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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Will

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Speaker 1: the US government be shut down? While President Donald Trump

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Speaker 1: says he's threatening to shut down the government over the

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Speaker 1: border wall funding? Here to explain more is Steve Bell.

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Speaker 1: He is senior adviser the Bipartisan Policy Center. He's a

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Speaker 1: former Senate Budget Committee staff director for Republican Pete Dominici.

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Speaker 1: And that was in four eighties six. Steve Bell, Boy,

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Speaker 1: that seems like ancient times, doesn't it. Well, it really

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Speaker 1: does things. Nothing is golden except in our memories, but

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Speaker 1: those were much easier years than now. Explain how the

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Speaker 1: contrast has informed your understanding of what President Trump said

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Speaker 1: in Phoenix about shutting down the government and connecting that

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Speaker 1: to funding for a potential border wall. Well, he said

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Speaker 1: it several times now, and so I'm beginning to think

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Speaker 1: that he means it quite seriously. Uh, let me just

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Speaker 1: distinguish between two things. Shutting Down the government would mean

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Speaker 1: that we just didn't pass the twelve spending bills or

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Speaker 1: appropriation bills for the upcoming fiscal year by October one.

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Speaker 1: That is much different than defaulting on the debt. And

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Speaker 1: I just want to make sure everyone understands there are

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Speaker 1: two different things. Um, I think the President will if

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Speaker 1: he doesn't get a bill that has funding directly for

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Speaker 1: the wall, I think he will not sign it. And

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Speaker 1: I think that we will have on the twenty nine

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Speaker 1: um of September, I think we will have beginning of

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Speaker 1: what I believe will be e relatively short government shutdown. So, Steve,

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Speaker 1: can you talk about the distinction that you just mentioned,

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Speaker 1: because when I look at bond markets, they certainly are

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Speaker 1: not expecting any kind of default and they're not frankly

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Speaker 1: expecting even a close call. I mean, I'm just looking at,

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Speaker 1: for example, three months and six month treasury bills and

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Speaker 1: they're not showing any distortions like we've seen in the past.

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Speaker 1: So is there a show is explained to us how

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Speaker 1: we could see a government shut down but not a default,

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Speaker 1: and tell us why you think this would play well

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Speaker 1: with President Trump's base, well, at least I think I

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Speaker 1: think you saw in Phoenix a couple of nights ago. Uh,

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Speaker 1: what the president is doing with the base. And if

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Speaker 1: he had to shut down spending and shut down the

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Speaker 1: government and the the swamp with all the bureaucracy because

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Speaker 1: they wouldn't give him a border wall, I think that

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Speaker 1: plays very well with his base, and I think it's

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Speaker 1: something they'll remember. You can blame it on the Congress

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Speaker 1: and um. I think that gets him a pretty much

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Speaker 1: a free ride on that. But a different question is

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Speaker 1: what happens if we have any kind of default in

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Speaker 1: the debt, which I do not believe we will have.

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Speaker 1: We will pass a debt extension. It may not be

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Speaker 1: for a couple of years, it may only be for

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Speaker 1: ninety days, but we will pass a debt extension in time.

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Speaker 1: We will not pass, in my view, any of these

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Speaker 1: twelve appropriation bills on time, and it will be something

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Speaker 1: we call a big omnibus spending bill that will be

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Speaker 1: sent to the president. If it doesn't have roll funding,

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Speaker 1: I think it will fail and he will shut down

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Speaker 1: the government. Steve, do you believe that there's going to

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Speaker 1: be any movement, any activity on tax reform. I think

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Speaker 1: it's going to be very, very difficult. I wrote something

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Speaker 1: about this yesterday. Um, the challenges ahead are really very

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Speaker 1: difficult because you need bipartisan support to get a tax

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Speaker 1: bill out, and that means you're going to have to

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Speaker 1: move towards whatever Democrats want in their tax bill. Will

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Speaker 1: that be higher rates on the top five, Will that

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Speaker 1: be an expansion of the earned income tax credit. No

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Speaker 1: one really knows what they will demand, but it's pretty

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Speaker 1: clear to most of us now that a Republican only

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Speaker 1: tax plan cannot pass the Senate under current circumstances, and

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Speaker 1: that's going to be I think a big time fight.

