1 00:00:05,120 --> 00:00:07,200 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,680 --> 00:00:10,799 Speaker 2: I'm Lisa Abramoids along with Tom Keane and Jonathan Farrow. 3 00:00:11,160 --> 00:00:15,280 Speaker 2: Join us each day for insight from the best in economics, geopolitics, 4 00:00:15,320 --> 00:00:16,440 Speaker 2: finance and investment. 5 00:00:16,760 --> 00:00:18,840 Speaker 1: Subscribe to Bloomberg Surveillance. 6 00:00:18,360 --> 00:00:21,840 Speaker 2: On demand on Apple, Spotify and anywhere you get your podcasts, 7 00:00:22,160 --> 00:00:25,200 Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and 8 00:00:25,200 --> 00:00:26,440 Speaker 2: the Bloomberg Business App. 9 00:00:26,920 --> 00:00:29,639 Speaker 3: Right now, I've been out a few days, but I 10 00:00:29,720 --> 00:00:32,800 Speaker 3: really want to reset here on the American economy, and 11 00:00:32,800 --> 00:00:35,040 Speaker 3: there's no one better to do that than Tiffany Wilding, 12 00:00:35,640 --> 00:00:38,000 Speaker 3: economist at Pimco. Tiffy, I'm going to go beyond the 13 00:00:38,040 --> 00:00:41,040 Speaker 3: labor reports. We'll circle back to that. What is your 14 00:00:41,120 --> 00:00:44,680 Speaker 3: real GDP growth for twenty twenty four? 15 00:00:47,159 --> 00:00:49,320 Speaker 4: Yeah, I mean, so we think that the good news 16 00:00:49,320 --> 00:00:52,040 Speaker 4: from twenty twenty three, the resilient story, the you know, 17 00:00:52,040 --> 00:00:55,800 Speaker 4: two and a half percent kind of above trend GDP growth, 18 00:00:56,120 --> 00:00:58,840 Speaker 4: you know, that's probably squarely behind us. You know, the 19 00:00:58,880 --> 00:01:01,280 Speaker 4: saying kind of goes you can't go to heaven twice, 20 00:01:01,280 --> 00:01:03,600 Speaker 4: and we think some of the factors that led to that, 21 00:01:04,360 --> 00:01:06,600 Speaker 4: you know, we're still some of these excess savings sloshing 22 00:01:06,680 --> 00:01:09,080 Speaker 4: around from the pandemic and other supports, and you know, 23 00:01:09,120 --> 00:01:11,240 Speaker 4: and those kinds of things in our and under our 24 00:01:11,360 --> 00:01:14,640 Speaker 4: estimation are going away next year. And when you when 25 00:01:14,680 --> 00:01:16,920 Speaker 4: those things go away, what you're left with is still 26 00:01:17,040 --> 00:01:20,200 Speaker 4: tight monetary policy, you know. And obviously we have a 27 00:01:20,200 --> 00:01:22,120 Speaker 4: Federal Reserve that is telling us they're going to remain 28 00:01:22,200 --> 00:01:24,759 Speaker 4: on hold. So those policy drags are continuing to build. 29 00:01:24,840 --> 00:01:27,280 Speaker 4: So overall, we think growth probably is closer to something, 30 00:01:28,000 --> 00:01:31,319 Speaker 4: you know, the stagnant. You know, whether it's slightly positive 31 00:01:31,360 --> 00:01:33,479 Speaker 4: or slightly negative, I think is anyone's guest. But we're 32 00:01:33,520 --> 00:01:35,240 Speaker 4: kind of a stagnant situation next year. 33 00:01:35,440 --> 00:01:37,720 Speaker 2: So are you basically saying that we're in heaven and 34 00:01:37,760 --> 00:01:39,760 Speaker 2: that this is the Goldilocks and that you can't go 35 00:01:39,840 --> 00:01:40,880 Speaker 2: there again it's over? 36 00:01:43,680 --> 00:01:45,640 Speaker 4: Yeah, I mean, so we do think there's a lot 37 00:01:45,640 --> 00:01:48,840 Speaker 4: of good news this year with the US economy. There's 38 00:01:48,840 --> 00:01:51,800 Speaker 4: a lot of surprising resilience in the growth numbers, of course, 39 00:01:51,840 --> 00:01:54,440 Speaker 4: you know, and and so we think, you know, the 40 00:01:54,440 --> 00:01:57,560 Speaker 4: supply picture, as the Federal Reserve has also pointed out, 41 00:01:57,840 --> 00:02:00,280 Speaker 4: has also helped that, you know. But again, if you 42 00:02:00,280 --> 00:02:02,880 Speaker 4: looked at twenty twenty four, you have demand which is 43 00:02:02,880 --> 00:02:06,000 Speaker 4: potentially coming down, you know, but some of the things 44 00:02:06,000 --> 00:02:09,800 Speaker 4: that added to supply, like supply chain normalizations. You know, 45 00:02:09,800 --> 00:02:12,080 Speaker 4: we have the labor force participation rate for the prime 46 00:02:12,120 --> 00:02:14,440 Speaker 4: age folks that are now you know, it's back to 47 00:02:14,520 --> 00:02:17,480 Speaker 4: pre pandemic levels. You know, we're just not convinced maybe 48 00:02:17,480 --> 00:02:19,640 Speaker 4: that you're going to get as much on the supply 49 00:02:19,800 --> 00:02:22,680 Speaker 4: side next year. Now. Of course, immigration has been a 50 00:02:22,720 --> 00:02:26,080 Speaker 4: story here, and that's why we've also seen you know, 51 00:02:26,120 --> 00:02:29,639 Speaker 4: the unemployment rate rise because some of those labor market 52 00:02:29,639 --> 00:02:32,800 Speaker 4: inflows aren't getting absorbed by just a strong labor demand. 53 00:02:33,040 --> 00:02:35,200 Speaker 4: But again, overall, all of those signals kind of point 54 00:02:35,240 --> 00:02:37,520 Speaker 4: to us of something that's closer to more stagnant. More 55 00:02:37,560 --> 00:02:38,480 Speaker 4: stagnant economy. 56 00:02:38,600 --> 00:02:40,480 Speaker 2: Baked into this is this assumption that you're going to 57 00:02:40,560 --> 00:02:42,760 Speaker 2: have higher yields for a longer period of time. You said, 58 00:02:42,800 --> 00:02:44,560 Speaker 2: what we're going to be left with is just tighter 59 00:02:44,639 --> 00:02:47,760 Speaker 2: financial conditions, and yet it's unclear. 60 00:02:47,280 --> 00:02:48,399 Speaker 1: Whether that's going to be the case. 61 00:02:48,400 --> 00:02:50,160 Speaker 2: There have been a lot of people calling for pretty 62 00:02:50,160 --> 00:02:52,920 Speaker 2: substantial rate cuts by the Fed, by the ECP in 63 00:02:52,960 --> 00:02:55,600 Speaker 2: response to inflation coming down significantly. 64 00:02:55,639 --> 00:02:56,880 Speaker 1: Do you agree with the. 65 00:02:56,840 --> 00:03:00,360 Speaker 2: Paradigm or oil prices stay lower than they have and 66 00:03:00,440 --> 00:03:03,920 Speaker 2: keep inflecting lower because of production, because of supply, you 67 00:03:03,960 --> 00:03:08,960 Speaker 2: start to see a re engagement of global trade, forget deglobalization, 68 00:03:09,320 --> 00:03:11,480 Speaker 2: and you start to get more people come into the workforce. 69 00:03:11,520 --> 00:03:13,280 Speaker 2: It's basically everyone that people use. 70 00:03:13,400 --> 00:03:15,240 Speaker 1: It's the opposite of the this. 71 00:03:15,280 --> 00:03:17,200 Speaker 2: Time is different narrative that we heard this year. 72 00:03:19,000 --> 00:03:21,720 Speaker 4: Yeah, well, I mean, I'm not exactly sure in terms 73 00:03:21,800 --> 00:03:25,400 Speaker 4: of labor market inflows. You know, higher participation rates for 74 00:03:25,440 --> 00:03:27,280 Speaker 4: that prime age cohort, you know, I'm not sure that 75 00:03:27,280 --> 00:03:30,720 Speaker 4: that's going to continue to increase. I do think there's 76 00:03:30,720 --> 00:03:34,960 Speaker 4: some potential for immigration flows to stay high in twenty 77 00:03:35,000 --> 00:03:36,960 Speaker 4: twenty four. That's been a story not only in the 78 00:03:37,040 --> 00:03:41,280 Speaker 4: US but across the developed markets. Obviously geop elevated, you know, 79 00:03:41,320 --> 00:03:44,760 Speaker 4: geopolitical risks and conflicts are are contributing to that as well. 80 00:03:45,520 --> 00:03:48,520 Speaker 4: But overall, you know, I guess what we would say 81 00:03:48,600 --> 00:03:51,880 Speaker 4: is is that, you know, the Federal Reserve has told 82 00:03:51,960 --> 00:03:54,600 Speaker 4: us that they are still worried about the last mile 83 00:03:54,680 --> 00:03:58,400 Speaker 4: problem on inflation. In order to really ensure that inflation's 84 00:03:58,440 --> 00:03:59,960 Speaker 4: back to target, you know, I think we think, you do, 85 00:04:00,040 --> 00:04:01,920 Speaker 4: you need to see some more labor market loosening. 86 00:04:02,080 --> 00:04:05,040 Speaker 3: Marketing's coming back here in equity's, bonds, currencies, commodities, a 87 00:04:05,040 --> 00:04:07,280 Speaker 3: little bit of adjustment off the claims, and we've come 88 00:04:07,320 --> 00:04:09,839 Speaker 3: back in a little bit. I call it noodling. As 89 00:04:09,840 --> 00:04:13,200 Speaker 3: we staggered to tomorrow morning at eight thirty, Tiffany, one 90 00:04:13,200 --> 00:04:16,080 Speaker 3: of the great responsibilities you have is to stagger down 91 00:04:16,120 --> 00:04:20,360 Speaker 3: the rows at PIMCO, tripping over the antique Monroe traders 92 00:04:20,400 --> 00:04:24,359 Speaker 3: and looking at people's Bloomberg screens. And the two minute 93 00:04:24,440 --> 00:04:26,440 Speaker 3: drill is what is a short space going to do, 94 00:04:26,560 --> 00:04:29,640 Speaker 3: the Jerome Schneider space, And what's it going to do 95 00:04:29,720 --> 00:04:32,279 Speaker 3: in terms of the wall of money that's out there 96 00:04:32,920 --> 00:04:36,600 Speaker 3: that's off your remit? But your remit is what are 97 00:04:36,640 --> 00:04:42,000 Speaker 3: the economic conditions that make cash finally move? Can you 98 00:04:42,040 --> 00:04:45,400 Speaker 3: come up with a scenario where cash finally moves? 