WEBVTT - Bloomberg Surveillance TV: January 15, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amerie Hordern join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.000 Terminal and the Bloomberg Business app. We begin this hour 0:00:37.040 --> 0:00:39.680 with stocks rising ahead of CPI data and better than 0:00:39.760 --> 0:00:42.600 expected results from both JP Morgan and from Wales Farco. 0:00:42.880 --> 0:00:46.000 Joining us now to discuss is Ken Leon of cfra Ken. 0:00:46.000 --> 0:00:48.320 You've had about fifteen minutes to pour over those numbers. 0:00:48.320 --> 0:00:49.360 What do you make of them? 0:00:49.720 --> 0:00:50.400 Well, it's great. 0:00:50.440 --> 0:00:53.360 So we had outsize games for these stocks last year, 0:00:53.960 --> 0:00:58.520 and what the results speak to is the ability. 0:00:58.080 --> 0:00:59.800 To earn into your evaluation. 0:01:00.040 --> 0:01:02.640 I would expect the street is going to have upward 0:01:02.680 --> 0:01:05.920 earnings revisions for twenty twenty five. Take a look at 0:01:05.920 --> 0:01:10.319 twenty twenty six, as noted here, what's the delta for 0:01:10.440 --> 0:01:13.480 driving that earnings and that's about really for JP Morgan. 0:01:13.560 --> 0:01:17.320 First would really be net interest income, so it's not 0:01:17.440 --> 0:01:20.680 just rates as noted here, but it's also volume what 0:01:20.840 --> 0:01:23.600 speaks to the US economy growing about two and a 0:01:23.680 --> 0:01:28.399 half percent. Those two flywheels drives net interest income, which 0:01:28.480 --> 0:01:30.600 is significant for JP. 0:01:30.480 --> 0:01:31.680 Morgan and other banks. 0:01:31.959 --> 0:01:35.760 The other delta that we haven't spoken about is investment banking, 0:01:35.800 --> 0:01:38.520 and it might start slow, but the ability of a 0:01:38.640 --> 0:01:42.640 risk on environment for mergers and acquisitions and also equity 0:01:42.720 --> 0:01:46.080 underwriting means that we're going to be moving further up 0:01:46.080 --> 0:01:49.360 from the trough of the market or the cycle about 0:01:49.400 --> 0:01:53.640 eighteen months ago. Additionally, when you look at again net 0:01:53.640 --> 0:01:59.000 interest income, but JP Morgan is a diversified bank, so 0:01:59.040 --> 0:02:02.080 it's getting that from many different types of services. 0:02:02.360 --> 0:02:04.080 The only negative. 0:02:03.680 --> 0:02:08.000 Here in the print was really community banks a little 0:02:08.000 --> 0:02:12.160 bit slower in terms of their net revenue. But mostly 0:02:12.200 --> 0:02:16.919 this is a monolithic global bank, well placed trading at 0:02:16.960 --> 0:02:21.359 an expensive valuation. Our takeaway is stay the course and 0:02:21.400 --> 0:02:24.560 they're going to grow into their earnings and valuation. 0:02:25.040 --> 0:02:27.880 Ken another figure, fourth quarter provisions for credit losses came 0:02:27.880 --> 0:02:30.240 in at two point six billion. The estimate was higher 0:02:30.480 --> 0:02:33.320 at just over three billion. Similar story for Wells, a 0:02:33.400 --> 0:02:36.120 lower number than expected to What does that say to 0:02:36.160 --> 0:02:38.760 you about credit quality? Are we in a period or 0:02:38.800 --> 0:02:41.000 at least getting very close to normalization? 0:02:41.680 --> 0:02:41.880 Yeah? 0:02:41.919 --> 0:02:44.520 For JP Murray, then the industry, so bank analysts are 0:02:44.520 --> 0:02:47.040 a nervous lot, and the concern is always on credit 0:02:47.160 --> 0:02:51.280 risk and major write offs. And so far the economy 0:02:51.320 --> 0:02:55.000 is resilient. We're nowhere near an amber or red alert 0:02:55.120 --> 0:02:58.960 in terms of significant need for build up of credit reserves. 0:02:59.200 --> 0:03:00.720 Looks like we're going to have a pretty good year 0:03:00.760 --> 0:03:01.560 for the economy. 