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Speaker 1: I consider that to be something that might happen in

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Speaker 1: the first quarter of two eighteen. But people should understand

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Speaker 1: that the legislative process and the Senate on taxes is

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Speaker 1: very complex. Uh, Steve, you're talking about the likelihood of

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Speaker 1: a government shutdown and the likely unwillingness of Republican senators

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Speaker 1: and House representatives to pass a bill that does have

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Speaker 1: some kind of provision for the while funding. I'm wondering

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Speaker 1: why would a government shut down due for the relation

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Speaker 1: s ship between GOP senators and congressmen with President Trump?

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Speaker 1: Especially as the evident battle between Mitch McConnell and President

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Speaker 1: Trump Piazza up. Well, I think it would have more

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Speaker 1: of an impact on the relationship, which is already quite

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Speaker 1: poor between the Senate Republican Caucus and the President. Um.

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Speaker 1: I think that this will have some impact, but not

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Speaker 1: a lot on such things as the tax reform possibility,

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Speaker 1: some sort of initiative on infrastructure, those kinds of things,

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Speaker 1: but they're going to be delayed anyway. What what bothers

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Speaker 1: me more is if what I'm saying comes through, we

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Speaker 1: have a government shutdown, the President blames the Congress and

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Speaker 1: says it's all over the law, you know, that kind

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Speaker 1: of stuff, that it will probably endanger him getting anything

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Speaker 1: done that he wants to get done, as far as

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Speaker 1: sort of a big infrastructure initiative, spending more for defense,

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Speaker 1: which I think already is a steep hield to climb.

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Speaker 1: All in all, there are three people you ought not

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Speaker 1: to make mad in this town. That's the intelligence community

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Speaker 1: and he's done that, And it's the FBI and he's

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Speaker 1: done that. And the third one is Mitch McDonald Because

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Speaker 1: only Mr McConnell's desire to have a tax bill to

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Speaker 1: help his senators get reelected next year. Only that one

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Speaker 1: fact really helps the possibility of a tax bill passing. Steve,

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Speaker 1: I just want to break in and just give you

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Speaker 1: everyone this headline from Bloomberg that the smartphone maker HTC

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Speaker 1: is said to explore strategic options. We'll get more details

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Speaker 1: and pass them along, Steve once you to just continue

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Speaker 1: because I'm sure you've got ongoing relationships friendships in d C.

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Speaker 1: With lawmakers and staffers. What have you heard in their

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Speaker 1: reaction to some of the President's comments about the border

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Speaker 1: wall and in general about his relationship with the Republican leadership.

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Speaker 1: His relationship with the Republican leadership is quite strained. You

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Speaker 1: just don't take on a Jeff Flake Senator Flake uh

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Speaker 1: and encourage a person to run against him in the

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Speaker 1: primary and have a group associated with you raising money

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Speaker 1: against him, and make friends with the Republican Senate caucus.

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Speaker 1: And you don't do it with with Mr Heller in Nevada.

