1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordert. Join us each day 4 00:00:18,760 --> 00:00:22,320 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,720 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,360 Speaker 2: Terminal and the Bloomberg Business app. Bruce Casman of JP 10 00:00:37,479 --> 00:00:40,519 Speaker 2: Morgan writes in the following Elevated inflation suggests that the 11 00:00:40,560 --> 00:00:43,600 Speaker 2: removal of downside growth risks would make it unlikely that 12 00:00:43,640 --> 00:00:47,159 Speaker 2: the Fed will deliver the substantial easing expected through the 13 00:00:47,320 --> 00:00:50,080 Speaker 2: end of next year. Bruce joins us now for more. 14 00:00:50,200 --> 00:00:52,600 Speaker 2: Bruce has been too long, my friend, Welcome to the program. 15 00:00:52,800 --> 00:00:55,760 Speaker 2: July thirtieth was the last time we heard from Chairman Power. 16 00:00:55,800 --> 00:00:57,920 Speaker 2: It was in the news conference in Washington, d C. 17 00:00:58,440 --> 00:01:00,360 Speaker 2: How dated do you think they're his views? 18 00:01:02,320 --> 00:01:05,399 Speaker 3: It's clearly dated because we've had important information both on 19 00:01:05,520 --> 00:01:09,800 Speaker 3: growth with the weak labor report and also on inflation. However, 20 00:01:09,840 --> 00:01:11,959 Speaker 3: I think it's important to look at what we got 21 00:01:12,000 --> 00:01:14,960 Speaker 3: from that meeting, both in terms of Palell's description of 22 00:01:15,000 --> 00:01:17,720 Speaker 3: the labor market is solid, as well as the committee 23 00:01:17,760 --> 00:01:21,119 Speaker 3: minutes that showed that a majority of members still thought 24 00:01:21,120 --> 00:01:24,600 Speaker 3: inflation risks were more important than growth US at that time. 25 00:01:24,680 --> 00:01:26,960 Speaker 3: So we're starting with a committee that I think has 26 00:01:27,000 --> 00:01:30,560 Speaker 3: a somewhat hawkish bias around easing. I don't think from 27 00:01:30,600 --> 00:01:33,240 Speaker 3: what you've heard so far from members that there's a 28 00:01:33,280 --> 00:01:36,000 Speaker 3: consensus to ease. And I think whatever we get from 29 00:01:36,040 --> 00:01:39,160 Speaker 3: Powell today, he clearly can't tell us what the September 30 00:01:39,200 --> 00:01:41,959 Speaker 3: meeting is going to do. Having said that, I do 31 00:01:42,040 --> 00:01:46,040 Speaker 3: think the weak labor market report is important. 32 00:01:46,080 --> 00:01:48,000 Speaker 4: It does send a stall speed signal. 33 00:01:48,280 --> 00:01:51,760 Speaker 3: I think the Fed traditionally has an asymmetric bias to 34 00:01:51,800 --> 00:01:54,440 Speaker 3: being sensitive to recession risk. And I think he is 35 00:01:54,480 --> 00:01:57,280 Speaker 3: going to tilt somewhat here in the direction and moving 36 00:01:57,320 --> 00:01:59,680 Speaker 3: away from his description of the labor market is solid 37 00:02:00,080 --> 00:02:02,600 Speaker 3: to tell us that the door is open for and 38 00:02:02,720 --> 00:02:05,240 Speaker 3: easing that hasn't been decided at the September meeting. 39 00:02:05,680 --> 00:02:08,480 Speaker 5: So Bruce, he opens the door, But to what degree 40 00:02:08,560 --> 00:02:12,320 Speaker 5: do you think he would introduce that two way risk, 41 00:02:12,400 --> 00:02:14,960 Speaker 5: that two sided risk, and try to maybe coax the 42 00:02:15,000 --> 00:02:18,480 Speaker 5: market away from leading as heavily as it is now 43 00:02:18,639 --> 00:02:20,000 Speaker 5: to a rate cut in September. 44 00:02:21,200 --> 00:02:25,360 Speaker 3: I think right now the market is decided that there's 45 00:02:25,400 --> 00:02:27,480 Speaker 3: almost certainly going to be a rate cut. I think 46 00:02:27,520 --> 00:02:29,880 Speaker 3: by opening the door but not saying we're going to 47 00:02:29,919 --> 00:02:33,079 Speaker 3: walk through it, that does reflect the two sided risks. 48 00:02:33,080 --> 00:02:34,880 Speaker 3: So this is not a chair that's going to do 49 00:02:34,960 --> 00:02:37,320 Speaker 3: what he did last year and basically promise a rate 50 00:02:37,360 --> 00:02:40,239 Speaker 3: cut at the September meeting. But I think he has 51 00:02:40,360 --> 00:02:43,880 Speaker 3: to reflect the rising risk. He has to reflect the 52 00:02:43,919 --> 00:02:46,760 Speaker 3: shift in his own thinking. He has to tell us 53 00:02:46,800 --> 00:02:49,320 Speaker 3: that September is alive meeting. If he does that, I 54 00:02:49,400 --> 00:02:51,480 Speaker 3: think the market will pretty much stay where it is 55 00:02:52,040 --> 00:02:53,440 Speaker 3: on the September call, Bruce. 56 00:02:53,440 --> 00:02:55,679 Speaker 5: If we also get some discussion about the frame work, 57 00:02:55,720 --> 00:02:58,920 Speaker 5: which we are expecting to and you hear Powell talk 58 00:02:58,960 --> 00:03:03,679 Speaker 5: about turning away from flexible average inflation targeting, if you 59 00:03:03,800 --> 00:03:06,920 Speaker 5: sort of emphasize that, is there any signal in that 60 00:03:07,040 --> 00:03:10,360 Speaker 5: alone or is that more just details that matter not 61 00:03:10,440 --> 00:03:12,400 Speaker 5: from your term policy but policy down. 62 00:03:12,200 --> 00:03:16,360 Speaker 3: The road, I think the reality is the effects flexible 63 00:03:16,400 --> 00:03:20,399 Speaker 3: inflation targeting regime never really took off, and I think 64 00:03:20,440 --> 00:03:23,600 Speaker 3: there are some problems with the way it was described 65 00:03:23,600 --> 00:03:27,000 Speaker 3: in the last framework review. I think Powell will basically 66 00:03:27,040 --> 00:03:29,080 Speaker 3: tell us we're moving back, but I don't think it 67 00:03:29,160 --> 00:03:31,720 Speaker 3: has any implications for how the FED is going to 68 00:03:31,720 --> 00:03:35,440 Speaker 3: set policy, not in September and not going forward from there. 69 00:03:35,480 --> 00:03:37,880 Speaker 4: It'll be interesting color, but not impactful. 