WEBVTT - Recession Obsession 0:00:03.760 --> 0:00:07.400 Welcome to Bloomberg Opinion. I'm Ronny. When this week inflation 0:00:07.600 --> 0:00:09.879 and the bear market, we'll speak with Barry Riddles and 0:00:10.000 --> 0:00:12.840 near case are and later. It would be very helpful 0:00:12.840 --> 0:00:15.200 to know who was on the side of things that 0:00:15.720 --> 0:00:20.400 really should not be involved in mainstream politics anymore. Jonathan 0:00:20.400 --> 0:00:23.799 Bernstein on the continuing January six hearings. First to the 0:00:23.840 --> 0:00:26.880 markets and whether earning season will reflect the confusion in 0:00:26.960 --> 0:00:30.680 economic and fed forecasting. Let's get straight to Barry Riddles. Okay, 0:00:30.680 --> 0:00:33.120 So it's been an interesting first half Bury, to say 0:00:33.159 --> 0:00:35.560 the very least, and yet it seems to be pretty quiet, 0:00:35.840 --> 0:00:38.960 almost dull at this point. Well, the question is how 0:00:39.040 --> 0:00:43.640 much of the bad news is already reflected in stock prices. Hey, 0:00:43.640 --> 0:00:48.440 look at the second quarter, the SMP down, Russell two thousand, 0:00:50.000 --> 0:00:54.480 NASA down. Those are epic numbers. You have to go 0:00:54.560 --> 0:00:58.120 back to the COVID pandemic quarter, to the Great financial crisis, 0:00:58.440 --> 0:01:01.240 and to the dot com andplos to find quarters that 0:01:01.400 --> 0:01:06.280 bad since the crash. So this is up there with 0:01:06.360 --> 0:01:09.319 the worst quarters we've seen. It was really quite phenomenal, 0:01:09.360 --> 0:01:11.759 and yet now it feels like the market is frozen. 0:01:11.800 --> 0:01:14.479 And I don't mean literally frozen. I just mean people 0:01:14.600 --> 0:01:16.520 they're waiting to see what's going to happen in terms 0:01:16.520 --> 0:01:18.560 of the economy, in terms of the Federal Reserve, they're 0:01:18.560 --> 0:01:21.240 not putting money to work, it feels like, so we're 0:01:21.280 --> 0:01:25.360 waiting on when the Federal Reserve will recognize that peak 0:01:25.400 --> 0:01:27.520 inflation is passed. When we look at a lot of 0:01:27.600 --> 0:01:33.080 data points in copper commodities, oil wages are slowing, down, 0:01:33.240 --> 0:01:36.800 home sales, there's lots of evidence that that big surge 0:01:36.880 --> 0:01:41.760 in inflation we saw in into two has peaked. But 0:01:41.959 --> 0:01:47.040 we've had twenty four consecutive days of gasoline prices falling. 0:01:47.600 --> 0:01:50.560 Oil is back under a hundred from a hundred and twenty, 0:01:51.040 --> 0:01:56.560 copper down, industrial medals down, lumber cut in half from 0:01:56.640 --> 0:02:00.640 really and we've actually seen the Mannheim used car. And remember, 0:02:01.040 --> 0:02:05.000 inflation first reared its head with cars because you couldn't 0:02:05.000 --> 0:02:08.680 get new cars because semiconductor production head legged and was 0:02:08.720 --> 0:02:13.080 so delayed opening. Now we're seeing a pretty substantial decrease 0:02:13.120 --> 0:02:18.000 in use cars from admittedly very inflated levels. So once 0:02:18.040 --> 0:02:21.600 we get under that eight handle on cp I, if 0:02:21.600 --> 0:02:25.079 it's seven or for bids six in the coming months, 0:02:25.120 --> 0:02:28.720 I think that will let the fed realize they've slowed 0:02:28.800 --> 0:02:35.000 the economy enough, they've already seen inflation roll over, and 0:02:35.160 --> 0:02:38.840 maybe a more moderate set of increases five or fifty 0:02:38.880 --> 0:02:42.840 basis points instead of seventy will continue to pressure inflation, 0:02:43.280 --> 0:02:47.600 but without causing a full blown economic crash in recession. Well, 0:02:47.639 --> 0:02:51.679 so this is it. Our recession expectations overdone. Almost nobody 0:02:51.720 --> 0:02:54.160 I speak to isn't expecting a recession. They're not expecting 0:02:54.160 --> 0:02:56.000 it immediately. Might be twelve to eighteen months out? Is 0:02:56.000 --> 0:02:59.840 that because there are supply chain concerns further out? So 0:03:00.160 --> 0:03:03.639 first eighteen to twenty four months is just so far 0:03:03.680 --> 0:03:06.480 off in the future, it's you know, it's makeable. It 0:03:06.520 --> 0:03:09.280 might be twenty years off because when we look at 0:03:09.280 --> 0:03:11.400 the year head forecast, just what Wall Street does for 0:03:11.400 --> 0:03:14.000 the economy, for the stock market, nobody gets it right. 