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Speaker 1: So he's got about seven or eight people that he's

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Speaker 1: directly made mad. The president has and in private, staff

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Speaker 1: simply doesn't know how much real effort the President will

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Speaker 1: put into a tax plan or into funding the wall

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Speaker 1: will it be sort of like it was in healthcare,

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Speaker 1: where ever so often he would talk about where we

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Speaker 1: need to get the healthcare bill finished. Um, if we're

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Speaker 1: going to get a help, if we're going to get

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Speaker 1: a tax reform bill passed by the first quarter of

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Speaker 1: this coming year, then the President is going to have

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Speaker 1: to devote all of his energy and all of his

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Speaker 1: remarks towards that goal. Otherwise there just will not be

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Speaker 1: the momentum in six when we passed the tax bill, Remember,

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Speaker 1: we had Reagan a hundred percent behind it, We had

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Speaker 1: Congress that have been negotiating behind the scenes for a

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Speaker 1: couple of years behind it, and it was still tough

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Speaker 1: to do. Steve Bell, thank you so much for joining

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Speaker 1: us and for your insights into this. Steve Bell as

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Speaker 1: Senior adviser for the Bipartisan Policy Center, also a former

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Speaker 1: Senate Budget Committee staff director for Republican Pete Dominici from six.

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Speaker 1: There are a couple of new employment laws that are

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Speaker 1: set to take effect in New York City later this year,

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Speaker 1: and I'm very interested to learn more about them, because

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Speaker 1: somehow they totally flew under my radar, and I'm sure

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Speaker 1: that they have a lot of other people as well,

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Speaker 1: Ronnie has said Home joins us now. She's a managing

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Speaker 1: partner at set Home Law Group, which is based in

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Speaker 1: New York, and has been tracking these changes which potentially

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Speaker 1: could have some significant effects in particular businesses. So Ronnie,

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Speaker 1: thank you so much for joining us. Can you just

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Speaker 1: first lay out what the main rules are employment rules

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Speaker 1: that you're tracking, and what the potential consequences in your

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Speaker 1: view will be sure so effective. On Halloween, October thirty

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Speaker 1: one interesting day to choose, employers will no longer be

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Speaker 1: able to ask about salary history. And the theory behind

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Speaker 1: this is that by not asking about salary history, women

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Speaker 1: and minorities in particular will fare better. Now, as a

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Speaker 1: woman who is a minority, I want us to all

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Speaker 1: fare better, but I just don't see how this is

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Speaker 1: going to to help us. Um wait, wait, just before

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Speaker 1: we go on, So in another word, can you just

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Speaker 1: elaborate why do you think that that it won't necessarily

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Speaker 1: help the situation? Well, I think it's we need to

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Speaker 1: change people's thinking and help them understand how benefit show

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Speaker 1: it is to have women in the workplace and minorities

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Speaker 1: in the workplace, and by simply not asking someone excuse me,

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Speaker 1: how much are you currently making? It doesn't help them

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Speaker 1: at all. I mean, for example, if you have no

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Speaker 1: intention of hiring a female minority person and you're interviewing them.

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Speaker 1: In your head, you're saying, Okay, this job, I'm going

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Speaker 1: to be able to spend between eighty and a hundred

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Speaker 1: and twenty thousand dollars on a salary in walks a

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Speaker 1: female and in walks a white male. And you decide

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Speaker 1: that you're going to only pay females and minorities the

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Speaker 1: eighty thousand, never having asked a question about their previous

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Speaker 1: salary history at all, and in your mind you are

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Speaker 1: going to offer this white male a hundred and twenty thousand.

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Speaker 1: Can you just give us a sense of what the

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Speaker 1: other side of that is and why was it implemented?

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Speaker 1: What was the thinking? Uh? Was it just simply that

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Speaker 1: because there would be a sort of range, so that

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Speaker 1: if somebody walked in and had been paid less than

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Speaker 1: their prior job, which studies have shown that sometimes women

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Speaker 1: and minorities have been paid less, that if they come in,

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Speaker 1: if you have a range, then you have to stick

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Speaker 1: with that range. That's exactly it. It's because when you

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Speaker 1: are asked what are you currently making if you're a

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Speaker 1: female or a minority, are likely making less. So even

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Speaker 1: if you obtain a substantial raise, it's still substantially less

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Speaker 1: than you would otherwise earn if you're a white male

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Speaker 1: in the same position. But again, it's all about the mindset.

