WEBVTT - Equity Uncertainty and Bloomberg's Conversation with Donald Trump 0:00:02.440 --> 0:00:07.520 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:16.360 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.360 --> 0:00:19.759 at seven am Eastern on applecar Player or Android Auto 0:00:19.800 --> 0:00:23.079 with the Bloomberg Business App. Listen on demand wherever you 0:00:23.160 --> 0:00:26.200 get your podcasts, or watch us live on YouTube. 0:00:26.360 --> 0:00:28.880 Carol Masser along with Barry Redholts, we are in for 0:00:29.000 --> 0:00:32.000 Tom and Paul here on Bloomberg Surveillance on this Wednesday edition. 0:00:32.720 --> 0:00:34.199 We want to get into it and talk about some 0:00:34.200 --> 0:00:35.919 of the big trends that are out there. We've got 0:00:35.920 --> 0:00:38.360 a great guest to do that, Ifan Devitt. She is 0:00:38.479 --> 0:00:41.560 chief Global strategist over at Minetta. It is a one 0:00:41.600 --> 0:00:45.320 hundred percent partner owned registered investment advisor, and she joins 0:00:45.400 --> 0:00:48.199 us on this Wednesday if in good to have you 0:00:48.240 --> 0:00:50.920 here with Barry and myself. There's a lot to kind 0:00:50.920 --> 0:00:53.840 of tackle that is coming out investors right now. Some 0:00:53.920 --> 0:00:58.200 would say between the elections, geopolitics, concerns, maybe about earnings. 0:00:58.240 --> 0:01:00.640 It's early on the season that meet. We just kind 0:01:00.640 --> 0:01:02.920 of park a bunch of stuff in cash at this 0:01:03.000 --> 0:01:04.520 point and kind of write it out. 0:01:04.520 --> 0:01:05.280 What do you say? 0:01:07.000 --> 0:01:09.679 Probably not what we're going to advise though, Whereas having 0:01:10.319 --> 0:01:14.240 stuff and cash worked well when interest rates were high. Unfortunately, 0:01:14.319 --> 0:01:17.320 our clients aren't really in a position to tactically move 0:01:17.400 --> 0:01:19.720 things around. So what we're really trying to get them 0:01:19.720 --> 0:01:22.440 to do is stay the course, not be too reactive, 0:01:22.959 --> 0:01:25.160 and wait and see and have a bit of a 0:01:25.160 --> 0:01:27.600 strong stomach at this point, because we do think that 0:01:27.640 --> 0:01:30.160 the next twenty plus days are going to be a 0:01:30.160 --> 0:01:33.919 bit of a wild ride. We can see some expectations exceeded, 0:01:34.319 --> 0:01:37.840 some dashed, and a political backdrop, as you just noted, 0:01:37.880 --> 0:01:39.080 that is really unprecedented. 0:01:39.560 --> 0:01:44.919 So so I'm glad you mentioned not trying to be tactical. 0:01:45.040 --> 0:01:48.640 But at the same time, lots of investors have been 0:01:48.680 --> 0:01:52.880 thrilled getting five percent in money market funds at least 0:01:52.880 --> 0:01:55.960 for the past year or so. What are you guys 0:01:56.040 --> 0:02:00.640 doing with just spare cash that's looking for yield now 0:02:00.720 --> 0:02:04.520 that we're starting to see money market yield kind of 0:02:04.720 --> 0:02:06.240 slide below five. 0:02:07.280 --> 0:02:09.880 That's a great question. I mean, it's sliding slowly below five. 0:02:09.960 --> 0:02:11.680 So we're still in a much better place than we 0:02:11.720 --> 0:02:13.920 were when cash used to be a drag on portfolios, 0:02:14.080 --> 0:02:16.000 but we are starting to look at the margin back 0:02:16.040 --> 0:02:19.760 into the fifth income complex, see where opportunities. 0:02:19.080 --> 0:02:20.120 Are interesting there. 0:02:20.320 --> 0:02:22.880 Spreads are pretty tight, but still you're still getting a 0:02:22.919 --> 0:02:24.440 yield that's higher than you would have got a few 0:02:24.520 --> 0:02:27.960 years ago. And we've always had a pretty core exposure 0:02:27.960 --> 0:02:31.400 to equities, and that wasn't particularly thematic, so it wasn't 0:02:31.760 --> 0:02:34.600 writing with the volatility of tech stock. 