70 00:03:38,560 --> 00:03:41,480 Speaker 2: Their understanding of the labor market will be impactful. I 71 00:03:41,560 --> 00:03:43,920 Speaker 2: want your understanding of the labor market first, and then 72 00:03:43,960 --> 00:03:46,480 Speaker 2: we can talk about whether there's any dayline between how 73 00:03:46,480 --> 00:03:48,720 Speaker 2: you think the FED reach things. What do you think 74 00:03:48,800 --> 00:03:50,840 Speaker 2: is going on here? So we've obviously had a step 75 00:03:50,880 --> 00:03:53,040 Speaker 2: down in payrolls growth, and let's just run with the 76 00:03:53,080 --> 00:03:55,040 Speaker 2: numbers we've got so far, because they might change. I've 77 00:03:55,040 --> 00:03:56,840 Speaker 2: got no idea, and I imagine you don't either, But 78 00:03:56,960 --> 00:03:59,320 Speaker 2: let's just run with these numbers. We've seen a step 79 00:03:59,320 --> 00:04:02,000 Speaker 2: down in payroll growth. Bruce, can you put more emphasis 80 00:04:02,000 --> 00:04:04,480 Speaker 2: on the demands side or supply side, a cyclical turn 81 00:04:04,640 --> 00:04:05,600 Speaker 2: or a structural shift? 82 00:04:06,920 --> 00:04:07,119 Speaker 6: Oh? 83 00:04:07,160 --> 00:04:09,600 Speaker 3: I think labor demand is the key issue here, and 84 00:04:09,680 --> 00:04:12,280 Speaker 3: I think in an economy that has slowed sharply in 85 00:04:12,320 --> 00:04:14,480 Speaker 3: the first half of the year, what we're also seeing 86 00:04:14,760 --> 00:04:18,359 Speaker 3: is a family, substantial downshift within the breath and the 87 00:04:18,400 --> 00:04:21,880 Speaker 3: magnitude of labor demand. I am concerned that when we 88 00:04:21,920 --> 00:04:24,919 Speaker 3: see private barrel slow to the pace we've seen in 89 00:04:24,920 --> 00:04:27,320 Speaker 3: the last few months, that that's a warning signal. 90 00:04:27,360 --> 00:04:28,960 Speaker 4: I call it a stall speed alert. 91 00:04:29,279 --> 00:04:32,239 Speaker 3: But at the same time, we haven't seen businesses start 92 00:04:32,240 --> 00:04:35,960 Speaker 3: to retrench. There's nothing suggesting layoffs have picked up. And 93 00:04:36,000 --> 00:04:39,520 Speaker 3: there's also, I think importantly, no signs that the slowing 94 00:04:39,560 --> 00:04:42,680 Speaker 3: and labor demand has really hit labor income, as wages 95 00:04:42,720 --> 00:04:44,680 Speaker 3: have picked up somewhat in the last few months and 96 00:04:44,760 --> 00:04:47,400 Speaker 3: hours have held up. So we have an economy that 97 00:04:47,480 --> 00:04:50,600 Speaker 3: is downshifted. It's sending a risk signal, but it's not 98 00:04:50,839 --> 00:04:52,880 Speaker 3: by any means breaking, And of course we do have 99 00:04:52,920 --> 00:04:56,080 Speaker 3: the flip side on inflation to worry about. I think 100 00:04:56,120 --> 00:04:58,960 Speaker 3: you have to look at the FED as responding to 101 00:04:59,000 --> 00:05:02,880 Speaker 3: these asymmetric the recession risk when it starts to pick up, 102 00:05:03,160 --> 00:05:06,039 Speaker 3: becomes a dominant factor in their thinking. And as I said, 103 00:05:06,120 --> 00:05:08,160 Speaker 3: I think it's enough to get you a couple of eases, 104 00:05:08,240 --> 00:05:10,760 Speaker 3: maybe three, it's not enough to get you one hundred 105 00:05:10,800 --> 00:05:13,520 Speaker 3: and thirty basis points. So the market's pricing in over 106 00:05:13,560 --> 00:05:15,000 Speaker 3: the next eighteen months. 107 00:05:14,800 --> 00:05:17,400 Speaker 2: Bruce, Governor wall is in your camp without a doubt. 108 00:05:17,400 --> 00:05:19,360 Speaker 2: But as you pointed out, the counter point to all 109 00:05:19,400 --> 00:05:22,200 Speaker 2: of this is that measures of slack of being quite stable, 110 00:05:22,240 --> 00:05:25,280 Speaker 2: and you pointed to wages, wages are still okay. So 111 00:05:25,400 --> 00:05:27,040 Speaker 2: you might get a few people on the Committee who 112 00:05:27,120 --> 00:05:30,200 Speaker 2: say this is more about labor supply and that we've 113 00:05:30,240 --> 00:05:32,600 Speaker 2: got a real risk care that we might get pushed 114 00:05:32,640 --> 00:05:35,000 Speaker 2: in one direction when perhaps we should be looking in 115 00:05:35,040 --> 00:05:36,880 Speaker 2: the other. Bruce, how do you think that debate is 116 00:05:36,880 --> 00:05:38,640 Speaker 2: going to plan on the Committee in September? 117 00:05:39,520 --> 00:05:41,799 Speaker 3: You could clearly see that in the minutes this week. 118 00:05:41,839 --> 00:05:45,080 Speaker 3: And I am very much win Waller's camp and being 119 00:05:45,080 --> 00:05:47,839 Speaker 3: concerned about labor demand. But I'm not with him, and 120 00:05:47,880 --> 00:05:50,039 Speaker 3: I think most of the Committee is not with him 121 00:05:50,040 --> 00:05:52,000 Speaker 3: in the way he's reading the inflation data. 122 00:05:52,400 --> 00:05:53,040 Speaker 4: And that's the. 123 00:05:53,040 --> 00:05:56,640 Speaker 3: Tough part of this call, because there is inflation pressure building. 124 00:05:56,680 --> 00:05:59,840 Speaker 3: I don't think underlying signals are telling us US score 125 00:05:59,880 --> 00:06:03,160 Speaker 3: and inflation is below three percent at this point. If 126 00:06:03,160 --> 00:06:05,680 Speaker 3: it wasn't for a risk issue, I don't think the 127 00:06:05,680 --> 00:06:08,039 Speaker 3: Fed would have a case for eezing. I do think 128 00:06:08,080 --> 00:06:10,520 Speaker 3: there's a legitimate risk issue, and I do think it's 129 00:06:10,520 --> 00:06:13,440 Speaker 3: appropriate to respond to that with modest easing as we 130 00:06:13,480 --> 00:06:16,800 Speaker 3: go through the next two or three meetings, Bruce, how. 131 00:06:16,640 --> 00:06:19,320 Speaker 5: Important is it where we've come from, the fact that 132 00:06:19,360 --> 00:06:21,680 Speaker 5: this has been four and a half years of inflation 133 00:06:21,800 --> 00:06:24,960 Speaker 5: consistently above target, the fact that you have scars of 134 00:06:25,000 --> 00:06:28,640 Speaker 5: twenty twenty two still really fresh. Does that in itself 135 00:06:28,720 --> 00:06:31,520 Speaker 5: push back against some of the waller thinking that he 136 00:06:31,680 --> 00:06:34,880 Speaker 5: might be right in normal times, but this time around 137 00:06:35,080 --> 00:06:36,679 Speaker 5: the risk of inflation is different. 