WEBVTT - Surveillance: Economy Weighs on Midterms 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. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.920 and of course on the Bloomberg Terminal. It is a 0:00:31.000 --> 0:00:33.240 time of change and all as we readjust to the 0:00:33.320 --> 0:00:35.400 end of the year and maybe readjust after the election. 0:00:35.479 --> 0:00:38.760 Joining us now, someone with terrific respect on this, Alan Ruskin, 0:00:39.320 --> 0:00:43.159 chief international strategist at Deutsche Bank, is well Ellen, I 0:00:43.240 --> 0:00:47.120 want to go to the path from ultra accommodative Stanley 0:00:47.159 --> 0:00:52.559 Fisher to accommodative, to an unmeasurable neutrality and to a 0:00:52.640 --> 0:00:56.840 Domini constant over at Missoo calls super restrictive, which is 0:00:56.880 --> 0:01:01.240 basically disinflation even with oil, even with ants. How close 0:01:01.240 --> 0:01:05.440 are we to restrictive? How close are we two super restrictive? 0:01:07.360 --> 0:01:09.720 Great question, Tom, because I think you canscious look at 0:01:09.720 --> 0:01:11.679 this in terms of monetary policy. You have to look 0:01:11.720 --> 0:01:14.680 at it in terms of fiscal policy as well. And 0:01:15.040 --> 0:01:18.360 I think the most underrated element in terms of the 0:01:18.360 --> 0:01:23.880 policy stance is that fiscal policy from one was really 0:01:23.920 --> 0:01:27.760 the most stimulus we've ever had by Quantum's Yeah, I 0:01:27.800 --> 0:01:31.320 think it's a temper center GDP stimulus at that point 0:01:31.319 --> 0:01:34.319 for over those two years, about five times what a 0:01:34.400 --> 0:01:38.240 large stimulus is. That's still reverberating, that's still showing up 0:01:38.240 --> 0:01:43.440 in excess savings, that still buffering the consumer, and to me, 0:01:44.440 --> 0:01:48.520 that is creating the underlying resilience. That means that interest 0:01:48.600 --> 0:01:50.960 rates can be much higher than they would otherwise be, 0:01:51.560 --> 0:01:54.360 and that interest rates look like they're much tighter than 0:01:54.400 --> 0:01:58.400 they are. An arch theme of your colleague David Folker's Lenda, 0:01:58.520 --> 0:02:01.280 who has been there will be for school stimulus clearly 0:02:01.280 --> 0:02:05.600 in Europe to rebuild Europe after an horrific or as well. 0:02:05.760 --> 0:02:10.160 Do you see fiscal leveling, fiscal stimulus, or maybe even 0:02:10.280 --> 0:02:16.560 some form of dropped down in fiscal spending in America? Look, 0:02:16.600 --> 0:02:20.280 I think an it's gonna hinge on Tuesday and the 0:02:20.280 --> 0:02:24.280 events thereof, I think the anticipation is that fiscal policy 0:02:24.360 --> 0:02:27.200 is going to be a lot tighter going forward. I 0:02:27.200 --> 0:02:30.160 think the question there again is what are we going 0:02:30.160 --> 0:02:32.880 to see in terms of front loading from the lame 0:02:33.000 --> 0:02:35.960 dark section the session? In terms of you know, the 0:02:36.040 --> 0:02:38.639 death seeling. How much constraint is that going to impose? 0:02:39.280 --> 0:02:42.600 But I think the anticipation will be that we will 0:02:42.639 --> 0:02:45.680 see tightening. But again, want to emphasize the fact that 0:02:45.720 --> 0:02:50.919 the lagged fiscal stimulus from twenty twenty and twenty one 0:02:51.280 --> 0:02:54.720 is still going to act as a buffer for three 0:02:54.720 --> 0:02:57.880 and four, so it's still going to be substantive. And 0:02:57.919 --> 0:03:01.120 I'm not that worried about the tightening on the school side. Okay, 0:03:01.120 --> 0:03:03.960 but there's a very strange confluence of bad news is 0:03:04.000 --> 0:03:06.240 good news for markets right now. And we can put 0:03:06.280 --> 0:03:08.920 fiscal spending in there. It's good we get bad data 0:03:08.960 --> 0:03:10.960 because that means heilds will go down. It's good when 0:03:10.960 --> 0:03:13.080 we get less fiscal spending because it means bond yields 0:03:13.080 --> 0:03:15.440 will go down and perhaps ill cap inflation. At what 0:03:15.600 --> 0:03:18.560 point does