WEBVTT - Surveillance: Market Divergence With Chandler 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.160 and of course on the Bloomberg Terminal. Right now, with 0:00:30.200 --> 0:00:33.320 foreign Exchange, the global litmus paper for the system, Mark 0:00:33.400 --> 0:00:36.760 Chandler joins us with Bannockburg in the chief market strategist. Mark, 0:00:36.800 --> 0:00:39.280 thank you so much for joining us. What does strong 0:00:39.400 --> 0:00:42.520 dollars signal for the equity market and for the fixed 0:00:42.560 --> 0:00:46.159 income market? Yeah, it's been some ways, Tom, I think 0:00:46.200 --> 0:00:48.720 that they both are all reflecting the same kind of thing. 0:00:48.760 --> 0:00:51.680 And that is as Lisa was saying, is this incredible 0:00:51.680 --> 0:00:54.680 divergence between what's happening in the United States and what's 0:00:54.680 --> 0:00:57.440 happening in the other major in Dutch life countries and 0:00:57.560 --> 0:01:00.960 in emerging markets. And I think nobody, no other country 0:01:01.000 --> 0:01:04.520 has the political will or the wherewithal to use to 0:01:04.600 --> 0:01:07.080 do what the US is doing fiscally, and the Federal 0:01:07.120 --> 0:01:10.800 Reserve is more aggressive than other central banks and continue 0:01:10.800 --> 0:01:16.360 to buy US bonds. Mark Chandler's diversions tradeable. I mean, 0:01:16.400 --> 0:01:21.080 do you want convergence or divergence to get alpha? Well, 0:01:21.120 --> 0:01:23.200 I think that in the short run, and we're still 0:01:23.240 --> 0:01:25.640 in that short run is divergence is still the theme. 0:01:25.680 --> 0:01:27.959 And we're gonna see this play out when we get 0:01:27.959 --> 0:01:31.440 the final p m I readings from Europe starting later 0:01:31.520 --> 0:01:34.319 this week. But the whole host of data, including that 0:01:34.400 --> 0:01:37.360 Friday's US jobs data, I think that the key thing 0:01:37.400 --> 0:01:39.840 here that that so far I haven't heard you at 0:01:39.880 --> 0:01:43.000 least to speak about, and that is that even that 0:01:43.319 --> 0:01:45.240 the bottom line here is a market is pushing back 0:01:45.280 --> 0:01:47.760 against Fed ideas that they're not going to raise rates 0:01:47.800 --> 0:01:52.400 until twenty until after after that jobs data before the weekend. 0:01:52.760 --> 0:01:57.360 The euro dollar future is looking at the December is 0:01:57.360 --> 0:01:59.560 already tried to get at least one hike, and you 0:01:59.600 --> 0:02:02.000 can see this as well in the FED funds futures. 0:02:02.680 --> 0:02:04.720 So I think this is an important thing, the market 0:02:04.720 --> 0:02:08.080 pushing back against the feds more doubash views, and this 0:02:08.120 --> 0:02:10.480 is what I think helping pick the dollar higher. And 0:02:10.520 --> 0:02:14.200 this whole idea about UH stronger US growth continue to 0:02:14.200 --> 0:02:16.920 be revised up, I think is really the key to 0:02:17.040 --> 0:02:19.919 the US equity market. Well, do you get on this trademark. 0:02:19.960 --> 0:02:21.840 Do you say that, yes, the Fed's gonna have to 0:02:21.880 --> 0:02:23.880 capitulate to the market's view, or do you say, don't 0:02:23.919 --> 0:02:28.160 fight the Fed and perhaps bet against this stronger, taller trade. Well, 0:02:28.280 --> 0:02:29.720 I think it's a bit a little bit early to 0:02:29.800 --> 0:02:31.480 bet against the dollar trade. But here's where I think 0:02:31.560 --> 0:02:33.560 is gonna happen. I think that the Fed has given 0:02:33.600 --> 0:02:36.600 us a uh sort of the bar for when they're 0:02:36.639 --> 0:02:40.360 gonna begin tapering, and they say when there's significant progress 0:02:40.400 --> 0:02:43.960 towards its goals. We had almost a one million jobs 0:02:44.000 --> 0:02:48.080 being created last month. The early call for the April report, 0:02:48.120 --> 0:02:50.040 which we don't get until early next month, is for 0:02:50.080 --> 0:02:52.880 another million jobs. So that means by the time the 0:02:52.919 --> 0:02:56.000 Federal Reserve meets in June, the US economy would have 0:02:56.000 --> 0:02:58.440 created something on the magnitude of two to two and 0:02:58.440 --> 