WEBVTT - Fed Sees Rates Near Zero Through 2023 0:00:00.720 --> 0:00:03.720 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.800 --> 0:00:06.320 Jason Kelly. We're right here every day bringing you the 0:00:06.400 --> 0:00:11.160 latest news from the world's of business and finance, plus technology, politics, economics, 0:00:11.240 --> 0:00:14.280 all harnessing the power of Business Week reporters and editors. 0:00:14.440 --> 0:00:16.439 And of course Carol that's part of a team of 0:00:16.520 --> 0:00:20.439 twenty seven hundred journalists and analysts more than a hundred 0:00:20.480 --> 0:00:23.280 and twenty countries and Jason. You can download Bloomberg Business 0:00:23.280 --> 0:00:26.239 Week on iTunes, SoundCloud, blo Bloomberg dot com. You can 0:00:26.280 --> 0:00:28.640 also listen to our radio show at two pm Eastern 0:00:28.680 --> 0:00:31.560 on Bloomberg Radio every weekday, or watch us on YouTube 0:00:31.600 --> 0:00:36.400 by searching Bloomberg Global News. All right, Kathleen Hayes, now 0:00:36.440 --> 0:00:38.960 that we've got the bills paid, talk to us about 0:00:39.080 --> 0:00:41.880 what you're seeing and what jumped out of you. Well, 0:00:41.920 --> 0:00:45.479 first of all, the fact that they're the vote was 0:00:45.760 --> 0:00:50.280 a to two uh thirteen and seventeen officials forecast rates 0:00:50.280 --> 0:00:54.960 on hold through three not surprising, But again, um, I 0:00:54.960 --> 0:00:57.000 think it's a little bit surprising to me. On the 0:00:57.040 --> 0:01:00.680 descent from Rob Kaplan Neil Cush Gary Minneapolis, said, Rob 0:01:00.760 --> 0:01:03.960 Kaplin from the Dallas said Now, remember there's only there's 0:01:04.000 --> 0:01:06.760 there's twelve Fed Bank presidents. Four of them vote on 0:01:06.800 --> 0:01:09.360 a rotating basis. That's how you get a total of 0:01:09.440 --> 0:01:12.240 ten on this vote out of the seventeen officials on 0:01:12.240 --> 0:01:17.160 the Federal Market Committee. But importantly, Rob Kaplan uh preferred 0:01:17.200 --> 0:01:23.280 to retain quote greater policy rate flexibility, while uh Neil 0:01:23.319 --> 0:01:26.640 Coscary dissented because he wanted to wait for a rate 0:01:26.720 --> 0:01:31.200 hike until core inflation has reached two percent on a 0:01:31.319 --> 0:01:35.520 sustained basis. Um, I think you know, one of the 0:01:35.560 --> 0:01:39.080 criticisms among Fed watchers of what came out of the 0:01:39.160 --> 0:01:44.880 Jackson Hole virtual meeting, this switch to an inflation targeting framework, etcetera, 0:01:44.959 --> 0:01:47.640 is how are they gonna do it? You know, how 0:01:47.680 --> 0:01:50.240 much are they going to overshoot? What happens if they overshoot, 0:01:50.280 --> 0:01:53.760 then do they have to undershoot? There's so little it's 0:01:53.760 --> 0:01:56.040 really spelled out in terms of details. This is so vague, 0:01:56.080 --> 0:01:58.840 And many of them say, well, it's probably because there's 0:01:58.880 --> 0:02:01.760 still not a full agreement within the Federal but Market 0:02:01.800 --> 0:02:04.680 Committee about how they're going to carry this out. Um. 0:02:04.800 --> 0:02:06.880 Rob Kaplan, I think is already said in the past 0:02:06.920 --> 0:02:09.520 that he would be fine with in the past year 0:02:09.760 --> 0:02:12.239 or more that he'd be fine with let inflation run hot, 0:02:12.440 --> 0:02:14.079 let it run above a bit two percent, but at 0:02:14.080 --> 0:02:16.480 some point he'd want to look at that and you 0:02:16.800 --> 0:02:19.920 then he might think change his main mind about rates. 