0:03:14.040 --> 0:03:17.720 Twelve months is forever. Eighteen is a whole another lifetime. 0:03:18.080 --> 0:03:20.600 When we talk about the supply chains, some really interesting 0:03:20.720 --> 0:03:25.320 data points. We're seeing the transit times for international shipping 0:03:25.639 --> 0:03:29.919 have fallen pretty substantially. The backlog at ports and the 0:03:30.000 --> 0:03:32.600 time to ship has fallen. And we also are seeing 0:03:33.280 --> 0:03:37.880 the shipping containers which pre pandemic cost about two thousand 0:03:37.960 --> 0:03:40.480 dollars to ship from China to Europe or or the 0:03:40.560 --> 0:03:44.520 United States spiked up to twenty thousand and has since 0:03:44.800 --> 0:03:47.160 more than cut in half to about eight thousand. It's 0:03:47.160 --> 0:03:49.800 still much higher than when it was, but it's less 0:03:49.840 --> 0:03:54.040 than half of of the peak. So that suggests that 0:03:54.120 --> 0:03:58.760 the shipping and demand for goods is sort of normalizing. 0:03:58.760 --> 0:04:02.640 And keep in mind, as we get more and more 0:04:02.640 --> 0:04:08.640 infectious but less dangerous variations of COVID, people are are moving. 0:04:08.760 --> 0:04:12.960 Remember we're primarily a services based economy. During the lockdown, hey, 0:04:13.000 --> 0:04:15.640 we didn't go on vacation. We bought all this junk, 0:04:15.960 --> 0:04:19.479 We bought televisions, we expanded our houses. All these goods 0:04:19.480 --> 0:04:23.320 purchases put real stress on the supply system, and so 0:04:23.360 --> 0:04:26.160 we end up with things starting to get back to normal. 0:04:26.440 --> 0:04:29.640 It's not a surprise to see that drop. I'm not 0:04:29.880 --> 0:04:33.440 in the recession camp. We're certainly not in recession today. 0:04:33.560 --> 0:04:36.080 You don't feels like the economy is mooming. Listen, you 0:04:36.160 --> 0:04:38.840 just added two point seven four million jobs in the 0:04:38.960 --> 0:04:42.159 first half of the year. Wages have gone up about 0:04:42.160 --> 0:04:45.560 five four percent. The bottom half of the wage pool 0:04:45.600 --> 0:04:48.960 of bottom quartile is up about six percent. Consumer spending 0:04:49.040 --> 0:04:52.159 year over year is up about five uh. The only 0:04:52.240 --> 0:04:56.400 place we're really seeing an economic slowdown has been in housing, 0:04:56.600 --> 0:05:00.600 from admittedly very elevated levels form us in a row 0:05:00.680 --> 0:05:05.040 of decreased existing home sales during the season where home 0:05:05.120 --> 0:05:08.799 sales typically go up, home sales bottom around December January, 0:05:08.839 --> 0:05:10.560 and they go up throughout the beginning of the county year, 0:05:10.560 --> 0:05:12.640 and they peak in July and August. To see that 0:05:12.760 --> 0:05:16.080 negative is telling you that increased mortgage rates and the 0:05:16.160 --> 0:05:22.000 ongoing big price increases have discouraged fired. But other than housing, 0:05:22.320 --> 0:05:24.760 which is more of an inventory problem than anything else, 0:05:25.640 --> 0:05:30.200 the rest of the economy looks pretty robust. The mid terms, 0:05:30.279 --> 0:05:32.960 how are they going to impact what gets done? The 0:05:33.000 --> 0:05:35.400 president obviously wants people to stop talking about inflation, or 0:05:35.440 --> 0:05:37.400 to at least not vote on inflation, because there are 0:05:37.440 --> 0:05:40.360 so many other issues to vote on. What can he do? 0:05:41.720 --> 0:05:44.320 So first, I'm not a political analyst, and I try 0:05:44.360 --> 0:05:47.520 not to make political forecast because of all the terrible 0:05:48.200 --> 0:05:50.440 objective thing that we can say. No matter who would 0:05:50.440 --> 0:05:52.640 be in the president's right, will he do anything? You think? 