that run out and people start to think, okay, 0:03:18.560 --> 0:03:20.720 wait a second, this isn't going to support the economy, 0:03:20.919 --> 0:03:23.640 and that is negative broadly for the dollar and for 0:03:23.760 --> 0:03:26.399 risk asses. Yeah, at Lisa, I think if you look 0:03:26.440 --> 0:03:30.679 at the past patterns whereby we've had a Democrat president 0:03:30.880 --> 0:03:35.240 with a divided Congress, you've seen as you might expect 0:03:35.440 --> 0:03:39.280 that fiscal deficits tend to come down. You see bond 0:03:39.360 --> 0:03:42.920 heels well supported, but you also see equities and I 0:03:43.000 --> 0:03:46.480 tend to underperform, and you see the underlying economy the 0:03:46.560 --> 0:03:49.640 GDP numbers tend to be weaker. So um, I think 0:03:49.680 --> 0:03:53.040 you asked the right question there, that it does tend 0:03:53.080 --> 0:03:57.040 to add to underlying weakness, and that good news for 0:03:57.080 --> 0:04:00.440 the bond market is only going to fill to through 0:04:00.480 --> 0:04:03.280 to some extent. As far as the economy is concerned. 0:04:03.280 --> 0:04:05.200 I don't think it's going to be sufficient, for example, 0:04:05.480 --> 0:04:08.680 to stop a recession, say by the time the end 0:04:08.680 --> 0:04:12.840 of three. We had been later on earlier in the show, 0:04:12.880 --> 0:04:14.960 earlier in this hour, and he was saying that he 0:04:15.040 --> 0:04:17.200 thinks that there is going to be a very big 0:04:17.240 --> 0:04:19.919 move up in risk assets because that there will be 0:04:19.960 --> 0:04:22.680 cutting of interest rates by the Federal Reserve, and we'll 0:04:22.720 --> 0:04:24.400 go back not to the same extent, but to a 0:04:24.440 --> 0:04:27.240 similar playbook as the one that we've come accustomed to. 0:04:27.520 --> 0:04:29.480 Do you think that that is likely? Is that something 0:04:29.520 --> 0:04:31.640 that people can count on in the next twelve months 0:04:31.680 --> 0:04:34.200 or perhaps even eighteen months, even if it doesn't seem 0:04:34.200 --> 0:04:37.479 like it's on the horizon now, I think that's a 0:04:37.720 --> 0:04:40.080 very optimistic view. I think, you know, we're trying to 0:04:40.160 --> 0:04:43.880 establish all the things that Pal highlighted, which is where 0:04:43.920 --> 0:04:46.359 is the peak and what is the shape of the 0:04:46.440 --> 0:04:49.760 rate cycle at the peak? And increasingly that peaks just 0:04:49.800 --> 0:04:51.960 seems to drift up. You know, we're now at a 0:04:52.000 --> 0:04:55.000 five percent handle. It's possible, and I think the stew 0:04:55.320 --> 0:04:57.920 is still to the top side of that. We're thinking 0:04:57.960 --> 0:05:02.480 in terms of the shape, and people felt the higher 0:05:02.520 --> 0:05:05.440 we got, the quicker rates would actually come down. In fact, 0:05:05.520 --> 0:05:09.000 now increasingly there's a feeling that rates won't come down quickly, 0:05:09.200 --> 0:05:11.200 that it's more like an inverted l at the top 0:05:11.600 --> 0:05:15.479 of of of the cycle. So to me, none of 0:05:15.520 --> 0:05:19.279 that is that optimistic from a necessary from a growth 0:05:19.520 --> 0:05:23.000 cycle standpoint. Well, and if we dash to a hundred 0:05:23.000 --> 0:05:27.360 dollar brand again, is the hundred dollar a barrel brand? 0:05:27.440 --> 0:05:30.040 If we see it now at ninety eight dollars, is 0:05:30.080 --> 0:05:33.400 it the same is a hundred dollars the last time around? 0:05:35.920 --> 0:05:39.120 I think you've always got to, you know, just assess 0:05:39.240 --> 0:05:43.240 what the overall backdrop, you know, macro backdrop is. I mean, 0:05:43.279 --> 0:05:45.719 I think it would be upsetting from a sort of 0:05:45.720 --> 0:05:49.040 a stagflation standpoint if we started to see oil prices 0:05:49.080 --> 0:05:51.040 move in the you know, in the so called a 0:05:51.120 --> 0:05:54.719 wrong direction from a stagflation standpoint, I think, you know, 0:05:54.880 --> 0:05:58.640 falling on a weakening economy. One would argue that perhaps 0:05:58.720 --> 0:06:01.320 to have even more negative