WEBVTT - Markets Push Higher amid Uncertainty 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.920 us live on YouTube. 0:00:27.120 --> 0:00:32.400 Joining us Jeffrey Rosenberg, Senior portfolio Manager, Systematic Multi Strategy 0:00:32.400 --> 0:00:35.400 Fund at Blackrack. So you're a temper at Carnegie mel 0:00:35.479 --> 0:00:38.440 And a million years ago, and some fancy finance guy 0:00:38.520 --> 0:00:42.280 goes regression to the mean when you is a bond guy, 0:00:42.760 --> 0:00:45.960 coupon guy. Look at the equity markers. Is it going 0:00:46.000 --> 0:00:48.760 to be one big regression to the mean over the 0:00:48.800 --> 0:00:49.800 next five years? 0:00:51.080 --> 0:00:51.159 No? 0:00:51.280 --> 0:00:53.800 I think you know, when you think about fixed income 0:00:53.960 --> 0:00:56.640 versus equities, the big difference is fixed income. 0:00:56.480 --> 0:00:58.840 Returns are a lot simpler. It's your coupon. 0:00:59.560 --> 0:01:03.160 The price appreciation over time is not really where your 0:01:03.200 --> 0:01:04.120 source of return is. 0:01:04.280 --> 0:01:05.280 In equities is different. 0:01:05.280 --> 0:01:07.160 It goes up into the right and so it isn't 0:01:07.200 --> 0:01:09.560 about regression to the mean, whereas interest rates, it's a 0:01:09.560 --> 0:01:12.680 little bit more about regression to the mean and a 0:01:12.720 --> 0:01:15.880 little bit more about income over capital appreciation. 0:01:16.319 --> 0:01:19.960 Blackrock, do we believe we see the productivity to drive 0:01:20.000 --> 0:01:22.920 all this, you know, A I mean, it's not your wheelhouse. 0:01:22.959 --> 0:01:25.640 I get it, it's off your remit, But do you 0:01:25.680 --> 0:01:30.640 see an overlay of underestimation of productivity in America? 0:01:31.120 --> 0:01:33.960 So it's a great topic, Tom, and you know it 0:01:33.959 --> 0:01:38.319 obviously reminds us of the nineties debate. Productivity is everywhere 0:01:38.440 --> 0:01:42.679 except in the statistics, and it's a similar kind of 0:01:42.880 --> 0:01:46.559 you know, hope that you're getting this productivity. I think 0:01:46.560 --> 0:01:49.080 to say that the AI impact is showing up in 0:01:49.120 --> 0:01:52.680 the productivity data, you know, in a meaningful way, maybe 0:01:52.760 --> 0:01:57.160 overstating the AI contribution to it. There's certainly a productivity boost, 0:01:58.240 --> 0:02:01.440 and there's a certainly individual areas. I mean, we're all 0:02:01.480 --> 0:02:06.480 experiencing the productivity boost individually in terms of the specific applications, 0:02:06.760 --> 0:02:09.720 but whether you're seeing that across the economy that's accounting 0:02:09.720 --> 0:02:10.440 for this productivity. 0:02:10.480 --> 0:02:12.200 I think it's a little bit too early to say that. 0:02:12.680 --> 0:02:15.919 Blackrock is the top liquid AUCS manager. 0:02:16.480 --> 0:02:18.280 What is a liquid as to say. 0:02:18.800 --> 0:02:24.160 A liquid alt is basically a strategy for delivering returns 0:02:24.240 --> 0:02:27.840 without taking on kind of your fixed income exposure or 0:02:27.840 --> 0:02:30.240 your equity exposure. You got a lot of that exposure 0:02:30.240 --> 0:02:32.200 in your portfolios already. So what we try to do 0:02:32.320 --> 0:02:35.800 is give you another source of returns without adding to 0:02:36.160 --> 0:02:38.480 fixed income or equity. In my fund, we do it 0:02:38.520 --> 0:02:42.600 with a fixed income replacement, So we try to provide 0:02:43.000 --> 0:02:47.960 a defensive bond like alternative without really relying as much 0:02:48.120 --> 0:02:50.200 on kind of duration and that total return that I 0:02:50.280 --> 0:02:53.200 was talking about before. We do it with alternative strategies, 0:02:53.200 --> 0:02:56.640 which are mostly bringing to the liquid mutual fund and 0:02:56.680 --> 0:03:01.080 ETF vehicles long short, moret neutral strategies. 