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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 3: So, Matt, we've got some news crossing the tape here.

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Speaker 1: Jason JP Morgan settles with Staley US Virgin Islands to

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Speaker 1: end Epstein legal woes. JP Morgan Chase reached settlements with

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Speaker 1: former executive Jess Stally and the US Virgin Islands over

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Speaker 1: ties to Jeffrey Epstein as it seeks to end its

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Speaker 1: legal woes over its banking relationship to the deceased pedophile.

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Speaker 1: The biggest US bank tentatively agreed to pay seventy five

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Speaker 1: million dollars to the US Virgin Island. That's, according to

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Speaker 1: the statement Tuesday, less than half of one hundred and

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Speaker 1: ninety million dollars of the territory it sought. So let's

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Speaker 1: kind of break this down a little bit, and we

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Speaker 1: can do that with Elliott Stein. He's the senior analyst

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Speaker 1: of Bloomberg Intelligence. Following all the legal issues for bi Ellie,

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Speaker 1: I guess this, if nothing else, does put an end

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Speaker 1: to kind of what JP Morgan sees is a very

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Speaker 1: bad part of its history.

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Speaker 4: Yeah.

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Speaker 5: I mean this, This has been assorted saga ever since

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Speaker 5: Epstein was arrested, and then late last year you had

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Speaker 5: both Deutsche Bank and JP Morgan sued both by the

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Speaker 5: victims Epstein's victims, and then JP Morgan was also sued

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Speaker 5: by the US Virgin Islands. Both banks settled with the

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Speaker 5: victims previously, and now we have this settlement which should

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Speaker 5: put an end to at least, you know, the litigation

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Speaker 5: against the banks.

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Speaker 2: It's sorry, it's unclear what the settlement with Staley looks like.

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Speaker 2: So we know that in the in terms of the

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Speaker 2: US Virgin Islands, the bank has at least tentatively agree

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Speaker 2: to pay seventy five million dollars. They're not admitting any wrongdoing,

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Speaker 2: I imagine, but when you fork over seventy five million dollars,

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Speaker 2: you know that says something in itself. In terms of Staley,

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Speaker 2: I don't get whether this means that he is going

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Speaker 2: to pay them, and certainly they haven't released any terms.

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Speaker 5: Yeah, I mean, presumably there's some sort of monetary component

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Speaker 5: to the settlement between JP Morgan and Jess Staley.

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Speaker 2: They were coming from Staley to JP Morgan.

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Speaker 5: Right, JP Morgan was you know, they were saying that

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Speaker 5: they were really only on the hook because of Jess

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Speaker 5: Staley's involvement with bringing in Epstein into the bank as

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Speaker 5: a client, and that as a result, the bank was

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Speaker 5: you know, vicariously liable because of his actions, and so

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Speaker 5: they went after him for a few things, you know,

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Speaker 5: reaching his duty to the bank by not telling the

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Speaker 5: bank earlier about what was going on, and then seeking

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Speaker 5: any contribution for any payout that JP Morgan was going

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Speaker 5: to make.

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Speaker 2: Well for convincing them to keep Epstein's client. Everyone knew

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Speaker 2: what was going on. I mean, his the prosecution and

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Speaker 2: his conviction in what two thousand and eight was public knowledge.

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Speaker 2: So everyone knew.

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Speaker 5: Right, and you know, and that was the problem for

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Speaker 5: the banks that there were red flags. I mean there

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Speaker 5: was no you know, concrete evidence that he was you know,

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Speaker 5: doing sex trafficking with children, but there were enough red flags,

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Speaker 5: part of which was because he had a prior conviction.

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Speaker 4: All right.

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Speaker 3: Deutsche Bank also paid, didn't the actually remember them being involved.

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Speaker 5: Yeah, So Deutsche earlier this year paid about seventy five

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Speaker 5: million dollars to the class of victims that had sued Deutsche.

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Speaker 5: JP Morgan also settled with that class of victims for

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Speaker 5: about two hundred and ninety million dollars. And you know

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Speaker 5: that was earlier in the year, in the spring and

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Speaker 5: in the summer. And in this case, the US Origin

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Speaker 5: Islands case against J. P. Morgan was going to go

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Speaker 5: to trial in October. So actually I wrote just a

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Speaker 5: couple weeks ago that it looked like this case was

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Speaker 5: on the path the settlement because neither side wants to

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Speaker 5: go to trial in the case this sillacious.

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Speaker 1: Yeah, that's the last thing if you're JP Morgan you

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Speaker 1: want to have and then have you know, Jamie Diamond

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Speaker 1: dragged into this.

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Speaker 5: Exactly right there. These are not facts anyone wants to

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Speaker 5: come out in court.

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Speaker 1: And so I guess, can we from JP Morgan's perspective,

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Speaker 1: is this issue behind it now?

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Speaker 5: I think so?

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Speaker 1: Because you settled with the vic or the class of victims,

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Speaker 1: I guess right, yep. And if you'd enjoined that class,

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Speaker 1: do you have any standing to come back and try

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Speaker 1: to do something again?

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Speaker 5: No, no, you know, the settlement is like you either

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Speaker 5: opt into the settlement or you don't.

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Speaker 2: Okay, Well, they were sued by this class of victims,

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Speaker 2: and they were sued by the US Virgin Islands. Right,

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Speaker 2: who knows if some other group will come and sue

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Speaker 2: them as well.

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Speaker 5: Yeah, it's hard to envision what group that would be.

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Speaker 5: And there's always statutes limitations too, which sort of put

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Speaker 5: a cap on when lawsuits can be brought. So at

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Speaker 5: this point, given you know, this is definitely this resolves

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Speaker 5: everything that's out there right now for JP Morgan related

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Speaker 5: to Epstein.

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Speaker 1: All right, all right, that's interesting news, just crossing the

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Speaker 1: tape here, So we want to dive into it and

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Speaker 1: see what the impact will be for JP Morgan. But

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Speaker 1: I guess if nothing else, it's like it puts that

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Speaker 1: legal issue behind them. Elliot Stein, thanks so much for

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Speaker 1: joining us. Elliot Stein is the senior analyst with Bloomberg Intelligence.

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Speaker 3: He went to Stanford.

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Speaker 1: So that's PAC twelve, right, you're Stanford cow all that

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Speaker 1: kind of stuff. Yeah, guess what, it's Stale and the

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Speaker 1: Stanford cardell Now have to come to the East coast

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Speaker 1: because you're playing in the ACC Going forward, how stupid is.

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Speaker 5: That they're coming closer to me? So I appreciate it.

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Speaker 2: It's good for you, I guess for me, I can

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Speaker 2: see more games, but it doesn't make any sense history.

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Speaker 1: I'm going to ask the volleyball team, some of these

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Speaker 1: young ladies to travel two days to get here, a

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Speaker 1: couple of days, two days to get back for a

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Speaker 1: volleyball game against NC State.

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Speaker 2: And want to go to the West coast.

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Speaker 1: You know, yeah, I always see these kids, you know,

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Speaker 1: in the airports, these teams from all these schools, and

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Speaker 1: they're you know, it's not like the football.

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Speaker 3: Team where they get their own charter or anything. Of

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Speaker 3: the basketball team.

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Speaker 1: It's the volleyball team, it's the soccer team, it's the

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Speaker 1: golf team or whatever. And they're always like sitting in airports,

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Speaker 1: huddle up, trying to study and everything. I just imagine

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Speaker 1: a cross country stuff. Of course, USC and UCLA they get.

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Speaker 3: To come to Piscataway, New Jersey they play. How good

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Speaker 3: is that? All right? Ellie, thanks so much for it.

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Speaker 3: He joining us here.

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Speaker 4: You're listening to the team.

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Speaker 6: Can's a line program Bloomberg Markets weekdays at ten am,

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Speaker 6: eastern Burg dot Com, The iHeartRadio app and the Blowberg

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Speaker 1: Definitely a risk off feel to the market here today again,

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Speaker 1: as the high interest rate environment seems to be here

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Speaker 1: for longer.

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Speaker 3: Is what the market's pricing in.

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Speaker 1: Let's check in with somebody who has an informed opinion

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Speaker 1: on this. Brent Shooty, chief investment strategist for Northwestern Mutual. Brent,

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Speaker 1: what's your call here on what our federal Reserve is

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Speaker 1: going to do kind of over the next six to

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Speaker 1: twelve months.

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Speaker 7: Yeah, I think the Federal Reserve is worried about wage growth.

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Speaker 7: So you have seen the disinflation that we thought would happen.

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Speaker 7: That was largely because the inflation that we had over

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Speaker 7: the prior couple years was largely tied to COVID. As

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Speaker 7: we pushed further past that and the economy moved back

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Speaker 7: somewhere towards equilibrium, we thought that inflation would come down,

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Speaker 7: and it has. That's the good news. The bad news

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Speaker 7: is the US economy looks late in an economic cycle.

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Speaker 7: Typically happens late in the economic cycle is that the

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Speaker 7: labor market is tight, which causes wages to grow and

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Speaker 7: that can lead to inflation being pulled back higher, which

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Speaker 7: I think is the prime warror right now, and so

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Speaker 7: so until the FED sees wages move lower, they are

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Speaker 7: not going to take that liquidity tourniquet off. Unfortunately, the

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Speaker 7: only way that labor or that wages have moved lower

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Speaker 7: in the past when the labor markets is tied us

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Speaker 7: through job losses, which we think is a likely outcome

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Speaker 7: in the coming months, which will lead to that recession

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Speaker 7: that we still think is on the horizon.

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Speaker 2: What do you think about the UAW strike and you know,

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Speaker 2: if they come back with wage increases, they're going to

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Speaker 2: be at least twenty percent, right, maybe closer to thirty.

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Speaker 2: That's I guess you could say only one hundred and

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Speaker 2: fifty thousand workers, but people at other shops are going

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Speaker 2: to look over there and say, I want that too.

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Speaker 2: Is that going to be a real factor or is

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Speaker 2: or or are you not expected to have kind of

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Speaker 2: a nationwide effect?

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Speaker 7: No, I mean, I think it's more indicative of where

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Speaker 7: we are in the economic cycle, which is late where

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Speaker 7: wages rise because there's a lack of workers to fill

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Speaker 7: open positions, which causes that wage growth. Of the FED

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Speaker 7: fears about, I think people forget that the inflationary period

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Speaker 7: that the FED worries about that was so bad in

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Speaker 7: this US economy was called the wage price spiral, and

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Speaker 7: that's where I think we're at right now, and that's

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Speaker 7: why I think the Federal Reserve isn't going to stop.

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Speaker 7: They're not going to loosen policy until they see wages

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Speaker 7: pull back. Right now, wages are running at four point

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Speaker 7: three to four point five percent, pick your measure. I

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Speaker 7: think in an interview a few weeks ago, John Williams,

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Speaker 7: VP of the FMC said that three point two to

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Speaker 7: three point five was more consistent with two percent inflation.

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Speaker 7: And as I mentioned before, the only way that's happened

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Speaker 7: in the past is through recession, and so maybe this

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Speaker 7: time is different. But I think there are enough things

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Speaker 7: that are flashing red that you can continue to think

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Speaker 7: about that recession coming in the not too distant future.

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Speaker 1: Well, if that's the background there, Brent, are you advising

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Speaker 1: folks to just go into two year treasuries at five

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Speaker 1: point one three percent? That doesn't seem like a bad

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Speaker 1: place to be.

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Speaker 7: Well, we have been repositioning towards fixed income for the

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Speaker 7: better half the last six to nine months, and so

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Speaker 7: we are overweight fixed income and underweight equities. As far

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Speaker 7: as hiding out in the front end of the curve,

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Speaker 7: I would advise people not to do that. I think

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Speaker 7: intermediate term bonds offer value here, and they offer a

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Speaker 7: hedge against equity downside risk, which I think will be

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Speaker 7: caused by too little economic growth, which will cause inflation

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Speaker 7: to fall. And so if you think about your Bloomberg

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Speaker 7: aggregate index at five point three five percent and a

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Speaker 7: six duration, if inflation does fall, think about the difference

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Speaker 7: between five point three and two percent. That's where I

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Speaker 7: think there's value right now, especially if you believe like

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Speaker 7: I do, inflation is set to falter, which I do.