0:03:01.320 a half million jobs. I think that could meet the 0:03:01.400 --> 0:03:05.160 fence UH litmus test. And by that time we're gonna 0:03:05.160 --> 0:03:08.840 get inflation above two percent as the base effect from 0:03:08.919 --> 0:03:14.160 last year's deflation drops out of the year over year comparisons. Wait, 0:03:14.200 --> 0:03:15.880 so you're saying that you do think that the federal 0:03:15.960 --> 0:03:19.320 actually have to high grates before when they say they 0:03:19.320 --> 0:03:20.919 are going to high grates for the first time and 0:03:20.960 --> 0:03:23.520 they're gonna start tapering, which raises a question, how disruptive 0:03:23.600 --> 0:03:25.359 is this for the rest of the world. How much 0:03:25.400 --> 0:03:28.960 does this create outflows from particularly the developing world. Well, 0:03:28.960 --> 0:03:32.000 on one hand, you're right that that that the US 0:03:32.240 --> 0:03:36.440 bond yield increase in stort of dragging other interest rates higher. 0:03:36.760 --> 0:03:39.720 On the other hand, the strength of the US economy. 0:03:39.840 --> 0:03:42.360 We're gonna see this in the I M S forecast tomorrow, 0:03:42.400 --> 0:03:44.480 like the O E C D S forecast, They're gonna 0:03:44.520 --> 0:03:48.840 advise up world growth primarily because of what's happening in 0:03:48.880 --> 0:03:52.880 the US. Secondly, what's happening in China. Stronger US growth, 0:03:53.560 --> 0:03:56.080 it's gonna it's going to help fuel growth in the 0:03:56.160 --> 0:04:00.760 US trading partners like Canada, Mexico, and well as countries 0:04:00.800 --> 0:04:03.120 in East Asia, with the US imports a lot of 0:04:03.120 --> 0:04:05.400 consumer goods from so I want to break down down 0:04:05.440 --> 0:04:09.800 emerging markets. And while rising yields hurts the and the 0:04:09.880 --> 0:04:13.400 shorter dollar hurts, the strength of the US economy overrides that. 0:04:13.480 --> 0:04:17.440 In the short term. News breaking right now widely expected 0:04:17.480 --> 0:04:19.480 game stop. And of course this is with the chewy 0:04:19.520 --> 0:04:23.080 management really driving forward the theme they're gonna offer three 0:04:23.080 --> 0:04:26.800 point five millions shares. The stock was down nine point 0:04:26.880 --> 0:04:29.240 one percentage, which would be what you'd expect with the 0:04:29.279 --> 0:04:33.800 share announcement, maybe down three, down four percent. Uh. This 0:04:33.880 --> 0:04:37.640 is an at the market equity offering program, and Mark Chandler, 0:04:37.680 --> 0:04:41.040 I want to fold that in to the great underestimation 0:04:41.320 --> 0:04:46.080 using foreign exchanges a litmus paper. Is it corporations adjust? 0:04:46.520 --> 0:04:51.719 How will corporations? How will American corporations adjust to the 0:04:51.800 --> 0:04:57.400 superior divergence the excellence of the American economic experiment. Well, 0:04:57.560 --> 0:05:00.359 in the short one, I think it's obviously positive. But 0:05:00.520 --> 0:05:03.000 in the medium to longer term, this divergence is not 0:05:03.000 --> 0:05:06.800 gonna last forever. We're not talking really about about canceling 0:05:07.320 --> 0:05:11.960 recovery in Europe or recovery in parts of Asia. We're 0:05:11.960 --> 0:05:16.119 really talking about postponing, delaying that until maybe the second half. 0:05:16.480 --> 0:05:19.400 And so I think that this divergence will more morph 0:05:19.520 --> 0:05:23.560 into convergence, but where maybe three months away from that mark. 0:05:23.800 --> 0:05:26.240 Just to wrap everything up, I want to bring some news. 0:05:26.400 --> 0:05:29.640 Berkshire Hathaway borrowing money in the Japanese bond market for 0:05:29.640 --> 0:05:31.600 the third year in a row. As they say that 0:05:31.640 --> 0:05:34.760 they're going to be making investments in Japanese companies? Is 0:05:34.760 --> 0:05:37.800 this smart? Do you see other investment firms doing this, 0:05:37.880 --> 0:05:41.560 basically levering up basically free costs based on where barring 0:05:41.640 --> 0:05:45.200 rates are in Japan and then investing in companies there. Well, 0:05:45.200 --> 0:05:48.080 I think that this isn't really about a currency view 0:05:48.160 --> 0:05:51.960 as much as it's really about matching your assets and liabilities. 