0:02:20.160 --> 0:02:22.400 Neil Coush Gary, on the other hand, has been very 0:02:22.440 --> 0:02:24.839 worried about the virus. I think this is he's he's 0:02:24.880 --> 0:02:28.640 the dub because the key inflation gauge is not the 0:02:28.680 --> 0:02:30.919 core inflation gauge. Right, so now he's talking about core 0:02:30.960 --> 0:02:34.040 inflation reaching at two percent on a susteemed basis if 0:02:34.080 --> 0:02:36.639 it's a little more, a little stricter, right, I think 0:02:36.720 --> 0:02:38.640 that this. I think it's going to be something that 0:02:38.720 --> 0:02:40.760 comes out of this well. And I'm just gonna say 0:02:40.760 --> 0:02:42.680 what's coming out of it in terms of market reaction, 0:02:42.720 --> 0:02:45.000 not much. When you look along the yield curve, the ten, 0:02:45.040 --> 0:02:47.239 five and two pretty much where they were right before 0:02:47.280 --> 0:02:50.280 the release of those Fed minutes. Equities, however, we've seen 0:02:50.320 --> 0:02:53.320 some support and we're moving to just a little bit 0:02:53.400 --> 0:02:56.280 higher on those news. Let's bring in Dave Wilson. Dave 0:02:56.400 --> 0:02:58.560 give us the equity market reaction here, because we have 0:02:58.600 --> 0:03:01.040 seen a bit of a turnaround. I mean, we have 0:03:01.280 --> 0:03:05.360 and it kind of started, you know, before the decision 0:03:05.520 --> 0:03:08.840 was announced, and you know, we saw the SNP five 0:03:09.240 --> 0:03:11.040 kind of pop up for a few minutes. It's given 0:03:11.080 --> 0:03:14.840 back sort of those initial games. Still trying to hang 0:03:14.919 --> 0:03:17.800 on though for a fourth straight advance. And when you 0:03:17.840 --> 0:03:20.400 look at the eleven main industry groups in the SMP five, 0:03:21.080 --> 0:03:25.080 it's a distinctly sort of economic bent to all this. Uh, 0:03:25.240 --> 0:03:29.959 energy stocks, industrial stocks, financial stocks, best performers out of 0:03:30.080 --> 0:03:32.880 those eleven groups, and what they also have in common 0:03:32.919 --> 0:03:36.600 is they're all down for the year. So it's almost like, uh, 0:03:36.640 --> 0:03:38.560 to some extent, what we're seeing out of the FED 0:03:38.720 --> 0:03:41.360 is giving at least some investors a reason to kind 0:03:41.360 --> 0:03:43.840 of look at the more beaten down areas of the market. 0:03:43.920 --> 0:03:46.120 And I say that knowing that there are only two 0:03:46.160 --> 0:03:50.000 groups that are down out of the eleven, Technology and 0:03:50.080 --> 0:03:54.720 communication services, which includes Facebook and Google's owner Alphabet and 0:03:54.760 --> 0:03:59.400 a bunch more sort of Internet linked companies. So, you know, 0:03:59.680 --> 0:04:03.120 definitely a shift from what we've seen over time in 0:04:03.280 --> 0:04:06.840 terms of the relative performance industry wise, but also areas 0:04:06.840 --> 0:04:09.440 of the market that have run up a lot, you know, right, yeah, 0:04:09.480 --> 0:04:12.800 absolutely so, Kathleen, Let's take a step back if we 0:04:12.880 --> 0:04:16.279 can and just remind people. I mean, the FED always important, 0:04:16.400 --> 0:04:19.839 of course, but it has been many would argue, and 0:04:19.920 --> 0:04:22.960 I might agree with them, the critical player in the 0:04:23.040 --> 0:04:27.520 government's response to this pandemic, especially from the market's perspective. 0:04:27.640 --> 0:04:29.960 So as you see this, and obviously we're gonna hear 0:04:30.000 --> 0:04:35.039 more from J. Powell coming up in about twenty four minutes, 0:04:35.600 --> 0:04:39.039 remind us the place that the FED is really holding 0:04:39.080 --> 0:04:42.320 here in terms of kind of keeping it all together. Well, 0:04:42.400 --> 0:04:45.800 let's remember that the FED very early, I believe it 0:04:45.880 --> 0:04:49.160 was March third, and that was before there were even 0:04:49.440 --> 0:04:52.280 lockdowns going on in the United States. UM made its 0:04:52.279 --> 0:04:54.920 first emergency rate cut, right, and then it quickly got 0:04:54.960 --> 0:04:59.120 the rates down to near zero as it launched in 0:04:59.279 --> 0:05:03.479 totally and nine different programs to to lend money to people, 0:05:03.520 --> 0:05:06.200 to get money to businesses, to make it easier for 0:05:06.240 --> 0:05:10.240 them to UM not layoff workers. And importantly, though, remember 0:05:10.240 --> 0:05:13.120 how crazy the bomb market was in February. That's one 0:05:13.120 --> 0:05:15.640 of the reasons why I started buying securities pumping liquidity right, 0:05:15.880 --> 0:05:17.599 and they did it. They've done an excellent job