WEBVTT - Sanders Announces Presidential Run: Greg Valliere 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Wicks. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.760 at Bloomberg dot com. Here's some words for you. I 0:00:21.800 --> 0:00:24.840 think President Trump is a pathological liar. Every day he's 0:00:24.840 --> 0:00:26.720 telling one liar or another, and it gives me no 0:00:26.760 --> 0:00:28.800 pleasure to say that. I also think he's a racist, 0:00:28.880 --> 0:00:32.599 a sexist, homophobe, a zenophobe, somebody who's getting cheap political 0:00:32.640 --> 0:00:36.040 points by trying to pick on minorities. That is what 0:00:36.120 --> 0:00:39.200 Bernie Sanders said in an interview with Vermont Public Radio 0:00:39.280 --> 0:00:42.280 as he announced his candidacy for the President of the 0:00:42.360 --> 0:00:45.600 United States. Greg Bellier, chief US policy strategist for a 0:00:45.680 --> 0:00:48.760 g F Investments, joins us Now, Greg, no surprise, but 0:00:48.800 --> 0:00:51.160 what do you make of how you rolled out this announcement. 0:00:51.840 --> 0:00:53.960 Just think we're going to have a year and a 0:00:54.000 --> 0:00:56.760 half of this kind of rhetoric back and forth in 0:00:56.840 --> 0:01:00.320 Trump of Chris hits back even harder. So, uh, welcome 0:01:00.360 --> 0:01:02.360 to the next election. That's going to be pretty ugly. 0:01:03.000 --> 0:01:05.000 And Paul, what's interesting, at least for me, is for 0:01:05.040 --> 0:01:06.920 the last election, like Bernie Sanders was out on a 0:01:06.959 --> 0:01:09.440 lima his own. Now he's not. Now he's not, he's 0:01:09.440 --> 0:01:11.839 there's lots of company out on the left limb where 0:01:11.840 --> 0:01:16.080 he likes to, uh they play. But Greg, thinking about it, 0:01:16.120 --> 0:01:18.760 you know, it is a competitive it's it's a very 0:01:18.760 --> 0:01:21.120 crowded field. We're up to twenty some odd names on 0:01:21.120 --> 0:01:24.280 the Democratic side. Where do you think Bernie Sanders best 0:01:24.280 --> 0:01:28.640 positions himself this go around. Well, let's be honest here, 0:01:28.720 --> 0:01:33.679 He's not a Democrat. He is a self professed Democratic socialist, 0:01:34.040 --> 0:01:36.839 has never really joined the party, so he's out there. 0:01:36.840 --> 0:01:40.199 I mean he's well to the left. Obviously Elizabeth Warren 0:01:40.240 --> 0:01:43.880 will be as well. But there's a huge lane in 0:01:43.920 --> 0:01:47.119 the center. I think Klobuchar last night in the town 0:01:47.160 --> 0:01:49.640 hall tried to take some of that lane. I think 0:01:49.760 --> 0:01:52.080 Joe Biden well might even be a guy by the 0:01:52.160 --> 0:01:54.280 name of Bloomberg. So there are a lot of people 0:01:54.280 --> 0:01:58.760 who might want the middle lane, and Bernie makes it 0:01:58.800 --> 0:02:01.200 easier for them. And of course Mike Bloomberg is the 0:02:01.200 --> 0:02:05.640 majority owner uh and founder of Bloomberg LP. UM, So 0:02:05.960 --> 0:02:08.120 are we in for this no matter what side? Because 0:02:08.120 --> 0:02:11.080 if you take away even this sort of populist socialist rhetoric, 0:02:11.280 --> 0:02:14.080 you also have things like buybacks with Marco Rubio, and 0:02:14.120 --> 0:02:17.040 you have a Sanders and Schumer on that train to like, 0:02:17.160 --> 0:02:19.760 either way, we're sort of headed for this sort of 0:02:19.800 --> 0:02:23.200 collapse of Wall Street versus Main Street. Again, that's a 0:02:23.200 --> 0:02:26.800 good point, Alex, and I think that even Republicans feel 0:02:26.880 --> 0:02:30.959 that perhaps the tax cuts went too far for corporations 0:02:30.960 --> 0:02:33.600 and the very wealthy, so that's going to be fair 0:02:33.639 --> 0:02:37.440 game for just about everyone. But when you look at 0:02:37.639 --> 0:02:41.359 Bernie Sanders in particular and the candidates who were well 0:02:41.400 --> 0:02:43.680 to the left, I'll be damned if I can figure 0:02:43.680 --> 0:02:45.960 out how they'll pay for any of this stuff. And 0:02:46.000 --> 0:02:48.160 it may be a little too exotic. Trump has not 