WEBVTT - Surveillance: Fed's Pain Threshold with Misra 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:08.280 I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Brahmoids along with Tom Keen and Jonathan Ferroll. Join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:19.480 finance and investment. Subscribe to Bloomberg Surveillance Undermanned on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.400 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:26.640 --> 0:00:29.040 The question is certainly shifted away from how far are 0:00:29.080 --> 0:00:31.920 they going to hike? To how far were they cut? 0:00:32.159 --> 0:00:34.400 Prams were joined just now had a global rate strategy 0:00:34.520 --> 0:00:37.320 at TD Securities Prayer. Let's start with the economic data. 0:00:37.440 --> 0:00:40.120 It's changed since we last spoke. It's started to weaken. 0:00:40.520 --> 0:00:43.320 That process seems to be continuing. Do you expect it 0:00:43.600 --> 0:00:45.760 to accelerate in the coming months? 0:00:46.560 --> 0:00:46.960 We do. 0:00:47.080 --> 0:00:49.839 I mean the Fed still hiking QT is still ongoing, 0:00:50.000 --> 0:00:52.599 long end real rates high, and now you've got the 0:00:52.640 --> 0:00:55.640 bank tightening lending standards. I guess our viewer is this 0:00:55.680 --> 0:00:59.080 is not an idiosyncratic mismanagement of a few banks. This 0:00:59.160 --> 0:01:01.880 is going to have long lasting issues. We think deposits 0:01:01.880 --> 0:01:04.880 continue to fly out of banks into money market funds, 0:01:05.600 --> 0:01:07.320 and so the banks are going to have to cut 0:01:07.400 --> 0:01:10.319 lending standards. You know, even if you ignore the CIRE issue. 0:01:10.640 --> 0:01:13.520 I think as lending slows down, our views is going 0:01:13.560 --> 0:01:15.920 to accelerate. But it's a really tricky time for the 0:01:15.959 --> 0:01:18.640 market because things are slowing. I don't think I can 0:01:18.680 --> 0:01:21.319 point to any data right now and say here's the recession, 0:01:21.840 --> 0:01:23.319 but we think it is going to happen. I think 0:01:23.360 --> 0:01:27.199 that speed of the decline, particularly in high frequency data, 0:01:27.240 --> 0:01:29.520 is what we're looking at. In our view, it is 0:01:29.560 --> 0:01:31.480 going to accelerate into the second half. We see a 0:01:31.520 --> 0:01:34.000 recession in the fourth quarter, But really, I think you 0:01:34.040 --> 0:01:36.800 have to be nimbled because the data is just slowing. 0:01:36.880 --> 0:01:40.120 I think it's not obvious right now, but we do 0:01:40.240 --> 0:01:44.520 think it's all the signs point towards this accelerating into 0:01:44.600 --> 0:01:45.200 the end of the year. 0:01:45.319 --> 0:01:47.560 Preer, I'd love you to take on Alan Roskin's comments 0:01:47.560 --> 0:01:50.760 with respect to the divergence that we see with respect 0:01:50.800 --> 0:01:53.160 and manufacturing and services. He says that this is a 0:01:53.200 --> 0:01:55.080 sign that if the FED pauses, they may have to 0:01:55.160 --> 0:01:58.560 hike again later on as some of the distortions from 0:01:58.600 --> 0:02:01.520 the pandemic era build up of inventory starts to work 0:02:01.560 --> 0:02:04.520 itself through. Do you agree that there actually is a 0:02:04.600 --> 0:02:08.359 risk here signaled by this divergence of inflation that stickier 0:02:08.400 --> 0:02:10.560 and remains much higher than people expect. 0:02:11.880 --> 0:02:14.359 So I agree that inflation is likely to be more sticky. 