99 00:04:47,000 --> 00:04:47,279 Speaker 5: Yeah? 100 00:04:47,320 --> 00:04:50,040 Speaker 4: Absolutely, I mean I do think it's it's certainly this 101 00:04:50,560 --> 00:04:53,840 Speaker 4: quote soft landing scenario, right, you know. And I think 102 00:04:53,839 --> 00:04:56,520 Speaker 4: that the fact that the Federal Reserve as well as 103 00:04:56,560 --> 00:04:59,200 Speaker 4: other central banks have signaled that they're at the top 104 00:04:59,240 --> 00:05:03,119 Speaker 4: of their cycle, you know, along with this coinciding shock 105 00:05:03,200 --> 00:05:07,080 Speaker 4: to term premiums, just made bond market valuations look really 106 00:05:07,120 --> 00:05:11,000 Speaker 4: attractive and as a result, those higher yields just didn't 107 00:05:11,000 --> 00:05:13,520 Speaker 4: stay around that long, and you are starting to see 108 00:05:13,560 --> 00:05:15,800 Speaker 4: cash I think, come off the sidelines, go into the 109 00:05:15,839 --> 00:05:18,520 Speaker 4: bond market now, you know, I think there's a question 110 00:05:18,560 --> 00:05:21,359 Speaker 4: around the equity market, you know, riskier assets. I mean, 111 00:05:21,480 --> 00:05:24,919 Speaker 4: certainly the soft landing will be helpful, but when we 112 00:05:24,920 --> 00:05:27,839 Speaker 4: look at valuations, you know, for equities, for example, we 113 00:05:27,920 --> 00:05:32,040 Speaker 4: are more cautious. Equity risk premiums are still within their 114 00:05:32,120 --> 00:05:34,279 Speaker 4: historical range. They're not pricing in a lot of recession 115 00:05:34,320 --> 00:05:36,000 Speaker 4: risk in our view, and we don't think were out 116 00:05:36,000 --> 00:05:37,599 Speaker 4: of the water yet or out of the woods yet. 117 00:05:37,720 --> 00:05:40,120 Speaker 4: There's still a lot of uncertainty here, and we just 118 00:05:40,120 --> 00:05:41,960 Speaker 4: don't know that you're paid for it going out the 119 00:05:42,040 --> 00:05:42,680 Speaker 4: risk spectrum. 120 00:05:42,839 --> 00:05:46,039 Speaker 3: The quality of a lower GDP reset off of the 121 00:05:46,080 --> 00:05:49,400 Speaker 3: shock of what happened in two thousand and three, two thousand. Listen, ma, 122 00:05:49,400 --> 00:05:53,320 Speaker 3: I'm decades away. Lisa helped me here twenty twenty three. 123 00:05:53,920 --> 00:05:57,760 Speaker 3: To me, what's so important, Tiffany, is the productivity discussion 124 00:05:58,320 --> 00:06:01,880 Speaker 3: of the last ninety days. Give us the PIMCO brief 125 00:06:02,400 --> 00:06:05,799 Speaker 3: on the efficiencies of the American economy. 126 00:06:07,000 --> 00:06:09,160 Speaker 4: Yeah, well, you know, I think if you look more, 127 00:06:09,320 --> 00:06:11,680 Speaker 4: you know, kind of a more broadly, there was a 128 00:06:11,680 --> 00:06:15,240 Speaker 4: lot of noise around the productivity statistics during the pandemic 129 00:06:15,640 --> 00:06:19,559 Speaker 4: because you had unproductive sectors that were effectively shut down 130 00:06:20,200 --> 00:06:23,080 Speaker 4: then they reopened, and so there was kind of a mixshift, 131 00:06:23,120 --> 00:06:25,719 Speaker 4: if you will, in terms of economic output that impacted 132 00:06:25,720 --> 00:06:28,600 Speaker 4: the productivity data. But if you look more broadly, it 133 00:06:28,640 --> 00:06:32,760 Speaker 4: looks like it's on trend at a low level, you know. 134 00:06:32,800 --> 00:06:35,279 Speaker 4: And I would say that there is you know, probably 135 00:06:35,320 --> 00:06:38,599 Speaker 4: good news in terms of the productivity outlook that's embedded 136 00:06:38,680 --> 00:06:41,320 Speaker 4: in you know, AI and large language models and things 137 00:06:41,360 --> 00:06:45,240 Speaker 4: like that. But if we look at research that you know, 138 00:06:45,360 --> 00:06:48,400 Speaker 4: just kind of estimates how long it takes for those 139 00:06:48,400 --> 00:06:50,920 Speaker 4: types of technologies to puller for it, obviously that time 140 00:06:50,960 --> 00:06:53,440 Speaker 4: has come down, but it's not twenty twenty four. It's 141 00:06:53,480 --> 00:06:56,520 Speaker 4: still likely a quote secular horiso three to five year 142 00:06:56,560 --> 00:07:00,560 Speaker 4: time horizon that you're really seeing the productivity gains from 143 00:07:00,560 --> 00:07:02,280 Speaker 4: something like that. And the last thing I would just 144 00:07:02,360 --> 00:07:05,040 Speaker 4: highlight is that, you know, we saw PCs or the internet, 145 00:07:05,640 --> 00:07:07,840 Speaker 4: you know that it took you know, quite some time 146 00:07:07,880 --> 00:07:10,160 Speaker 4: for us to actually see productivity gains in the nineties 147 00:07:10,160 --> 00:07:12,040 Speaker 4: to come from that. So you know, at least from 148 00:07:12,080 --> 00:07:15,480 Speaker 4: a twenty twenty four perspective. You know, we're not as 149 00:07:15,520 --> 00:07:17,440 Speaker 4: convinced that you really start to see that in the data. 150 00:07:17,840 --> 00:07:20,320 Speaker 4: But I think there's you know, room for encouragement on 151 00:07:20,360 --> 00:07:21,920 Speaker 4: a secular timeframe. 152 00:07:22,040 --> 00:07:24,119 Speaker 2: Just quickly, Tiffany, you seem to be pushing back against 153 00:07:24,200 --> 00:07:26,680 Speaker 2: market expectations for rate cuts next year. Do you think 154 00:07:26,680 --> 00:07:28,440 Speaker 2: that we will get rate cuts by the Fed? Do 155 00:07:28,480 --> 00:07:30,240 Speaker 2: you think that they'll be in the first half or 156 00:07:30,240 --> 00:07:31,560 Speaker 2: do you think that they're going to be squarely in 157 00:07:31,600 --> 00:07:32,800 Speaker 2: the second half and not that many? 158 00:07:34,840 --> 00:07:37,760 Speaker 4: Yeah, well, I mean, look, I do think it depends. 159 00:07:37,800 --> 00:07:41,800 Speaker 4: I mean the real side of the economy. You know, 160 00:07:41,840 --> 00:07:44,800 Speaker 4: it does need to slow in our view, and it 161 00:07:44,880 --> 00:07:46,559 Speaker 4: needs to slow, and you need to see a little 162 00:07:46,560 --> 00:07:50,440 Speaker 4: bit more you know, loosening of the labor market, we think, 163 00:07:50,520 --> 00:07:53,360 Speaker 4: in order for central banks to really feel confident that 164 00:07:53,440 --> 00:07:57,800 Speaker 4: inflation is more sustainably at their target and you know, 165 00:07:57,880 --> 00:08:00,640 Speaker 4: looking at you know, I think there's definitely some still 166 00:08:00,680 --> 00:08:04,360 Speaker 4: resilience in the economy and we could see central banks 167 00:08:04,480 --> 00:08:08,520 Speaker 4: lag worried about that outcome. You know, Powell has very 168 00:08:08,600 --> 00:08:11,200 Speaker 4: clearly stated, you know, that he wants to be a 169 00:08:11,280 --> 00:08:14,240 Speaker 4: vulgar you know, and Nana Burns, and so you know, 170 00:08:14,240 --> 00:08:16,040 Speaker 4: we think they could be laggy in terms of when 171 00:08:16,080 --> 00:08:19,120 Speaker 4: they start to cut, you know. But but nevertheless, you know, 172 00:08:19,160 --> 00:08:22,440 Speaker 4: obviously the market's going to price a balance of risks here, 173 00:08:22,840 --> 00:08:24,720 Speaker 4: and the inflation data certainly has been good over the 174 00:08:24,800 --> 00:08:25,720 Speaker 4: last couple of months. 175 00:08:25,880 --> 00:08:27,200 Speaker 3: Tiffany, thank you so much. 176 00:08:27,240 --> 00:08:27,960 Speaker 6: Tiffany World. 177 00:08:28,080 --> 00:08:30,560 Speaker 3: With pimcoll they manage Bill's notes and bonds out of 178 00:08:30,600 --> 00:08:35,000 Speaker 3: Newport Beach, California. 179 00:08:36,080 --> 00:08:37,920 Speaker 7: I think David Fann is doing what every other guest 180 00:08:38,040 --> 00:08:40,000 Speaker 7: is comes on this program over the last ten years, 181 00:08:40,000 --> 00:08:41,880 Speaker 7: does trying to work out the first question that Tom's 182 00:08:41,880 --> 00:08:43,280 Speaker 7: going to ask, because no one's got any. 183 00:08:43,840 --> 00:08:44,360 Speaker 6: I got two. 184 00:08:44,520 --> 00:08:46,679 Speaker 7: It's a double bear. I hear it from guests all 185 00:08:46,760 --> 00:08:47,120 Speaker 7: the time. 186 00:08:47,160 --> 00:08:48,760 Speaker 6: I thought he was going to ask me what devis was. 187 00:08:48,760 --> 00:08:49,839 Speaker 6: That's where I was leaning. 