0:05:52.160 --> 0:05:55.920 So oftentimes when a corporation is buying a foreign asset, 0:05:56.279 --> 0:05:59.440 they can they can acquire that currency by buying the couragency, 0:05:59.640 --> 0:06:02.360 or if you're large enough, like Berkshire hath the way 0:06:02.400 --> 0:06:05.600 they can borrow that currency and thereby not taking having 0:06:05.600 --> 0:06:07.800 a currency mismatch. So I think this is really just 0:06:07.880 --> 0:06:12.000 about running a balanced book and avoiding misalignments between your 0:06:12.000 --> 0:06:16.400 revenues and your expenditures. Mark Chandler, we have to leave 0:06:16.400 --> 0:06:18.840 it there. On a Monday morning, March Chandler with prospective 0:06:18.839 --> 0:06:27.560 from Bannockburn, their chief market strategists. Anahan joins us she's 0:06:27.600 --> 0:06:32.320 with Wells Fargo equity strategist. But that barely describes her mathematics, 0:06:32.400 --> 0:06:36.000 acuity and addressing the stock market. And I want to 0:06:36.040 --> 0:06:39.760 go to nerd alert right now. What is the mathematically 0:06:40.000 --> 0:06:46.320 or dynamically distinctive feature of this bull market. Well, what's 0:06:46.360 --> 0:06:49.000 interesting in this bull market is what was leading the 0:06:49.040 --> 0:06:52.200 market a year ago is not necessarily the momented trade 0:06:52.200 --> 0:06:54.760 that's happening right now. And I think that's been a 0:06:54.760 --> 0:06:56.839 big change. And that's not to say that the market 0:06:56.880 --> 0:07:00.640 overall can't go higher. But when the leaders start to change, 0:07:00.920 --> 0:07:04.200 you also start seeing certain styles play out differently, like 0:07:04.360 --> 0:07:07.840 the value, like the cyclical trade now against growth. Do 0:07:07.920 --> 0:07:12.120 you sell those fancy stocks from a year ago or 0:07:12.120 --> 0:07:15.480 do you hold them and just take additional cash into 0:07:15.520 --> 0:07:20.480 these new stocks well right now rather than sell them. 0:07:20.520 --> 0:07:23.480 It's a question of what goes up faster, what goes 0:07:23.560 --> 0:07:25.960 up higher? Where can you get that bang for your book? 0:07:26.280 --> 0:07:29.800 And that's that value and cyclical trade you're seeing. But 0:07:30.120 --> 0:07:33.640 you know, frankly, the real early cyclical place have run 0:07:33.680 --> 0:07:35.840 pretty hot, and Tom, you know, it's hard for me 0:07:35.880 --> 0:07:37.560 to sit here and tell you to get into that 0:07:37.600 --> 0:07:40.360 game now, um, but you know we like the more 0:07:40.440 --> 0:07:42.680 mid cycle place. So that's why we're up on that 0:07:42.760 --> 0:07:46.640 consumer services industry. Now that the economy is starting to reopen, 0:07:46.880 --> 0:07:49.480 people have the cash to spend. It's the things that 0:07:49.560 --> 0:07:51.640 they can spend on when they can go on that 0:07:51.720 --> 0:07:54.480 travel they haven't been able to do now as vaccines 0:07:54.520 --> 0:07:58.000 get rolled out, nearly forty of US adults are vaccinated. 0:07:58.080 --> 0:08:00.440 I'm going to be eligible next week, you know. I 0:08:00.480 --> 0:08:02.920 know I'm ready and excited to travel. So these are 0:08:02.920 --> 0:08:04.720 the kind of things we're thinking about, and those are 0:08:04.760 --> 0:08:07.400 the places that we think really are worth playing right now. 0:08:07.480 --> 0:08:10.640 And good luck. We wish you the best in your vaccination. 0:08:10.720 --> 0:08:12.800 And there's a question about game Stop, which came out 0:08:12.840 --> 0:08:15.200 this morning and said it's offering three and a half 0:08:15.320 --> 0:08:17.080 up to three and a half million dollars of a 0:08:17.160 --> 0:08:20.920 million shares about a billion dollars maximum of shares, a 0:08:21.000 --> 0:08:23.239 sort of add on equity offering that we've been expecting 0:08:23.280 --> 0:08:25.800 for a long time, given how much their share prices 0:08:26.000 --> 0:08:28.680 have run up. Is it too late for a game 0:08:28.720 --> 0:08:31.360 Stop as retail investors start to bow out of the market. 