0:02:14.400 --> 0:02:18.119 We think there are structural factors demographics, you know, on shoring, etc. 0:02:19.360 --> 0:02:22.040 You know, But I would say manufacturing is a most 0:02:22.080 --> 0:02:26.520 cyclical industry. Manufacturing typically slows down before services services have 0:02:26.560 --> 0:02:29.280 been strong because the consumers have a saving buffer and 0:02:29.320 --> 0:02:32.440 monetary policy works with a lad Our view is manufacturing 0:02:32.440 --> 0:02:34.760 is actually a harbinger for the fact that services is 0:02:34.760 --> 0:02:37.280 going to slow down as that savings buffer comes down 0:02:37.280 --> 0:02:39.600 and I can't really max out my credit card and 0:02:39.639 --> 0:02:42.600 I can't get another credit card. I think that's when 0:02:42.720 --> 0:02:45.560 consumer spending starts to slow down. So our view is 0:02:45.560 --> 0:02:47.640 that the FED is going to be torn, really torn 0:02:47.720 --> 0:02:51.200 between inflation north of two percent but the unemployment rates 0:02:51.200 --> 0:02:51.960 starting to rise. 0:02:52.160 --> 0:02:52.600 I think we. 0:02:52.639 --> 0:02:55.560 Don't know their pain threshold. Is it four percent, is 0:02:55.600 --> 0:02:57.639 it four and a half, is it five? I think 0:02:57.639 --> 0:02:59.560 the market's going to grapple with that for the rest 0:02:59.560 --> 0:03:02.400 of the year. But I actually think that services is 0:03:02.440 --> 0:03:06.959 going to slow down, and so you know, I hiking again. 0:03:07.120 --> 0:03:09.200 I think that we should be talking about that in 0:03:09.280 --> 0:03:11.239 twenty twenty five. I think first they're going to have 0:03:11.280 --> 0:03:13.520 to cut rates. They're going to have to take rates 0:03:13.520 --> 0:03:16.400 into accommodative territory, which is not priced and we're still 0:03:16.400 --> 0:03:20.200 pricing in a torough rate above three percent on FED funds. 0:03:20.360 --> 0:03:21.920 If the economy is in a recession at the end 0:03:21.960 --> 0:03:23.480 of this year, I think we'll be talking about how 0:03:23.520 --> 0:03:26.640 low they are going rather than stopping around three percent rare. 0:03:26.720 --> 0:03:28.800 This is pretty incredible at a time, and a lot 0:03:28.800 --> 0:03:30.240 of people don't think that FED is ever going to 0:03:30.240 --> 0:03:31.880 go back to the ultra low rates that we saw 0:03:32.000 --> 0:03:35.240 pre pandemic. Are you saying that zero or even half 0:03:35.240 --> 0:03:37.040 a percent or one percent is very much on the 0:03:37.040 --> 0:03:38.240 table for a FED funds rate? 0:03:39.360 --> 0:03:41.480 So I look at real rates. I think real rates 0:03:41.480 --> 0:03:44.120 should probably be closer to zero negative. You know, if 0:03:44.120 --> 0:03:46.440 inflation is going to be three percent next year or 0:03:46.720 --> 0:03:49.520 heaven FORURID four percent next year, you know, then how 0:03:49.640 --> 0:03:51.880 low can the FED go in terms of nominal rates? 0:03:51.920 --> 0:03:55.080 Perhaps two one, you know? But I do think if 0:03:55.200 --> 0:03:57.600 the if the unemployment rate is rising we see it 0:03:57.640 --> 0:03:59.640 peaking at five and a half next year, is very 0:03:59.640 --> 0:04:02.360 similar to what happened after the savings and loan crisis. 0:04:02.520 --> 0:04:05.080 If you get that much weakening in the labor market, 0:04:05.240 --> 0:04:07.440 the FED has to take real rates negative. So I 0:04:07.440 --> 0:04:10.080 don't know about zero or QE, but can they get 0:04:10.120 --> 0:04:12.520 to two percent on FED funds? I think that would 0:04:12.560 --> 0:04:14.360 be our base case, two two and a half at 0:04:14.400 --> 0:04:16.960 least get rates that low, and the market is not 0:04:16.960 --> 0:04:18.479 pricing that, and so I think we should keep an 0:04:18.480 --> 0:04:21.480 eye on inflation clearly, but those real rates and real 0:04:21.560 --> 0:04:25.000 rates right now are well in restrictive territory. I think 0:04:25.040 --> 0:04:27.320 that's what we'll be watching how much the Fed cuts. 0:04:27.320 --> 0:04:29.440 But right now they're in a bind. I don't think 0:04:29.440 --> 0:04:32.119 they can signal any near term cuts. So our views 0:04:32.120 --> 0:04:34.440 that they start later in terms of rate cuts. They're 0:04:34.480 --> 0:04:36.520 going to be pulled in, as we call it, kicking 0:04:36.560 --> 0:04:39.880 