0:03:01.840 --> 0:03:05.520 And when you look at the consumer, certainly, as you 0:03:05.680 --> 0:03:10.000 do see increases in allowance for bad debt, it's mostly 0:03:10.040 --> 0:03:12.440 because the volumes are much higher today. 0:03:12.240 --> 0:03:14.120 Than they were two or three years ago. 0:03:14.919 --> 0:03:19.040 Ultimately, and we didn't speak about this, which is whether 0:03:19.080 --> 0:03:23.200 it's on credit risk or on trading. Is that black 0:03:23.320 --> 0:03:28.160 Swan event? So Jamie Diamond mentions geopolitical arrests. The third 0:03:28.240 --> 0:03:31.920 I would ask, is some liquidity squeeze in a complex 0:03:32.280 --> 0:03:36.200 trading product that upsets the market and maybe the bank stocks. 0:03:36.440 --> 0:03:38.480 We haven't seen it here, you know, if you go 0:03:38.600 --> 0:03:41.000 back in twenty twenty three, that was credit. 0:03:40.720 --> 0:03:43.880 Swiss Ken thirty minutes ago, I asked you what's your 0:03:43.880 --> 0:03:45.440 favorite what kind of business do you want to warn? 0:03:45.480 --> 0:03:47.080 And you were loving Goldman Sex. Do you love them 0:03:47.080 --> 0:03:49.120 a little bit more after those numbers? 0:03:49.680 --> 0:03:54.120 We do, and I think there's a more dynamic story 0:03:54.160 --> 0:03:57.440 here for Goldman. They'll under promise and over deliver. I 0:03:57.480 --> 0:04:01.480 think through most of twenty twenty five, traditional businesses are 0:04:01.480 --> 0:04:05.320 going to get the benefits of positive trend M and A. 0:04:05.400 --> 0:04:09.320 Of course, with one trillion of private equity investments that 0:04:09.440 --> 0:04:12.240 have to be monetized in the next twenty four months, 0:04:12.280 --> 0:04:17.440 CEO confidences coming up, we're also seeing what higher equity 0:04:17.520 --> 0:04:21.240 marketing values great trading. But John, the story is, and 0:04:21.279 --> 0:04:24.480 if I was Goldman Management, I'd be talking about their 0:04:25.000 --> 0:04:30.719 really pivot to having durable, recurring fee revenue businesses across 0:04:31.200 --> 0:04:33.200 that would be an asset in wealth management. 0:04:33.440 --> 0:04:34.719 They're large businesses. 0:04:35.040 --> 0:04:38.120 And then also as we see the easing of regulation 0:04:38.200 --> 0:04:40.919 in Washington, you're going to see Goldman be more of 0:04:40.960 --> 0:04:44.960 a principal actor besides just an agent for transactions, and 0:04:45.040 --> 0:04:47.039 what that means is getting to be more of a 0:04:47.080 --> 0:04:51.640 participant in direct private equity and private credit. We saw 0:04:51.720 --> 0:04:53.880 that as part of their announcement earlier in the week 0:04:54.040 --> 0:04:57.160 of blending some of these businesses so that they can 0:04:57.560 --> 0:05:01.600 partner or compete with Apollo and others. 0:05:01.880 --> 0:05:03.960 It is a different model can because for most of 0:05:04.000 --> 0:05:06.120 the big banks, the way that they've been approaching private 0:05:06.160 --> 0:05:10.320 credit is partnerships. Goldman with that announcement, to your point, 0:05:10.360 --> 0:05:13.080 shows that they can compete with some of the big 0:05:13.160 --> 0:05:15.520 names which are the model for the banking sector. Do 0:05:15.560 --> 0:05:16.920 you think we'll ultimately win out? 0:05:17.920 --> 0:05:20.000 That's who you are, But I think Goldman can play 0:05:20.040 --> 0:05:22.800 often so they can certainly, as I said, be principal 0:05:23.040 --> 0:05:26.000 and compete, but also for asset back loans, they can 0:05:26.040 --> 0:05:30.520 also be there to also provide funding for the private 0:05:30.560 --> 0:05:34.160 equity firms. The traditional banks have a different game, particularly 0:05:34.360 --> 0:05:38.120 regionals or mid size you know, which is really loans 0:05:38.240 --> 0:05:42.520 or syndicate loans, competing against a corporate who