188 00:08:49,559 --> 00:08:52,640 Speaker 7: Over David Baale and CIO and head of investments at 189 00:08:52,640 --> 00:08:54,800 Speaker 7: City Global Wath with this in just a moment, let's 190 00:08:54,800 --> 00:08:56,680 Speaker 7: turn to the price section equities on the S and 191 00:08:56,679 --> 00:08:59,160 Speaker 7: P five hundred shaping up as follows, t K positive 192 00:08:59,320 --> 00:09:02,760 Speaker 7: by point one yields up five basis points four fifteen 193 00:09:02,880 --> 00:09:04,880 Speaker 7: fifty two on a US ten yet. 194 00:09:04,800 --> 00:09:08,280 Speaker 3: Audible question to Baalen, you worked with John Henry years ago, 195 00:09:08,440 --> 00:09:10,720 Speaker 3: the owner of the Boston Red Sox. How in God's 196 00:09:10,800 --> 00:09:13,560 Speaker 3: name is John Henry let one Soto go to the 197 00:09:13,600 --> 00:09:15,800 Speaker 3: New York Yankees and not the Boston Red Sox. 198 00:09:15,840 --> 00:09:17,800 Speaker 8: And if you I won't answer that question, but tell 199 00:09:17,800 --> 00:09:20,320 Speaker 8: me how it is that John Henry, as a trend 200 00:09:20,360 --> 00:09:22,840 Speaker 8: followers won three World Series when the Yankees have only 201 00:09:22,880 --> 00:09:26,360 Speaker 8: won one. And that's said very nicely finased, Thank you, 202 00:09:26,480 --> 00:09:27,440 Speaker 8: very much, very good. 203 00:09:27,520 --> 00:09:28,280 Speaker 3: Let's go to cash. 204 00:09:28,320 --> 00:09:29,280 Speaker 6: I mentioned at the Bramo. 205 00:09:29,360 --> 00:09:31,920 Speaker 3: It's in your review here the mystery here of all 206 00:09:31,960 --> 00:09:34,800 Speaker 3: this cash and you talk about there's just too much 207 00:09:34,840 --> 00:09:36,560 Speaker 3: cash out there. What do we do with our cash? 208 00:09:36,720 --> 00:09:37,200 Speaker 3: Next year? 209 00:09:37,520 --> 00:09:40,800 Speaker 8: You've laid out actually an incredible introduction to our what 210 00:09:40,840 --> 00:09:42,640 Speaker 8: we're writing for this next year. We're just called slow 211 00:09:42,720 --> 00:09:45,280 Speaker 8: then Grow, And the idea is that you are going 212 00:09:45,360 --> 00:09:47,680 Speaker 8: to see a slowing economy at the beginning of the year. 213 00:09:48,160 --> 00:09:50,000 Speaker 8: A lot of the concerns at LISTA just talked about, 214 00:09:50,040 --> 00:09:51,640 Speaker 8: you know, actually could come to bear right, which is 215 00:09:51,640 --> 00:09:54,600 Speaker 8: the economy slows down, but it does not crash. We 216 00:09:54,640 --> 00:09:56,280 Speaker 8: do not have a recession, we do not have a 217 00:09:56,360 --> 00:09:58,800 Speaker 8: v shape recovery. And because we don't have a clear 218 00:09:58,880 --> 00:10:02,240 Speaker 8: signal to investors. They sit there in cash five point 219 00:10:02,280 --> 00:10:04,800 Speaker 8: eight trillion dollars worth of cash at this point in 220 00:10:04,840 --> 00:10:07,960 Speaker 8: overnight funds. It's extraordinary. And yet when you take a 221 00:10:07,960 --> 00:10:09,960 Speaker 8: look at all the different parts of the economy, right, 222 00:10:10,000 --> 00:10:11,719 Speaker 8: you take a look at the average stock in the 223 00:10:11,800 --> 00:10:14,640 Speaker 8: US hasn't done that well. Ten stocks have done incredibly well. 224 00:10:14,800 --> 00:10:18,160 Speaker 8: Bond market's already started to move, energy is down. You 225 00:10:18,240 --> 00:10:21,079 Speaker 8: are seeing real signs that inflation is not an issue 226 00:10:21,160 --> 00:10:23,360 Speaker 8: and that the FED will hit their target of two 227 00:10:23,440 --> 00:10:24,760 Speaker 8: to two and a half percent by the end of 228 00:10:24,800 --> 00:10:25,120 Speaker 8: the year. 229 00:10:25,480 --> 00:10:27,320 Speaker 6: So if that's true, right, what. 230 00:10:27,200 --> 00:10:29,000 Speaker 8: You then need is a boost of earnings, right in 231 00:10:29,080 --> 00:10:31,320 Speaker 8: order to believe that all of this comes together. And 232 00:10:31,360 --> 00:10:33,440 Speaker 8: this is where I think the story is being missed 233 00:10:33,480 --> 00:10:36,040 Speaker 8: by the average investor, is that in the US you're 234 00:10:36,040 --> 00:10:39,320 Speaker 8: going to see ambient like earnings up by probably five 235 00:10:39,360 --> 00:10:42,440 Speaker 8: percent this year and then eight percent in twenty twenty five. 236 00:10:43,080 --> 00:10:45,240 Speaker 8: And that sets us up for a thing where you know, 237 00:10:45,280 --> 00:10:48,280 Speaker 8: an opportunity where a balanced portfolio. Right, you put your 238 00:10:48,320 --> 00:10:50,440 Speaker 8: money in bonds, and you put your money in stocks, 239 00:10:50,640 --> 00:10:53,000 Speaker 8: and you sit there and you're patient, and over the 240 00:10:53,000 --> 00:10:55,000 Speaker 8: next eighteen months you can get yourself a fifteen or 241 00:10:55,000 --> 00:10:58,880 Speaker 8: twenty percent total return. Now you're giving me the skeptical look, Lisa, Right, 242 00:10:58,920 --> 00:11:02,520 Speaker 8: and here here's there's the here's the here's the here's. 243 00:11:02,320 --> 00:11:03,480 Speaker 6: The interesting data point. 244 00:11:03,720 --> 00:11:06,880 Speaker 8: In nineteen thirty one and in nineteen sixty nine, the 245 00:11:06,960 --> 00:11:09,440 Speaker 8: last two times we had stock and bond markets down 246 00:11:09,480 --> 00:11:12,200 Speaker 8: for an entire year, if you looked out just two 247 00:11:12,320 --> 00:11:15,080 Speaker 8: years later, in each of those periods, you know the 248 00:11:15,280 --> 00:11:18,440 Speaker 8: A balanced portfolio sixty forty was up more than twenty percent. 249 00:11:18,920 --> 00:11:21,880 Speaker 8: And while that's not statistically significant, what's interesting is we've 250 00:11:21,920 --> 00:11:25,400 Speaker 8: already had incredible negativity in the stock market and incredible 251 00:11:25,440 --> 00:11:27,280 Speaker 8: negativity in the bond market this year. 252 00:11:27,920 --> 00:11:30,560 Speaker 2: Okay, you point to Tom, but this to me is 253 00:11:30,600 --> 00:11:34,079 Speaker 2: really a question of can you bet on the grow 254 00:11:34,600 --> 00:11:35,840 Speaker 2: before we get the slow? 255 00:11:36,760 --> 00:11:36,920 Speaker 6: Right? 256 00:11:36,920 --> 00:11:39,600 Speaker 8: Well, the grow is already the grow is the is 257 00:11:39,640 --> 00:11:41,360 Speaker 8: really the is the coming off of it? 258 00:11:41,400 --> 00:11:41,720 Speaker 6: Was good? 259 00:11:41,800 --> 00:11:44,679 Speaker 7: One sec. Did you just make that up? Because that's correct. 260 00:11:45,160 --> 00:11:47,720 Speaker 2: But that's essentially what we're asking is can you bet 261 00:11:47,760 --> 00:11:50,480 Speaker 2: on the expansion before we get any kind of slow? 262 00:11:50,640 --> 00:11:51,680 Speaker 7: I love that. That's awesome. 263 00:11:51,880 --> 00:11:54,240 Speaker 6: Okay, so we have to answer the question that please stake. 264 00:11:55,280 --> 00:11:58,880 Speaker 8: So let's let's take a look along real estate, right, which, right, 265 00:11:58,920 --> 00:12:01,800 Speaker 8: has already been in a recession. We've had manufacturing already 266 00:12:01,840 --> 00:12:02,560 Speaker 8: been in a recession. 267 00:12:02,600 --> 00:12:03,120 Speaker 6: We've had. 268 00:12:04,520 --> 00:12:08,040 Speaker 8: Parts of the you know, parts of our economy like healthcare, right, 269 00:12:08,080 --> 00:12:10,439 Speaker 8: negative earnings for the first time in fifteen years this 270 00:12:10,520 --> 00:12:14,160 Speaker 8: last year, lots of these you know parts of our economy. 271 00:12:14,160 --> 00:12:16,280 Speaker 8: Forty or fifty percent of our sectors are going to 272 00:12:16,280 --> 00:12:19,040 Speaker 8: be having very positive earnings relative to twenty twenty three. 273 00:12:19,280 --> 00:12:21,840 Speaker 8: And then the average stock which has gone virtually nowhere 274 00:12:21,840 --> 00:12:24,440 Speaker 8: this year, you know, has the opportunity to rise. You know, 275 00:12:24,440 --> 00:12:26,640 Speaker 8: one of the things we put into our portfolios is 276 00:12:26,679 --> 00:12:29,200 Speaker 8: the most boring investment we've added, which is sn P 277 00:12:29,360 --> 00:12:31,920 Speaker 8: equal weight. If ten stocks have done well, you want 278 00:12:31,960 --> 00:12:34,160 Speaker 8: to own the other four hundred and ninety. So I 279 00:12:34,240 --> 00:12:36,600 Speaker 8: just think that this is where people have sort of 280 00:12:36,600 --> 00:12:39,080 Speaker 8: missed it is that we haven't seen the overall market 281 00:12:39,200 --> 00:12:41,520 Speaker 8: rise yet. And that's what twenty four is going to 282 00:12:41,559 --> 00:12:42,520 Speaker 8: be about in terms of earning. 