and screaming into rate cuts. But when they start that cutting, 0:04:39.920 --> 0:04:41.960 they're going to be much more aggressive than the market's 0:04:42.000 --> 0:04:42.920 pricing in. 0:04:42.680 --> 0:04:45.200 Prayer just awesome to get your perspective, as always, Prayer 0:04:45.200 --> 0:04:52.719 mesure of TV Securities. Let's talk about Tesla and the 0:04:52.760 --> 0:04:56.520 next narrative around this name. So yesterday price cuts again 0:04:56.880 --> 0:05:01.080 this morning, price high specific ones they've increased prices if 0:05:01.080 --> 0:05:04.520 they're model SNX and those vehicles in the United States 0:05:04.560 --> 0:05:06.800 after the state markdowns that we've seen through the whole 0:05:06.839 --> 0:05:10.400 year so far. Yesterday, the stock at absolutely hammered. This morning, 0:05:10.440 --> 0:05:12.839 the stock looks like this positive by about a half 0:05:12.839 --> 0:05:15.840 of one percent DNA. I've senior equity research analyst of 0:05:15.880 --> 0:05:18.360 web Bush joins us now to talk about it. Dan, 0:05:18.400 --> 0:05:22.880 can you help frame the strategy? Hit yesterday, cuts, this morning, hikes. 0:05:22.920 --> 0:05:23.560 What's happening? 0:05:24.800 --> 0:05:27.320 Look, they're trying to find the yin yang the bounds 0:05:27.400 --> 0:05:29.920 because I think for right now it's about a driving 0:05:29.960 --> 0:05:34.680 demand but also aggressive because of competition that we're seeing global, 0:05:34.760 --> 0:05:36.880 and I think we're going to continue to see this 0:05:37.080 --> 0:05:40.280 some cut, some hikes. I think over the next few 0:05:40.320 --> 0:05:42.880 months you'll starting to see it level off. But I 0:05:42.880 --> 0:05:46.000 think it just speaks to some odjita that investors have 0:05:46.120 --> 0:05:49.240 because of margins, and that's why the stock got crossed yesterday. 0:05:49.600 --> 0:05:52.040 The sort of flip flopping though of messaging in terms 0:05:52.080 --> 0:05:54.960 of cutting or raising prices. What do you make of 0:05:55.040 --> 0:05:59.840 Elon Musk's somewhat I don't know, random approach in terms 0:05:59.839 --> 0:06:02.120 of how he's signaling, at least to the pricing. 0:06:03.560 --> 0:06:05.120 Yeah, at least I think a lot of it is 0:06:05.160 --> 0:06:07.960 inventory driven as well as what they're seeing in demand. 0:06:08.040 --> 0:06:10.599 I think you know, from month to month they could 0:06:10.600 --> 0:06:13.480 tell if ultimately they cut too much or maybe they 0:06:13.480 --> 0:06:15.760 need to cut more, and I think they're trying to 0:06:15.760 --> 0:06:18.240 find that balance. Now when you look at SNX, that's 0:06:18.240 --> 0:06:20.800 a little different than what's a model Y and three. 0:06:21.080 --> 0:06:23.000 I think you're starting to see more of a sort 0:06:23.040 --> 0:06:26.320 of leveling off from a supplied demand mile three mile 0:06:26.360 --> 0:06:28.320 of why. I mean, that's really the focus of the 0:06:28.360 --> 0:06:31.000 street in terms of how many more price cuts, what 0:06:31.080 --> 0:06:34.200 margins look like, because right now they're kind of going 0:06:34.240 --> 0:06:36.719 Game of Throne style in terms of what they're trying 0:06:36.720 --> 0:06:40.480 to do from a pricing perspective. That's great for demand 0:06:40.880 --> 0:06:44.520 from a unit perspective, but obviously margins that continues to 0:06:44.520 --> 0:06:45.599 be the elephant in the room. 0:06:45.839 --> 0:06:48.240 We were speaking with Jullian Emmanuel yesterday and he said 0:06:48.240 --> 0:06:50.800 that Tesla is not just in aduosyncratic story, that it 0:06:50.839 --> 0:06:53.719 is a macro story, as J'ah miss mentioning earlier, because 0:06:53.720 --> 0:06:56.359 it does signal this need to cut prices and a 0:06:56.440 --> 0:06:59.080 disinflationary force. How much are you expecting to see that 0:06:59.480 --> 0:07:01.880 as a th bleeding through some of the tech earnings 0:07:01.880 --> 0:07:03.000 