0:02:34.720 --> 0:02:36.040 So that's looking quite good. 0:02:36.480 --> 0:02:39.120 And we've always been open at least to some of 0:02:39.160 --> 0:02:42.440 the alternatives and some of the areas like private credit 0:02:42.480 --> 0:02:44.360 that have really stayed the course have been a very 0:02:44.400 --> 0:02:47.280 steady source of income, and we haven't been as open 0:02:47.360 --> 0:02:50.240 to some more speculative asset classes. But we've always been 0:02:50.240 --> 0:02:51.560 in education mode around that. 0:02:51.919 --> 0:02:52.079 Huh. 0:02:52.200 --> 0:02:56.160 Really interesting. In your most recent note, you mentioned oil 0:02:56.280 --> 0:02:59.919 is down about four percent, and that kind of implies 0:03:00.040 --> 0:03:04.200 the market is not really worried about geopolitics. Kind of 0:03:04.240 --> 0:03:07.360 shocking considered how much stuff is going on not just 0:03:07.480 --> 0:03:10.920 Russian and Ukraine, but the Middle East, and not just 0:03:11.200 --> 0:03:15.960 Gaza but now spreading out to other parts of that 0:03:16.120 --> 0:03:19.320 conflict and the threat of a broader war. How are 0:03:19.320 --> 0:03:21.760 you looking at what's taking place geopolitically. 0:03:23.000 --> 0:03:26.079 It remains a modern wonder of our age that markets 0:03:26.160 --> 0:03:29.400 are continuing to be so resilient despite the political mails 0:03:29.400 --> 0:03:32.120 from on the domestic front, and despite what Ian Bremer 0:03:32.160 --> 0:03:35.400 describes as a geopolitical recession. We never had our actual 0:03:35.440 --> 0:03:39.400 economic recession, but we have had geopolitical recession in terms 0:03:39.440 --> 0:03:44.680 of just this coincidence of massive numbers of shocks and 0:03:45.240 --> 0:03:48.600 surprises on the geopolitical front. These do have the potential 0:03:48.760 --> 0:03:51.400 to disrupt supply chains and disrupt the price of these 0:03:51.520 --> 0:03:54.040 raw goods, but it's not happening, and we can see 0:03:54.040 --> 0:03:56.320 that perhaps there has been a lot more near shoring. 0:03:56.720 --> 0:04:01.440 The pandemic certainly really tested these supply chain networks, and 0:04:01.440 --> 0:04:03.120 you can see that they've come out the other side 0:04:03.160 --> 0:04:06.600 more resilient, that they've perhaps been stronger where the cracks were. 0:04:07.120 --> 0:04:09.520 And now we can see that markets are so sailing 0:04:09.600 --> 0:04:12.960 through breezely without paying much attention to it. So it 0:04:13.000 --> 0:04:15.600 remains a wonder. I don't quite understand it, because I 0:04:15.600 --> 0:04:18.480 think there is some more concern, but you know, it's 0:04:18.480 --> 0:04:21.280 a nice problem to have in that the portfolio remains resilient. 0:04:21.360 --> 0:04:23.040 Portfolios of our clients remain resilient. 0:04:23.240 --> 0:04:23.360 Well. 0:04:23.400 --> 0:04:25.560 I do wonder even in terms of the commodity market, 0:04:26.040 --> 0:04:29.640 specifically when you talk about oil, energy that there's a 0:04:29.680 --> 0:04:31.960 lot of supply out there, and I feel like the 0:04:32.000 --> 0:04:35.280 metrics have changed dramatically, So I do wonder about that 0:04:35.320 --> 0:04:38.000 as an indicator. Having said that, I also do wonder 0:04:38.000 --> 0:04:41.719 about the last twenty years or so, certainly the last 0:04:41.800 --> 0:04:45.240 decade of just money being so cheap and things distorted, 0:04:45.520 --> 0:04:48.440 and are we yet through that cycle here today? 0:04:50.000 --> 0:04:51.800 I would say, no, we're not through the cycle of 0:04:51.880 --> 0:04:54.400 cheap money and searching for yield. We can see that 0:04:54.480 --> 0:04:56.800 immediately there's a dip in the market, there's a flood 0:04:56.880 --> 0:04:59.880 of money in out of money market funds into equity funds. 