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Speaker 7: I think the good news on the opposite side of

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Speaker 7: that is the FED will be able to cut rates,

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Speaker 7: but not until they actually see, you know, that actual

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Speaker 7: recession happen, which I think is still on the horizon.

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Speaker 2: How far out the curve do you go to you say,

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Speaker 2: six year? I mean, I know nothing about bonds like Paul,

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Speaker 2: but I look at four point eight five percent on

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Speaker 2: the twenty year and I think, when's the next time

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Speaker 2: I'm going to see that?

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Speaker 7: Yeah, this is where so maybe just a little bit

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Speaker 7: more common sensical. So if you invest in a two

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Speaker 7: year right now. So let's take you back to six

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Speaker 7: and give you a real life example. In O six,

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Speaker 7: the yield care was inverted. I believe the two year

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Speaker 7: was somewhere around five twenty eight to ten year was

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Speaker 7: at five twenty four or something. So it wasn't as

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Speaker 7: big as an inversion of the day. But think about

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Speaker 7: that person in the two year, think about something called

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Speaker 7: reinvestment rate risk. They would have had to have had

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Speaker 7: to reinvest that tenuere or that two year four more times.

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Speaker 7: The first reinvestment I believe would have occurred sub two percent,

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Speaker 7: the last three sub one percent. And so that's where

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Speaker 7: I think just having bonds across the spectrum for an individual,

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Speaker 7: I think is the most appropriate thing. I just worry

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Speaker 7: right now that people are hiding in cash, and you're right,

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Speaker 7: who knows where rates will be two, three, five years

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Speaker 7: from now. You know, perhaps rates are hired now. I

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Speaker 7: don't think we're going back to where we were before,

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Speaker 7: but that's still a kind of an uncertain call, and

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Speaker 7: I think that's reflective of if you think about uncertainty,

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Speaker 7: you probably want to spread your bond across the curve

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Speaker 7: just a bit and not hide in any one part

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Speaker 7: of the market.

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Speaker 1: So on the fixed income space, go out a little bit,

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Speaker 1: and is it really are you staying with investment grade?

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Speaker 3: Are you considering certain parts of the high yield.

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Speaker 7: No, not high yield yet, I mean investment grade right now,

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Speaker 7: given that we're headed into an economic contraction, I think

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Speaker 7: you want to stay high quality, especially when those investment

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Speaker 7: grade bonds offer quite a bit of yield, in many

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Speaker 7: cases yields you haven't seen in sixteen to twenty years,

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Speaker 7: which I think you know four years ago, if I

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Speaker 7: came on your show and told you that, you would

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Speaker 7: have told me I'm crazy. So that maybe has a

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Speaker 7: little bit of a commentary about how uncertain the world

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Speaker 7: can be. And that's where I think, you know, I

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Speaker 7: think people need to reflect that, and I think you

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Speaker 7: need to invest across the curve, but focus more so

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Speaker 7: on intermediate term bonds. Just given the fact that you

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Speaker 7: do lock in those yields for a few more years.

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Speaker 2: When is the right time to buy high yield debt?

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Speaker 2: I mean, if you see a recession coming next year,

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Speaker 2: do you buy in the middle of it, at the

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Speaker 2: beginning of it, at the end of it?

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Speaker 7: When, yeah, I think somewhere on the middle of it.

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Speaker 7: I mean, that's where I think, and that's not where

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Speaker 7: it's kind of uncertain about timing. You know, there are

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Speaker 7: many indications to me that the US economy is headed

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Speaker 7: to a recession. I think people ignoring them because they

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Speaker 7: believe this time is different. There are so many things

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Speaker 7: flashing red right now that you know, I think a

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Speaker 7: recession is is probably you know, it could happen in

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Speaker 7: the next three to six months. That's where timing is

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Speaker 7: a bit uncertain. But that's where you just behave better

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Speaker 7: at the end of an economic cycle, and that's where

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Speaker 7: I think you want to be in high quality bonds now.

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Speaker 7: I think the time for owning things that are less

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Speaker 7: than high quality is after they reprice quite a bit,

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Speaker 7: which they haven't done enough right so yet.

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Speaker 2: By the way, I got another credit trader writing in

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Speaker 2: with a question, since by rates is sort of consensus

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Speaker 2: decade high yields, how do you outperform your peers if

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Speaker 2: everyone's doing the same trade.

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Speaker 7: I'm not for sure sure that that is consensus any

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Speaker 7: longer or is consensed. So I think that you know,

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Speaker 7: the soft landing trade was on the higher forever and

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Speaker 7: interest rates when I talk to individual investors, they are

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Speaker 7: scared to buy bonds, and I don't think you're seeing

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Speaker 7: a huge rush into the bond market. I hear enough

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Speaker 7: other voices of people like myself who are telling people

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Speaker 7: the opposite, which I think is the wrong answer.

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Speaker 1: Inequities, I mean, the big cap growth stocks have been

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Speaker 1: the winners.

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Speaker 3: Here this year.

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Speaker 1: Do you stick with them or do you try to

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Speaker 1: find some value elsewhere.

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Speaker 7: I think you try to find value elsewhere. And this

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Speaker 7: is where my probably my commentary about liking small and

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Speaker 7: mid is a bit odd because they are more economically sensitive.

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Speaker 7: And this is where I do think there is some

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Speaker 7: good news for equity investors. I think parts of the

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Speaker 7: market have discounted some sort of a recession. And so

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Speaker 7: if you think about most of us on Wall Street,

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Speaker 7: we do have to put money to work every day,

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Speaker 7: and so I think most people have hidden out in

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Speaker 7: those large cap names that they think are economically insensitive,

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Speaker 7: that they're going to grow forever. And that's been the

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Speaker 7: part of the market that has done well. Other parts

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Speaker 7: of the market haven't. Those are small and mid cap stocks.

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Speaker 7: S and P six hundred trades at twelve point five

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Speaker 7: times four twelve earnings that are down twelve to thirteen percent,

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Speaker 7: and so I suspect that you will see those earnings

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Speaker 7: estimates fall a bit. But I do think there is

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Speaker 7: some cushion there, and that's where I think the opposite

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Speaker 7: side of this can be really good for individual investors

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Speaker 7: in those areas.

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Speaker 1: All Right, Brent, thanks so much for giving us some

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Speaker 1: of your time. Really appreciated brand shooting. He's a chief

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Speaker 1: investment strategist at Northwestern Mutual. I appreciate getting his thoughts

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Speaker 1: here on the equity side, a little bit underweight and

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Speaker 1: overweight on fixting companies.

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Speaker 6: You're listening to the tape Kensur Live program Bloomberg Markets

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Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune

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Speaker 6: in app, Bloomberg dot Com, and.

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Speaker 4: The Bloomberg Business App.

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Speaker 6: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.

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Speaker 3: Matt.

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Speaker 1: We've been talking about this strike against the auto workers

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Speaker 1: that doesn't appear like they're making much headway. One of

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Speaker 1: the questions I have is how long can these auto

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Speaker 1: companies go with this strike? From a financial perspective. Joe

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Speaker 1: Levington Joints As. He's the director of credit research for

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Speaker 1: Bloomberg Intelligence. He covers the auto companies from the credit perspective.

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Speaker 1: He joins us live here in a Bloomberg Interactive broker studio.

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Speaker 3: So, Joel, how are their balance sheets?

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Speaker 1: How strong are these auto companies from a financial perspective,

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Speaker 1: because at some point the strike's really going to hurt

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Speaker 1: them financially potentially, oh one.

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Speaker 8: Hundred percent, Paul.

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Speaker 9: You know, eventually they all have to get to a

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Speaker 9: table and have to come to agreement because everybody needs

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Speaker 9: to make money, right.

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Speaker 2: Well, they only have to have more money than the UAW.

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Speaker 2: So how is their balance sheet look compared to that

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Speaker 2: of the United Autoworkers Union.

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Speaker 9: It's they're significantly significantly stronger than the AW. Okay, it's

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Speaker 9: combined Ford and GF have about ninety billion dollars of liquidity. Stillantes,

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Speaker 9: I think has about seventy billion dollars of liquidity.

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Speaker 1: So liquidity for you is like cash on the balance

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Speaker 1: sheet plus some bank lines that they control down on.

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Speaker 3: So if I need cash, how much do I really have?

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Speaker 9: And they've got like ninety billion years That's what I'm saying.

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Speaker 9: STILLANTIS has like another seventy. So you're talking about one

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Speaker 9: hundred and sixty billion dollars of firepower and the UAW

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Speaker 9: has eight hundred and twenty five million dollars in cash. Oops,

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Speaker 9: that's what I'm trying to say. Yeah, I mean, if

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Speaker 9: you were on the DraftKings app, you'd probably heavily that

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Speaker 9: the Lottos can you like, last a lot longer than

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Speaker 9: the uawken.

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Speaker 2: And they haven't even really struck where it hurts, right.

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Speaker 2: They hit them at a Bronco plant. That's bad, you know,

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Speaker 2: because there's already a long line of waiting for a Bronco.

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Speaker 2: They're awesome. They hit the Colorado and I know, you know,

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Speaker 2: Mark Royce loves those mid sized pickup trucks.

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Speaker 3: Actually I drove.

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Speaker 2: One, and I was really impressed with the turbo charged

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Speaker 2: inline four engine because you're an in like six guy,

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Speaker 2: I like an inline six, I like, you know, but

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Speaker 2: this small engine I thought was super punchy, had a

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Speaker 2: lot of torque. Anyway, they hit him the Wranglers, you know,

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Speaker 2: high margin vehicle, but they haven't hit them on the

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Speaker 2: truck lines, which is where it hurts, right. They haven't

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Speaker 2: struck where they make the f one fifty. They haven't

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Speaker 2: struck where they make the Tahoe and the suburban, and

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Speaker 2: that would be pretty hardcore if they did that, it

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Speaker 2: would be.

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Speaker 9: But it goes both ways because the more people you

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Speaker 9: put out of the plants, that also means the more

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Speaker 9: they're draining down that eight hundred and twenty five million

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Speaker 9: dollars right, because they're paying them while they're the UAW

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Speaker 9: is paying their employee that their clients while they're you know,

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Speaker 9: like while they're on strike. But I agree with you

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Speaker 9: if you look back to times like the pandemic, right,

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Speaker 9: the pandemic, really what you saw was about a ten

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Speaker 9: billion dollars swing in cash flow over a couple of

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Speaker 9: quarters if you're talking about a FORD or GM. So

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Speaker 9: you could kind of get into that range like if

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Speaker 9: this protracts into you know, like a five six, seven

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Speaker 9: week kind of event. But we're not there yet, and

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Speaker 9: I think, you know, while you have this time, both

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Speaker 9: sides are going to hackle out for each percentage increase

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Speaker 9: in salary that they can get.

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Speaker 3: How are the bonds? How have they been trading?

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Speaker 9: Bonds really haven't moved all that much because the raiders

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Speaker 9: have been done Actually a very nice job of being

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Speaker 9: republic about how they don't expect this to be impactful,

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Speaker 9: and how they've built in somewhere between five and eight

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Speaker 9: weeks of flexibility. So now that we're, you know, like

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Speaker 9: just getting towards the low end of that range, there's

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Speaker 9: still plenty of room in terms of how they're thinking

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Speaker 9: about ratings.

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Speaker 3: So we came out of so GM and Stillantis.

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Speaker 2: They did go bankrupt during the crepy Well, I mean,

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Speaker 2: Chrysler is really what you're talking about, right Stilantis is

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Speaker 2: essentially a French company that bought the Italian company that

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Speaker 2: bought Chrysler for like a dollar.

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Speaker 9: It's a mix of Pugio Fiat At Chrislis okay coming together.

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Speaker 2: But I mean, I'm gonna guess where you were going

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Speaker 2: with this. So we talk a lot about the fact

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Speaker 2: that the unions took a crappy deal in order to

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Speaker 2: help support the automaker's post financial crisis. What we don't

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Speaker 2: talk too much about is that the unions had a

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Speaker 2: much greedier deal that kind of pushed these automakers into

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Speaker 2: bankruptcy during the financial crisis.