283 00:12:42,640 --> 00:12:44,679 Speaker 7: So the double digit percentage point game that you think 284 00:12:44,679 --> 00:12:46,600 Speaker 7: we can get next year, that's the equal weight and 285 00:12:46,679 --> 00:12:48,079 Speaker 7: not the market can't whites it index. 286 00:12:48,240 --> 00:12:50,760 Speaker 8: That's right, Okay, that's right, And I think that's you know, 287 00:12:50,800 --> 00:12:53,240 Speaker 8: that's the opportunity, is this rising earnings because you've had 288 00:12:53,640 --> 00:12:56,160 Speaker 8: you know, large portions of the US economy are coming 289 00:12:56,160 --> 00:12:58,680 Speaker 8: out of a recession. Now, their inventories are down, they've 290 00:12:58,679 --> 00:12:59,959 Speaker 8: got to rebuild, they're not hiring. 291 00:13:00,120 --> 00:13:01,920 Speaker 6: Wage cross are coming down. You know. 292 00:13:02,000 --> 00:13:04,280 Speaker 8: It's it's not about a landing. That's the other things 293 00:13:04,280 --> 00:13:06,680 Speaker 8: everyone's LP does. This is the hard landing something forget 294 00:13:06,720 --> 00:13:09,120 Speaker 8: about it. We're now in the situation where we're now 295 00:13:09,280 --> 00:13:12,560 Speaker 8: beginning a normalization of markets to back to you know, 296 00:13:12,600 --> 00:13:14,439 Speaker 8: sort of where they were like four years ago, pre 297 00:13:14,520 --> 00:13:16,920 Speaker 8: pandemic conditions, and we're going to be coming out of 298 00:13:16,920 --> 00:13:17,160 Speaker 8: this in. 299 00:13:17,160 --> 00:13:18,040 Speaker 6: A grow mode. 300 00:13:18,160 --> 00:13:20,600 Speaker 7: A bank structured well for that moment. 301 00:13:21,200 --> 00:13:23,480 Speaker 6: A bank structure or our client structure now. 302 00:13:23,360 --> 00:13:26,120 Speaker 7: A bank structured as in the equities, the bank equities 303 00:13:26,120 --> 00:13:28,360 Speaker 7: that have struggled so much this year off the back 304 00:13:28,360 --> 00:13:29,000 Speaker 7: of high yeas. 305 00:13:29,000 --> 00:13:31,319 Speaker 8: I mean, I definitely believe that the normalization of the 306 00:13:31,400 --> 00:13:34,120 Speaker 8: yield curve is going to definitely change valuations for banks 307 00:13:34,120 --> 00:13:36,480 Speaker 8: as a segment. I think that's more of a twelve 308 00:13:36,480 --> 00:13:38,559 Speaker 8: to eighteen months trade than it is a long term, 309 00:13:38,679 --> 00:13:40,720 Speaker 8: you know, long term opportunity. I do think that banks 310 00:13:40,720 --> 00:13:43,120 Speaker 8: are very undervalued at these At this point, I guess. 311 00:13:42,920 --> 00:13:46,400 Speaker 2: I'm trying to understand this perfect scenario and how much 312 00:13:46,440 --> 00:13:49,000 Speaker 2: oil plays into it as well, given the fact that 313 00:13:49,000 --> 00:13:51,560 Speaker 2: that has been one of the reasons we've seen this 314 00:13:51,960 --> 00:13:55,920 Speaker 2: disinflation narrative get some legs. How much is that factor 315 00:13:55,920 --> 00:13:58,120 Speaker 2: in that we're going to keep seeing suppressed valuations? 316 00:13:58,280 --> 00:14:00,319 Speaker 8: Right, So, I don't think we expected oil to move 317 00:14:00,360 --> 00:14:02,839 Speaker 8: down as quickly as it has, and I definitely think 318 00:14:02,840 --> 00:14:05,480 Speaker 8: it's supply. Like you said earlier, earlier in the program, 319 00:14:06,080 --> 00:14:09,920 Speaker 8: what we I think discounted as the fact that globalization 320 00:14:10,080 --> 00:14:14,439 Speaker 8: is still a major disinflationary force. Import costs of goods 321 00:14:14,480 --> 00:14:17,640 Speaker 8: coming into the US, both finished and unfinished goods are 322 00:14:18,120 --> 00:14:21,040 Speaker 8: negative three point seven percent relative to last year. They 323 00:14:21,080 --> 00:14:24,520 Speaker 8: are adding to the disinflation story. So between energy and 324 00:14:24,640 --> 00:14:27,640 Speaker 8: import costs, you have this situation where you just don't 325 00:14:27,640 --> 00:14:31,040 Speaker 8: have inflation on goods, and that of course translates into 326 00:14:31,200 --> 00:14:33,720 Speaker 8: a better economic scenario. It seems like you're having trouble 327 00:14:33,760 --> 00:14:35,960 Speaker 8: believing that this is actually that you could have a 328 00:14:36,000 --> 00:14:38,440 Speaker 8: really good backdrop for markets. 329 00:14:38,560 --> 00:14:40,760 Speaker 2: Now, what I find fascinating is just how much the 330 00:14:40,840 --> 00:14:44,080 Speaker 2: narrative has gotten it wrong. Everyone's talking about deglobalization, how 331 00:14:44,080 --> 00:14:46,320 Speaker 2: that would lead to inflation. Oil prices would be higher 332 00:14:46,320 --> 00:14:49,800 Speaker 2: because their production just wasn't capable of meeting demand. As 333 00:14:49,840 --> 00:14:52,200 Speaker 2: all of the transition happens, and all of a sudden, 334 00:14:52,320 --> 00:14:54,480 Speaker 2: workers are going to cost more to do the jobs 335 00:14:54,600 --> 00:14:57,040 Speaker 2: that need to get done. And what we're seeing is 336 00:14:57,120 --> 00:14:59,640 Speaker 2: all of the exact opposite. Isn't that sort of remarkable? 337 00:15:00,080 --> 00:15:03,200 Speaker 8: Is remarkable? Hiring for the last years has been surprising. 338 00:15:03,240 --> 00:15:06,840 Speaker 8: We've hired more people with slower gd GDP growth in 339 00:15:06,880 --> 00:15:09,720 Speaker 8: the US than in history, and now that's coming the 340 00:15:09,720 --> 00:15:13,280 Speaker 8: other side. And you know, the Saudi's and Opek wanted 341 00:15:13,320 --> 00:15:16,000 Speaker 8: to keep oil prices higher, right, but they were unable 342 00:15:16,040 --> 00:15:18,520 Speaker 8: to do so. They were originally willing to cut back production. 343 00:15:18,840 --> 00:15:20,560 Speaker 8: So there's a lot of things where people, you know, 344 00:15:20,800 --> 00:15:22,960 Speaker 8: think they can control market. And just to add one 345 00:15:22,960 --> 00:15:26,640 Speaker 8: more thing, expectations in China and Europe are so low 346 00:15:26,920 --> 00:15:29,240 Speaker 8: that they can't help but contribute, I think, to the 347 00:15:29,280 --> 00:15:32,120 Speaker 8: growth story. Sometimes in twenty twenty thirty four. 348 00:15:32,080 --> 00:15:33,680 Speaker 7: This was great. You should get a podcast. 349 00:15:34,800 --> 00:15:36,760 Speaker 6: You do that all the time here podcasts. 350 00:15:36,840 --> 00:15:37,880 Speaker 7: Yeah, we can do another one. 351 00:15:38,000 --> 00:15:38,280 Speaker 9: Why not? 352 00:15:38,800 --> 00:15:43,400 Speaker 7: What should we cod it? Help and glue something like that. 353 00:15:45,160 --> 00:15:46,880 Speaker 8: We just call it sloth and grow or what was 354 00:15:46,880 --> 00:15:49,120 Speaker 8: the other oh forget okay, but it was good. 355 00:15:49,160 --> 00:15:53,120 Speaker 7: It was like drive, It's awesome. That's his work time 356 00:15:53,120 --> 00:15:53,480 Speaker 7: for that. 357 00:15:53,480 --> 00:15:55,200 Speaker 1: That was the whole thing. I mean, that's the bet 358 00:15:55,200 --> 00:15:55,920 Speaker 1: that we have going on. 359 00:15:56,200 --> 00:15:58,400 Speaker 7: That's great, David, Thank you and thanks for sharing you 360 00:15:58,400 --> 00:15:59,320 Speaker 7: around with us as well. 361 00:15:59,360 --> 00:16:00,000 Speaker 6: My great pleasure. 362 00:16:00,160 --> 00:16:02,520 Speaker 7: Depending then, a city glob of waff looking ahead to 363 00:16:02,600 --> 00:16:13,720 Speaker 7: next year, is. 364 00:16:13,640 --> 00:16:14,480 Speaker 1: The FED put back? 365 00:16:14,680 --> 00:16:16,800 Speaker 2: There's no better way to answer that question than speaking 366 00:16:16,960 --> 00:16:20,600 Speaker 2: with a former FED governor, Randy Krasner, professor of economics 367 00:16:20,600 --> 00:16:25,000 Speaker 2: at the University of Chicago Booth School in Chicago, joining us. Now, Randy, 368 00:16:25,000 --> 00:16:27,800 Speaker 2: do you believe in this idea that the FED will 369 00:16:27,880 --> 00:16:32,160 Speaker 2: cut rates aggressively next year simply in response to disinflation, 370 00:16:32,600 --> 00:16:34,320 Speaker 2: even if it is not accompanied by weakness. 371 00:16:36,400 --> 00:16:39,560 Speaker 10: So, if they've reached their goal of bringing inflation down 372 00:16:39,600 --> 00:16:43,000 Speaker 10: to their two percent target, they'll be happy to bring 373 00:16:43,160 --> 00:16:45,200 Speaker 10: rates down. But I don't think they're going to get 374 00:16:45,200 --> 00:16:46,520 Speaker 10: to their target anytime soon. 375 00:16:47,880 --> 00:16:49,880 Speaker 3: I look, Governor Crasner, and I know you had a 376 00:16:49,920 --> 00:16:53,600 Speaker 3: recent meeting where the Booth School graduate John Stadzinsky, in 377 00:16:53,640 --> 00:16:56,320 Speaker 3: all of his work now at PIMCO as well, but 378 00:16:56,440 --> 00:17:01,440 Speaker 3: what the John Stadinski world is about a global sense 379 00:17:01,800 --> 00:17:04,399 Speaker 3: of we're all in this together. That's been the hallmark 380 00:17:04,480 --> 00:17:08,040 Speaker 3: of his work for years. How linked now our central 381 00:17:08,160 --> 00:17:13,119 Speaker 3: banks to develop a constructive disinflationary trend. 