0:05:00.120 --> 0:05:01.800 So there's still a sense that you are not going 0:05:01.839 --> 0:05:04.279 to make money investing in cash or investing in bonds, 0:05:04.400 --> 0:05:06.720 especially if you have FOMO when you look at those 0:05:06.760 --> 0:05:09.680 double digit record number and equity markets, so there is 0:05:09.720 --> 0:05:12.039 still that sense that we would need to get risk 0:05:12.160 --> 0:05:14.560 on on of a very strong drive to do that. 0:05:14.880 --> 0:05:16.560 I'd say overall, we can see that. 0:05:16.600 --> 0:05:19.080 And when it comes to the geopolitics and the focus 0:05:19.080 --> 0:05:22.040 on energy, yes, we are in a place now where 0:05:22.440 --> 0:05:25.440 energy security is clearly of prime importance, but we've done 0:05:25.520 --> 0:05:28.400 much better job around supply. The exception to that is 0:05:28.440 --> 0:05:30.800 Europe coming into the winter. Now there's going to be 0:05:30.839 --> 0:05:34.520 a question mark around what Europe potentially will have when 0:05:34.520 --> 0:05:38.200 it comes to their energy supply. Inflation's very low here, 0:05:38.440 --> 0:05:40.680 it won't upset the apple cart, but that is a 0:05:40.720 --> 0:05:42.719 bit of a question mark around energy here. 0:05:43.680 --> 0:05:47.599 You mentioned inflation low. UK inflation coming in at one 0:05:47.640 --> 0:05:48.599 point seven percent. 0:05:48.640 --> 0:05:51.200 I feel I'm pretty happy this morning, right, And. 0:05:51.080 --> 0:05:55.720 You know, I'm still perplexed by people who are fighting 0:05:55.760 --> 0:05:59.159 the last war and are arguing about sticking inflation. It's 0:05:59.279 --> 0:06:03.560 clearly not happening in Europe or in Asia at two 0:06:03.680 --> 0:06:07.200 two and a half percent. Can we declare the inflation 0:06:07.400 --> 0:06:10.680 battle one? Now here in the US we. 0:06:10.600 --> 0:06:12.400 Can the people who are not celebrating a course, as 0:06:12.400 --> 0:06:14.600 anybody who has their assets in Sterling, which has taken 0:06:14.640 --> 0:06:17.560 another dive against the dollar today based on the expectation 0:06:17.680 --> 0:06:20.560 that the next rate cup is a whopper one, a 0:06:20.560 --> 0:06:23.560 fifty basis point jumbo cut here in London the Bank 0:06:23.600 --> 0:06:26.000 of England. So clearly the there is are rough and 0:06:26.080 --> 0:06:28.760 the smooth with those inflation numbers. But yes, your point, 0:06:28.839 --> 0:06:30.800 I think we have now moved on. I've seen the 0:06:30.880 --> 0:06:34.080 language used around a hinge economy. Has the economy now 0:06:34.160 --> 0:06:36.760 kind of turned a page. Inflation is not a concern. 0:06:36.880 --> 0:06:39.600 We're back to worrying about growth where we get it 0:06:39.640 --> 0:06:43.360 from employment. We're not worried about overheating, and in the 0:06:43.440 --> 0:06:46.200 nice position that the central banks have a significant amount 0:06:46.200 --> 0:06:49.080 of arsenal with which to stimulate the economy when they 0:06:49.200 --> 0:06:52.440 need to. So is it over Well, certainly we don't 0:06:52.480 --> 0:06:55.480 know whether all supply chain problems are fixed, but certainly 0:06:55.839 --> 0:06:57.839 it's not over as an election issue though, as you 0:06:57.880 --> 0:07:00.359 well know, because this is still front of the center 0:07:00.440 --> 0:07:01.240 of the voters' minds. 0:07:01.279 --> 0:07:03.560 Yea, and I would say that stronger inflation reading for 0:07:03.600 --> 0:07:06.000 September in the US made everybody kind of reset in 0:07:06.080 --> 0:07:08.400 terms of their expectations for the fed efan we got 0:07:08.440 --> 0:07:11.880 to run Ifan Devitt, chief Global market strategist over at Manetta, 0:07:12.120 --> 0:07:16.160 joining us on this Wednesday. 0:07:18.400 --> 0:07:22.239 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:07:22.360 --> 0:07:25.680 weekday afternoons from seven to ten am Easter Listen on 0:07:25.720 --> 0:07:28.280 Apple car Play and and brought Auto with a Bloomberg 0:07:28.320 --> 0:07:30.679 Business app, or watch US live on YouTube. 