costs that 0:08:46.120 --> 0:08:49.160 arguably climbed up a little too much during the the 0:08:49.200 --> 0:08:52.760 euphoria post pandemic. But the reality is these are still 0:08:53.000 --> 0:08:57.160 very profitable companies. We're not talking about two thousand when 0:08:57.160 --> 0:09:00.679 you had Banhastic one D and barely any offit ability. 0:09:01.160 --> 0:09:02.680 Ross I can't let you get away with saying the 0:09:02.679 --> 0:09:05.640 word pivot without really pressing into what that means. You 0:09:05.679 --> 0:09:08.040 think that with all of this backdrop and the potential 0:09:08.080 --> 0:09:10.200 pain that we're seeing in terms of layoffs, there will 0:09:10.240 --> 0:09:12.559 be a pivot. What does pivot mean? Does it mean cuts? 0:09:12.559 --> 0:09:15.280 Does it mean a pause? I think it's more of 0:09:15.280 --> 0:09:17.439 a pause. I think the FED has been very clear 0:09:17.440 --> 0:09:20.319 and again conditions can change, and they reserve the right 0:09:20.360 --> 0:09:24.040 to change their minds. But it's not necessarily practical to 0:09:24.080 --> 0:09:27.560 expect cuts this year. The question is where where's the 0:09:27.559 --> 0:09:30.280 turninal FED funds rate? Is it five five and a 0:09:30.400 --> 0:09:33.680 quarter market right now? Is uh? You know, forecasting someone 0:09:33.720 --> 0:09:36.440 in the zip code to five or the conditions force 0:09:36.520 --> 0:09:38.280 them to go much higher than that to five and 0:09:38.280 --> 0:09:40.720 a half five and three quarters. I think that's the 0:09:40.800 --> 0:09:43.360 question the market right now is trying to resolve. Is 0:09:43.400 --> 0:09:46.680 you see signs of deceilration and inflation as you see 0:09:46.720 --> 0:09:49.199 some salt in the labor market, and you get clarity 0:09:49.240 --> 0:09:52.000 around that. That I think is when you get a 0:09:52.000 --> 0:09:55.079 more tradeable bottom in financial markets. Can we get to 0:09:55.120 --> 0:09:57.960 a pivot, Russ if we don't get a significant sell 0:09:58.040 --> 0:10:00.920 off in equities, if we don't get the tightening for 0:10:01.240 --> 0:10:04.920 financial conditions that the FED has been looking for, Yes, 0:10:05.000 --> 0:10:07.600 I think you can. I think the FED is clearly 0:10:08.000 --> 0:10:11.040 financial conditions are are front and center. But at the 0:10:11.120 --> 0:10:13.160 end of the day, they've told us what they're focused on, 0:10:13.200 --> 0:10:15.480 And if I had to focus on one factor, it's 0:10:15.480 --> 0:10:17.760 going to be the labor market. Because we know that 0:10:17.840 --> 0:10:21.800 headline inflation is coming down, goods inflation is coming down. 0:10:22.120 --> 0:10:25.240 What has been remarkably resilient has been the labor market. 0:10:25.600 --> 0:10:27.000 And that's where I think the FED is going to 0:10:27.080 --> 0:10:29.559 focus not necessarily and whether the S and P five 0:10:29.640 --> 0:10:32.800 hundreds at thirty seven hundred or thirty nine, Russ, can 0:10:32.840 --> 0:10:34.720 you help me understand what's going on with the labor market. 0:10:34.800 --> 0:10:36.800 So I looked at the quits right yesterday got the 0:10:36.880 --> 0:10:39.560 jobs report. Job openings, quits are up, Quits picked up 0:10:39.600 --> 0:10:42.360 for the first time since February. That screams confidence in 0:10:42.400 --> 0:10:44.960 the labor market. Job opening still about one point seven 0:10:45.400 --> 0:10:48.560 openings for every single unemployed American. Again, that screams a 0:10:48.640 --> 0:10:51.880 tight labor market. Then, Russ, I see this news from Salesforce, 0:10:52.120 --> 0:10:54.280 from Amazon, from others as well. Russ, We're trying to 0:10:54.320 --> 0:10:56.839 work out what should I believe here we the corporations 0:10:56.840 --> 0:10:59.120 in one industry, autnemy or what the official data is 0:10:59.160 --> 0:11:02.080 telling