effect, and it would have 0:06:01.360 --> 0:06:07.200 had in prior last two quarters. A general questionnaire, let's 0:06:07.200 --> 0:06:09.960 call it econ one oh one this morning, I believe 0:06:09.960 --> 0:06:15.000 there are fourteen core CPI measurements in each country. Is 0:06:15.040 --> 0:06:18.479 there a value of looking at headline inflation now? Or 0:06:18.520 --> 0:06:20.760 do each of us have to find a core series 0:06:20.760 --> 0:06:24.800 we're comfortable with? And I think CORE was seen as 0:06:25.360 --> 0:06:29.159 helpful in terms of telling you what the underlying picture was, 0:06:29.520 --> 0:06:32.960 you know, where the natural gravitation would be over say 0:06:33.000 --> 0:06:37.080 a twelve month period when food and energy prices erratic 0:06:37.160 --> 0:06:39.719 food and energy prices work their way out. But I 0:06:39.720 --> 0:06:43.719 think if you're asking questions about, you know, what is 0:06:43.880 --> 0:06:46.840 inflation doing for the average man in the street, then 0:06:47.000 --> 0:06:49.000 skip the CORE. I mean, you've really got to focus 0:06:49.040 --> 0:06:53.000 on the total inflation and uh, you know, it would 0:06:53.040 --> 0:06:56.240 be a travesty ready to start removing food and energy 0:06:56.320 --> 0:06:59.080 from those kind of measures. But I think CORE for 0:06:59.160 --> 0:07:02.680 the economists trying to look say twelve months out, is 0:07:02.880 --> 0:07:05.200 still reasonable, and you've got his search country by country 0:07:05.240 --> 0:07:07.359 on the fraid time when you look country to country. 0:07:07.400 --> 0:07:09.040 I just want to wrap it up with this question 0:07:09.080 --> 0:07:11.360 about Europe. And we've been talking a lot about the 0:07:11.440 --> 0:07:13.760 US and the CYSCAL spending in the US and how 0:07:13.800 --> 0:07:15.600 we're going to see the dollar progress. But at what 0:07:15.680 --> 0:07:18.720 point does Europe become attractive again considering how much it 0:07:18.840 --> 0:07:21.280 sold off, but also considering that it faces a much 0:07:21.320 --> 0:07:25.000 bleaker picture in many ways than the United States. Yeah. 0:07:25.000 --> 0:07:27.840 I mean, obviously a lot turns on the politics. So 0:07:28.160 --> 0:07:34.200 you had somewhat optimistic mentions of the US touching base 0:07:34.320 --> 0:07:36.560 with the Russians, which is you know, I think an 0:07:36.720 --> 0:07:40.200 egg people to think in terms of some sort of 0:07:40.920 --> 0:07:45.520 Ukraine peace deal eventually. Um, that's not obviously an optimistic 0:07:45.600 --> 0:07:48.680 view of things. Um, so that's going to be crucial 0:07:48.760 --> 0:07:51.320 I think in terms of, you know, how you think 0:07:51.360 --> 0:07:54.960 about Europe going forward. Um. That being said, I think 0:07:54.960 --> 0:07:57.280 there's some built in resilience that we're starting to see 0:07:57.320 --> 0:08:00.760 from the economies. You are seeing uh an ability to 0:08:00.880 --> 0:08:03.680 navigate some of the energy shocks. So I don't think 0:08:03.720 --> 0:08:05.960 it's all pessimism really in a way. But I think 0:08:06.000 --> 0:08:07.880 he's still gonna have to just wait for that political 0:08:07.920 --> 0:08:10.720 signal before it's a real buying opptuesing allan thank you 0:08:10.760 --> 0:08:12.560 as old white body. I appreciate your time and I'm 0:08:12.600 --> 0:08:25.720 resking that of Deutsche Bank right now and this is 0:08:25.840 --> 0:08:28.680 a joy. We truly begin our coverage with the Wendy Shiller, 0:08:28.720 --> 0:08:31.760 director of the tub and Center for American Politics and 0:08:31.800 --> 0:08:36.200 Policy at Brown University, with Greg Valier just a foundation 0:08:36.320 --> 0:08:40.720 of what surveillance does on politics. Professor Schiller, I want 0:08:40.760 --> 0:08:43.880 you to address, as in your memo, the mid term 0:08:44.000 --> 0:08:47.360 messaging that has led us in the last forty eight 0:08:47.360 --> 0:08:52.880 hours to indeterminate polling. Give us the messaging dynamic red 0:08:52.920 --> 0:08:56.840 and blue versus the polling shock that we're