0:05:52.680 --> 0:05:54.840 Is there anything that you know a sitting president can do? 0:05:55.240 --> 0:05:59.440 The problem is it's very difficult to do something about inflation, 0:06:00.040 --> 0:06:04.000 isn't it if you don't have the full cooperation of Congress. 0:06:04.040 --> 0:06:06.960 And even then when it comes actually inflation, it's hard 0:06:07.000 --> 0:06:08.880 to do something about it. Well, well, when it's it's 0:06:08.920 --> 0:06:10.960 more these days of what you don't do than what 0:06:11.040 --> 0:06:14.120 you actually do. When you look at the impact of 0:06:14.120 --> 0:06:17.440 the Cares Act, all three segments, the first one under 0:06:17.440 --> 0:06:21.159 President Trump was two trillion dollars. It was unprecedented, was 0:06:21.360 --> 0:06:24.839 ten percent of GDP. The second one, also in the 0:06:24.839 --> 0:06:29.120 Trump was another nine hundred billion, and then Biden came 0:06:29.160 --> 0:06:34.000 into office and there was another two trillion dollars. So really, 0:06:34.040 --> 0:06:37.080 the people to blame our Congress who passed these giants 0:06:37.080 --> 0:06:40.080 spending bills. But both Trump and Biden put a lot 0:06:40.120 --> 0:06:43.240 of money into the system, and that's part of the 0:06:43.279 --> 0:06:46.400 reason we've seen prices go up. Consumers are out spending 0:06:46.400 --> 0:06:49.360 a lot of money. So once that toothpaste is out 0:06:49.360 --> 0:06:50.880 of the tube, I don't know how you get that 0:06:50.920 --> 0:06:55.160 back in other than dampening demand by cranking up rates, 0:06:55.200 --> 0:06:57.440 and the Fed seems to have accomplished that. So all right, 0:06:57.480 --> 0:07:00.640 let's talk about valuations. How are people value in companies 0:07:00.640 --> 0:07:03.200 these days? How do they measure what the intrinsic value 0:07:03.240 --> 0:07:05.840 of a company is when clearly stock market valuations are 0:07:05.880 --> 0:07:07.760 just all over the place. So there are two key 0:07:07.760 --> 0:07:11.680 factors that drive valuation. One is just the basic math. 0:07:11.800 --> 0:07:14.120 What are the earnings right now? You could look at 0:07:14.120 --> 0:07:17.720 all sorts of other ways of measuring revenue, growth in 0:07:17.800 --> 0:07:19.760 price the book, and whatever, but really it all comes 0:07:19.760 --> 0:07:23.520 down to earnings. That's your starting point. And then the 0:07:23.600 --> 0:07:27.520 market will put some type of a multiple on earnings. 0:07:27.520 --> 0:07:32.440 And here's where investor psychology becomes so important. The multiple 0:07:32.560 --> 0:07:37.280 is really a function of everybody's collective consensus as to 0:07:37.480 --> 0:07:39.880 what investors should pay. Hey, how much are you going 0:07:39.920 --> 0:07:42.800 to pay for that dollar of earnings? And we see 0:07:42.880 --> 0:07:45.720 that this rises and falls with the market cycle. My 0:07:45.800 --> 0:07:48.800 favorite example, you start in the beginning of the eighty 0:07:48.840 --> 0:07:51.920 two to two thousand bull market. The P ratio for 0:07:52.000 --> 0:07:54.720 the S and P five hundred was seven x, and 0:07:54.800 --> 0:07:58.200 it ended at thirty two x. And so while the 0:07:58.240 --> 0:08:01.920 economy expanded an earnings ru over that eighteen year period, 0:08:02.320 --> 0:08:06.840 three quarters of the market gain was caused by multiple expansion. 0:08:07.880 --> 0:08:11.040 One of the reasons we look at that and don't 0:08:11.120 --> 0:08:13.520 say this is a crazy delusion, This is a bubble 0:08:13.760 --> 0:08:17.640 is the nature of corporate America has changed. Go back 0:08:17.680 --> 0:08:21.560 to the seventies, the era that led to that high inflation, 0:08:21.760 --> 0:08:26.920 low economic growth, and industry was big and costly, a 0:08:26.920 --> 0:08:28.960 lot of manpower, a lot of material, a lot of 0:08:28.960 --> 0:08:33.800 capital required. Compare that to you know, the Instagram purchase 0:08:34.160 --> 0:08:37.120 by Facebook. The joker is a couple of guys on 0:08:37.160 --> 0:08:39.280 a laptop and it was sold for a billion dollars. 