0:07:30.760 --> 0:07:32.560 Let's see what Anna Moletti has to say. She's head 0:07:32.560 --> 0:07:37.160 of equity over at Allspring Global Investments, joining us on 0:07:37.200 --> 0:07:41.400 this Wednesday. Hey, and great to be checking in with 0:07:41.440 --> 0:07:44.160 you again. Let's start with the election. You guys, you 0:07:44.200 --> 0:07:47.200 looked into it, wrote a paper on it. How are 0:07:47.240 --> 0:07:49.760 you thinking about what investors should or shouldn't be doing 0:07:50.120 --> 0:07:52.320 when it comes to the US presidential election. 0:07:53.520 --> 0:07:58.960 Well, I think you summarized it really well, Carol. You know, look, investors, 0:07:59.280 --> 0:08:03.120 we're all human means, and we get fearful of change, 0:08:03.240 --> 0:08:06.760 and especially when it's in our face every day. I 0:08:06.840 --> 0:08:11.600 live in a swing state in Wisconsin. There's polarization happening 0:08:11.800 --> 0:08:15.480 around what each of the policies for you know, the 0:08:15.520 --> 0:08:19.720 Republican candidate or the Republican candidate, the Democrat or the 0:08:19.760 --> 0:08:24.120 Republican candidate could could produce. But the reality is history 0:08:24.200 --> 0:08:30.040 does suggest equities can continue to do well through either administration. 0:08:30.640 --> 0:08:34.800 And likely it's also because it's not just the president 0:08:35.120 --> 0:08:39.320 who determines right these things. It's also because the Senate 0:08:39.360 --> 0:08:41.280 in the House. Do you make a big difference. 0:08:41.200 --> 0:08:43.520 Right, And we keep talking about that what happens in 0:08:43.559 --> 0:08:46.480 those down ballot races, particularly what happens in Congress, is 0:08:46.480 --> 0:08:49.240 important to what a president get done. Having said that, 0:08:49.280 --> 0:08:53.199 we are spending so much time and talking about John Micklethwaite, 0:08:53.360 --> 0:08:55.920 editor in chief of Bloomberg News, sitting down with Donald Trump. 0:08:55.960 --> 0:08:59.080 Donald Trump talked a lot about tariffs. We've done some 0:08:59.160 --> 0:09:03.199 of the research about now what tariffs across the board, 0:09:03.280 --> 0:09:06.439 whether it's China or even other some of our allies, 0:09:06.440 --> 0:09:08.599 as Trump has talked about what it would mean in 0:09:08.679 --> 0:09:11.600 terms of the impact on the US economy. If that 0:09:12.080 --> 0:09:14.560 happens and we have a second term by a Trump 0:09:14.559 --> 0:09:17.080 White House, would that change your thinking about what that 0:09:17.160 --> 0:09:19.520 might mean for some companies here in the US and 0:09:19.520 --> 0:09:21.199 how some equities trade. 0:09:22.360 --> 0:09:27.560 Look, you know, either administration could have an impact on 0:09:28.160 --> 0:09:32.199 individual companies, but we know that they will adjust. I 0:09:32.240 --> 0:09:37.000 think this tariff issue is an interesting one because two 0:09:37.040 --> 0:09:41.559 things could be true. Tariffs could increase inflation and make 0:09:42.040 --> 0:09:46.280 and have increased some challenges for some companies, but you know, 0:09:46.559 --> 0:09:49.960 maybe if you do get growth alongside of it, you 0:09:50.040 --> 0:09:52.920 don't feel that. And I think that's one of the 0:09:52.920 --> 0:09:56.040 most important things that I've learned in my career in 0:09:56.120 --> 0:09:59.120 the equity markets is that you can't look at things 0:09:59.120 --> 0:10:02.360 in isolation. And even when we're looking at economic data, 0:10:02.400 --> 0:10:05.320 there's no one set of data that really will kind 0:10:05.320 --> 0:10:10.560 of rule the forward path it's a collective sets of data, 0:10:10.760 --> 0:10:13.679 and so we tend to look at these things in silos, 0:10:13.800 --> 0:10:16.400 like what would happen with the tariffs? I think it's 0:10:16.960 --> 0:10:19.480 what would happen with tariffs? What would happen with the 0:10:19.520 --> 0:10:22.920 growth rate? What would happen with all of these things? 