0:02:48.320 --> 0:02:52.919 lost uh that Uh. He made a speech in Miami 0:02:53.120 --> 0:02:55.480 yesterday in which like half of it seemed to be 0:02:55.760 --> 0:02:59.240 talking how about how horrible socialists are. What they've done 0:02:59.280 --> 0:03:01.160 to venis a whale of us. So he's going to 0:03:01.240 --> 0:03:03.799 try to portray the Democrats is all socialists. I don't 0:03:03.840 --> 0:03:06.000 think it's going to work. So Gregg, what do you 0:03:06.040 --> 0:03:09.320 think that Bernie Sanders needs to change from the last 0:03:09.320 --> 0:03:13.240 go round for him? Well, I think that he probably 0:03:13.320 --> 0:03:16.359 has to do a little bit better with African Americans. 0:03:16.400 --> 0:03:20.080 That was a weak spot for him. I think that 0:03:20.440 --> 0:03:23.720 you know, at his age at seventy seven, now he's 0:03:23.720 --> 0:03:25.680 going to have to show a lot of vigor. You know, 0:03:25.760 --> 0:03:28.760 he can't get a cold. He's got to He's got 0:03:28.800 --> 0:03:31.840 to plow right through. I think, uh, energy levels are 0:03:31.840 --> 0:03:35.160 going to be important. So also what we're sort of 0:03:35.160 --> 0:03:37.240 percolating on this is all the rhetoric we heard about 0:03:37.280 --> 0:03:40.200 these potential auto tariffs from the US. You had the 0:03:40.280 --> 0:03:42.600 auto European leaders speaking out against it. You know, I 0:03:42.640 --> 0:03:44.880 spoke to Michael Jays as he runs policy over at 0:03:44.920 --> 0:03:47.760 Morgan Stanley US Public Policy, and he said, look, it's 0:03:47.760 --> 0:03:49.560 an issue, but it would be short term. This is 0:03:49.600 --> 0:03:51.880 what he had to sand Bloomberg Television earlier today. There 0:03:52.000 --> 0:03:55.119 is a potential political circuit breaker, which is a couple 0:03:55.200 --> 0:03:57.320 of different bills that are going through the Senate right now. 0:03:57.680 --> 0:03:59.840 Um that could take back some of this tariffing authority 0:04:00.040 --> 0:04:02.680 from the President before it's actually put in the place 0:04:02.960 --> 0:04:04.880 right now. I don't think that that's going to happen 0:04:04.960 --> 0:04:07.760 before this becomes more live than it already is. But 0:04:07.840 --> 0:04:09.600 we have to watch that very carefully because that could 0:04:09.640 --> 0:04:12.240 stop it before it starts. So kind of to your point, Greg, 0:04:12.320 --> 0:04:14.920 is that you know you went too far to one side. 0:04:15.200 --> 0:04:17.599 Are we seeing a world where the Senate and Congress 0:04:17.640 --> 0:04:19.359 is going to try and pair back any power that 0:04:19.400 --> 0:04:22.400 Trump really has to push certain things forward. I think 0:04:22.440 --> 0:04:25.520 if he went for auto terroris, and there's a secret 0:04:25.560 --> 0:04:28.760 report that came out over the weekend from Commerce to 0:04:28.880 --> 0:04:31.479 the President, and if he looks at it and says 0:04:31.480 --> 0:04:33.479 I'm going to impose auto terris, he could get a 0:04:33.600 --> 0:04:39.039 mighty mighty pushback from Congress, and not just from Democrats. So, Greg, 0:04:39.839 --> 0:04:42.279 mentioning tariffs, what do you expect if anything out of 0:04:42.279 --> 0:04:44.400 the trade talks with China that contents that are ongoing? 0:04:44.839 --> 0:04:48.400 You know, I think that we probably have gone a 0:04:48.400 --> 0:04:50.520 little bit too far, Paul. We've gotten a little bit 0:04:50.560 --> 0:04:53.360 ahead of ourselves that there's not going to be a deal. 0:04:53.400 --> 0:04:56.760 In my opinion on March one way, too much stuff 0:04:56.839 --> 0:05:00.760 still to be resolved. I do think late spring, early 0:05:00.800 --> 0:05:03.360 summer there's going to be a big, made for TV 0:05:03.640 --> 0:05:08.520 splashy theatrical meeting between Presidents Trump and Z and we 0:05:08.600 --> 0:05:11.080 will get a deal. But for anyone who's hoping for 0:05:11.120 --> 0:05:14.400 a deal by this much March one deadline, I think 0:05:14.440 --> 0:05:17.960 that's unrealistic. So you think we'll get an extension then 0:05:18.320 --> 0:05:20.360 at least, yeah, I do. I don't think there's anything 0:05:20.400 --> 0:05:23.200 special about that day. They can push it back, you know, 0:05:23.240 --> 0:05:26.080 two or three months. It does look like they're making progress, 0:05:26.440 --> 0:05:28.760 but there's not going to be a final deal without 0:05:28.800 --> 0:05:32.080 Trump and Z. And it's too soon for them to 0:05:32.120 --> 0:05:35.400 get together. I think that comes to three months from now. 0:05:36.279 --> 0:05:40.599 Greg Valieri, Chief US Policy Strategy at a g F Investments, 0:05:40.600 --> 0:05:43.360 thank you very much for joining us on Bloomberg Radio 0:05:43.400 --> 0:05:56.440 this morning. Joining us now is the man who can 0:05:56.440 --> 0:06:00.520 talk about everything retail berk Littinger, he joins. So from 0:06:00.560 --> 0:06:02.719 a strategic let me get the name right, I don't 0:06:02.720 --> 0:06:06.080 want to miss this one up Strategic Resource Group, show off, 0:06:06.080 --> 0:06:08.240 Strategic Resource Group. I had your bio up, but of 0:06:08.279 --> 0:06:09.520 course I didn't have the name of your shop. So 0:06:09.560 --> 0:06:12.640 we managing director of Strategic Resource Group has a long career. 0:06:12.960 --> 0:06:15.680 Whether you take a look at say PNG, throughout the 0:06:15.800 --> 0:06:18.839 history and sort of helping boost consumer sales, their marketing 0:06:18.880 --> 0:06:22.320 and retailing. You're the guy. So clearly Walmart did well 0:06:22.400 --> 0:06:24.640 in part because of the push to e commerce, and 0:06:24.680 --> 0:06:28.520 they're discounting and Alex and Paul. What's really impressive about 0:06:28.560 --> 0:06:33.200 this quarter that hasn't been reported by other networks is 0:06:33.360 --> 0:06:37.239 that Walmart's paying higher wages and at the same time 0:06:37.320 --> 0:06:42.440 they're lowering their prices and generating more revenue and producing 0:06:42.520 --> 0:06:45.680 higher levels of profits. So they're hitting all four cornerstones 0:06:46.040 --> 0:06:50.480 that other competitors are not. And even even Amazon's not 0:06:50.600 --> 0:06:53.440 doing all that because Amazon's racing prices, and that's one 0:06:53.480 --> 0:06:56.080 of the reasons Walmart's doing so well well. This quarter's 0:06:56.160 --> 0:06:58.760 numbers were very interesting. I think investors always focused on 0:06:58.800 --> 0:07:00.839 Walmart just given its size. By think after the retail 0:07:00.839 --> 0:07:03.320 sales report from last week that was such a curveball 0:07:03.360 --> 0:07:05.720 for everybody with retail sales. I guess and you sent 0:07:05.800 --> 0:07:08.440 me down reported one point two per cent. What do 0:07:08.480 --> 0:07:11.400 you make of those that number plus the Walmart numbers today? 0:07:11.440 --> 0:07:15.160 It's an important question in the issue is that all 0:07:15.200 --> 0:07:18.960 consumers across the country are facing all ten monthly budget 0:07:18.960 --> 0:07:23.760 expenditures have gone up over the last twelve months. UH 0:07:24.080 --> 0:07:28.119 rich people love a bargain, and working people and people 0:07:28.120 --> 0:07:30.960 on fixed and limited income need and have to have 0:07:31.040 --> 0:07:33.120 a bargain. And the best place to get a bargain 0:07:33.200 --> 0:07:37.080 on everything UH she or he buys as the consumers 0:07:37.400 --> 0:07:41.880 is Walmart. It's the easiest place to return and UH 0:07:42.440 --> 0:07:46.040 Amazon is good if a product doesn't weigh a lot, 0:07:46.440 --> 0:07:49.280 or if it's not big in size, but if it's 0:07:49.400 --> 0:07:52.600 something that's bulky, like a fifty pound bag of pet 0:07:52.640 --> 0:07:56.920 food or uh any anything else that's large in size 0:07:57.000 --> 0:08:00.160 or heavy and weight like a UH gall on a 0:08:00.280 --> 0:08:03.840 milk which weighs nine pounds and is expensive on Amazon. 