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Speaker 1: We are here at Apollo Global Management and joining us

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Speaker 1: now someone you are very familiar with, Torsten Slock, of

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Speaker 1: course holding court at Deutsche Bank for years, dragged over

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Speaker 1: to Apollo to provide economic wisdom, and we're thrilled that

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Speaker 1: you would host us here today. Nice coffee, We're coming

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Speaker 1: next week. You have one single sentence in your report

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Speaker 1: this time around. It's not the Friday jobs report, it's

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Speaker 1: the Thursday Friday Jobs report. Because the optimists are hanging

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Speaker 1: on claims. How important are claims?

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Speaker 2: Well, that's really a critical question when it comes to

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Speaker 2: this employment report on Friday for November. Jobless claims has

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Speaker 2: been surprising and resilient for a very long period. Now

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Speaker 2: it's beginning to look more not like a soa if

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Speaker 2: Daniel Hard any more, and more like a long term lending.

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Speaker 2: We're waiting more and more and more for any evidence

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Speaker 2: of either a shop ors lowdown or acceleration. And what

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Speaker 2: we do have on the label market on the lowdown

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Speaker 2: side is as we'll get today. The Jolts data has

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Speaker 2: been showing the quits rate has been coming down. Meeting

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Speaker 2: the number of people who volunteerly quits their jobs has

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Speaker 2: been declining. That number of job openings has been coming down,

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Speaker 2: the work week has been coming down. Wages for job

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Speaker 2: switches relatives to job stayers has been converging. In other words,

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Speaker 2: you no longer have as much bargaining power if you

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Speaker 2: change jobs. Combined with a number of people who are

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Speaker 2: changing jobs for permanent reasons has also been changing. So

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Speaker 2: the conclusion is we still have more and more evidence

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Speaker 2: pointing a direction of the label markets oftening one indicator

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Speaker 2: job this claims yes, still good, but basically everything else

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Speaker 2: is pointing a direction of what you would expect, namely

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Speaker 2: a week of label.

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Speaker 1: Okay, I want a single point nine farm perils estimate,

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Speaker 1: but they won't serve me the bacon John was talking about.

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Speaker 1: So let me go to this is the whisper number.

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Speaker 1: Finally turning towards it's a look down a set. There

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Speaker 1: was a John one hundred and eight eight thousand.

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Speaker 3: Word that's consensus maybe estimate. Yeah we wait, w which

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Speaker 3: is about a whisper.

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Speaker 1: Number coming down instead of going up this time.

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Speaker 2: Well, if you really back up and think about what's

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Speaker 2: going on. The FED high rates in March of twenty

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Speaker 2: twenty two, and your textbook would tell you when you

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Speaker 2: raise interest rates. You should expect to see consumption begin

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Speaker 2: to slow down, capic spending begins to slow down, credit

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Speaker 2: growth from the banking sector begins to slow down, And

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Speaker 2: all those things are happening, and all those things should

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Speaker 2: also be expected to hit in particular lower rated credits,

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Speaker 2: smaller companies, middle market companies. And that's exactly where you're

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Speaker 2: beginning to these signs of weaker labor demand. So you

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Speaker 2: should expect to see non farm payrolls over the next

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Speaker 2: several months do what the FED is expecting it to do,

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Speaker 2: Let me gradually be soft and softer.

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Speaker 3: Is this labor market right now? And this is anil

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Speaker 3: doubts a question I for a ram Mack, is this

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Speaker 3: labor market right now less of a reason to be

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Speaker 3: hawkish at the Federal Reserve, even if we are printing

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Speaker 3: two hundred K on payrolls.

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Speaker 2: Well, as Jim was saying earlier, if it put is back,

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Speaker 2: because think about it, we have now a situation where

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Speaker 2: the market is spending so much time on the Fed's

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Speaker 2: ministricial small changes in their communication. And if the Fed

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Speaker 2: is now beginning to say, well, we still don't think

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Speaker 2: that we are there yet, the market says, well, Okay,

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Speaker 2: we are there yet, and you come to that conclusion.

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Speaker 2: But we've had that pivot so many times, and it

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Speaker 2: remains to be seen whether that pivot this time is right.

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Speaker 2: But the way I think what should be looking at

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Speaker 2: it is in the dual mandate. Should we be focusing

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Speaker 2: on inflation or employment is moving in the right direction.

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Speaker 2: Employment is moving gradually in the right direction. But if

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Speaker 2: the label market does start to have more than a

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Speaker 2: soft landing, then we will certainly have a sentiment change

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Speaker 2: in markets. So I never thought that i'd get to

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Speaker 2: the place for Torston Slock and Ben Ladler would agree.

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Speaker 2: I think of you as a perennial pessimist. I always

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Speaker 2: open your your emails that I kind of enjoy. No,

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Speaker 2: I actually risk exactly. So you're worrying about risks and

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Speaker 2: you're pointing to all.

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Speaker 1: These risks you're responsible. Then you say, you know there's

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Speaker 1: a FED put So does that mean that Goldilocks is

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Speaker 1: back on the table.