0:10:23.000 --> 0:10:24.199 And what is the. 0:10:24.240 --> 0:10:28.520 Impact ultimately on companies that are trying to manage through it? 0:10:28.559 --> 0:10:33.640 And I think the reality is that companies typically do 0:10:33.840 --> 0:10:37.440 adjust and find ways of adjusting to a new set 0:10:37.440 --> 0:10:40.360 of rules. Sometimes it takes a little bit of time, 0:10:40.679 --> 0:10:44.280 but they typically do adjust, which again leads to the 0:10:45.440 --> 0:10:49.200 performance that Barry also talked about at the initial outset. 0:10:49.320 --> 0:10:52.600 So, Anne, I want to throw out a contrarian idea 0:10:52.840 --> 0:10:55.880 and get your response to it. People have been talking 0:10:55.920 --> 0:10:59.760 about this election like it's a big change election, but 0:11:00.200 --> 0:11:03.760 can't we say either we're going to get a second 0:11:03.840 --> 0:11:06.080 Trump term which isn't going to look very different than 0:11:06.120 --> 0:11:09.960 the first Trump term, or a first Harris term where 0:11:10.000 --> 0:11:11.760 there isn't going to be a whole lot of daylight 0:11:11.880 --> 0:11:14.320 between her and Biden. I know she's trying to cut 0:11:14.320 --> 0:11:18.920 her own course, but isn't this just choosing between one 0:11:19.080 --> 0:11:22.520 former incumbent or the other? How big of a change 0:11:22.559 --> 0:11:23.920 election can this be? 0:11:25.320 --> 0:11:29.040 You know, I actually think that's a really interesting point. 0:11:29.679 --> 0:11:33.520 A couple of months ago, when I was on the show, 0:11:34.240 --> 0:11:37.520 I had talked about this to Berry. I think these 0:11:37.559 --> 0:11:41.160 are kind of two known entities in terms of what 0:11:41.320 --> 0:11:45.000 is what the potential outcome could be. It is very 0:11:45.160 --> 0:11:49.480 likely that Trump two point zero will be similar with 0:11:49.559 --> 0:11:52.880 his policies and what we saw with his first term. 0:11:53.559 --> 0:11:57.440 It also is very likely that although Harris would like 0:11:57.520 --> 0:12:00.800 to cut her own path, you will see some of 0:12:00.840 --> 0:12:04.160 the same policies that we've seen over the last four years. 0:12:04.520 --> 0:12:09.599 So despite all of the drama out there and uncertainty, 0:12:09.920 --> 0:12:12.840 these are known entities, and we haven't had an election 0:12:13.320 --> 0:12:15.600 where both sides are so well known. 0:12:16.320 --> 0:12:20.760 So let's stay with this theme and look forward if 0:12:20.800 --> 0:12:22.720 we kind of get a sense of what we're going 0:12:22.800 --> 0:12:27.680 to get with either candidate. I want to focus your 0:12:27.960 --> 0:12:32.280 discussion on quality and moving down the market cap size 0:12:32.320 --> 0:12:36.400 into mid and small cap. Does that matter who gets 0:12:36.400 --> 0:12:41.640 elected or is that just broad allocation regardless of the 0:12:42.440 --> 0:12:45.200 twenty twenty four presidential election outcome. 0:12:46.480 --> 0:12:50.040 I actually think it's regardless of the election outcome. Again, 0:12:50.160 --> 0:12:52.160 I don't want to look at anything in a vacuum. 0:12:52.240 --> 0:12:53.400 So there's always some. 0:12:53.559 --> 0:12:58.360 Relation to bigger picture issues. But one of the things 0:12:58.360 --> 0:13:02.880 that we've seen over the past several years is this 0:13:03.000 --> 0:13:07.760 increased concentration into the large cap space. Now, as you know, 0:13:08.400 --> 0:13:14.240 fundamentals have driven that earning's growth. Revenue growth has been higher, 0:13:14.800 --> 0:13:18.640 substantially higher in some of those large cap companies. But 0:13:19.400 --> 0:13:25.240 now index investors, passive index investors in particular, are taking 0:13:25.440 --> 0:13:29.679 very concentrated bets when they're investing in a straight SMP 0:13:29.800 --> 0:13:34.319 five hundred index, for example, and it becomes not only 0:13:34.679 --> 0:13:39.040 more difficult for those large cap companies to grow, but 0:13:39.160 --> 0:13:43.400 there's also more scrutiny for those large cap companies. I mean, 0:13:43.520 --> 0:13:47.120 today we see forty three percent of the SMP five 0:13:47.240 --> 0:13:52.800 hundred is under anti trust investigation, which is interesting and 0:13:52.960 --> 0:13:54.360 may not be the whole hunt. 0:13:54.480 --> 0:13:56.400 I'm sure they feel that there's a different word rather 0:13:56.440 --> 0:13:57.080 than interesting. 