138 00:06:38,160 --> 00:06:40,040 Speaker 3: I think that's right, And I think if we were 139 00:06:40,200 --> 00:06:42,320 Speaker 3: sitting in a world where you didn't feel there was 140 00:06:42,360 --> 00:06:45,480 Speaker 3: a heightened risk of a labor market break, you're not 141 00:06:45,520 --> 00:06:49,360 Speaker 3: supposed to be easing even as you see growth having slowed. 142 00:06:49,839 --> 00:06:52,880 Speaker 3: But we do know that recessions are quite disruptive. We 143 00:06:53,560 --> 00:06:57,479 Speaker 3: do know they're they're quite disinflationary. We also can see 144 00:06:57,520 --> 00:07:00,159 Speaker 3: that so far the FED hasn't lost its anchor the 145 00:07:00,160 --> 00:07:03,000 Speaker 3: longer end on inflation credibility. So I think in the 146 00:07:03,040 --> 00:07:07,080 Speaker 3: balancing act here, if you are concerned about inflation recession risk, 147 00:07:07,480 --> 00:07:09,320 Speaker 3: you're supposed to respond to it. If I could put 148 00:07:09,360 --> 00:07:11,760 Speaker 3: another point in here, I do think the FED is 149 00:07:11,800 --> 00:07:14,920 Speaker 3: politically vulnerable as an institution here, and I think the 150 00:07:15,040 --> 00:07:18,320 Speaker 3: risk that they fail to respond to a downturn. Taking 151 00:07:18,360 --> 00:07:21,720 Speaker 3: hold here would create a pretty substantial backlash, which I 152 00:07:21,760 --> 00:07:24,400 Speaker 3: think does weigh on their minds in terms of how 153 00:07:24,400 --> 00:07:26,560 Speaker 3: they're going to think about things as they go into 154 00:07:26,600 --> 00:07:27,520 Speaker 3: the September meeting. 155 00:07:28,040 --> 00:07:30,640 Speaker 2: But it's just built on that vulnerable as an institution. 156 00:07:31,320 --> 00:07:32,240 Speaker 7: What does that really mean? 157 00:07:33,360 --> 00:07:34,960 Speaker 3: Well, I think what it means is if you listen 158 00:07:35,040 --> 00:07:38,160 Speaker 3: to Stephen Moran, if you listen to Bessent, there's talk 159 00:07:38,240 --> 00:07:41,800 Speaker 3: about the FED being reevaluated as an institution. This is 160 00:07:41,800 --> 00:07:44,400 Speaker 3: not about who leads the FED. This is not about 161 00:07:44,480 --> 00:07:48,360 Speaker 3: firing members of the board. This is about do we 162 00:07:48,600 --> 00:07:50,840 Speaker 3: have a reevaluation of the Federal Reserve Act? 163 00:07:50,840 --> 00:07:51,480 Speaker 4: At some point? 164 00:07:51,520 --> 00:07:54,160 Speaker 3: Here is the FED as an institution going to be 165 00:07:54,240 --> 00:07:57,640 Speaker 3: changed by this administration. They're certainly pointing in that direction. 166 00:07:58,000 --> 00:08:01,000 Speaker 3: And I think the more the FED behind the curve, 167 00:08:01,120 --> 00:08:03,240 Speaker 3: the more the FED puts itself in a position where 168 00:08:03,240 --> 00:08:06,120 Speaker 3: it's not sensitive to growth rists that are realized, the 169 00:08:06,120 --> 00:08:09,239 Speaker 3: more those risks increase. The FED understands that the FED 170 00:08:09,440 --> 00:08:12,680 Speaker 3: is a political institution, and I think it accommodates when 171 00:08:12,720 --> 00:08:13,800 Speaker 3: it is under pressure. 172 00:08:14,040 --> 00:08:15,240 Speaker 4: It's a marginal issue. 173 00:08:15,280 --> 00:08:17,520 Speaker 3: I think it won't make the FED ease when there's 174 00:08:17,560 --> 00:08:20,120 Speaker 3: not a good case for it, but when decisions are marginal, 175 00:08:20,200 --> 00:08:22,560 Speaker 3: I think it leans in the dubbsh direction. I think 176 00:08:22,600 --> 00:08:25,400 Speaker 3: that's exactly where we're going to sit at the September meeting. 177 00:08:27,280 --> 00:08:40,240 Speaker 2: Stay with us, Mulblinpex Savanna's coming up after this. Jean 178 00:08:40,280 --> 00:08:42,480 Speaker 2: Barvan of Blackcroff with this to say, we would still 179 00:08:42,559 --> 00:08:45,520 Speaker 2: lean against the market pricing of multiple FED rate cuts 180 00:08:45,960 --> 00:08:48,360 Speaker 2: over the next year. Jonas with us in a studio 181 00:08:48,520 --> 00:08:50,640 Speaker 2: Monta John, Good morning. Why would you push back? 182 00:08:51,360 --> 00:08:54,160 Speaker 8: Well, I think the situation is very murky and it 183 00:08:54,240 --> 00:08:57,040 Speaker 8: remains very much so. Yes, the peril number that came 184 00:08:57,040 --> 00:08:59,600 Speaker 8: out the last one was an important one, and we 185 00:08:59,640 --> 00:09:02,679 Speaker 8: are close attention. I think it leads to even more 186 00:09:02,679 --> 00:09:05,760 Speaker 8: of an easy bias. But the inflation story is far 187 00:09:05,800 --> 00:09:08,600 Speaker 8: from clear. We have many more prints. I don't think 188 00:09:08,600 --> 00:09:10,280 Speaker 8: it's even the next too. I mean it's the next 189 00:09:10,520 --> 00:09:14,000 Speaker 8: many before we get a real handle and that situation, 190 00:09:14,240 --> 00:09:17,040 Speaker 8: and you know, you get inflation and row going in 191 00:09:17,040 --> 00:09:21,200 Speaker 8: the opposite direction. How they're going to balance that is 192 00:09:21,200 --> 00:09:22,160 Speaker 8: is far from clear. 193 00:09:22,200 --> 00:09:23,400 Speaker 4: From how do you put it in a speech? 194 00:09:23,640 --> 00:09:27,320 Speaker 8: In one Amazonia, I think I think you're careful to 195 00:09:27,440 --> 00:09:29,560 Speaker 8: guide the market too much, especially since the more the 196 00:09:29,600 --> 00:09:32,199 Speaker 8: market is I think By you don't want to lug 197 00:09:32,240 --> 00:09:33,600 Speaker 8: this in I don't think so. 198 00:09:34,480 --> 00:09:34,960 Speaker 7: I think you. 199 00:09:35,480 --> 00:09:37,600 Speaker 8: I think there's a big story in inflation that needs 200 00:09:37,640 --> 00:09:41,080 Speaker 8: to be spelled out. The labor market is a very 201 00:09:41,200 --> 00:09:43,600 Speaker 8: very unusual dynamic. It's I think it's very interesting that 202 00:09:43,679 --> 00:09:46,920 Speaker 8: the topic of the conference is really about, you know, employment, 203 00:09:47,040 --> 00:09:50,960 Speaker 8: labor market demographics, which are big structural forces that are 204 00:09:51,280 --> 00:09:54,680 Speaker 8: making the labor market very murky. And I think you 205 00:09:54,679 --> 00:09:58,439 Speaker 8: you emphasize that, and I think I think President Goalsby 206 00:09:58,520 --> 00:10:02,880 Speaker 8: is right that the service on inflation is really puzzling. 