me month a month, weay come weak. Well, I 0:11:02.080 --> 0:11:04.000 think I think you hit it. It's what the its 0:11:04.040 --> 0:11:06.520 industry by industry, and that is why this is such 0:11:06.559 --> 0:11:10.520 a difficult labor market. Absolutely, we're seeing layoffs in tech, 0:11:11.080 --> 0:11:14.960 We're seeing solignated in parts of the professional class. But 0:11:15.240 --> 0:11:20.439 if you look at other parts of the labor market, hospitality, restaurants, healthcare, 0:11:21.000 --> 0:11:23.880 these segments of the economy lost hundreds of thousands of 0:11:23.920 --> 0:11:27.440 workers during the pandemic that have never come back. They're 0:11:27.440 --> 0:11:30.440 still missing workers, which is why the quit rate is 0:11:30.480 --> 0:11:33.440 still high, and that's why the labor market may remain 0:11:33.559 --> 0:11:36.560 somewhat resilient, at least in those parts of the market 0:11:36.600 --> 0:11:39.720 that are playing catch up with all of his dislocations 0:11:39.760 --> 0:11:42.320 that happened during the pandemic. I rush, this was great. 0:11:42.320 --> 0:11:43.880 We appreciate it happen to year to you in the 0:11:43.920 --> 0:11:58.319 same thank you breast constrict typing of black Tom Forte 0:11:58.440 --> 0:12:01.600 with us. He's senior research unlest did d a davidsonboat 0:12:01.640 --> 0:12:06.160 It really is is a guy encyclopedic on what goes 0:12:06.200 --> 0:12:10.040 on at Amazon. The background story we don't hear of. 0:12:10.440 --> 0:12:13.400 I love how you end your note. Tom. You talk 0:12:13.480 --> 0:12:17.400 about revenge travel. Bramo owns that, and you also talk 0:12:17.520 --> 0:12:20.640 about we're all going to see Taylor Swift. You've gotta 0:12:20.679 --> 0:12:23.840 be kidding me. Did Amazon just blow this with a 0:12:23.880 --> 0:12:29.880 blowout growth track to the end of the pandemic? Sure? So, 0:12:30.200 --> 0:12:35.640 e commerce companies in general overestimated demands for the current 0:12:35.679 --> 0:12:38.400 state of the pandemic, not just Amazon. You see it 0:12:38.400 --> 0:12:42.400 at Wayfair, you see it at Shopify. So I think 0:12:42.440 --> 0:12:46.680 that what what happened was initially, when the stores were closed, 0:12:46.960 --> 0:12:52.400 consumers leaned into e commerce to such extensive levels that 0:12:52.640 --> 0:12:55.840 there was an expectation that those levels would hold. And 0:12:55.960 --> 0:12:59.480 first what happened is consumers return to physical stores. Then 0:13:00.160 --> 0:13:02.480 they had inflation, so they had more money spent on 0:13:02.559 --> 0:13:06.560 food and on energy, and then they had Revengie Travel, 0:13:07.120 --> 0:13:09.600 and then they had Taylor Swift. So I think you 0:13:09.640 --> 0:13:12.720 are seeing a return to live events. But from Amazon's 0:13:12.800 --> 0:13:16.040 vanage point, as well as Wayfair and shopifies, people are 0:13:16.080 --> 0:13:19.040 not shopping on e commerce and that's a problem at least. 0:13:19.080 --> 0:13:21.199 So this is just as shattered the A and R 0:13:21.280 --> 0:13:24.600 screen on the Bloomberg there's fifty five buys, three holes 0:13:25.400 --> 0:13:28.920 in one cell the streets, just violently against what Jesse 0:13:29.080 --> 0:13:31.920 is doing. Yeah, clearly they don't see this is being 0:13:31.960 --> 0:13:34.040 a massive downside. In fact, this might just be just 0:13:34.160 --> 0:13:37.360 the medicine the Amazon needs to have the same kind 0:13:37.400 --> 0:13:39.480 of profitability that they're pricing in. I do wander though, 0:13:39.520 --> 0:13:43.240 Tom eighteen tho corporate jobs cut. Does that indicate a 0:13:43.320 --> 0:13:46.120 much broader wave of job cuts among the rank and 0:13:46.160 --> 0:13:49.160 file in the months to come? Yes, So I think 0:13:49.200 --> 0:13:51.319 part of what you're seeing is so if you look 0:13:51.360 --> 0:13:54.600 at Salesforce laying off ten thousand, you look at you know, 0:13:54.960 --> 0:13:58.520 big tech company to your with more layoffs, is that 0:13:58.760 --> 0:14:02.920 to some extent there was some element of bloated headcount. 