0:03:01.080 --> 0:03:02.120 That's really what's kind of. 0:03:02.120 --> 0:03:05.120 Underneath the hood in those strategies. So what are the 0:03:05.200 --> 0:03:08.120 securities that get you there? So we do it across 0:03:08.560 --> 0:03:11.359 all kinds of different securities. We have fixed income securities, 0:03:11.919 --> 0:03:14.680 we have equity securities as well. We take a fixed 0:03:14.680 --> 0:03:19.520 income lens to the selection of equities. We do this 0:03:19.760 --> 0:03:23.520 from our experience in evaluating corporate credit. We turned it 0:03:23.560 --> 0:03:26.720 onto the equity side and it lends a super interesting 0:03:26.760 --> 0:03:30.399 return profile which we call defensive alpha, which is alpha 0:03:30.880 --> 0:03:34.360 returns without market direction that tend to be really strong 0:03:34.360 --> 0:03:37.160 when equity markets go down. That's the kind of alternative 0:03:37.200 --> 0:03:37.840 to fixed income. 0:03:37.880 --> 0:03:40.720 And this is curly, This is brilliant, folks. This is 0:03:40.720 --> 0:03:44.360 a global Wall Street talk. Here. Rosenberg can't go duma, 0:03:44.720 --> 0:03:47.680 so we're going fancy. Now stay with me on this, folks. 0:03:47.680 --> 0:03:53.560 I'll try to explain it. Strategies like this need a 0:03:53.680 --> 0:03:59.240 down market to achieve and excel and generate alpha. We 0:03:59.280 --> 0:04:02.680 sort of like have an add and down market. So 0:04:02.760 --> 0:04:06.960 you're stealed for what a five percent ticked down. Do 0:04:07.680 --> 0:04:11.680 these strategies click in with a correction ten percent, do 0:04:11.760 --> 0:04:14.920 they click in with a bear market eighteen percent? Or 0:04:14.960 --> 0:04:16.080 do you need something worse? 0:04:16.400 --> 0:04:17.599 It's a great question. 0:04:17.680 --> 0:04:20.080 So first of all, it's not directional, so it's not 0:04:20.160 --> 0:04:22.599 like put option buying where you really need the market 0:04:22.600 --> 0:04:25.520 to go down. They're balanced and we have other strategies 0:04:25.560 --> 0:04:28.800 inside that help to provide positive returns when markets are 0:04:28.800 --> 0:04:31.120 going up. But on the defensive alpha side, Tom, it's 0:04:31.120 --> 0:04:35.680 really about a quarter decline inequity markets, meaning a persistent 0:04:35.720 --> 0:04:39.760 decline in equity market's over a quarter calendar period, So 0:04:40.279 --> 0:04:42.360 it's not short term trading. 0:04:43.360 --> 0:04:44.800 It's a little bit more. 0:04:44.720 --> 0:04:47.599 Of a type of market move that is reflective of 0:04:47.960 --> 0:04:50.200 more of a recession kind of fear. That's how we've 0:04:50.240 --> 0:04:52.719 tuned the defensive alpha, and as you know, we've been 0:04:52.800 --> 0:04:55.599 doing it over ten years as a thirteen out of 0:04:55.600 --> 0:04:59.280 fourteen quarter track record of delivering that that positive alpha. 0:04:59.320 --> 0:05:04.279 It's like the Yank defensive alpha US versus non US. 0:05:04.440 --> 0:05:05.480 How do you guys allocate? 0:05:05.520 --> 0:05:05.680 There? 0:05:05.839 --> 0:05:06.720 Is that changed? 0:05:07.560 --> 0:05:11.240 Yeah, it's really about the opportunity set of what types 0:05:11.279 --> 0:05:15.440 of companies give us the ability to take credit insights 0:05:15.480 --> 0:05:20.560 into the allocation algorithm. And so what we have mostly 0:05:20.800 --> 0:05:25.839 is a US and large global universe of companies inside there, 0:05:25.920 --> 0:05:32.720 it's not really taking on the factor exposure of geographic exposures. 0:05:32.720 --> 0:05:34.640 It's really trying to neutralize to that and get to 0:05:34.680 --> 0:05:37.280 the idiosyncratic risk. And so we can extract that idiosyncratic 0:05:37.400 --> 0:05:42.279 risk out of global large issuers and US large and 0:05:42.360 --> 0:05:43.239 mid sized companies. 