1
00:00:05,800 --> 00:00:08,360
Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim

2
00:00:08,400 --> 00:00:11,440
Speaker 1: Fox along with my co host Lisa Bramowitz. Each day

3
00:00:11,480 --> 00:00:15,000
Speaker 1: we bring you the most important, noteworthy, and useful interviews

4
00:00:15,040 --> 00:00:17,520
Speaker 1: for you and your money, whether you're at the grocery

5
00:00:17,560 --> 00:00:20,560
Speaker 1: store or the trading floor. Find the Bloomberg P M

6
00:00:20,680 --> 00:00:31,440
Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.

7
00:00:31,560 --> 00:00:33,800
Speaker 1: Right now, let's bring in Dave Wilson, Bloomberg Fox Editor,

8
00:00:33,840 --> 00:00:36,680
Speaker 1: columnist and blogger at M Life. Go on the Bloomberg.

9
00:00:36,880 --> 00:00:38,800
Speaker 1: I really want to start with bank earnings. We've got

10
00:00:38,840 --> 00:00:43,239
Speaker 1: Goldman Sachs as results. Uh. Interestingly, the reaction has been

11
00:00:43,479 --> 00:00:46,680
Speaker 1: decidedly mixed, even though they beat by quite a bit

12
00:00:46,840 --> 00:00:50,680
Speaker 1: on the top line revenues. Yeah, some concern with what's

13
00:00:50,680 --> 00:00:52,920
Speaker 1: going on with their equity trading business. That was a

14
00:00:53,000 --> 00:00:55,840
Speaker 1: weak spot in terms of revenue. Of course, you got

15
00:00:55,920 --> 00:01:03,280
Speaker 1: a management transition. It's understatement of the year management transition. Yeah, Boss, Well,

16
00:01:03,440 --> 00:01:06,040
Speaker 1: it's a process, okay, I mean it's not going to

17
00:01:06,120 --> 00:01:10,039
Speaker 1: happen right away. We know that Lloyd blank Find will

18
00:01:10,080 --> 00:01:13,280
Speaker 1: remain CEO and chairman until October one. We'll give up

19
00:01:13,280 --> 00:01:17,199
Speaker 1: the CEO job to President David Solomon. Then by Rand

20
00:01:17,200 --> 00:01:20,319
Speaker 1: will step down as chairman. Solomon will take that job.

21
00:01:20,520 --> 00:01:24,720
Speaker 1: So yeah, it's a transition that it's in something that's

22
00:01:24,720 --> 00:01:26,520
Speaker 1: been talked about for a few months. So it's not

23
00:01:26,680 --> 00:01:30,560
Speaker 1: surprised that, you know, it's like anything else. It's you know,

24
00:01:30,840 --> 00:01:34,280
Speaker 1: it's change coming to Goldman and you know people tend

25
00:01:34,360 --> 00:01:37,080
Speaker 1: not to like change very much, and that would explain

26
00:01:37,280 --> 00:01:40,319
Speaker 1: at least in part the stocks slide in early trading.

27
00:01:40,400 --> 00:01:43,200
Speaker 1: Also a big big mover today Netflix They were portty

28
00:01:43,200 --> 00:01:46,680
Speaker 1: disappointing earnings after the bell yesterday and they are just

29
00:01:46,760 --> 00:01:50,400
Speaker 1: getting hammered and bringing the nasdack down. UH shares? What it?

30
00:01:50,440 --> 00:01:52,240
Speaker 1: What's the latest with the shares? They were down, well,

31
00:01:52,240 --> 00:01:56,360
Speaker 1: they're down a bit more than ten percent. But what's interesting, though,

32
00:01:56,480 --> 00:01:58,720
Speaker 1: is if you go back and look at the history

33
00:01:58,800 --> 00:02:02,960
Speaker 1: of Netflix's move was after earnings reports, this is not

34
00:02:03,160 --> 00:02:07,360
Speaker 1: a surprise at all because you know, on average the

35
00:02:07,440 --> 00:02:11,079
Speaker 1: stock up or downcent going all the way back to