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Speaker 9: Right, Yeah, I mean we're still talking about I guess

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Speaker 9: Mary Varrow's out there saying that we made an offer

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Speaker 9: worth one hundred and fifteen thousand dollars uaw worker that

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Speaker 9: was rejected.

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Speaker 2: So whether you' that's their final pay, one hundred and

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Speaker 2: fifteen thousand dollars.

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Speaker 9: Right, that's your take home pay. So whether you are,

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Speaker 9: depending on what side of the corner you're on, whether

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Speaker 9: you think that's good or bad. It doesn't sound particularly

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Speaker 9: horrible to me in any way for a unionized manufacturing facility.

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Speaker 2: But you know, well, I'm just hang on, I'm just dividing.

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Speaker 2: So Mary gets about twenty five million dollars, so divided

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Speaker 2: by one hundred fifteen, so she still gets two hundred

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Speaker 2: and seventeen times more than that. Yeah, and she works hard,

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Speaker 2: I'm sure, and she's steered the company through some tough times,

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Speaker 2: but she's had their help.

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Speaker 9: Yes, And that's what I say. They eventually have to

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Speaker 9: come together because they both need each other.

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Speaker 3: Right, if you're going to.

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Speaker 2: Make money, you have to have workers.

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Speaker 9: And if workers want to have a salary, that they

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Speaker 9: have to have a proper parable company behind them.

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Speaker 2: Now, they don't just want a salary, right, Mary has

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Speaker 2: a defined benefits pension plan. Yes, are the workers going

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Speaker 2: to get that too?

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Speaker 9: Well, Ford seems to have caved a little bit on

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00:20:10,280 --> 00:20:10,760
Speaker 9: that front.

441
00:20:10,760 --> 00:20:11,040
Speaker 4: Matt.

442
00:20:11,400 --> 00:20:14,440
Speaker 9: That's a really difficult front for others to go into,

443
00:20:14,480 --> 00:20:17,240
Speaker 9: because if you think about GM, I mean, their opebs

444
00:20:17,240 --> 00:20:19,040
Speaker 9: blew up to like seventy billion before they.

445
00:20:18,920 --> 00:20:21,640
Speaker 3: Went to bankrupt I'm sorry that, Paul.

446
00:20:21,720 --> 00:20:25,359
Speaker 9: There are other pension liabilities that are on their balance sheet.

447
00:20:25,720 --> 00:20:28,040
Speaker 9: That's really what drove them into bankruptcy to begin with

448
00:20:28,240 --> 00:20:31,240
Speaker 9: was to get rid of those liabilities. So to start

449
00:20:31,320 --> 00:20:33,280
Speaker 9: bringing them back in I think would be a really

450
00:20:33,400 --> 00:20:35,720
Speaker 9: difficult thing and probably one of the bigger challenges on

451
00:20:35,760 --> 00:20:39,200
Speaker 9: the GM side. Whereas Ford woulds didn't go into bankruptcy,

452
00:20:39,240 --> 00:20:44,760
Speaker 9: seems more open to working with the union in that aspect.

453
00:20:45,240 --> 00:20:48,760
Speaker 1: So if I'm a creditor too, if I'm a bond

454
00:20:48,760 --> 00:20:51,520
Speaker 1: holder of the big three auto companies, do I have

455
00:20:51,560 --> 00:20:55,119
Speaker 1: a threshold where I don't want to see them have

456
00:20:55,200 --> 00:20:57,480
Speaker 1: an increase more than twenty five thirty percent?

457
00:20:57,640 --> 00:20:58,960
Speaker 3: Or do I just not really care? I just want

458
00:20:58,960 --> 00:20:59,920
Speaker 3: to get a deal done the paper.

459
00:21:00,080 --> 00:21:03,080
Speaker 2: It probably doesn't matter, right you care about the pension.

460
00:21:03,840 --> 00:21:06,080
Speaker 9: I think you care about the pension first when it

461
00:21:06,080 --> 00:21:08,560
Speaker 9: comes to pay. You know, when you're talking about these

462
00:21:08,560 --> 00:21:11,480
Speaker 9: increases between twenty and forty percent are kind of you know,

463
00:21:11,520 --> 00:21:14,520
Speaker 9: like where people are targeting. Even if you think about

464
00:21:14,520 --> 00:21:17,080
Speaker 9: forty percent, it's forty percent of four percent of your

465
00:21:17,119 --> 00:21:19,680
Speaker 9: total cost of your total bill, and that's before there's

466
00:21:19,760 --> 00:21:22,920
Speaker 9: any cost benefits that the company may get, and that's

467
00:21:22,920 --> 00:21:23,920
Speaker 9: before you think about price.

468
00:21:24,119 --> 00:21:26,240
Speaker 3: So labor's only four percent of their cost. Diructor, it's

469
00:21:26,240 --> 00:21:26,960
Speaker 3: only four percent.

470
00:21:27,040 --> 00:21:30,600
Speaker 9: It's really deal, just well, that's that's what two guys

471
00:21:30,600 --> 00:21:33,960
Speaker 9: from some it might say, yes, but why does it

472
00:21:34,000 --> 00:21:36,760
Speaker 9: call it thirty or thirty five percent? Have a drink

473
00:21:36,800 --> 00:21:39,640
Speaker 9: and revel with life, and then you'd be fine, because

474
00:21:39,640 --> 00:21:42,120
Speaker 9: really you're talking about a percentage point or two on

475
00:21:42,160 --> 00:21:45,159
Speaker 9: your price side, or figuring out some cost benefits on

476
00:21:45,200 --> 00:21:46,800
Speaker 9: the way, and then you can move on with life.

477
00:21:47,160 --> 00:21:50,400
Speaker 2: Pensions are much more expensive. They also want a four

478
00:21:50,520 --> 00:21:52,359
Speaker 2: day work week, which means you got to hire a

479
00:21:52,359 --> 00:21:55,000
Speaker 2: whole bunch of other people and pay more health care

480
00:21:55,640 --> 00:22:00,240
Speaker 2: benefits to those men and women. Plus they want to

481
00:22:00,359 --> 00:22:03,639
Speaker 2: know which products are coming. So, for example, you know,

482
00:22:03,760 --> 00:22:06,080
Speaker 2: Dodge doesn't have anything coming next year and they're going

483
00:22:06,160 --> 00:22:09,040
Speaker 2: to cancel a couple of their offerings. Chrysler only has

484
00:22:09,119 --> 00:22:11,520
Speaker 2: the Pacific, a minivan and nothing else.

485
00:22:12,040 --> 00:22:13,679
Speaker 9: It's a good thing that the UAW is not at

486
00:22:13,680 --> 00:22:16,280
Speaker 9: Bloomberg because we love a seven day work week right here,

487
00:22:16,480 --> 00:22:18,240
Speaker 9: I don't know what a four day work week would

488
00:22:18,240 --> 00:22:20,439
Speaker 9: actually look like. It makes no sense to me.

489
00:22:20,480 --> 00:22:24,280
Speaker 2: I'm a fan of a four hour work frankly, but

490
00:22:24,359 --> 00:22:26,720
Speaker 2: clearly that's not going to happen with the autoworkers.

491
00:22:26,760 --> 00:22:29,200
Speaker 9: That's just thrown out as a starting point.

492
00:22:30,200 --> 00:22:31,400
Speaker 2: But yeah, you're totally right.

493
00:22:31,400 --> 00:22:32,080
Speaker 3: It's the full.

494
00:22:31,920 --> 00:22:34,000
Speaker 9: Package, and it's really the benefits side that I think

495
00:22:34,119 --> 00:22:36,119
Speaker 9: is more of the sticking point for a GM or

496
00:22:36,160 --> 00:22:36,720
Speaker 9: a stillant this.

497
00:22:37,160 --> 00:22:39,840
Speaker 1: So how do you think this place out, having you know,

498
00:22:39,880 --> 00:22:41,880
Speaker 1: listened to both sides and all three companies.

499
00:22:42,160 --> 00:22:44,040
Speaker 9: Yeah, I mean I think Paul Well probably wind up

500
00:22:44,080 --> 00:22:46,320
Speaker 9: somewhere that to some guys could figure it out over cocktail,

501
00:22:46,400 --> 00:22:48,240
Speaker 9: is that it'll probably be somewhere in the thirty percent

502
00:22:48,320 --> 00:22:50,199
Speaker 9: range of a salary increase. You're going to have your

503
00:22:50,200 --> 00:22:53,639
Speaker 9: forty hour work week. Maybe there's some marginal benefit that

504
00:22:53,680 --> 00:22:55,960
Speaker 9: they give back on pensions, and that's.

505
00:22:55,800 --> 00:22:57,240
Speaker 2: About where it'll wind up.

506
00:22:57,520 --> 00:22:59,920
Speaker 9: And the reason that it's not that relevant to it

507
00:23:00,160 --> 00:23:02,840
Speaker 9: to a credit person is because when you think about

508
00:23:02,880 --> 00:23:05,800
Speaker 9: that increase, you're talking about thirty or forty basis points

509
00:23:05,840 --> 00:23:08,399
Speaker 9: of margin. It's really not that big a deal for

510
00:23:08,520 --> 00:23:11,560
Speaker 9: the autos and their outlooks for the long term.

511
00:23:11,920 --> 00:23:12,680
Speaker 4: All right, we'll.

512
00:23:12,600 --> 00:23:14,720
Speaker 3: See what kind of deal they can get done.

513
00:23:15,240 --> 00:23:19,120
Speaker 6: You're listening to the Team ken'shar Live program Bloomberg Markets

514
00:23:19,119 --> 00:23:22,240
Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the

515
00:23:22,320 --> 00:23:25,439
Speaker 6: iHeartRadio app and the Bloomberg Business App, or listen on

516
00:23:25,520 --> 00:23:27,600
Speaker 6: demand wherever you get your podcasts.

517
00:23:30,000 --> 00:23:32,240
Speaker 1: Deftly, some concerns out there in the credit markets, but

518
00:23:32,359 --> 00:23:35,840
Speaker 1: one area of a positive sign so Standard and Poors

519
00:23:36,359 --> 00:23:39,800
Speaker 1: Global Ratings on Wednesday upgraded the Government of Jamaica's long

520
00:23:39,920 --> 00:23:43,880
Speaker 1: term foreign and local currency issue a default rating from

521
00:23:44,119 --> 00:23:47,440
Speaker 1: B plus to double B minus with a stable outlook.

522
00:23:47,440 --> 00:23:49,480
Speaker 1: It is the best credit rating that Jamaica has received

523
00:23:49,520 --> 00:23:52,040
Speaker 1: from S and P since it started rating the country

524
00:23:52,160 --> 00:23:53,680
Speaker 1: sovereign dead in nineteen ninety nine.

525
00:23:53,680 --> 00:23:55,360
Speaker 3: Some good news there. We're gonna break that.

526
00:23:55,359 --> 00:24:01,360
Speaker 1: Down with Senator Auburn Hill, Minister of Industry, Investment and Commerce,

527
00:24:01,560 --> 00:24:03,680
Speaker 1: Member of the Senate of the Government of Jamaica, joining

528
00:24:03,760 --> 00:24:06,879
Speaker 1: us live here in our Bloomberg Interactive Broker studio. Minister,

529
00:24:07,000 --> 00:24:11,760
Speaker 1: Welcome to Bloomberg what drove the increase in the rating

530
00:24:11,840 --> 00:24:16,159
Speaker 1: outlook from your ratings issuer for Jamaica, if.

531
00:24:16,040 --> 00:24:21,200
Speaker 8: I could put towards this discipline management we took over

532
00:24:21,359 --> 00:24:24,679
Speaker 8: in twenty sixteen, the Andrew Holness administration took over. We

533
00:24:24,720 --> 00:24:28,120
Speaker 8: made a commitment to the IMF at the time that

534
00:24:28,200 --> 00:24:31,879
Speaker 8: we would continue to make sure we've become fiscally disciplined.