0:14:03.240 --> 0:14:05.839 So you had a very tight job market, especially in 0:14:05.880 --> 0:14:09.520 the technology area, and you have companies that ramped their 0:14:09.520 --> 0:14:14.280 headcount very significantly. Some of it was a miscalculation of demand, 0:14:14.679 --> 0:14:16.600 but I think some of it is turning out to 0:14:16.640 --> 0:14:19.640 be bloated headcount. So I think that there is a 0:14:19.640 --> 0:14:23.520 possibility that you could see some margin improvement in Amazon 0:14:23.920 --> 0:14:27.160 and some of these other big tech companies from scaling 0:14:27.160 --> 0:14:29.800 back their headcount. But I do think it is worrisome 0:14:30.120 --> 0:14:32.520 again for the current state of demand for e commerce. 0:14:33.280 --> 0:14:35.800 This is kind of bizarre to me. Tom. Basically, this 0:14:35.920 --> 0:14:37.520 is like Tom going to the bobs and asking for 0:14:37.520 --> 0:14:40.000 a hairdcunt. Someone pulls out of teas. Tom, this is 0:14:40.040 --> 0:14:41.880 even a big problem, and they're not dealing with it, 0:14:42.280 --> 0:14:43.800 or it's not a big problem, and that just doing 0:14:43.840 --> 0:14:46.280 something small. I didn't get it. Tom. If I've got 0:14:46.320 --> 0:14:50.920 one point five median people on the books, then what 0:14:51.080 --> 0:14:54.520 is eighteen thousand? So so think of it as two ways. 0:14:54.600 --> 0:14:58.760 Amazon basically has two workforces, the blue collar workforce that 0:14:58.880 --> 0:15:01.880 employs that the fulfillment center. They had a hundred thousand 0:15:02.000 --> 0:15:04.840 quiet production and headcamp between the March quarter and June 0:15:04.880 --> 0:15:07.720 quarter of last year. As they basically didn't hire back 0:15:08.280 --> 0:15:11.880 on attrition. And then the white collar workforce. And what 0:15:11.960 --> 0:15:14.560 we're talking about here is a white collar workforce eighteen 0:15:14.560 --> 0:15:17.280 thousand jobs and a ten thousand jobs, and I think 0:15:17.360 --> 0:15:21.800 that is an indication of software demand and a greater 0:15:21.880 --> 0:15:25.840 effort for cost controls. So two different labor forces in Amazon. 0:15:26.320 --> 0:15:29.720 Here we're talking more about white collar job layoffs. That's 0:15:29.720 --> 0:15:32.520 impulland climsy tumpson. Can you tell me where the other 0:15:32.600 --> 0:15:34.600 leavers are and whether you think they might have to 0:15:34.640 --> 0:15:37.880 be pulled in the year ahead. The big challenge for 0:15:37.960 --> 0:15:41.080 Amazon in the third quarter wasn't that their e commerce 0:15:41.160 --> 0:15:44.240 was slowing. It was that their higher margin, higher growth 0:15:44.480 --> 0:15:48.240 cloud computing and advertising business. We're starting to feel the 0:15:48.320 --> 0:15:53.040 negative impact of challenging macroeconomic environment environment. So to the 0:15:53.080 --> 0:15:56.280 extent that you consider, you see more weakness than ten 0:15:56.320 --> 0:16:00.520 thousand could become eighteen thousand could become thirty thousand. Will 0:16:00.520 --> 0:16:03.320 see how they continue to manage costs as the demand, 0:16:03.680 --> 0:16:07.760 especially for cloud computing and advertising, remains in flux in 0:16:07.760 --> 0:16:11.400 a challenging macro tom what is Jesse gonna do about 0:16:11.440 --> 0:16:17.320 the ginormous headache the logistics of the last mile for Amazon? 