with 0:05:17.720 --> 0:05:20.080 all that. Congress of course did get on board and 0:05:20.080 --> 0:05:22.560 pass a big stimulus program, but now it looks like 0:05:22.640 --> 0:05:25.479 nothing until after the election. So they have played a 0:05:25.520 --> 0:05:27.120 very important role. And I think the other thing that 0:05:27.120 --> 0:05:29.640 the FED is trying to do with all of the 0:05:29.680 --> 0:05:33.000 stuff that's done lately in terms of this framework, they're 0:05:33.040 --> 0:05:35.200 just making it so crystal clear. I mean, you wouldn't 0:05:35.200 --> 0:05:37.960 expect with all the speeches safe given everything. J Pole 0:05:38.000 --> 0:05:39.600 and others have said that they were even thinking about 0:05:39.640 --> 0:05:43.160 thinking about hiking rates for a long time, but more 0:05:43.160 --> 0:05:45.080 and more there are so many people, Hey, we're not 0:05:45.120 --> 0:05:47.240 going to start hiking rates. We're not going to be 0:05:47.320 --> 0:05:49.320 is this is not the past where we let inflation 0:05:49.760 --> 0:05:52.120 up rise so much and then say, man, we better 0:05:52.160 --> 0:05:53.680 cut it up. And I think you have to bring 0:05:53.720 --> 0:05:55.800 in all the other aspects of this as well. In 0:05:55.880 --> 0:05:58.680 Jackson holl the FED also added something that caught a 0:05:58.720 --> 0:06:01.280 lot of people's eyes. It's not just maximum employment. The 0:06:01.320 --> 0:06:05.520 FED supporting massive maxim massive inclusive employment, because more and 0:06:05.560 --> 0:06:07.840 more there's been voices saying, look, you gotta let they 0:06:07.839 --> 0:06:11.279 call me run hot to allow low income workers. Uh, 0:06:11.360 --> 0:06:14.200 many of them happened to be black, happened to be Latino, 0:06:14.400 --> 0:06:17.000 allowed them to get caught up too. So there's a 0:06:17.040 --> 0:06:19.520 lot of pieces here, and I think the FED is 0:06:19.560 --> 0:06:21.480 clearly on the side of some of the big trends 0:06:21.520 --> 0:06:24.240 going on in our in our country and in the 0:06:24.279 --> 0:06:27.160 world even I think the question for markets, for investors, 0:06:27.160 --> 0:06:30.480 and for economists, though, is how this is really going 0:06:30.520 --> 0:06:35.479 to work as we go down the road. Yeah, exactly. 0:06:35.600 --> 0:06:38.560 I just I'm blown away about Um, you know, we 0:06:38.640 --> 0:06:40.400 keep kind of kidding about c e O s and 0:06:40.800 --> 0:06:43.400 we don't know what's going to happen in visibility. And 0:06:43.520 --> 0:06:45.560 I respect that because it's still a lot of questions. 0:06:45.600 --> 0:06:47.800 But here's the FED saying, you know, we're gonna likely 0:06:47.880 --> 0:06:51.080 keep rates, uh you know, you know forecasts, you know, 0:06:51.200 --> 0:06:54.680 and and rates at zero through Don't you suppose that's 0:06:54.680 --> 0:06:57.520 why Rob Kaplan said, Hey, I'm dissenting in Rob's a centrist, 0:06:57.600 --> 0:07:00.400 wrong right middle of the road, downright right down the 0:07:00.440 --> 0:07:02.400 road guy. And remember he worked on Wall Street for 0:07:02.440 --> 0:07:04.440 a long time. So, Kathleen, how often is it that 0:07:04.480 --> 0:07:06.680 they can they put out this kind of long term 0:07:06.720 --> 0:07:09.360 forecast but then they come back in a year, I mean, 0:07:09.520 --> 0:07:12.960 I don't know, a long time always. I mean, how 0:07:13.000 --> 0:07:14.840 likely is it that they're going to revise that? Carol, 0:07:14.920 --> 0:07:17.360 Let's I'm talk to you like I'm set official. Well, Carol, 0:07:17.400 --> 0:07:20.480 you know today I put in my forecast to the content. Carol, 0:07:20.600 --> 0:07:23.200 I'm looking at the economy looks right now and how 0:07:23.200 --> 0:07:25.040 I think the virus is going to play out. And 0:07:25.080 --> 0:07:26.800 we really expect it's going to take a long time 0:07:26.840 --> 0:07:29.800 to get unemployment uh down to a level that we 0:07:29.840 --> 0:07:33.360 would consider something like maximum and make sure it's inclusive unemployment. 