that we start getting next week. 0:07:04.279 --> 0:07:06.640 Look, I do think it is a little separate from 0:07:06.680 --> 0:07:08.400 what we're going to see next week, and maybe even 0:07:08.400 --> 0:07:10.600 if I go back next call a few weeks. I 0:07:10.640 --> 0:07:14.400 mean Apple, we see iPhone demand that continues to be 0:07:14.400 --> 0:07:17.600 pretty resilient in the storm. I think cloud. When you 0:07:17.640 --> 0:07:20.360 look in Microsoft, what we're going to see out of Amazon, 0:07:20.480 --> 0:07:23.400 Google and others, I think slight beats. But I think 0:07:23.480 --> 0:07:26.520 overall we're starting to see some stabilization relative to what 0:07:26.520 --> 0:07:28.280 we saw in the summer. Jen you, at least from 0:07:28.280 --> 0:07:31.440 an enterprise spent, I think in terms of tech stocks, 0:07:31.440 --> 0:07:33.400 in terms of going to earnings, it's a green light 0:07:33.480 --> 0:07:36.360 to continue to in tech. I think this earning season 0:07:36.520 --> 0:07:39.320 is something I think more investors are ultimately going to 0:07:39.360 --> 0:07:43.520 start to then dive back into tech rather than fearing it. 0:07:43.600 --> 0:07:47.120 In terms of where I believe are fundamentals starting to stabilize. 0:07:46.760 --> 0:07:49.520 Dan dive back in. Talk to me about yet today, 0:07:49.560 --> 0:07:51.200 What do you think people have been doing already? 0:07:51.640 --> 0:07:57.480 They've ripped, no doubt, But I think from an institutional perspective, 0:07:57.760 --> 0:08:00.880 still many hate the rally. May I think on the 0:08:00.960 --> 0:08:05.960 sidelines ultimately sort of bending against tech, and which is argue, 0:08:06.200 --> 0:08:08.400 you know, we can see tech stocks up another ten 0:08:08.400 --> 0:08:11.360 percent plus for the rest of the year because you 0:08:11.360 --> 0:08:14.320 look what's happened in terms of numbers that are starting 0:08:14.320 --> 0:08:17.880 to stabilize. They already ripped the band aid off on guidance. 0:08:18.280 --> 0:08:20.520 I think big tech specifically when I look at fang names, 0:08:20.520 --> 0:08:24.040 logan names like Apple, Google, Amazon, and I think these 0:08:24.040 --> 0:08:26.560 are stocks that could be fifteen to twenty percent for 0:08:26.600 --> 0:08:28.720 the rest of the year. You know, red by Apple. 0:08:28.760 --> 0:08:30.480 Well, you mentioned the cloud story. Can we just build 0:08:30.520 --> 0:08:32.439 on that a little bit more? There was obviously massive 0:08:32.480 --> 0:08:35.240 pull forward in demand for a range of things across 0:08:35.240 --> 0:08:38.440 this whole spectrum through the pandemic. Dan, I just wonder 0:08:38.520 --> 0:08:40.360 how much the cloud story has become much more of 0:08:40.360 --> 0:08:43.760 a cyclical issue now for some of these companies. What's 0:08:43.760 --> 0:08:44.840 your feel on that, Dan. 0:08:45.800 --> 0:08:48.200 But I think we'll see with Microsoft and with what 0:08:48.320 --> 0:08:50.640 comes out of REDMINU on Tuesday. I think the big 0:08:50.720 --> 0:08:54.760 issue is that a lot of companies, you know, budgets 0:08:54.760 --> 0:08:58.200 were not set, but during the they're halfway through massive 0:08:58.240 --> 0:09:01.400 cloud deployments, so now you're starting to see more and 0:09:01.480 --> 0:09:04.280 more only forty five percent of workloads during the cloud, 0:09:04.640 --> 0:09:07.439 so that I believe goes to seventy percent next two years. 0:09:07.520 --> 0:09:10.719 And I think that's why names like Microsoft continues to 0:09:10.760 --> 0:09:14.440 sort see share gains versus the likes of Amazon, and 0:09:14.480 --> 0:09:17.359 I think Google is another one that continues to see success. 0:09:17.520 --> 0:09:20.040 But I think ultimately, I mean, these are rock Gibraltar 0:09:20.080 --> 0:09:23.160 sectors in terms of where I've seen cloud cybersecurity, which 0:09:23.160 --> 0:09:25.120 is why we're bullish going into earnings. 