0:08:04.240 --> 0:08:10.800 Walmart saves people more money. And Walmart's investing in advertising, marketing, 0:08:10.800 --> 0:08:15.160 and consumer communication, whether it's Bloomberg, Radio, TV, the Super Bowl. 0:08:15.640 --> 0:08:19.560 Sam Walden and his son Rob thought marketing and advertising 0:08:19.680 --> 0:08:25.440 was an expense. Amazon views advertising as an expense, Doug McMillan, 0:08:25.520 --> 0:08:28.920 the CEO of Walmart, looks at as an investment, and 0:08:29.000 --> 0:08:34.240 Jerry del Famina, the legendary advertising agency head I, said 0:08:34.240 --> 0:08:37.480 Walmart's advertising as some of the best anywhere in the world, 0:08:37.880 --> 0:08:42.360 and that's in taking consumers away from competitors when Walmart 0:08:42.760 --> 0:08:46.319 loss for competitors, but at what expense? Right, Like, so 0:08:46.400 --> 0:08:49.200 gross margin expansion is going to still be a lusive 0:08:49.280 --> 0:08:50.920 for them because they have to do all the stuff 0:08:50.920 --> 0:08:52.840 that you just said. They have to keep prices low. 0:08:52.880 --> 0:08:54.640 They also have to deal with delivery and shipping and 0:08:54.679 --> 0:08:58.679 all that. So why is it okay now? First a 0:08:58.720 --> 0:09:01.000 couple of years ago and that wasn't okay. We we 0:09:01.080 --> 0:09:05.800 look at it, Alex on your key question is Walmart's 0:09:05.840 --> 0:09:10.880 investing in the future to profitably drive sales growth. So 0:09:10.920 --> 0:09:15.120 if you look at depreciation for Walmart versus depreciation for Amazon, 0:09:15.760 --> 0:09:20.280 Walmart's spending more than its level of depreciation to win online. 0:09:20.400 --> 0:09:24.160 When with their store eleven in Avon, Colorado, with click 0:09:24.200 --> 0:09:28.520 and collect, with a FedEx station inside, with Western Union 0:09:28.520 --> 0:09:32.920 to wire money and of America will be able to 0:09:32.960 --> 0:09:37.080 get deliveries from Walmart dot Com including consumables within the 0:09:37.080 --> 0:09:40.720 next two years. That's all through the investment. Meanwhile, Jeff 0:09:40.720 --> 0:09:44.439 Bezos aid Amazon typically does not reinvest all his and 0:09:44.559 --> 0:09:48.400 Amazon's depreciation in winning for the future. So Walmart with 0:09:48.440 --> 0:09:52.080 a better balance sheet. To your point, the margin margins 0:09:52.120 --> 0:09:55.520 are more modest, but that's investing in the Roman Empire 0:09:55.559 --> 0:09:58.880 of retail UH to win in cyberspace and when the 0:09:58.880 --> 0:10:03.080 wars and the stores well, because Amazon's just getting crushed 0:10:03.520 --> 0:10:07.000 in the new whole foods formats by Walmart and others. 0:10:07.480 --> 0:10:10.520 So Bert Flickinger, Managing director for Strategic Resource Group, joining 0:10:10.600 --> 0:10:13.319 us in studio. One of the numbers that jumped out 0:10:13.480 --> 0:10:17.080 at me Bert was that growth in e commerce UH 0:10:17.240 --> 0:10:21.520 for Walmart. So they continue to compete extraordinarily well against Amazon. 0:10:22.440 --> 0:10:25.480 What is the secret sauce for them? Secret sauce is 0:10:25.600 --> 0:10:32.200 the investment that Alex referenced, plus the reverse recruiting, so UH, 0:10:32.200 --> 0:10:35.720 Walmart and Doug McMillan of recruited Mark Lorie, who was 0:10:35.760 --> 0:10:39.760 a genius who helped develop wag Diapers dot com a 0:10:39.760 --> 0:10:43.760 lot of Amazon dot com away from Amazon. Dave Criscione, 0:10:44.320 --> 0:10:48.120 my star student at Cornell Summer Executive Program, was running 0:10:48.160 --> 0:10:51.640 Amazon Go. Walmart recruited Dave away, so they've taken a 0:10:51.720 --> 0:10:54.920 dream team out of Amazon and Bazos, in our view, 0:10:55.000 --> 0:10:57.840 is the most brilliant guy in all of the history 0:10:57.840 --> 0:11:01.400 of retail. But one general can't win the war, and 0:11:01.480 --> 0:11:06.199 Walmart's taking as best officers and bringing them into Walmart 0:11:06.240 --> 0:11:08.480 for Walmart to win where Walmart has been losing in 0:11:08.600 --> 0:11:13.800 cyberspace before they did a complete reset with great leadership 0:11:13.840 --> 0:11:17.959 as opposed to family management. So who do you think 0:11:17.960 --> 0:11:20.719 Walmart is taking market share from? Or is the pie 0:11:20.760 --> 0:11:22.599 bigger than we thought? And we've talked about Amazon, but 0:11:22.640 --> 0:11:25.080 I'm more interested also in like the targets are the Macy's, 0:11:25.200 --> 0:11:26.839 Like who are they eat? Who's lunch a they're eating? 