going nowhere 0:08:56.880 --> 0:09:00.640 in the last two days. Well, it's interesting and sort 0:09:00.640 --> 0:09:03.120 of a very late shift by the Democrats. We've talked 0:09:03.120 --> 0:09:06.800 about this before to the economy and also attacking Republicans 0:09:06.840 --> 0:09:10.360 on social security and medicare the problem with that charge 0:09:10.400 --> 0:09:12.079 of the Democrats as many people who are over the 0:09:12.120 --> 0:09:14.960 age of sixty five already voted. That's the biggest bulk 0:09:15.000 --> 0:09:17.880 of people who vote by mail, and also people being 0:09:17.960 --> 0:09:20.960 the age of sixty five, A lot of that early 0:09:21.040 --> 0:09:23.280 voting is coming from them. They care about the economy. 0:09:23.520 --> 0:09:26.199 It's just a little bit too late, I think. And 0:09:26.320 --> 0:09:28.840 uh you know, they misplayed the abortion issue by over 0:09:28.880 --> 0:09:31.679 emphasizing it nationally and not being strategic about that. They 0:09:31.679 --> 0:09:33.960 did some redistricting decisions that we could talk about, we 0:09:33.960 --> 0:09:36.280 don't have time. In twenty we have that case in 0:09:36.360 --> 0:09:38.679 Rhode Island where they over districted, in other words, put 0:09:38.679 --> 0:09:41.120 too many Democrats in one district and left the end 0:09:41.280 --> 0:09:43.600 on their district vulnerable. So now we've got a potential 0:09:43.640 --> 0:09:45.400 for a Republican to be elected in Rhode Island for 0:09:45.400 --> 0:09:48.160 the Congress. That hasn't happened in a long time. Uh So, 0:09:48.240 --> 0:09:49.839 I think. On the other hand, the Democrats had a 0:09:49.880 --> 0:09:52.839 lot of losses in the House, so you know, the 0:09:52.960 --> 0:09:55.880 damage actually might be mitigated and other problems can pick 0:09:55.920 --> 0:09:57.600 up a lot of seats and win control, but it 0:09:57.640 --> 0:10:02.840 won't necessarily look like eleven or twenty. Where are we 0:10:02.920 --> 0:10:06.480 on the tipping point where the mail and voting, the 0:10:06.559 --> 0:10:11.880 pre voting becomes more important than the Tuesday voting. That's 0:10:11.880 --> 0:10:14.520 a really great question. Place like Pennsylvania, for example, we're 0:10:14.520 --> 0:10:17.320 all watching that states Senate race in particular. They start 0:10:17.400 --> 0:10:20.400 counting Tuesday morning, so you may not have that kind 0:10:20.400 --> 0:10:22.280 of blue wave red wave kind of thing going on. 0:10:22.400 --> 0:10:24.160 May take them a long time. There's about I think 0:10:24.160 --> 0:10:27.160 five and fifty thousand or six hundred thousand early votes 0:10:27.360 --> 0:10:29.720 by mail, but they start counting at least on Tuesday. 0:10:29.920 --> 0:10:32.240 It's some other states, like Ohio, they accept mail and 0:10:32.280 --> 0:10:35.079 ballots for another ten days, So you know, if it's 0:10:35.120 --> 0:10:37.280 really tight in some of these states, it could be 0:10:37.320 --> 0:10:40.079 a while before we know the answers. But midterm elections 0:10:40.080 --> 0:10:42.079 are about a referendum on the party in power in 0:10:42.120 --> 0:10:45.160 the White House. Most of the time that party loses seats. 0:10:45.440 --> 0:10:47.960 You know, when you have such division, you're gonna switch 0:10:47.960 --> 0:10:51.120 control the chambers a lot more frequently. Years ago, we 0:10:51.120 --> 0:10:53.600 didn't have as much division, and so you know, it's 0:10:53.640 --> 0:10:56.520 harder to flip control. But it is typical for the 0:10:56.559 --> 0:10:58.640 party in the White House to lose seats in a 0:10:58.640 --> 0:11:02.160 mid from election. Wendy's a referendum on this administration or 0:11:02.240 --> 0:11:04.480 is it a larger referendum. There is a story in 0:11:04.600 --> 0:11:09.240 Axios basically talking about how leading Democratic voices are saying 0:11:09.280 --> 0:11:11.880 the party has seen as too extreme and that this 0:11:12.000 --> 0:11:15.920 basically is a big clarion call for a rethink in 0:11:16.000 --> 0:11:19.160 some of the messaging. More broadly, do you agree that 0:11:19.160 --> 0:11:21.840 that is the conclusion if the Democrats do face some 0:11:21.880 --> 0:11:25.880 pretty severe losses uh this particular week, Lisa, I think 0:11:25.880 --> 0:11:27.720 it's just so much more complicated than that. I would 0:11:27.720 --> 0:11:30.920 be cautious of overinterpreting the results of this particular election. 