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Speaker 1: Why not just not have such a large band? How

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Speaker 1: about a band of one ten to one twenty in

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Speaker 1: your head? I mean I just hired somebody and my

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Speaker 1: band was about five thousand dollars. Well, I think also

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Speaker 1: you just want to hire the best person. Well, of

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Speaker 1: course you do, of course you do. And I think

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Speaker 1: the real messages that females and minorities are just as

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Speaker 1: great as others. Yeah, I mean I don't think that.

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Speaker 1: I I you don't segregate people when they come in

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Speaker 1: the door, you know, you go in one interview room

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Speaker 1: in another interview room. Of course not. But I think

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Speaker 1: that those individuals who are holding back, you know, minorities

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Speaker 1: and females aren't going to be hindered simply because they

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Speaker 1: can't ask one question. Instead of doing in posing a

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Speaker 1: ban on a question help people think better. Well, hold

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Speaker 1: on a second, there are a couple of other rules

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Speaker 1: that are going into effect as well, at one effects

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Speaker 1: fast food workers basically saying, uh that they need more

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Speaker 1: advanced notice about their schedules and things can't just be

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Speaker 1: shifted on them at the last minute. Then a similar

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Speaker 1: type of thing within retail, and that you had a

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Speaker 1: similar complaint in theory, I get you know, you get it,

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Speaker 1: but it won't actually have the practical effect that was intended.

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Speaker 1: Can I just get ask for a little bit of

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Speaker 1: history into why these rules are getting implemented? Now? Who

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Speaker 1: is behind them and who is the big lobby behind them?

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Speaker 1: I guess is my other question? Well, I think you

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Speaker 1: know union groups probably if I had to guess, I

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Speaker 1: would say, you know, thirty two b JS is partially

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Speaker 1: part of this. I think there's um a lot of

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Speaker 1: progressive cooperatives for back of lack of a better term,

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Speaker 1: that are behind it. I think the reason behind these

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Speaker 1: laws are they're good, they're well intentioned. I just don't

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Speaker 1: know if the lawmakers had enough foresight to understand how

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Speaker 1: this is practically impacting companies. So, if you are working

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Speaker 1: in retail as a salesperson not in the executive office,

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Speaker 1: or you're working in a fast food chain in the

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Speaker 1: same vein, you know at the store, at the restaurant,

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Speaker 1: at the franchise. You're likely a low income wage earner,

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Speaker 1: and right now you have no way of knowing how

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Speaker 1: much you're going to make in a particular week. You

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Speaker 1: could have forty hour shift, you could have a twenty

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Speaker 1: hour shift. And of course it's difficult to make ends

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Speaker 1: meet when you're living like that, paycheck to paycheck and

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Speaker 1: not even knowing how steady it will be. So that's

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Speaker 1: the reason. The reason is we want to help these

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Speaker 1: you know, workers at least know how much they're going

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Speaker 1: to earn, because you can't, you know, force them to

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Speaker 1: get paid a certain amount, except with minimum wage, of course,

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Speaker 1: but no one is telling you you have to employ

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Speaker 1: them for fifty hours a week. The law says, if

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Speaker 1: you're in fast food, you have to give someone their

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Speaker 1: schedule fourteen days in advance, and if you don't, you

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Speaker 1: have to pay a premium. Yeah, I have to wonder.

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Speaker 1: I wonder if certain retailers and fast food restaurants will

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Speaker 1: cut back on that. Maybe their response, you know, running

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Speaker 1: I wo just want to get your the last point here,

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Speaker 1: which is the Fair Work Week Act. This is about

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Speaker 1: on call scheduling. What is that on call scheduling is

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Speaker 1: when you it's in the retail space, you call it

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Speaker 1: and you say hi, you know, I'm I'm calling in

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Speaker 1: to see if there's a job for me today that's

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Speaker 1: on call scheduling. You have to make yourself available. I

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Speaker 1: think it's a term that came from the union labor

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Speaker 1: field where they used to say you have to be ready, willing,

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Speaker 1: and able, and he used to do something called shaping.