wants to 0:05:42.600 --> 0:05:46.640 just get immediate attention with a direct borrowing from a 0:05:46.680 --> 0:05:50.760 private equity firm. And it's a sea change because it's 0:05:50.800 --> 0:05:54.440 moving up in size of the deals from small mid 0:05:55.080 --> 0:05:58.400 mid sized companies to much larger deals over a billion 0:05:59.760 --> 0:06:03.720 a year trend. I think Goldman again, you have to 0:06:03.760 --> 0:06:07.080 go back over ten years. Gold you know, Goldman couldn't 0:06:07.120 --> 0:06:11.760 be competing with Blackstone and KKR because of regulation, and 0:06:11.800 --> 0:06:14.120 we're going to see a little easing of regulation, but 0:06:14.160 --> 0:06:16.280 they're going to be smart because they want to have 0:06:16.320 --> 0:06:18.240 the right strategy and execute. 0:06:18.360 --> 0:06:20.120 Ken, I want to go back to John's earlier point 0:06:20.160 --> 0:06:23.120 to Shanali, do you see any weakness in any of 0:06:23.120 --> 0:06:23.800 these earnings. 0:06:25.760 --> 0:06:30.920 The weakness is, you know, really related to any sharp 0:06:31.800 --> 0:06:36.479 change or shock in the markets that affects volume but 0:06:36.680 --> 0:06:41.080 also affects in their books exposure. And I mentioned that 0:06:41.279 --> 0:06:44.520 at the hour before, which is really the black Swan event. 0:06:44.920 --> 0:06:48.240 You know, some complex derivative product that has a ripple 0:06:48.279 --> 0:06:51.200 effect whether it happens in Asia or Europe, but it 0:06:51.279 --> 0:06:55.640 impacts Goldman generally. The other one, which Jamie Diamond speaks to, 0:06:55.760 --> 0:06:58.880 is a geopolitical event that has usually been if there's 0:06:58.920 --> 0:07:02.480 any sell off of buyer opportunity. But what we're seeing 0:07:02.600 --> 0:07:06.680 so far is confirmation that twenty twenty five stayed the course, 0:07:07.000 --> 0:07:09.840 and we're going to see I think the consensus or 0:07:09.880 --> 0:07:12.520 street analysts raise their estimates as we go. 0:07:12.480 --> 0:07:12.960 Through the year. 0:07:13.200 --> 0:07:15.960 Ken, we spoke to you about thirty minutes ago. I'm 0:07:15.960 --> 0:07:18.040 going to say this for you. You gave Goldman Saxon 0:07:18.080 --> 0:07:21.160 a plus. What does City get this morning, Well, we'll 0:07:21.160 --> 0:07:21.880 give them a bee. 0:07:22.080 --> 0:07:24.320 I haven't seen the details, but picking up from what 0:07:24.400 --> 0:07:29.720 Chinali said, the return on equity narrowing the range. You know, 0:07:29.800 --> 0:07:32.760 they took a one billion dollar restructuring charge in twenty 0:07:32.800 --> 0:07:37.240 four so the ability possibly to reduce costs or more 0:07:37.320 --> 0:07:39.880 than the street thinks might be able to help them 0:07:39.880 --> 0:07:44.560 on Roe. City is also an event driven stock. Of 0:07:44.600 --> 0:07:48.320 the large banks, they are finally this year, we hope 0:07:48.520 --> 0:07:54.280 moving to monetizing selling in Mexico Banamex, which was by 0:07:54.320 --> 0:08:00.160 far the largest consumer bank they had outside the US. 0:07:59.840 --> 0:08:01.880 That significant. It's event driven. 0:08:02.560 --> 0:08:07.640 They also have stable businesses with more transparency. That's called services. 0:08:07.680 --> 0:08:11.520 It's treasury and trade solutions, a dominant position in the 0:08:11.560 --> 0:08:16.200 corporate treasury market, and certainly they're more on the fixed 0:08:16.600 --> 0:08:20.160 income side versus equity across banking and trading. 0:08:20.360 --> 0:08:23.600 So you know, I think City is going to be fine. 0:08:24.480 --> 0:08:28.920 And they're still trading below net tangible book value, although 0:08:28.960 --> 0:08:32.720 the gap has narrowed a bit, so we need to 0:08:32.720 --> 0:08:37.000 see results improve through twenty twenty five. But I think 0:08:37.080 --> 0:08:41.040 myself and most analysts with buys think that they can execute. 