382 00:17:15,000 --> 00:17:18,000 Speaker 10: I think that's right. I think you saw that once 383 00:17:18,040 --> 00:17:22,000 Speaker 10: the FED took off raising rates fairly aggressively, that the 384 00:17:22,000 --> 00:17:25,359 Speaker 10: major central banks in the world did the same, so 385 00:17:25,400 --> 00:17:27,639 Speaker 10: that they kind of played from the same playbook because 386 00:17:27,640 --> 00:17:30,960 Speaker 10: they were experiencing inflation in a similar way, which suggested 387 00:17:31,000 --> 00:17:33,640 Speaker 10: that at least part of the inflation wasn't just due 388 00:17:33,680 --> 00:17:36,240 Speaker 10: to what central banks were doing, but was also doing 389 00:17:36,240 --> 00:17:39,639 Speaker 10: to some of these broader global supply chain factors. And 390 00:17:39,680 --> 00:17:43,040 Speaker 10: we've seen inflation come down, we've seen them move down together. 391 00:17:43,359 --> 00:17:47,440 Speaker 10: But the FED is is really the big player, and 392 00:17:47,520 --> 00:17:50,240 Speaker 10: so it tends to be that other central banks will 393 00:17:50,280 --> 00:17:52,080 Speaker 10: follow what the FED is doing. But of course there's 394 00:17:52,119 --> 00:17:54,840 Speaker 10: some discussion across the central banks, but the Fed's got 395 00:17:54,880 --> 00:17:57,920 Speaker 10: to do what it's got to do for the US economy. 396 00:17:57,520 --> 00:17:59,320 Speaker 3: If we are the big player. And I guess this 397 00:17:59,359 --> 00:18:02,359 Speaker 3: is off the job report tomorrow on the American exceptionalism 398 00:18:02,400 --> 00:18:06,520 Speaker 3: of strong nominal GDP better than good fiscal stimulus. You know, 399 00:18:06,600 --> 00:18:09,400 Speaker 3: we all know the story, But the answer is we're 400 00:18:09,440 --> 00:18:13,679 Speaker 3: dealing with the technological excellence. Does the FED pull that 401 00:18:13,840 --> 00:18:14,840 Speaker 3: into their debate? 402 00:18:16,680 --> 00:18:19,520 Speaker 10: That's one of the debates about productivity, and because if 403 00:18:19,560 --> 00:18:23,240 Speaker 10: you have high productivity growth, it's perfectly fine to have 404 00:18:23,600 --> 00:18:27,679 Speaker 10: high wage growth and not have inflation. But if you 405 00:18:27,720 --> 00:18:31,439 Speaker 10: have low productivity growth, you can't sustain high wage growth 406 00:18:31,600 --> 00:18:34,040 Speaker 10: without there being inflation because the costs are going up 407 00:18:34,160 --> 00:18:38,680 Speaker 10: relative to the outputs. And so that's one of the debates. 408 00:18:38,800 --> 00:18:41,720 Speaker 10: Are we going to see productivity continue to be strong 409 00:18:41,880 --> 00:18:43,400 Speaker 10: as we have over the lastree quarters? 410 00:18:43,560 --> 00:18:45,120 Speaker 2: Is that the main reason? Ready, you don't think we're 411 00:18:45,119 --> 00:18:46,840 Speaker 2: going to get to the Fed's target. 412 00:18:48,560 --> 00:18:50,920 Speaker 10: Oh, it's I think their whole variety of reasons. I 413 00:18:50,960 --> 00:18:54,200 Speaker 10: think you've got expectations that never went up very much 414 00:18:54,240 --> 00:18:56,600 Speaker 10: for inflation, I think to the Fed's credit, so that 415 00:18:56,720 --> 00:18:59,000 Speaker 10: never really lost credibility as the FED did in the 416 00:18:59,080 --> 00:19:02,320 Speaker 10: late nineteen seven in these early nineteen eighties, but I 417 00:19:02,359 --> 00:19:04,480 Speaker 10: think it did lose a little bit and people have 418 00:19:04,600 --> 00:19:06,879 Speaker 10: kind of gotten used to asking for a little bit 419 00:19:06,920 --> 00:19:10,400 Speaker 10: more in wages, and they also have to make up 420 00:19:10,440 --> 00:19:14,560 Speaker 10: for having lost so much in real terms inflation adjusted 421 00:19:14,640 --> 00:19:16,720 Speaker 10: terms over the last couple of years, so I think 422 00:19:16,720 --> 00:19:18,320 Speaker 10: there's going to be a catch up in wages. I 423 00:19:18,359 --> 00:19:20,159 Speaker 10: think nominal wage growth is going to be above the 424 00:19:20,160 --> 00:19:23,879 Speaker 10: inflation rate as it has been over the last few months, 425 00:19:24,240 --> 00:19:26,680 Speaker 10: and that means at some point it will be less 426 00:19:26,720 --> 00:19:30,000 Speaker 10: exciting for firms to be hiring and holding workers. The 427 00:19:30,080 --> 00:19:32,040 Speaker 10: employment rate will move up, and as you know I've 428 00:19:32,080 --> 00:19:34,800 Speaker 10: mentioned before, I think we'll probably have a hard ish landing. 429 00:19:34,840 --> 00:19:36,240 Speaker 10: Not a hard landing, but hard ish. 430 00:19:36,520 --> 00:19:39,960 Speaker 2: So if you talk about the nodes of inflation that 431 00:19:40,040 --> 00:19:42,159 Speaker 2: are stick here that are going to be concerning to 432 00:19:42,200 --> 00:19:44,240 Speaker 2: the FED, that aren't going to allow them to cut 433 00:19:44,240 --> 00:19:46,920 Speaker 2: as aggressively as some people are currently pricing in. 434 00:19:47,440 --> 00:19:48,919 Speaker 1: Is it particularly the service sector. 435 00:19:49,119 --> 00:19:51,680 Speaker 2: Is there an area of inflation that you're focused on 436 00:19:52,040 --> 00:19:54,240 Speaker 2: to sort of signal what you're talking about. 437 00:19:55,720 --> 00:19:57,560 Speaker 10: I think the FED is going to be laser focused 438 00:19:57,560 --> 00:20:00,680 Speaker 10: exactly as you said, on services as well as on 439 00:20:01,000 --> 00:20:03,720 Speaker 10: the key thing that will be driving services inflation, which 440 00:20:03,760 --> 00:20:07,280 Speaker 10: will be wage growth, particularly wage growth relative to the 441 00:20:07,320 --> 00:20:11,920 Speaker 10: inflation rate, which until recently, until really maybe four or 442 00:20:11,960 --> 00:20:16,040 Speaker 10: five months ago, had been wage growth, nominal wage growth 443 00:20:16,119 --> 00:20:18,920 Speaker 10: was below the inflation rate, and now nominal wage growth 444 00:20:18,960 --> 00:20:21,399 Speaker 10: has been above the inflation rate. It's great for workers 445 00:20:21,400 --> 00:20:24,920 Speaker 10: because they're getting increase in real wages, but that means 446 00:20:24,920 --> 00:20:26,640 Speaker 10: that firms are going to be a little more reluctant 447 00:20:26,680 --> 00:20:27,960 Speaker 10: to to higher. 448 00:20:27,920 --> 00:20:33,560 Speaker 2: Randy, our lower prices. If oil inflationary or disinflationary. 449 00:20:34,520 --> 00:20:39,920 Speaker 10: Well it certainly for headline inflation it's lower. It helps 450 00:20:39,960 --> 00:20:43,640 Speaker 10: to lower the headline inflation rate. But as we know, 451 00:20:43,840 --> 00:20:46,320 Speaker 10: the oil prices have gone down, gone up, down, down, 452 00:20:46,400 --> 00:20:48,439 Speaker 10: and so the FED kind of looks through that, and 453 00:20:48,480 --> 00:20:50,080 Speaker 10: that's one of the reasons why they look at the 454 00:20:50,760 --> 00:20:53,359 Speaker 10: core numbers that strip out the more volable food and 455 00:20:53,440 --> 00:20:54,120 Speaker 10: energy sectors. 456 00:20:54,240 --> 00:20:58,280 Speaker 3: Randy, you're one of our giants in financial economics. Where 457 00:20:58,280 --> 00:21:00,800 Speaker 3: we are right now? Is it out of the textbooks 458 00:21:00,840 --> 00:21:04,399 Speaker 3: you learned from or post pandemic? Is this all original? 459 00:21:05,920 --> 00:21:07,879 Speaker 10: Well, I wouldn't say it's all original, but it's at 460 00:21:08,000 --> 00:21:11,160 Speaker 10: least a little bit unusual. The amount of supply chain 461 00:21:11,200 --> 00:21:15,439 Speaker 10: disruption we had. Pandemics so far have only come from 462 00:21:15,480 --> 00:21:17,520 Speaker 10: along once a century, and hopefully it will be another 463 00:21:17,520 --> 00:21:21,480 Speaker 10: century before we have another one. And we've also seen 464 00:21:22,200 --> 00:21:25,520 Speaker 10: an unusual resilience, not only the US economy but elsewhere 465 00:21:25,800 --> 00:21:29,520 Speaker 10: to very significant interest rate increases, and so that's a 466 00:21:29,520 --> 00:21:32,199 Speaker 10: little bit off of the traditional playbook. Is it a 467 00:21:32,200 --> 00:21:35,680 Speaker 10: whole new playbook, I'm not so sure yet. Certainly it's 468 00:21:36,040 --> 00:21:37,680 Speaker 10: pushed the existing playbook to the edges. 