207 00:10:03,480 --> 00:10:05,640 Speaker 8: And I think, you know, it's important to remember that 208 00:10:06,000 --> 00:10:09,679 Speaker 8: going into this year, if we hadn't had this kind 209 00:10:09,679 --> 00:10:14,320 Speaker 8: of surprise weakness in service inflation would be more like 210 00:10:14,520 --> 00:10:17,240 Speaker 8: three percent inflation right now. And there's not a real 211 00:10:17,280 --> 00:10:21,199 Speaker 8: explanation for this weakness in service inflation because it doesn't 212 00:10:21,200 --> 00:10:23,360 Speaker 8: really line up with the labor market and wage dynamic 213 00:10:23,440 --> 00:10:25,760 Speaker 8: that we're saying. So so I think the jury is 214 00:10:25,840 --> 00:10:29,360 Speaker 8: very much held on inflation. And unless you get convinced 215 00:10:29,400 --> 00:10:31,959 Speaker 8: that recession risk is very real, then it's going to 216 00:10:32,000 --> 00:10:33,240 Speaker 8: be tough to deliver those cuts. 217 00:10:33,400 --> 00:10:37,200 Speaker 5: So is this, then, Powell that introduces two way risk 218 00:10:37,360 --> 00:10:39,240 Speaker 5: into this market in his speech today? 219 00:10:39,720 --> 00:10:41,680 Speaker 8: Yeah, I think this is this is very hard to do, 220 00:10:43,400 --> 00:10:46,280 Speaker 8: but I think by emphasizing some of the inflation story 221 00:10:46,280 --> 00:10:50,880 Speaker 8: that is not resolve and recession. It's one data point 222 00:10:50,880 --> 00:10:52,680 Speaker 8: on the payroll, right, I mean we could get like, 223 00:10:53,080 --> 00:10:55,960 Speaker 8: you know, a pretty strong one next one. We believe 224 00:10:56,040 --> 00:11:00,080 Speaker 8: that you know, sixty forty to sixty thousand job is 225 00:11:00,160 --> 00:11:03,920 Speaker 8: kind of what we need to keep inflation stable. So 226 00:11:04,800 --> 00:11:07,920 Speaker 8: that's easy to achieve in the next payroll numbers, and 227 00:11:07,960 --> 00:11:09,560 Speaker 8: that would not be screaming recession. 228 00:11:09,640 --> 00:11:11,640 Speaker 6: So I don't know, making those. 229 00:11:11,559 --> 00:11:13,880 Speaker 8: Kinds of points I think pushes a bit against one 230 00:11:13,920 --> 00:11:15,760 Speaker 8: hundred percent price and cut. 231 00:11:16,200 --> 00:11:17,160 Speaker 6: And Look, you're not. 232 00:11:17,080 --> 00:11:18,480 Speaker 5: The only one to say this. I think a lot 233 00:11:18,480 --> 00:11:20,640 Speaker 5: of people have come around this table this week have 234 00:11:20,760 --> 00:11:24,840 Speaker 5: said that before four right, maybe for the past month 235 00:11:24,880 --> 00:11:27,120 Speaker 5: two months, we can go back further saying that they're 236 00:11:27,160 --> 00:11:28,320 Speaker 5: stuck between a hard place. 237 00:11:28,360 --> 00:11:29,840 Speaker 6: It's not a market that's saying. 238 00:11:29,640 --> 00:11:32,280 Speaker 5: That, though, John, So, how vulnerable are we at this 239 00:11:32,360 --> 00:11:34,880 Speaker 5: moment to having a FED that will push back and 240 00:11:34,960 --> 00:11:37,800 Speaker 5: a powel that will push back against current market pricing. 241 00:11:38,320 --> 00:11:41,839 Speaker 8: I think this is an environment that is very as 242 00:11:41,840 --> 00:11:44,640 Speaker 8: a result, very volatile. We keep telling clients and you 243 00:11:44,640 --> 00:11:48,480 Speaker 8: know investors that this is an environment where we have 244 00:11:49,320 --> 00:11:52,080 Speaker 8: more scenarios that are possible in the table than usual. 245 00:11:52,559 --> 00:11:55,559 Speaker 8: You cannot bank on one being one hundred percent. Things 246 00:11:55,600 --> 00:11:58,120 Speaker 8: are not binary, and as a result, we think that 247 00:11:58,160 --> 00:12:01,520 Speaker 8: creates a lot of alpha or you know, investment opportunities. 248 00:12:02,280 --> 00:12:04,120 Speaker 8: The fact that it's price one hundred percent and there 249 00:12:04,200 --> 00:12:06,880 Speaker 8: might be room for some surprise will create some you know, 250 00:12:06,960 --> 00:12:10,000 Speaker 8: near term opportunities, and I think that creates a pretty 251 00:12:10,040 --> 00:12:11,040 Speaker 8: interesting trading. 252 00:12:10,840 --> 00:12:13,680 Speaker 7: Environment for for investors. What you like right now? 253 00:12:14,520 --> 00:12:18,480 Speaker 8: We we we like UH risk in general because I mean, 254 00:12:18,720 --> 00:12:21,600 Speaker 8: no matter what happens with the communication today, and even 255 00:12:21,640 --> 00:12:24,720 Speaker 8: if there was like a surprise, how kishness coming out 256 00:12:24,800 --> 00:12:27,400 Speaker 8: and the market work to react. Adversely, we think there's 257 00:12:27,480 --> 00:12:30,560 Speaker 8: pretty strong under need uh, you know, support for risk assets. 258 00:12:30,559 --> 00:12:32,680 Speaker 8: So we like we like equities, We like US equities 259 00:12:32,679 --> 00:12:36,360 Speaker 8: in particular. We would be you know, a bit more 260 00:12:36,440 --> 00:12:38,840 Speaker 8: careful on on on the rate side of things and 261 00:12:38,840 --> 00:12:42,360 Speaker 8: fix income for like what we're just discussing here, and 262 00:12:42,800 --> 00:12:45,280 Speaker 8: in the context where the dollar has been you know, 263 00:12:45,840 --> 00:12:48,120 Speaker 8: behaving the way it has this year, Uh, there are 264 00:12:48,160 --> 00:12:50,920 Speaker 8: pockets of interest in emerging market that continues to be 265 00:12:51,000 --> 00:12:53,800 Speaker 8: to be there for us and ai UH is UH 266 00:12:54,160 --> 00:12:57,360 Speaker 8: is certainly something that despite the ongoing debate and so on, 267 00:12:58,520 --> 00:13:00,000 Speaker 8: you know, we think it's a pretty powerful force. 