0:08:32.800 --> 0:08:34.960 I wouldn't say it's too late. In fact, what it 0:08:35.040 --> 0:08:37.160 looks like these kind of companies who have seen their 0:08:37.240 --> 0:08:41.040 valuation search, whether it's because a retail flow came into it, 0:08:41.200 --> 0:08:43.679 or you know, perhaps because of their cyclical nature that 0:08:43.720 --> 0:08:46.160 they were able to run hot. They're taking advantage of 0:08:46.200 --> 0:08:49.040 that by doing issuance, and the issuance for them is 0:08:49.080 --> 0:08:52.520 an opportunistic moment and for us, the way we see 0:08:52.559 --> 0:08:55.439 it is, okay, do that issue once and right now. 0:08:55.480 --> 0:08:57.319 It's not so concerning where we think it's going to 0:08:57.440 --> 0:09:00.720 stress the credit markets, but it does come into question. 0:09:00.800 --> 0:09:03.520 You know, as you see these opportunities play out, it's 0:09:03.559 --> 0:09:07.640 because the backdrop is improving. It's because there's risk appetite 0:09:07.679 --> 0:09:09.920 as the economy improves. All right. The reason why I 0:09:09.920 --> 0:09:11.840 ask is because Tom was planning to get in on this, 0:09:11.960 --> 0:09:14.240 and he's been really aggressive on game stop and bit 0:09:14.280 --> 0:09:17.000 dog as he calls it, and all the aspects of 0:09:17.040 --> 0:09:19.440 the market these days. There's a question though about the 0:09:19.480 --> 0:09:21.880 retail investor, the marginal buyer, and there have been a 0:09:21.960 --> 0:09:24.280 number of stories about how there's been a pullback there. 0:09:24.600 --> 0:09:27.240 How much does that affect the meme stock? How much 0:09:27.280 --> 0:09:29.400 does this affect some of the momentum names that have 0:09:29.440 --> 0:09:31.240 gotten a boost from people who are stuck at home 0:09:31.440 --> 0:09:35.920 trading stocks. But when you see momentum names, it's interesting 0:09:36.000 --> 0:09:38.680 is you are seeing that the retail flow has ability 0:09:38.720 --> 0:09:41.960 to affect the momentum and play a momentum trade. But 0:09:42.160 --> 0:09:45.200 largely speaking, the momentum trade is really more focused on 0:09:45.240 --> 0:09:48.559 the institutional funds um. You know, we have growth be 0:09:48.920 --> 0:09:53.040 the momentum trade coming into the year in and now 0:09:53.120 --> 0:09:55.520 you look at it, the moment in trade is transforming 0:09:55.559 --> 0:09:59.800 into this value nature, you know, economically sensitive thing that's 0:09:59.800 --> 0:10:03.360 a little different from the momentum trade that retail traders play, 0:10:03.559 --> 0:10:06.240 where it's really just price appreciation and a little more 0:10:06.280 --> 0:10:09.000 i would say, short term looking than you say, look 0:10:09.000 --> 0:10:12.559 on in twelvemonth or nine months framework that US institutional 0:10:12.600 --> 0:10:14.640 players are used to looking at. And I'm looking for 0:10:14.720 --> 0:10:16.880 Catharsis here and I don't see it would be if 0:10:16.880 --> 0:10:19.320 you're negative on the market, you need some Catharsis up 0:10:19.360 --> 0:10:22.040 to go the other way. Give us the dynamics now 0:10:22.080 --> 0:10:25.079 of this bull market, whether it's SPX or I'll let 0:10:25.080 --> 0:10:27.640 you pick whichever index you want to look at. But 0:10:27.800 --> 0:10:31.439 where's the gamma? Where's the convexity? Now? Where's that momentum 0:10:31.640 --> 0:10:35.600 bet that gets people in trouble? Well, when you talk 0:10:35.640 --> 0:10:39.040 about convexity, it's sort of like you're asking what's acceleration 0:10:39.120 --> 0:10:42.360 towards the upside that we could or maybe won't see. 0:10:42.559 --> 0:10:44.280 What do we need to get it? To get that 0:10:44.360 --> 0:10:48.360 next umph up and for us it becomes expectations. You know, 0:10:48.400 --> 0:10:51.679 you've heard me see this before, Tom. Earnings expectations go 0:10:51.880 --> 0:10:55.320 higher as things get better, and the higher that bar goes, 0:10:55.480 --> 0:10:58.160 you really got to do more than the same one trick, 0:10:58.240 --> 0:11:01.760 pony uh to to really impressed towards the upside, and 0:11:01.800 --> 0:11:05.079 that gets harder and harder. So for now, look that 0:11:05.280 --> 0:11:10.120 economic backdrop of GDP growth looking above six percent, unemployment 0:11:10.200 --> 0:11:13.600 dropping below five percent this year. These are the things 0:11:13.640 --> 0:11:17.320 pushing the market higher. But to really get that acceleration upward, 0:11:17.559 --> 0:11:20.560 we need to see earnings show up, alright, So that 0:11:20.640 --> 0:11:23.439 earnings show up to to justify expectations. How about a 0:11:23.480 --> 0:11:26.079 place where the expectations have already been diminished like Europe. 