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Speaker 1: It was the same thing. And this is this is

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Speaker 1: going to be bad. Correct, This is the no, no more.

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Speaker 1: I need to give you the schedule seventy two hours

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Speaker 1: in advance if you're a retail employee. Thank you very

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Speaker 1: much for being here and enlightening us. Well done. Set

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Speaker 1: Home managing partner of set Home Law Group talking about

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Speaker 1: three new laws that are going to be put into

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Speaker 1: effect that really change the way employers and employees deal

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Speaker 1: with each other. Thank you very much. Here a lot

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Speaker 1: about big retailers trying to compete with the albatross of Amazon,

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Speaker 1: but Costco is perhaps not playing the same game. Here

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Speaker 1: to explain its approach and some of the controversy over

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Speaker 1: it is Matt Boyle, us retail reporter for Bloomberg News

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Speaker 1: who joins us in our Bloomberg eleven three oh studios. Matt,

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Speaker 1: can you give us a little bit of a sense

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Speaker 1: of why Costco is opting out of this race to

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Speaker 1: online sales and what that has meant for its performance. Well,

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Speaker 1: it really gets down to their business model. I mean,

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Speaker 1: this is a company we've all I'm sure we've all

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Speaker 1: shopped there. You know, you walk in, it's a treasure

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Speaker 1: home experience. You've got your you know, your big tubs

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Speaker 1: of mayo and your paper towels on the outside, and

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Speaker 1: you grab those. But then it's all about the stuff

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Speaker 1: you find in the middle of the store. You know,

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Speaker 1: you could find a margarita maker, you could find a kayak.

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Speaker 1: I mean there's stuff. They change the stuff out all

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Speaker 1: the time, and a lot of it is tailor made

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Speaker 1: us only available at Costco, So they know that people

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Speaker 1: are going to be keep going in there for those

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Speaker 1: treasure hunt items as well as the bulk purchases of

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Speaker 1: you know, the really big tubs of mayo and the

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Speaker 1: you know, forty packs of Gillette razors. But that is

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Speaker 1: a business model that is not very conducive to selling online,

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Speaker 1: particularly the treasure hunt model where your things are changing

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Speaker 1: constantly like that, and so for those reasons, Costco has

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Speaker 1: felt that, well, our store real estate is so valuable,

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Speaker 1: we have so many more areas that we might be

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Speaker 1: able to conquer. For example, they just opened in France,

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Speaker 1: they just opened in Iceland. They've decided to too, and

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Speaker 1: I think wisely thus far, to spend a lot of

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Speaker 1: their capital expenditure on just expanding geographically in the US,

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Speaker 1: in North America and also internationally, rather than going you know,

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Speaker 1: hog wild on the web like other retailers have done.

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Speaker 1: So is this going to benefit them? I mean, you know,

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Speaker 1: we're raising the issue because everyone seems to be running

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Speaker 1: scared from anything that Amazon touches. You've got to remember him.

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Speaker 1: I mean, selling online is very it's very hard to

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Speaker 1: be possible. Walmart is doing a lot online, but they're

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Speaker 1: not making a heck of a lot of money online

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Speaker 1: and they're making a lot of noise. They're buying Jet

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Speaker 1: and they're doing you know, easy reorder, and had that

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Speaker 1: agreement with Google. That then with Google this week, so

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Speaker 1: they're now selling on on Google's online shopping mall. But

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Speaker 1: it is still extremely hard to make money on these sales.