0:07:33.440 --> 0:07:36.160 And I'm gonna say, say, fedeficial, get real pertem We're 0:07:36.200 --> 0:07:39.560 at a bar and you're really talkative, beneficial, Kathleen Hayes, 0:07:39.600 --> 0:07:42.080 tell me what you really think. Well, they're gonna change 0:07:42.080 --> 0:07:44.440 this right, you know, you would say, Carol, You might say, well, 0:07:44.440 --> 0:07:47.520 but Kathleen, you guys already missed the fact on unemployment 0:07:47.640 --> 0:07:49.480 that um you you thought it was gonna be nine 0:07:49.480 --> 0:07:52.080 point three percent at the end of twenty It's already 0:07:52.080 --> 0:07:54.440 down to eight point four percent as of August. What 0:07:54.600 --> 0:07:57.920 if the economy gets stronger faster? Can you really stick 0:07:58.000 --> 0:08:00.960 with no rate hike until three And then if you 0:08:01.000 --> 0:08:04.880 push me hard enough for one of them, they probably say, well, sure, yeah, 0:08:05.080 --> 0:08:08.080 but we're not you know, in going about two percent 0:08:08.240 --> 0:08:09.800 isn't the thing that pushes us. It's going to be 0:08:09.880 --> 0:08:13.200 unemployment falling and getting people back to work, and we're 0:08:13.200 --> 0:08:16.040 willing to tolerate some overshoot. But that's the question too, 0:08:16.200 --> 0:08:19.320 how much overshoot? Yeah exactly, I love this role playing. 0:08:19.360 --> 0:08:21.040 I could just sit here all day and listen to 0:08:21.080 --> 0:08:23.679 you guys sort of pretend to be FED officials, and 0:08:23.720 --> 0:08:28.640 I feel like we've got this is the show. Is 0:08:29.080 --> 0:08:31.240 role playing that fat. I just want to play j 0:08:31.400 --> 0:08:35.360 Powell and sort of sort of monitor monitone every and 0:08:35.520 --> 0:08:38.160 not really answer any questions. All right, Kathleen Hayes, thank 0:08:38.200 --> 0:08:39.920 you so much. Dave Wilson, give us a little tease 0:08:39.960 --> 0:08:42.360 for your chart of the day coming up. Oh, it's 0:08:42.360 --> 0:08:45.280 been quite a year. You know. There's a word called 0:08:45.360 --> 0:08:49.440 dispersion that analysts used to talk about the extent to 0:08:49.480 --> 0:08:53.559 which stocks or industry groups either track each other or don't. 0:08:53.880 --> 0:08:58.560 This year is all about don't there you go role 0:08:58.600 --> 0:09:02.680 playing for Dave too. Yeah exactly. This is Bloomberg Business 0:09:02.720 --> 0:09:06.720 Week with Carol Masser and Jason Kelly on Bloomberg Radio. 0:09:07.000 --> 0:09:10.160 Got another blockbuster team here on deck to help us 0:09:10.200 --> 0:09:13.920 understand what's going on at the FED. Dr Stephen Skanky, 0:09:14.120 --> 0:09:17.080 of course, chief economic advisor at keel Point, former U. S. 0:09:17.080 --> 0:09:20.400 Treasury and White House National Security Council staff member. He's 0:09:20.440 --> 0:09:24.319 in Washington, d C. Speaking the nation's capital, and Jeffrey Cleveland, 0:09:24.400 --> 0:09:27.240 chief economist for Paydon and Regal, he joins us on 0:09:27.280 --> 0:09:30.560 the phone from Los Angeles. Jeffrey, I want to start 0:09:30.679 --> 0:09:35.280 with you as you sort of distill this down. Nothing 0:09:35.320 --> 0:09:39.199 seems to be shocking the market about this, but steady 0:09:39.200 --> 0:09:42.280 as she goes? Or what what do you see here? Well, 0:09:42.280 --> 0:09:45.160 I said, this is more explicit for guidance than I 0:09:45.200 --> 0:09:47.880 think I expected in the statement to the Fed. Here 0:09:47.960 --> 0:09:52.160 pledging to keep rate slow until inflation is back above 0:09:52.160 --> 0:09:55.079 two percent for some time and we get the full employment. 