36
00:02:11,160 --> 00:02:14,320
Speaker 1: two thousand seven h the day after earnings, and you know,

37
00:02:14,440 --> 00:02:18,200
Speaker 1: today we were down at the low's fourteen percent and change,

38
00:02:18,280 --> 00:02:21,079
Speaker 1: and Netflix is actually making some of that back and

39
00:02:21,800 --> 00:02:24,639
Speaker 1: now the stock's only up eighty seven percent. For the year,

40
00:02:24,840 --> 00:02:27,680
Speaker 1: which really tells you, you know, what's happening here as

41
00:02:27,720 --> 00:02:30,040
Speaker 1: much as anything is a bit of a buy. The

42
00:02:30,160 --> 00:02:32,520
Speaker 1: rumors sell the news, even when the news isn't something.

43
00:02:33,560 --> 00:02:35,280
Speaker 1: I'm just gonna get you what's going on in the

44
00:02:35,360 --> 00:02:38,799
Speaker 1: bond market, which is basically nothing. Uh the ten year

45
00:02:38,840 --> 00:02:41,639
Speaker 1: at two point eight five percent, though the uh, well,

46
00:02:41,760 --> 00:02:45,160
Speaker 1: the two year at the two point six percent. I

47
00:02:45,240 --> 00:02:48,359
Speaker 1: want to bring in Carl Rickadonna, our chief US economist

48
00:02:48,440 --> 00:02:52,200
Speaker 1: for Bloomberg Economics, and Matt Posler are Bloomberg News reporter

49
00:02:52,280 --> 00:02:54,160
Speaker 1: who covers the Federal Reserve, And of course we are

50
00:02:54,200 --> 00:02:56,760
Speaker 1: awaiting Jerome Powell, Chair of the Federal Reserve, and his

51
00:02:56,880 --> 00:03:00,919
Speaker 1: testimony before a Congress. Um, Matt, what do you expect

52
00:03:01,040 --> 00:03:03,200
Speaker 1: him to say when we've got the prepared marks? But

53
00:03:03,240 --> 00:03:04,840
Speaker 1: I mean, is it really going to say anything that's

54
00:03:04,880 --> 00:03:07,720
Speaker 1: gonna be market moving? Well, that's a good question, you know,

55
00:03:07,800 --> 00:03:11,560
Speaker 1: I think, Um, maybe if they start getting into some

56
00:03:11,680 --> 00:03:14,720
Speaker 1: more detailed questions about the Fed's plans for interest rates

57
00:03:14,800 --> 00:03:16,240
Speaker 1: this year and next year, you know, there's a big

58
00:03:16,360 --> 00:03:19,639
Speaker 1: question about Um, the Fed kind of sees there's this

59
00:03:19,840 --> 00:03:22,160
Speaker 1: neutral interest rate that they think once they get to

60
00:03:22,240 --> 00:03:25,000
Speaker 1: that neutral rate, then um, you know, they will no

61
00:03:25,160 --> 00:03:27,560
Speaker 1: longer be stimulating the economy. And so the big question

62
00:03:27,639 --> 00:03:29,680
Speaker 1: for next year is once they get to that neutral rate,

63
00:03:29,720 --> 00:03:32,600
Speaker 1: which will probably happen next year they think it's around two,

64
00:03:34,400 --> 00:03:37,320
Speaker 1: then do they keep going and actually starting to outright

65
00:03:37,440 --> 00:03:41,520
Speaker 1: restrict economic growth because they're worried about unemployment being too low,

66
00:03:42,040 --> 00:03:44,520
Speaker 1: um and maybe inflation you know, going higher. So we

67
00:03:44,560 --> 00:03:47,880
Speaker 1: don't really see any indication that j. Powell and these

68
00:03:47,920 --> 00:03:51,120
Speaker 1: prepared remarks really feels like that's you know, going to

69
00:03:51,160 --> 00:03:52,960
Speaker 1: be necessary because it's going to be asked about the