469 00:21:37,920 --> 00:21:41,160 Speaker 3: Professor Krasner, thank you so much, Randall Krasner, the former 470 00:21:41,200 --> 00:21:48,000 Speaker 3: governor of the Federal Reserve System. Paul sank joins right 471 00:21:48,040 --> 00:21:51,040 Speaker 3: now foundered lead analyst at Sankie Research with one of 472 00:21:51,040 --> 00:21:53,720 Speaker 3: the most red notes on the street. Paul, I want 473 00:21:53,720 --> 00:21:56,720 Speaker 3: to go to the madness of nineteen eighty six. I'll 474 00:21:56,800 --> 00:22:00,679 Speaker 3: pack absolutely blow it in nineteen eighty six with a 475 00:22:00,720 --> 00:22:03,359 Speaker 3: price plunge. Can we get a redux on that again? 476 00:22:03,680 --> 00:22:06,880 Speaker 3: And particularly with the new American production of oil. 477 00:22:07,720 --> 00:22:09,600 Speaker 5: It's not eighty six now. And by the way, it's 478 00:22:09,640 --> 00:22:13,480 Speaker 5: a pump jack and leap to think about the joke. 479 00:22:13,560 --> 00:22:16,040 Speaker 5: That's kind of more realistic. As you use your swimming 480 00:22:16,080 --> 00:22:18,080 Speaker 5: pool to store oil that. 481 00:22:17,960 --> 00:22:19,120 Speaker 6: You need a can tango. 482 00:22:19,640 --> 00:22:22,119 Speaker 5: You need can tango for that swimming pool trait. And 483 00:22:22,160 --> 00:22:25,560 Speaker 5: we're in vanquidation. So eighty six is not the right one, 484 00:22:25,600 --> 00:22:30,199 Speaker 5: to be honest, Tom. It's that was when opek increased 485 00:22:30,320 --> 00:22:33,320 Speaker 5: into the Asian financial crisis, and it's quite the opposite here. 486 00:22:33,320 --> 00:22:36,600 Speaker 5: What we've got here is a twenty fourteen, probably not 487 00:22:36,640 --> 00:22:39,320 Speaker 5: a twenty twenty, but in both cases that's where Saudi 488 00:22:39,400 --> 00:22:43,760 Speaker 5: flushed the market essentially because they got frustrated with cutting 489 00:22:43,920 --> 00:22:48,000 Speaker 5: back and cutting back production to maintain prices, such as 490 00:22:48,040 --> 00:22:51,840 Speaker 5: twenty fourteen being the really excellent example. What was happening 491 00:22:51,920 --> 00:22:55,240 Speaker 5: is they were losing market share, particularly to Iran, which 492 00:22:55,320 --> 00:22:59,960 Speaker 5: was coming back through sanctions, and you had, of course 493 00:23:00,040 --> 00:23:03,080 Speaker 5: the growth in US production that was squeezing Saudi from 494 00:23:03,080 --> 00:23:05,639 Speaker 5: the other side. And then in fourteen they essentially couldn't 495 00:23:05,640 --> 00:23:08,080 Speaker 5: get the rest of OPEC to agree with them. They 496 00:23:08,160 --> 00:23:10,359 Speaker 5: dumped the market. They flushed the market. We went in 497 00:23:10,400 --> 00:23:13,479 Speaker 5: a straight line from one hundred and ten in summer 498 00:23:14,119 --> 00:23:19,159 Speaker 5: to fifty twenty fifteen January, so in six months we went, 499 00:23:19,359 --> 00:23:22,159 Speaker 5: we've cut in half and then we bottomed again. If 500 00:23:22,160 --> 00:23:24,960 Speaker 5: you remember in twenty sixteen, I don't think COVID you 501 00:23:25,000 --> 00:23:28,119 Speaker 5: know the twenty twenty market share wall, which was more extreme. 502 00:23:28,600 --> 00:23:30,800 Speaker 5: Sadi went to an all time high level of production 503 00:23:30,880 --> 00:23:34,120 Speaker 5: in twenty twenty, which was in April twenty twenty, which 504 00:23:34,160 --> 00:23:37,040 Speaker 5: was truly praised in a lot of ways because of 505 00:23:37,040 --> 00:23:40,000 Speaker 5: course it made for negative oil prices in the US. 506 00:23:40,040 --> 00:23:42,880 Speaker 5: But here you've clearly got a situation where Saudi has 507 00:23:42,960 --> 00:23:46,680 Speaker 5: cut production and is facing a very strong demand environment. 508 00:23:46,800 --> 00:23:49,120 Speaker 5: So it must be extremely and in fact an all 509 00:23:49,119 --> 00:23:52,560 Speaker 5: time record demand environment. It must be very frustrating for 510 00:23:52,600 --> 00:23:54,920 Speaker 5: them to be losing market share to Iran and as 511 00:23:55,040 --> 00:23:58,920 Speaker 5: John mentioned, to an absolutely booming US industry. And I 512 00:23:58,960 --> 00:24:02,720 Speaker 5: think everyone's turn negative oil, not least because the US 513 00:24:02,720 --> 00:24:05,840 Speaker 5: has accelerated this year into the second half in terms 514 00:24:05,880 --> 00:24:09,720 Speaker 5: of production and you know, taking more market share from Saudi. 515 00:24:09,800 --> 00:24:12,640 Speaker 5: So our concern is that Saudi said they'll push through 516 00:24:12,720 --> 00:24:15,240 Speaker 5: Q one with cuts, but by the time you get 517 00:24:15,280 --> 00:24:17,920 Speaker 5: to Q two and if demand isn't strong enough seasonally, 518 00:24:18,480 --> 00:24:20,639 Speaker 5: you could see Saudi dump the market and try and 519 00:24:20,640 --> 00:24:23,880 Speaker 5: make everyone honest again. So you know, that's I think 520 00:24:23,920 --> 00:24:25,080 Speaker 5: that's the analogy. Paula. 521 00:24:25,160 --> 00:24:26,520 Speaker 7: Just want to be really clear about where we are 522 00:24:26,600 --> 00:24:28,600 Speaker 7: right now. There's a lot of people trade in equity 523 00:24:28,600 --> 00:24:31,480 Speaker 7: as a columnists making recession calls. You think this is 524 00:24:31,520 --> 00:24:35,560 Speaker 7: about supply and not demand right now currently, I. 525 00:24:35,480 --> 00:24:37,240 Speaker 5: Don't know how you can get higher demand than all 526 00:24:37,280 --> 00:24:38,240 Speaker 5: time record demand. 527 00:24:38,320 --> 00:24:38,480 Speaker 2: Now. 528 00:24:38,480 --> 00:24:40,280 Speaker 5: Having said that, because we're one hundred and two point 529 00:24:40,359 --> 00:24:43,159 Speaker 5: five million barrels a day. We're at over one thousand 530 00:24:43,160 --> 00:24:46,639 Speaker 5: and two hundred barrels a second of demand, so demand 531 00:24:46,720 --> 00:24:49,359 Speaker 5: site's pretty much good. And China's been pretty good in 532 00:24:49,359 --> 00:24:52,280 Speaker 5: the second half too, which was always the balancing item 533 00:24:52,320 --> 00:24:54,960 Speaker 5: in terms of bullishness and oil. And keep in mind, 534 00:24:55,000 --> 00:24:57,280 Speaker 5: of course, John, that it's seasonally a weak time for 535 00:24:57,359 --> 00:25:01,520 Speaker 5: oil here, so we're dumping into the traditional post labor 536 00:25:01,560 --> 00:25:04,639 Speaker 5: day weakness. And we'd actually think, whilst we're worried about 537 00:25:04,640 --> 00:25:07,399 Speaker 5: the Saudi market share war, we can see a bounce 538 00:25:07,440 --> 00:25:10,800 Speaker 5: here in oil. Distillate demand here remains very strong. It's 539 00:25:10,840 --> 00:25:14,280 Speaker 5: cold this morning in Brooklyn, but more importantly it's cold 540 00:25:14,320 --> 00:25:16,560 Speaker 5: in Europe. And you know, I think we're a bit 541 00:25:16,600 --> 00:25:19,080 Speaker 5: over sold in oil here. Doesn't change the fact that 542 00:25:19,080 --> 00:25:21,240 Speaker 5: we think there's a structural problem in the market, which 543 00:25:21,440 --> 00:25:24,160 Speaker 5: exactly as you say, is too much supply and too 544 00:25:24,200 --> 00:25:26,320 Speaker 5: much better capacity. Particularly well, but. 545 00:25:26,359 --> 00:25:27,479 Speaker 1: Paul, I want to just develop. 546 00:25:27,520 --> 00:25:29,560 Speaker 2: You think that were over sold here, and you think 547 00:25:29,600 --> 00:25:32,400 Speaker 2: that there is a good chance that Saudi Arabia flushes 548 00:25:32,440 --> 00:25:36,120 Speaker 2: the market, increases, production goes away from some of those cuts, 549 00:25:36,280 --> 00:25:39,080 Speaker 2: as you said, make everyone honest again. In that case, 550 00:25:39,119 --> 00:25:41,720 Speaker 2: how low could prices go, well. 551 00:25:41,600 --> 00:25:43,719 Speaker 5: It's an interesting question because what you're trying to do 552 00:25:43,760 --> 00:25:46,800 Speaker 5: at that point is shut down US supply growth, and 553 00:25:46,840 --> 00:25:50,119 Speaker 5: that becomes the knotty debate, that's the analysis, that's the 554 00:25:50,160 --> 00:25:53,439 Speaker 5: Permian question, because of course what Saudi's trying to flush 555 00:25:53,480 --> 00:25:56,600 Speaker 5: at this point is going to be excellon Chevron Conicco. 