0:13:58.200 --> 0:13:59.280 Right, there's on the. 0:13:59.240 --> 0:14:02.560 Radar, that's right, and it may not mean a lot 0:14:02.840 --> 0:14:05.320 in your term. We all know these things get caught 0:14:05.360 --> 0:14:09.079 up in court and other things. But it also likely 0:14:09.200 --> 0:14:13.440 hampers the management's ability to be as flexible as they'd 0:14:13.559 --> 0:14:13.880 like to be. 0:14:14.600 --> 0:14:17.280 And I will say Donald Trump was asked about Google, 0:14:17.640 --> 0:14:22.040 and the cases are the government case against Google, so 0:14:22.720 --> 0:14:25.800 something that we know will continue into probably whatever administration, 0:14:25.920 --> 0:14:27.640 or maybe not, maybe it'll calm down a little bit 0:14:28.360 --> 0:14:30.760 and great stuff. As always, Am Maletti be while head 0:14:30.760 --> 0:14:32.840 of Equity over at all Spring Global Investments. 0:14:33.120 --> 0:14:37.400 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:14:37.480 --> 0:14:40.680 starting at seven am Eastern on applecar Play and Android 0:14:40.720 --> 0:14:43.560 Auto with the Bloomberg Business App. You can also listen 0:14:43.680 --> 0:14:46.800 live on Amazon Alexa from our flagship New York station 0:14:47.160 --> 0:14:49.880 just say Alexa playing Bloomberg eleven thirty. 0:14:50.000 --> 0:14:53.760 Let's see what Lachman Achuthon's has to say. A founder of, 0:14:53.760 --> 0:14:56.520 of course, the Economic Cycle Research Institute based here in 0:14:56.520 --> 0:14:59.000 New York City. Ecri Key is right now though in 0:14:59.040 --> 0:15:01.240 our Bloomberg Interactive Broker Studio, and his. 0:15:01.360 --> 0:15:05.080 Leading economic indicators is one of my favorite economic data. 0:15:05.080 --> 0:15:06.400 Well, that's what I was going to say. He knows 0:15:06.480 --> 0:15:10.000 data really well, lots of data, and it's accurate in 0:15:10.080 --> 0:15:11.920 terms of you think of where you were of the 0:15:11.960 --> 0:15:13.640 summer and what's played out, how are you. 0:15:14.120 --> 0:15:16.000 Well, It's so good to see you guys, and I 0:15:16.000 --> 0:15:18.600 think that I think the points that you're making are 0:15:18.640 --> 0:15:19.400 spot on. 0:15:20.000 --> 0:15:20.200 Right. 0:15:20.240 --> 0:15:22.960 It's surprising I think people when they saw that that 0:15:23.360 --> 0:15:27.160 employment report, and Barry, your point is exactly spot on, 0:15:27.400 --> 0:15:28.800 as it often is. 0:15:30.600 --> 0:15:34.480 I learned, all right, we're good, we're done. 0:15:34.520 --> 0:15:35.240 We're done. 0:15:35.480 --> 0:15:38.680 So the whole thing we're doing is monitoring cycles, economic cycles, 0:15:38.880 --> 0:15:42.440 cycles and growth cycles and employment cycles and inflation, and 0:15:42.560 --> 0:15:46.160 no one data point is good. They're all they're all 0:15:46.200 --> 0:15:49.400 really faulty. So we use indexes. We we spent a 0:15:49.400 --> 0:15:53.640 lot of time, decades, dare I say, three generations, putting 0:15:53.640 --> 0:15:57.400 together groups of indicators that give us a little bit 0:15:57.400 --> 0:16:01.680 of a heads up if there's a directional change. And so, Barry, 0:16:01.720 --> 0:16:04.280 I remember you and I were talking last April, we 0:16:04.320 --> 0:16:07.160 were doing your master's in business, and I was saying, Hey, 0:16:07.680 --> 0:16:11.800 the window of vulnerability, the cyclical window of vulnerability is closing. 