70
00:03:52,960 --> 00:03:55,880
Speaker 1: trade war. Yeah, so that's uh, that's also something that

71
00:03:56,000 --> 00:03:58,360
Speaker 1: you know, could could definitely have implications. He kind of,

72
00:03:58,480 --> 00:04:01,200
Speaker 1: you know, very briefly touches on it in these prepared remarks,

73
00:04:01,280 --> 00:04:03,560
Speaker 1: but doesn't really say anything you know, about what it

74
00:04:03,640 --> 00:04:06,760
Speaker 1: means in particular. So that could be interesting line of

75
00:04:06,840 --> 00:04:09,440
Speaker 1: questions as well. Carl, come on in here. We're going

76
00:04:09,480 --> 00:04:12,160
Speaker 1: to be a lot of questions also about the labor market,

77
00:04:12,280 --> 00:04:15,000
Speaker 1: which is sort of confusing. We have this very low

78
00:04:15,160 --> 00:04:19,320
Speaker 1: unemployment rate and really muted wage gains. How could he

79
00:04:19,400 --> 00:04:21,280
Speaker 1: be surprising on this? I mean, do you think that

80
00:04:21,360 --> 00:04:24,480
Speaker 1: he's going to say anything of note here well, in

81
00:04:24,520 --> 00:04:28,080
Speaker 1: the prepared remarks, he says moderate wages, say the job

82
00:04:28,200 --> 00:04:31,280
Speaker 1: market is not causing high inflation. So I think he's

83
00:04:31,320 --> 00:04:34,720
Speaker 1: going to echo this theme that maybe there still is

84
00:04:35,040 --> 00:04:38,240
Speaker 1: more slack in the labor market than what the three

85
00:04:38,360 --> 00:04:41,040
Speaker 1: point eight or four point zero percent unemployment rate, that

86
00:04:41,120 --> 00:04:44,479
Speaker 1: what otherwise have you believe? And I suspect he'll play

87
00:04:44,520 --> 00:04:48,360
Speaker 1: the role of economic cheerleader in terms of indicating that

88
00:04:48,520 --> 00:04:51,800
Speaker 1: death through the fence policy and maybe also tipping his

89
00:04:51,880 --> 00:04:56,159
Speaker 1: hat to tax reforms. We're actually seeing labor force participation

90
00:04:56,279 --> 00:04:59,920
Speaker 1: potentially at least leveling out, if not the edging higher

91
00:05:00,160 --> 00:05:03,239
Speaker 1: as a strong economy, as coaxing workers back in office

92
00:05:03,240 --> 00:05:07,280
Speaker 1: sideline in plain English, the participation rate. One thing that

93
00:05:07,520 --> 00:05:11,120
Speaker 1: people talk about is why has the unemployment rate for

94
00:05:11,520 --> 00:05:15,880
Speaker 1: working age men in particular remained higher than it was

95
00:05:16,240 --> 00:05:20,159
Speaker 1: right before the last downturn, and particularly the prime working

96
00:05:20,240 --> 00:05:24,200
Speaker 1: age men in the US. And people are wondering, you know,

97
00:05:24,320 --> 00:05:26,799
Speaker 1: is this because of the opioid epidemic? Is this because

98
00:05:26,839 --> 00:05:30,080
Speaker 1: of the high incarceration rates? Is because because of discrimination

99
00:05:30,720 --> 00:05:34,560
Speaker 1: childcare costs? Um do you expect him to to sort

100
00:05:34,600 --> 00:05:36,320
Speaker 1: of weigh in on that at all? I mean, does

101
00:05:36,360 --> 00:05:39,320
Speaker 1: that matter from economic perspective, certainly from a social perspective

102
00:05:39,360 --> 00:05:41,920
Speaker 1: it does. I think those are all factors, but I

103
00:05:42,000 --> 00:05:45,400
Speaker 1: think even more importantly as the dynamics of what has

104
00:05:45,480 --> 00:05:48,800
Speaker 1: been driving the economy. Uh. And so what you certainly