0:09:25.480 --> 0:09:28.200 What about disappointments. We were speaking earlier with lu Kawa 0:09:28.320 --> 0:09:29.880 and he said that if there is some kind of 0:09:29.920 --> 0:09:33.160 earning disappointment, it will be punished a proportionately because his 0:09:33.280 --> 0:09:36.200 sense is people are waiting for the cash behemoths to 0:09:36.200 --> 0:09:37.880 continue to be cash behemoths. 0:09:38.160 --> 0:09:42.920 Do you agree, Oh, no doubt. And also never underestimate 0:09:43.080 --> 0:09:46.520 just how bad imagined team could be or overestimate how good. 0:09:46.600 --> 0:09:50.680 That's why you have tacticians like Cook and Nadella and 0:09:50.760 --> 0:09:52.880 others on one side. But you're going to see, especially 0:09:52.920 --> 0:09:57.040 in smid Caplan, I mean it's almost a fork in 0:09:57.080 --> 0:09:59.400 the road where you're going to see weekends play out. 0:09:59.400 --> 0:10:02.560 I think there is still some fraud, and I think 0:10:02.720 --> 0:10:05.000 you know this is ultimately really going to be I think, 0:10:05.000 --> 0:10:08.439 a defining earning season for winners and losers. But I 0:10:08.480 --> 0:10:11.760 believe I almost viewed as a stock pickers market, which 0:10:11.800 --> 0:10:14.679 is why I really enjoyed this year in terms of 0:10:14.679 --> 0:10:17.520 just the way texts playing out. You know, especially as 0:10:17.520 --> 0:10:18.400 we go into earning. 0:10:18.200 --> 0:10:20.520 Season, Dan, you've got Leaster excited. There was a glimmer 0:10:20.520 --> 0:10:23.319 of bearishness there. Can you build on that? What do 0:10:23.400 --> 0:10:24.160 you perish about? 0:10:24.240 --> 0:10:24.400 Dan? 0:10:25.840 --> 0:10:28.480 Oh, it's not. What I'm saying is this is not 0:10:28.640 --> 0:10:33.240 a Roses and Rainbow and Champagne macra. So ultimately you're 0:10:33.280 --> 0:10:36.640 going to see weekends fall by the wayside. Competition is 0:10:36.679 --> 0:10:39.600 going to continue to increase, But ultimately that's why I 0:10:39.640 --> 0:10:41.959 think you got to pick the right stocks. It's not 0:10:42.080 --> 0:10:44.960 necessarily a basket approach, and I think that's what we're going 0:10:45.000 --> 0:10:47.520 to see playoff continued during earning season. But I think 0:10:47.520 --> 0:10:50.160 when it comes to large cap tach, when it comes 0:10:50.160 --> 0:10:54.400 to high quality tech cybersecurity cloud, I just continue view 0:10:54.440 --> 0:10:56.080 that as a green light going into earnings. 0:10:56.200 --> 0:10:58.000 Okay, then I was a wet bush down, not doubt 0:10:58.000 --> 0:11:00.360 with touch base of the nice company were going to 0:11:00.400 --> 0:11:01.439 get those endings, thank. 0:11:01.280 --> 0:11:13.640 CUSA gil doubt of joining us right now ahead of 0:11:13.720 --> 0:11:16.920 US economic research. It retissan to Macro, and I am 0:11:17.040 --> 0:11:20.400 curious about your view after hearing all of the pessimistic 0:11:21.080 --> 0:11:24.640 prognostications about why we should remain bearish, while you're coming 0:11:24.640 --> 0:11:27.079 on now to tell us we are all completely misguided 0:11:27.320 --> 0:11:28.880 and we need to be a little bit more optimistic. 0:11:30.480 --> 0:11:33.360 Well, good to see you, Lisa, Happy Friday, Happy Friday. 0:11:35.000 --> 0:11:37.520 You know. Look, I mean I think what's this business 0:11:37.559 --> 0:11:41.440 is about is about what the consensus is pricing in 0:11:42.360 --> 0:11:45.160 and what the likely outcome is going to be. Uh, 0:11:45.200 --> 0:11:48.760 that's how that's how we distinct, you know, create some 0:11:48.840 --> 0:11:54.760 distinction here. And remember the consensus is basically priced for, 0:11:55.240 --> 0:11:58.319 you know, essentially sudden stop dynamics in the economy. I mean, 0:11:58.559 --> 0:12:02.480 people are calling for recession starting, you know, sometime this week. 0:12:02.520 --> 0:12:05.400 It feels like, and I got to tell you that's 0:12:05.520 --> 0:12:07.600 just not in the data. I mean, in my view, 0:12:07.640 --> 0:12:11.400 the time to have been concerned about recession was last year. 0:12:12.040 --> 0:12:13.640 I mean, it's not to say that we're not worried 0:12:13.640 --> 0:12:16.040 about things now, but it would have been more prudent 0:12:16.120 --> 0:12:18.440 to be even more worried last year. You had energy 0:12:18.440 --> 0:12:22.360 prices spiking, the global economy was going down the tubes, right, 0:12:22.400 --> 0:12:24.080 I mean, people are worried about Europe, whether they're going 0:12:24.120 --> 0:12:25.760 to be able to keep the heat and the lights on. 0:12:26.360 --> 0:12:30.400 China was slowing down. In the US, we had the 0:12:30.440 --> 0:12:36.120 housing market weakening, fiscal tightening, right, the you know, and 0:12:36.440 --> 0:12:38.960 all the rest of it. So think about each of 0:12:39.000 --> 0:12:42.480 these things in turn. Right, fiscal policy, that's a tail 0:12:42.600 --> 0:12:46.080 and for the economy now there is no fiscal drag. 0:12:48.040 --> 0:12:52.440 The government's the tail went for growth housing. Take a 0:12:52.440 --> 0:12:55.680 look at a chart of homebuilding stocks. Anybody have that 0:12:55.720 --> 0:12:57.520 on their Bengo card for twenty twenty three. 0:12:57.640 --> 0:12:59.120 I think that people missed a lot of things. 0:12:59.120 --> 0:13:01.000 Globalis that came out this morning. 0:13:01.040 --> 0:13:03.600 Now, admittedly the manufacturing piece of it wasn't as strong, 0:13:03.679 --> 0:13:06.360 but you know, it's pretty clear that global growth in 0:13:06.400 --> 0:13:10.040 the aggregate is stronger so far this year than it 0:13:10.200 --> 0:13:13.960 was before. So if the consensus is talking about, you know, 0:13:14.040 --> 0:13:16.960 some sort of cliff dive moment in the second quarter, 0:13:17.880 --> 0:13:20.600 that's not happening. It doesn't mean that you don't pencil 0:13:20.600 --> 0:13:23.400 in a recept I mean, I do think that if 0:13:23.440 --> 0:13:25.040 you want to be honest with yourself, you have to 0:13:25.120 --> 0:13:26.959 kind of keep this in the baseline outlook for the 0:13:27.000 --> 0:13:29.080 next eighteen months. But the question is whether it's going 0:13:29.080 --> 0:13:32.200 to happen imminently, because that's what the consensus is expecting, 0:13:32.920 --> 0:13:34.960 and I don't really see it. 0:13:35.120 --> 0:13:36.200 In the data, Neil. 0:13:36.240 --> 0:13:38.920 There are two aspects of this. There's growth and there's inflation. 0:13:39.240 --> 0:13:41.480 And what we have seen is that growth has slowed, 0:13:42.080 --> 0:13:44.000 but it has not cratered in the same kind of way. 0:13:44.040 --> 0:13:46.400 To highlight what you're talking about, and in certain sectors 0:13:46.480 --> 0:13:50.240 is actually accelerated and inflation seems to be coming down. 0:13:50.440 --> 0:13:52.600 Do you believe that this can continue, that you will 0:13:52.640 --> 0:13:55.560 see the sort of disinflation at the same time that 0:13:55.600 --> 0:13:59.080 there still is a lot of momentum underputting the growth. 0:13:59.360 --> 0:14:02.560 Oh wow, Lisa Bramwitz, growth in some parts of the 0:14:02.600 --> 0:14:05.240 economy accelerated. Man, that must have tasted like vitterger coming 0:14:05.240 --> 0:14:05.760 out of your mouth. 0:14:05.840 --> 0:14:08.440 Well, I've actually bought airplane tickets, so I understand that 0:14:08.520 --> 0:14:11.160 in some areas there is complete capacity carry out. 0:14:11.360 --> 0:14:16.120 Look, I think to me, it actually feels a little bit. 0:14:18.000 --> 0:14:19.800 I mean, I might get crucified for saying this, but 0:14:19.880 --> 0:14:21.840 it does feel a little bit. It does feel a 0:14:21.840 --> 0:14:24.760 little bit like a soft landing. I mean, at the 0:14:24.840 --> 0:14:27.520 margin the data is consistent with soft landing. I mean, 0:14:27.560 --> 0:14:29.800 think about what you just said. Inflation is slowing down 0:14:29.880 --> 0:14:33.320 activities holding up right. I mean you look at some 0:14:33.400 --> 0:14:35.840 of what the early reads are for auto sales in April. 