1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:38,320 Speaker 2: Terminal and the Bloomberg Business app. Stock sliding on valuation concerns, 10 00:00:38,360 --> 00:00:41,839 Speaker 2: Lisa Shallatt, CIO of Morgan Stanley Wealth Management, saying the following, 11 00:00:42,000 --> 00:00:44,519 Speaker 2: While the twenty six ball case remains intact, there are 12 00:00:44,560 --> 00:00:48,159 Speaker 2: some headwinds from the affordability crisis and growing pessimism in 13 00:00:48,200 --> 00:00:50,320 Speaker 2: the labor market. Lisa joins us now for more. Lisa, 14 00:00:50,360 --> 00:00:52,400 Speaker 2: good morning, good morning. It's got to see you. Not 15 00:00:52,479 --> 00:00:54,480 Speaker 2: just about AI, not just about big tech. 16 00:00:54,640 --> 00:00:57,200 Speaker 3: It is not It's about the K shaped economy. 17 00:00:57,200 --> 00:00:59,520 Speaker 4: It's about that consumer and the lower end of the 18 00:00:59,600 --> 00:01:04,240 Speaker 4: K and this idea, that consumer sentiment. It's not even 19 00:01:04,240 --> 00:01:06,600 Speaker 4: their behavior at the minute, it's this sentiment is so 20 00:01:06,760 --> 00:01:09,600 Speaker 4: negative you out, you know, to the question in the 21 00:01:09,680 --> 00:01:11,560 Speaker 4: University of Michigan, you know, what do you think job 22 00:01:11,640 --> 00:01:14,960 Speaker 4: prospects are in a year? Right, We're the worst reading 23 00:01:15,120 --> 00:01:16,760 Speaker 4: since nineteen eighty. 24 00:01:17,920 --> 00:01:19,800 Speaker 3: You know, folks are really. 25 00:01:20,319 --> 00:01:23,720 Speaker 4: Depressed about the potential for the job market. 26 00:01:23,800 --> 00:01:25,720 Speaker 3: And it's not just cyclical. 27 00:01:25,760 --> 00:01:29,680 Speaker 4: I think it is this handwringing about you know, the 28 00:01:29,680 --> 00:01:30,919 Speaker 4: secular story of Jenny. 29 00:01:31,040 --> 00:01:33,640 Speaker 2: I think we've got to stay on that forty five 30 00:01:33,760 --> 00:01:37,880 Speaker 2: years of events. Just think about everything that's happened, GFC, 31 00:01:38,319 --> 00:01:41,640 Speaker 2: the pandemic, and you, Mitch, just talagus. The consumers are 32 00:01:41,640 --> 00:01:44,240 Speaker 2: taligus that this is the worst they felt about the 33 00:01:44,280 --> 00:01:47,680 Speaker 2: labor market across all those things that have happened. Yes, 34 00:01:47,800 --> 00:01:50,520 Speaker 2: that's bonkers, it is What do you think is behind that? 35 00:01:51,400 --> 00:01:55,720 Speaker 4: I think it really is this existential fear. I think 36 00:01:55,760 --> 00:01:59,760 Speaker 4: it starts with what they're observing, as Lisa noted, with 37 00:02:00,080 --> 00:02:04,040 Speaker 4: new graduates not being absorbed into the labor force at 38 00:02:04,080 --> 00:02:07,840 Speaker 4: the normal rate, but what they're seeing at the workplace 39 00:02:08,000 --> 00:02:10,880 Speaker 4: and and you know, all the visions of how I'm 40 00:02:10,919 --> 00:02:14,120 Speaker 4: going to be automated away, whether it's from you know, 41 00:02:14,200 --> 00:02:17,080 Speaker 4: the robotics end of it. Right, if you're you know, 42 00:02:17,200 --> 00:02:21,480 Speaker 4: a physical laborer, or if you're a knowledge worker from 43 00:02:21,760 --> 00:02:25,600 Speaker 4: you know, an agenic entity or an agenic bot. 44 00:02:26,560 --> 00:02:29,000 Speaker 5: Do we have to have that kind of future where 45 00:02:29,120 --> 00:02:32,799 Speaker 5: in some ways robusts takeover humans or to justify valuations 46 00:02:32,800 --> 00:02:34,919 Speaker 5: where they are I don't. 47 00:02:34,720 --> 00:02:38,040 Speaker 4: Think so, you know, our take has been you know, 48 00:02:38,120 --> 00:02:41,560 Speaker 4: here we are. There's one hundred and fifty three Americans 49 00:02:41,600 --> 00:02:43,400 Speaker 4: working in the United States labor force. 50 00:02:43,520 --> 00:02:45,799 Speaker 3: The US stock markets. 51 00:02:45,520 --> 00:02:47,960 Speaker 4: Are the envy of the world, where you know, within 52 00:02:48,040 --> 00:02:51,000 Speaker 4: two to three percent of all time highs, our profit 53 00:02:51,120 --> 00:02:53,200 Speaker 4: margins and our returns on equity. 54 00:02:52,919 --> 00:02:54,320 Speaker 3: Or at historic highs. 55 00:02:54,919 --> 00:02:57,480 Speaker 4: You know, this is you know, as we were talking 56 00:02:57,520 --> 00:03:00,800 Speaker 4: about before we got on air, you know some of 57 00:03:00,840 --> 00:03:04,600 Speaker 4: this is the technology is here, and is this, you know, 58 00:03:05,080 --> 00:03:08,880 Speaker 4: a solution in search of the problem. I don't find 59 00:03:08,919 --> 00:03:12,480 Speaker 4: a lot of people saying that America has a profitability problem. 60 00:03:12,639 --> 00:03:15,560 Speaker 1: Well, so Dan Pinto of JP Martin. 61 00:03:15,639 --> 00:03:18,440 Speaker 5: Daniel Pinto came out earlier this morning and was talking 62 00:03:18,440 --> 00:03:20,600 Speaker 5: about this and said that there probably isn't a correction 63 00:03:20,639 --> 00:03:22,680 Speaker 5: that has more to go, particularly with respect to AI, 64 00:03:22,760 --> 00:03:25,360 Speaker 5: and so that in order to justify these valuations, you 65 00:03:25,360 --> 00:03:28,239 Speaker 5: are considering a level of productivity that it will happen, 66 00:03:28,280 --> 00:03:30,519 Speaker 5: but it may not happen as fast as the market 67 00:03:30,560 --> 00:03:32,320 Speaker 5: is pricing in now. Is that how you see it 68 00:03:32,360 --> 00:03:33,880 Speaker 5: as well, that there needs to be some sort of 69 00:03:33,880 --> 00:03:36,560 Speaker 5: retracement that potentially these are the stocks that could trade 70 00:03:36,600 --> 00:03:40,680 Speaker 5: sideways for months, if not a year, before the use 71 00:03:40,720 --> 00:03:42,960 Speaker 5: cases grow into some of the valuations. 72 00:03:43,400 --> 00:03:46,440 Speaker 4: I'm in that camp. I know some of my compatriots 73 00:03:46,480 --> 00:03:49,840 Speaker 4: at Morgan Stanley are not. But you know, what's built 74 00:03:49,920 --> 00:03:53,200 Speaker 4: into the twenty twenty six earnings forecast already is about 75 00:03:53,200 --> 00:03:57,120 Speaker 4: another one hundred and thirty basis points of margin expansion 76 00:03:57,200 --> 00:04:02,200 Speaker 4: and productivity gains. That is a lot of productivity gains 77 00:04:02,240 --> 00:04:06,320 Speaker 4: in one year across an economy. And so our best 78 00:04:06,360 --> 00:04:09,240 Speaker 4: guess is that you know next year the earnings will 79 00:04:09,240 --> 00:04:12,560 Speaker 4: be decent, and decent to me is up five to 80 00:04:12,600 --> 00:04:16,120 Speaker 4: ten percent, but things that you know border on fifteen 81 00:04:16,200 --> 00:04:19,240 Speaker 4: to twenty percent is a push because it's a level 82 00:04:19,279 --> 00:04:22,400 Speaker 4: of productivity that I just don't think the American workforce 83 00:04:22,880 --> 00:04:25,120 Speaker 4: is ready to deliver, let alone embrace. 