105
00:05:48,880 --> 00:05:53,279
Speaker 1: see uneven distribution of employment by sectors. UH. For example,

106
00:05:53,320 --> 00:05:56,559
Speaker 1: the construction sector tends to hire a lot more males

107
00:05:56,640 --> 00:06:00,400
Speaker 1: and females. And certainly construction activity has been a aggered

108
00:06:00,440 --> 00:06:04,000
Speaker 1: in this cycle as the housing sector really struggled to

109
00:06:04,080 --> 00:06:07,599
Speaker 1: recover up from the bust. And so, you know, everything

110
00:06:07,640 --> 00:06:09,840
Speaker 1: you mentioned is correct, But I think also just the

111
00:06:09,880 --> 00:06:13,680
Speaker 1: composition of growth is a very relevant He'll probably be

112
00:06:13,800 --> 00:06:16,000
Speaker 1: asked about this. I don't think that there will be

113
00:06:16,320 --> 00:06:20,360
Speaker 1: upmarket moving responses. Uh. You know, as he'll he'll cite

114
00:06:20,360 --> 00:06:24,240
Speaker 1: many of the factors that I've mentioned. Just now, Matt,

115
00:06:24,400 --> 00:06:27,000
Speaker 1: what if you could just comment on some of the

116
00:06:27,080 --> 00:06:31,000
Speaker 1: other FEDER officials, For example, Neil cash Cary recently talking

117
00:06:31,040 --> 00:06:34,200
Speaker 1: about the yield curve. Do you think that the chairman

118
00:06:34,279 --> 00:06:38,560
Speaker 1: power will get questions referencing Neil cash Cary. Yeah, you know,

119
00:06:38,640 --> 00:06:40,760
Speaker 1: I can't imagine the yeld curve is to top of

120
00:06:40,839 --> 00:06:42,440
Speaker 1: mine for a lot of these senators. But on the

121
00:06:42,480 --> 00:06:45,000
Speaker 1: other hand, it is you know, a three hour hearing, right, So,

122
00:06:45,080 --> 00:06:47,240
Speaker 1: I mean that is something that could come up, um

123
00:06:47,400 --> 00:06:49,279
Speaker 1: at some point. Certainly it's the talk of the town

124
00:06:49,320 --> 00:06:52,440
Speaker 1: on Wall Street. Everybody's looking at this yield curve flattening

125
00:06:52,560 --> 00:06:57,520
Speaker 1: almost flat. Um. Obviously historically, uh, that has sort of

126
00:06:58,040 --> 00:07:00,520
Speaker 1: been followed by recessions, and so low of people are

127
00:07:00,560 --> 00:07:03,120
Speaker 1: worried about that. I mean. The interesting thing about FED

128
00:07:03,200 --> 00:07:05,760
Speaker 1: officials talking about that so much is, you know, to

129
00:07:05,920 --> 00:07:08,920
Speaker 1: some extent, they do control not only the short term

130
00:07:08,960 --> 00:07:11,800
Speaker 1: interest rate, but where that long term interest rate settles

131
00:07:11,840 --> 00:07:13,800
Speaker 1: as well, because if you think it's sort of the

132
00:07:13,920 --> 00:07:16,640
Speaker 1: average of you know, expected short term interest rates over

133
00:07:16,680 --> 00:07:19,160
Speaker 1: the next ten years, then they can kind of affect that.

134
00:07:19,240 --> 00:07:21,800
Speaker 1: And so if you look at their long run neutral

135
00:07:21,880 --> 00:07:24,280
Speaker 1: rate that we were just talking about earlier, that's right

136
00:07:24,320 --> 00:07:27,320
Speaker 1: between two seventy five and three percent, that's exactly where

137
00:07:27,360 --> 00:07:30,520
Speaker 1: the ten year yield is as well. So UM, I

138
00:07:30,640 --> 00:07:33,120
Speaker 1: think the FED, you know, FED officials kind of need

139
00:07:33,160 --> 00:07:36,400
Speaker 1: to think about the yield curve and and the extent

140
00:07:36,520 --> 00:07:39,440
Speaker 1: to that to which that is just reflecting what they're

141
00:07:39,520 --> 00:07:41,640
Speaker 1: telling people they are going to do with interest rates

142
00:07:41,960 --> 00:07:44,280
Speaker 1: and whether that should really be so concerning to them.