0:11:31.400 --> 0:11:33.679 People are concerned about inflation. It's still hard to get 0:11:33.679 --> 0:11:36.840 a new car. There's ridiculous inflation markups on new cars 0:11:36.880 --> 0:11:39.640 for example. I mean people's people feel it. They feel 0:11:39.640 --> 0:11:42.240 it every day. This could just be a big example 0:11:42.400 --> 0:11:45.560 of bad campaigning by the Democratic Party. In terms of messaging. 0:11:45.800 --> 0:11:48.240 They had tons of money, Uh, and did they not 0:11:48.400 --> 0:11:51.400 emphasize what they should have emphasized, sort of average campaign 0:11:51.480 --> 0:11:53.880 one oh one. And in terms of democracy, if we 0:11:53.920 --> 0:11:55.640 have turned out, you know, we already have more early 0:11:55.720 --> 0:11:57.480 voting than we had in twenty eighteen, you know, by 0:11:57.480 --> 0:11:59.600 about a million votes already, and we don't even know 0:11:59.640 --> 0:12:01.720 the folk than the burling voting. So if we have 0:12:01.880 --> 0:12:05.120 really big turnout and you say democracy is dying, that's 0:12:05.120 --> 0:12:08.320 a conflicting message. Again, So the Democrats have to be cautious. 0:12:08.480 --> 0:12:10.720 Everybody has to be cautious about interpreting the results of 0:12:10.720 --> 0:12:13.800 this particular election, but it is true that the Democrats 0:12:13.800 --> 0:12:15.960 did a lot that they say they did for a 0:12:16.000 --> 0:12:17.839 lot of the people who are not voting for the 0:12:17.880 --> 0:12:22.040 Democratic Party in November. And where is that mismatch most acute? 0:12:22.280 --> 0:12:24.760 And how do they have to localize their messaging as 0:12:24.800 --> 0:12:26.920 they move forward? Well, especially when it comes to crime. 0:12:26.960 --> 0:12:28.760 And I say this living in New York City and 0:12:28.960 --> 0:12:31.000 living in New York and we have seen this become 0:12:31.200 --> 0:12:34.080 a huge campaign issue that actually makes this highly blue 0:12:34.120 --> 0:12:36.600 state suddenly on the ballot when it comes to the 0:12:36.640 --> 0:12:39.160 governor race. What's your interpretation of that? And I understand 0:12:39.200 --> 0:12:42.120 that there are single idiosyncratic messages, but is this just 0:12:42.160 --> 0:12:45.280 a messaging issue or is this a policy issue? Well, 0:12:45.320 --> 0:12:47.240 I mean, you know, in terms of crime, you know, 0:12:47.520 --> 0:12:49.480 the irony for the Democrats are the frustration of the 0:12:49.480 --> 0:12:52.080 Democrats is that part of the violent nature of crime 0:12:52.120 --> 0:12:53.720 is that more people of guns. You know, it's just 0:12:53.760 --> 0:12:56.000 easier to get a gun and many more people have guns. 0:12:56.240 --> 0:12:59.040 That's dude to basically Republican slash n R a opposition 0:12:59.080 --> 0:13:02.199 to gun safety ledges slation. But the Democrats has lost 0:13:02.240 --> 0:13:05.000 that message entirely. Uh. And it's true people want to 0:13:05.040 --> 0:13:06.840 be safe when they go into a supermarket or a 0:13:06.840 --> 0:13:09.360 movie theater or the subway, wherever they are, they want 0:13:09.400 --> 0:13:11.320 to be safe. And it's been typical that the Republicans 0:13:11.360 --> 0:13:14.520 have taken advantage of that in electoral terms. And there 0:13:14.640 --> 0:13:17.400 is also sort of a racial coded message in criminal 0:13:17.600 --> 0:13:20.040 sort of focusing on crime in some areas as well. 0:13:20.240 --> 0:13:23.079 So the pushback by the Democrats against that messaging hasn't 0:13:23.080 --> 0:13:26.440 been exactly the right mix of messaging about security versus 0:13:26.480 --> 0:13:30.360 being you know, cautious on on using racist or stereotypical 0:13:30.440 --> 0:13:33.040 tropes