0:11:27.120 --> 0:11:30.680 They're doing a combination. They're taking the business from Target 0:11:30.720 --> 0:11:35.600 because Walmart on your investment point, Walmart has the biggest 0:11:36.040 --> 0:11:40.120 UH data base in terms of terror bytes, second only 0:11:40.160 --> 0:11:44.480 to the US Pentagon. So in terms of dedicated direct 0:11:44.600 --> 0:11:50.720 distribution h e commerce communications down to the nanosecond, they're great. 0:11:50.960 --> 0:11:53.640 Target's been working with McKenzie and company and a lot 0:11:53.679 --> 0:11:55.920 of consulting firms that have done a lot of good work, 0:11:56.200 --> 0:12:01.200 but they've outsourced distribution. They've outsowed, they outsourced Target dot 0:12:01.240 --> 0:12:03.280 Com for a number of years, the outsourced part of 0:12:03.320 --> 0:12:08.680 credit cards. So Target doesn't have that institutional efficiencies that 0:12:09.000 --> 0:12:12.160 Walmart's gotten. The other thing that you and Paul reported 0:12:12.960 --> 0:12:17.480 very well is the Payless bankruptcy, the Jimboree bankruptcies, the 0:12:17.520 --> 0:12:21.679 earlier retail bankruptcies. So two toys r US, which you 0:12:21.760 --> 0:12:25.240 and Paul spoke of earlier. So Walmart's aggregating the sales 0:12:25.320 --> 0:12:30.319 from the bankrupt retailers, plus taking retailers from food, drug 0:12:30.440 --> 0:12:35.520 discount department store category dominant, especially sporting goods and toys 0:12:36.040 --> 0:12:40.679 twenty spart. How's the consumer doing? Broadly defined? Consumers doing 0:12:40.720 --> 0:12:45.640 well in off price and the word working consumer, consumers 0:12:45.679 --> 0:12:50.160 doing okay. Uh. Luxury consumers are really struggling worldwide. As 0:12:50.200 --> 0:12:52.760 my husband said, can you just please stop spending alex 0:12:53.320 --> 0:12:56.880 thanks just one week, don't buy Maybe I think a 0:12:56.880 --> 0:13:00.000 lot of people that In December Profit Burt Flicking, your 0:13:00.040 --> 0:13:03.520 managing director for Strategic Resource Group, joining us in study 0:13:03.679 --> 0:13:18.360 on Walmart and all things retail. As we were talking about, 0:13:18.400 --> 0:13:20.600 you have the FED minutes coming out on Wednesday at 0:13:20.600 --> 0:13:23.960 two pm, and you know what I'm hearing, kill the dots, 0:13:24.160 --> 0:13:27.400 more revolution of more revolt against the dot plot because 0:13:27.400 --> 0:13:30.400 it doesn't help provide clarity, but more confusion for the markets. 0:13:30.440 --> 0:13:35.080 Joining us now is Craig Taurus with the latest. So Craig, realistically, 0:13:35.760 --> 0:13:37.240 are we really going to see the end of the 0:13:37.280 --> 0:13:42.199 dot plot? And why no? And you're so sad about that. 0:13:44.080 --> 0:13:46.440 It took a long time to get agreement on this. 0:13:47.400 --> 0:13:51.640 I do think it really isn't expressing what they would 0:13:51.640 --> 0:13:55.840 like to express, and maybe that's the departure point of 0:13:55.920 --> 0:14:01.160 their conversation these days. So Craig, maybe you know, it's 0:14:01.200 --> 0:14:04.040 debatable whether the dot plot itself and that forecast and 0:14:04.040 --> 0:14:06.079 what it represents is the problem, or maybe just the 0:14:06.160 --> 0:14:10.400 messaging of what the FED officials are seeing what happened 0:14:10.440 --> 0:14:15.720 in December that really riled the markets. I think so they, 0:14:15.760 --> 0:14:19.480 as everybody now knows, they stuck with this outlook of 0:14:19.640 --> 0:14:23.360 two rate hikes at a time when we later saw 0:14:23.360 --> 0:14:26.600 in the minutes there were as many as five downside 0:14:26.680 --> 0:14:30.520 risks that they cited, and so whatever they said in 0:14:30.600 --> 0:14:34.720 the press release and the FED statement in their forecasts 0:14:35.480 --> 0:14:42.480 