0:08:41.160 --> 0:08:43.160 Jane Fraser is still on course. 0:08:43.679 --> 0:08:46.160 She's still on course. That gap maybe even narrowing more 0:08:46.200 --> 0:08:48.800 this morning with the rally still ongoing. Pre market, Ken 0:08:48.840 --> 0:08:51.040 another headline that came out is that they see their 0:08:51.040 --> 0:08:54.520 expenses for twenty twenty five slightly lower than fifty three 0:08:54.600 --> 0:08:57.360 point eight billion dollars. That is the high end of 0:08:57.400 --> 0:08:59.880 their range that they had already given to this market. 0:09:00.320 --> 0:09:03.080 Does it concern you that they aren't bringing in expenses 0:09:03.160 --> 0:09:07.040 quicker in the midst of this restructuring, Well, it ties. 0:09:06.840 --> 0:09:09.960 In with my earlier point one billion dollar restructuring. But 0:09:10.400 --> 0:09:15.440 what they're doing is reducing management layers and also realigning 0:09:15.760 --> 0:09:20.960 businesses that weren't really responsive to the markets or customers. 0:09:21.360 --> 0:09:23.120 So I think it's a. 0:09:23.080 --> 0:09:28.200 Timing issue and one where you'll see accelerated improvement perhaps 0:09:28.280 --> 0:09:31.280 in the second half of the year, but you'll see improvement, 0:09:31.400 --> 0:09:33.920 but it just doesn't happen in one or two quarters. 0:09:34.160 --> 0:09:36.120 I Ken, appreciate you time. Thanks for this morning, Ken 0:09:36.200 --> 0:09:49.600 Lee on that of CFI on City pH Seth appearing 0:09:49.600 --> 0:09:53.240 on course to win confirmation dismissing acusations of past misconduct 0:09:53.520 --> 0:09:56.840 in his Senate hearing. Secretary of State nominee Marco Rubio 0:09:56.960 --> 0:09:59.319 among those speaking on Capital Hill Lights alone this morning, 0:09:59.400 --> 0:10:03.320 then recent country nomination Scale Besson appearing on Thursday, joining 0:10:03.360 --> 0:10:06.640 us not to discuss Jennifer Flitzer of INVESTCA, Jennifer, welcome 0:10:06.679 --> 0:10:08.920 back any reason to believe that some of these nominations 0:10:09.000 --> 0:10:11.959 might be in trouble, any trouble at so well. 0:10:12.000 --> 0:10:14.520 I think what we saw yesterday is that a lot 0:10:14.640 --> 0:10:20.160 depends on these hearings, and objectively, you know, Pete Hegseth 0:10:20.800 --> 0:10:23.160 did a pretty good job and it is now. 0:10:23.160 --> 0:10:26.480 Taking him on the path to confirmation. I think he'll skate. 0:10:26.320 --> 0:10:31.440 Through the committee approval and he'll be on the floor 0:10:31.559 --> 0:10:38.360 probably sometime next week. The other more controversial of folks 0:10:38.480 --> 0:10:39.559 like Tulci. 0:10:39.320 --> 0:10:41.640 Gabbard or Robert F. Kennedy Junior. 0:10:43.040 --> 0:10:45.640 I think these hearings are really going to matter, and 0:10:45.720 --> 0:10:48.640 if they have some of the same showing as Pete 0:10:48.600 --> 0:10:50.840 Heggseth did, then I think they're well. 0:10:50.640 --> 0:10:52.319 On their way to confirmation, Jennifer. 0:10:52.360 --> 0:10:54.640 If they're going up for the hearing, though, the Trump 0:10:54.720 --> 0:10:57.559 campaign must think that they have the votes for these 0:10:57.559 --> 0:11:00.080 individuals like Tulci Gabbard and our. 0:11:01.520 --> 0:11:01.679 Well. 0:11:01.720 --> 0:11:04.920 I think they have faith in their strength right. 0:11:04.960 --> 0:11:07.120 And one thing that is sort of a through line 0:11:07.200 --> 0:11:11.640 with all of these nominees is their strong ability to communicate, 0:11:11.760 --> 0:11:14.320 their ability to message and stay on message. 0:11:14.760 --> 0:11:18.360 And I think you're going to see that with Chelsea 0:11:18.480 --> 0:11:20.679 Gabbard and with Robert F. 0:11:20.760 --> 0:11:27.600 Kennedy Junior, with patl for the FBI director. If they 0:11:27.640 --> 0:11:30.080 have strong showings that they're hearings and I think the 0:11:30.080 --> 0:11:33.080 faith there is with them from the transition. 