84 00:04:25,560 --> 00:04:28,479 Speaker 1: Ken Us stocks outperform if. 85 00:04:28,279 --> 00:04:31,200 Speaker 5: You don't have the AI names leading the charge. 86 00:04:31,839 --> 00:04:33,280 Speaker 3: I actually think that they can. 87 00:04:33,440 --> 00:04:35,240 Speaker 4: And the reason is is that I think that there 88 00:04:35,240 --> 00:04:38,960 Speaker 4: have been huge portions of our market that have been 89 00:04:39,080 --> 00:04:44,080 Speaker 4: squeezed out or forgotten right over the last fifteen years 90 00:04:44,160 --> 00:04:47,880 Speaker 4: by you know, this huge tech leadership. In fact, you know, 91 00:04:48,040 --> 00:04:50,080 Speaker 4: our best gas is that next year we're going to 92 00:04:50,080 --> 00:04:54,320 Speaker 4: see some nice return in leadership to financial services, as 93 00:04:54,880 --> 00:05:01,839 Speaker 4: you know, we get deregulation and animal spirits returning to markets, healthcare, energy. 94 00:05:02,160 --> 00:05:04,600 Speaker 4: So we do think that there are places to make 95 00:05:04,680 --> 00:05:08,360 Speaker 4: money in this market, that leadership can new leadership can 96 00:05:08,360 --> 00:05:11,680 Speaker 4: emerge or at least challenge some of these tech leaders 97 00:05:12,120 --> 00:05:14,880 Speaker 4: and that to me is a very healthy stock market. 98 00:05:14,960 --> 00:05:17,560 Speaker 2: Lisa, could you describe what's happening and what the starting 99 00:05:17,600 --> 00:05:19,760 Speaker 2: point is gone into twenty six So we've sent a 100 00:05:19,760 --> 00:05:21,960 Speaker 2: three percent decline at the index level on the S 101 00:05:22,000 --> 00:05:24,720 Speaker 2: and P. How much downbench is that beneath the surface 102 00:05:24,760 --> 00:05:25,640 Speaker 2: away from big tech? 103 00:05:26,839 --> 00:05:29,839 Speaker 4: So there has been damage, obviously, we've seen it, you 104 00:05:29,839 --> 00:05:32,080 Speaker 4: know in some of the more macro sectors. We're seeing 105 00:05:32,120 --> 00:05:36,720 Speaker 4: it in cryptocurrencies. Obviously, you know, there's there's some pain. 106 00:05:37,360 --> 00:05:39,960 Speaker 4: So we do think that that there are opportunities, Like 107 00:05:40,000 --> 00:05:43,400 Speaker 4: I said, we'd be we'd be picking through you know, 108 00:05:43,440 --> 00:05:46,520 Speaker 4: some of the financial services stocks, some of these consumer stocks, 109 00:05:47,200 --> 00:05:49,920 Speaker 4: some of the healthcare stocks have started to recover here. 110 00:05:50,800 --> 00:05:53,039 Speaker 4: So there are lots of things today what needs. 111 00:05:52,839 --> 00:05:55,520 Speaker 2: To gun right with consumer discretion rate into next year. 112 00:05:55,920 --> 00:05:56,480 Speaker 3: So I think the. 113 00:05:56,440 --> 00:06:00,120 Speaker 4: Fundamental thing that needs to go right is that, you know, 114 00:06:00,200 --> 00:06:02,919 Speaker 4: some of our worries and the fears about both the 115 00:06:03,000 --> 00:06:08,240 Speaker 4: job market and inflation, you need to kind of tamp 116 00:06:08,320 --> 00:06:12,239 Speaker 4: down and we need to see decent income growth for 117 00:06:12,520 --> 00:06:14,680 Speaker 4: the bottom half of the k to quote unquote hang 118 00:06:14,760 --> 00:06:15,120 Speaker 4: in there. 119 00:06:15,320 --> 00:06:17,719 Speaker 1: How much do we need rate cuts? Significant rate cuts? 120 00:06:19,279 --> 00:06:20,760 Speaker 3: So it's an interesting question. 121 00:06:21,040 --> 00:06:24,679 Speaker 4: I think, you know, the small to mid sized business 122 00:06:24,680 --> 00:06:28,719 Speaker 4: sector parts of private credit, I think need close to 123 00:06:28,760 --> 00:06:32,400 Speaker 4: two hundred basis points of rate cuts. The key thing 124 00:06:32,520 --> 00:06:35,960 Speaker 4: is we're probably not going to get it, and that's 125 00:06:36,000 --> 00:06:38,800 Speaker 4: why there's a little bit of this current dance that 126 00:06:38,839 --> 00:06:41,920 Speaker 4: we're doing with the FED, I think, which is kind 127 00:06:41,920 --> 00:06:45,760 Speaker 4: of moot. It's like, what's the difference another fifty basis points? 128 00:06:46,120 --> 00:06:48,080 Speaker 3: Who is that helping and who is it hurting? 129 00:06:48,800 --> 00:06:51,680 Speaker 4: If anything, it's just kind of steepening the long end 130 00:06:51,680 --> 00:06:54,240 Speaker 4: of the curve, which doesn't help your housing market. 131 00:06:54,400 --> 00:06:56,560 Speaker 2: Lisa Shantt is going to say, as always, thank you, 132 00:06:56,560 --> 00:06:59,279 Speaker 2: Lisa Shannitt. That's THEO of MOP and Stanley Wath Management 133 00:06:59,560 --> 00:07:01,760 Speaker 2: fifty could do more harm than good. 134 00:07:01,920 --> 00:07:03,960 Speaker 5: Yeah, the idea that it steepens the curve and it 135 00:07:04,040 --> 00:07:06,880 Speaker 5: leaves the mortgage market in even more pain. The idea 136 00:07:06,920 --> 00:07:10,880 Speaker 5: that private credit needs two hundred to perform highlights the 137 00:07:10,920 --> 00:07:13,960 Speaker 5: gap right now in perception versus reality, and it's part 138 00:07:14,000 --> 00:07:16,200 Speaker 5: of what's fueling some of the anksier seeing reflected in 139 00:07:16,280 --> 00:07:16,760 Speaker 5: Equity show. 140 00:07:16,760 --> 00:07:18,880 Speaker 2: You want to drop the front end aggressively. The balance 141 00:07:18,880 --> 00:07:20,400 Speaker 2: sheet needs to do some words to count the long 142 00:07:20,520 --> 00:07:22,600 Speaker 2: end of the year curve with inflation closer to three 143 00:07:22,640 --> 00:07:23,400 Speaker 2: than two. 144 00:07:23,480 --> 00:07:25,520 Speaker 1: You mean, deal curve control is sort of the inevitability. 145 00:07:25,520 --> 00:07:26,240 Speaker 1: That's what people think. 146 00:07:26,520 --> 00:07:29,360 Speaker 2: Maybe I would love to get some inside the questions, 147 00:07:29,360 --> 00:07:29,520 Speaker 2: you know. 148 00:07:30,040 --> 00:07:32,160 Speaker 3: Ties in the debt here we go maybe when. 149 00:07:32,000 --> 00:07:34,200 Speaker 2: The da story is that when the Dalla story was 150 00:07:34,200 --> 00:07:35,280 Speaker 2: picking up on the start of the year. 151 00:07:36,520 --> 00:07:38,560 Speaker 3: I mean, you know, Scott Bessant knows what he's doing. 152 00:07:38,640 --> 00:07:40,960 Speaker 3: He's just gonna jam and he's he's going to buy it. 153 00:07:41,040 --> 00:07:44,200 Speaker 2: You expect another round of that next year another witness. 154 00:07:44,400 --> 00:07:47,040 Speaker 3: Yes, I do. I do again. 