0:05:43.920 --> 0:05:48.200 Where's Jeff Rosenberg and rebalancing? I mean, Tempers had a 0:05:48.360 --> 0:05:53.400 whole career studying this is the question of rebalancing a portfolio. 0:05:53.920 --> 0:05:56.480 The x access the study of the when of it 0:05:57.240 --> 0:05:58.320 or is it something else? 0:05:59.200 --> 0:06:02.200 So it's an interesting, you know point. 0:06:02.800 --> 0:06:04.840 You know, we look a lot at kind of risk 0:06:05.000 --> 0:06:08.240 and risk rebalancing, and you know, one of the things 0:06:08.240 --> 0:06:11.120 that you see from kind of long term studies there 0:06:11.320 --> 0:06:15.560 is is you have this kind of countercyclical approach, and 0:06:15.640 --> 0:06:18.560 so you want to look at countercyclical risk balancing as 0:06:18.560 --> 0:06:22.479 opposed to pro cyclical risk balancing and pro risk. Pro 0:06:22.839 --> 0:06:26.440 Cyclical risk balancing tends to be that which targets short 0:06:26.520 --> 0:06:28.919 term measures of risk, so you end up kind of 0:06:28.960 --> 0:06:32.320 doing the wrong thing. When risk is going down, portfolio 0:06:32.400 --> 0:06:35.360 looks like it's less risky, you start adding notional So it's. 0:06:35.279 --> 0:06:37.039 About balancing in our approach. 0:06:37.120 --> 0:06:39.880 Balancing kind of the short term measures you can get 0:06:39.880 --> 0:06:41.640 you into a pro cycled one with a little bit 0:06:41.720 --> 0:06:45.360 longer term measure which helps you to avoid that and 0:06:45.560 --> 0:06:46.560 be anti. 0:06:46.760 --> 0:06:50.680 Fifty seconds, do you sense a leverage in the system 0:06:50.960 --> 0:06:55.320 of our bullmarket frenzy? Is there shadows of leverage in there? 0:06:56.160 --> 0:07:00.200 So you know, what's the big change here that we'd 0:07:00.240 --> 0:07:02.320 be talking about it? And the big changes You know, 0:07:02.440 --> 0:07:05.200 when you look at a kind of the AI frenzy, 0:07:05.680 --> 0:07:09.279 what was different from the nineteen nineties frenzy. The big 0:07:09.279 --> 0:07:13.320 difference was the nineteen nineties frenzy was all debt financed. 0:07:13.560 --> 0:07:16.560 Right when you think about like the Internet bubble bursting 0:07:16.800 --> 0:07:18.960 in the fixed income markets, that was the high yield 0:07:19.040 --> 0:07:23.320 telcom media technology concentration of defaults because the back end 0:07:23.480 --> 0:07:27.360 infrastructure was funded by debt, and it was funded predominantly 0:07:27.400 --> 0:07:30.800 by debt. So when you think about that two default cycle, 0:07:31.160 --> 0:07:38.520 it was sixtei verscent CMT bonds, global crossing WorldCom. You 0:07:38.560 --> 0:07:41.920 look at this cycle and up until most recently, it's 0:07:41.960 --> 0:07:44.720 all financed out a cash flow. Now the difference is 0:07:44.880 --> 0:07:47.880 some of these debt financed transactions. And that's the piece 0:07:47.880 --> 0:07:49.640 that we should kind of be paying attention to. 0:07:49.800 --> 0:07:52.720 Jeffrey Rosenberg, thank you so much with us always on 0:07:52.760 --> 0:07:55.160 the fedish sides and giving this perspective there and some 0:07:55.240 --> 0:08:00.480 of the emotions of the effervescence and exuberance of moment. 0:08:00.720 --> 0:08:01.400 Stay with us. 0:08:01.640 --> 0:08:04.880 More from Bloomberg Surveillance coming up after this. 0:08:12.120 --> 0:08:15.720 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:15.760 --> 0:08:18.920 weekday afternoons from seven to ten am Eastern Listen on 0:08:19.000 --> 0:08:22.680 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:22.840 --> 0:08:24.280 watch us live on YouTube. 0:08:24.640 --> 0:08:25.520 Here's the way it rolls. 0:08:25.560 --> 0:08:27.960 Some of our guests, like they all have an entourage. 