didn't really reflect the conditionality or their conviction about those 0:14:42.520 --> 0:14:47.600 two hikes in penciled in for so, so again I 0:14:47.680 --> 0:14:51.120 come back to, is more of a messaging issue. How 0:14:51.120 --> 0:14:52.800 can they fix that if there is in fact a 0:14:52.840 --> 0:14:58.360 systemic problem. It's complicated. As we say in our story today, 0:14:59.120 --> 0:15:02.840 During a number of ideas floating around, one is well, 0:15:03.000 --> 0:15:06.120 j Pal's having press conferences eight times a year now, right, 0:15:06.960 --> 0:15:10.280 so they could give more frequent updates on their forecasts 0:15:10.360 --> 0:15:13.560 eight times a year instead of four. Now, that would 0:15:13.560 --> 0:15:17.920 show more agility in response to current information. And I 0:15:17.920 --> 0:15:21.560 would expect, you know, that dot plot and the outlook 0:15:21.640 --> 0:15:26.760 for growth, you might see some changes. UM would not 0:15:26.920 --> 0:15:32.080 express conditionality though, uh no, it would not. So here's 0:15:32.080 --> 0:15:33.920 what this reminds me of. And if you are a parent, 0:15:33.960 --> 0:15:36.120 maybe you'll get this analogy. It reminds me of my 0:15:36.160 --> 0:15:38.800 toddler wanting chocolate for breakfast and I said, you can't 0:15:38.840 --> 0:15:40.800 have chocolate for breakfast, like but I want to and 0:15:40.840 --> 0:15:42.200 hear all the reasons why, and I say, no, you 0:15:42.240 --> 0:15:44.960 can't have any anything except giving her chocolate for breakfast. 0:15:45.120 --> 0:15:47.200 Won't let her relax and calm down. It's kind of 0:15:47.200 --> 0:15:49.760 the same thing. The markets basically want Powell to come 0:15:49.800 --> 0:15:52.800 out and say we're raising rates this date and if 0:15:52.800 --> 0:15:55.080 we don't, here's the number one reason why. But that 0:15:55.160 --> 0:15:58.360 Paul is like totally unrealistic. That's not how the system works. 0:15:58.400 --> 0:16:00.680 It is. And it's also a question of getting too 0:16:00.720 --> 0:16:03.200 much information. With Chairman Pal, you know, speaking eight times 0:16:03.240 --> 0:16:06.240 a year versus four times UM, is that too much information? 0:16:07.400 --> 0:16:12.680 I don't think so. So I think the problem. You know, 0:16:12.720 --> 0:16:16.440 there's something about communication when you make a decision, you know, 0:16:16.480 --> 0:16:19.600 as a parent, as an individual, whoever, you want to 0:16:19.600 --> 0:16:22.280 come out and kind of sell the decision, right, this 0:16:22.360 --> 0:16:25.360 is why we did what we did. It's kind of 0:16:25.400 --> 0:16:28.320 hard then to shift and say this is why we 0:16:28.440 --> 0:16:32.240 might not do what we did. But they have to 0:16:32.280 --> 0:16:36.680 do that because you know why fed funds markets, money 0:16:36.720 --> 0:16:42.320 markets are always of reflecting the conditionality and probability of 0:16:42.680 --> 0:16:44.640 that they're going to do or may not do that, 0:16:45.240 --> 0:16:48.160 So somehow they have to address that. So basically that 0:16:48.200 --> 0:16:51.440 means that instead of the market focusing on the dot plot, 0:16:51.680 --> 0:16:53.920 it come out and say, I'm making this up. Here's 0:16:53.920 --> 0:16:57.480 the criteria of six things that we look at boom boom, boom, 0:16:57.520 --> 0:16:59.280 and this is what makes us doat a dependent or 0:16:59.320 --> 0:17:03.920 not correct. So some central banks run scenarios and they 0:17:03.960 --> 0:17:08.280 say this isn't gonna we don't this isn't our baseline. 