155 00:07:47,080 --> 00:07:51,320 Speaker 4: I know my compatriots at Morgan Cely have moderated their 156 00:07:51,400 --> 00:07:53,280 Speaker 4: view and said, you know, they think the dollar's flat 157 00:07:53,360 --> 00:07:55,840 Speaker 4: next year, but I do think we're going to have 158 00:07:55,880 --> 00:07:58,360 Speaker 4: another bout of it, especially you know, no one's talking 159 00:07:58,360 --> 00:08:01,080 Speaker 4: about this, but you know Trump's out there that Hey, 160 00:08:01,080 --> 00:08:04,480 Speaker 4: I'm giving everyone the tariff bonus track. Well, what weren't 161 00:08:04,480 --> 00:08:06,680 Speaker 4: the tariffs over ten years supposed to pay for your 162 00:08:06,720 --> 00:08:09,600 Speaker 4: tax bill? Like, wasn't that the whole point? So let's see, 163 00:08:09,640 --> 00:08:12,360 Speaker 4: you had a regressive tax. It's called tariffs, and now 164 00:08:12,400 --> 00:08:14,560 Speaker 4: I'm giving you the rebate of the money I took 165 00:08:14,600 --> 00:08:14,880 Speaker 4: from you. 166 00:08:16,000 --> 00:08:18,880 Speaker 2: I'm keeping track. I'm trying to keep track. Lisa, you 167 00:08:18,960 --> 00:08:20,480 Speaker 2: keep bringing me back. I'm trying to go. It's going 168 00:08:20,560 --> 00:08:22,679 Speaker 2: to see you. Thank you, Lisa, Shallona Molk and Stanley. 169 00:08:22,720 --> 00:08:27,360 Speaker 2: Everyone stay with us. More Bloomberg surveillance coming up after this. 170 00:08:36,360 --> 00:08:38,400 Speaker 2: We need some more data and we'll get that data 171 00:08:38,440 --> 00:08:40,840 Speaker 2: on Thursday. Stephanie Roth of Wolf Research looking for a 172 00:08:40,920 --> 00:08:44,240 Speaker 2: solid sixty thousand payrolls on Thursday's jobs report, writing, the 173 00:08:44,280 --> 00:08:47,360 Speaker 2: hawkish Fed narrative may persist through the report, but the 174 00:08:47,440 --> 00:08:50,720 Speaker 2: narrative may change a bit with subsequent data that's likely 175 00:08:50,800 --> 00:08:53,640 Speaker 2: to be more mixed. Stephanie joins us now for more. 176 00:08:53,679 --> 00:08:56,719 Speaker 2: Stephanieki Mornic Good morning. Let's start with September. Why the 177 00:08:56,760 --> 00:08:57,960 Speaker 2: bounce back? What are you looking for? 178 00:08:58,480 --> 00:09:00,680 Speaker 6: So we should see a bit of bounce back in 179 00:09:00,679 --> 00:09:02,920 Speaker 6: the sense that the trend over the summer was probably 180 00:09:02,920 --> 00:09:04,800 Speaker 6: not the real trend. So we think not only will 181 00:09:04,840 --> 00:09:06,800 Speaker 6: September be decent, but you also will probably get some. 182 00:09:06,840 --> 00:09:07,920 Speaker 3: Upward revisions to August. 183 00:09:08,280 --> 00:09:10,360 Speaker 6: So the twenty nine thousand and three month average could 184 00:09:10,400 --> 00:09:12,880 Speaker 6: easily look like something in the sixties. So that would 185 00:09:12,880 --> 00:09:16,840 Speaker 6: be a much different trajectory because there was seasonality problems 186 00:09:16,880 --> 00:09:20,360 Speaker 6: over the summer. There was significant terarif uncertainty that has 187 00:09:20,400 --> 00:09:23,360 Speaker 6: started to fade. The comment that you made about perhaps 188 00:09:23,360 --> 00:09:25,200 Speaker 6: we're starting to see a bit of a pickup in 189 00:09:25,280 --> 00:09:27,880 Speaker 6: terms of the job market in the month of October 190 00:09:28,200 --> 00:09:30,200 Speaker 6: seems like a trend that we expect to persist in 191 00:09:30,240 --> 00:09:31,800 Speaker 6: the next couple months, where you might start to see 192 00:09:31,800 --> 00:09:34,200 Speaker 6: cyclical industries start to hire again. 193 00:09:34,480 --> 00:09:37,520 Speaker 5: So pair that with consumer confidence that's said in the water, 194 00:09:37,600 --> 00:09:40,400 Speaker 5: with people feeling really bad about their job opportunities, with 195 00:09:40,600 --> 00:09:43,199 Speaker 5: the slow pace of hiring and wage growth, with the 196 00:09:43,280 --> 00:09:45,679 Speaker 5: Chipotles of the world and the sweet greens, and this 197 00:09:45,720 --> 00:09:48,600 Speaker 5: morning the home depot, how do you square a story 198 00:09:48,600 --> 00:09:51,640 Speaker 5: of accelerating growth with what we're hearing from companies and 199 00:09:51,679 --> 00:09:53,679 Speaker 5: what we're hearing from consumers. 200 00:09:53,480 --> 00:09:55,079 Speaker 3: Well, this is growth turning at the margin. 201 00:09:55,120 --> 00:09:56,480 Speaker 6: It's not as if growth is picking up to a 202 00:09:56,559 --> 00:09:58,240 Speaker 6: very high pace. For twenty twenty six, we put out 203 00:09:58,200 --> 00:10:00,000 Speaker 6: our outlook, we're looking for two point one percent growth, 204 00:10:00,040 --> 00:10:02,920 Speaker 6: which is just above tart just above trend. And then 205 00:10:02,960 --> 00:10:05,079 Speaker 6: at the margin you're probably like this, like to see 206 00:10:05,120 --> 00:10:06,559 Speaker 6: the low and consumer get a bit better. 207 00:10:06,600 --> 00:10:08,079 Speaker 3: It's a price level problem though. 208 00:10:08,120 --> 00:10:10,040 Speaker 6: A lot of people feel bad about the level of 209 00:10:10,040 --> 00:10:12,400 Speaker 6: prices in the economy, and that is a hard problem 210 00:10:12,440 --> 00:10:15,199 Speaker 6: to solve because prices don't fall in the economy unless 211 00:10:15,200 --> 00:10:17,880 Speaker 6: you have a larger session. So the administration is trying 212 00:10:17,920 --> 00:10:20,800 Speaker 6: to put together policies that will bring down the level 213 00:10:20,800 --> 00:10:23,160 Speaker 6: of prices, but that's just not realistic in this environment. 214 00:10:23,280 --> 00:10:25,480 Speaker 5: So this goes to a paper that you wrote recently 215 00:10:25,520 --> 00:10:28,080 Speaker 5: about how Washington can't do this and overnight in terms 216 00:10:28,160 --> 00:10:31,440 Speaker 5: of the cost of living. What do you think then 217 00:10:31,720 --> 00:10:33,240 Speaker 5: is going to be the solution. Do you think that 218 00:10:33,280 --> 00:10:36,040 Speaker 5: it only can be driven by a recession or that 219 00:10:36,080 --> 00:10:39,040 Speaker 5: there are other marginal kind of efforts that could happen 220 00:10:39,400 --> 00:10:42,360 Speaker 5: to bring down at least some of the inflation, if 221 00:10:42,360 --> 00:10:43,559 Speaker 5: not the price level. 222 00:10:44,040 --> 00:10:45,679 Speaker 6: You're probably not going to bring down the price level. 