535
00:24:32,480 --> 00:24:35,520
Speaker 8: Right through that period of time. We moved our debts

536
00:24:35,680 --> 00:24:37,840
Speaker 8: down from the high as we might recall at one

537
00:24:37,880 --> 00:24:40,000
Speaker 8: fur to seven when we took over must have been

538
00:24:40,000 --> 00:24:42,480
Speaker 8: in the one thirty five or thereabouts, and move it

539
00:24:42,560 --> 00:24:45,720
Speaker 8: down to where we are today at seventy seven and

540
00:24:45,960 --> 00:24:48,760
Speaker 8: going in the direction of sixty. We had planned to

541
00:24:48,800 --> 00:24:53,040
Speaker 8: get there by twenty sixteen, the pandemic interrupted. We moved

542
00:24:53,040 --> 00:24:55,520
Speaker 8: it to twenty eighteen, but we might get there before

543
00:24:55,600 --> 00:24:59,680
Speaker 8: twenty eighteen. And all through that we've gone through the

544
00:24:59,720 --> 00:25:02,600
Speaker 8: plane them spend one hundred billion Jamaican dollars we didn't

545
00:25:02,600 --> 00:25:06,000
Speaker 8: plan to spend, haven't borrowed any money, and we haven't

546
00:25:06,080 --> 00:25:10,159
Speaker 8: raised taxes in seven years, so that kind of fiscal discipline.

547
00:25:10,880 --> 00:25:14,200
Speaker 8: The rating agencies have been watching it, and the best

548
00:25:14,240 --> 00:25:17,560
Speaker 8: rating we've ever had in twenty four years of S

549
00:25:17,640 --> 00:25:20,800
Speaker 8: and P. We've just had the rating upgrade, and of

550
00:25:20,800 --> 00:25:22,560
Speaker 8: course we're in not happy with that. We want to

551
00:25:22,600 --> 00:25:26,320
Speaker 8: continue to make sure that gets to investment grade as

552
00:25:26,400 --> 00:25:27,120
Speaker 8: quickly as we can.

553
00:25:27,280 --> 00:25:32,199
Speaker 2: So what are the industries that are driving this? Are

554
00:25:32,280 --> 00:25:37,800
Speaker 2: supporting this growth? I have been going to Jamaica my

555
00:25:37,880 --> 00:25:40,200
Speaker 2: whole life. We go to Silver Sands and Trelawney and

556
00:25:40,240 --> 00:25:42,560
Speaker 2: if I get a good bonus, then I'll spend a

557
00:25:42,560 --> 00:25:46,880
Speaker 2: couple of days over at Rose Hall. It's a little pricey,

558
00:25:47,080 --> 00:25:50,639
Speaker 2: but so tourism obviously is I guess one of the

559
00:25:50,640 --> 00:25:52,920
Speaker 2: main industries. What else is pushing this because Jamaica is

560
00:25:52,960 --> 00:25:55,280
Speaker 2: not an offshore economy. This isn't somewhere where people go

561
00:25:55,320 --> 00:25:58,720
Speaker 2: to hide money, you know, or to start crypto businesses.

562
00:25:58,760 --> 00:26:03,040
Speaker 8: No, that's not what we do. What happened is when

563
00:26:03,080 --> 00:26:07,560
Speaker 8: tourism took a dip or and somebody who you've had

564
00:26:07,600 --> 00:26:11,680
Speaker 8: here at Bloomberg, Grandite, tims Ed Bartlett, found all kinds

565
00:26:11,720 --> 00:26:15,360
Speaker 8: of innovative ways to help us open back tourism as

566
00:26:15,400 --> 00:26:18,840
Speaker 8: quickly as we can so that didn't stay down too

567
00:26:18,880 --> 00:26:22,640
Speaker 8: long and we're now back this summer, well past what

568
00:26:22,720 --> 00:26:26,680
Speaker 8: we were in twenty nineteen before the pandemic. But through

569
00:26:26,840 --> 00:26:31,560
Speaker 8: the pandemic we had the BPO, the business processing outsourcing business,

570
00:26:31,560 --> 00:26:36,280
Speaker 8: the knowledge outsourcing business, and that grew by twenty percent

571
00:26:36,320 --> 00:26:39,280
Speaker 8: per year in the last four years. So we quickly

572
00:26:39,320 --> 00:26:42,840
Speaker 8: moved to work from home media adjustments because under the

573
00:26:43,280 --> 00:26:46,960
Speaker 8: BPO arrangement and OECD watching, you have to make sure

574
00:26:47,000 --> 00:26:49,800
Speaker 8: you follow certain basic rules. We got those fixed with

575
00:26:49,840 --> 00:26:53,000
Speaker 8: the Ministry of Finance and through myself, I was then

576
00:26:53,040 --> 00:26:55,640
Speaker 8: in the Ministry of Economic Growth, which is a Prime

577
00:26:55,680 --> 00:26:58,959
Speaker 8: minister's ministry, worked it out, got it to work, and

578
00:26:59,160 --> 00:27:01,639
Speaker 8: it kept on growing and it keeps on growing. But

579
00:27:01,680 --> 00:27:07,600
Speaker 8: we also are looking at growing or exports because we

580
00:27:07,720 --> 00:27:10,520
Speaker 8: have had looks like we had a long period of

581
00:27:10,840 --> 00:27:14,600
Speaker 8: bad debt situation. We've had a longer period of negative

582
00:27:15,960 --> 00:27:19,399
Speaker 8: trade balances and we're now grapping our hands around that

583
00:27:19,480 --> 00:27:21,800
Speaker 8: as we've done with debt. To me, and that's one

584
00:27:21,800 --> 00:27:26,120
Speaker 8: of my main focus why I'm here with twenty odd

585
00:27:26,240 --> 00:27:30,560
Speaker 8: thirty businesses to look at new markets and develop new

586
00:27:30,600 --> 00:27:34,879
Speaker 8: market markets, because you cannot be an exporting business and

587
00:27:34,920 --> 00:27:37,040
Speaker 8: stay in your office, right, So I take them with me.

588
00:27:37,400 --> 00:27:39,320
Speaker 8: I took them here, took them to a land I'm

589
00:27:39,320 --> 00:27:42,400
Speaker 8: going to London from here to make sure we developed

590
00:27:42,400 --> 00:27:45,120
Speaker 8: the markets that we have, and then wider field.

591
00:27:44,920 --> 00:27:46,480
Speaker 1: What are some of those markets that you'd like to

592
00:27:46,520 --> 00:27:48,800
Speaker 1: develop or some of those products or services that you'd

593
00:27:48,840 --> 00:27:49,359
Speaker 1: like to develop.

594
00:27:49,560 --> 00:27:53,440
Speaker 8: For instance, you know Goya very well. We have something called.

595
00:27:54,760 --> 00:27:55,119
Speaker 10: Aki.

596
00:27:55,320 --> 00:27:57,919
Speaker 8: Matty would have had Aki courter breakfast in Jamaica. My

597
00:27:57,960 --> 00:28:00,520
Speaker 8: eggs okay with your egg it looks like eggs, So

598
00:28:00,560 --> 00:28:05,359
Speaker 8: we we know. Goya said to one of our importants

599
00:28:05,680 --> 00:28:10,399
Speaker 8: in Florida recently, we want twenty fourty foot containers. They

600
00:28:10,440 --> 00:28:13,399
Speaker 8: could only give them one. They want something we have color,

601
00:28:13,520 --> 00:28:16,879
Speaker 8: which is like spinach. They want breadfruit, which is we

602
00:28:16,960 --> 00:28:20,159
Speaker 8: make into flour and it's gluten free, which people want.

603
00:28:20,480 --> 00:28:24,840
Speaker 8: We want containers of that. So we have markets I am.

604
00:28:24,920 --> 00:28:27,440
Speaker 8: While I'm looking for new markets, we really what I'm

605
00:28:27,480 --> 00:28:31,000
Speaker 8: looking for as well. The Ministry of Industry. Investment is

606
00:28:31,000 --> 00:28:34,280
Speaker 8: the second part in commerce. I'm looking for investment to

607
00:28:34,680 --> 00:28:39,760
Speaker 8: fit those markets. Come in, help us grow agriculture, agro

608
00:28:40,400 --> 00:28:43,600
Speaker 8: process it and make sure we have the markets for you.

609
00:28:43,920 --> 00:28:46,200
Speaker 8: Come invest. So that's part of the message I bring

610
00:28:46,200 --> 00:28:46,520
Speaker 8: as well.

611
00:28:46,520 --> 00:28:48,840
Speaker 2: What about cannabis, We talk about the canabis business here

612
00:28:48,880 --> 00:28:53,000
Speaker 2: a lot Obviously, the legalization across well for recreational use

613
00:28:53,000 --> 00:28:56,720
Speaker 2: twenty three states in the US has grown the market,

614
00:28:56,760 --> 00:28:59,960
Speaker 2: the legal market considerably. Here can that be an export

615
00:29:00,360 --> 00:29:04,200
Speaker 2: from a country that's in a way famous for Bob

616
00:29:04,280 --> 00:29:07,840
Speaker 2: Marley and and that sort of product we have, We have.

617
00:29:07,880 --> 00:29:17,200
Speaker 8: Exported to places like Australia and Germany, But you probably

618
00:29:17,240 --> 00:29:21,040
Speaker 8: need to get to thirty eight states, at which point

619
00:29:21,080 --> 00:29:24,920
Speaker 8: you can change a constitution because it's a Schedule one drug,

620
00:29:25,200 --> 00:29:29,600
Speaker 8: and until the FEDS change it, you can't do interstate banking.

621
00:29:29,640 --> 00:29:31,360
Speaker 8: So you can do all you want in Colorado, but

622
00:29:31,400 --> 00:29:35,120
Speaker 8: you can't ship it to California. So until that changes.

623
00:29:36,440 --> 00:29:39,760
Speaker 8: As a Schedule one drug, we have to abide by

624
00:29:39,840 --> 00:29:42,959
Speaker 8: certain international rules that we've signed in treaties, So we

625
00:29:43,000 --> 00:29:45,200
Speaker 8: can't just export it will in illly and we can't

626
00:29:45,240 --> 00:29:48,040
Speaker 8: export the United States or even use your airspace to

627
00:29:48,080 --> 00:29:48,520
Speaker 8: export it.

628
00:29:48,720 --> 00:29:51,920
Speaker 2: What is the political climate like in Kingston? I mean,

629
00:29:52,560 --> 00:29:58,840
Speaker 2: you know, we have here a very partisan, very divided

630
00:29:59,080 --> 00:30:05,400
Speaker 2: political system, which is driving Moody is to threaten a downgrade.

631
00:30:05,520 --> 00:30:07,840
Speaker 2: So we've already had downgrades at Fitch and s and P.

632
00:30:08,120 --> 00:30:11,080
Speaker 2: So what advice can you give to the US government?

633
00:30:11,640 --> 00:30:16,479
Speaker 2: You know, post upgrade to try and get along and

634
00:30:16,600 --> 00:30:18,840
Speaker 2: govern correctly.

635
00:30:19,160 --> 00:30:21,800
Speaker 8: Why don't I tell you what we've done. We have

636
00:30:22,680 --> 00:30:28,240
Speaker 8: made sure that we focus on the fiscal part. Because

637
00:30:28,240 --> 00:30:32,040
Speaker 8: I noticed why Moody is threatening to downgrade the same

638
00:30:32,080 --> 00:30:36,240
Speaker 8: reason SMP did in twenty eleven. It's from what I've read,

639
00:30:36,400 --> 00:30:40,840
Speaker 8: it's the fractiousness over the government closing down. Well, we

640
00:30:41,000 --> 00:30:44,680
Speaker 8: can't say anything about that nor And you have the

641
00:30:44,760 --> 00:30:47,880
Speaker 8: privilege of having the reserve currents in the world, so

642
00:30:48,120 --> 00:30:51,360
Speaker 8: you're in a very particularly privileged position. But what we

643
00:30:51,480 --> 00:30:54,360
Speaker 8: have done in Jamaica is if we didn't get I

644
00:30:54,400 --> 00:30:57,960
Speaker 8: remember when the IMF came in twenty thirteen, I was

645
00:30:58,040 --> 00:31:01,160
Speaker 8: in that meeting called the University of Western is by

646
00:31:01,160 --> 00:31:04,400
Speaker 8: Oliver Clark, who I know, you know from from Silverton,

647
00:31:04,760 --> 00:31:08,280
Speaker 8: from Silverstand. Oliver called that meeting. I remember the Governor

648
00:31:08,360 --> 00:31:11,880
Speaker 8: brand went at the time saying, we cannot get our

649
00:31:12,720 --> 00:31:17,040
Speaker 8: currency and our inflation under check unless the government gets

650
00:31:17,120 --> 00:31:20,360
Speaker 8: its fiscal house in order. You will never hear or

651
00:31:20,480 --> 00:31:23,400
Speaker 8: know we've made since then. We've made the Bank of

652
00:31:23,480 --> 00:31:27,080
Speaker 8: Jamaica independent. You never hear the government talk. The governor

653
00:31:27,120 --> 00:31:29,680
Speaker 8: of the central Bank talks about the talking about the

654
00:31:30,200 --> 00:31:34,280
Speaker 8: fiscal position of the government because we've put it under control.