143
00:07:44,720 --> 00:07:47,320
Speaker 1: Um that markets seem to be getting the message. All right,

144
00:07:47,440 --> 00:07:50,960
Speaker 1: Dave come back in here with respect to equity markets,

145
00:07:51,520 --> 00:07:54,000
Speaker 1: do you expect them to have any reaction to anything

146
00:07:54,080 --> 00:07:57,760
Speaker 1: that fed Powell could say? For example, if he says, look, uh,

147
00:07:58,000 --> 00:08:00,120
Speaker 1: we don't necessarily think that the yield curve of a

148
00:08:00,160 --> 00:08:02,560
Speaker 1: setting the same signals that has in the past. We're

149
00:08:02,560 --> 00:08:06,400
Speaker 1: gonna keep raising rates at a study uh and slow pace,

150
00:08:06,560 --> 00:08:09,200
Speaker 1: but we're going to stay on our trajectory. What does

151
00:08:09,240 --> 00:08:13,400
Speaker 1: that do to ataquities? Well, I mean, there is certainly

152
00:08:13,480 --> 00:08:17,120
Speaker 1: the potential for a movement, although let's face it, Uh,

153
00:08:17,320 --> 00:08:20,120
Speaker 1: you know, the chair power would be perfectly happy if

154
00:08:20,240 --> 00:08:22,720
Speaker 1: nothing moved. In response to what he was saying that

155
00:08:22,840 --> 00:08:27,400
Speaker 1: he's simply reinforced where people are going in in terms

156
00:08:27,480 --> 00:08:30,640
Speaker 1: to in terms of interest rate policy. Here, I mean,

157
00:08:30,720 --> 00:08:32,439
Speaker 1: just to give you some idea, we so sort of

158
00:08:32,480 --> 00:08:34,320
Speaker 1: a brief flip up to the highs of the day,

159
00:08:34,360 --> 00:08:36,720
Speaker 1: and he has some P five hundred after those initial

160
00:08:36,760 --> 00:08:39,959
Speaker 1: headlines came out. Uh, and now you're you're seeing stocks

161
00:08:40,000 --> 00:08:44,640
Speaker 1: and bounce around. Uh. Still not quite higher, though they've

162
00:08:44,679 --> 00:08:47,240
Speaker 1: made up a lot of their early losses. So you know,

163
00:08:47,360 --> 00:08:50,280
Speaker 1: if that's the outcome, then I suspect the policy makers

164
00:08:50,360 --> 00:08:52,920
Speaker 1: would be perfectly happy with that. Matt, just a little

165
00:08:52,920 --> 00:08:58,079
Speaker 1: bit about inflation. Uh, milk, eggs, bread, You've been following

166
00:08:58,160 --> 00:09:01,600
Speaker 1: the basics, Yeah, absolutely, so you know that's uh, that's

167
00:09:01,640 --> 00:09:03,839
Speaker 1: really good news. Right. So the prices of milk, eggs

168
00:09:03,840 --> 00:09:05,640
Speaker 1: and bread, as you mentioned, seemed to be coming down

169
00:09:05,679 --> 00:09:07,640
Speaker 1: a lot, and so that was a really big criticism

170
00:09:07,760 --> 00:09:10,480
Speaker 1: of the Fed in the early years of this expansion,

171
00:09:10,559 --> 00:09:12,240
Speaker 1: when we did have a little bit of inflation, it

172
00:09:12,360 --> 00:09:15,800
Speaker 1: was a lot of that um, you know, uh inflation

173
00:09:15,880 --> 00:09:18,319
Speaker 1: that was driven by dollar weakness. It was really hitting

174
00:09:18,480 --> 00:09:21,000
Speaker 1: you know, low end consumers right where it hurt the most,