223 00:10:45,760 --> 00:10:47,320 Speaker 6: Certainly we shouldn't be hoping for our sessions. So the 224 00:10:47,320 --> 00:10:49,320 Speaker 6: best case scenario is that you grow into the price 225 00:10:49,400 --> 00:10:51,800 Speaker 6: levels in that you have a couple of years where 226 00:10:51,840 --> 00:10:53,640 Speaker 6: wage growth is a little bit elevated, you start to 227 00:10:53,640 --> 00:10:55,480 Speaker 6: see a bit of a pickup, call a little above 228 00:10:55,600 --> 00:10:58,839 Speaker 6: four percent, and then prices remain largely steady, so you 229 00:10:58,840 --> 00:11:00,480 Speaker 6: don't really see a big pickup in prices, and you 230 00:11:00,520 --> 00:11:02,640 Speaker 6: kind of grow into the economy. At the same time, 231 00:11:02,679 --> 00:11:05,760 Speaker 6: people then might forget about the prices as they were 232 00:11:05,760 --> 00:11:07,800 Speaker 6: before the pandemic. I think that's part of the problem. 233 00:11:08,000 --> 00:11:10,920 Speaker 6: People remember what prices were before the pandemic, and they 234 00:11:10,960 --> 00:11:13,280 Speaker 6: don't necessarily take into account the fact that their incomes 235 00:11:13,280 --> 00:11:16,320 Speaker 6: have grown about twenty nine percent since the pandemic as well, 236 00:11:16,480 --> 00:11:18,600 Speaker 6: but they do see that prices have gone up pretty 237 00:11:18,600 --> 00:11:20,200 Speaker 6: significantly since then. 238 00:11:20,400 --> 00:11:22,000 Speaker 5: Do you think that the risk then for the federal 239 00:11:22,000 --> 00:11:25,199 Speaker 5: reserves cutting rates could actually reaccelerate inflation in a way 240 00:11:25,200 --> 00:11:26,720 Speaker 5: that goes counter to this, Yeah. 241 00:11:26,559 --> 00:11:28,560 Speaker 6: I think that is a risk, especially when we're talking 242 00:11:28,559 --> 00:11:30,679 Speaker 6: about house prices. Is probably one of the areas that's 243 00:11:30,720 --> 00:11:31,960 Speaker 6: the most unaffordable today. 244 00:11:32,160 --> 00:11:33,280 Speaker 3: If you see a big. 245 00:11:33,080 --> 00:11:35,679 Speaker 6: Reduction in rates, and if the government tries to put 246 00:11:35,720 --> 00:11:39,480 Speaker 6: in place policies like the GSS buying more mbs and 247 00:11:39,520 --> 00:11:41,920 Speaker 6: that lowers mortgage spreads, you might see prices start to 248 00:11:41,920 --> 00:11:42,680 Speaker 6: pick up as a result. 249 00:11:42,760 --> 00:11:43,800 Speaker 3: And that's a challenge. 250 00:11:43,920 --> 00:11:46,880 Speaker 6: By the way, two thousand dollars stimulus checks that would 251 00:11:46,960 --> 00:11:47,679 Speaker 6: have the same result. 252 00:11:47,840 --> 00:11:50,200 Speaker 2: What is a big reduction in rights because some might 253 00:11:50,280 --> 00:11:52,520 Speaker 2: argue we've had one one hundred and fifty basis points 254 00:11:52,559 --> 00:11:55,400 Speaker 2: since September of last year, and housing and shout to 255 00:11:55,480 --> 00:11:57,560 Speaker 2: cast on the rise in a way that some people 256 00:11:57,640 --> 00:11:59,360 Speaker 2: might anticipate. So what is a big. 257 00:11:59,160 --> 00:12:03,120 Speaker 6: Cup Well, I would say it's more reduction in rates. 258 00:12:03,120 --> 00:12:04,920 Speaker 6: At the same time the economy is starting to pick up. 259 00:12:05,440 --> 00:12:07,560 Speaker 6: The fallen rates that we've seen recently has been because 260 00:12:07,559 --> 00:12:08,600 Speaker 6: the economy is slow down to that. 261 00:12:08,640 --> 00:12:12,040 Speaker 2: More distinction exactly the jobs growth you've anticipate alongside with 262 00:12:12,120 --> 00:12:14,480 Speaker 2: that growth. Just describe twenty twenty six for us, because 263 00:12:14,480 --> 00:12:16,960 Speaker 2: twenty twenty five has actually been People talk down growth 264 00:12:16,960 --> 00:12:19,000 Speaker 2: for twenty twenty five. Growth hasn't been that bad in 265 00:12:19,080 --> 00:12:21,960 Speaker 2: twenty twenty five. What's been bad, it's the employment growth. 266 00:12:22,240 --> 00:12:23,640 Speaker 2: Why is twenty six going to be different? 267 00:12:24,320 --> 00:12:25,640 Speaker 3: So it should be a little bit better. 268 00:12:25,640 --> 00:12:28,720 Speaker 6: We're talking Our forecast is for eighty thousand payrolls growth 269 00:12:28,720 --> 00:12:30,680 Speaker 6: for next year. It's not as if it's anything compared 270 00:12:30,679 --> 00:12:32,320 Speaker 6: to what we've seen in the last couple of years, 271 00:12:32,440 --> 00:12:35,160 Speaker 6: but relative to break even the break even pays. Our 272 00:12:35,240 --> 00:12:37,200 Speaker 6: estimate for twenty six is about seventy thousand. 273 00:12:37,640 --> 00:12:38,320 Speaker 3: For twenty five. 274 00:12:38,360 --> 00:12:40,400 Speaker 6: It was closer to fifty thousand, and the reason is 275 00:12:40,440 --> 00:12:43,160 Speaker 6: because immigration was a lot stricter in twenty twenty five 276 00:12:43,200 --> 00:12:45,360 Speaker 6: than we expect for twenty six. Still should be strict, 277 00:12:45,400 --> 00:12:48,120 Speaker 6: but less so at the margin. So we're talking about 278 00:12:48,120 --> 00:12:51,240 Speaker 6: a payrolls number that's not that strong historically speaking, but 279 00:12:51,440 --> 00:12:52,160 Speaker 6: better than it's been. 280 00:12:52,440 --> 00:12:54,520 Speaker 5: If you do see some sort of reduction in the tariffs, 281 00:12:54,559 --> 00:12:57,880 Speaker 5: and we've seen some marginal types of moves around bananas 282 00:12:58,000 --> 00:13:00,520 Speaker 5: and coffee and things of that nature, if there is 283 00:13:00,559 --> 00:13:03,960 Speaker 5: a more significant rollback of certain tariffs, do you think 284 00:13:04,000 --> 00:13:05,920 Speaker 5: that that would reaccelerate. 285 00:13:05,320 --> 00:13:06,800 Speaker 1: The economy in a more meaningful way. 286 00:13:07,400 --> 00:13:08,480 Speaker 3: Yeah, it certainly could. 287 00:13:08,520 --> 00:13:10,120 Speaker 6: The challenge with that is also then you might start 288 00:13:10,120 --> 00:13:12,080 Speaker 6: to see rates fries at the same time, because then 289 00:13:12,120 --> 00:13:14,120 Speaker 6: you'll have an environment where people might be a little 290 00:13:14,120 --> 00:13:16,360 Speaker 6: bit more concerned about the deficit, and at the same 291 00:13:16,400 --> 00:13:19,440 Speaker 6: time you're just having natural growth acceleration. FED cuts would 292 00:13:19,440 --> 00:13:23,280 Speaker 6: have to get priced out, so that does pose some challenges. 293 00:13:23,440 --> 00:13:26,480 Speaker 6: But I think there's the possibility that we'll see an 294 00:13:26,559 --> 00:13:29,959 Speaker 6: environment where tariffs get rolled back marginally, But what we've 295 00:13:29,960 --> 00:13:30,880 Speaker 6: seen recently is. 296 00:13:30,840 --> 00:13:32,239 Speaker 3: It was on some ag products. 297 00:13:32,400 --> 00:13:36,880 Speaker 6: So I think what we'll see is the occasional tariff relief, 298 00:13:37,000 --> 00:13:40,360 Speaker 6: but not enough to be needle moving in terms of 299 00:13:40,400 --> 00:13:41,160 Speaker 6: the account. 