556 00:25:56,760 --> 00:25:59,639 Speaker 5: You know, it's not your old school emp's with a 557 00:25:59,640 --> 00:26:01,760 Speaker 5: lot of that kind of collapse at the first side 558 00:26:01,760 --> 00:26:04,880 Speaker 5: of trouble. And of course all these companies have basically 559 00:26:04,920 --> 00:26:08,359 Speaker 5: planned at sixty dollars maybe less in terms of what 560 00:26:08,440 --> 00:26:11,200 Speaker 5: they're doing, and have growth targets that they want to meet. 561 00:26:11,840 --> 00:26:14,000 Speaker 5: So I think it's going to be a more inelastic 562 00:26:14,080 --> 00:26:18,560 Speaker 5: supply side for the Saudis to attack. Additionally, in twenty 563 00:26:18,640 --> 00:26:22,000 Speaker 5: five we're adding eight FPSOs that's a floating production and 564 00:26:22,040 --> 00:26:25,720 Speaker 5: storage vessel, which are very big in places like Guyana, Senegal, 565 00:26:26,160 --> 00:26:28,439 Speaker 5: and those are very priced and sensitive as too. That 566 00:26:28,560 --> 00:26:31,440 Speaker 5: is to say, once you've built your huge production vessel, 567 00:26:31,640 --> 00:26:33,600 Speaker 5: you don't shut it down. Because I was at fifty 568 00:26:34,080 --> 00:26:37,760 Speaker 5: So it's a pretty it's a fascinating market. By the way, Tom, 569 00:26:37,760 --> 00:26:40,520 Speaker 5: going back to eighty six, the whole peak oil question 570 00:26:40,680 --> 00:26:43,679 Speaker 5: is like what were you talking about the supply side. 571 00:26:43,960 --> 00:26:47,119 Speaker 5: The supply side has got excess at one hundred and 572 00:26:47,119 --> 00:26:49,760 Speaker 5: two point five million doles of their demand. It's like 573 00:26:49,800 --> 00:26:52,680 Speaker 5: what I think, a lot of bit of technology and AI. 574 00:26:52,800 --> 00:26:56,160 Speaker 3: Actually, seriously, I'm very proud to say I didn't believe 575 00:26:56,160 --> 00:26:58,480 Speaker 3: in peak oil for one minute. That's maybe one thing 576 00:26:58,520 --> 00:27:02,159 Speaker 3: I got somewhat right. Paul, we see mister Putin on 577 00:27:02,280 --> 00:27:07,000 Speaker 3: a junket to Saudi Arabia or Muhammad ben Salman. What's 578 00:27:07,040 --> 00:27:09,920 Speaker 3: a dynamic there? Does the Saudis tell the Russians what 579 00:27:09,960 --> 00:27:12,120 Speaker 3: to do? In the Paul Sanke world. 580 00:27:13,200 --> 00:27:15,199 Speaker 5: I think they ask them for help, for sure. The 581 00:27:15,200 --> 00:27:17,480 Speaker 5: problem is the Russians lie, right, I mean, whatever they 582 00:27:17,520 --> 00:27:19,639 Speaker 5: say is like whatever they say, I don't know how 583 00:27:19,720 --> 00:27:22,280 Speaker 5: much they really do. It's possible that they realize that 584 00:27:22,280 --> 00:27:24,439 Speaker 5: there's enough of a problem and that they want that 585 00:27:24,520 --> 00:27:26,880 Speaker 5: relationship with Saudi to be good, that they do get 586 00:27:26,960 --> 00:27:29,760 Speaker 5: on board. And I think it is very significant obviously 587 00:27:29,800 --> 00:27:33,200 Speaker 5: the Putin's meeting MBS, because there must be some quid 588 00:27:33,240 --> 00:27:36,359 Speaker 5: pro quo here. We suspect and we really don't know that. 589 00:27:36,400 --> 00:27:39,720 Speaker 5: The Saudis have also asked the US to tighten sanctions 590 00:27:39,720 --> 00:27:44,000 Speaker 5: on particularly Iran, but also Russia obviously, because those have 591 00:27:44,040 --> 00:27:47,160 Speaker 5: been two other major problems for the Saudis. The US 592 00:27:47,160 --> 00:27:49,720 Speaker 5: has essentially been allowing a lot of additional oil onto 593 00:27:49,760 --> 00:27:52,600 Speaker 5: the market into an election year. We think that maybe 594 00:27:52,600 --> 00:27:55,960 Speaker 5: the Saudis have said, if you tighten sanctions, will make 595 00:27:56,000 --> 00:27:58,840 Speaker 5: sure the ol price doesn't get too high for elections. 596 00:27:59,080 --> 00:28:00,879 Speaker 5: But of course then the camp next years to the 597 00:28:00,880 --> 00:28:04,280 Speaker 5: Saudis really preferred Donald Trump. So you know, I'm not 598 00:28:04,320 --> 00:28:07,199 Speaker 5: sure about that that speculation, but certainly there's been evidence 599 00:28:07,240 --> 00:28:11,480 Speaker 5: the US has been tightening somewhat the Iranian and Russian sanctions, 600 00:28:11,480 --> 00:28:12,960 Speaker 5: which would help Saudi apoor. 601 00:28:13,040 --> 00:28:15,680 Speaker 7: Didn't they try that going into the midterms last. 602 00:28:15,520 --> 00:28:18,680 Speaker 5: Year, tried to tighten sanctions or try to. 603 00:28:18,800 --> 00:28:21,440 Speaker 7: Try to get the Saudis to boost output to get 604 00:28:21,440 --> 00:28:22,480 Speaker 7: THRUD prices lower. 605 00:28:23,200 --> 00:28:26,320 Speaker 5: Yeah, I think Saudi US relations have improved over the 606 00:28:26,359 --> 00:28:28,920 Speaker 5: last year, for sure, and I think through the Hamas, 607 00:28:29,600 --> 00:28:32,480 Speaker 5: you know, a nightmare, we've seen obviously a lot of 608 00:28:32,520 --> 00:28:35,960 Speaker 5: work from Blincoln to try and get everyone back on 609 00:28:36,000 --> 00:28:38,440 Speaker 5: the page. And of course it's said in the press 610 00:28:38,480 --> 00:28:41,240 Speaker 5: that the NBS actually kept blinking waiting for quite a 611 00:28:41,240 --> 00:28:44,120 Speaker 5: long time at a time when he was insanely busy, 612 00:28:44,160 --> 00:28:46,560 Speaker 5: which I'm sure he didn't appreciate. So I think they're 613 00:28:46,560 --> 00:28:50,880 Speaker 5: still sending messages that the original language of this administration, 614 00:28:50,920 --> 00:28:54,120 Speaker 5: which you'll remember well before the election, when Biden was 615 00:28:54,200 --> 00:28:56,920 Speaker 5: very negative about oil and very negative about the Saudis. 616 00:28:57,200 --> 00:29:00,400 Speaker 5: They don't forget that stuff easily. But at the same time, 617 00:29:00,440 --> 00:29:04,080 Speaker 5: they're very pragmatic people. I think they realize that the 618 00:29:04,160 --> 00:29:07,160 Speaker 5: US is hugely important to them. We've had subsequently had 619 00:29:07,200 --> 00:29:12,200 Speaker 5: security agreements between Saudi and the US. So it's really complex, 620 00:29:12,240 --> 00:29:13,760 Speaker 5: and I think a lot of people are saying a 621 00:29:13,760 --> 00:29:15,760 Speaker 5: lot of things to a lot of you. There's a 622 00:29:15,760 --> 00:29:19,000 Speaker 5: lot of multipolar world going on here. I don't know 623 00:29:19,040 --> 00:29:21,360 Speaker 5: how much they really truly love the Russians as well. 624 00:29:21,400 --> 00:29:24,160 Speaker 5: I mean, the history of that relationship is nothing like 625 00:29:24,280 --> 00:29:27,680 Speaker 5: the quality of the history of the US Saudi relationship. 626 00:29:28,040 --> 00:29:30,800 Speaker 7: Well said Paul, appreciate the explanations this morning. Thank you, sir. 627 00:29:30,920 --> 00:29:34,320 Speaker 7: You're one of the best pol of Sanki research. 628 00:29:44,680 --> 00:29:48,040 Speaker 3: Joining us right now. Terry Haynes and Pangae are really 629 00:29:48,080 --> 00:29:52,240 Speaker 3: timely discussion here. Staggering to January, Terry Haynes, the zeitgeist 630 00:29:52,320 --> 00:29:57,440 Speaker 3: out there is OMG a red nation a Republican presidency, 631 00:29:57,600 --> 00:30:04,440 Speaker 3: a Republican Senate, and a Republican House. Maybe maybe not. 632 00:30:04,680 --> 00:30:06,760 Speaker 3: Where are we heading? Here? Are we heading to a 633 00:30:06,800 --> 00:30:07,960 Speaker 3: Republican sweep? 634 00:30:09,240 --> 00:30:11,239 Speaker 9: I think where we're heading is very much like what 635 00:30:11,280 --> 00:30:15,080 Speaker 9: you see today, Tom Frankly, Whether or not the president 636 00:30:15,120 --> 00:30:20,320 Speaker 9: is Democratic or Republican, I'd still give Biden Biden Trump race. 637 00:30:20,360 --> 00:30:23,480 Speaker 9: I'd still give Biden a little bit of edge. So 638 00:30:23,560 --> 00:30:26,240 Speaker 9: let's start there. I think what you've got is a 639 00:30:26,280 --> 00:30:29,880 Speaker 9: Senate that is more likely to be marginally Republican majority 640 00:30:30,280 --> 00:30:34,400 Speaker 9: and a House that's more likely to be marginally Democratic majority. 641 00:30:34,640 --> 00:30:38,040 Speaker 9: So it's another version of the same thing. People will 642 00:30:38,040 --> 00:30:42,000 Speaker 9: spend the next year winding themselves up about this, but 643 00:30:42,280 --> 00:30:45,320 Speaker 9: the reality in Washington is, unless you have a sweep 644 00:30:45,320 --> 00:30:48,840 Speaker 9: of all three parties plus a sixty vote majority in 645 00:30:48,880 --> 00:30:53,000 Speaker 9: the Senate, which nobody's had for decades, not much changes. 646 00:30:53,360 --> 00:30:56,000 Speaker 3: Do you see a Trump Haley ticket. I was asked 647 00:30:56,000 --> 00:30:59,000 Speaker 3: at least three times this week about that. Is she 648 00:30:59,120 --> 00:31:00,440 Speaker 3: running for vice resident? 