0:08:27.960 --> 0:08:30.440 One or two people got to hang out. Go to Starbucks, 0:08:30.480 --> 0:08:33.199 you know, be sure the uber gets there, cantrell ser 0:08:33.400 --> 0:08:34.640 she goes with five or six piece. 0:08:34.600 --> 0:08:35.120 Sure, why not? 0:08:35.520 --> 0:08:37.480 Levy, I gotta cut to the Chase. One of your 0:08:37.480 --> 0:08:40.760 people walks in and says, talk about the Broncos. First, 0:08:41.160 --> 0:08:44.320 is PIMCO paying for you to go to London to 0:08:44.320 --> 0:08:47.960 Tottenham steaks? I wish to watch the Broncos. 0:08:48.320 --> 0:08:52.000 I wish, sadly, no, sadly no, we do. We have 0:08:52.080 --> 0:08:54.559 a we have a recent partnership with the Boston Celtics, 0:08:54.800 --> 0:08:58.200 but not not not at ever team sadly so not not. 0:08:58.760 --> 0:09:00.400 We know where to get seen neither the NU gets 0:09:00.480 --> 0:09:01.120 north the Broncos. 0:09:01.200 --> 0:09:05.239 Okay, the Chase send. What an exciting game against the Eagles. 0:09:05.280 --> 0:09:06.600 Amazing, My goodness. 0:09:06.640 --> 0:09:08.440 What was the observation? 0:09:08.640 --> 0:09:11.280 I mean, I just I you know, it felt like 0:09:11.320 --> 0:09:13.040 it was going to be sort of a predictable end. 0:09:13.040 --> 0:09:14.839 The Eagles were going to beat us. But wow, was 0:09:14.880 --> 0:09:18.360 that last that last fourth, last quarter? Pretty pretty pretty competive. 0:09:18.440 --> 0:09:20.479 Is a shutdown going to beat America? 0:09:21.920 --> 0:09:22.040 There? 0:09:22.120 --> 0:09:22.200 Ye? 0:09:22.640 --> 0:09:23.040 I loved it. 0:09:23.320 --> 0:09:24.959 I loved it, so you know me. 0:09:24.960 --> 0:09:27.920 I think that the conventional wisdom, probably right, is that 0:09:28.000 --> 0:09:30.560 a short term shutdown doesn't really matter, doesn't matter for 0:09:30.600 --> 0:09:33.160 the economy, doesn't matter for markets. I think that the 0:09:33.880 --> 0:09:37.360 risk to that thinking is that this very likely looks 0:09:37.400 --> 0:09:40.520 like it could be a prolonged shutdown. And just remember 0:09:40.640 --> 0:09:43.600 that the last and the only real full shutdown that 0:09:43.640 --> 0:09:45.640 we've had in the last few decades was in twenty 0:09:45.679 --> 0:09:49.440 thirteen that lasted for sixteen days. The catalyst there was 0:09:49.480 --> 0:09:52.200 to to increase the debt the debt ceiling. There is 0:09:52.240 --> 0:09:55.120 no such catalyst, and so we don't really know what 0:09:55.160 --> 0:09:58.120 happens to the economy sort of after a sixteen day period. 0:09:58.480 --> 0:09:59.520 I think that that our. 0:09:59.440 --> 0:10:00.720 Concern is that. 0:10:00.640 --> 0:10:04.599 There are sort of these nonlinear economic impacts should the 0:10:04.640 --> 0:10:07.280 governments shut down for longer than in two weeks, which 0:10:07.320 --> 0:10:09.959 looks again more likely than not at this point, given 0:10:10.040 --> 0:10:12.679 both sides are pretty comfortable in their positions, is. 0:10:12.640 --> 0:10:16.880 There any I mean, what's the key issue here between 0:10:16.920 --> 0:10:20.040 the two sides here for this shut down here? 0:10:20.080 --> 0:10:21.840 Is there is there one issue that's keeping well? 0:10:21.880 --> 0:10:23.880 I think the Democrats have sort of struggled with trying 0:10:23.920 --> 0:10:26.640 to articulate the real issue. But what they seem to 0:10:26.640 --> 0:10:31.000 be coalescing around is this expiration of the Obamacare expanded 0:10:31.040 --> 0:10:35.000 subsidies that expire at the end of end of this year. 0:10:35.080 --> 0:10:37.960 Even though republic many Republicans don't like Obamacare, they don't 0:10:38.000 --> 0:10:41.920 like these enhanced subsidies. You do see some splintering among 0:10:41.960 --> 0:10:44.600 the Republican caucus last night. 