300 00:13:40,840 --> 00:13:42,400 Speaker 2: I can I ask you if you'll view changes with 301 00:13:42,440 --> 00:13:44,680 Speaker 2: the incoming FED chair. When you find out who the 302 00:13:44,679 --> 00:13:46,280 Speaker 2: new FED share is, how much does that move the 303 00:13:46,320 --> 00:13:47,199 Speaker 2: dial for you? 304 00:13:47,440 --> 00:13:50,520 Speaker 6: So our expectation is this Hassett, even though we prefer Waller. 305 00:13:51,760 --> 00:13:55,080 Speaker 6: If we end up getting someone like Hassett, I don't 306 00:13:55,080 --> 00:13:57,199 Speaker 6: expect that the committee will change so much. It's a 307 00:13:57,200 --> 00:14:00,240 Speaker 6: committee of people that are very divided at the most moment, 308 00:14:00,679 --> 00:14:02,360 Speaker 6: and that's likely to even grow if we have a 309 00:14:02,440 --> 00:14:04,880 Speaker 6: chair that's seen as much more dubvish than the rest 310 00:14:04,880 --> 00:14:05,480 Speaker 6: of the committee. 311 00:14:05,520 --> 00:14:08,440 Speaker 2: We prefer Walla. It's interesting I don't usually hear language 312 00:14:08,480 --> 00:14:10,360 Speaker 2: like that from mccarmists. Some wolf straight why would you 313 00:14:10,440 --> 00:14:12,959 Speaker 2: prefer Walla governor Wallas. 314 00:14:13,240 --> 00:14:15,480 Speaker 3: He's a much more independent thinker. 315 00:14:15,840 --> 00:14:20,120 Speaker 6: He is very data driven. He's just somebody that's the 316 00:14:20,160 --> 00:14:22,120 Speaker 6: market very much respects, and I think that would be 317 00:14:22,400 --> 00:14:25,920 Speaker 6: a good candidate given the sort of the list of implies. 318 00:14:25,640 --> 00:14:27,760 Speaker 2: Kevin has it as not the only SAT director. 319 00:14:27,880 --> 00:14:29,800 Speaker 3: It's not fair, that's fair. 320 00:14:30,760 --> 00:14:31,920 Speaker 2: What gives you that impression? 321 00:14:33,160 --> 00:14:35,920 Speaker 3: Is he Myron? 322 00:14:36,840 --> 00:14:40,480 Speaker 6: They've they've, they've their comments have been suggesting that, you know, 323 00:14:41,080 --> 00:14:44,120 Speaker 6: rates are a lot more should be a lot less 324 00:14:44,120 --> 00:14:47,360 Speaker 6: restrictive than they currently are. Their commentary is just much 325 00:14:47,400 --> 00:14:49,640 Speaker 6: more aligned with what the president wants to hear. And 326 00:14:50,320 --> 00:14:52,600 Speaker 6: while are somebody that's been long respected by the market, 327 00:14:52,680 --> 00:14:55,400 Speaker 6: he's had view has been a very much data driven. Yes, 328 00:14:55,440 --> 00:14:57,760 Speaker 6: he's been more dubbish recently, but it is backed by 329 00:14:58,000 --> 00:15:01,640 Speaker 6: conversations around the labor market having slow down, concerns around 330 00:15:01,680 --> 00:15:04,840 Speaker 6: layoff speaking up, which is all very fair and solid arguments. 331 00:15:05,360 --> 00:15:08,120 Speaker 6: I'm a little less concerned, but the market, I think 332 00:15:08,120 --> 00:15:12,200 Speaker 6: would would very much cheer having him as the next. 333 00:15:12,040 --> 00:15:16,840 Speaker 2: Year stay with us. More Bloomberg surveillance coming up after this, 334 00:15:26,200 --> 00:15:30,240 Speaker 2: Amazon joining Meta Alphabet, Oracle, all with multi billion dollar 335 00:15:30,280 --> 00:15:33,480 Speaker 2: bond sales, to help fund AI buildouts. K Her, the 336 00:15:33,640 --> 00:15:36,640 Speaker 2: US Global Fixed Income, Currency and Commodity c IO at 337 00:15:36,680 --> 00:15:39,240 Speaker 2: JP Morgan Asset Management joins us now for more. Okay, 338 00:15:39,320 --> 00:15:42,040 Speaker 2: good morning, good to see you, Good morning, John. Debt 339 00:15:42,120 --> 00:15:45,600 Speaker 2: from Alphabet, forty year debt from Amazon? What are these 340 00:15:45,640 --> 00:15:48,280 Speaker 2: guys up to? Why do investors want a piece of it? 341 00:15:48,600 --> 00:15:48,680 Speaker 3: So? 342 00:15:48,720 --> 00:15:50,680 Speaker 7: I think the first thing to remember is these are 343 00:15:50,760 --> 00:15:53,640 Speaker 7: highly rated companies with a lot of free cash flow. 344 00:15:53,640 --> 00:15:56,280 Speaker 7: If you think about the five hyperscalers, most of them 345 00:15:56,320 --> 00:15:58,400 Speaker 7: have enough cash on the balance sheet to pay for 346 00:15:58,480 --> 00:16:01,360 Speaker 7: this debt. It's the opportunity, though, to put debt in 347 00:16:01,400 --> 00:16:05,040 Speaker 7: the markets. Yesterday, the investment grade credit market had twenty 348 00:16:05,080 --> 00:16:08,600 Speaker 7: six billion dollars of new issuance, all of which absorbed 349 00:16:08,720 --> 00:16:11,920 Speaker 7: very easily. You know, initial price talk on the Amazon 350 00:16:11,960 --> 00:16:15,120 Speaker 7: deal yesterday was you know, twenty five thirty wider of 351 00:16:15,560 --> 00:16:18,440 Speaker 7: a concession. It ended up pricing pretty much on the 352 00:16:18,480 --> 00:16:21,160 Speaker 7: screws and traded there. So there's a lot of demand 353 00:16:21,280 --> 00:16:23,440 Speaker 7: for fixed income here at these levels. 354 00:16:23,080 --> 00:16:24,360 Speaker 1: Even for forty year tranches. 355 00:16:24,400 --> 00:16:25,680 Speaker 5: I mean, what do you make of the forty and 356 00:16:25,720 --> 00:16:27,600 Speaker 5: the fifty year pieces of some of this debt? 357 00:16:28,280 --> 00:16:30,640 Speaker 7: Look, I think when you think about this, you're going 358 00:16:30,640 --> 00:16:33,360 Speaker 7: out a long time. And the question about the returns 359 00:16:33,360 --> 00:16:37,640 Speaker 7: that companies are going to generate for this the AI investment, 360 00:16:38,160 --> 00:16:41,240 Speaker 7: it's it's awfully uncertain. But I think these companies have 361 00:16:41,360 --> 00:16:43,680 Speaker 7: a lot of cash flow they can repay the debt. 362 00:16:43,920 --> 00:16:45,920 Speaker 7: I think I would be more focused on the multiples 363 00:16:45,920 --> 00:16:48,440 Speaker 7: that are paid in the equity markets than on their 364 00:16:48,520 --> 00:16:50,400 Speaker 7: ability to repay when they've got. 365 00:16:50,200 --> 00:16:52,480 Speaker 3: Cash on the balance sheets. Lisa, the best way. 366 00:16:52,360 --> 00:16:54,280 Speaker 5: To say, check your own house before accusing the debt. 367 00:16:54,360 --> 00:16:55,360 Speaker 3: I think maybe. 368 00:16:55,520 --> 00:16:57,840 Speaker 5: So, yeah, you think that that's what's going on, that's right. 369 00:16:58,000 --> 00:17:00,160 Speaker 5: I just wonder if there's a better story to tell, 370 00:17:00,320 --> 00:17:03,640 Speaker 5: maybe in either speculative grade credit or outside of the US, 371 00:17:03,760 --> 00:17:06,359 Speaker 5: where you are more insulated from some of the tech story. 