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Speaker 1: You make a lot more money a lot more profits

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Speaker 1: in your store, and Costco knows this well, but I

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Speaker 1: think that a lot of the retailers, to be fair,

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Speaker 1: the Walmarts and the targets of the world, aren't doing

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Speaker 1: this for short term profits. When I say this, I

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Speaker 1: mean doing it for long terms, right and for long

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Speaker 1: terms of weather. They're beefing up their online presence is

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Speaker 1: so that they can be a viable competitor to whatever

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Speaker 1: Amazon morphs into. And it's sort of the question mark

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Speaker 1: around Costco's model. Perhaps it's working now, perhaps it makes

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Speaker 1: sense right now, but what happens when the consumer all

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Speaker 1: of a sudden gets used to being able to order

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Speaker 1: something and just go to the store and pick it

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Speaker 1: up and not spend two hours hunting for treasure. That's

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Speaker 1: the question we asked, and that's why we thought it

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Speaker 1: was timely to do this story right now, because it's

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Speaker 1: a fair question. Analysts are starting to ask it, especially

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Speaker 1: in the wake of the Amazon whole food steal, where

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Speaker 1: you now have Amazon going heavily into grocery and surveys

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Speaker 1: have been done. The reason people go to Costco more

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Speaker 1: than anything else. I know. I talked about kayaks and

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Speaker 1: margarita machines, but people go to Costco for grocery. I

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Speaker 1: mean they go there to buy big cuts of meat,

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Speaker 1: They go there to buy produce that's fresh and very good.

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Speaker 1: They go there to buy wine and cheese and all that,

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Speaker 1: all those great items. And now with Amazon buying whole foods,

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Speaker 1: people now have a reason. Wait a minute, do I

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Speaker 1: need to go to Costco as often? Maybe not? And

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Speaker 1: this is where an online offering would really help. But

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Speaker 1: thus far Costco has really just kind of done the

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Speaker 1: basics online. I was looking at the basics online and

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Speaker 1: things like you can buy a shed from Costco for

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Speaker 1: teen hundred bucks, but then you can also buy uh,

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Speaker 1: you know, a Lenovo laptop for about a thousand bucks

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Speaker 1: and then get a two ll rebate. So I mean

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Speaker 1: their prices seem to be pretty comparable to what other

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Speaker 1: issue is not. The prices are amazing, you know. That's

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Speaker 1: why they are so sick. And they got their private

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Speaker 1: label brand, Kirkland. Kirkland is a bona fide brand. I

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Speaker 1: wouldn't even call it a private label. It is a

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Speaker 1: bona fide brand and you could find it another store.

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Speaker 1: K I think Kirkland is you know, a real brand

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Speaker 1: like a Nike or Tiffany or something like that. So

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Speaker 1: the issue is more about what they need to do

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Speaker 1: in the long term. Do they need to be spending

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Speaker 1: a little bit more. Do they need to be adding

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Speaker 1: let's say, a online order pickup desk. And I asked

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Speaker 1: the CFL of Costco this he said, and he's answered

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Speaker 1: this question many times. He says, Look, our space in

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Speaker 1: the store is so valuable. Whatever we put there is

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Speaker 1: going to sell so quickly. I'd rather not sit somebody

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Speaker 1: behind a desk and just deliver online orders because somebody

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Speaker 1: coming in might just grab whatever they ordered online and

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Speaker 1: then walk out. Costco doesn't want you walking out. They

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Speaker 1: want you wandering around eating food samples, stuff like that.

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Speaker 1: So far, does it seem like their sales are accelerating

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Speaker 1: or are they starting to see someone? Their sales are

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Speaker 1: doing very well. The issue that we've noted and we

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Speaker 1: saw in the story is their online sales growth of

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Speaker 1: about eleven twelve. It's well beyond Walmart, well beyond Target.