on crime. So I think the Democrats have some 0:13:33.040 --> 0:13:34.400 work to do on messaging. They also have to pick 0:13:34.480 --> 0:13:36.559 up who's gonna run their party. They have people who 0:13:36.559 --> 0:13:38.840 are you know, no offense, people in their seventies and eighties, 0:13:39.000 --> 0:13:42.200 you know, all good, but they have a fairly old bench, 0:13:42.559 --> 0:13:45.040 and the Republicans have a fairly younger bench, with the 0:13:45.080 --> 0:13:47.640 exception of Donald Trump, who who still has a lot 0:13:47.679 --> 0:13:50.480 of vitality, but nonetheless you had the governor of Virginia, 0:13:50.640 --> 0:13:52.480 you know, relatively young guy, probably has a future in 0:13:52.559 --> 0:13:55.400 national politics. The Democrats have a befaired who is there 0:13:55.440 --> 0:13:58.319 who are their spokespeople and what age group are they 0:13:58.360 --> 0:14:00.880 are they picking from? And that's that's a big rethink 0:14:00.960 --> 0:14:02.880 for them, and they better do it fast. Wendy, thank 0:14:02.920 --> 0:14:05.400 you when they share that of Brandy Universtity, I think 0:14:05.400 --> 0:14:08.320 you missed at the end, Tom perhaps for the best. Wendy, 0:14:08.320 --> 0:14:15.679 thank you very much. We are thrilled to bring you. Dana, 0:14:15.720 --> 0:14:19.080 I've senior equity research director at Wedbush. Daniel and I 0:14:19.120 --> 0:14:22.400 were talking about this, any clarity on sales the two 0:14:22.440 --> 0:14:25.560 fancy phones, with the phone war that's out there, T 0:14:25.720 --> 0:14:28.440 Mobile and all that. Am I right that the Pro 0:14:28.680 --> 0:14:33.000 and the Pro Max are selling like hotcakes? Look, I 0:14:33.040 --> 0:14:36.800 think demand on Pro has been unprecedented relative to what 0:14:36.840 --> 0:14:38.720 we're seeing in this macro. And I think you saw 0:14:38.760 --> 0:14:41.920 that with September results and even the guidance, and you 0:14:42.000 --> 0:14:44.640 see that even come out in China. But for apples, 0:14:44.720 --> 0:14:47.640 we saw last night the issues not the man. It's 0:14:47.680 --> 0:14:50.360 the supply and oxous to the zero COVID in China. 0:14:50.720 --> 0:14:53.520 That's the gut punch that we're dealing with this morning. Okay, 0:14:53.520 --> 0:14:55.160 so wait, there on a scale and I don't mean 0:14:55.160 --> 0:14:56.920 to get Matthew here, Dan, but I think we do 0:14:57.000 --> 0:14:59.920 with the Bloomberg reporting. What percent of this is a 0:15:00.000 --> 0:15:05.200 about China lockdown? What percentages about demand of the phones 0:15:05.720 --> 0:15:09.680 underneath the pro in the pro Max. Yeah, so let's 0:15:09.680 --> 0:15:12.200 break that down in terms of the Bloomberg report. That's 0:15:12.200 --> 0:15:14.920 really time. When you look at the iPhone fourteen class, 0:15:14.960 --> 0:15:17.920 I mean, that's really been a strikeout for Apple coming 0:15:17.920 --> 0:15:19.880 out of the gate. It s that's where you're seeing 0:15:19.880 --> 0:15:23.400 the lower production in terms of coming out of Asia. 0:15:23.920 --> 0:15:26.400 But but on the other side, the strength is coming 0:15:26.400 --> 0:15:30.520 out from fourteen pro. A typical mix is about sixty 0:15:30.600 --> 0:15:34.760 sixty five percent. We think it's closer to eight this quarter. 0:15:35.120 --> 0:15:38.840 That's bullets that's positive for a sp is positive from margins, 0:15:39.200 --> 0:15:41.920 and that's really what the streets focused on here. So, Dan, 0:15:42.200 --> 0:15:44.520 I guess that you're rejecting this idea that this could 0:15:44.520 --> 0:15:47.440 be demand driven reduction in production. Is that correct that 0:15:47.480 --> 0:15:51.480 you think that that's uh, perhaps not a correct interpretation 0:15:51.600 --> 0:15:54.920 of Apple's announcement. Well, I mean if you look at 0:15:55.160 --> 0:15:58.160 just off the quarter, I mean when Cook gave guidance, 0:15:58.280 --> 0:16:01.880 and I think across big the last four or five years, 0:16:01.880 --> 0:16:05.200 no one's in better in terms of forecasting. They're seeing 0:16:05.240 --> 0:16:07.960 strength and I believe the iPhones would still be up 0:16:08.080 --> 0:16:10.040 year of the year, but obviously in terms of the 0:16:10.160 --> 0:16:12.440 zero COVID shut then we think that probably takes off 0:16:12.520 --> 0:16:17.640 to potentially three percent iPhone unit demands. Issue it continues 0:16:17.680 --> 0:16:20.160 to be supply and I think that's are of the 0:16:20.240 --> 0:16:23.720 frustration for Cupertino in terms of what they're dealing with 0:16:23.760 --> 0:16:27.680 in China. Although you're not necessarily seeing people expect bigger margins. 