268 00:13:00,200 --> 00:13:01,000 Speaker 7: Let's just sit on that. 269 00:13:01,440 --> 00:13:03,200 Speaker 2: You've talked about this as a team, the lack of 270 00:13:03,280 --> 00:13:06,760 Speaker 2: macro anchors right now to focus on other things. Can 271 00:13:06,800 --> 00:13:08,760 Speaker 2: you build out that just a little bit more? 272 00:13:09,400 --> 00:13:13,520 Speaker 8: Yeah, I think you know, there's this environment since twenty twenty. 273 00:13:13,520 --> 00:13:16,280 Speaker 8: It's ironic they're going to be reviewing their framework now 274 00:13:17,080 --> 00:13:19,840 Speaker 8: five years and that five years was exactly for us 275 00:13:20,080 --> 00:13:23,439 Speaker 8: where we moved to a completely different regime. It used 276 00:13:23,480 --> 00:13:27,439 Speaker 8: to be all about demand and risk of inflation, under 277 00:13:27,480 --> 00:13:30,160 Speaker 8: shooting and targets. Now we think it's all shaped by supply. 278 00:13:30,480 --> 00:13:34,040 Speaker 8: It's a transformation, it's a real transformation. There's a lot 279 00:13:34,040 --> 00:13:36,960 Speaker 8: of mega forces that play AI is one in particular, 280 00:13:37,400 --> 00:13:39,920 Speaker 8: and that means that you know where we're going to 281 00:13:39,960 --> 00:13:41,480 Speaker 8: be ending up in. 282 00:13:41,360 --> 00:13:42,480 Speaker 7: Two, three, five years. 283 00:13:42,520 --> 00:13:44,600 Speaker 8: I think it's a lot more clear than any point 284 00:13:44,640 --> 00:13:47,200 Speaker 8: in the four years prior to twenty twenty. Are we 285 00:13:47,240 --> 00:13:48,920 Speaker 8: going to get three percent growth? Are we going to 286 00:13:48,920 --> 00:13:51,120 Speaker 8: get like on a sustained basis, which would be like, 287 00:13:51,600 --> 00:13:54,280 Speaker 8: you know, a speed up or would we be the 288 00:13:54,320 --> 00:13:57,720 Speaker 8: one percent world? These are very different world, very likely 289 00:13:57,800 --> 00:13:59,600 Speaker 8: that we could be in both, but we just don't 290 00:13:59,640 --> 00:14:02,920 Speaker 8: know so to be ready for that. And then inflation, 291 00:14:03,440 --> 00:14:06,479 Speaker 8: we are debating the near term, but we have big deficits. 292 00:14:06,520 --> 00:14:08,160 Speaker 4: We have, you know, big debts. 293 00:14:08,960 --> 00:14:11,160 Speaker 8: How this is going to play out, How these trade 294 00:14:11,200 --> 00:14:13,320 Speaker 8: off will be navigator of the next five years is 295 00:14:13,440 --> 00:14:16,000 Speaker 8: very unclear, And as a result, I think it's very 296 00:14:16,000 --> 00:14:19,000 Speaker 8: difficult to build out a scenario five years out for 297 00:14:19,080 --> 00:14:21,640 Speaker 8: strategic asset allocation and say this is like a reasonable 298 00:14:21,680 --> 00:14:24,840 Speaker 8: basis where I can navigate around. Instead, I think you 299 00:14:24,880 --> 00:14:27,560 Speaker 8: need to be a lot more tactical and instead of 300 00:14:27,560 --> 00:14:29,400 Speaker 8: looking at this macro anchor, I think we want to 301 00:14:29,400 --> 00:14:33,360 Speaker 8: look to these megapce anchor and AI. There are many 302 00:14:33,400 --> 00:14:35,920 Speaker 8: macro scenaris, but we think AI will power through many 303 00:14:35,960 --> 00:14:37,880 Speaker 8: of them, and as a result, is a better way 304 00:14:37,920 --> 00:14:39,120 Speaker 8: to kind of shape portfolios. 305 00:14:39,840 --> 00:14:43,320 Speaker 2: Stay with US multile impact surveillance coming up after this. 306 00:14:52,720 --> 00:14:55,680 Speaker 2: The former us A Labor Department Chief economist Betsy Stevenson, 307 00:14:55,760 --> 00:14:58,320 Speaker 2: writing in The New York Times, the following the fact 308 00:14:58,440 --> 00:15:01,160 Speaker 2: is looking at job numbers without a real understanding of 309 00:15:01,200 --> 00:15:04,640 Speaker 2: what our current steady state job growth should be. Betsy 310 00:15:04,760 --> 00:15:06,520 Speaker 2: joined us now for more, Betsy, thanks for giving us 311 00:15:06,520 --> 00:15:07,880 Speaker 2: some time. I want to give you some space just 312 00:15:07,880 --> 00:15:10,720 Speaker 2: to explain that. What's your understanding of the current situation? 313 00:15:11,720 --> 00:15:15,040 Speaker 9: Yeah, thank you for giving me a chance to give 314 00:15:15,080 --> 00:15:17,160 Speaker 9: the context, because the context is important there. 315 00:15:17,200 --> 00:15:20,000 Speaker 6: Why do we not really know what the steady state 316 00:15:20,040 --> 00:15:20,440 Speaker 6: should be? 317 00:15:20,800 --> 00:15:23,360 Speaker 9: And the reason is that when we're looking at those 318 00:15:23,440 --> 00:15:26,280 Speaker 9: job numbers, what we're trying to think about is how 319 00:15:26,320 --> 00:15:27,200 Speaker 9: many workers. 320 00:15:26,880 --> 00:15:28,240 Speaker 6: Are employers trying to hire. 321 00:15:28,600 --> 00:15:30,360 Speaker 9: But on the other side of that is how many 322 00:15:30,360 --> 00:15:34,800 Speaker 9: workers are there available for them to hire, and how 323 00:15:34,880 --> 00:15:38,760 Speaker 9: much hiring does it take to keep our employment steady 324 00:15:39,040 --> 00:15:40,440 Speaker 9: so that we're at full employment. 