0:16:17.760 --> 0:16:20.920 They got all those boxes piled up, and it just 0:16:20.920 --> 0:16:24.240 seems like getting the last mile, getting the last four miles, 0:16:24.560 --> 0:16:27.160 getting the last four hundred yards in New York City 0:16:27.680 --> 0:16:29.760 is the ultimate battle. Are they going to fix that? 0:16:31.080 --> 0:16:33.800 I think this is their strength. So if you look 0:16:33.800 --> 0:16:37.280 at the duopoly of FedEx in UPS, one of my 0:16:37.360 --> 0:16:41.360 favorite moments in UH tech was within the last three 0:16:41.360 --> 0:16:44.640 months when FedEx said we're about to enter a global recession. 0:16:45.120 --> 0:16:48.920 Second statement, we're raising prices. So I see an opportunity 0:16:49.040 --> 0:16:53.280 for Amazon to use their first party delivery efforts for 0:16:53.360 --> 0:16:57.600 all retailers. They could break the duopoly of FedEx and UPS. 0:16:57.640 --> 0:17:00.360 So I see that as actually an opportunity for Amazon, 0:17:00.880 --> 0:17:03.480 and I think that that's something that seven percent of 0:17:03.520 --> 0:17:06.320 units sold an Amazon were third party that could grow 0:17:06.320 --> 0:17:10.840 to sever time. Leveraging their delivery effort is what will 0:17:10.920 --> 0:17:15.840 enable them to do that. That's fascinating clinic from some 0:17:16.040 --> 0:17:17.679 FOTA at Day, I send him what he thinks it's 0:17:17.680 --> 0:17:23.919 gonna happen with Amazon. We thought we would get some 0:17:24.000 --> 0:17:27.680 perspective on the madness in Washington now. And there's no 0:17:27.720 --> 0:17:30.919 one better than Wendy Schiller, who owns a high ground 0:17:30.920 --> 0:17:35.320 at Brown University on American politics. Wendy, I'm gonna cut 0:17:35.400 --> 0:17:37.560 to the chase. You and I were channeling the great 0:17:37.640 --> 0:17:41.880 Alan Evans on Grover Cleveland and a time from another place, 0:17:42.440 --> 0:17:45.320 and there was a guy from Maine, Tom Reid of 0:17:45.400 --> 0:17:50.119 Bowden College, who changed the rules. What did Zuri do 0:17:50.720 --> 0:17:54.360 in eighteen eighty five or whatever that matters to Mr 0:17:54.440 --> 0:17:58.680 McCarthy today, it's it's very similar. He changed the Rules Committee. 0:17:58.680 --> 0:18:01.520 The Rules Committee is the gateway put legislation on the floor, 0:18:01.640 --> 0:18:03.399 and when you get through the Rules Committee, they determine 0:18:03.400 --> 0:18:05.360 which amendments you can offer and who can offer them, 0:18:05.359 --> 0:18:07.960 and how long you debate the bill. So read basically 0:18:08.000 --> 0:18:10.560 stacked the deck. He took control of Speaker of the 0:18:10.640 --> 0:18:12.919 Rules Committee and then gave the Rules Committee and the 0:18:12.920 --> 0:18:16.760 Steering Committee the opportunity to shape legislation and cut out 0:18:16.800 --> 0:18:19.320 individual members and members gave him the power to do 0:18:19.359 --> 0:18:22.320 that precisely what you just mentioned, Tom. The McKinley Tarift Bill, 0:18:22.560 --> 0:18:24.520 they all wanted to get it past a big industry. 0:18:24.560 --> 0:18:27.159 Republicans were united. They needed to get it through, and 0:18:27.160 --> 0:18:30.520 they needed a uniform process to squelch all the opposition, 0:18:30.520 --> 0:18:33.560 particularly Southern Democrats who want to free trade that's not 0:18:33.680 --> 0:18:35.879 here today. They don't seem to have a kind of 0:18:35.920 --> 0:18:40.480 agreement in the Republican Party singular policy calls. Pelosi had 0:18:40.560 --> 0:18:44.560 Louise slaughter, She went with an iron grip, handled the 0:18:44.640 --> 0:18:49.000 rules committee in a McCarthy house. Does he have a 0:18:49.080 --> 0:18:51.879 rules committee when maybe Greg Valier says he's going to 0:18:52.000 --> 0:18:54.240 give it up to one vote could throw him out 0:18:54.280 --> 0:18:57.680 of office? This isn't This is an even Pelosi slaughter 0:18:58.119 --> 0:19:01.320 of five years ago, is it? No? But you know 0:19:01.320 --> 0:19:04.840 they're clamoring for more open legislative process, you know, and 0:19:05.080 --> 0:19:07.840 in the midst of all the opposition and name calling, 