0:16:27.680 --> 0:16:30.360 In other words, we're not hearing that perhaps Apple will 0:16:30.440 --> 0:16:34.120 raise the price of the iPhone fourteen in response to 0:16:34.320 --> 0:16:38.080 the lack of supply. So does this mean that Apple 0:16:38.280 --> 0:16:40.720 and a lot of companies kind of reached the end 0:16:40.720 --> 0:16:43.920 of how much they can offset some of these these 0:16:43.920 --> 0:16:48.640 pressures with higher prices. Yeah, it's a great point. I 0:16:48.680 --> 0:16:51.480 also think it speaks to why within the four walls 0:16:51.520 --> 0:16:54.600 of Cupertino, why it's so important from a chip and 0:16:54.720 --> 0:16:57.160 own their own ecosystem, and I think that's what Apple 0:16:57.200 --> 0:16:59.240 has done. It gives them more flexibility on the supply 0:16:59.400 --> 0:17:02.840 chain and from a margin perspective, and that's something that's 0:17:02.880 --> 0:17:05.520 playing out more and more. But I think really the 0:17:05.640 --> 0:17:09.120 narrative is that iPhone four team pro despite opposite dark 0:17:09.119 --> 0:17:12.879 storm clouds is seeing strength despite what we see what 0:17:13.240 --> 0:17:15.920 I'd call it almost a nightmare. We have a large 0:17:15.960 --> 0:17:19.520 cap tech enemy season Dan, in the hallways of all 0:17:19.560 --> 0:17:22.720 these fancy tech people with their egos and their business 0:17:22.760 --> 0:17:26.400 beliefs and all that. What's the difference between a hiring 0:17:26.600 --> 0:17:32.680 freeze and outright firings? Explain that body language, not company 0:17:32.720 --> 0:17:36.000 to company, but within the industry, within the culture you 0:17:36.160 --> 0:17:40.800 follow well in the valley, especially intact the last I 0:17:40.840 --> 0:17:43.040 call it sevent eight years. I mean a lot of 0:17:43.040 --> 0:17:46.840 these companies were hiring fifteen, twenty, sometimes thirty percent more 0:17:46.840 --> 0:17:49.920 employees per year. So in terms of a freeze, they 0:17:49.960 --> 0:17:52.000 were just used it. You need ten more engineers and 0:17:52.040 --> 0:17:54.920 a project, you get it. Now, what you're starting to 0:17:54.960 --> 0:17:58.920 see clearly a slowing down. You're starting to finally see 0:17:58.960 --> 0:18:02.760 these culturalities come to just spending like ninety rock stars. 0:18:02.760 --> 0:18:06.439 But you're starting to see now cuts across the board 0:18:06.880 --> 0:18:09.879 because they really want to make sure that they get ahead. 0:18:09.920 --> 0:18:13.200 It's on margin perspective. I still don't be with his ominous. 0:18:13.480 --> 0:18:16.760 It's still more between a freeze and slight cuts. If 0:18:16.760 --> 0:18:19.600 it continued, then it becomes a dark winner. Hey Dan, 0:18:19.840 --> 0:18:21.720 thank you, Dan, I said wet Bush still looking for 0:18:21.760 --> 0:18:36.240 two on Apple Jayler Richardson with his chief economists at 0:18:36.280 --> 0:18:39.639 ADP Research. And she's fabulous because not only working with 0:18:39.680 --> 0:18:42.800 a DP with a thumb and the pulse of American wages, 0:18:43.160 --> 0:18:46.240 but also her work on government economics. Thank you so 0:18:46.320 --> 0:18:48.760 much for joining today, Thanks for having you walked in 0:18:48.800 --> 0:18:52.879 and said, hey, stupid, this is what matters in the media, 0:18:53.040 --> 0:18:57.639 and this is no it's says it's Monday. It's stupid 0:18:57.680 --> 0:19:01.240 Monday for me. But the media over weights technology because 0:19:01.280 --> 0:19:04.159 