0:09:55.160 --> 0:09:58.600 So I would say that is effectively pledging to keep 0:09:58.640 --> 0:10:02.840 interest rates at zero for forever, Jason, for the foreseeable future, 0:10:03.080 --> 0:10:06.240 unless you really expect inflation above two p m. The 0:10:06.280 --> 0:10:09.040 feed is the Fed is at zero. That was already 0:10:09.040 --> 0:10:12.200 priced in. So I think that's why markets are not 0:10:12.320 --> 0:10:15.320 reacting much, at least so far. You didn't have a 0:10:15.400 --> 0:10:20.720 rate hike priced into the bond market until so that's 0:10:20.880 --> 0:10:23.080 that's nothing new. But I think it's interesting to to 0:10:23.160 --> 0:10:26.880 think about UH made more explicit that forward guidance. Then 0:10:26.960 --> 0:10:29.640 I think most people expected in this particular meeting. I'm 0:10:29.679 --> 0:10:32.440 like blown away. Um, Steve Skanky, come on in on this. Um, 0:10:32.520 --> 0:10:34.920 I'm curious. Do you think that this is a political 0:10:34.960 --> 0:10:38.440 decision one at least made a little bit with the 0:10:38.480 --> 0:10:44.000 election in November in mind. Yeah, the fet is obvious. 0:10:44.040 --> 0:10:46.200 You just pointed that there hasn't been any action on 0:10:46.240 --> 0:10:50.520 the fiscal stimulus tide of things yet. They've they've said 0:10:50.559 --> 0:10:53.320 about all that they can and being specific about that, 0:10:53.720 --> 0:10:57.199 and they they no in their announcement, and then the 0:10:57.880 --> 0:11:00.679 comments of individual f l M team was leading up 0:11:00.679 --> 0:11:04.840 to the meeting that they remained concerned about the economy 0:11:04.960 --> 0:11:11.000 and the tremendous human and economic hardship. They once again 0:11:11.080 --> 0:11:15.920 reiterate their their statement from six weeks ago the path 0:11:15.960 --> 0:11:19.000 of the economy will depend significantly on the course of 0:11:19.040 --> 0:11:26.480 the virus, and we had daily infections yesterday thousand. It's 0:11:26.800 --> 0:11:30.960 it's very frustrating for the FT and UH and rather 0:11:31.080 --> 0:11:35.720 say something more about the fiscal stimulus, UH, they were 0:11:35.760 --> 0:11:38.640 just very explicit they're going to keep rates of zero, 0:11:38.760 --> 0:11:42.360 They're going to continue their their pond buying program at 0:11:42.480 --> 0:11:45.480 least at the current rate, and may implied that they 0:11:45.480 --> 0:11:48.840 may increase it above a hundred and twenty billion a 0:11:48.920 --> 0:11:54.720 month until there's just a honstormable evidence that they're reaching 0:11:54.760 --> 0:12:01.160 the employment targets and inflation that is average Jane above 0:12:01.280 --> 0:12:05.679 two percent a year for some period of time. Um, 0:12:05.760 --> 0:12:10.040 it would be hard for them to just say more 0:12:10.120 --> 0:12:14.040 that would be encouraging and positive for the market. Well, 0:12:14.080 --> 0:12:17.640 and in the market seemed to be reacting pretty positively. 0:12:17.679 --> 0:12:20.040 I mean, now taking a look Carroll, the SMP in 0:12:20.040 --> 0:12:22.520 the Dow, uh definitely hitting their highs of the day, 0:12:22.880 --> 0:12:28.040 the NASDAC creeping very close to there as well. So 0:12:28.360 --> 0:12:33.080 Jeffrey Cleveland, I mean, this is a market that not 0:12:33.200 --> 0:12:35.320 to be too silly about it, but like loves the Fed. 0:12:35.400 --> 0:12:38.480 They have counted on the Fed throughout this entire crisis. Well, 0:12:38.520 --> 0:12:40.520 there is no alternative right at this point. I mean, 0:12:40.559 --> 0:12:44.160 they're pushing people into equities. Yeah, what's the old adage, 0:12:44.440 --> 0:12:46.960 don't fight the Fed. I think that that applies. If 0:12:47.559 --> 0:12:50.880 real rates are going to be maintained at a negative level, 0:12:50.960 --> 0:12:55.959 so negative T bill returns, then investors, you know, many 0:12:55.960 --> 0:12:59.560 of our clients looking elsewhere. So the investment grade corporate space, 0:12:59.679 --> 0:13:04.040 the high yield corporate space, emerging market debt and equities. Uh, 0:13:04.400 --> 0:13:07.640 there's your alternative if you're looking for income and return. 