655
00:31:34,760 --> 00:31:40,080
Speaker 8: And if until you get that done, then their the

656
00:31:40,200 --> 00:31:43,480
Speaker 8: rating agents will have that discussion. But frankly, your discussion

657
00:31:43,520 --> 00:31:45,840
Speaker 8: is quite different because you're the reserve We hold the

658
00:31:45,840 --> 00:31:48,280
Speaker 8: reserve currency and the biggest military in the world.

659
00:31:49,080 --> 00:31:52,600
Speaker 1: Minister talks us about the economy today in Jamaica. What's

660
00:31:52,640 --> 00:31:54,680
Speaker 1: it like for the average in Jamaican today.

661
00:31:54,640 --> 00:31:58,000
Speaker 8: The average Jamaican. First of all, we're just recently the

662
00:31:58,360 --> 00:32:01,600
Speaker 8: most recent figure we had for unemployment is four point

663
00:32:01,600 --> 00:32:05,880
Speaker 8: five percent. It's the lowest in the history of taking

664
00:32:05,960 --> 00:32:09,720
Speaker 8: numbers in Jamaica, so we have a historical law in

665
00:32:09,800 --> 00:32:12,560
Speaker 8: unemployment in the emerging market. Four point five percent is

666
00:32:12,560 --> 00:32:15,880
Speaker 8: near the full employment. So what's happening people in the

667
00:32:15,960 --> 00:32:20,120
Speaker 8: knowledge of outsourcing business, the hospitality business, the tourism business, saying,

668
00:32:20,280 --> 00:32:21,640
Speaker 8: and the construction business.

669
00:32:21,680 --> 00:32:22,640
Speaker 4: We want people.

670
00:32:24,160 --> 00:32:28,440
Speaker 8: Seventy to eighty percent of our university graduates are women.

671
00:32:29,240 --> 00:32:32,000
Speaker 8: We have three hundred or four hundred thousand young people

672
00:32:32,040 --> 00:32:35,640
Speaker 8: on the street who tend to get into gangs their men,

673
00:32:35,880 --> 00:32:38,600
Speaker 8: primarily men, because they're the ones who weren't graduating. So

674
00:32:38,760 --> 00:32:41,160
Speaker 8: now we're saying we have heard trust and t we're

675
00:32:41,200 --> 00:32:45,240
Speaker 8: investing money to take them off the street, put them

676
00:32:45,280 --> 00:32:49,800
Speaker 8: in a training center for months, pay them a stipend.

677
00:32:50,000 --> 00:32:51,960
Speaker 8: A part of the stipend we used to open a

678
00:32:52,000 --> 00:32:55,040
Speaker 8: bank account. We give them a national idea. We give

679
00:32:55,080 --> 00:32:57,880
Speaker 8: them a passport, driver's license so they become part of

680
00:32:57,920 --> 00:33:01,560
Speaker 8: the citizenship. We give them the has been certify them

681
00:33:01,760 --> 00:33:03,720
Speaker 8: so they could work in Jamaica, the United States or

682
00:33:03,720 --> 00:33:06,280
Speaker 8: Saudia Arabia, and put them back in the workforce. So

683
00:33:06,360 --> 00:33:11,400
Speaker 8: we're expanding the workforce in this vicinaty, but with apprenticeship

684
00:33:11,440 --> 00:33:12,080
Speaker 8: with skills.

685
00:33:12,200 --> 00:33:14,760
Speaker 3: All right, that's good news. That's a good story.

686
00:33:14,800 --> 00:33:17,560
Speaker 1: The Standard and poorst certainly thinks it's a good story.

687
00:33:17,880 --> 00:33:19,800
Speaker 3: Jamaica upgraded its credit rating.

688
00:33:19,960 --> 00:33:23,760
Speaker 1: Senator Aubin Hill, he's a Minister of Industry, Investment in Commerce.

689
00:33:23,920 --> 00:33:26,080
Speaker 1: He's also a member of the Senate in the government

690
00:33:26,120 --> 00:33:27,680
Speaker 1: of Jamaica. We appreciate getting a few minuts.

691
00:33:27,680 --> 00:33:27,960
Speaker 3: You're time.

692
00:33:27,960 --> 00:33:29,840
Speaker 2: Great to have you here. Thanks so much for joining us.

693
00:33:30,120 --> 00:33:31,440
Speaker 4: You're listening to the tape.

694
00:33:31,560 --> 00:33:34,840
Speaker 6: Cat's are live program Bloomberg Markets weekdays at ten am

695
00:33:34,920 --> 00:33:38,720
Speaker 6: Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com,

696
00:33:38,760 --> 00:33:39,120
Speaker 6: and the.

697
00:33:39,000 --> 00:33:40,200
Speaker 4: Bloomberg Business app.

698
00:33:40,240 --> 00:33:43,040
Speaker 6: You can also listen live on Amazon Alexa from our

699
00:33:43,080 --> 00:33:48,120
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

700
00:33:48,720 --> 00:33:53,240
Speaker 2: Gary Shilling from a Gary Shilling in company has darkened

701
00:33:53,240 --> 00:33:58,240
Speaker 2: our door and Gary, we've seen an incredible rise in

702
00:33:58,400 --> 00:34:02,040
Speaker 2: rates over the last few weeks. What is going on here?

703
00:34:03,040 --> 00:34:07,280
Speaker 11: Well, I think there's a conviction that the Fed is

704
00:34:07,280 --> 00:34:11,040
Speaker 11: not through tightening, and I don't think they are. They

705
00:34:11,160 --> 00:34:15,240
Speaker 11: really are determined to get inflation back to two percent

706
00:34:15,320 --> 00:34:17,640
Speaker 11: and to keep it there. And of course they were

707
00:34:17,960 --> 00:34:20,839
Speaker 11: very much behind the curve when they started early last year.

708
00:34:21,239 --> 00:34:26,440
Speaker 11: They thought that the inflation spurt was simply reopening the

709
00:34:26,440 --> 00:34:31,480
Speaker 11: economy after the pandemic and and the problems with the

710
00:34:31,640 --> 00:34:32,440
Speaker 11: supply change.

711
00:34:32,480 --> 00:34:34,279
Speaker 2: Now, hang on a second, what have you got there?

712
00:34:34,320 --> 00:34:35,880
Speaker 2: Is it like a candy bar wrapper or.

713
00:34:36,320 --> 00:34:37,719
Speaker 10: It's a sweetish fish? All right?

714
00:34:37,760 --> 00:34:39,880
Speaker 2: Now put the Swedish fish down, because we hear that

715
00:34:39,960 --> 00:34:42,760
Speaker 2: crackling on the So what do you think about Jamie

716
00:34:42,760 --> 00:34:46,279
Speaker 2: Diamond's warning? I mean, seven percent maybe just a number

717
00:34:46,280 --> 00:34:47,759
Speaker 2: that he picked out of the air when he was

718
00:34:47,800 --> 00:34:49,759
Speaker 2: talking in an interview of the Times of India. Who

719
00:34:49,840 --> 00:34:53,040
Speaker 2: knows where he got that number, but we all thought

720
00:34:53,120 --> 00:34:56,719
Speaker 2: that at the most the Fed is going to like

721
00:34:56,920 --> 00:34:59,719
Speaker 2: five and three quarters, And now all of a sudden,

722
00:34:59,760 --> 00:35:01,080
Speaker 2: ever talking about seven.

723
00:35:01,760 --> 00:35:04,399
Speaker 11: Well, interestingly enough, we've done a lot of work over

724
00:35:04,400 --> 00:35:06,279
Speaker 11: the years. We just updated on what we call a

725
00:35:06,360 --> 00:35:09,560
Speaker 11: debt bomb, and that is the question of what is

726
00:35:09,600 --> 00:35:13,120
Speaker 11: the rate at which the interest on the debt, which

727
00:35:13,160 --> 00:35:16,440
Speaker 11: of course is part of the deficit, becomes so great

728
00:35:16,680 --> 00:35:20,640
Speaker 11: that the whole thing grows geometrically and blows up. Now,

729
00:35:20,840 --> 00:35:24,439
Speaker 11: the interest rate on the federal debt now is under

730
00:35:24,480 --> 00:35:26,640
Speaker 11: three percent because a lot of a short term but

731
00:35:26,760 --> 00:35:30,280
Speaker 11: of course it rolls over in time at higher rates.

732
00:35:30,280 --> 00:35:32,840
Speaker 11: So if we stay here, it could be a problem.

733
00:35:32,880 --> 00:35:36,280
Speaker 11: Although our numbers show that unless you got eight percent

734
00:35:36,920 --> 00:35:38,240
Speaker 11: on the federal debt.

735
00:35:38,239 --> 00:35:40,520
Speaker 2: The average eight and we've never been there, right, because

736
00:35:40,560 --> 00:35:41,520
Speaker 2: I remember reading.

737
00:35:41,360 --> 00:35:44,520
Speaker 11: Average maternity is only six years, so until you got

738
00:35:44,520 --> 00:35:47,440
Speaker 11: to eight percent, you probably didn't have a problem.

739
00:35:47,560 --> 00:35:49,480
Speaker 10: But we've never had that problem. We've never had a

740
00:35:49,520 --> 00:35:50,000
Speaker 10: debt bomb.

741
00:35:50,040 --> 00:35:53,680
Speaker 11: The closest we had was nineteen ninety two when interest

742
00:35:53,760 --> 00:35:56,960
Speaker 11: in relation to GDP was three point one percent. It's

743
00:35:57,000 --> 00:36:00,799
Speaker 11: now three percent. It's basically the same. We haven't been there.

744
00:36:00,800 --> 00:36:04,920
Speaker 11: We're not Argentina, but but uh, you know this, this

745
00:36:05,160 --> 00:36:10,280
Speaker 11: is a this is obviously a concern because if interest

746
00:36:10,360 --> 00:36:13,600
Speaker 11: rates are up and stay up, of course, there's a

747
00:36:13,640 --> 00:36:14,920
Speaker 11: lot of other things you worry about.

748
00:36:14,960 --> 00:36:16,200
Speaker 10: I mean, you know, the economy.

749
00:36:16,200 --> 00:36:19,640
Speaker 11: I don't think could stand anything like eight percent interest

750
00:36:19,719 --> 00:36:22,359
Speaker 11: on the federal debt because you'd be you'd be talking

751
00:36:22,400 --> 00:36:25,399
Speaker 11: about double digits for everything else. And we haven't seen

752
00:36:25,440 --> 00:36:28,920
Speaker 11: that since, uh, since the Boker era and and the

753
00:36:30,120 --> 00:36:31,000
Speaker 11: ensuing collapsed.

754
00:36:31,160 --> 00:36:33,520
Speaker 2: Well, now, there's a lot of things you've done in

755
00:36:33,560 --> 00:36:37,719
Speaker 2: your career, uh to to become such a famous economist.

756
00:36:38,320 --> 00:36:41,200
Speaker 2: I probably the biggest is you're a bond bowl and

757
00:36:41,360 --> 00:36:45,520
Speaker 2: we're for throughout the bond bowl market, and you know,

758
00:36:45,600 --> 00:36:48,960
Speaker 2: really made your name with with those calls. How painful.