0:11:26.200 --> 0:11:28.400 Are getting on that train saying that there can only 0:11:28.440 --> 0:11:31.360 be out performance in a place where the expectations have 0:11:31.400 --> 0:11:35.600 been pushed down to such a degree as in the Eurozone. Well, 0:11:35.600 --> 0:11:38.040 I won't say that there's only upside because when you 0:11:38.080 --> 0:11:42.000 have that uncertainty brewing, you know it can spiral downwards. Now, 0:11:42.160 --> 0:11:44.320 so far, it looks like, you know, the path forward 0:11:44.440 --> 0:11:46.560 is you know, sunnier, and it looks like it's going 0:11:46.600 --> 0:11:50.199 to get better as vaccine distribution gets a little more familiar, 0:11:50.400 --> 0:11:52.719 and as always, every day you know a little more 0:11:52.720 --> 0:11:55.560 about the situation. But for now, that's why we're keeping 0:11:55.559 --> 0:11:57.360 our money in the States. That's why we like the 0:11:57.440 --> 0:12:00.920 US equity play because we're seeing less certain to hear 0:12:01.040 --> 0:12:05.240 domestically and we're more comfortable the opportunities here. And thank 0:12:05.240 --> 0:12:07.600 you so much, greatly appreciated today with well as Fargo 0:12:07.679 --> 0:12:11.720 Securities and Equity strategist here within a great grade bullmarket. 0:12:16.520 --> 0:12:20.360 Terry Haynes joins US which with Pangea. Right now, Terry, 0:12:20.400 --> 0:12:24.840 this is where political rhetoric runs up again, blunt reality. 0:12:25.320 --> 0:12:28.520 I mean, all this talk about infrastructure and fiscal policy 0:12:29.080 --> 0:12:34.280 runs up against the political emotions of the constituencies. How 0:12:34.320 --> 0:12:38.520 does Ireland? How does Ireland adjust to a call for 0:12:38.640 --> 0:12:44.200 global corporate minimum tax? Oh? How they how they respond 0:12:44.240 --> 0:12:47.360 to it? Tom is uh giving at the back of 0:12:47.400 --> 0:12:50.400 their hand or inviting you into the pub for a drink. 0:12:50.440 --> 0:12:53.840 And meanwhile, very soon you'll be talking about something anything 0:12:53.880 --> 0:12:57.600 other than that. You're quite right that yuh that it's 0:12:58.440 --> 0:13:03.440 firstly and secondly, you know Yellen's uh. Yellan's not an 0:13:03.480 --> 0:13:06.520 independent chair of the FED here, she's the Secretary of 0:13:06.559 --> 0:13:09.440 the Treasury, so a general in the Biden Army trying 0:13:09.480 --> 0:13:14.360 to figure out some way to provide additional money for 0:13:14.440 --> 0:13:18.040 additional stimulus and infrastructure spending isn't exactly news, but that's 0:13:18.080 --> 0:13:19.760 not gonna get it done. How do we pay for 0:13:19.800 --> 0:13:24.520 infrastructure if there's a genuine pushback to individual taxes and 0:13:24.679 --> 0:13:28.600 shock corporate taxes as well, well, that's gonna The short 0:13:28.640 --> 0:13:30.679 answer is, I don't know, but it's gonna be. It's 0:13:30.679 --> 0:13:35.200 gonna be a negotiation between between the Congress, particularly the 0:13:35.240 --> 0:13:38.679 Senate uh and the White House, and they're gonna have 0:13:38.720 --> 0:13:41.520 to get both sides are gonna have to get serious. 