325 00:15:40,840 --> 00:15:42,120 Speaker 4: What we have right now is. 326 00:15:42,080 --> 00:15:45,920 Speaker 9: A big decline in immigration, and that is clouding these 327 00:15:46,000 --> 00:15:51,240 Speaker 9: numbers because with people exiting, that's labor supply contracting. We 328 00:15:51,400 --> 00:15:55,680 Speaker 9: definitely need fewer jobs being added each month, but the 329 00:15:55,800 --> 00:15:58,560 Speaker 9: question is how many fewer? What's that steady state rate 330 00:15:58,600 --> 00:16:01,880 Speaker 9: of growth On the flip side, you know, in twenty 331 00:16:01,920 --> 00:16:05,120 Speaker 9: twenty four, twenty twenty three, a lot of people were 332 00:16:05,160 --> 00:16:07,840 Speaker 9: worried that the economy was overheating because they were adding 333 00:16:07,880 --> 00:16:10,440 Speaker 9: so many jobs per month. And it felt like where 334 00:16:10,480 --> 00:16:13,440 Speaker 9: could they be getting these workers while we were seeing 335 00:16:13,600 --> 00:16:17,720 Speaker 9: a resurgence of immigration as we now know, and that 336 00:16:17,880 --> 00:16:23,479 Speaker 9: resurgence of immigration was giving the labor's supply that employers 337 00:16:23,560 --> 00:16:26,120 Speaker 9: needed to be able to keep hiring at that very 338 00:16:26,240 --> 00:16:27,000 Speaker 9: rapid clip. 339 00:16:27,360 --> 00:16:30,080 Speaker 5: Well to that point, Betsy, the most recent reporting from 340 00:16:30,120 --> 00:16:32,480 Speaker 5: the Journal does suggest that there will be a change 341 00:16:32,520 --> 00:16:35,040 Speaker 5: from j. Powell when he speaks today about the framework 342 00:16:35,240 --> 00:16:38,400 Speaker 5: about not just inflation but employment as well, and how 343 00:16:38,440 --> 00:16:41,200 Speaker 5: they view this labor market. Given what you're talking about 344 00:16:41,400 --> 00:16:44,600 Speaker 5: and really the clouds and the unknowingness of how exactly 345 00:16:44,640 --> 00:16:47,520 Speaker 5: this labor market is forming, how should the framework change, 346 00:16:47,520 --> 00:16:49,800 Speaker 5: how should they be approaching this labor market? 347 00:16:51,680 --> 00:16:53,640 Speaker 9: Well, I think what they need to be right now 348 00:16:53,720 --> 00:16:56,680 Speaker 9: is just incredibly data driven. And that's going to mean 349 00:16:56,720 --> 00:16:59,720 Speaker 9: looking at lots of sources of data, because they're trying 350 00:16:59,720 --> 00:17:02,600 Speaker 9: to at not just how many jobs are added, what's 351 00:17:02,640 --> 00:17:06,879 Speaker 9: the unemployment rate, but what is the pressure in the 352 00:17:06,960 --> 00:17:10,639 Speaker 9: labor market that could spark inflation? And so that's going 353 00:17:10,720 --> 00:17:15,439 Speaker 9: to mean digging in and looking more granularly at unemployment 354 00:17:15,520 --> 00:17:18,439 Speaker 9: rates for different groups of people. But remember they have 355 00:17:18,480 --> 00:17:20,960 Speaker 9: a dual mandate. They do want to keep employment at 356 00:17:21,040 --> 00:17:23,400 Speaker 9: full employment, but they've also got to try to get 357 00:17:23,400 --> 00:17:26,919 Speaker 9: that inflation back to their target of two percent. You know, 358 00:17:26,960 --> 00:17:29,560 Speaker 9: we had hit it and then it's sort of bounced 359 00:17:29,640 --> 00:17:31,760 Speaker 9: up a little bit, and we might not think that 360 00:17:31,800 --> 00:17:35,280 Speaker 9: inflations it's not out of control, but it's certainly not 361 00:17:35,359 --> 00:17:38,040 Speaker 9: where they want it to be. And it looks like 362 00:17:38,119 --> 00:17:39,360 Speaker 9: inflation might be about to. 363 00:17:39,320 --> 00:17:41,720 Speaker 6: Tick up even further. So what they're going to be. 364 00:17:41,640 --> 00:17:45,600 Speaker 9: Looking at is what's happening to inflation expectations. 365 00:17:45,920 --> 00:17:47,400 Speaker 6: How tough do they have to. 366 00:17:47,359 --> 00:17:51,800 Speaker 9: Be to keep that inflationary pressure down? And then they 367 00:17:51,880 --> 00:17:56,720 Speaker 9: got to balance that with you know, is this slow 368 00:17:56,760 --> 00:17:59,760 Speaker 9: down in the labor market we're seeing is this driven 369 00:17:59,800 --> 00:18:05,440 Speaker 9: by employers just you know, not having enough oom? Are 370 00:18:05,480 --> 00:18:08,359 Speaker 9: we starting to see a recession where we're going to 371 00:18:08,440 --> 00:18:11,840 Speaker 9: have a bunch of resources, which are workers and people, 372 00:18:12,040 --> 00:18:15,600 Speaker 9: but also capital equipment that's just laying around and doing nothing. 373 00:18:16,000 --> 00:18:18,160 Speaker 6: That's what a recession is all about. We don't want a. 374 00:18:18,119 --> 00:18:21,320 Speaker 9: Recession, but we also don't want to see us demanding 375 00:18:21,640 --> 00:18:26,560 Speaker 9: more than we can supply, and particularly with reducing our 376 00:18:26,600 --> 00:18:30,399 Speaker 9: supply channels from overseas, that means that they're going to 377 00:18:30,440 --> 00:18:32,439 Speaker 9: have to be a little bit careful to try to 378 00:18:32,440 --> 00:18:35,359 Speaker 9: make sure that those reductions and supply don't lead. 379 00:18:35,240 --> 00:18:36,160 Speaker 6: To higher prices. 380 00:18:36,400 --> 00:18:38,520 Speaker 9: I think this is the toughest position the FED is 381 00:18:38,560 --> 00:18:41,640 Speaker 9: basically you know I've ever been in in my lifetime 382 00:18:41,680 --> 00:18:42,320 Speaker 9: at least. 383 00:18:42,119 --> 00:18:45,119 Speaker 5: Well Bessie just describing you describing the state of things. 384 00:18:45,160 --> 00:18:49,880 Speaker 5: It seems like labor market unknown, signals unclear. But what 385 00:18:50,080 --> 00:18:53,520 Speaker 5: is known is that inflation is still with us. In fact, 386 00:18:53,800 --> 00:18:56,680 Speaker 5: it's higher than it was this time last year at 387 00:18:56,800 --> 00:18:59,640 Speaker 5: Jackson Hole. How can the FED be cutting that next month? 388 00:19:01,760 --> 00:19:03,520 Speaker 6: I think that's a big question. 389 00:19:03,600 --> 00:19:06,919 Speaker 9: I think that's why you're hearing a lot from members 390 00:19:06,920 --> 00:19:10,480 Speaker 9: of the Board of Governors and you know, the FOMC 391 00:19:11,080 --> 00:19:14,320 Speaker 9: that you know it's not clear that they should cut. 392 00:19:14,600 --> 00:19:17,440 Speaker 9: They're really really going to have to be data dependent. 393 00:19:17,480 --> 00:19:19,959 Speaker 9: What does that mean? That means that they shouldn't have 394 00:19:19,960 --> 00:19:22,199 Speaker 9: made up their minds right now what they're going to 395 00:19:22,240 --> 00:19:24,800 Speaker 9: do in September. There's data that's going to come in 396 00:19:24,800 --> 00:19:26,800 Speaker 9: between now and then, and they're going to have to 397 00:19:26,840 --> 00:19:29,320 Speaker 9: react to it. I will say, keep in mind that 398 00:19:29,400 --> 00:19:33,960 Speaker 9: we want the FED to react before we. 399 00:19:33,840 --> 00:19:35,200 Speaker 6: See a big problem. 