372 00:17:06,400 --> 00:17:10,159 Speaker 5: Because even if these are highly capitalized companies, the whip 373 00:17:10,160 --> 00:17:13,320 Speaker 5: saw in sentiment around AI seems to have driven a 374 00:17:13,359 --> 00:17:14,920 Speaker 5: lot of the movement recently. 375 00:17:15,320 --> 00:17:17,359 Speaker 7: So I think if you look at the bond market, 376 00:17:17,400 --> 00:17:19,640 Speaker 7: the bond markets holding up. Okay, you look at yesterday 377 00:17:19,680 --> 00:17:21,360 Speaker 7: or the last few days you've had to sell off, 378 00:17:21,400 --> 00:17:24,160 Speaker 7: bonds are actually doing what they're supposed to be doing, right, 379 00:17:24,240 --> 00:17:26,920 Speaker 7: think about it. The eggs up almost seven percent this year, 380 00:17:27,359 --> 00:17:31,960 Speaker 7: bonds are delivering stability, diversification, liquidity. I know it's boring 381 00:17:32,000 --> 00:17:34,359 Speaker 7: and old fashioned, but that's kind of where we are. 382 00:17:34,600 --> 00:17:36,439 Speaker 2: Is that just a US bond story or do you 383 00:17:36,440 --> 00:17:37,560 Speaker 2: see that across selferance. 384 00:17:38,080 --> 00:17:40,119 Speaker 3: No, I think that is true or broadly. 385 00:17:40,160 --> 00:17:42,359 Speaker 7: I'm obviously much more focused on the US, but I 386 00:17:42,359 --> 00:17:43,520 Speaker 7: think broadly that is true. 387 00:17:43,720 --> 00:17:45,520 Speaker 3: Bonds are doing what they're supposed to be doing. Here. 388 00:17:45,560 --> 00:17:47,760 Speaker 2: We've had a forty basis point plus move on the year. 389 00:17:47,960 --> 00:17:49,800 Speaker 2: I think on the US tenure we're down another four 390 00:17:49,840 --> 00:17:52,159 Speaker 2: basis points this morning to about four point one percent. 391 00:17:52,560 --> 00:17:54,480 Speaker 2: Some convulsions. I've used that word a few times in 392 00:17:54,520 --> 00:17:56,600 Speaker 2: the last twenty four hours with regards to fixed income. 393 00:17:56,800 --> 00:17:59,760 Speaker 2: Some convulsions in jgb's what's happening at the long end 394 00:17:59,760 --> 00:18:02,440 Speaker 2: of the AGB curve and what's the potential spill over 395 00:18:02,760 --> 00:18:03,840 Speaker 2: into global markets. 396 00:18:04,280 --> 00:18:07,520 Speaker 7: So I think you've had some geopolitical uncertainty in the JGB. 397 00:18:07,680 --> 00:18:10,560 Speaker 7: You've got a new prime minister out there. Some you know, 398 00:18:11,440 --> 00:18:13,639 Speaker 7: I'm on TV. You got to be careful what you say, 399 00:18:13,880 --> 00:18:16,639 Speaker 7: because if you're going to use the word convulsions, people 400 00:18:16,640 --> 00:18:17,679 Speaker 7: can make a lot of entire re. 401 00:18:17,760 --> 00:18:20,359 Speaker 2: Use the word convulsion you don't have to. Is there 402 00:18:20,400 --> 00:18:23,800 Speaker 2: a potential though, to reanchor global bond you's hire given 403 00:18:23,840 --> 00:18:25,119 Speaker 2: what's developing. 404 00:18:24,880 --> 00:18:26,840 Speaker 7: There is in the Japanese bond market, there's always a 405 00:18:26,840 --> 00:18:29,399 Speaker 7: potential for hire. There's an equal potential for the lower 406 00:18:29,440 --> 00:18:31,320 Speaker 7: I mean every day there's a market made in this. 407 00:18:31,520 --> 00:18:33,600 Speaker 7: I mean, look at the FED, or look at pricing 408 00:18:33,600 --> 00:18:35,480 Speaker 7: on the FED. I think the last time I was here, 409 00:18:35,520 --> 00:18:38,240 Speaker 7: it was almost one hundred percent certainty that the Fed 410 00:18:38,320 --> 00:18:40,880 Speaker 7: was going to cut another twenty five basis points. Here 411 00:18:40,920 --> 00:18:44,520 Speaker 7: we are that's now below fifty percent, and so there's 412 00:18:44,520 --> 00:18:46,600 Speaker 7: always a market to be made in these in buyers 413 00:18:46,600 --> 00:18:47,160 Speaker 7: and sellers. 414 00:18:47,359 --> 00:18:49,920 Speaker 2: Do you think the risk is balanced into that Fed decision? 415 00:18:50,920 --> 00:18:53,520 Speaker 7: I think the market is pricing it pretty much balanced. 416 00:18:53,560 --> 00:18:56,560 Speaker 7: I think the probability is now below fifty percent today, 417 00:18:56,960 --> 00:18:59,119 Speaker 7: But we actually think the Fed's going to continue. We 418 00:18:59,119 --> 00:19:00,680 Speaker 7: think the FED cuts again in December. 419 00:19:00,760 --> 00:19:03,040 Speaker 2: What's going to deliver that move? Another weight jobs report? 420 00:19:03,760 --> 00:19:04,520 Speaker 3: So it's funny. 421 00:19:05,160 --> 00:19:07,879 Speaker 7: Yesterday one of my trustees was in and reminded me 422 00:19:07,960 --> 00:19:10,480 Speaker 7: that they always call us bond gouls. We're bond goouls, 423 00:19:10,560 --> 00:19:12,960 Speaker 7: So bond gooules as bond goals, you know, we can 424 00:19:13,000 --> 00:19:17,399 Speaker 7: complain about anything. So we spent the whatever sixty something 425 00:19:17,480 --> 00:19:20,240 Speaker 7: days of the of the federal government shutdown complaining that 426 00:19:20,280 --> 00:19:23,240 Speaker 7: there's no data. And now we're obsessing because there's data. 427 00:19:23,280 --> 00:19:23,639 Speaker 3: Starting. 428 00:19:23,680 --> 00:19:26,280 Speaker 7: We get ADP at eight thirty. We get non farm 429 00:19:26,320 --> 00:19:30,200 Speaker 7: payrolls on Thursday. So I think if you look, I mean, 430 00:19:30,359 --> 00:19:31,919 Speaker 7: the data is going to be anything you want it 431 00:19:31,960 --> 00:19:33,840 Speaker 7: to be. Right, We're going to get a September number 432 00:19:33,840 --> 00:19:37,520 Speaker 7: on Thursday. Consensus is fifty seven thousand or whatever it is. 433 00:19:38,960 --> 00:19:42,480 Speaker 7: But you all know that the margin of error for 434 00:19:42,560 --> 00:19:45,200 Speaker 7: economists on those non farm payrolls is plus or minus 435 00:19:45,240 --> 00:19:48,480 Speaker 7: one hundred thousand jobs. So it's going to be interesting 436 00:19:48,520 --> 00:19:50,120 Speaker 7: to see what the Fed does here. 437 00:19:51,359 --> 00:19:54,880 Speaker 2: Stay with US mult Blomberg surveillance coming up after this 438 00:20:03,560 --> 00:20:06,640 Speaker 2: that sunds Capitol Hill Affordability tomp of mine in Washington, 439 00:20:06,720 --> 00:20:10,040 Speaker 2: the Treasury Secretary scompess in telling media the President Trump's 440 00:20:10,040 --> 00:20:12,920 Speaker 2: plans for two thousand dollars tariff dividend checks will require 441 00:20:13,160 --> 00:20:16,159 Speaker 2: an Act of Congress. I'm Marias down in Washington, d C. 442 00:20:16,280 --> 00:20:18,320 Speaker 2: And stands by, but a special guest mornicom Maery. 