0:13:07.679 --> 0:13:09.680 So I think that's still in play. I should also 0:13:09.720 --> 0:13:12.600 say that, you know, the there are risks, of course, 0:13:12.679 --> 0:13:14.439 the one of them that were worried about is the 0:13:14.679 --> 0:13:17.560 fiscal relief, the lack thereof the extension of that. But 0:13:17.760 --> 0:13:20.480 the data, the economic data is better than last time. 0:13:20.559 --> 0:13:23.680 The Fed put out their projections that much more pessimistic 0:13:23.720 --> 0:13:27.560 projections from the f MC in June, and they've marked 0:13:27.679 --> 0:13:31.439 up their GDP forecast. They've marked down at least in 0:13:31.720 --> 0:13:34.160 terms of the unemployment rate, lowering the unemployment rate to 0:13:34.200 --> 0:13:36.439 seven point six, you know, by the year end. So 0:13:36.640 --> 0:13:38.680 that's much better than they were anticipating in June they 0:13:38.679 --> 0:13:42.440 had it closer to ten. So things have improved relative 0:13:42.520 --> 0:13:44.559 to you know, ninety days ago. And I think that's 0:13:44.600 --> 0:13:48.000 important for the for the financial markets because financial markets 0:13:48.000 --> 0:13:51.959 are always looking ahead. So what do you guys want 0:13:51.960 --> 0:13:54.600 to hear from j Powell at the bottom of the hour, 0:13:54.760 --> 0:13:57.480 So just in about ten minutes time, Steve, let me 0:13:57.520 --> 0:13:59.360 start with you. What was it What would it be 0:13:59.400 --> 0:14:03.560 that you would us the FED chief on to be 0:14:04.160 --> 0:14:07.880 more explicit if you can about what really is the 0:14:07.920 --> 0:14:12.440 inflation target and and probably even more importantly, Carol, is 0:14:12.640 --> 0:14:14.360 what it is they're going to do to try to 0:14:14.520 --> 0:14:18.880 drive it to that. What's left in their arsenal of 0:14:19.200 --> 0:14:22.000 monetary policy tools which they say they're going to use 0:14:22.080 --> 0:14:28.320 their fullest to to help bring further economic activity that 0:14:28.600 --> 0:14:35.080 will cause wages to rise and and further health increase employment. Uh. 0:14:35.080 --> 0:14:37.920 And you know, following up a little bit of what 0:14:37.920 --> 0:14:40.800 about what you asked earlier, this is really I mean, 0:14:40.840 --> 0:14:44.119 their next meeting is at the eve of the election, 0:14:44.240 --> 0:14:46.800 and so it's very hard for them to do or 0:14:46.880 --> 0:14:51.440 say much at their next meeting without sounding political. So 0:14:52.200 --> 0:14:54.800 so Chairman Powell has got to get in all the 0:14:54.840 --> 0:14:58.040 points you'd like to make in this press conference and 0:14:58.160 --> 0:15:01.360 exactly what they're gonna do in terms of increasing the 0:15:01.440 --> 0:15:06.120 balance sheet, uh, putting more energy into their their emergency 0:15:06.240 --> 0:15:10.200 long facilities to get things quite in a better way. 0:15:10.560 --> 0:15:13.480 And especially if we end up with no more fiscal 0:15:13.560 --> 0:15:19.120 genulus before the end of the year. And so, Jeffrey, 0:15:19.200 --> 0:15:22.640 if you're on Capitol Hill and you're looking at this 0:15:22.800 --> 0:15:25.920 and you're watching the negotiations or lack thereof go on 0:15:26.120 --> 0:15:32.440 around fiscal rescue or stimulus, does this change your thinking 0:15:32.480 --> 0:15:35.560 at all. I mean, it's hard to say what they're 0:15:35.560 --> 0:15:37.600 thinking candidly at this point because they can't get it. 0:15:37.640 --> 0:15:39.520 They can't seem to get get a deal done. But 0:15:39.760 --> 0:15:42.240 how does the fiscal picture match up with what we're 0:15:42.240 --> 0:15:45.440 hearing on the monetary side. Well, unfortunately, I think the 0:15:45.800 --> 0:15:48.240 story was that the consumer was going to completely fall 0:15:48.280 --> 0:15:52.680 apart in August and September when these benefits ended as 0:15:52.720 --> 0:15:54.960 at the end of July, and that really hasn't happened. 0:15:55.000 --> 0:15:57.480 You're you know today this morning's data for retail sales, 0:15:57.520 --> 0:16:00.280 the August data, it was a little bit lower than 0:16:00.320 --> 0:16:02.680 expect did it slowed down from July, but you know, 0:16:02.720 --> 0:16:06.920 the consumer has not fallen apart. We're remarkably Jason back, 0:16:06.960 --> 0:16:09.960 I think we're fifteen six below where we were in 0:16:10.000 --> 0:16:14.360 February on restaurant sales. So that's much better than I 0:16:14.360 --> 0:16:18.200 would anticipated given the expiration of the fiscal benefits and 0:16:18.240 --> 0:16:20.840 the fact that, um, you know, the the virus is ongoing. 