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Speaker 1: It's even lower than the broader e commerce market, which

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Speaker 1: is growing. And if you can't grow faster than the

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Speaker 1: broader market, you know you might need to catch up

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Speaker 1: a little bit. But they're in store sales what they

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Speaker 1: called the same store sales, which is the key metric

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Speaker 1: and retail they're they're doing gangbusters there, you know, five percent,

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Speaker 1: six percent, those are numbers that any other retailer would

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Speaker 1: kill for right now in the midst of this retail apocalypse. Well,

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Speaker 1: I'm just looking at a comparison to Amazon sales, where

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Speaker 1: we're talking about about a hundred and fifty billion a

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Speaker 1: year right now. The run rate for Costco is about

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Speaker 1: a hundred and twenty three billion, So you know there's

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Speaker 1: there's some comparable uh business execution. Yeah, they you know,

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Speaker 1: they do need to do a little bit more online.

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Speaker 1: I think they acknowledge this. I think we'll see more

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Speaker 1: from Costco in months ahead online, but you know, culturally,

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Speaker 1: it's just something that they're a bit resistant to. Shares

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Speaker 1: a Costco excuse me, shares a Costco down stock is

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Speaker 1: up three and a quarter percent so far this year.

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Speaker 1: Thanks very much for being with us. Always a pleasure,

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Speaker 1: Matt Boyle. I want to bring in Stephen Englander, head

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Speaker 1: of research and strategy at Rafiki Capital Management. He was

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Speaker 1: formerly uh the head of G ten f X strategy

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Speaker 1: at City Group, and Stephen joins us now Stephen, what

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Speaker 1: do you make of this ongoing trade, especially uh, the

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Speaker 1: idea that a lot of hedge funds are doubling down,

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Speaker 1: that the US dollar will continue to weaken. Good morning,

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Speaker 1: Lisa and Tim. Um. Look, you know, I think that

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Speaker 1: a lot of things are changing here. In particular, UM,

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Speaker 1: what's different. Setting aside the the you know, Trump election victory, UM,

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Speaker 1: which is mostly fated from the market, I think the

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Speaker 1: big surprise is how persistent disinflationary shocks are at this

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Speaker 1: stage of the business cycle, and the market is really debating, um,

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Speaker 1: how much necessity there is of the set to keep

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Speaker 1: raising rates and how successful they're going to be at

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Speaker 1: hitting their two percent inflation target. I think, by contrast,

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Speaker 1: the surprise in Europe is just how well the European economy,

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Speaker 1: how fast the unemployment trade is dropping, um, how quickly

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Speaker 1: things are improving there. And a lot of European officials,

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Speaker 1: not necessarily Mario Draggy, but others on the governing council,

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Speaker 1: you know, the the Bundestank representative for example, are looking

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Speaker 1: at this and saying, why do we still have um

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Speaker 1: monetary policy settings at emergency measures? And it's this big

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Speaker 1: long term question mark about US inflation and the beginning

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Speaker 1: of this shift in e c B. I think it's

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Speaker 1: moving markets more than the Trump trade. Well, you know, Steve,

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Speaker 1: I wonder if you could just explain a little bit

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Speaker 1: about what the what value you know, comes from let's say,

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Speaker 1: these confabs like the Jackson Hall, Wyoming meeting and so on.

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Speaker 1: I mean, it seems as though many investors they're looking

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Speaker 1: at the details of their investments. They're not necessary they've

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Speaker 1: done with this big macro trade because we know what

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Speaker 1: the future is. They're gonna unwind the balance sheet, and

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Speaker 1: then we wait for Mario drag you to figure out

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Speaker 1: when they're going to stop buying bonds. Well, I think

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Speaker 1: that they're waiting for to see if there's any big surprise.