0:08:40.120 --> 0:08:44.800 The intangibles have not been measured correctly by investors for 0:08:44.840 --> 0:08:48.120 the past twenty years. And when you saw a technology 0:08:48.280 --> 0:08:51.319 run up as much as it has over the past decade, 0:08:51.800 --> 0:08:55.040 a lot of that was those intangibles. That's everything from 0:08:55.320 --> 0:08:59.360 patents to copyright to business methods and algorithms. I think 0:08:59.400 --> 0:09:03.120 we've started to see intangibles be reflected in prices. Their 0:09:03.200 --> 0:09:06.280 value is starting to be recognized. So where do we 0:09:06.320 --> 0:09:08.520 go from here? We have a quarter coming up where 0:09:08.559 --> 0:09:11.200 earnings are not going to be all that exciting, They're 0:09:11.240 --> 0:09:13.840 going to be disappointing people. Well, that's the big question 0:09:13.960 --> 0:09:16.880 is you know, we're we've seen record high earnings over 0:09:16.920 --> 0:09:20.680 the past couple of years. We're still forecast for two 0:09:21.240 --> 0:09:25.080 The consensus is a ten point six percent gain and earnings. 0:09:25.120 --> 0:09:29.760 Some people think that's a little rich. We've seen a 0:09:29.880 --> 0:09:32.960 correction in the SMP five hundred, but we haven't seen 0:09:33.000 --> 0:09:38.680 a correlated downgrade of earnings. I think we'll know really quickly. 0:09:39.360 --> 0:09:43.720 Is the consensus estimates too high? Ps Historically they're always 0:09:43.720 --> 0:09:50.199 too high. The analysts community always overestimate earnings, the exception 0:09:50.320 --> 0:09:54.840 being in the Nadia of recessions, they underestimate the recovery. 0:09:55.240 --> 0:09:57.320 The odd thing about the past couple of years is 0:09:57.360 --> 0:10:01.280 the overly optimistic estimates of earnings turned out to be 0:10:01.360 --> 0:10:03.840 more or less dead on. Well. The other thing is 0:10:03.880 --> 0:10:05.920 that there's going to be a bifurcation between companies that 0:10:05.960 --> 0:10:09.720 can pass down inflation problems and still hold onto their 0:10:09.760 --> 0:10:12.160 margins and the company's account. One of the things that 0:10:12.200 --> 0:10:15.560 I think the average investor doesn't often recognize is that 0:10:15.720 --> 0:10:19.319 stocks have long acted as an inflation hedge. And if 0:10:19.320 --> 0:10:22.920 that sounds counterintuitive, you know, if your input costs go 0:10:23.120 --> 0:10:26.200 up and there's still plenty of consumer demand for your products, 0:10:26.920 --> 0:10:29.760 just pass along the price. So your revenues go up 0:10:30.080 --> 0:10:33.640 on a nominal basis, but they're going up because of inflation. 0:10:33.760 --> 0:10:37.600 Your earnings go up as inflation. The exception to that 0:10:37.760 --> 0:10:40.640 is when you can pass along those increases in input costs. 0:10:41.080 --> 0:10:43.920 So you know when we see five percent increases in 0:10:44.000 --> 0:10:47.959 consumer demand year over year. Not only is corporate America 0:10:48.040 --> 0:10:50.520 as well set up in terms of their debt and 0:10:50.640 --> 0:10:53.760 balance sheet, but we look at the household balance sheets. 0:10:54.120 --> 0:10:57.520 People are sitting on a couple of trillion dollars of cash. 0:10:57.679 --> 0:11:01.319 The average household is working, Most Bello have gotten pay raises. 0:11:01.880 --> 0:11:05.280 This isn't the standard situation that you see heading into 0:11:05.320 --> 0:11:10.640 a recession. This is a pretty robust expansion where unique 0:11:10.679 --> 0:11:15.200 circumstances caused by COVID nineteen, the pandemic, the lockdown, and 0:11:15.240 --> 0:11:18.400 then the reopening have caused the spike in inflation. As 0:11:18.440 --> 0:11:22.040 things start to normalize, we could have a pretty typical 0:11:22.200 --> 0:11:25.760 two to and g d P with two pc inflation 0:11:26.360 --> 0:11:30.360 in twenty three. Everybody is so focused on the change 0:11:30.360 --> 0:11:32.520 in the cost of capital and the increase in rates 0:11:33.040 --> 0:11:35.880 they may be missing the optimistic picture, which is the 0:11:35.920 --> 0:11:39.840 economy is still fairly robuts how much is Russia's war 0:11:39.920 --> 0:11:43.040 in Ukraine lingering when it comes to the US economy 0:11:43.200 --> 0:11:46.360 and particular U s docs, so it's less of a 0:11:46.400 --> 0:11:49.199 factor in the US than it is overseas, but it's 0:11:49.200 --> 0:11:52.240 a global market. So if Russia restricts their output, all 0:11:52.280 --> 0:11:55.439 those little bumper stickers on gas stations, with Biden saying 0:11:55.480 --> 0:11:59.319 I did that, it's a fair argument to say Putin 0:11:59.400 --> 0:12:04.040 did that. Before the war, oil prices were fairly elevated. 