0:11:33.480 --> 0:11:35.839 Then I think they're well on their way to confirmation. 0:11:36.120 --> 0:11:38.840 And what we're hearing behind the scenes with the meetings 0:11:38.840 --> 0:11:42.319 that are happening with the senators is that they're gaining 0:11:42.440 --> 0:11:44.880 a lot of support as they move along. 0:11:45.080 --> 0:11:46.840 It's a good point you make, because that's what sources 0:11:46.920 --> 0:11:49.720 close to Trump tell me that being able to communicate 0:11:49.720 --> 0:11:52.679 his agenda is just as important as being able to 0:11:52.760 --> 0:11:55.320 do the job that he's putting some of these nominees 0:11:55.360 --> 0:11:57.480 in place. Can you give us a sense is what's 0:11:57.520 --> 0:12:01.280 so different from Trump one point zero and how they 0:12:01.480 --> 0:12:03.920 worked with nominees and some under secretaries. So what we're 0:12:03.920 --> 0:12:05.480 seeing now are they moving faster? 0:12:05.640 --> 0:12:08.200 Now? They're definitely moving faster. 0:12:08.400 --> 0:12:10.440 I mean I think the vetting was a little slow 0:12:10.600 --> 0:12:13.240 because of how they decided to do it, and when 0:12:13.280 --> 0:12:16.520 they brought in the FBI vetting, and when they started 0:12:16.520 --> 0:12:18.880 filing with the Senate. But I think they're well with 0:12:19.040 --> 0:12:23.280 on within their way, well on the path to getting 0:12:23.280 --> 0:12:27.439 folks in immediately as soon as the president is inaugurated 0:12:27.480 --> 0:12:32.600 on day one. I do see a much sort of 0:12:33.040 --> 0:12:37.400 stronger bench in the sense of the ability of Trump 0:12:37.520 --> 0:12:40.839 and the Trump transition team and really Susie Wiles at 0:12:40.840 --> 0:12:43.240 the top there as in the chief of Staff to 0:12:43.320 --> 0:12:47.720 get folks in who are really speaking the message of 0:12:47.800 --> 0:12:50.320 Trump and Trump two point zero. I think in one 0:12:50.360 --> 0:12:54.320 point oh, you saw sort of, you know, the mechanism 0:12:54.520 --> 0:12:55.880 in Washington. 0:12:56.600 --> 0:12:59.000 Really working to influence Trump. 0:12:59.240 --> 0:13:04.240 Now, Trump has a very strong position and has a 0:13:04.440 --> 0:13:08.520 whole team of folks who are there to push that position, 0:13:08.600 --> 0:13:10.280 to push that agenda. 0:13:10.440 --> 0:13:13.959 Beyond just the ability to get these various cabinet members 0:13:14.000 --> 0:13:17.559 confirm Jennifer. Does it also speak to a cohesion within 0:13:17.600 --> 0:13:20.600 the Republican Party that will benefit Trump as he tries 0:13:20.640 --> 0:13:23.320 to do things like past one big beautiful bill in 0:13:23.400 --> 0:13:26.080 a very slim majority. Does it help that these are 0:13:26.080 --> 0:13:28.080 getting through? Does it speak to that ability? 0:13:28.840 --> 0:13:29.120 Yeah? 0:13:29.120 --> 0:13:32.000 Absolutely, And I think we've seen it just in this 0:13:32.040 --> 0:13:33.160 transition period. 0:13:34.040 --> 0:13:35.800 Mar A Lago is a very. 0:13:35.600 --> 0:13:39.080 Busy place right now, and not just with CEOs from 0:13:39.080 --> 0:13:39.960 the tech industry. 0:13:40.360 --> 0:13:44.360 You see Washington basically flying down to mar A Lago. 0:13:45.080 --> 0:13:49.880 He has been entertaining members of Congress, senators and Tiger 0:13:49.960 --> 0:13:54.680 caucuses and factions of the House representatives. I think going forward, 0:13:54.840 --> 0:13:57.600 especially within this first six months, you're going to see 0:13:57.600 --> 0:14:02.200 a very hands on White House working their agenda and 0:14:02.480 --> 0:14:05.840 working with the members within the House who might be 0:14:06.040 --> 0:14:07.800 the most difficult to get on board. 