759
00:36:49,000 --> 00:36:52,240
Speaker 2: Then has this drop in price, run up and yields

760
00:36:52,280 --> 00:36:57,840
Speaker 2: been for you? And at what point do you say, Okay,

761
00:36:57,880 --> 00:36:59,120
Speaker 2: now it's time to buy again.

762
00:37:00,320 --> 00:37:03,960
Speaker 11: Well, obviously when you've had a long term forecast, and

763
00:37:04,520 --> 00:37:08,280
Speaker 11: you might recall Matt when I said in nineteen eighty

764
00:37:08,320 --> 00:37:10,440
Speaker 11: one that we're entering the bond rally of a lifetime

765
00:37:10,440 --> 00:37:13,000
Speaker 11: to yield on the thirty year bond was fourteen point

766
00:37:13,160 --> 00:37:17,239
Speaker 11: six percent. It was a long time ago. Obviously it

767
00:37:17,280 --> 00:37:20,359
Speaker 11: came way down. Now it's rebounded with all other rays.

768
00:37:21,440 --> 00:37:24,120
Speaker 11: I think we're getting I think we're getting close because

769
00:37:24,400 --> 00:37:28,440
Speaker 11: the economy simply cannot stand these kind of rates. We're

770
00:37:28,880 --> 00:37:32,200
Speaker 11: close to or maybe already in a recession. It's always

771
00:37:32,239 --> 00:37:34,279
Speaker 11: up to the National Burea of Economic Research to make

772
00:37:34,320 --> 00:37:37,600
Speaker 11: that call. But I think that will do it. And

773
00:37:37,640 --> 00:37:41,200
Speaker 11: of course you get a recession. What happens. You get

774
00:37:41,440 --> 00:37:45,160
Speaker 11: less demand for high quality credit, you get the safe

775
00:37:45,160 --> 00:37:49,880
Speaker 11: haven of the treasuries, you get the FED easing. But

776
00:37:49,960 --> 00:37:51,400
Speaker 11: I think the Fed is going to be slow to

777
00:37:51,480 --> 00:37:54,480
Speaker 11: ease because they want to make sure that inflation.

778
00:37:54,200 --> 00:37:55,480
Speaker 10: Is killed and killed dead.

779
00:37:56,480 --> 00:37:59,319
Speaker 11: They really were so far behind the curve on this,

780
00:37:59,760 --> 00:38:02,040
Speaker 11: so I think this whole thing is going to get

781
00:38:02,040 --> 00:38:04,799
Speaker 11: stretched out. But I don't think we're there quite there

782
00:38:04,880 --> 00:38:07,680
Speaker 11: yet where I won't go out. We in our portfolio,

783
00:38:07,680 --> 00:38:10,960
Speaker 11: as we manage, we do have some long gone positions,

784
00:38:10,960 --> 00:38:13,680
Speaker 11: but relatively small. We're not adding to them right yet.

785
00:38:13,920 --> 00:38:18,200
Speaker 1: Is there an irrational investor exuberance back in this market?

786
00:38:21,120 --> 00:38:22,080
Speaker 10: Well, he sure is.

787
00:38:22,200 --> 00:38:24,759
Speaker 11: I mean if you look at you look a look

788
00:38:24,760 --> 00:38:30,319
Speaker 11: at example at the FANG index gross stocks. Now to

789
00:38:30,360 --> 00:38:34,320
Speaker 11: the extent that their prices today are the discounted value

790
00:38:34,360 --> 00:38:38,320
Speaker 11: of future earnings out five or ten years. Those things

791
00:38:38,320 --> 00:38:40,960
Speaker 11: ought to be in the tank. Now they've sold off

792
00:38:41,000 --> 00:38:43,360
Speaker 11: a little bit lately, but I mean they've rallied for

793
00:38:43,480 --> 00:38:46,360
Speaker 11: most of most of the year. And of course this

794
00:38:46,480 --> 00:38:49,120
Speaker 11: is a big thorn in the side of the FED

795
00:38:49,160 --> 00:38:52,879
Speaker 11: because they see investors really not believing them. They don't

796
00:38:52,920 --> 00:38:56,160
Speaker 11: really they just don't really believe that they're serious, because

797
00:38:56,200 --> 00:38:58,000
Speaker 11: if they did, you'd see a lot of things like this.

798
00:38:58,120 --> 00:39:01,120
Speaker 11: You see stocks in general and says the interest rates

799
00:39:01,160 --> 00:39:05,600
Speaker 11: sensor is housing already affected by interest rates, but investors

800
00:39:06,160 --> 00:39:09,600
Speaker 11: in terms of securities not yet convinced.

801
00:39:09,160 --> 00:39:12,080
Speaker 1: So so you think, I guess, do you think that

802
00:39:12,120 --> 00:39:14,920
Speaker 1: there's a there's really risk to the stock market in general?

803
00:39:15,320 --> 00:39:15,520
Speaker 4: Oh?

804
00:39:15,600 --> 00:39:16,880
Speaker 10: Yeah.

805
00:39:17,000 --> 00:39:19,120
Speaker 11: Early last year I said, I thought we have a

806
00:39:19,400 --> 00:39:22,080
Speaker 11: thirty percent decline. Peaked the trough, we were down twenty

807
00:39:22,120 --> 00:39:22,760
Speaker 11: five percent.

808
00:39:23,200 --> 00:39:24,040
Speaker 10: You got a rally.

809
00:39:25,000 --> 00:39:27,880
Speaker 11: That means from here you need about a thirty percent decline.

810
00:39:28,239 --> 00:39:32,319
Speaker 11: And yeah, I think I think there is is big risk.

811
00:39:32,400 --> 00:39:35,440
Speaker 11: I mean, you look at all the indicators, you look

812
00:39:35,480 --> 00:39:38,200
Speaker 11: at the leading indicators, you look at the yield curve,

813
00:39:39,000 --> 00:39:41,840
Speaker 11: you look at small business hiring intentions. It's just a

814
00:39:41,880 --> 00:39:45,480
Speaker 11: whole host of factors. And boy, if this isn't if

815
00:39:45,480 --> 00:39:48,000
Speaker 11: this doesn't tell your recession and all it goes with it,

816
00:39:48,360 --> 00:39:52,520
Speaker 11: including fedies a lot easier, a lot lower rates, you've

817
00:39:52,560 --> 00:39:53,719
Speaker 11: got to throw out all the history.

818
00:39:54,080 --> 00:39:56,759
Speaker 2: I would think so too. And you know, I have

819
00:39:56,800 --> 00:39:59,359
Speaker 2: a laundry list of all of the headwinds and all

820
00:39:59,360 --> 00:40:02,680
Speaker 2: the problems that consumers are facing. And you've got along

821
00:40:02,719 --> 00:40:06,799
Speaker 2: with that, this strike which could be bad for the economy,

822
00:40:06,880 --> 00:40:11,480
Speaker 2: and also inflation, government shutdown which doesn't augur well, debts,

823
00:40:11,680 --> 00:40:16,560
Speaker 2: student debt, coming back, delinquencies on credit card debt, and autolans.

824
00:40:17,160 --> 00:40:22,040
Speaker 2: Every time I run this list by a bull, he'll say, hey,

825
00:40:22,719 --> 00:40:24,839
Speaker 2: unemployment is at three point eight percent. You know, as

826
00:40:24,880 --> 00:40:27,160
Speaker 2: long as we have jobs, it's no big deal.

827
00:40:27,320 --> 00:40:30,919
Speaker 11: Well, one of the real issues here, Matt, is that

828
00:40:31,560 --> 00:40:35,680
Speaker 11: employers spend so much time and energy hiring people that

829
00:40:35,719 --> 00:40:39,560
Speaker 11: they're very reluctant to lay them off. It takes time

830
00:40:39,600 --> 00:40:42,400
Speaker 11: to shift gears one hundred and eighty degrees. But of

831
00:40:42,400 --> 00:40:47,960
Speaker 11: course as profits and sales weaken, that's what happens. They

832
00:40:47,960 --> 00:40:50,319
Speaker 11: get layoffs. But this is one of the reasons I

833
00:40:50,320 --> 00:40:52,359
Speaker 11: think this whole exercise is going to be stretched out.

834
00:40:52,440 --> 00:40:54,840
Speaker 11: The other one is the FED taking their good sweet

835
00:40:54,920 --> 00:40:56,920
Speaker 11: time to shift the east because they want to make

836
00:40:56,960 --> 00:40:58,560
Speaker 11: sure that inflation is really.

837
00:40:58,600 --> 00:41:00,680
Speaker 2: But that could mean a deeper set right if we

838
00:41:00,800 --> 00:41:03,080
Speaker 2: have that could mean a very deep recession. If we

839
00:41:03,160 --> 00:41:06,640
Speaker 2: have the kind of UH slow down where you know,

840
00:41:07,480 --> 00:41:11,359
Speaker 2: companies have been not wanting to fire people, but are

841
00:41:11,360 --> 00:41:14,120
Speaker 2: all of a sudden then pushed to do it, and

842
00:41:14,200 --> 00:41:16,960
Speaker 2: then the FED doesn't want to come in cut rates

843
00:41:17,040 --> 00:41:20,799
Speaker 2: until until the economy is really in trouble, that could

844
00:41:20,800 --> 00:41:22,040
Speaker 2: mean a big deep drop.

845
00:41:22,320 --> 00:41:26,640
Speaker 11: I think it means a long recession, but not necessarily deep.

846
00:41:26,680 --> 00:41:28,839
Speaker 11: To get a really deep recession, you've got to have

847
00:41:28,880 --> 00:41:34,000
Speaker 11: a major financial crisis. That That's what happened with the UH,

848
00:41:34,080 --> 00:41:38,080
Speaker 11: with the dot coms in the in the late nineteen nineties,

849
00:41:38,080 --> 00:41:40,839
Speaker 11: and of course that's what happened with the subprime mortgages, the.

850
00:41:40,760 --> 00:41:43,360
Speaker 2: Great Financial Crisis. I mean, looks like there could be

851
00:41:43,400 --> 00:41:45,719
Speaker 2: the beginning of that happening in China right now.

852
00:41:46,200 --> 00:41:49,319
Speaker 11: Does that deep as opposed along you've got to get

853
00:41:49,320 --> 00:41:51,320
Speaker 11: a huge inventory correctionion well.

854
00:41:51,200 --> 00:41:55,160
Speaker 2: Does the Chinese property problem? Were you or are we

855
00:41:55,239 --> 00:41:58,839
Speaker 2: too insulated? The economy, not not that much.

856
00:41:58,960 --> 00:42:05,080
Speaker 11: I mean, our ourd with China has has atrophied. It does, no,

857
00:42:05,239 --> 00:42:08,680
Speaker 11: it does. It does mean that China's internal growth is going.

858
00:42:08,640 --> 00:42:09,040
Speaker 4: To be weak.

859
00:42:09,080 --> 00:42:13,160
Speaker 11: But you look at Si who basically is a present

860
00:42:13,200 --> 00:42:16,680
Speaker 11: for life. He doesn't really care about the well being

861
00:42:16,719 --> 00:42:19,279
Speaker 11: of the average Chinese, only that it's good enough that

862
00:42:19,360 --> 00:42:22,640
Speaker 11: they don't the regime doesn't get tossed out. But but

863
00:42:23,239 --> 00:42:25,600
Speaker 11: they're in a different world. I mean we look at

864
00:42:25,600 --> 00:42:29,759
Speaker 11: it through Western eyes where growth is is is good,

865
00:42:30,200 --> 00:42:32,160
Speaker 11: but they don't look at it. Stay in power is

866
00:42:32,200 --> 00:42:35,680
Speaker 11: good for as far as their concerned. So I don't

867
00:42:35,719 --> 00:42:38,040
Speaker 11: think that China really really cares. And of course they

868
00:42:38,120 --> 00:42:42,520
Speaker 11: got the property problem, they got overbuilt infrastructure, they got

869
00:42:42,640 --> 00:42:47,120
Speaker 11: huge deaths. The result of this, particularly at the provincial level. Well,

870
00:42:47,160 --> 00:42:49,080
Speaker 11: I think China is basically going to be in its

871
00:42:49,120 --> 00:42:50,480
Speaker 11: own its own sphere.