0:14:36.880 --> 0:14:40.760 They're planting to sequential acceleration Lisa for for auto sales 0:14:40.800 --> 0:14:43.880 in April despite this financing costs and the rest of it. 0:14:43.920 --> 0:14:47.080 And the builders are doing the same thing sequential improvement 0:14:47.120 --> 0:14:48.040 and activity in April. 0:14:48.080 --> 0:14:49.560 So remember everyone. 0:14:49.240 --> 0:14:51.720 Was talking about how housing is a leading indicator and 0:14:51.960 --> 0:14:54.960 because housing was collapsing in twenty twenty two, that was 0:14:55.000 --> 0:14:58.160 going to spell the death of the economy in early 0:14:58.200 --> 0:15:01.200 twenty twenty three. Well, now housing's rea accelerating and it's 0:15:01.240 --> 0:15:05.600 highly likely that single family residential construction picks up over 0:15:05.640 --> 0:15:06.560 the next few months. 0:15:06.720 --> 0:15:08.200 Well, so I. 0:15:08.160 --> 0:15:09.720 Hear what you're saying, Neil, and I think that a 0:15:09.720 --> 0:15:11.520 lot of people would agree with you, which is a 0:15:11.520 --> 0:15:13.520 reason why you've seen the rallies year to date. That 0:15:13.560 --> 0:15:15.400 has surprised a lot of people, even in some of 0:15:15.440 --> 0:15:17.360 the areas that people had left for dead or said 0:15:17.360 --> 0:15:20.080 that they were going to underperform. Now, however, a lot 0:15:20.120 --> 0:15:21.760 of people are saying just wait for it, because the 0:15:21.760 --> 0:15:24.080 tightening credit conditions are going to really play out, and 0:15:24.120 --> 0:15:26.120 we're starting to see it around the margins with loan 0:15:26.160 --> 0:15:29.720 originations and credit loss provisions. How do you push back 0:15:29.760 --> 0:15:31.720 against that and say, look, it's just not going to happen. 0:15:31.760 --> 0:15:33.520 It's not that big of a drag. This happens as 0:15:33.520 --> 0:15:36.280 a feature of every single tightening cycle that we've ever had. 0:15:37.960 --> 0:15:39.080 Yeah, I mean it's not good. 0:15:39.120 --> 0:15:41.520 The question is whether that's enough to push the economy 0:15:41.520 --> 0:15:44.000 into a below potential growth state that pushes up the 0:15:44.040 --> 0:15:44.840 unemployment rate. 0:15:44.920 --> 0:15:48.840 And I think we're not there yet. I mean, if 0:15:48.840 --> 0:15:50.320 you and you know, speaking to the. 0:15:50.240 --> 0:15:54.200 Point about credit, keep in mind, the housing market's working, 0:15:54.320 --> 0:15:57.360 that must mean that credit is flowing to households. But 0:15:57.400 --> 0:15:59.320 more broadly, if you take a look at loan and 0:15:59.400 --> 0:16:03.720 leases long growth, you know, bank credit relative to GDP, 0:16:04.560 --> 0:16:07.760 it's basically been flat since twenty sixteen twenty seventeen, So 0:16:07.880 --> 0:16:11.640 perhaps the economy is not nearly as credit sensitive as 0:16:11.960 --> 0:16:15.080 as is being made out to be. You know, what 0:16:15.160 --> 0:16:18.160 I see is the reason why the economy has been 0:16:18.160 --> 0:16:21.320 holding up is because is because consumers have been doing okay. 0:16:21.360 --> 0:16:24.120 And the reason they're doing okay is because disposable incomes 0:16:24.120 --> 0:16:26.720 have been holding up, and that's going to continue because 0:16:26.720 --> 0:16:29.640 lower natural gas prices will bleed into household utilities. 0:16:30.080 --> 0:16:31.440 And you know the fact that. 0:16:33.000 --> 0:16:36.080 You know, wholesale gasoline futures have been declining, that's probably 0:16:36.080 --> 0:16:38.560 going to show up in lower pump prices in coming weeks. 