0:17:08.440 --> 0:17:11.200 This could happen or it may not. But what would 0:17:11.240 --> 0:17:15.720 happen if after the fiscal stimulus, growth ratcheted down to 0:17:15.840 --> 0:17:18.919 two percent or below, and then you just ran an 0:17:18.960 --> 0:17:22.280 economic model and plotted out a funds rate that's called 0:17:22.280 --> 0:17:25.680 a fan chart. Those are just as confusing. Now that's 0:17:25.720 --> 0:17:28.000 not a fan chart. This is a scenario with a 0:17:28.040 --> 0:17:30.639 funds rate and not a fan around it. Fan charts 0:17:30.640 --> 0:17:34.360 are meaningless in my view and in many people's view, 0:17:34.400 --> 0:17:37.760 because it tells you the number could be zero where 0:17:37.800 --> 0:17:41.480 it could before. That's really not specific guidance, or it 0:17:41.520 --> 0:17:44.640 doesn't say anything about I hate this word, but I'm 0:17:44.640 --> 0:17:49.320 going to use it your reaction function, how you'll respond. So, Craig, 0:17:49.359 --> 0:17:51.520 is there any chance that the FED would consider a 0:17:51.520 --> 0:17:58.680 consensus forecast? That's a great question. So if the three 0:17:58.680 --> 0:18:01.159 of us were in a room and we had to 0:18:01.240 --> 0:18:05.400 walk out and say something to Bloomberg at large, right, 0:18:06.320 --> 0:18:09.160 I think we could agree on what we're going to say. 0:18:09.359 --> 0:18:12.080 For some reason, the f o MC has a very 0:18:12.119 --> 0:18:15.199 hard time coming up with us or getting to the 0:18:15.200 --> 0:18:17.680 point where they say, well, this is we're going to 0:18:17.760 --> 0:18:21.000 agree on this forecast. Part of it is our system 0:18:21.000 --> 0:18:26.560 were diversity of views is also important, But it doesn't 0:18:26.600 --> 0:18:30.320 seem to me like a big goal to aim for. Um. 0:18:30.359 --> 0:18:33.280 I'm optimistic, I guess all right, Craig, tourists tired of 0:18:33.320 --> 0:18:35.399 the dot plot, but I resigned and trying to get 0:18:35.440 --> 0:18:48.800 optimistic joining us up from Bloomberg. Well, interest rates are falling, 0:18:48.800 --> 0:18:52.480 and a growing course is forecasting slower growth and tepid inflation. 0:18:52.960 --> 0:18:55.920 Consensus has shifted to a point where virtually all forecasters 0:18:55.960 --> 0:18:58.879 expect interest rates to follow inflation towards this seller. To 0:18:58.920 --> 0:19:01.480 get a sense of how this scenario may play out, 0:19:01.520 --> 0:19:04.920 we welcome Jack Ablin. Jack is founding partner and chief 0:19:04.960 --> 0:19:08.840 investment officer at Crescent Wealth Advisors. Jack, thanks so much 0:19:08.880 --> 0:19:12.159 for joining us. So the inflation outlook is currently I 0:19:12.200 --> 0:19:14.280 think quite benign in the marketplace. What do you think 0:19:14.280 --> 0:19:18.600 could change that? Well, I think probably if anything is 0:19:18.680 --> 0:19:22.840 the labor market. You know clearly um our economy is 0:19:22.840 --> 0:19:27.880 is pivots off of households, and household income pivots off 0:19:27.960 --> 0:19:30.159 of wages. And you know, we'll keep in mind that 0:19:30.760 --> 0:19:34.359 wages your over year have are up three point two percent, 0:19:34.440 --> 0:19:39.360 so certainly you know, well above our trend trend growth 0:19:40.320 --> 0:19:44.679 UH for real GDP, and based on our forecast, we 0:19:44.760 --> 0:19:48.080 think wages could rise another three percent over the coming 0:19:48.080 --> 0:19:51.919 four quarters. So does that wind up feeding into inflation 0:19:51.960 --> 0:19:55.639 expectations because a lot of investors now argue that inflation 0:19:55.720 --> 0:20:00.720 expectations will be now, really what the fees reacting to Yeah, 0:20:00.760 --> 0:20:03.480 I think that's exactly at Uh. The fact is that, 0:20:03.600 --> 0:20:07.560 you know, um that we've we've we've printed four point 0:20:07.600 --> 0:20:12.240 three four point five trillion dollars of money to buy bonds. 0:20:12.680 --> 0:20:16.720 That hasn't led too much inflation. We've had now a 0:20:17.000 --> 0:20:21.880 ten year recovery. Uh, that so far has not led 0:20:21.920 --> 0:20:26.280 too much inflation. But I think consumer demand, which drives 0:20:26.320 --> 0:20:30.680 obviously most of economic activity, once we start running out 0:20:30.680 --> 0:20:35.280 of capacity, we will, uh, we will eventually start to 0:20:35.280 --> 0:20:38.240 see some price rises. Not to mention, of course, uh 0:20:38.280 --> 0:20:41.679 some of these tariffs that um, that that companies are 0:20:41.680 --> 0:20:44.160 going to have to pass along. So Jack, I guess 0:20:44.160 --> 0:20:46.800 the consensus for the Fed for the remainder of the 0:20:46.840 --> 0:20:49.679 year is maybe one, maybe two hikes and then I 0:20:49.680 --> 0:20:53.400 guess a systematic, steady wind down of the balance sheet. 