872
00:42:50,520 --> 00:42:50,680
Speaker 4: Now.

873
00:42:50,680 --> 00:42:53,200
Speaker 11: One thing that is is does come out of this

874
00:42:53,320 --> 00:42:56,640
Speaker 11: if it's China's growing more slowly. Uh, it's the second

875
00:42:56,760 --> 00:42:58,920
Speaker 11: largest economy in the world, and it's a stage of

876
00:42:58,960 --> 00:43:03,640
Speaker 11: growth where it's it's more emphasis on goods than services.

877
00:43:03,680 --> 00:43:06,919
Speaker 11: It's economies mature, they shift their services and when you're

878
00:43:06,920 --> 00:43:10,319
Speaker 11: in goods you need commodities, So I think that I

879
00:43:10,360 --> 00:43:13,600
Speaker 11: think that that's we can. Commodities obviously is very differentiated

880
00:43:14,040 --> 00:43:16,879
Speaker 11: the stuff that goes into electric cars, and it's kind

881
00:43:16,880 --> 00:43:17,640
Speaker 11: of its own world.

882
00:43:17,719 --> 00:43:19,880
Speaker 10: But you look at copper. Copper is my favorite.

883
00:43:20,560 --> 00:43:22,640
Speaker 11: I like copper because there's no car tell on either

884
00:43:22,719 --> 00:43:24,880
Speaker 11: the supplier demand side, and it goes into almost any

885
00:43:25,080 --> 00:43:30,000
Speaker 11: manufactured I mean, again, full disclosure. We're short and short

886
00:43:30,000 --> 00:43:32,200
Speaker 11: copper and portfolio as we manage.

887
00:43:32,040 --> 00:43:35,759
Speaker 2: Your short copper. Yes, that's no bueno. Why why are

888
00:43:35,760 --> 00:43:36,560
Speaker 2: you short copper?

889
00:43:36,719 --> 00:43:40,400
Speaker 11: Well because it because that's a that's a bet on

890
00:43:40,520 --> 00:43:43,080
Speaker 11: global manufacturing weakness.

891
00:43:43,360 --> 00:43:43,800
Speaker 4: Yeah.

892
00:43:43,880 --> 00:43:46,200
Speaker 10: Plus the fact say is a bear. I mean, I

893
00:43:46,200 --> 00:43:47,160
Speaker 10: mean you look at opek.

894
00:43:47,239 --> 00:43:49,960
Speaker 11: You can have a great forecast on the oil and

895
00:43:50,200 --> 00:43:54,040
Speaker 11: yet Opac plus comes out tomorrow and make some announcement

896
00:43:54,120 --> 00:43:56,240
Speaker 11: and you're.

897
00:43:55,840 --> 00:43:58,600
Speaker 2: Really all as that were looking ninety dollars hundred dollar barrels. Gary,

898
00:43:58,640 --> 00:44:00,799
Speaker 2: great having you in the studio. Thank you so much

899
00:44:00,840 --> 00:44:02,880
Speaker 2: for coming in. A Gary shilling.

900
00:44:04,320 --> 00:44:06,960
Speaker 3: Yeah, just you know, we just turn them on and

901
00:44:07,000 --> 00:44:08,200
Speaker 3: we can just sit here and listen all day.

902
00:44:08,320 --> 00:44:10,720
Speaker 2: Yeah, well I do that sometimes on the weekends.

903
00:44:10,760 --> 00:44:12,839
Speaker 3: On the weekends. Okay, very good, All right, Gerry, Thanks

904
00:44:12,840 --> 00:44:13,799
Speaker 3: so much for joining us.

905
00:44:14,200 --> 00:44:17,320
Speaker 6: You're listening to the tape Cat's are live program Bloomberg

906
00:44:17,400 --> 00:44:21,000
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

907
00:44:21,040 --> 00:44:23,000
Speaker 6: tune in app, Bloomberg dot Com, and.

908
00:44:22,960 --> 00:44:24,239
Speaker 4: The Bloomberg Business App.

909
00:44:24,320 --> 00:44:27,120
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910
00:44:27,160 --> 00:44:32,120
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

911
00:44:33,120 --> 00:44:34,680
Speaker 3: Let's check out our next guest right here.

912
00:44:35,360 --> 00:44:40,319
Speaker 1: Tim Dewey, Chief US Economists for sg H Macro Advisors. Tim,

913
00:44:40,360 --> 00:44:42,799
Speaker 1: I'm not sure if you heard our last discussion. It

914
00:44:42,920 --> 00:44:47,480
Speaker 1: was with Gary Shilling, and he was bearsh right Man.

915
00:44:47,800 --> 00:44:49,920
Speaker 2: Well, he is, obviously, you know, one of the most

916
00:44:49,920 --> 00:44:52,600
Speaker 2: famous bears on Wall Street exactly. A lot of what

917
00:44:52,640 --> 00:44:54,719
Speaker 2: he was saying reminded me a little bit of what

918
00:44:54,760 --> 00:44:58,719
Speaker 2: I've heard from Jeremy Grantham as well, who is you know,

919
00:44:58,840 --> 00:45:03,439
Speaker 2: obviously uber. But I have to admit that I have

920
00:45:04,640 --> 00:45:07,719
Speaker 2: that that that appeals to me because I see so

921
00:45:07,800 --> 00:45:11,760
Speaker 2: many headwinds in this economy, Tim, and you know, the

922
00:45:11,760 --> 00:45:15,440
Speaker 2: the exuberance that pushed us up to forty five hundred

923
00:45:15,480 --> 00:45:17,640
Speaker 2: on the S and P just doesn't make sense to

924
00:45:17,640 --> 00:45:19,839
Speaker 2: me as the Fed's raising rates five hundred and six

925
00:45:19,960 --> 00:45:21,719
Speaker 2: hundred basis points. How do you see it?

926
00:45:23,560 --> 00:45:27,840
Speaker 12: I am I'm a little bit more optimistic than Gary Schilling.

927
00:45:27,920 --> 00:45:31,240
Speaker 12: I'm not I'm not not quite as bearish of the economy,

928
00:45:31,239 --> 00:45:34,880
Speaker 12: and I tend to be much more optimistic that the

929
00:45:35,000 --> 00:45:38,640
Speaker 12: economy remains more resilient than than people give it credit for.

930
00:45:38,840 --> 00:45:43,960
Speaker 12: And that's a big reason here why stocks that have

931
00:45:44,160 --> 00:45:48,560
Speaker 12: performed better than I think anybody would have anticipated in

932
00:45:48,600 --> 00:45:51,839
Speaker 12: this cycle, you know, given because you said the Fed

933
00:45:51,920 --> 00:45:54,120
Speaker 12: raised rates, you know, over five hundred basis points and

934
00:45:54,239 --> 00:45:58,680
Speaker 12: is threatening you know, the even possibility even more. But

935
00:45:58,760 --> 00:46:01,400
Speaker 12: I think that's just really real that the the economy

936
00:46:01,520 --> 00:46:05,719
Speaker 12: is is is at a fundamental level different and stronger

937
00:46:05,760 --> 00:46:09,879
Speaker 12: than than than than people have really I think been

938
00:46:09,880 --> 00:46:11,440
Speaker 12: willing to contemplate.

939
00:46:11,040 --> 00:46:13,200
Speaker 2: Than ever before in history. Right, I mean, when's the

940
00:46:13,239 --> 00:46:15,200
Speaker 2: last time the FED was able to raise rates five

941
00:46:15,280 --> 00:46:17,239
Speaker 2: or six percent without causing a recession.

942
00:46:18,239 --> 00:46:20,680
Speaker 12: It's a it's a it's a it's a big it's

943
00:46:20,719 --> 00:46:21,920
Speaker 12: a big shift, right.

944
00:46:22,120 --> 00:46:22,440
Speaker 11: Uh.

945
00:46:22,480 --> 00:46:24,920
Speaker 12: And so you know that plenty of people pointed out

946
00:46:24,960 --> 00:46:29,359
Speaker 12: to you know, uh, you know, indicators over the past year,

947
00:46:29,440 --> 00:46:32,000
Speaker 12: year and a half that would all point to a

948
00:46:32,080 --> 00:46:35,600
Speaker 12: recession and in so far you know that that recession

949
00:46:35,680 --> 00:46:38,880
Speaker 12: just hasn't materialized. And again it's just I think speaks

950
00:46:38,920 --> 00:46:42,640
Speaker 12: to a very different economic environment than than we've been

951
00:46:42,680 --> 00:46:43,239
Speaker 12: familiar with.

952
00:46:43,960 --> 00:46:46,400
Speaker 1: So I mean, for better or worse him, you know,

953
00:46:46,440 --> 00:46:49,280
Speaker 1: on my personal agenda, I've taken recession off the table

954
00:46:49,400 --> 00:46:50,080
Speaker 1: several months ago.

955
00:46:50,120 --> 00:46:53,240
Speaker 3: But was I a little premature? There is that still

956
00:46:53,440 --> 00:46:54,959
Speaker 3: really potentially in the cards here?

957
00:46:55,760 --> 00:46:58,319
Speaker 12: Well, so eventually, right, I mean, this is this is

958
00:46:58,360 --> 00:47:01,680
Speaker 12: the stop clock argument, is there's always going to be

959
00:47:01,680 --> 00:47:05,680
Speaker 12: a recession sooner or later. But you know, I think

960
00:47:05,680 --> 00:47:07,800
Speaker 12: you were wise to take it off the table several

961
00:47:07,840 --> 00:47:11,080
Speaker 12: months ago because you know, clearly, you know, I think

962
00:47:11,120 --> 00:47:15,080
Speaker 12: that the predictions that we would have a recession by

963
00:47:15,080 --> 00:47:19,360
Speaker 12: this time, you know, just having materialized, and uh, you know,

964
00:47:19,360 --> 00:47:22,319
Speaker 12: I don't really see one coming, you know, anytime soon.

965
00:47:22,440 --> 00:47:25,440
Speaker 12: I think there's still some momentum under this economy. Uh

966
00:47:25,480 --> 00:47:29,200
Speaker 12: and and that momentum is not going to fade very quickly.

967
00:47:30,080 --> 00:47:33,360
Speaker 12: So I really, you know, I don't have a recession

968
00:47:33,360 --> 00:47:36,080
Speaker 12: in the forecast because you know, it's it's such an

969
00:47:36,120 --> 00:47:39,120
Speaker 12: idiosyncratic event. And that's what keeps tripping people up, is

970
00:47:39,120 --> 00:47:43,319
Speaker 12: that every recession is a little bit different. The indicators

971
00:47:43,360 --> 00:47:45,279
Speaker 12: that that lead you into that recession are a little

972
00:47:45,280 --> 00:47:48,520
Speaker 12: bit different every time. So you know, we really, I think,

973
00:47:48,600 --> 00:47:52,320
Speaker 12: don't have a lot of visibility on on when another

974
00:47:52,360 --> 00:47:53,239
Speaker 12: recession is going to occur.

975
00:47:53,560 --> 00:47:57,200
Speaker 2: And it's a big and diverse economy, who is it?

976
00:47:57,320 --> 00:47:59,640
Speaker 2: Ed Yard Denny has said that he thinks we're in

977
00:48:00,080 --> 00:48:02,239
Speaker 2: kind of a rolling recession where different pockets of the

978
00:48:02,280 --> 00:48:05,200
Speaker 2: economy are hit at different times. You're not just the

979
00:48:05,280 --> 00:48:09,480
Speaker 2: chief economist at SGH Macro Advisors. You are an actual

980
00:48:09,719 --> 00:48:13,200
Speaker 2: doctor in economics. I mean you have a PhD and

981
00:48:13,280 --> 00:48:16,120
Speaker 2: teach courses on this and uh, you know, help to

982
00:48:16,160 --> 00:48:18,560
Speaker 2: guide the economy of the state of organ as far

983
00:48:18,600 --> 00:48:22,600
Speaker 2: as I understand it. What do you think of that

984
00:48:22,840 --> 00:48:25,560
Speaker 2: idea rolling recession? You know, some states are going to

985
00:48:25,640 --> 00:48:29,160
Speaker 2: have problems, some industries are going to have recessions, whereas

986
00:48:29,840 --> 00:48:32,680
Speaker 2: you know, we don't see everyone having a uniform recession.