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Speaker 2: Well, But the issue here is that the market has

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Speaker 2: been interpreting the FED in so many different ways for

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Speaker 2: the last year, and the FED pivot has come I

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Speaker 2: mean seven out of the last nine times, as you will,

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Speaker 2: so a variant of the old joke of how many

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Speaker 2: times can you come with the same story that now

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Speaker 2: is the time, Now is the time for the Feds

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Speaker 2: or turn dubbish. But they haven't turned dubbish, and I

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Speaker 2: think that's why we will have rates higher for longer.

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Speaker 2: This is good for fixed income. This means that the

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Speaker 2: front end of the curve should be still cutting coupons.

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Speaker 2: In terms of thinking about what is the overall outook.

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Speaker 2: Its goes to take time before we get inflation under control.

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Speaker 2: And I think that process, meaning into next year, still

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Speaker 2: means that the downside risks. So the outlook continues.

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Speaker 1: To court to first Gym from Rochester, Thanks so much

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Speaker 1: for watching today, tourist, and I'm going to cut to

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Speaker 1: the chase. There's non linearities out there along the curve.

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Speaker 1: The chairman Powell looks at where's the biggest potential non linearity.

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Speaker 1: Is it wicked short like Apollo short term paper, is

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Speaker 1: it ten to twenty year French paper, thirty or forties

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Speaker 1: at the Austrian piece, where's the stress.

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Speaker 2: I would look at this from a macro perspective that

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Speaker 2: if it has high rates, we're seeing the language rates

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Speaker 2: going up on credit cards, on auto loans.

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Speaker 1: If there's no breath, there's a slock brim.

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Speaker 2: All of seeing the vault rates going up on higher

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Speaker 2: land loans it's been going up quite quickly in the

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Speaker 2: last six months. You're also seeing the bank credit growth

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Speaker 2: slow down quite substantially. Taking those things together, all that

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Speaker 2: so far looks like a soft landing. But again, as

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Speaker 2: I said, it, moll been along landing here. But the

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Speaker 2: bottom line still is to your question, the risk is

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Speaker 2: if people wake up suddenly in the next few quarters

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Speaker 2: and say, wow, maybe there's more downside rich to consumption.

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Speaker 2: Because the hit is not only from interest rates going up.

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Speaker 2: If people also start losing their jobs and the label

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Speaker 2: markets often, which is what the FED has been talking about,

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Speaker 2: we get the double wheremy of both high interst rates

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Speaker 2: hanging in there at the same time while the label

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Speaker 2: market finally softens, which is what the FED has been

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Speaker 2: waiting for for so long.

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Speaker 3: Okay, pause, because in the last week we've just had

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Speaker 3: records spending Black Friday online cyber month that was online

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Speaker 3: busiest day on recording US airports, and then buy now,

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Speaker 3: pay later underpinning bad news. That's why I want to ask.

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Speaker 2: Okay, remember roughly half of the population has used by

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Speaker 2: now pay Later, and that number had just continued to

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Speaker 2: go up in the last several months. So you begin

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Speaker 2: to think about, well, is that a sign that they

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Speaker 2: can't get credited elsewhere, even on their credit cards.

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Speaker 1: So rangers tickets would find now pay Later.

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Speaker 2: I know, well, that's You're probably part of that that

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Speaker 2: has used it. But I'm just saying the confusion is

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Speaker 2: that we're getting to the to the bottom line here

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Speaker 2: that people are getting stressed more on the household side,

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Speaker 2: savings are mainly with the middle and high income households.

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Speaker 2: Low income households are getting more and more pressure, in

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Speaker 2: particular when it comes to the language rates. So that's

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Speaker 2: of course implying that we will see more downside pressure

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Speaker 2: on consumers over the next one.

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Speaker 3: Maybe this might be just the beginning of the consumer

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Speaker 3: levering gun. Why isn't it that.

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Speaker 2: Well, because the backdrop here is that the FED is

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Speaker 2: not going to cut race anytime soon. So if the

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Speaker 2: cost of financing states or in FED language, you will

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Speaker 2: appreciate this. We will be above our star, which is

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Speaker 2: two and a half for a very extended verison, do

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Speaker 2: our start?

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Speaker 1: Come on?

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Speaker 2: Will we got twelve seconds we've got a bat a

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Speaker 2: minute least, Williams said, love, I would say they have medol.

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Speaker 1: Get that.

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Speaker 2: Well, I'll go with the FED line here and say

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Speaker 2: two and a half percent, and if you add five

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Speaker 2: and a half, we will have restrictive monetary posts for

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Speaker 2: at least a few more years. So to Jonathan's question,

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Speaker 2: that means that consumers will be under pressure potentially for

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Speaker 2: a few more years.

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Speaker 1: A guy yesterday said he is some German bank. He said,

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Speaker 1: ECB is gonna go first. What's a bundes fink gonna

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Speaker 1: tell the guard when she decides to cut.

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Speaker 2: That's a real wrestle inside the ECB at the moment.

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Speaker 2: But the ECB will go first. But it's very clear

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Speaker 2: that different EASYB government council members are showing up at

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Speaker 2: the meeting and have probably had a different whishlists.

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Speaker 3: Yeah, the federal reserves on the same page, maybe right

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Speaker 3: now the Company Council over the ECB. Tossy slock there

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Speaker 3: of Apollo