we've got technology in the brain and you're saying layoffs, 0:19:04.400 --> 0:19:08.320 it Lift or Apple wherever, it's not that big a deal. Well, 0:19:08.320 --> 0:19:10.639 it's a big a deal for the tech sector. It's 0:19:10.680 --> 0:19:13.320 a big deal for tech employees. But in terms of 0:19:13.359 --> 0:19:18.040 the overall workforce, tech information sector is about two. So 0:19:18.080 --> 0:19:22.399 when you so when you're talking about what's really the 0:19:22.560 --> 0:19:27.240 heavy hitters in the labor force, its services. Services is 0:19:27.720 --> 0:19:31.719 when it comes to consumer facing services like leisure in hospitality, 0:19:31.840 --> 0:19:35.760 which no suffered the most during the pandemic, retail sector, 0:19:35.960 --> 0:19:39.880 that's important. Professional business services to all your accountants out there, 0:19:40.200 --> 0:19:43.399 that's important. Tech is mark what is this what is 0:19:43.400 --> 0:19:47.479 this service dynamic into this election coming off the ADP report, 0:19:47.560 --> 0:19:50.040 coming off the full employment reports on Friday. What's a 0:19:50.119 --> 0:19:52.880 service dynamic right now? It's all about wages and it's 0:19:52.920 --> 0:19:56.200 all about leisure in hospitality really because it's that has 0:19:56.240 --> 0:19:59.720 been the big growth sector. Is interesting. In January of 0:19:59.760 --> 0:20:03.800 T one, wage growth and leisure and hospitality was the 0:20:03.840 --> 0:20:07.120 lowest of any sector we track. Now it's the highest, 0:20:07.119 --> 0:20:10.240 and it's been at double dudgets since the summer for 0:20:10.280 --> 0:20:12.919 a very long time. It's what's driving up wage growth. 0:20:13.160 --> 0:20:16.960 But as that dynamic changes, you might see wages start 0:20:17.000 --> 0:20:20.119 to peter out in terms of acceleration, but still remain 0:20:20.320 --> 0:20:22.840 high at these elevated levels. We're all waiting for this 0:20:22.960 --> 0:20:28.639 supply side response, any sign of it whatsoever. Well, yeah, 0:20:28.720 --> 0:20:30.800 a little bit here and there, just the hint of it, 0:20:31.119 --> 0:20:34.159 walk us through it in pocket. I mean, there was 0:20:34.800 --> 0:20:37.480 a little bit of movement, and I'm talking about labor 0:20:37.520 --> 0:20:41.920 supply of course. Yeah, hopefully we're one. We we did 0:20:41.920 --> 0:20:46.480 see someone so many supply issues here, but we did 0:20:46.520 --> 0:20:49.119 see some people move back into the labor market. In 0:20:49.160 --> 0:20:52.600 the fall. We had the promise of a normal school 0:20:52.640 --> 0:20:54.880 season and so that was helpful. But if you look 0:20:54.920 --> 0:20:57.679 at that labor force participation rate. It's still stubborn, and 0:20:57.680 --> 0:21:00.480 it retreated last month. That is an issue you because 0:21:00.480 --> 0:21:04.199 that suggests a bit more permanence to the fact that 0:21:04.240 --> 0:21:08.479 the work working age supply has, you know, shrunk, And 0:21:08.520 --> 0:21:11.000 what does that mean for growth going forward, not just 0:21:11.080 --> 0:21:13.520 when we get through this inflation cycle, but in the 0:21:13.600 --> 0:21:15.480 years ahead. Well, this is the inflation cycle I wanted 0:21:15.520 --> 0:21:17.920 to talk about. So on the way up, inflation kick 0:21:18.000 --> 0:21:20.800 tie really really quickly. Do you consider it to be 0:21:20.840 --> 0:21:22.919 stickier on the way down? Is that the way this 0:21:23.040 --> 0:21:26.320 usually works out, It's stickier, and I think it's going 0:21:26.359 --> 0:21:29.080 to be more persistent. The Fed's already admitted that the 0:21:29.160 --> 0:21:33.200 persistence is much more than it has been in previous cycles, 0:21:33.240 --> 0:21:38.960 That the supply shortages, those dynamics globalization, you know, automation 0:21:39.000 --> 0:21:42.840 that we're pushing inflation down, aren't. They don't have the 0:21:42.880 --> 0:21:46.200 same power they used to, And the demographic changes are 0:21:46.240 --> 0:21:48.800 not having the same power it used to to keep 0:21:48.840 --> 0:21:52.280