400 00:19:35,440 --> 00:19:39,240 Speaker 9: The FED does the best think about coming into COVID. 401 00:19:39,680 --> 00:19:41,320 Speaker 9: You know, the FED could see the writing on the 402 00:19:41,320 --> 00:19:43,639 Speaker 9: wall with COVID because it was a pandemic and we 403 00:19:43,680 --> 00:19:46,280 Speaker 9: had to help data before we had the economic data, 404 00:19:46,320 --> 00:19:49,920 Speaker 9: and they were able to work to stimulate the economy 405 00:19:49,920 --> 00:19:53,080 Speaker 9: to cut rates before we saw the problems of COVID, 406 00:19:53,119 --> 00:19:56,640 Speaker 9: and I think that really helped us have a less 407 00:19:56,640 --> 00:20:00,640 Speaker 9: bad economic experience with COVID and recover quickly. But they 408 00:20:00,720 --> 00:20:04,000 Speaker 9: kept rates too low too long, and we had that 409 00:20:04,200 --> 00:20:07,880 Speaker 9: surge of inflation, so that it's a tough balancing act 410 00:20:07,920 --> 00:20:09,679 Speaker 9: for them and they're going to have to be looking 411 00:20:09,760 --> 00:20:11,359 Speaker 9: forward using. 412 00:20:11,080 --> 00:20:12,240 Speaker 6: The best data they can. 413 00:20:12,600 --> 00:20:15,600 Speaker 9: And then they're facing a data crisis in the federal government, 414 00:20:15,880 --> 00:20:21,360 Speaker 9: which is firing workers, cutting back staffing, which is making 415 00:20:21,400 --> 00:20:25,600 Speaker 9: it so that the data is cloudier and it's taking 416 00:20:25,800 --> 00:20:28,360 Speaker 9: longer for accurate data to come out. 417 00:20:29,280 --> 00:20:42,000 Speaker 2: Stay with us. Mulblindog. Savannah's coming up after this. Let's 418 00:20:42,040 --> 00:20:45,480 Speaker 2: have that conversation with Alex and Arista of the Cato Institute. 419 00:20:45,720 --> 00:20:49,840 Speaker 2: Alex intervention has consequences, Does it have unintended consequences? 420 00:20:51,480 --> 00:20:52,560 Speaker 7: It absolutely does. 421 00:20:52,680 --> 00:20:55,639 Speaker 1: The long term problems and even the short term problems 422 00:20:55,960 --> 00:20:58,919 Speaker 1: of the government trying to take these equity stakes and 423 00:20:59,000 --> 00:21:02,560 Speaker 1: some of the most productive and innovative companies in the world. 424 00:21:02,920 --> 00:21:06,200 Speaker 1: Is disastrous, and investors and firms are going to look 425 00:21:06,240 --> 00:21:08,400 Speaker 1: at this and they are going to start to make 426 00:21:08,440 --> 00:21:12,520 Speaker 1: investment decisions based on what makes politicians happy and on 427 00:21:12,560 --> 00:21:15,640 Speaker 1: what favors they think they can make, rather than the 428 00:21:15,760 --> 00:21:21,040 Speaker 1: profitability of these investments, which will eventually undermine a lot 429 00:21:21,200 --> 00:21:24,439 Speaker 1: of the productivity gains that we get from these firms. 430 00:21:24,480 --> 00:21:27,119 Speaker 1: I mean, we saw this back in the financial crisis, 431 00:21:27,640 --> 00:21:31,320 Speaker 1: where the government took stakes and companies, temporary stakes, big 432 00:21:31,359 --> 00:21:35,399 Speaker 1: bailouts and companies and auto companies and then made investment 433 00:21:35,440 --> 00:21:38,560 Speaker 1: decisions for them. This was not good for the auto industry, 434 00:21:38,600 --> 00:21:40,840 Speaker 1: it wasn't good for the United States, and I fear 435 00:21:41,359 --> 00:21:43,600 Speaker 1: that the effect of doing this with some of the 436 00:21:43,600 --> 00:21:47,399 Speaker 1: most advanced chip makers in the world will be even 437 00:21:47,480 --> 00:21:48,400 Speaker 1: more destructive. 438 00:21:48,560 --> 00:21:49,720 Speaker 4: Let's work through this, alex So. 439 00:21:49,800 --> 00:21:52,639 Speaker 2: Let's say GFC was about distressed assets connected to the 440 00:21:52,680 --> 00:21:55,640 Speaker 2: employment of thousands upon thousands of people in this country. 441 00:21:55,840 --> 00:21:57,600 Speaker 2: The government found like they had a role to play. 442 00:21:57,760 --> 00:22:00,840 Speaker 2: Let's talk about this one. It feels unique. Here's the situation. 443 00:22:01,000 --> 00:22:03,879 Speaker 2: The government doesn't believe that the freehanded the market is 444 00:22:03,880 --> 00:22:06,600 Speaker 2: going to allow them to build out domestic foundry capacity 445 00:22:06,800 --> 00:22:09,840 Speaker 2: and they need to for national security purposes. What is 446 00:22:09,880 --> 00:22:11,840 Speaker 2: the free market solution to making that happen. 447 00:22:13,280 --> 00:22:15,399 Speaker 1: Well, I think the major free market solution for a 448 00:22:15,440 --> 00:22:17,919 Speaker 1: lot of this is if the government thinks that it 449 00:22:18,080 --> 00:22:20,639 Speaker 1: needs to have certain components in order to fight a 450 00:22:20,680 --> 00:22:23,199 Speaker 1: war at some point, stockpiling is a good way to 451 00:22:23,240 --> 00:22:23,480 Speaker 1: do that. 452 00:22:23,840 --> 00:22:27,280 Speaker 7: Relying on exports from a lot of our allies is 453 00:22:27,280 --> 00:22:28,080 Speaker 7: a good way to do this. 454 00:22:28,160 --> 00:22:31,160 Speaker 1: I mean, if that was really the justification, the United 455 00:22:31,200 --> 00:22:33,600 Speaker 1: States government would not be putting. 456 00:22:33,600 --> 00:22:35,520 Speaker 7: Tariffs on other countries. 457 00:22:35,080 --> 00:22:38,560 Speaker 1: That are our allies, would be increasing trade flows with 458 00:22:38,600 --> 00:22:42,080 Speaker 1: these countries and away from the potential adversary. 459 00:22:42,240 --> 00:22:44,520 Speaker 7: So the Trump administration is trying to. 460 00:22:44,480 --> 00:22:48,200 Speaker 1: Have every side of every argument in this debate over 461 00:22:48,320 --> 00:22:51,720 Speaker 1: trade and ships and equity stakes in these companies. But 462 00:22:51,840 --> 00:22:56,280 Speaker 1: these arguments are all contradicting than each other, contradicting themselves. 