175
00:09:21,080 --> 00:09:24,000
Speaker 1: and the grocery basket. And so while the Fed was saying, oh,

176
00:09:24,080 --> 00:09:26,679
Speaker 1: you know, we have to keep policy easy, Um, we're

177
00:09:26,679 --> 00:09:29,480
Speaker 1: not worried about inflation, everybody's looking at their grocery bill

178
00:09:29,520 --> 00:09:31,520
Speaker 1: and saying, well, you know, how can you kind of

179
00:09:31,600 --> 00:09:34,040
Speaker 1: be taking this position and build Dudley famously got in

180
00:09:34,080 --> 00:09:36,280
Speaker 1: trouble when he said, well, you know, look at iPads, right,

181
00:09:36,360 --> 00:09:38,280
Speaker 1: the price of those has come down a lot. And

182
00:09:38,800 --> 00:09:40,439
Speaker 1: he said that in twenty eleven and someone at the

183
00:09:40,480 --> 00:09:42,400
Speaker 1: town hall said, well, you can't eat an iPad, so

184
00:09:42,880 --> 00:09:45,400
Speaker 1: that certainly is not the case anymore. It's an interesting

185
00:09:45,520 --> 00:09:49,000
Speaker 1: kind of Yeah, I mean, Carl coming on the US

186
00:09:49,040 --> 00:09:51,959
Speaker 1: economy if you can. Industrial production report out today for

187
00:09:52,040 --> 00:09:54,880
Speaker 1: the month of June. Estimates were for a gain of

188
00:09:54,920 --> 00:09:58,439
Speaker 1: a half a percent, actually up six it actually top

189
00:09:58,720 --> 00:10:02,400
Speaker 1: Actually manufacturing was stronger. But we have to really pass

190
00:10:02,440 --> 00:10:04,800
Speaker 1: through the details here because there was a fire at

191
00:10:04,880 --> 00:10:07,240
Speaker 1: a part supplier in the auto sector, and so we

192
00:10:07,320 --> 00:10:10,640
Speaker 1: saw a swoon in May and then a sharp rebound

193
00:10:10,720 --> 00:10:13,120
Speaker 1: in June. The moral of the story is the Q

194
00:10:13,320 --> 00:10:16,880
Speaker 1: two factory output data looks good. Uh. The Q two

195
00:10:17,000 --> 00:10:20,440
Speaker 1: consumer spending data look great. Uh. And we're looking at

196
00:10:20,440 --> 00:10:23,439
Speaker 1: a quarter that will probably a register g d P

197
00:10:23,640 --> 00:10:26,160
Speaker 1: gain of if not in the high threes, maybe even

198
00:10:26,240 --> 00:10:29,800
Speaker 1: in the low four percent territory. But we shouldn't get

199
00:10:29,800 --> 00:10:33,319
Speaker 1: too excited about one single quarter because we will see

200
00:10:33,360 --> 00:10:35,560
Speaker 1: a moderation in the second half of the year. Uh.

201
00:10:35,640 --> 00:10:38,480
Speaker 1: There's this usual whipsaw between a week Q one and

202
00:10:39,320 --> 00:10:41,440
Speaker 1: we have to break in here. A Jerome Palifa draw

203
00:10:41,440 --> 00:10:45,160
Speaker 1: Reserve chair is now starting his testimony before the House.

204
00:10:45,240 --> 00:10:52,079
Speaker 1: Let's listen in Thanks for listening to the Bloomberg P

205
00:10:52,200 --> 00:10:55,160
Speaker 1: and L podcast. You can subscribe and listen to interviews

206
00:10:55,200 --> 00:10:59,240
Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

207
00:10:59,679 --> 00:11:03,240
Speaker 1: I'm him Fox. I'm on Twitter at pim Fox. I'm

208
00:11:03,280 --> 00:11:06,640
Speaker 1: on Twitter at Lisa Abramowits one before the podcast. You

209
00:11:06,679 --> 00:11:09,200
Speaker 1: can always catch us worldwide on Blueberg Radio