0:12:04.080 --> 0:12:06.760 They were, then the war came in and tacked on another. 0:12:08.080 --> 0:12:10.600 So at the moment, you're painting a fairly rosy pitcher 0:12:10.640 --> 0:12:12.720 which seems to die. But with what we're saying, rosy 0:12:12.760 --> 0:12:16.840 picture from down exactly I was. You know, it's easier 0:12:16.880 --> 0:12:20.240 to be rosy when the market has gone on sale 0:12:20.240 --> 0:12:23.160 a little bit. Yeah, exactly, Well, what could derail the 0:12:23.200 --> 0:12:25.679 market further? Of all of the scenarios you painted, there 0:12:25.679 --> 0:12:27.640 doesn't seem to be any kind of an event in there. 0:12:27.840 --> 0:12:31.040 So the biggest threat is a policy mistake by the FED, 0:12:31.240 --> 0:12:36.080 and that means overtightening. It's not a fragile economy, but 0:12:36.240 --> 0:12:40.400 it's not a bulletproof economy either, So that's one issue. 0:12:41.000 --> 0:12:44.000 We would hate to see the Russian invasion of Ukraine's 0:12:44.000 --> 0:12:47.800 spill into the rest of Europe. That could be really problematic. 0:12:48.320 --> 0:12:51.840 You never know what's going on in China. China's economy 0:12:51.920 --> 0:12:55.200 seems to be slowing much more than I think people 0:12:55.200 --> 0:12:59.440 were expecting. That's still impacting supply chains and goods. We 0:12:59.480 --> 0:13:01.439 also help this stronger dollar, which doesn't seem to be 0:13:01.520 --> 0:13:04.360 going anywhere and anything. It's going to strengthen more. I 0:13:04.400 --> 0:13:07.319 love the expression the cleanest shirt and a hamper full 0:13:07.360 --> 0:13:10.000 of dirty laundry. Where else are you going to put 0:13:10.080 --> 0:13:14.960 your currency? The Euro? Certainly not the end come on 0:13:16.160 --> 0:13:19.160 or when? When we look at China's currency, the US 0:13:19.440 --> 0:13:23.840 is clearly the best choice amongst those. And by the way, 0:13:23.880 --> 0:13:26.719 we've been hearing about the death of the dollar, I 0:13:26.720 --> 0:13:29.760 don't know my whole adult lifetime. If you think the 0:13:29.840 --> 0:13:32.520 dollar is dead, you should go to Europe and spend 0:13:32.520 --> 0:13:35.319 some time in Italy or Paris or wherever you like, 0:13:35.920 --> 0:13:38.960 and you'll see the purchasing power of the dollar remains very, 0:13:39.080 --> 0:13:41.120 very really strong. Well, it's a party now basically with 0:13:41.160 --> 0:13:44.320 the euro amazing. So honestly, everything you've just said makes 0:13:44.360 --> 0:13:47.199 me think the markets by so the market is a 0:13:47.280 --> 0:13:49.959 bye if you have a time horizon of more than 0:13:50.280 --> 0:13:52.600 you know, six to twelve months, because anything can happen 0:13:52.640 --> 0:13:55.920 in a giving year. I think the concern is when 0:13:56.000 --> 0:13:59.600 will the FED realize that we are past peek inflation, 0:14:00.200 --> 0:14:03.480 that their original take that inflation wasn't going to be 0:14:03.520 --> 0:14:05.839 sticky and it was going to be transitory turned out 0:14:05.840 --> 0:14:07.760 to be right, just trans story took a lot longer 0:14:07.800 --> 0:14:12.760 than anyone expected, and that they've already done most of 0:14:12.800 --> 0:14:16.320 what they need to do. I hope the FED is 0:14:16.400 --> 0:14:21.320 aware of the fact that copper metals, lumber, gas, oil, 0:14:21.520 --> 0:14:25.080 even housing and wages are either slowing their rate of 0:14:25.120 --> 0:14:28.720 increase or tacking downwards, in which case they should be 0:14:28.760 --> 0:14:31.520 a little more gentle Barry riddles there. Let's get to 0:14:31.560 --> 0:14:34.440 the January six hearings now here in seven, with another 0:14:34.480 --> 0:14:37.320 to come next Thursday. We're joined by Jonathan Bernstein. We 0:14:37.360 --> 