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Speaker 1: Quite often, what the market reaction that you see after

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Speaker 1: these events, you know, and it can be even the

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Speaker 1: Neffluence meeting or FOMC minutes is not whether or not

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Speaker 1: they surprised, but that investors have been holding back from

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Speaker 1: putting on a position or taking off a position because

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Speaker 1: they um really, I mean, but Stephen, really, you you

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Speaker 1: know investors who will wait based on what they hear

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00:23:58,520 --> 00:24:02,239
Speaker 1: from a central bank. No, no, but the if you

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Speaker 1: think that the uh, there's a lot of uncertainty over

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00:24:05,520 --> 00:24:09,000
Speaker 1: the next three days. You may ask yourself, why make

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00:24:09,040 --> 00:24:11,199
Speaker 1: an investment today when I can do it on Monday,

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00:24:11,200 --> 00:24:13,760
Speaker 1: when this is all passed, and you know, if everything

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00:24:13,760 --> 00:24:17,920
Speaker 1: goes according to plan perfectly fine. But if they throw

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00:24:17,960 --> 00:24:21,159
Speaker 1: a wrench into the system, you know I will have

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Speaker 1: my powder dry to react accordingly, and many investors behave

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Speaker 1: that way, Stephen. I wanted to touch what you were

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Speaker 1: talking about, which is that there have been disinflationary surprises

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00:24:33,119 --> 00:24:35,880
Speaker 1: in the US or the economic data hasn't been as

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00:24:35,920 --> 00:24:39,440
Speaker 1: good as many people have been expecting, whereas in Europe

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Speaker 1: there have been a number of positive surprises. At this point,

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Speaker 1: given where earnings have been in the past season, which

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00:24:46,760 --> 00:24:50,320
Speaker 1: have actually been pretty good. Do you think that the

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Speaker 1: bulk of the disinflationary surprises are behind us in the US?

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00:24:56,000 --> 00:24:59,160
Speaker 1: Not necessarily, you know, one that's it's a very difficult

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00:24:59,200 --> 00:25:04,040
Speaker 1: question because these are very difficult trends to unravel. But

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Speaker 1: I think what we're seeing is that the disinflationary surprises

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00:25:07,880 --> 00:25:11,560
Speaker 1: are not caused by um the types of demand shocks

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Speaker 1: like we have when we have a recession and the

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Speaker 1: output falls on unemployment rises Um, they're being caused by

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Speaker 1: technological innovation. And the idea that that innovation or the

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00:25:24,119 --> 00:25:26,840
Speaker 1: impact of that innovation would be concentrated in a three

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Speaker 1: or four month period and then stop, I think is unlikely.

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Speaker 1: So I think it's quite possible that we're going to

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Speaker 1: continue to see these shocks UH related to innovation, largely

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Speaker 1: related to our ability to use capital more efficiently. And um,

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Speaker 1: it's going to be a battle. The labor market is

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Speaker 1: tighter than it used to be. But on the other hand,

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Speaker 1: I think that these shocks are are going to be

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Speaker 1: with us for some time. All right, So what what

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Speaker 1: kinds of shocks are you talking about? What would be

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Speaker 1: an example, Well, for example, the if you think of

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Speaker 1: you know, the ride sharing, if you think of apartments sharing, UM,

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00:26:05,200 --> 00:26:09,480
Speaker 1: tremendous economies of scale in all of these adventures, the

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Speaker 1: ability to use capital efficiently, and that puts downward pressure

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Speaker 1: on you know, these traditional sources you know, to hotels,

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Speaker 1: whether taxis and so on, and we're seeing this in

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Speaker 1: many areas. All right, we're gonna leave it there, thanks

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Speaker 1: very much. As Stephen england Or, he is the head

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Speaker 1: of research and Strategy at Rafiki Capital Management, based in

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Speaker 1: New York. They are a cross asset hedge fund. Thanks

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00:26:36,640 --> 00:26:39,280
Speaker 1: for listening to the Bloomberg P and L podcast. You

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00:26:39,320 --> 00:26:43,080
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

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00:26:43,200 --> 00:26:46,680
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

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00:26:46,720 --> 00:26:50,280
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa

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00:26:50,280 --> 00:26:53,439
Speaker 1: abramowits one before the podcast. You can always catch us

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00:26:53,480 --> 00:27:02,000
Speaker 1: worldwide on Bloomberg Radio