0:20:53.920 --> 0:20:58.440 Are you in that consensus? Yeah, I mean I think 0:20:58.520 --> 0:21:02.400 that In fact, I would say consensus what the Fed 0:21:02.440 --> 0:21:05.720 believes and what consensus believes maybe a little bit different here. 0:21:06.359 --> 0:21:10.280 I think consensus is closer to you know, zero hikes 0:21:10.359 --> 0:21:12.760 this year and in fact rate cuts next year. I 0:21:12.800 --> 0:21:19.640 think that probably a little overly aggressive. I do think, um, 0:21:19.680 --> 0:21:24.159 you know, we are starting to run of certain capacity. UM. 0:21:24.200 --> 0:21:27.200 You know, I I did note that, for example, UM, 0:21:27.240 --> 0:21:30.040 a lot of the staples companies said that they're going 0:21:30.080 --> 0:21:34.880 to be passing along higher prices to their consumers. UM. 0:21:35.000 --> 0:21:39.080 And so you know that's obviously staples in elastic demand. 0:21:39.160 --> 0:21:43.040 But eventually if that starts to move into other areas, UM, 0:21:43.080 --> 0:21:46.679 you know, that could that could put the price indecks higher. 0:21:46.920 --> 0:21:50.000 Here's a question. Can we just keep going up but 0:21:50.119 --> 0:21:56.960 the economy slows? You know, it's a it's a great question. UM, yeah, 0:21:57.000 --> 0:21:59.840 I guess it could if we have a higher productivity. 0:22:00.040 --> 0:22:04.520 Mean right now, you know, businesses can only pay wage 0:22:04.560 --> 0:22:09.919 increases out of really two things. One is higher inflation, right, 0:22:09.920 --> 0:22:12.480 if they can price their products higher and then share 0:22:12.560 --> 0:22:16.640 some of those higher prices with labor. Uh. The other, 0:22:16.720 --> 0:22:21.119 of course, is productivity if they if their employees can earn, 0:22:21.280 --> 0:22:24.119 you know, can can pump out five more product for 0:22:24.119 --> 0:22:26.800 the same amount of effort that I argue you could 0:22:26.880 --> 0:22:31.080 argue that, UM, business owners can pass some of those 0:22:31.280 --> 0:22:37.080 productivity benefits along to their workforce. Without those two, UM, 0:22:37.280 --> 0:22:40.919 the business owners have to start cutting into profits to 0:22:40.960 --> 0:22:44.960 pay those wage increases. And that's pretty much what we're 0:22:44.960 --> 0:22:49.240 starting to see over the last couple of quarters. So Jack, 0:22:49.320 --> 0:22:51.680 we had some pretty good numbers coming out of Walmart 0:22:51.840 --> 0:22:55.800 this morning. UM, kind of kind of I think, offsetting 0:22:55.840 --> 0:22:57.600 kind of the weak retail sales number we had for 0:22:57.680 --> 0:23:00.640 December last week. What is what is sense of where 0:23:00.640 --> 0:23:04.159 the consumer is right now? I think that, you know, 0:23:04.280 --> 0:23:08.440 it's funny, I'm actually very surprised with that weak retail 0:23:08.520 --> 0:23:12.360 number in December. Um. You know, I don't know. UM 0:23:12.400 --> 0:23:15.239 you know obviously one month um, and we want to 0:23:15.280 --> 0:23:18.720 you know, one once we get um, you know, more data, 0:23:18.800 --> 0:23:21.480 we can get a better sense of it. But I 0:23:21.600 --> 0:23:24.840 tend to be believe Walmart, which I think last time 0:23:24.880 --> 0:23:28.720 I checked was ten percent of all retail UM. Over 0:23:28.760 --> 0:23:31.760 you know, some of the one one time government stat 0:23:32.440 --> 0:23:35.239 I think the consumer is very strong. Um. You know 0:23:35.280 --> 0:23:40.240 again hearkening back to this notion, uh that uh that 0:23:40.320 --> 0:23:44.399 wages have outpaced economic activity, so real wages are on 0:23:44.480 --> 0:23:49.080 the rise, and of course pump prices UM are remarkably low. 0:23:49.119 --> 0:23:51.200 One of the things we look at is how far 0:23:51.359 --> 0:23:55.760 can you drive on an hour's worth of work? Um. 0:23:55.840 --> 0:23:58.280