0:14:40.040 seem to be getting a lot more details, and I mean, 0:14:40.240 --> 0:14:42.680 the gossipmonger parts of us are very satisfied with what 0:14:42.720 --> 0:14:45.640 we're hearing out of the committee. But what struck you 0:14:45.800 --> 0:14:49.840 as the most intense part of this week's hearing, Well, 0:14:49.840 --> 0:14:54.040 you know, they're just continuing to fill in the details 0:14:54.440 --> 0:14:58.480 of the basic story of of You know that Donald 0:14:58.480 --> 0:15:03.400 Trump was attempt thing to overturn the election and essentially 0:15:03.560 --> 0:15:07.200 overthrow the government the United States. So you know, each 0:15:07.280 --> 0:15:11.800 detail sort of adds to that without anything in particular 0:15:11.920 --> 0:15:15.720 really changing what we've actually known since January six itself. 0:15:15.760 --> 0:15:18.640 But you know, it's increasingly clear that it was a 0:15:18.680 --> 0:15:23.400 deliberate plan, that he was deliberately trying to do this, 0:15:23.640 --> 0:15:26.120 and that he was calling on anybody who was willing 0:15:26.200 --> 0:15:30.760 to work with him, including these extremist organizations. Now, did 0:15:30.760 --> 0:15:33.560 it give the committee half to the Patsy Bylonian people 0:15:33.600 --> 0:15:36.440 like that, did actually give testimony in the end, And 0:15:36.520 --> 0:15:38.160 do we need to hear from people like Steve Bannon? 0:15:38.880 --> 0:15:41.320 Part of this goes beyond my expertise, which is to 0:15:41.440 --> 0:15:43.840 the legal side of things and exactly what is criminal 0:15:43.920 --> 0:15:47.800 and what kind of evidence would they need to you know, 0:15:48.000 --> 0:15:51.400 make certain charges stick. And you know, I'm not a lawyer, 0:15:51.480 --> 0:15:53.200 so I can't really speak to that. But the more 0:15:53.400 --> 0:15:56.120 evidence that they can get, and and not just about 0:15:56.120 --> 0:15:59.520 Trump himself, but about you know, other people who are 0:15:59.560 --> 0:16:02.400 active leaders of the Republican Party, whether they're members of 0:16:02.480 --> 0:16:05.240 the House or people who were in the administration who 0:16:05.440 --> 0:16:08.280 are still active leaders of the Republican Party. Whatever happens 0:16:08.320 --> 0:16:10.800 to Donald Trump, it would be very helpful for us 0:16:10.880 --> 0:16:13.440 to know who was involved into what level because you know, 0:16:13.760 --> 0:16:16.840 as the Committee has said, there's nothing wrong with pushing 0:16:17.640 --> 0:16:22.240 legitimate lawsuits to make sure that the presidents that any 0:16:22.320 --> 0:16:25.000 candidates case gets made in court if they think that 0:16:25.080 --> 0:16:27.760 there's something going on that they have rights to what 0:16:28.000 --> 0:16:31.120 Trump did with something else, and it would be very 0:16:31.200 --> 0:16:33.440 helpful to know who was on the side of things 0:16:34.200 --> 0:16:39.680 that really should not be involved in mainstream politics anymore. Well, 0:16:39.720 --> 0:16:41.560 the only thing that we heard this week is that 0:16:41.720 --> 0:16:44.520 we heard from some members of some of these groups, 0:16:44.640 --> 0:16:47.000 like the Old Keepers for example. Does it take away 0:16:47.120 --> 0:16:51.160 some of their perceived power or their self perceived power 0:16:51.320 --> 0:16:54.760 that lives being shared on how they operate. Yeah, I 0:16:54.840 --> 0:16:57.400 think that it's very helpful. You know, this is stuff 0:16:57.480 --> 0:17:00.880 that you know, people who follow all these things have 0:17:01.040 --> 0:17:05.479 known about for years really, um, but it's very helpful 0:17:05.560 --> 0:17:07.760 for the committee to shine some light on it. As 0:17:07.800 --> 0:17:11.840 you say, these are dangerous groups. They are extremist groups, 0:17:12.520 --> 0:17:15.280 and one of the things that Donald Trump did that 0:17:15.440 --> 0:17:19.400 was so unusual was to treat them as legitimate parts 0:17:19.480 --> 0:17:24.159 of the party coalition. And once the president, once the 0:17:24.280 --> 0:17:26.320 leader of the party does that, it's very hard for 0:17:26.400 --> 0:17:29.920 the rest of the party