0:16:11.840 --> 0:16:13.680 There's a whole bunch of reasons. We can tell the 0:16:13.840 --> 0:16:16.520 story in the data, but the risk of a hard 0:16:16.600 --> 0:16:19.880 landing isn't really there. And you know, in the summer, 0:16:19.880 --> 0:16:22.320 people got really excited, Hey is there a recession? All 0:16:22.360 --> 0:16:25.760 this stuff, and lo and behold, we're hanging in there. 0:16:25.800 --> 0:16:29.680 We're slowing down, but we're not crashing. And you know, 0:16:29.760 --> 0:16:32.240 It's kind of a little goldilocks at the moment. Not 0:16:32.280 --> 0:16:33.400 too hot, not too cold. 0:16:33.440 --> 0:16:35.600 Do we have to have a landing of some sort 0:16:35.680 --> 0:16:38.479 at some point? They are cycles, they have highs. 0:16:38.240 --> 0:16:40.840 They have close You do, you absolutely do. The question 0:16:41.000 --> 0:16:44.280 is is it hard or soft? And right now it 0:16:44.320 --> 0:16:47.800 looks decidedly soft as far as we can see. We 0:16:47.800 --> 0:16:49.560 can't see that far. I don't want to say we 0:16:49.680 --> 0:16:52.560 know what's going to happen down the line, but for 0:16:52.640 --> 0:16:57.360 everything that we're monitoring and managing cycle risk, now is 0:16:57.400 --> 0:16:59.440 not the time to play super duper defense. 0:16:59.640 --> 0:16:59.880 Right. 0:17:00.680 --> 0:17:02.720 You said something that has stayed with. 0:17:02.640 --> 0:17:03.480 Me for a long time. 0:17:03.520 --> 0:17:06.440 I want to say twenty thirteen, twenty fourteen, we were 0:17:06.440 --> 0:17:12.400 talking about we were still suffering a little PTSD post crisis, 0:17:12.440 --> 0:17:16.080 and a lot of people then were forecasting recessions. And 0:17:16.240 --> 0:17:18.280 one of the things that has always stayed with me 0:17:18.480 --> 0:17:22.520 is the economy. Think of someone walking down the street 0:17:22.880 --> 0:17:27.360 and you get bumped or jostled. A steady, healthy person 0:17:27.480 --> 0:17:30.520 a running back is going to keep their feet for 0:17:30.720 --> 0:17:34.160 one of these surprises, one of these shocks to cause recession. 0:17:34.680 --> 0:17:38.159 You need a weekened economy that's very vulnerable. Talk a 0:17:38.200 --> 0:17:42.040 little bit about how strong a weak the overall state 0:17:42.080 --> 0:17:43.120 of the economy is right. 0:17:43.160 --> 0:17:46.440 So that's your cyclical vulnerability. I've said over the years 0:17:46.440 --> 0:17:48.800 people who have listened to us, we talk about a 0:17:48.800 --> 0:17:52.240 window of vulnerability a week in immune system in a 0:17:52.320 --> 0:17:55.080 free market oriented economy, and we've studied them all over 0:17:55.119 --> 0:17:58.359 the place for a very long time. There are cycles, 0:17:58.400 --> 0:18:01.119 ebbs and flows. There's times when your immune system is 0:18:01.119 --> 0:18:03.440 strong and times when it's weaker, when you're off kilter. 0:18:03.720 --> 0:18:07.399 When you're off kilter, almost any shock can be a 0:18:07.400 --> 0:18:10.840 recessionary shock. When you're standing firm, you can take a 0:18:10.880 --> 0:18:14.560 hit and keep on going. Remember Katrina, we're talking. We're 0:18:14.600 --> 0:18:17.399 in a hurricane season. And when Katrina hit, a lot 0:18:17.400 --> 0:18:19.800 of people say, oh, that's recessionary. A quarter of the 0:18:20.000 --> 0:18:23.560 economy shut down for a minute, and lo and behold, 0:18:23.720 --> 0:18:27.040 there was no sicklical vulnerability, and we walked through it. 0:18:27.400 --> 0:18:30.040 Here we've got some hurricanes. What's going on. We're going 0:18:30.080 --> 0:18:32.440 to get jumpiness in the data. I guarantee you it's 0:18:32.440 --> 0:18:34.359 going to happen. Maybe someone will run with it and 0:18:34.400 --> 0:18:36.679 say it means this, and it means that when you 0:18:36.720 --> 0:18:39.720 look at the composite indexes, that tells you a little 0:18:39.720 --> 0:18:43.440 bit clearer picture. And right now, even though we're likely 0:18:43.480 --> 0:18:46.480 to get some ups and downs here, it's steady as 0:18:46.520 --> 0:18:51.080 she goes and all the activity that gets hit during 0:18:51.080 --> 0:18:54.119 the hurricanes. On the other side, you're going to have rebuilding. 