0:10:46.360 --> 0:10:49.600 God, folks, this is the reality. This is ru Paul, 0:10:49.640 --> 0:10:53.920 great question and answers. Marjorie Taylor Green says, President Trump, 0:10:54.040 --> 0:10:57.079 your nuts. Two of my family members are going to 0:10:57.160 --> 0:10:59.760 get crushed by that. How prevalent is that? 0:11:00.080 --> 0:11:01.760 And also, I mean, if you look at who are 0:11:01.800 --> 0:11:04.400 the beneficiaries of these hit hand subsidies, you know, three 0:11:04.480 --> 0:11:06.680 quarters of the folks live in Trump and states that 0:11:06.800 --> 0:11:09.480 voted for Trump. So this is this is a salient 0:11:09.520 --> 0:11:12.720 political issue for the president and for you know, certain 0:11:12.760 --> 0:11:14.679 members of the Republican Caucus. I think that's whay why 0:11:14.760 --> 0:11:17.880 you saw, you know, Trump opened the window yesterday to 0:11:18.000 --> 0:11:21.640 potentially negotiating over this. So I think that you know, 0:11:21.920 --> 0:11:24.080 you know, our view is that there probably there has 0:11:24.160 --> 0:11:27.120 to be a deal on this issue, whether it's after 0:11:27.160 --> 0:11:30.320 the government reopens or before the government reopens, but this 0:11:30.400 --> 0:11:33.400 will have to be addressed because I think politically speaking, 0:11:33.480 --> 0:11:37.000 it's just too salient for again enough Republicans for them 0:11:37.080 --> 0:11:38.920 not to do at least something. Now, there could be 0:11:38.960 --> 0:11:40.760 some modifications or what have you, But again I think 0:11:40.760 --> 0:11:42.560 that's probably going to be kind of table stakes at 0:11:42.559 --> 0:11:42.920 this point. 0:11:43.240 --> 0:11:46.960 So Supreme Court also begins a session today. Yeah, what 0:11:47.000 --> 0:11:48.360 do we focus on there? 0:11:48.440 --> 0:11:50.680 Well, So I think the two big cases obviously for 0:11:50.720 --> 0:11:53.600 the market are going to be these AIPA tariffs, the 0:11:53.640 --> 0:11:57.160 sort of legitimacy around those. Was this a violation of 0:11:57.200 --> 0:12:00.160 this you know, broad statute and in which case? So 0:12:00.640 --> 0:12:02.560 what is the ruling like do they have to pay 0:12:02.600 --> 0:12:02.880 back the. 0:12:05.440 --> 0:12:05.960 Tariffs? 0:12:06.240 --> 0:12:08.520 And then also of course the Lisa Cook hearing, which 0:12:08.600 --> 0:12:09.640 is going to be in January. 0:12:09.679 --> 0:12:12.480 It looks like, Okay, I get the Newport Beach has 0:12:12.520 --> 0:12:14.319 that just saw ten X, So we'll say when Taylor 0:12:14.360 --> 0:12:18.040 Swift has you're flying around in the Felcon nine hundred ALEX, 0:12:18.240 --> 0:12:22.480 you're immune from the area lights. Our listeners in viewers 0:12:22.559 --> 0:12:25.880 are not immune from the shutdown. I just read CNN 0:12:25.960 --> 0:12:29.960 from twenty nineteen where ten air traffic controllers went off 0:12:30.240 --> 0:12:33.559 shutdown Atlanta, et cetera, and everybody had a Bart Simpson 0:12:33.640 --> 0:12:35.960 cow is that where we're heading? Yeah, which this is 0:12:36.000 --> 0:12:38.080 really about TSA and air traffic. 0:12:38.280 --> 0:12:40.880 I think that could absolutely be the catalyst for a reopening, 0:12:40.960 --> 0:12:42.480 right because if you look at what are the what 0:12:42.520 --> 0:12:45.200 are the inflection points. October fifteenth, that's when missed you know, 0:12:45.240 --> 0:12:48.560 pay from active military folks. November first, that's when the 0:12:48.600 --> 0:12:50.839 openrollment for ACA comes out with when people will be 0:12:50.920 --> 0:12:54.520 actually notified about that their premiums could be increasing. And 0:12:54.559 --> 0:12:57.920 then there's just the political pain and TSA. The air 0:12:57.960 --> 0:13:00.680 traffic control, I mean, in twenty nineteen was actually the 0:13:00.720 --> 0:13:02.880 issue that ended up reopening the government, so that could 0:13:03.000 --> 0:13:04.719 could very well be. But again, I think people are 0:13:04.840 --> 0:13:07.000 you know, in Washington, feel very comfortable in the fact 0:13:07.000 --> 0:13:09.080 that the House is anyven session. Yeah, I mean they're 0:13:09.120 --> 0:13:11.480 not coming back into session anytime soon and maybe not 0:13:11.520 --> 0:13:12.160 into even until. 