0:19:08.200 --> 0:19:10.080 you know, in the Senate, the same thing. The parties 0:19:10.080 --> 0:19:12.840 have really consolidated leadership. Senators complained they can't do anything 0:19:12.840 --> 0:19:15.000 on the floor of the Cannel far amendments. The legislative 0:19:15.000 --> 0:19:18.199 process isn't really there anymore for for either chamber. So 0:19:18.280 --> 0:19:21.000 they're making a valid point that they want a bigger stay. 0:19:21.040 --> 0:19:22.920 And what happens, the problem is they don't share the 0:19:22.960 --> 0:19:26.159 same ideological viewpoint or policy goals, so they will obstruct 0:19:26.440 --> 0:19:30.040 and with such a slim margin, it really paralyzes the House. Wendy, 0:19:30.080 --> 0:19:34.280 the Democrats are remaining quiet, probably wisely so to allow 0:19:34.320 --> 0:19:37.119 this to play out without their input. I am wondering, 0:19:37.160 --> 0:19:39.560 though we had expected after the holidays to hear from 0:19:39.600 --> 0:19:42.720 President Biden about whether he would run again, he hasn't 0:19:42.760 --> 0:19:45.760 announced and talked about that at all. When is he 0:19:45.840 --> 0:19:48.520 going to discuss that more in full? Do you get 0:19:48.560 --> 0:19:50.800 any scuttle butt about what's going on on that behind 0:19:50.800 --> 0:19:53.600 the scenes? Well at LISTA, that's a great question. It 0:19:53.640 --> 0:19:55.520 seems to me since the State of the Union address 0:19:55.560 --> 0:19:58.000 will be earlier this year than it was last year, 0:19:58.080 --> 0:20:01.359 most likely makes sense to take that unique opportunity do 0:20:01.400 --> 0:20:03.879 it as a neutral, you know, bipartisan leader of the 0:20:03.880 --> 0:20:07.080 country event uh, and then announced you're gonna run. And 0:20:07.119 --> 0:20:09.440 if you do it beforehand, then everything about the State 0:20:09.440 --> 0:20:11.520 of the Union is tainted by that announcement. So my 0:20:11.560 --> 0:20:13.080 guess as he waits till after the State of the 0:20:13.160 --> 0:20:15.879 Union and does announce that he's going to seek the presidency, 0:20:15.960 --> 0:20:18.840 particularly if the Republicans look like they're in disarray, it 0:20:18.880 --> 0:20:22.000 really stomps on whatever momentum some of these challengers like 0:20:22.080 --> 0:20:26.560 Rhonda Scientists, Donald Trump have going into to look ahead 0:20:26.560 --> 0:20:29.159 to twenty four. Some people would argue the opposite that 0:20:29.320 --> 0:20:31.919 President Biden said that he would run again if former 0:20:31.960 --> 0:20:34.200 President Trump was in the running. Sure, he's in the running, 0:20:34.200 --> 0:20:35.560 but he's kind of taken a back seat when it 0:20:35.560 --> 0:20:39.439 comes to leadership, certainly with this latest House speaker nomination 0:20:39.680 --> 0:20:42.200 and vote that we've seen go down in d C. 0:20:42.440 --> 0:20:46.720 At what point does that factor into what President Biden does? 0:20:46.760 --> 0:20:49.359 Where does the leadership go for the future in the 0:20:49.400 --> 0:20:53.400 Democratic Party. Well that's a really great question. But right 0:20:53.440 --> 0:20:56.240 now Biden is like he's got a lead in sports analogy, 0:20:56.280 --> 0:20:57.760 He's got to lead in the game. He's sitting on 0:20:57.800 --> 0:21:00.280 the lead. They out team doesn't have their acting together. 0:21:00.680 --> 0:21:02.639 Why would you step off the field, Why would you 0:21:02.640 --> 0:21:04.359 give up the game? You know, He's gonna go forward. 0:21:04.359 --> 0:21:06.640 He's got some good cabinet members, got some good governors 0:21:06.640 --> 0:21:09.800 in the wings. I think given today's political environment, people 0:21:09.840 --> 0:21:12.919 can ramp up pretty quickly to run for president. So 0:21:13.040 --> 0:21:15.399 I don't think it hurts the Democratic Party. And as 0:21:15.440 --> 0:21:17.919