0:16:21.000 --> 0:16:24.760 So things have have you falled better than some of 0:16:24.800 --> 0:16:28.040 the worst fears until I guess that just makes policymakers, 0:16:28.080 --> 0:16:31.160 if they already had their heels dug in on the 0:16:31.200 --> 0:16:34.360 on the fiscal relief front, they might stay with that position. 0:16:34.640 --> 0:16:37.000 I mean, Jeffy, how does the economy feel right now? 0:16:37.040 --> 0:16:40.760 I mean it's really kind of shocking. I feel like 0:16:41.160 --> 0:16:42.960 if you think about, you know, how much we went down, 0:16:43.000 --> 0:16:45.720 how much you know we have come off of that low, 0:16:45.800 --> 0:16:48.920 and yet there are still statistics, some that are promising, 0:16:48.960 --> 0:16:51.160 some that are troubling. How do you see the economy, 0:16:51.240 --> 0:16:53.440 especially when we don't have a lot of CEOs who 0:16:53.480 --> 0:16:56.280 come out and say here's what we're seeing. Um, even 0:16:56.280 --> 0:16:59.120 those CEOs who are in a better place and God forbid, 0:16:59.240 --> 0:17:02.040 you know, have kind of benefited from the pandemic. So 0:17:02.120 --> 0:17:03.920 how do you see the economy for the rest of 0:17:03.960 --> 0:17:07.919 the year and going into well, the third quarter is 0:17:07.920 --> 0:17:11.119 looking great, carol Us and global we're we're going to 0:17:11.240 --> 0:17:14.040 see a GDP, you know, annualized rate in excess of 0:17:15.680 --> 0:17:18.360 which is good coming off the decline, and we saw 0:17:18.359 --> 0:17:21.399 on Q two, so big bouncing Q three And by 0:17:21.440 --> 0:17:24.159 the end of the year we're still below levels that 0:17:24.240 --> 0:17:26.439 we that we started the year. So GDP is probably 0:17:26.440 --> 0:17:29.720 three to four percent below levels and we'll take another 0:17:30.280 --> 0:17:34.040 year or two to get back to the pre virus levels. 0:17:34.040 --> 0:17:36.800 So strong bounce back, but then we are going to 0:17:36.960 --> 0:17:39.639 face a little bit of a longer road to get 0:17:39.680 --> 0:17:42.639 to get back there with you know, some some uncertainty 0:17:42.680 --> 0:17:45.560 in the fall, of course. And Steve, do you agree 0:17:45.760 --> 0:17:49.720 with that or what's your assessment here? I do agree 0:17:49.760 --> 0:17:51.680 that we should see a g d F bounce back 0:17:51.720 --> 0:17:55.680 at an annualized rate oft in UH in the third 0:17:55.760 --> 0:17:59.480 quarter and then just continue to continue to move forward. 0:17:59.840 --> 0:18:02.200 I think one of the challenging things though, is the 0:18:03.320 --> 0:18:06.080 difficulty that we've had with some of the employment numbers 0:18:06.080 --> 0:18:09.879 and unemployment numbers. You know, this began back in March 0:18:10.119 --> 0:18:17.720 where the the COVID impact on surveys had a created 0:18:17.720 --> 0:18:20.760 a big problem for the way the survey results were 0:18:20.800 --> 0:18:23.800 coming in. And even when we looked at the August numbers, 0:18:23.800 --> 0:18:29.840 which were great all things considered, after tremendous shot browth 0:18:29.960 --> 0:18:34.080 in UH May in June, UH, there are there are 0:18:34.200 --> 0:18:38.560 fifteen million people roughly who left the labor force, a 0:18:38.640 --> 0:18:42.720 third of those because they didn't have shild care opportunities 0:18:43.840 --> 0:18:46.760 UH and the other two thirds unsure as to what 0:18:46.840 --> 0:18:51.720 opportunities there there might be. So while I I'm really 0:18:51.760 --> 0:18:55.800 excited about the unemployment rate falling to where it has 0:18:56.240 --> 0:18:58.080 compared to word the tent thought it was going to 0:18:58.200 --> 0:19:00.399 be even to the end of the year or in 0:19:00.440 --> 0:19:03.959 the percent range. I think we need to be careful, uh, 0:19:04.119 --> 0:19:06.359 to make sure we understand really what's going on in 0:19:06.359 --> 0:19:15.120 those numbers, so that the people, especially policymakers, aren't are 0:19:15.240 --> 0:19:17.760 aren't letting the foot off the gas. Two to right. 