0:18:54.119 --> 0:18:55.720 And I got to tell you one of the sectors 0:18:55.760 --> 0:18:59.040 that's been a bulwark here has been the construction sector, 0:18:59.119 --> 0:19:03.000 non residential can struction. Now I bet residential construction comes back. 0:19:02.880 --> 0:19:06.320 In So so the one question I keep asking people 0:19:06.680 --> 0:19:10.879 and not getting a satisfactory answer, is why do you 0:19:12.119 --> 0:19:14.800 now press that? But you're the right person to answer 0:19:14.840 --> 0:19:19.840 ask this, Given that window of vulnerability, why did so 0:19:19.920 --> 0:19:23.919 many economists so expect a recession that never showed up? 0:19:23.920 --> 0:19:25.800 Remember how many interest rate cuts they were thinking at 0:19:25.840 --> 0:19:26.159 the end of. 0:19:26.200 --> 0:19:28.159 Last year, last year, the year before. 0:19:28.400 --> 0:19:31.920 Yeah, okasion they've been talking about forever a couple less, 0:19:31.920 --> 0:19:32.359 all right. 0:19:32.680 --> 0:19:35.679 I think that I think the fundamental reason is labor hoarding. 0:19:36.200 --> 0:19:38.520 Now we're talking post COVID stuff, right, right, So we're 0:19:38.520 --> 0:19:41.639 coming off we got rate hikes going like crazy, and 0:19:41.680 --> 0:19:45.639 we've got a big slow down, and everything cyclical, anything 0:19:45.680 --> 0:19:48.919 discretionary was slowing down. Even employment was coming down. The 0:19:48.960 --> 0:19:52.280 growth in the cyclical discretionary parts of the economy was 0:19:52.320 --> 0:19:57.000 slowing really, really hard. However, the non discretionary think teachers, 0:19:57.200 --> 0:20:02.000 I think doctors and nurses. Okay, that employment component, which 0:20:02.040 --> 0:20:05.440 is a lot of people, was running near three decade highs, 0:20:05.480 --> 0:20:07.760 and it's growth rate it was solid, and it was 0:20:08.480 --> 0:20:13.199 it was so structurally difficult to get recessionary declines and 0:20:13.240 --> 0:20:16.560 employment even with the big cyclical slow down. I think 0:20:16.600 --> 0:20:20.320 that labor hoarding continues today. The only reason we're having 0:20:20.400 --> 0:20:23.960 some slow down in jobs growth right now is because 0:20:24.359 --> 0:20:28.639 that non discretionary component of the jobs market is slowing. 0:20:28.680 --> 0:20:32.520 It's coming off of crazy three decade highs, and the 0:20:32.600 --> 0:20:36.360 cyclical component, the discretionary component, I think it's actually tropic. 0:20:36.720 --> 0:20:39.639 So lax, Do you get upset or nervous if we 0:20:39.720 --> 0:20:42.520 stop to see we don't see that labor hoarding anymore. 0:20:42.560 --> 0:20:44.320 If we start to see layoffs we haven't seen. 0:20:45.080 --> 0:20:46.200 If we start to see that. 0:20:46.359 --> 0:20:49.760 Sure layoffs, I think layoffs I would take as seriously 0:20:49.800 --> 0:20:53.159 as someone who got layoff. Okay, those are serious things. 0:20:53.480 --> 0:20:57.040 We don't see them here. Jobless claims are a great 0:20:57.040 --> 0:20:57.840 thing to look at. 0:20:58.119 --> 0:21:00.400 We have a so the Boeing or the of us 0:21:00.400 --> 0:21:03.320 that we talked about this morning, that's want to see. 0:21:03.840 --> 0:21:07.320 These are companies specific I don't see. There's so you 0:21:07.400 --> 0:21:11.400 use ps PTSD before. There's so much PTSD about that, 0:21:11.400 --> 0:21:15.280 that difficulty in hiring post COVID, and there's no hard 0:21:15.520 --> 0:21:16.160 I'm still stung. 0:21:16.200 --> 0:21:17.399 Companies are still stung from that. 0:21:17.640 --> 0:21:19.720 Look, it's very expensive to let someone go and then 0:21:19.800 --> 0:21:20.520 hire them back again. 0:21:20.640 --> 0:21:23.720 And there's a shortage of workers out there. 0:21:23.520 --> 0:21:26.160