0:14:08.080 --> 0:14:21.600 Jennifer, appreciate your time. Jennifer Flitten of Investco. David Kelly's 0:14:21.640 --> 0:14:23.480 with us around of TYPEO with David Kelly of JP 0:14:23.640 --> 0:14:26.440 markin Asset Management, David Mornick get to see you morning. 0:14:26.640 --> 0:14:29.280 You expected to see more of this softer inflation prints 0:14:29.280 --> 0:14:30.640 in a monthst ahead, Yes, I do. 0:14:30.880 --> 0:14:33.640 I think the I think it's important to recognize that 0:14:33.920 --> 0:14:35.680 the year of year, which is kind of high right 0:14:35.720 --> 0:14:37.800 now at two point nine, that's going to look a 0:14:37.840 --> 0:14:40.640 lot better by April because the first four months of 0:14:40.760 --> 0:14:45.480 last year we saw pretty strong inflation, so that that 0:14:45.680 --> 0:14:47.920 makes it very easy to get down to a low 0:14:48.000 --> 0:14:51.320 twos by April. And overall, this is not an inflation 0:14:51.400 --> 0:14:54.000 prone economy. I mean, the economy left to itself is 0:14:54.040 --> 0:14:57.560 just chugging along, steady growth at over two percent growth, 0:14:57.720 --> 0:15:00.840 unemployment very steady, and inflation grad coming down. 0:15:00.920 --> 0:15:03.360 So the economy itself looks pretty good right now. 0:15:03.360 --> 0:15:06.160 It's got a lot coming up on the plate. 0:15:05.920 --> 0:15:08.400 Here, but overall feel pretty good about. 0:15:08.440 --> 0:15:09.720 We'll talk about what's coming up on a play, and 0:15:09.720 --> 0:15:12.680 I've seen you're talking about incoming policy changes. Potentially you've 0:15:12.680 --> 0:15:16.400 written about this sources of inflation, labor, energy, goods, and services. 0:15:16.480 --> 0:15:17.680 Where'd you have the most confidence? 0:15:17.720 --> 0:15:17.920 Now? 0:15:18.960 --> 0:15:21.160 I think the most important is the labor market, and 0:15:22.000 --> 0:15:24.800 I think what we've seen is American workers just won't 0:15:24.840 --> 0:15:28.600 ask for race. It's remarkable. I mean, we saw production 0:15:28.680 --> 0:15:31.600 on supervisory workers, wages up three point eight percent year 0:15:31.640 --> 0:15:32.040 over year. 0:15:32.120 --> 0:15:33.800 We've got eight million job openings. 0:15:33.840 --> 0:15:36.240 Everybody knows it's hard to find a good employee, but 0:15:36.320 --> 0:15:37.760 yet quits rates are below. 0:15:37.560 --> 0:15:38.960 Where they were before the pandemic. 0:15:39.240 --> 0:15:42.080 And either American business is great at saying why they're 0:15:42.080 --> 0:15:44.000 not going to give people a raise, or American workers 0:15:44.040 --> 0:15:45.440 are just won't be about asking for one. 0:15:45.440 --> 0:15:47.520 But whatever way it works, we're just. 0:15:47.520 --> 0:15:50.240 Not getting inflation coming out of the labor market, and 0:15:50.280 --> 0:15:52.560 without that you cannot get sustained inflation. 0:15:53.840 --> 0:15:55.800 Just to that point on the labor market, as we're 0:15:55.840 --> 0:15:59.120 digesting CPI, you have had these individual announcements from companies, 0:15:59.200 --> 0:16:02.640 be it from Meta, Microsoft, Southwest City, when it comes 0:16:02.640 --> 0:16:06.680 to benefits about reducing hiring, not hiring, or even letting 0:16:06.720 --> 0:16:08.960 people go do some of that softness. Do you look 0:16:09.000 --> 0:16:11.680 at that and say these are idiosyncratic company events or 0:16:11.720 --> 0:16:14.400 does it suggest that something has indeed shifted in the 0:16:14.480 --> 0:16:16.840 labor market in terms of who has the power and 0:16:16.920 --> 0:16:18.920 overall represents some form of softness. 