0:19:17.800 --> 0:19:19.280 Can I just say, Jason, do I still have to 0:19:19.280 --> 0:19:22.520 get my head around a bounce back, you know after 0:19:22.640 --> 0:19:26.000 drop of like I just can't even yeah, and and 0:19:26.000 --> 0:19:28.040 and to that, to that point, and and to the 0:19:28.080 --> 0:19:32.600 point Um Stevenskey was was just making you know, this 0:19:32.680 --> 0:19:37.080 question of who's affected and how I mean, Jeffrey, I 0:19:37.119 --> 0:19:39.040 think about that a lot. I was having a conversation 0:19:39.080 --> 0:19:42.440 earlier today for a private equity event with David Rubinstein, 0:19:42.440 --> 0:19:45.760 and we were talking about this K shaped recovery um 0:19:46.320 --> 0:19:48.560 and maybe that is or isn't the right way to 0:19:48.600 --> 0:19:51.280 look at it. But what we do know is that 0:19:51.400 --> 0:19:55.600 this pandemic has not been indiscriminate economically. We know it 0:19:55.640 --> 0:20:02.439 has been actually very um discriminatory economically. What are the 0:20:02.480 --> 0:20:05.840 long term impacts of that, especially given that we even 0:20:05.920 --> 0:20:08.400 have maybe I shouldn't say even, but we do have 0:20:08.760 --> 0:20:12.960 the feed essentially saying we may let the economy run 0:20:13.000 --> 0:20:17.359 a little hotter in order to ensure that employment is 0:20:17.400 --> 0:20:21.120 not just fuller, but fairer. Well, that was the key 0:20:21.160 --> 0:20:23.920 part of the Ford guidance in the statement Jason, full employment, 0:20:23.960 --> 0:20:26.000 so there's a whittle room around. That does not mean 0:20:26.080 --> 0:20:29.480 in my view, the unemployment rate getting back to four 0:20:29.600 --> 0:20:33.399 or five. What they probably refer are referring to is 0:20:33.440 --> 0:20:37.560 something you know, more inclusive, so an employment to population ratio. 0:20:37.760 --> 0:20:39.399 So one that we like to look at is the 0:20:40.160 --> 0:20:43.360 fifty four year old the core working age population employment 0:20:43.400 --> 0:20:48.080 to population ratio that as of August was seventy five, 0:20:48.440 --> 0:20:53.040 right around there pre COVID, before before the pandemic, we 0:20:53.040 --> 0:20:55.520 were around eighty, a little bit above eighty. So we 0:20:55.560 --> 0:20:58.199 have a ways to go until we get back to 0:20:58.720 --> 0:21:01.800 a more in full, inclusive employment. But that that would 0:21:01.840 --> 0:21:03.840 be the metric that I would watch, and the fetes 0:21:04.400 --> 0:21:10.040 pledging to keep rates low until that time. Alright, So 0:21:10.440 --> 0:21:12.440 what keeps you up at night Steve when you think 0:21:12.480 --> 0:21:14.560 about the economy. I mean you talked about, you know, 0:21:14.600 --> 0:21:17.359 your concerns about policymakers making sure that they are watching 0:21:17.359 --> 0:21:19.520 and being smart as we read the data. I feel like, 0:21:19.520 --> 0:21:23.040 we've to be really good about digging deeper into statistics 0:21:23.119 --> 0:21:25.119 right now so that we really understand what's going on. 0:21:25.280 --> 0:21:26.760 But what is it that keeps you up at night 0:21:26.800 --> 0:21:30.560 when it comes to the economy, Well, Carl, it's it's 0:21:30.640 --> 0:21:36.359 really that there's overconfidence and how quickly to rebound is coming. Um. 0:21:36.480 --> 0:21:40.840 The the the annualized numbers are are are are sort 0:21:40.880 --> 0:21:42.720 of hard to get our head around, especially when you're 0:21:42.720 --> 0:21:46.840 talking about a second quarter decline of thirty two UH 0:21:47.280 --> 0:21:51.800 minus a little bit on an annualized rate from January. 0:21:51.800 --> 0:21:54.200 At the end of the end of June that GDP 0:21:54.359 --> 0:21:57.879 went down about eleven and we went from a twenty 0:21:57.880 --> 0:22:01.520 one frellon dollar economy to a nine and change trade 0:22:01.520 --> 0:22:05.320 and pour economy and lost a lot of jobs in 0:22:05.359 --> 0:22:09.280