0:13:12.320 --> 0:13:14.880 Can they be comfortable if after a cup of coffee, 0:13:14.960 --> 0:13:18.720 Newark was delayed an hour and two hours yesterday, that's. 0:13:18.600 --> 0:13:22.319 Like any you know, I actually fly, I fly Middle 0:13:22.320 --> 0:13:26.760 stat coach very often, so so I am very I'm 0:13:26.840 --> 0:13:29.720 very familiar with the Newark you know, flight delays. And 0:13:29.760 --> 0:13:31.480 I think again, I think a lot of folks will 0:13:31.520 --> 0:13:34.240 just brush that off and until this really becomes a 0:13:34.280 --> 0:13:37.360 real issue again, I think both sides are going to 0:13:37.440 --> 0:13:39.360 sort of stay stay, stay where they are. 0:13:39.480 --> 0:13:43.560 Can press any Trump fire these employees, federal employees, yees. 0:13:43.559 --> 0:13:44.840 So I think that is a big question. I mean, 0:13:44.880 --> 0:13:47.359 just to be very clear, there are no new authorities 0:13:47.480 --> 0:13:51.040 that are imparted on the executive branch to fire employees 0:13:51.120 --> 0:13:53.040 during a shutdown. I think there's a lot of confusion 0:13:53.040 --> 0:13:56.559 about that. So it's the same laws that govern pre 0:13:56.679 --> 0:14:00.199 shutdown versus during a shutdown. I think, you know, he's 0:14:00.200 --> 0:14:03.080 obviously threatened to do that. Maybe he will actually you know, 0:14:03.120 --> 0:14:04.960 go through on those threats. I think there is a 0:14:05.000 --> 0:14:07.600 political issue though, I mean, once you start really firing people, 0:14:07.920 --> 0:14:10.560 that doesn't necessarily pull particularly well. And of course, eighty 0:14:10.559 --> 0:14:13.240 percent of federal workers are outside of the DMV area, 0:14:13.320 --> 0:14:15.839 which is I think quite important. So outside of the 0:14:15.960 --> 0:14:18.920 DC Maryland Virginia area are eighty percent. So this is 0:14:18.960 --> 0:14:22.520 like not just this sort of Beltway kind of niche issue. 0:14:22.560 --> 0:14:25.280 This does affect folks, and like this is important. 0:14:25.280 --> 0:14:28.680 Seven hundred and fifty thousand people. Did you say eighty 0:14:28.720 --> 0:14:30.680 percent are outside the beltway. 0:14:30.400 --> 0:14:33.160 Eight percent of federal workers just in general, right, So, 0:14:33.280 --> 0:14:33.920 I mean of those. 0:14:33.920 --> 0:14:36.400 Kansas cities, those for a lot amounts. 0:14:36.160 --> 0:14:40.360 I own money too, I've written all of them checks. 0:14:40.480 --> 0:14:43.160 And again, like I mean, the president has vast authorities. 0:14:43.200 --> 0:14:46.360 He's obviously, you know, try to sort of test the 0:14:46.440 --> 0:14:49.080 limits of those authorities. So I'm not saying that he 0:14:49.160 --> 0:14:51.640 won't necessarily fire folks. It's just that there is some 0:14:51.800 --> 0:14:54.840 political ramifications of doing so, given that a lot of 0:14:54.880 --> 0:14:56.280 these folks are not necessarily in that. 0:14:56.320 --> 0:14:58.560 Paul and I read like over the weekend of the 0:14:58.560 --> 0:15:01.240 Cook Political Report, that's somebody's doing well in the polls. 0:15:01.280 --> 0:15:04.280 I'll pick on Spanberg or Virginia is doing well. How 0:15:04.320 --> 0:15:06.760 does that play in Libby Cantrell's belt play right now? 0:15:06.800 --> 0:15:06.960 Yeah? 0:15:07.000 --> 0:15:07.200 I think. 