987
00:48:32,760 --> 00:48:33,560
Speaker 2: Doesn't that make sense?

988
00:48:34,400 --> 00:48:34,560
Speaker 7: Oh?

989
00:48:34,680 --> 00:48:36,719
Speaker 12: It makes it makes a lot of sense. I mean

990
00:48:36,800 --> 00:48:39,000
Speaker 12: we get we sort of forgot it. I mean during

991
00:48:39,000 --> 00:48:44,319
Speaker 12: the the immediate aftermath of the pandemic, when everything was booming, right,

992
00:48:44,440 --> 00:48:47,960
Speaker 12: everybody was doing well, That's that's really not the norm, right,

993
00:48:48,360 --> 00:48:51,400
Speaker 12: if you have, you know, a slower economy. You know

994
00:48:51,440 --> 00:48:54,000
Speaker 12: it's still someone but even but slower economy.

995
00:48:54,360 --> 00:48:54,480
Speaker 11: Uh.

996
00:48:54,719 --> 00:48:57,239
Speaker 12: You you have sectors that that that that are op

997
00:48:57,360 --> 00:49:00,359
Speaker 12: versus down, and that's just you know, that's just part

998
00:49:00,400 --> 00:49:03,040
Speaker 12: of the national give and take. I think of the economy.

999
00:49:03,040 --> 00:49:06,839
Speaker 12: You can't expect everything's going to be cruising along at

1000
00:49:06,880 --> 00:49:09,640
Speaker 12: a high speed. And of course that makes you know,

1001
00:49:09,680 --> 00:49:12,200
Speaker 12: it more difficult to assess, you know, if you're going

1002
00:49:12,239 --> 00:49:14,640
Speaker 12: to fall into a recession or not. Because again, one

1003
00:49:14,680 --> 00:49:18,759
Speaker 12: industry sliding. I say this, this industry always slid during

1004
00:49:18,880 --> 00:49:21,080
Speaker 12: a prior to a recession. Then you turn around and

1005
00:49:21,120 --> 00:49:24,520
Speaker 12: you find another industry that had always slid prior to recession,

1006
00:49:24,760 --> 00:49:27,839
Speaker 12: but now is gaining traction, right, And so you kind

1007
00:49:27,840 --> 00:49:29,919
Speaker 12: of say, well, wait a second, what's going on here?

1008
00:49:30,560 --> 00:49:33,320
Speaker 12: And what's going on here is that you don't have

1009
00:49:33,920 --> 00:49:39,000
Speaker 12: an economy wide shock that is really driving firms to

1010
00:49:39,080 --> 00:49:45,040
Speaker 12: cut investment and cut employment in a very syn synchronized way.

1011
00:49:45,360 --> 00:49:47,840
Speaker 12: And until you can get that kind of shock, that

1012
00:49:47,960 --> 00:49:50,719
Speaker 12: kind of momentum, you really I think it's really hard

1013
00:49:50,760 --> 00:49:53,200
Speaker 12: to create a recession in the economy.

1014
00:49:53,719 --> 00:49:55,319
Speaker 1: That's kind of where I want to go. I'm this

1015
00:49:55,960 --> 00:49:58,279
Speaker 1: labor market. Tim just kind of fascinates me.

1016
00:49:58,560 --> 00:50:01,799
Speaker 3: You know, I've heard the term hoarding of employees and

1017
00:50:01,880 --> 00:50:03,360
Speaker 3: I've never heard that before.

1018
00:50:04,719 --> 00:50:06,520
Speaker 1: What do you make of a three point seven percent

1019
00:50:06,600 --> 00:50:08,120
Speaker 1: unemployment right here in this economy?

1020
00:50:08,920 --> 00:50:09,120
Speaker 4: You know?

1021
00:50:09,760 --> 00:50:13,080
Speaker 12: So yeah, we we. I mean, certainly it was during

1022
00:50:13,120 --> 00:50:15,560
Speaker 12: the case of the pandemic that labor was so hard

1023
00:50:15,560 --> 00:50:17,440
Speaker 12: to get. You didn't want to you didn't want to

1024
00:50:17,520 --> 00:50:21,040
Speaker 12: let it go. I think that, you know, firms, if

1025
00:50:21,080 --> 00:50:24,040
Speaker 12: they had the sort of economic conditions that that drove

1026
00:50:25,040 --> 00:50:27,840
Speaker 12: the need for layoffs, they would react quickly. So the

1027
00:50:27,960 --> 00:50:31,040
Speaker 12: labor hoarding story only takes you so far. And remember

1028
00:50:31,160 --> 00:50:34,040
Speaker 12: last fall, last winter, you know, around the turn of

1029
00:50:34,080 --> 00:50:38,480
Speaker 12: the year, we saw uh, you know, lots and lots

1030
00:50:38,480 --> 00:50:40,800
Speaker 12: and lots of layoffs in the tech industry.

1031
00:50:41,120 --> 00:50:43,879
Speaker 13: So even though that had been an industry that had

1032
00:50:43,920 --> 00:50:47,399
Speaker 13: struggled immensely to hold onto labor during the pandemic, once

1033
00:50:47,440 --> 00:50:50,480
Speaker 13: it was ready to shed labor, it shed labor. Now

1034
00:50:50,520 --> 00:50:53,640
Speaker 13: that that that story I think has asked us already.

1035
00:50:53,880 --> 00:50:57,520
Speaker 12: So for me again, you know, when I look at

1036
00:50:57,719 --> 00:51:00,840
Speaker 12: you know, what happens the unemployment right tip Leena cycle,

1037
00:51:01,320 --> 00:51:04,880
Speaker 12: It falls to some level like this, a three and

1038
00:51:04,920 --> 00:51:07,560
Speaker 12: a half to four percent, somewhere in that range, and

1039
00:51:07,640 --> 00:51:10,360
Speaker 12: it just sort of hangs out there until you can

1040
00:51:10,440 --> 00:51:14,000
Speaker 12: get again that massive negative shock that really slips you,

1041
00:51:14,080 --> 00:51:15,560
Speaker 12: pushes you into another direction.

1042
00:51:15,840 --> 00:51:18,760
Speaker 2: Hey, So, Tim, I just want to jump in because

1043
00:51:18,800 --> 00:51:21,719
Speaker 2: we are looking at pictures of President Biden on the

1044
00:51:21,800 --> 00:51:26,440
Speaker 2: tarmac with UAW President Sean Fain and some other union members,

1045
00:51:27,480 --> 00:51:29,719
Speaker 2: you know, and while we're speaking about labor, I might

1046
00:51:29,760 --> 00:51:32,520
Speaker 2: as well bring up this because I think we've seen

1047
00:51:32,640 --> 00:51:38,320
Speaker 2: a really fascinating shift in the power dynamic between labor

1048
00:51:38,760 --> 00:51:42,200
Speaker 2: and the corporate bosses. This may be coming to a

1049
00:51:42,239 --> 00:51:45,239
Speaker 2: head now as the UAW is asking first thirty six

1050
00:51:45,320 --> 00:51:49,279
Speaker 2: percent wage increases, bringing back pensions. They want a four

1051
00:51:49,360 --> 00:51:51,160
Speaker 2: day work week, They want to know what the production

1052
00:51:51,239 --> 00:51:53,640
Speaker 2: schedules are at these companies. And I wonder what you

1053
00:51:53,680 --> 00:51:55,360
Speaker 2: think what kind of effect this is going to have,

1054
00:51:55,480 --> 00:51:57,840
Speaker 2: because on the one hand, if they stay on strike,

1055
00:51:59,280 --> 00:52:01,920
Speaker 2: I would think that they're going to drive up the

1056
00:52:02,400 --> 00:52:05,160
Speaker 2: cost of cars even more, and they have barely recovered

1057
00:52:05,160 --> 00:52:08,200
Speaker 2: from the pandemic and in those in those terms. On

1058
00:52:08,239 --> 00:52:10,880
Speaker 2: the other hand, they're going to boost wages for at

1059
00:52:10,920 --> 00:52:13,359
Speaker 2: least one hundred and fifty thousand workers and probably more

1060
00:52:13,400 --> 00:52:15,520
Speaker 2: who look over and say I want that deal too.

1061
00:52:17,680 --> 00:52:17,879
Speaker 5: Yeah.

1062
00:52:18,000 --> 00:52:19,839
Speaker 12: No, So on the one hand, you know, at least

1063
00:52:19,840 --> 00:52:23,319
Speaker 12: the nearest issues you're you're you're, you're correct. I mean,

1064
00:52:23,400 --> 00:52:27,719
Speaker 12: we were counting on lower car prices too, and lower

1065
00:52:27,840 --> 00:52:29,840
Speaker 12: use car prices certainly to help on some of the

1066
00:52:29,880 --> 00:52:34,600
Speaker 12: inflation front. And we kind of supply now again that's

1067
00:52:34,640 --> 00:52:38,160
Speaker 12: gonna that's going to delay that. There's really large, i

1068
00:52:38,160 --> 00:52:40,960
Speaker 12: think strong pent up demand for automobiles already and that's

1069
00:52:41,000 --> 00:52:43,840
Speaker 12: one reason auto sales is in fact hold relatively high

1070
00:52:44,000 --> 00:52:47,879
Speaker 12: despite rising interest rates. So that's clearly a near term

1071
00:52:48,080 --> 00:52:51,040
Speaker 12: hit for the economy. The interesting thing, and I really

1072
00:52:51,080 --> 00:52:55,600
Speaker 12: like what you just said on the UH on the wages,

1073
00:52:56,080 --> 00:52:59,640
Speaker 12: is that you know, to one extent, does does this

1074
00:52:59,719 --> 00:53:02,359
Speaker 12: because a signal for the rest of the economy, right,

1075
00:53:02,520 --> 00:53:06,240
Speaker 12: is that if auto workers are getting you know, huge raises,

1076
00:53:06,320 --> 00:53:10,279
Speaker 12: and we've seen huge, huge raises in other industries to

1077
00:53:10,320 --> 00:53:15,759
Speaker 12: an extent, does that make other workers expecting a higher wave?

1078
00:53:15,960 --> 00:53:18,239
Speaker 12: So you know, instead of expecting three percent a year,

1079
00:53:18,239 --> 00:53:20,719
Speaker 12: now they're expecting five percent a year. And then how

1080
00:53:20,760 --> 00:53:24,080
Speaker 12: does that work play into inflation expectations? And you can

1081
00:53:24,120 --> 00:53:27,279
Speaker 12: tell a story where a series of negative shocks or

1082
00:53:27,520 --> 00:53:30,480
Speaker 12: those kinds of shocks really, do you know, create a

1083
00:53:30,640 --> 00:53:35,760
Speaker 12: different inflation environment than we had in the pre pandemic period.

1084
00:53:36,320 --> 00:53:37,839
Speaker 3: All right, Tim, thanks so much for joining us.

1085
00:53:37,840 --> 00:53:42,120
Speaker 1: Really appreciate that Tim doing chief EOS Economists, s g H,

1086
00:53:42,440 --> 00:53:45,439
Speaker 1: Macro Advisors, getting his thoughts there a little bit, little

1087
00:53:45,440 --> 00:53:48,200
Speaker 1: bit of a different spin than when we've heard from

1088
00:53:48,160 --> 00:53:49,200
Speaker 1: market Fred Gary Shad.

1089
00:53:51,680 --> 00:53:54,759
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1090
00:53:54,800 --> 00:53:58,560
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1091
00:53:58,640 --> 00:54:02,759
Speaker 2: podcast platform you I'm Matt Miller. I'm on Twitter at

1092
00:54:02,800 --> 00:54:04,480
Speaker 2: Matt Miller nineteen seventy three.

1093
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Speaker 3: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.

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Speaker 1: Before the podcast, you can always catch us worldwide at

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Speaker 1: Bloomberg Radio.