0:16:19.560 --> 0:16:21.760 I think it's good messaging for these companies. There's nothing 0:16:21.880 --> 0:16:24.880 there's nothing like announcing perspective layoffs to quieten down the 0:16:24.920 --> 0:16:27.840 labor force. So I think it's a way of really 0:16:28.120 --> 0:16:32.000 suppressing wage gains. There's no evidence in GDP. I mean, 0:16:32.480 --> 0:16:34.760 you know, if you want to figure out where employment's going, 0:16:34.960 --> 0:16:38.240 look at where GDP has been. Because the last four quarters, 0:16:38.240 --> 0:16:40.480 the current quarter, in the previous three quarters are a 0:16:40.600 --> 0:16:41.120 very good. 0:16:41.040 --> 0:16:42.320 Driver payroll employment. 0:16:42.520 --> 0:16:44.240 So I know that the rate of growth of this 0:16:44.320 --> 0:16:47.520 economy is capable of generating on hundred and fifty one 0:16:47.560 --> 0:16:49.840 hundred and seventy five thousand jobs per month as an 0:16:49.880 --> 0:16:52.600 average through this year, and that forecast is good for 0:16:52.600 --> 0:16:55.200 at least the next three to six months anyway. So 0:16:55.440 --> 0:16:59.600 there really isn't any softness in terms of the overall economy. 0:16:59.640 --> 0:17:02.240 But business, you know, they focus on margins, they focus 0:17:02.240 --> 0:17:03.080 on efficiencies. 0:17:03.240 --> 0:17:04.680 You know, how can we be more productive? 0:17:04.680 --> 0:17:06.720 And yes, if that means announcing well, I'm going to 0:17:06.720 --> 0:17:09.680 have to lay off a few people, then that that. 0:17:09.640 --> 0:17:11.800 Actually works in terms of maintaining cost control. 0:17:12.000 --> 0:17:15.320 David John mentioned energy and that was a big part 0:17:15.320 --> 0:17:17.760 of this inflation story for this print forty percent. I 0:17:17.760 --> 0:17:21.240 believe IA Overnight was saying, actually they see a smaller 0:17:21.320 --> 0:17:25.240 glut next year. How concerned you that fighting energy prices, 0:17:25.320 --> 0:17:27.399 higher oil prices, higher grass lean price is going to 0:17:27.400 --> 0:17:28.600 be a concern for twenty twenty five? 0:17:29.119 --> 0:17:29.600 Not too much. 0:17:29.600 --> 0:17:32.840 I mean, if you look at the global composite PMI index, 0:17:33.440 --> 0:17:36.960 you've got a global economy that is kind of muddling forward. 0:17:37.080 --> 0:17:40.720 The US is doing very well in places like India 0:17:41.160 --> 0:17:44.120 and Italy are doing well, but a lot of Europe 0:17:44.200 --> 0:17:47.320 and particularly China are pretty soft here that's not going 0:17:47.359 --> 0:17:50.240 to generate a lot of demand. Meanwhile, I think with 0:17:50.320 --> 0:17:52.600 the change in administration, you could get two things. One, 0:17:52.920 --> 0:17:55.840 you may get a peace settlement in the Middle East, 0:17:56.320 --> 0:17:59.359 which could you know, DAP and down tensions a little 0:17:59.359 --> 0:18:02.639 bit and con turns. And then secondly you're going to 0:18:02.640 --> 0:18:07.200 have a very pro drilling policy which could increase US production, 0:18:07.640 --> 0:18:09.240 and some deregulation. 0:18:08.640 --> 0:18:09.960 Which could help the energy sector. 0:18:10.000 --> 0:18:13.760 So overall, I don't think energy prices for fossil fuels 0:18:13.800 --> 0:18:16.680 are likely to go up significantly over the next few years. 0:18:16.720 --> 0:18:18.560 If you are just joining us, welcome to the program. 0:18:18.640 --> 0:18:21.480 Seven minutes ago, inflation data drops and came in a 0:18:21.520 --> 0:18:24.800 little bit better than expected on core CPI excluding food 0:18:24.800 --> 0:18:26.920 and energy month over month, coming in at zero point 0:18:26.960 --> 0:18:29.560 two percent the median estimate in our survey with zero 0:18:29.600 --> 0:18:32.840 point three on headline inline at zero point four percent 0:18:32.880 --> 0:18:35.760 the estimate with zero point four. Of course, we're trading 0:18:35.760 --> 0:18:38.400 off the back of that downside surprise on core CPI, 0:18:38.640 --> 0:18:41.240 and it's unlocking much lower bond yards across the curve. 