to disengage, especially since there 0:17:30.040 --> 0:17:34.320 are some overlapsing in policy positions or ideas. The Democrats 0:17:34.359 --> 0:17:37.200 have done a very good job on their side of 0:17:37.480 --> 0:17:41.040 keeping their distance from extremist groups. They have. Democrats didn't 0:17:41.040 --> 0:17:43.680 always do that. In the seventies, there was there was 0:17:43.800 --> 0:17:46.840 that kind of problem, but that problem is mostly on 0:17:46.880 --> 0:17:49.719 the Republican side now that they just find it very 0:17:49.800 --> 0:17:55.119 difficult to exclude people who you know, are not supportive 0:17:55.119 --> 0:17:58.479 of democracy and who are giving the party attention. Biden 0:17:58.680 --> 0:18:02.080 was asked on his middle strip about rematch with the 0:18:02.160 --> 0:18:05.600 former president. Say there is no prosecution and that the 0:18:05.640 --> 0:18:08.560 former sitting president doesn't see any sort of consequences from 0:18:08.600 --> 0:18:11.080 the hearings or the Justice Department doesn't do anything. What 0:18:11.160 --> 0:18:13.800 do you want again, Well, you know, there's a political 0:18:13.840 --> 0:18:16.720 scientist who says, we can talk about who is running 0:18:17.080 --> 0:18:19.960 four and then we can talk about who's running in 0:18:21.440 --> 0:18:24.080 As of right now, Donald Trump is running for president. 0:18:24.160 --> 0:18:26.080 As of right now, Joe Biden is running for a 0:18:26.160 --> 0:18:30.960 second term. In both cases, we just can't really predict 0:18:31.200 --> 0:18:33.000 whether that will still in the case, we can say 0:18:33.200 --> 0:18:37.200 with some certainty that if Biden eventually makes it too, 0:18:38.280 --> 0:18:42.080 he would almost certainly win the nomination. If there's such 0:18:42.160 --> 0:18:45.480 strong opposition to seeking a second term. He'll probably drop 0:18:45.560 --> 0:18:48.080 out sometime in the next I don't know, ten months 0:18:48.200 --> 0:18:51.280 or so. As far as Trump is concerned, he's much 0:18:51.359 --> 0:18:55.399 less predictable because he doesn't listen to people. UM. So 0:18:56.000 --> 0:18:59.320 it's it's certainly possible that he could run and win 0:18:59.400 --> 0:19:01.840 the nomination. That's possibly could run and lose the domination. 0:19:02.720 --> 0:19:05.080 It's possible that he could drop out of running entirely. 0:19:05.160 --> 0:19:07.480 There's just no way of really predicting what goes on 0:19:07.600 --> 0:19:10.119 in his head. And you have to wonder about Rhonda Santis. 0:19:10.200 --> 0:19:12.440 What are you hearing behind the scenes, Jonathan, about whether 0:19:12.560 --> 0:19:15.600 Rhonda Santez could overtake Trump as a party favorite. Oh, 0:19:15.640 --> 0:19:18.639 I don't hear anything. Of What I could say is 0:19:18.720 --> 0:19:22.160 that it's very very early, and the Sandals has has 0:19:22.400 --> 0:19:25.960 had a lot of support in Republican aligned media. You know, 0:19:26.040 --> 0:19:30.320 he gets mentioned a lot, which has successfully meant for 0:19:30.520 --> 0:19:33.640 him that he now shows up in polls doing double 0:19:33.720 --> 0:19:39.800 digits or better in Republican early polls ofation. But you know, 0:19:39.880 --> 0:19:43.320 we've seen a lot of candidates, whether it's Rudy Giuliani 0:19:43.640 --> 0:19:48.440 or whoever, UM, have early leads that dissipated once we 0:19:48.560 --> 0:19:51.000 find out who the actual candidates that are entering the 0:19:51.040 --> 0:19:54.680 primaries are and once the candidates get tested by going 0:19:54.760 --> 0:19:58.199 through the process. Jonathan Bernstein There, don't forget do get 0:19:58.240 --> 0:20:00.920 in touch via Twitter, I'm at Vanni Quinn or email 0:20:01.040 --> 0:20:04.800 v Quinn at Bloomberg dot net. Opinions and comments always welcome. 