463 00:22:56,560 --> 00:22:58,760 Speaker 1: And as a result, a lot of investors at a 464 00:22:58,840 --> 00:23:01,440 Speaker 1: lot of these companies they don't know which way to turn, 465 00:23:01,480 --> 00:23:04,679 Speaker 1: They don't know what types of investments to make, and 466 00:23:04,720 --> 00:23:08,399 Speaker 1: they don't know what the administration or the next administration 467 00:23:08,560 --> 00:23:09,240 Speaker 1: is going to do on this. 468 00:23:09,359 --> 00:23:10,720 Speaker 7: It is not a stable environment. 469 00:23:11,200 --> 00:23:14,119 Speaker 5: To that point, alex Often building up these types of 470 00:23:14,160 --> 00:23:18,080 Speaker 5: things take longer than four years. It will take longer 471 00:23:18,119 --> 00:23:22,119 Speaker 5: than this presidential cycle, is your estimation then that companies 472 00:23:22,200 --> 00:23:25,359 Speaker 5: won't commit. We've already gotten a lot of investment promises 473 00:23:25,400 --> 00:23:27,080 Speaker 5: from a variety of tech companies. 474 00:23:27,480 --> 00:23:28,480 Speaker 6: Do those get. 475 00:23:28,359 --> 00:23:31,000 Speaker 5: Followed through if there is this concern of what happens 476 00:23:31,040 --> 00:23:31,800 Speaker 5: after four years. 477 00:23:33,160 --> 00:23:36,280 Speaker 1: The history of industrial policy in the US and handing 478 00:23:36,320 --> 00:23:38,960 Speaker 1: out subsidies for firms to do this is that oftentimes 479 00:23:39,000 --> 00:23:41,800 Speaker 1: firms upfront will say yes, I'll do this, and then 480 00:23:41,840 --> 00:23:44,320 Speaker 1: they pull back their investments. We saw this for Foxcron 481 00:23:44,800 --> 00:23:48,800 Speaker 1: in places like Wisconsin, other states in Midwest. We've seen 482 00:23:48,840 --> 00:23:52,440 Speaker 1: it with companies throughout the country. Basically going back to 483 00:23:52,560 --> 00:23:56,160 Speaker 1: long periods of time that they will make a politically 484 00:23:56,240 --> 00:23:59,560 Speaker 1: favorable judgment to make the current politicians look good, and 485 00:23:59,560 --> 00:24:02,720 Speaker 1: then they'll back when they notice that they can't make 486 00:24:02,760 --> 00:24:06,480 Speaker 1: the economics work, they can't make the investment and profitable, 487 00:24:07,040 --> 00:24:11,240 Speaker 1: and ultimately that's probably a better situation than them investing 488 00:24:11,359 --> 00:24:15,680 Speaker 1: tens of billions of dollars in projects that won't ultimately work. Listen, 489 00:24:15,760 --> 00:24:19,399 Speaker 1: companies know what they're doing, they understand the rent secret 490 00:24:19,480 --> 00:24:22,639 Speaker 1: environment that they're in they understand this administration pretty well 491 00:24:22,960 --> 00:24:25,440 Speaker 1: and they are just trying to run it out without 492 00:24:25,480 --> 00:24:29,000 Speaker 1: doing too much damage to themselves, to their investors, and 493 00:24:29,040 --> 00:24:30,679 Speaker 1: to their to their share price. 494 00:24:30,840 --> 00:24:33,000 Speaker 5: They understand what the US is doing, Alex. To what 495 00:24:33,119 --> 00:24:36,040 Speaker 5: degree do companies understand and are able to navigate what 496 00:24:36,160 --> 00:24:39,879 Speaker 5: China is doing with AMD in Nvidia? The latest being 497 00:24:39,960 --> 00:24:43,359 Speaker 5: that China seemingly pushing back on allowing companies to buy 498 00:24:43,520 --> 00:24:46,119 Speaker 5: H twenty chips. How does an Nvidia navigate that? 499 00:24:47,640 --> 00:24:50,360 Speaker 1: I mean that, I mean that right there is a 500 00:24:50,880 --> 00:24:54,640 Speaker 1: you know, the trillion dollar question. The Chinese government has 501 00:24:54,680 --> 00:24:59,040 Speaker 1: long been inscrutable to a lot of investors around the world. 502 00:24:59,480 --> 00:25:03,480 Speaker 1: The Trumpet administration's decisions seem crazy to a lot of them. 503 00:25:03,480 --> 00:25:05,320 Speaker 7: So they're really stuck between a rock and. 504 00:25:05,240 --> 00:25:08,520 Speaker 1: A hard place in terms of the investments that they 505 00:25:08,560 --> 00:25:10,720 Speaker 1: want to make. But I mean, it's just going to 506 00:25:10,760 --> 00:25:12,840 Speaker 1: be very, very difficult for them to navigate this. I mean, 507 00:25:12,880 --> 00:25:16,840 Speaker 1: we have a budding geopolitical conflict between China and the 508 00:25:16,960 --> 00:25:19,520 Speaker 1: United States that a lot of people try to compare 509 00:25:19,520 --> 00:25:21,840 Speaker 1: it to the Cold War, but it is radically different 510 00:25:21,920 --> 00:25:25,320 Speaker 1: because there are enormous and valuable trade flows between these 511 00:25:25,359 --> 00:25:29,600 Speaker 1: companies Chinese companies. Chinese firms of Chinese government has long 512 00:25:29,640 --> 00:25:35,280 Speaker 1: demanded payments of intellectual property from American companies to be 513 00:25:35,320 --> 00:25:37,919 Speaker 1: able to operate in their markets. I think we're going 514 00:25:37,960 --> 00:25:40,920 Speaker 1: to see a diversification where the Chinese government is going 515 00:25:40,960 --> 00:25:43,960 Speaker 1: to continue to nickel and dio American firms and demand 516 00:25:44,040 --> 00:25:47,480 Speaker 1: bigger and bigger concessions, just like the US government is 517 00:25:47,480 --> 00:25:50,280 Speaker 1: demanding from American firms in the form of equity stakes. 518 00:25:50,320 --> 00:25:53,800 Speaker 1: So basically, the big loser in all this geopolitical conflict 519 00:25:54,080 --> 00:25:58,000 Speaker 1: is going to be some of the most innovative American companies. 520 00:25:57,520 --> 00:26:00,080 Speaker 7: In the world, no matter which government is doing the pressure. 521 00:26:01,400 --> 00:26:04,960 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 522 00:26:04,960 --> 00:26:08,040 Speaker 2: in markets, economics, and geo politics. 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