0:13:41.520 --> 0:13:43.079 I mean, one thing we're gonna have We're gonna find 0:13:43.120 --> 0:13:47.280 out pretty soon is whether the President is serious about 0:13:47.320 --> 0:13:51.720 wanting to do actual infrastructure improvements or whether this is 0:13:52.280 --> 0:13:55.920 whether this is mostly for show. Uh if if if 0:13:55.960 --> 0:13:58.000 the President wants to do that, there are a lot 0:13:58.000 --> 0:14:01.680 of Republicans out there, not just Roy Blunt on the 0:14:01.720 --> 0:14:04.920 Sunday shows, but Shelley Moore, Capital of West Virginia, and 0:14:04.960 --> 0:14:07.360 many others saying, look, we have a history here of 0:14:07.400 --> 0:14:10.520 doing bipartisan and coming up in the last couple of 0:14:10.559 --> 0:14:15.680 years with bipartisan solutions on infrastructure, water, all kinds of 0:14:15.679 --> 0:14:18.640 other things. If the President wants to involve in existing 0:14:18.679 --> 0:14:22.520 Senate discussions already, Uh, they can do that, but in 0:14:22.640 --> 0:14:25.400 order to do that, they're gonna have to stop identifying 0:14:25.440 --> 0:14:28.440 everything is infrastructure and get down to what you know, 0:14:28.480 --> 0:14:33.800 the general usage actually is Rhodes Bridges, water and that 0:14:33.880 --> 0:14:35.800 sort of thing, Terry, based on what you've actually seen 0:14:35.880 --> 0:14:39.960 so far, which is Joe Biden saying we want bipartisan support. Realistically, 0:14:39.960 --> 0:14:42.360 we're willing to go it alone. What do you see 0:14:42.440 --> 0:14:45.520 as the likely price tag, the likely timeline of something 0:14:45.560 --> 0:14:49.400 that could actually get done at this point. Well, at 0:14:49.440 --> 0:14:51.760 first I'd cautioned the markets that it's going to take 0:14:51.880 --> 0:14:55.120 months and months to do this. Lisa, I I bogie 0:14:55.160 --> 0:14:57.680 did at a at a at a fourth quarter calendar 0:14:57.760 --> 0:15:00.280 year twenty one. I think it takes a long time 0:15:00.320 --> 0:15:04.120 to do that. Just negotiating the politics of the Democratic 0:15:04.160 --> 0:15:07.520 Party between centrists who would be happy to go with 0:15:07.600 --> 0:15:10.360 kind of the meat and potatoes approach and progressives who 0:15:10.400 --> 0:15:13.720 think this is far too little money. Uh. The Biden 0:15:13.720 --> 0:15:16.600 people have already essentially made a decision. They're gonna let 0:15:16.600 --> 0:15:19.160 the progressives try to figure that out on their own 0:15:19.200 --> 0:15:22.920 without involving the White House too much. But I'd look 0:15:22.960 --> 0:15:25.280 at it much more as a one and a half 0:15:25.320 --> 0:15:29.080 trillion to two trillion number. Uh, And I think the 0:15:29.080 --> 0:15:32.400 White House can probably get something like that, but over 0:15:32.440 --> 0:15:34.560 ten years, but it's gonna take quite a while. There 0:15:34.640 --> 0:15:37.120 might be a little bit uh, a little bit of 0:15:37.120 --> 0:15:39.840 corporate tax in there, there might be a bunch of 0:15:39.880 --> 0:15:43.400 other solutions. UH. So that's number one. Number two, much 0:15:43.600 --> 0:15:46.800 much smaller point. You'll know if the administrations can't get 0:15:46.800 --> 0:15:50.120 it serious, if they are willing to accept ideas on 0:15:50.120 --> 0:15:54.040 how to ramp up UH and and make more effective 0:15:54.520 --> 0:15:59.920 infrastructure decisions. If this is about fixing Pennsylvania's roads quickly 0:16:00.040 --> 0:16:03.800 and well of the general public will be in Pennsylvania, 0:16:03.840 --> 0:16:06.320 for example, will be enthusiastic about that. But if this 0:16:06.400 --> 0:16:10.040 is simply shoveling more money to the state agency that 0:16:10.200 --> 0:16:15.520 has given Pennsylvania UH, Pennsylvanians the joke for generations that 0:16:16.040 --> 0:16:19.960 what's going on here is UH is putting together more 0:16:20.040 --> 0:16:22.720 orange cones, which is the joke is that that's the 0:16:22.720 --> 0:16:26.360 state flower. UM. If you know, if that's all this 0:16:26.440 --> 0:16:29.400 is about, it's not going to be received very enthusiastically 0:16:29.440 --> 0:16:31.200 at all. So the administration is going to have to 0:16:31.240 --> 0:16:35.400 make qualitative and quantitative decisions about what they want. I 0:16:35.440 --> 0:16:38.040 assume that they want something terry. This is a really 0:16:38.080 --> 0:16:41.560 important point the process of getting this done, not just 0:16:41.680 --> 0:16:44.560 the headline number, not just the goals, but the process 0:16:44.600 --> 0:16:46.240 of who does it and how they do it to 0:16:46.440 --> 0:16:49.440 prevent sort of a d m V type situation from emerging. 