0:15:07.240 --> 0:15:09.640 I mean my own view is that we kind of 0:15:09.640 --> 0:15:13.400 over index to these off cycle elections. Obviously there's a 0:15:13.400 --> 0:15:17.000 gubernatorial race, both in Virginia and New Jersey. I think 0:15:17.000 --> 0:15:20.200 the Democrats look like they're pulling better. That should we 0:15:20.600 --> 0:15:22.600 should we extrapolate too much from that? No, I don't 0:15:22.640 --> 0:15:26.320 think so. If they lose, then maybe that is a 0:15:26.320 --> 0:15:29.640 canary in the coal mine. But again, I think there's 0:15:29.640 --> 0:15:31.560 sort of too much inc that is. 0:15:31.680 --> 0:15:34.720 Jere Schneider just emailed in and says I'll carry Liz's 0:15:34.800 --> 0:15:38.200 bags that Todd him. It's a great stadium, Broncos Jets. 0:15:38.480 --> 0:15:41.920 Libby Cantrell in London coming up in the NFL. Libby 0:15:41.920 --> 0:15:45.440 Cantrell with Pimcot right now, stay with us. More from 0:15:45.480 --> 0:15:55.200 Bloomberg Surveillance coming up after this. 0:15:55.200 --> 0:15:59.120 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:15:59.160 --> 0:16:02.680 starting at seven eight on Applecarplay and Android Auto with 0:16:02.720 --> 0:16:05.720 the Bloomberg Business App. You can also listen live on 0:16:05.800 --> 0:16:09.480 Amazon Alexa from our flagship New York station, Just say 0:16:09.600 --> 0:16:10.480 Alexa play. 0:16:10.520 --> 0:16:13.040 Mark creatures Storry right now from the Royal Bank of 0:16:13.040 --> 0:16:17.560 Canada RBC here on the Outlook Forward. What's great about this, Mike, 0:16:17.720 --> 0:16:20.240 is you actually did a tour duty in the dark 0:16:20.280 --> 0:16:23.240 climbs of the Bureau of Economic Analysis. Now it's not 0:16:23.360 --> 0:16:27.680 BLS but BA. They use the same folders, the same 0:16:27.760 --> 0:16:31.680 roll of decks, the same desks. Is BLS. What do 0:16:31.760 --> 0:16:36.160 we not capture about the good people working at BLS 0:16:36.320 --> 0:16:39.240 right now? With the shutdown and with the inability to 0:16:39.240 --> 0:16:40.240 create a jobs. 0:16:39.920 --> 0:16:43.280 Report, Well, we're just missing a lot of data that 0:16:43.360 --> 0:16:46.320 we need. And you know, I think you can get 0:16:46.440 --> 0:16:49.360 the general trends right now. There's a lot of alternative data. 0:16:49.480 --> 0:16:50.920 When you think about the labor. 0:16:50.680 --> 0:16:52.200 Mark trusted, is it a value? 0:16:52.920 --> 0:16:56.000 I put more weight in the payroll report and the 0:16:56.040 --> 0:16:59.480 employment report than I do these alternatives I think you 0:16:59.520 --> 0:17:02.680 can still use them directionally, but the magnitude right now 0:17:02.760 --> 0:17:05.000 is what matters. And you don't get a good reading 0:17:05.040 --> 0:17:07.159 on magnitude from some of these alternative sets. 0:17:07.480 --> 0:17:10.000 You just explain magnets. It's like a fancy where you'll learn 0:17:10.040 --> 0:17:13.840 at it. Northeastern help me out here with what magnitude 0:17:13.880 --> 0:17:15.360 means to our viewers and listeners. 0:17:15.480 --> 0:17:16.800 So I'll give a good example. 0:17:16.960 --> 0:17:20.320 We look a lot at the ISM surveys, you know, 0:17:20.440 --> 0:17:25.000 ISM manufacturing and ISM services, and they have these diffusion indices, 0:17:25.280 --> 0:17:28.919 and specifically for the employment report, and it's really just 0:17:28.960 --> 0:17:31.960 a matter of reporting whether or not your employment levels 0:17:31.960 --> 0:17:34.560 are going up, down, or staying the same. So you 0:17:34.560 --> 0:17:37.280 don't know if it's increasing, did you hire ten people 0:17:37.440 --> 0:17:41.679 one hundred people? So again you get a direction, but 0:17:41.800 --> 0:17:45.560 you don't get the volume there. So it does mask 0:17:46.000 --> 0:17:48.960 the ultimate impact on what you might estimate, for say 0:17:49.040 --> 0:17:49.960 the unemployment rate. 0:17:50.600 --> 0:17:54.639 So, in the absence of some real time data, how 0:17:54.640 --> 0:17:56.320 do you think the US economy is doing these days? 0:17:57.640 --> 0:17:59.160 I still think it's very foggy. 