443 00:20:19,160 --> 00:20:19,920 Speaker 3: Good morning, John. 444 00:20:19,960 --> 00:20:22,800 Speaker 8: That's right, a man that potentially who running hearings about 445 00:20:22,800 --> 00:20:24,560 Speaker 8: this or will definitely get. 446 00:20:24,400 --> 00:20:25,080 Speaker 3: A vote on it. 447 00:20:25,240 --> 00:20:29,439 Speaker 8: The chairman of Financial Services Committee, Congressman French Hill of Arkansas, 448 00:20:29,600 --> 00:20:31,560 Speaker 8: Good morning, Congressman, thank you so much for joining me. 449 00:20:31,640 --> 00:20:32,320 Speaker 3: Great to be with you. 450 00:20:32,359 --> 00:20:33,120 Speaker 1: Thanks for having me. 451 00:20:33,119 --> 00:20:34,160 Speaker 3: So Jonathan was saying. 452 00:20:34,200 --> 00:20:36,920 Speaker 8: The Treasury Secretary over the weekend was talking about how 453 00:20:36,920 --> 00:20:39,520 Speaker 8: Congress would have to act for these two thousand dollars 454 00:20:39,560 --> 00:20:42,440 Speaker 8: tariff dividend checks the President has floated. Do you think 455 00:20:42,440 --> 00:20:44,040 Speaker 8: that's something Congress would get on board with. 456 00:20:44,520 --> 00:20:46,560 Speaker 9: I think Congress would certainly consider it. I mean, my 457 00:20:46,680 --> 00:20:50,680 Speaker 9: judgment has been that I think the tariff revenue that's sustainable, 458 00:20:50,760 --> 00:20:53,040 Speaker 9: that people believe is sustainable in the years ahead, ought 459 00:20:53,040 --> 00:20:54,800 Speaker 9: to be used to reduce the deficit. I think that 460 00:20:54,800 --> 00:20:58,359 Speaker 9: would be a much better macro use of it. We 461 00:20:58,400 --> 00:21:01,919 Speaker 9: are concerned about affordability, and in fact, in here in 462 00:21:01,960 --> 00:21:05,040 Speaker 9: our committee, we're going to have a hearing on housing affordability. 463 00:21:05,119 --> 00:21:09,639 Speaker 9: How does federal policy how could that encourage housing construction 464 00:21:09,760 --> 00:21:13,640 Speaker 9: development and also improve affordability When we know the biggest 465 00:21:13,720 --> 00:21:17,440 Speaker 9: barrier to housing affordability has been first on precedent inflation 466 00:21:18,320 --> 00:21:21,320 Speaker 9: commenced by the Biden administration and the Feds and mistakes 467 00:21:21,440 --> 00:21:24,360 Speaker 9: in and during and after the pandemic. But what can 468 00:21:24,359 --> 00:21:27,320 Speaker 9: we do at the margin in federal policy to increase 469 00:21:27,359 --> 00:21:28,880 Speaker 9: housing construction affordability. 470 00:21:28,920 --> 00:21:31,159 Speaker 8: Well, I remember when the second round of checks went 471 00:21:31,160 --> 00:21:35,680 Speaker 8: out to the Americans during COVID. The Republicans really made it. 472 00:21:36,280 --> 00:21:39,040 Speaker 8: Part of their criticism and the Biden administration was that 473 00:21:39,080 --> 00:21:42,240 Speaker 8: they were goosing inflation. Could two thousand dollars checks do 474 00:21:42,320 --> 00:21:44,600 Speaker 8: the same next year under Trump administration? 475 00:21:44,720 --> 00:21:49,520 Speaker 9: Look, I think inflation's calls by two many dollars, chasing 476 00:21:49,560 --> 00:21:51,560 Speaker 9: too few goods. And I think the origin of this 477 00:21:51,600 --> 00:21:54,560 Speaker 9: inflation of forty year high inflation that we had after 478 00:21:54,600 --> 00:21:57,640 Speaker 9: the pandemic was due to fiscal mistakes by the Biden 479 00:21:57,680 --> 00:22:01,679 Speaker 9: administration approving and spending another six trillion dollars in federal 480 00:22:01,720 --> 00:22:05,920 Speaker 9: spending that we borrowed, and secondly by keeping rates too 481 00:22:05,960 --> 00:22:08,399 Speaker 9: low in the balance sheet too big coming out of 482 00:22:08,400 --> 00:22:11,560 Speaker 9: the pandemic. We're now healing from that. Inflation is down, 483 00:22:12,119 --> 00:22:15,600 Speaker 9: oil prices are down. I think the consumers are going 484 00:22:15,640 --> 00:22:18,199 Speaker 9: to feel better off in their pocketbook from that. But 485 00:22:18,280 --> 00:22:20,479 Speaker 9: we have to be wary that one of the biggest 486 00:22:20,480 --> 00:22:23,720 Speaker 9: concerns that families have is the affordability of housing, and 487 00:22:23,760 --> 00:22:25,720 Speaker 9: that's where I think we should tackle that at the 488 00:22:25,720 --> 00:22:28,960 Speaker 9: federal level by removing barriers to more affordable housing and 489 00:22:29,040 --> 00:22:30,359 Speaker 9: access to credit for housing. 490 00:22:30,440 --> 00:22:32,520 Speaker 8: Jonathan and Lisa, we're just talking about home depot earnings. 491 00:22:32,560 --> 00:22:35,600 Speaker 8: They said that ongoing consumer sentiment has been a little 492 00:22:35,600 --> 00:22:36,040 Speaker 8: bit weak. 493 00:22:36,119 --> 00:22:37,440 Speaker 3: There's uncertainty there. 494 00:22:37,640 --> 00:22:39,640 Speaker 8: Of course, Walmart's going to be reporting. 495 00:22:39,320 --> 00:22:41,320 Speaker 3: Towards the end of the week. That's your constituent. 496 00:22:41,440 --> 00:22:45,600 Speaker 8: Have you been hearing from Walmart and other either small 497 00:22:45,600 --> 00:22:49,640 Speaker 8: businesses or big retailers about tariffs and how it has 498 00:22:49,680 --> 00:22:51,840 Speaker 8: been difficult to pass on some of these costs. 499 00:22:52,200 --> 00:22:55,160 Speaker 9: Well, I haven't heard so much about I've heard both 500 00:22:55,240 --> 00:22:58,320 Speaker 9: about passing on calls for some small manufacturers, you know, 501 00:22:58,320 --> 00:23:00,440 Speaker 9: American small MANUFT factors. 502 00:23:00,480 --> 00:23:01,639 Speaker 1: Our countries fill with that. 503 00:23:01,720 --> 00:23:04,800 Speaker 9: And about fifty percent of manufacturing inputs for small business 504 00:23:04,840 --> 00:23:09,080 Speaker 9: come from abroad and fifty percent ers sourced domestically. And 505 00:23:09,280 --> 00:23:12,840 Speaker 9: there are some American manufacturers and small businesses that don't 506 00:23:12,840 --> 00:23:16,600 Speaker 9: have another supply source, so they are hit in the 507 00:23:16,640 --> 00:23:19,160 Speaker 9: short run by across the board tariffs, which is why 508 00:23:19,240 --> 00:23:21,479 Speaker 9: generally I'm not supported across the board tariffs. 