0:16:49.800 --> 0:16:52.760 What processes would you like to see the Biden administration 0:16:52.800 --> 0:16:55.800 implement alongside a plan like this to make sure the 0:16:55.840 --> 0:16:59.240 efficiency of this use of cash. Well, what they're gonna 0:16:59.280 --> 0:17:02.760 have to what they're gonna have to do is UH 0:17:03.040 --> 0:17:05.199 is essentially put a lot of strings on it. UH. 0:17:05.320 --> 0:17:09.480 They're gonna have to incent state governments to prioritize projects. 0:17:09.560 --> 0:17:11.720 They're gonna have to send them to get it done quickly. 0:17:12.160 --> 0:17:15.480 And one thing Republicans will want to see is they'll 0:17:15.520 --> 0:17:18.119 want to see at the very least timelines. And you know, 0:17:18.240 --> 0:17:22.840 it's been potentially even some waivers of of environmental restrictions. 0:17:23.040 --> 0:17:25.160 And I don't mean getting rid of the environmental restrictions, 0:17:25.160 --> 0:17:28.440 I mean just the idea that environmental decisions can't take 0:17:28.440 --> 0:17:33.520 a decade to process, uh, which tends to happen a lot. Uh, 0:17:33.680 --> 0:17:36.280 if they're willing to streamline a process and make sure 0:17:36.359 --> 0:17:40.840 that the states are actually doing something rather aggressively to 0:17:40.840 --> 0:17:44.160 to implement infrastructure of all kinds, whether it be Rhodes bridges, 0:17:44.240 --> 0:17:47.760 broadband whatever. Uh. You know, there you'll see some more 0:17:47.760 --> 0:17:51.439 bipartisan receptivity. But if not, if this is all, if 0:17:51.520 --> 0:17:55.200 this is really all about same old, same old, then 0:17:55.280 --> 0:17:58.600 I think things will fall apart. Terry, thank you so much, 0:17:58.680 --> 0:18:06.160 Terry Hannes with Pengia with us today right now. This 0:18:06.240 --> 0:18:11.160 is a really really important conversation because not just Dana Peterson, 0:18:11.240 --> 0:18:13.800 but the Conference Board is where she is employed the 0:18:13.800 --> 0:18:17.000 Conference Board as their chief economists. Of Conference Board has 0:18:17.119 --> 0:18:22.320 thousands and thousands thousands of corporations is their clients, and 0:18:22.359 --> 0:18:26.240 it is a pulse and understanding of what corporate America 0:18:26.480 --> 0:18:30.720 and corporate globally is doing. Dana Peterson, how are corporations 0:18:30.760 --> 0:18:35.639 doing and what are their expectations? Well, um, CEOs are 0:18:35.640 --> 0:18:39.000 actually pretty happy. Our latest reading on CEO confidence is 0:18:39.040 --> 0:18:42.000 at a seventeen year high, and certainly when we talk 0:18:42.080 --> 0:18:45.280 to many of our members, they are actually quite excited 0:18:45.280 --> 0:18:48.480 about what's going on. However, they are very concerned about 0:18:48.480 --> 0:18:53.239 inflationary pressures. Um. You see that there are issues in 0:18:53.320 --> 0:18:57.439 terms of supply chain backlogs. Um. It's certainly uh. Energy 0:18:57.480 --> 0:19:00.520 prices are rising, so that's really a concern for members. 0:19:00.640 --> 0:19:03.400 What about fighting the last inflation war? I mean, there's 0:19:03.400 --> 0:19:05.480 anyone we can go back to the War of the sixties, 0:19:05.520 --> 0:19:08.600 the War the seventies, or the inflation East as failures 0:19:08.600 --> 0:19:11.560 over the last fifteen years. What's the war look like 0:19:11.800 --> 0:19:15.000 right now on inflation? Well, when you look at the 0:19:15.119 --> 0:19:18.480 core PC deflator, it looks like we've killed inflation. I mean, 0:19:18.520 --> 0:19:22.840 we're not seeing any inflationary pressures on the consumer side overall. However, 0:19:22.880 --> 0:19:26.119 there are definitely pockets of inflation. Um Our own measure 0:19:26.200 --> 0:19:29.000 of one year inflation expectations has been ticking up in 0:19:29.119 --> 0:19:31.400 line with gasoline prices. But when you look at other 0:19:31.440 --> 0:19:34.800 measures of longer term inflation expectations, they still appear to 0:19:34.840 --> 0:19:37.240 be pretty well anchored, all