0:17:59.520 --> 0:18:02.640 And what I mean by that is the signal we're 0:18:02.640 --> 0:18:05.399 getting from data is unclear. And I'll give you a 0:18:05.440 --> 0:18:07.520 good example of what's going on. We've talked a lot 0:18:07.560 --> 0:18:12.080 about the pull forward of some activities, whether it's imports 0:18:12.280 --> 0:18:16.160 that inventory build up. Right now, my wife and I 0:18:16.200 --> 0:18:21.560 are pulling forward some purchases of furniture and some cabinets 0:18:21.600 --> 0:18:25.440 because of the threat of tariffs. So you know, right 0:18:25.480 --> 0:18:27.440 now I have a delivery coming to my house, and 0:18:27.520 --> 0:18:30.560 in fact it's there right now. It's probably not a 0:18:30.600 --> 0:18:33.920 purchase I would have made had the tariff threat been 0:18:33.920 --> 0:18:36.840 off the table, but because they announced it, and I said, 0:18:36.880 --> 0:18:38.960 you know, let's just go ahead and do this now, 0:18:39.480 --> 0:18:41.400 and it'll probably sit in my garage for a couple 0:18:41.400 --> 0:18:43.800 of months before it gets installed, but at least we'll 0:18:43.800 --> 0:18:44.840 have it at a better price. 0:18:45.240 --> 0:18:45.720 Interesting. 0:18:45.760 --> 0:18:52.160 So, but we haven't necessarily seen inflation from these terrors 0:18:52.200 --> 0:18:55.439 really at all. On one could argue, well, what's happening there, 0:18:55.440 --> 0:18:56.840 because a lot of folks thought we'd see it. 0:18:57.200 --> 0:18:59.639 Yeah, I think that's the interesting story right now, and 0:19:00.000 --> 0:19:03.080 I think that's going to show up in two ways. First, 0:19:03.119 --> 0:19:05.720 we do suspect that it's still early days for that 0:19:05.880 --> 0:19:09.200 to show up. In terms of consumer prices, we saw 0:19:09.240 --> 0:19:11.720 a bit of a surge in the producer prices. When 0:19:11.720 --> 0:19:13.920 you look at the PPI that came out two months 0:19:13.960 --> 0:19:18.760 ago came in very hot. So ultimately we think those 0:19:18.960 --> 0:19:23.920 increased prices are going to be passed through to the consumer. Alternatively, 0:19:24.080 --> 0:19:26.320 if we don't see that full extent of the pass through, 0:19:26.960 --> 0:19:29.440 that's going to weigh on margins, and that really puts 0:19:29.440 --> 0:19:33.679 a risk that labor really starts to weaken beyond what 0:19:33.720 --> 0:19:34.560 we've already seen. 0:19:36.119 --> 0:19:39.080 I look at where we are, and, as you say brilliantly, 0:19:39.160 --> 0:19:42.520 the fog of it all, the overwhelming fog of the 0:19:42.600 --> 0:19:46.040 last three quarters is we were wrong, wrong, wrong on 0:19:46.680 --> 0:19:51.760 animal spirit, nominal, GDP eight, other issues, productivity, tech or that. 0:19:52.080 --> 0:19:54.719 Do you see any ending to how wrong we've been 0:19:54.800 --> 0:19:58.080 the last three quarters which leads to a successful outcome. 0:20:00.000 --> 0:20:03.360 I'd like to hope that as economists and forecasters, we're 0:20:03.400 --> 0:20:07.520 going to be wrong. But I still think there's a 0:20:07.800 --> 0:20:11.640 situation in our view where we continue down this road 0:20:11.680 --> 0:20:15.360 of kind of a stagflationary we call it stackflation light. 0:20:16.400 --> 0:20:19.879 So what does that mean whether growth is coming in 0:20:19.880 --> 0:20:23.280 at one percent one and a half percent, I think 0:20:23.480 --> 0:20:26.359 you're going to continue to see the consumer slow, and 0:20:26.400 --> 0:20:29.680 I think that's really important when you think about the economy. 0:20:29.720 --> 0:20:32.240