509 00:23:21,520 --> 00:23:22,280 Speaker 1: I think you ought to. 510 00:23:22,280 --> 00:23:27,400 Speaker 9: Target countries for bad behavior, mercantilistic behavior, non tariff barriers, 511 00:23:28,119 --> 00:23:33,120 Speaker 9: negative tariffs towards the US market, or target particular industries 512 00:23:33,160 --> 00:23:35,840 Speaker 9: you think should come back in the supply chains, whether 513 00:23:35,880 --> 00:23:39,200 Speaker 9: it's steel, aluminum, and then target that over a long 514 00:23:39,200 --> 00:23:43,960 Speaker 9: period of time. So yes, I've heard from constituents about this, 515 00:23:44,040 --> 00:23:46,159 Speaker 9: and this is why I think the biggest challenge is 516 00:23:46,200 --> 00:23:47,720 Speaker 9: not so much to the tariff rate as it is 517 00:23:47,760 --> 00:23:51,760 Speaker 9: an uncertainty about planning around tariffs. And I hope the 518 00:23:51,800 --> 00:23:56,440 Speaker 9: administration can come to the decision that they've made tremendous 519 00:23:56,480 --> 00:23:59,840 Speaker 9: trade successes with many of our partners around the world's 520 00:24:00,600 --> 00:24:04,160 Speaker 9: embrace those changes and get those implemented, and that will 521 00:24:04,160 --> 00:24:06,720 Speaker 9: give certainty to people planning for twenty twenty six. 522 00:24:06,800 --> 00:24:07,760 Speaker 3: You're having your first. 523 00:24:07,520 --> 00:24:10,200 Speaker 8: Hearing today since the government has been reopened, and it's 524 00:24:10,200 --> 00:24:13,760 Speaker 8: about deposit insurance. And I think of deposit insurance, I'm 525 00:24:13,760 --> 00:24:16,200 Speaker 8: always reminded of the sign at the bank that says 526 00:24:16,240 --> 00:24:18,560 Speaker 8: you are FDIC secured up to two hundred and fifty 527 00:24:18,560 --> 00:24:21,359 Speaker 8: thousand dollars. What kind of changes could we see to 528 00:24:21,440 --> 00:24:22,240 Speaker 8: that minimum. 529 00:24:22,600 --> 00:24:23,200 Speaker 3: Well, over the. 530 00:24:23,160 --> 00:24:25,399 Speaker 9: Last couple of years, Congress has had some hearings on 531 00:24:25,440 --> 00:24:28,879 Speaker 9: deposit insurance about a couple of things. One, should the 532 00:24:28,880 --> 00:24:31,800 Speaker 9: two hundred and fifty thousand dollars level be raised, but 533 00:24:31,880 --> 00:24:34,680 Speaker 9: due to inflation it was last increased as a result 534 00:24:34,760 --> 00:24:39,399 Speaker 9: of the two thousand and eight crisis. Secondly, should we 535 00:24:39,440 --> 00:24:43,359 Speaker 9: reauthorize the TAG program, which is an emergency program to 536 00:24:43,400 --> 00:24:47,520 Speaker 9: guarantee transaction deposits in the face of a systemic problem 537 00:24:47,960 --> 00:24:52,320 Speaker 9: with the US banking system that has been expired over 538 00:24:52,320 --> 00:24:54,879 Speaker 9: the years, and so I think Congress should reconsider that 539 00:24:54,920 --> 00:24:56,639 Speaker 9: and look at it. And then should we have a 540 00:24:56,680 --> 00:25:00,520 Speaker 9: deposit insurance study at large about how depositance is. 541 00:25:00,480 --> 00:25:01,840 Speaker 1: Working for the American people? 542 00:25:02,359 --> 00:25:04,480 Speaker 9: This is important, It's a priority for the committee, it's 543 00:25:04,480 --> 00:25:06,440 Speaker 9: a priority for the Senate Banking Committee. So we look 544 00:25:06,440 --> 00:25:07,760 Speaker 9: forward to the discussion today. 545 00:25:07,840 --> 00:25:10,160 Speaker 3: How long would something like that take to actually do. 546 00:25:11,080 --> 00:25:14,560 Speaker 8: And what specifically raising the two hundred and fifty thousand Well, I. 547 00:25:14,560 --> 00:25:17,040 Speaker 9: Think it could be raised according with inflation. But I 548 00:25:17,040 --> 00:25:18,880 Speaker 9: think this is where I think a study and being 549 00:25:19,000 --> 00:25:22,440 Speaker 9: data dependent is important. So many people make emotional decisions 550 00:25:22,480 --> 00:25:24,400 Speaker 9: about finance. I think we ought to study, make sure 551 00:25:24,440 --> 00:25:27,080 Speaker 9: we have the numbers, make sure we know the unintended 552 00:25:27,119 --> 00:25:30,600 Speaker 9: consequences of any aspect of change of the deposit insurance system. 553 00:25:30,760 --> 00:25:33,320 Speaker 9: You don't want to increase moral hazard. You want to 554 00:25:33,359 --> 00:25:37,080 Speaker 9: maintain bank competitiveness for banks of all sizes, and that's 555 00:25:37,160 --> 00:25:39,040 Speaker 9: important and that's why I think we should take it 556 00:25:39,119 --> 00:25:40,160 Speaker 9: in a deliberate way. 557 00:25:40,320 --> 00:25:43,120 Speaker 8: We talked about the kitchen table issues facing American families, 558 00:25:43,160 --> 00:25:45,840 Speaker 8: what's going on in the banking sector. The headlines today though, 559 00:25:45,880 --> 00:25:48,280 Speaker 8: in Congress, are going to be about this Jeffrey Epstein 560 00:25:48,640 --> 00:25:49,639 Speaker 8: discharge position. 561 00:25:50,119 --> 00:25:51,520 Speaker 3: How are you expecting to vote? 562 00:25:51,520 --> 00:25:53,399 Speaker 8: How do you think other Republicans will vote today? 563 00:25:53,760 --> 00:25:56,800 Speaker 9: I think people want transparency, and that's why Mike Johnson's 564 00:25:56,840 --> 00:25:58,720 Speaker 9: done a good job. Contrary to a lot of the 565 00:25:58,760 --> 00:26:04,600 Speaker 9: mainstream media. Mike Johnson asked Jamie Comber, our Oversight Committee chair, 566 00:26:05,240 --> 00:26:09,840 Speaker 9: to study this intensely investigated with subpoena authority, and he's 567 00:26:09,960 --> 00:26:13,840 Speaker 9: released everything that's a DOJ or FBI related document and 568 00:26:13,880 --> 00:26:17,840 Speaker 9: the Epstein of state that can be legally released, meaning 569 00:26:17,880 --> 00:26:20,280 Speaker 9: that it's not covered by a court order not to 570 00:26:20,320 --> 00:26:26,639 Speaker 9: release grand jury investigative material. The Massy proposal on the 571 00:26:26,640 --> 00:26:29,560 Speaker 9: House floor that I think most Republicans and Democrats will 572 00:26:29,640 --> 00:26:32,960 Speaker 9: support at the end of the day, calls for releasing 573 00:26:33,040 --> 00:26:36,720 Speaker 9: everything irrespective of those court orders. So I think you'll 574 00:26:36,760 --> 00:26:39,000 Speaker 9: see litigation if this were to be passed by the 575 00:26:39,040 --> 00:26:41,920 Speaker 9: Senate and it became a law, I think you'd see 576 00:26:41,960 --> 00:26:46,320 Speaker 9: litigation about protecting the confidentiality and grand jury investigations, which 577 00:26:46,359 --> 00:26:49,240 Speaker 9: is why I believe that the Comber approach and Speaker 578 00:26:49,280 --> 00:26:53,520 Speaker 9: Johnson's approach was more deliberative and appropriate. But all I 579 00:26:53,520 --> 00:26:57,080 Speaker 9: think Republicans and Democrats want transparency around the Epstein matter. 580 00:26:58,440 --> 00:27:01,960 Speaker 2: This is the Bloomberg Savanas podcast, bringing you the best 581 00:27:02,000 --> 00:27:05,080 Speaker 2: in markets, economics, and geo politics. 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