0:18:41.440 --> 0:18:43.760 The ten year is now lower by ten basis points, 0:18:43.760 --> 0:18:46.360 the two year down by nine. That unlocks some dollar 0:18:46.400 --> 0:18:48.920 weakness and euro strength. Euro dollar at one oh three forty, 0:18:49.040 --> 0:18:51.760 and equities a really big lift of stocks on the 0:18:51.840 --> 0:18:55.080 s and p up by one point four percent. Likewise, 0:18:55.080 --> 0:18:57.359 on the Nasdaq and on the Russle, the small caps 0:18:57.359 --> 0:19:01.320 are absolutely flying this morning. On Russell, we are rallying 0:19:01.359 --> 0:19:03.720 pretty hard going into the up and about up by 0:19:03.840 --> 0:19:07.280 two point nine percent. David, you talked about the incoming administration. 0:19:07.800 --> 0:19:10.440 Danny talked about this earlier, the cost of not making 0:19:10.440 --> 0:19:13.199 your plans clear. You think it's high yields, it's that 0:19:13.200 --> 0:19:15.240 what's playing out in the bond market, not this morning, 0:19:15.320 --> 0:19:16.440 but leading up to this move. 0:19:16.520 --> 0:19:19.680 Oh yeah, yes, absolutely, because we don't know how far 0:19:19.840 --> 0:19:22.960 we can push the global bond market. And on Friday 0:19:23.000 --> 0:19:24.680 we're going to get some new numbers from the Congression 0:19:24.680 --> 0:19:26.720 Budget Office looking at you know, if we don't do 0:19:26.840 --> 0:19:28.720 any tax cuts from here, if we don't even extend 0:19:28.720 --> 0:19:31.040 the tax cuts we've got still, I think they'll still 0:19:31.080 --> 0:19:34.600 show the debt to GDP ratio rising to about one 0:19:34.680 --> 0:19:36.840 hundred and twenty two hundred and twenty five percent of 0:19:36.920 --> 0:19:41.240 GDP by by twenty thirty five. It looks like that 0:19:41.400 --> 0:19:43.399 the budget deficit for this year could come in as 0:19:43.400 --> 0:19:46.280 over two trillion dollars, and half of that is interest, 0:19:46.480 --> 0:19:48.480 and these higher interest costs that we're seeing it's a 0:19:48.520 --> 0:19:50.560 negative feedback loop because it's actually pushing. 0:19:50.359 --> 0:19:50.960 Up the deficit. 0:19:51.080 --> 0:19:53.680 And the question is, well, how much can the government 0:19:53.760 --> 0:19:57.600 borrow from global capital markets at very cheap rates. 0:19:57.760 --> 0:19:59.920 You said in your note the most dangerous three were 0:20:00.119 --> 0:20:02.600 and economics are quote wait and see. What do you 0:20:02.640 --> 0:20:06.440 do that in this environment where Trump wants to be unpredictable. 0:20:06.520 --> 0:20:09.480 That's part of the policy. Yeah, and it doesn't it works. 0:20:09.640 --> 0:20:12.240 You know, it works well in football, it works well 0:20:12.280 --> 0:20:13.360 in military maneuvers. 0:20:13.359 --> 0:20:14.400 It does not work. 0:20:14.200 --> 0:20:15.760 Work well in macroeconomic management. 0:20:15.840 --> 0:20:16.919 You actually have to let people know. 0:20:16.960 --> 0:20:18.520 I mean, that's why the fence spends so much time 0:20:18.560 --> 0:20:21.200 saying we're looking for two percent inflation and just tries 0:20:21.240 --> 0:20:24.359 to telegraph their punches all the time. And that's really 0:20:24.400 --> 0:20:27.560 what what you should do in macroeconomic management. So yes, 0:20:27.600 --> 0:20:30.560 I think there is an uncertainty tax, absolutely, because the 0:20:30.640 --> 0:20:32.639 problem is that if you don't know what the administration 0:20:32.720 --> 0:20:34.920 is going to do in terms of taxation or deficits, 0:20:34.960 --> 0:20:36.480 you don't know where interest rates are going to be. 0:20:36.920 --> 0:20:38.760 What's the easiest thing for business to say, well, let's 0:20:38.760 --> 0:20:41.040 wait and see. And you know, whenever decides to wait 0:20:41.080 --> 0:20:42.600