right, Which has to do 0:19:37.359 --> 0:19:40.600 with wages and this idea that until wages really start 0:19:40.640 --> 0:19:43.280 to increase, you're not going to see inflation rise in 0:19:43.320 --> 0:19:45.159 the way that the Federal Reserve would like to see it. 0:19:45.359 --> 0:19:47.200 We are seeing more of a push from the Biden 0:19:47.240 --> 0:19:51.479 administration for unionization or for some sort of minimum wage. 0:19:51.720 --> 0:19:54.320 You know that that vote for the Amazon workers will 0:19:54.359 --> 0:19:57.000 be coming out in terms of the results this week. 0:19:57.280 --> 0:20:00.000 Do you think that those efforts will lead to wage 0:20:00.080 --> 0:20:04.800 inflation beyond what people are currently expecting? Well, certainly, not 0:20:04.840 --> 0:20:06.800 only at the federal government level, but lots of state 0:20:06.840 --> 0:20:10.880 and local governments have been raising minimum wages. And certainly 0:20:10.920 --> 0:20:15.240 you will see some inflationary pressures for certain industries. For example, 0:20:15.760 --> 0:20:19.840 hotels and restaurants nearly six of their workers are actually 0:20:19.880 --> 0:20:23.520 minimum wage workers. And certainly some states, especially in the South, 0:20:23.560 --> 0:20:27.560 will see some inflationary pressures. Um. But upsetting that could 0:20:27.600 --> 0:20:30.400 be the rise and remote work, where many businesses can 0:20:30.560 --> 0:20:33.680 hire workers that are in lower cost jurisdictions or even 0:20:33.720 --> 0:20:37.000 from abroad. Um. So you're gonna see some push and 0:20:37.040 --> 0:20:40.159 pull there in terms of those different pressures that with 0:20:40.200 --> 0:20:43.159 respect to inflation, Dana, how long will it take to 0:20:43.280 --> 0:20:46.720 determine the sea change under way of working from home 0:20:46.800 --> 0:20:49.480 and the shifts in the locations of some of these jobs. 0:20:49.640 --> 0:20:53.440 Have we already started to see that in the data? Well, 0:20:53.480 --> 0:20:56.720 I mean it's it's a little tough to see, certainly. 0:20:57.080 --> 0:20:59.640 I mean, we do have surveys where we've asked businesses 0:20:59.680 --> 0:21:03.000 about out our remote work, and many businesses are saying, hey, 0:21:03.040 --> 0:21:06.120 there's going to be a hybrid model going forward where uh, 0:21:06.160 --> 0:21:08.760 some workers are going to be working remotely permanently, some 0:21:08.840 --> 0:21:10.360 are going to be in the office, and some we're 0:21:10.400 --> 0:21:12.640 going to be going back and forth between remote work 0:21:13.080 --> 0:21:16.159 and in uh in person work. And so this is 0:21:16.200 --> 0:21:18.439 something that is not going to change. We're going to 0:21:18.480 --> 0:21:20.600 continue to see this and certainly there are going to 0:21:20.640 --> 0:21:24.280 be implications in terms of productivity as well as with 0:21:24.320 --> 0:21:27.640 respect to inflation data. I want to focus on I've 0:21:27.680 --> 0:21:29.560 really never done this with you, Dana, but I really 0:21:29.600 --> 0:21:32.439 think the dynamics and the history of the Conference Board, 0:21:32.760 --> 0:21:35.760 going back to the Triangle disaster in New York City 0:21:35.760 --> 0:21:40.560 in about nineteen fifteen, nineteen sixteen, this relationship of unions 0:21:41.240 --> 0:21:47.520 CEOs and a president who's extremely comfortable with the union movement. 0:21:47.720 --> 0:21:49.639 What is the labor and I don't want you to 0:21:49.720 --> 0:21:53.760 speak for the Conference Board and two thousand executives, but 0:21:53.840 --> 0:21:57.960 what do you see as the dynamic forward within labor 0:21:58.600 --> 0:22:04.200 unions and the CEO s or is it just noise? Well? 0:22:04.240 --> 0:22:06.080 I think the thing is that it depends on what 0:22:06.440 --> 0:22:08.879 labor unions are looking for. Certainly, when it comes to 0:22:08.960 --> 0:22:13.159 higher wages, we already see many large companies UM, certainly 0:22:13.160 --> 0:22:15.600 some of our own members that are already raising wages. 0:22:15.600 --> 0:22:19.640 They're already trying to address the concerns of of their 0:22:19.720 --> 0:22:23.879