0:20:05.160 --> 0:20:07.760 By the way. We're also available as a podcast on Apple, 0:20:07.920 --> 0:20:11.159 Spotify or wherever you get your podcasts. Happy to be 0:20:11.240 --> 0:20:13.639 joined now by near Caesar to continue our look at 0:20:13.680 --> 0:20:16.880 this bear market, what it signifies, how long it may last, 0:20:17.320 --> 0:20:20.520 and what you should know if it's your first So 0:20:20.640 --> 0:20:22.640 earlier I spoke with Barrio Riddholes and we were talking 0:20:22.640 --> 0:20:25.679 about how robust the economy is. In subsequent hours, suddenly 0:20:25.800 --> 0:20:27.560 one hundred basis points is on the table from the 0:20:27.560 --> 0:20:31.879 Federal Reserve. Is one hundred basis points necessary? Well, I 0:20:32.040 --> 0:20:34.440 was curious how the economy is doing. I was looking 0:20:34.480 --> 0:20:36.920 at the numbers today and from what I can tell, 0:20:37.000 --> 0:20:39.800 the latest estimate from the Bureau Economic Analysis is that 0:20:40.400 --> 0:20:43.360 is that the economy contracted by about one point six 0:20:43.400 --> 0:20:46.200 percent in the first quarter, and the latest estimate from 0:20:46.200 --> 0:20:50.240 Atlanta said is that it contracted an additional one This 0:20:50.359 --> 0:20:52.720 is all after inflation in the second quarter. If that's 0:20:52.760 --> 0:20:55.199 the case, then we have two consecutive quarters of negative 0:20:55.240 --> 0:20:58.880 real growth. We're technically in intercession now, but I don't 0:20:58.920 --> 0:21:00.639 know that that's the end of the now this because 0:21:00.760 --> 0:21:02.560 to the extent that there's a silver lining in this. 0:21:02.880 --> 0:21:04.960 Even though the inflation number today was bad, there's no 0:21:05.080 --> 0:21:07.399 question about that. If you look at what the market 0:21:07.480 --> 0:21:10.880 is expecting. The five year break even rate has declined 0:21:11.000 --> 0:21:13.399 from rough three and a half percent in the spring 0:21:13.880 --> 0:21:16.080 too close to two and a half percent now, and 0:21:16.200 --> 0:21:18.440 the ten year break even has declined over the same 0:21:18.520 --> 0:21:21.600 period from roughly three percent to two point three percent. 0:21:22.440 --> 0:21:24.760 So I mean the market at least believes that the 0:21:24.800 --> 0:21:28.280 worst of inflation is over, at least for now, and 0:21:28.680 --> 0:21:32.119 that might mean that whatever the FED has done so 0:21:32.280 --> 0:21:35.000 far plans to do, which is probably another two d 0:21:35.119 --> 0:21:38.240 basis points between now next year and all the tough 0:21:38.320 --> 0:21:41.439 talk in the meantime, might have been enough to uh 0:21:41.640 --> 0:21:44.200 to bring this inflation under control, even though it's not 0:21:44.359 --> 0:21:47.040 apparent in this moment. And if that's the case, we 0:21:47.240 --> 0:21:51.000 might have escaped with a relatively mild recession, which was 0:21:51.119 --> 0:21:53.159 the point I think to begin with. You know, if 0:21:53.200 --> 0:21:54.480 I had told you that that was going to be 0:21:54.560 --> 0:21:55.840 the worst of it, I think we all would have 0:21:55.880 --> 0:21:58.720 been happy with that result. It's too early to say, obviously, 0:21:59.040 --> 0:22:01.200 but as far as I can tell, that's the base case. Well, 0:22:01.240 --> 0:22:03.199 and that's the thing. If the fan does go one 0:22:03.280 --> 0:22:06.480 hundred basis points, is that enough to derail and economy? 0:22:06.560 --> 0:22:10.119 That's pretty robust, But as barivit All said earlier, not bulletproof. 0:22:10.680 --> 0:22:14.080 I don't think any more than where it is now, 0:22:14.320 --> 0:22:16.960 because I think ultimately the question is what are we 0:22:17.080 --> 0:22:20.199 digesting in terms of our expectations. I think people are 0:22:20.240 --> 0:22:23.359 pretty morose about inslation. I'm not sure that the print 0:22:23.480 --> 0:22:25.639 changed really any of that. And if you look at 0:22:25.720 --> 0:22:27.920 expectations in the futures markets, I mean you see that, 0:22:28.200 --> 0:22:30.920 you know, markets are expecting a fat funds rate of 0:22:31.040 --> 0:22:34.160 roughly three hundred forty basis points this time next year, 0:22:34.320 --> 0:22:37.680 roughly let's say June of next year. And so I think, 0:22:38.119 --> 0:22:41.320 you know, market participants, the economy in general, businesses, I 0:22:41.400 --> 0:22:44.720 think they've all calibrated for that number, and the question 0:22:44.840 --> 0:22:47.399