0:16:39.120 --> 0:16:40.520 So we're not going to get as much of a 0:16:41.760 --> 0:16:45.880 food and energy and frankly food tax as we've seen, 0:16:45.920 --> 0:16:48.000 and that's going to push up disposable income, which in 0:16:48.000 --> 0:16:52.200 turn will support consumer spending. So I think that the 0:16:52.600 --> 0:16:56.200 credit sensitivity of the economy, you know, it certainly affects 0:16:56.200 --> 0:16:57.920 some sectors. I mean, I don't want to, you know, 0:16:58.160 --> 0:17:01.320 sort of sound like everything's great here, but you know, 0:17:01.560 --> 0:17:04.639 my sense is that disposable income growth will remain relatively 0:17:04.920 --> 0:17:07.280 stable and probably continue climbing in. 0:17:07.200 --> 0:17:07.840 The second quarter. 0:17:08.000 --> 0:17:08.840 Yeah, you said that you. 0:17:08.840 --> 0:17:11.000 Think that's and I think that's an important story. 0:17:11.040 --> 0:17:13.280 You said that you think that you'll get crucified by 0:17:13.320 --> 0:17:16.240 saying that this is looking a lot like a soft landing. 0:17:16.720 --> 0:17:18.920 I would actually beg to differ. I think that probably 0:17:18.960 --> 0:17:21.960 people will say yes finally saying the quiet part out loud, 0:17:21.960 --> 0:17:24.119 because the market agrees with you. It seems like the 0:17:24.119 --> 0:17:26.560 equity markets are pricing in a soft landing right now 0:17:27.040 --> 0:17:28.840 in a lot of sectors. Do you disagree, I mean, 0:17:28.880 --> 0:17:31.800 how much is this already priced in? Not necessarily the 0:17:31.800 --> 0:17:33.640 recession calls that people keep waiting for. 0:17:35.840 --> 0:17:37.879 I think there's more room to go. I mean, I 0:17:37.920 --> 0:17:41.879 do think that you probably continue to see you know, 0:17:41.960 --> 0:17:44.960 growth holding up. You know, I think you start to 0:17:45.000 --> 0:17:48.320 see parts of the inflation picture continue to continue to 0:17:48.320 --> 0:17:52.439 improve somewhat. You know, we did see shelter come in 0:17:52.520 --> 0:17:55.960 quite a bit in March, and remember that's very inertial, 0:17:55.960 --> 0:17:58.280 it's sticky, so it's not going to start to reaccelerate 0:17:59.080 --> 0:18:02.000 right away. So I think that that's an important development. 0:18:02.080 --> 0:18:04.719 And you know, when I think about the FED, I mean, 0:18:04.760 --> 0:18:06.879 they're they're closer to the end of this than not, 0:18:07.080 --> 0:18:09.480 so it's unlikely that they're going to begin ratcheting up 0:18:09.520 --> 0:18:14.120 hikes immediately as well. So I do think you can 0:18:14.160 --> 0:18:17.800 make a case for equities here. You know, over the 0:18:17.880 --> 0:18:20.160 over the next you know, a couple of quarters for 0:18:20.160 --> 0:18:22.720 for equities to rally, and we continue to see a 0:18:22.760 --> 0:18:25.520 tailwind as well from from what's going on globally that 0:18:25.560 --> 0:18:28.159 will continue to pressure take pressure I think off the 0:18:28.280 --> 0:18:32.200 dollar which should provide earning support for a lot of 0:18:32.240 --> 0:18:35.800 the the cyclical names that do a lot of business overseas. 0:18:36.640 --> 0:18:38.920 How much do you see tech participating in this, especially 0:18:38.920 --> 0:18:40.880 with the earnings coming up next week? Are they still 0:18:40.920 --> 0:18:44.000 going to be the leaders at a time when there 0:18:44.000 --> 0:18:46.880 are a lot of areas that could perhaps recover if 0:18:47.040 --> 0:18:48.640 what you're saying comes to. 0:18:48.600 --> 0:18:52.280 Pass, well, if the FED is backing off, which I 0:18:52.320 --> 0:18:56.919 think is likely at some point this summer, you know 0:18:57.040 --> 0:18:59.560 that should that should provide some talent for for for 0:18:59.600 --> 0:19:01.960 technologlogy stocks given their rate sensitivity. 0:19:02.840 --> 0:19:04.680 How do you push back against the idea that we're 0:19:04.720 --> 0:19:08.359 getting right now? Sentiment really shifting and we saw that 0:19:08.440 --> 0:19:10.800 in the leading economic indicators, We saw that in the 0:19:10.800 --> 0:19:12.960