649 00:31:01,240 --> 00:31:01,280 Speaker 10: No? 650 00:31:01,440 --> 00:31:03,800 Speaker 9: I think she's running for president, And you know, I 651 00:31:03,840 --> 00:31:06,560 Speaker 9: think she's doing reasonably well. As I say, and as 652 00:31:06,560 --> 00:31:10,400 Speaker 9: you well kindly headlined, six out of ten Republican voters 653 00:31:10,440 --> 00:31:13,440 Speaker 9: don't want her. You know, even in the Trump numbers 654 00:31:13,440 --> 00:31:16,600 Speaker 9: in early primary states, one third of those people at 655 00:31:16,680 --> 00:31:20,920 Speaker 9: least are what pollsters call soft, in other words, willing 656 00:31:20,960 --> 00:31:25,560 Speaker 9: to entertain other options. Iowa has a history of surprising. 657 00:31:26,080 --> 00:31:28,320 Speaker 9: She's very much running for president and thinks that if 658 00:31:28,320 --> 00:31:30,320 Speaker 9: a couple of breaks go her way, she might well 659 00:31:30,360 --> 00:31:34,000 Speaker 9: get the nomination. And if that's the case, poll show 660 00:31:34,080 --> 00:31:36,760 Speaker 9: today she do much better than Biden would do. So 661 00:31:37,280 --> 00:31:39,480 Speaker 9: there's a path there for her, and you know she 662 00:31:39,560 --> 00:31:40,920 Speaker 9: sees it and she's trying to seize it. 663 00:31:41,120 --> 00:31:43,440 Speaker 2: Could you develop a little bit more what that path 664 00:31:43,640 --> 00:31:45,440 Speaker 2: is considering the fact that Trump is still pulling in 665 00:31:45,440 --> 00:31:48,240 Speaker 2: about sixty percent of Republican voters and she currently is 666 00:31:48,240 --> 00:31:49,160 Speaker 2: it at fifteen percent. 667 00:31:50,600 --> 00:31:55,160 Speaker 9: Well, the path is this. Firstly, throw out the national number. 668 00:31:55,560 --> 00:31:59,600 Speaker 9: At no point in the presidential race is a national 669 00:31:59,640 --> 00:32:03,760 Speaker 9: beauty contest number ever relevant. It's all about getting a nomination. 670 00:32:03,840 --> 00:32:06,040 Speaker 9: It's all about primary states. You get down to the 671 00:32:06,040 --> 00:32:09,840 Speaker 9: primary states, Iowa, New Hampshire. Now Trump's at about forty 672 00:32:09,880 --> 00:32:12,800 Speaker 9: five to forty to forty five depending on the polls. 673 00:32:12,960 --> 00:32:15,000 Speaker 9: So what you have is you've got fifty five to 674 00:32:15,080 --> 00:32:18,680 Speaker 9: sixty percent that already don't want Trump. A third of those, 675 00:32:18,720 --> 00:32:21,880 Speaker 9: as I say, or at least willing to entertain an alternative. 676 00:32:22,160 --> 00:32:26,800 Speaker 9: So it doesn't take much to see the quick consolidation 677 00:32:26,920 --> 00:32:31,560 Speaker 9: and the race that's already happened, combined with some Trump underperformance. Say, 678 00:32:31,760 --> 00:32:34,120 Speaker 9: you know a lot of those people decide, you know, gee, 679 00:32:34,200 --> 00:32:36,480 Speaker 9: cry what I heard from Christie's right, you know Trump's 680 00:32:36,480 --> 00:32:39,120 Speaker 9: not really going to be able to govern or anything else, 681 00:32:39,560 --> 00:32:42,600 Speaker 9: and make a break all of a sudden. What you've 682 00:32:42,640 --> 00:32:44,600 Speaker 9: got in the in the first race or two is 683 00:32:44,640 --> 00:32:47,640 Speaker 9: you've got a real race where Trump looks like he's 684 00:32:47,720 --> 00:32:53,760 Speaker 9: underperforming and the not Trump field is coalescing' that's the race, 685 00:32:53,800 --> 00:32:56,840 Speaker 9: Hayley sees. My only point is there's a much bigger 686 00:32:56,960 --> 00:33:00,520 Speaker 9: chance of that than most people are willing to entertained, 687 00:33:00,720 --> 00:33:03,320 Speaker 9: because I think, frankly they're blinded by the national number. 688 00:33:03,720 --> 00:33:06,040 Speaker 2: In the meantime, terry, there's this question around the ability 689 00:33:06,080 --> 00:33:08,600 Speaker 2: to govern before that, especially heading into the new year, 690 00:33:08,640 --> 00:33:10,480 Speaker 2: given the fact that Kevin McCarthy is going to be 691 00:33:10,480 --> 00:33:13,760 Speaker 2: stepping down the former House speaker who is going to 692 00:33:13,920 --> 00:33:16,640 Speaker 2: leave at the end of this year, how much more likely, 693 00:33:17,160 --> 00:33:20,000 Speaker 2: given the thin majorities, how much more luck likely does 694 00:33:20,040 --> 00:33:21,680 Speaker 2: that make some sort of government shutdown. 695 00:33:23,040 --> 00:33:27,880 Speaker 9: Well, you know, I think marginally, I think there's a 696 00:33:28,000 --> 00:33:31,200 Speaker 9: likelihood that what you see either in January or February 697 00:33:31,280 --> 00:33:35,480 Speaker 9: from House Republicans is some sort of a shutdown. You know, 698 00:33:35,520 --> 00:33:38,920 Speaker 9: a lot of this vast majority of this course is performative. 699 00:33:38,960 --> 00:33:44,400 Speaker 9: They're wrangling over thirty percent one percent cuts in thirty 700 00:33:44,400 --> 00:33:47,440 Speaker 9: percent of the budget, so it's not as if they're 701 00:33:47,520 --> 00:33:50,760 Speaker 9: taking an act to anything. But you know, what they'd 702 00:33:50,920 --> 00:33:56,240 Speaker 9: like is some backtracking and spending. You've heard that from 703 00:33:56,280 --> 00:33:59,400 Speaker 9: the presidential candidates last night, where you know, Hayley frankly 704 00:33:59,440 --> 00:34:04,120 Speaker 9: proposed something Gill return to pre COVID levels. Then even 705 00:34:04,120 --> 00:34:06,880 Speaker 9: House Republicans are doing so, you know they want to 706 00:34:07,080 --> 00:34:10,080 Speaker 9: not in that direction, but you know there's not a 707 00:34:10,080 --> 00:34:12,000 Speaker 9: lot of meeting that opens on the spending thing. 708 00:34:12,480 --> 00:34:15,080 Speaker 3: Terry. The middle of July next year, the Yankees are 709 00:34:15,080 --> 00:34:17,640 Speaker 3: going to be playing seven hundred baseball with Aaron Judge 710 00:34:17,640 --> 00:34:20,439 Speaker 3: in one Soto. I mean, it's a no brainer right there. 711 00:34:20,520 --> 00:34:24,000 Speaker 3: There's going to be a confab in Milwaukee to the 712 00:34:24,080 --> 00:34:28,640 Speaker 3: convention in Milwaukee and frankly the Democratic equivalent. Are these 713 00:34:28,680 --> 00:34:30,200 Speaker 3: going to be normal conventions? 714 00:34:32,080 --> 00:34:34,319 Speaker 9: If Biden is the nominee. It's going to be a 715 00:34:34,320 --> 00:34:38,040 Speaker 9: fairly normal convention. If Trump is the nominee. In the 716 00:34:38,080 --> 00:34:43,279 Speaker 9: Republican Party, I'd predict kind of mass affections and even 717 00:34:43,320 --> 00:34:45,279 Speaker 9: a temporary split in the party as a lot of 718 00:34:45,320 --> 00:34:49,480 Speaker 9: people walk out and refuse to support. Not unlike in 719 00:34:49,520 --> 00:34:52,120 Speaker 9: a very broad sense, not unlike what happened to Democrats 720 00:34:52,160 --> 00:34:54,160 Speaker 9: in nineteen seventy two, where you know, a lot of 721 00:34:54,200 --> 00:34:58,720 Speaker 9: the traditional Democratic coalition, including Labor, refused to support mcgovernor instead, 722 00:34:58,880 --> 00:35:01,600 Speaker 9: you know, supported Nixon. I think you see a lot 723 00:35:01,600 --> 00:35:04,279 Speaker 9: of that stuff. The other great unknown between now and 724 00:35:04,400 --> 00:35:07,680 Speaker 9: Joel I is what happens with third party races, whether 725 00:35:07,719 --> 00:35:10,360 Speaker 9: it be with Bob Kennedy, whether it would possibly be 726 00:35:10,440 --> 00:35:13,719 Speaker 9: with Joe Manchin somebody else. I say, I think there's 727 00:35:13,719 --> 00:35:16,760 Speaker 9: a huge restiveness in the electorate, and you could see 728 00:35:16,880 --> 00:35:20,400 Speaker 9: a third party candidacy gaining buyer really quickly. 729 00:35:20,520 --> 00:35:22,719 Speaker 3: When do we see the machinery to have a third 730 00:35:22,760 --> 00:35:25,920 Speaker 3: party candidate? Is that a January event, an April event, 731 00:35:26,280 --> 00:35:28,320 Speaker 3: or dare I say into the convention season? 732 00:35:28,960 --> 00:35:32,680 Speaker 9: I think more like a March to April event. Frankly, 733 00:35:34,120 --> 00:35:36,719 Speaker 9: that is kind of what the labels people have promised 734 00:35:37,400 --> 00:35:42,040 Speaker 9: but more importantly, what No Labels has promised is the 735 00:35:42,160 --> 00:35:45,400 Speaker 9: idea that, look, once things begin to take shape and 736 00:35:45,440 --> 00:35:48,640 Speaker 9: we know whether there's a Trump versus Biden likelihood or not, 737 00:35:49,040 --> 00:35:52,439 Speaker 9: you know, then we'll make a decision. So you're looking 738 00:35:52,440 --> 00:35:54,520 Speaker 9: at Super Tuesday in early March, and after that I 739 00:35:54,600 --> 00:35:56,280 Speaker 9: think you probably get a decision. 740 00:35:56,600 --> 00:35:59,040 Speaker 7: Terry Hines of PANCHEA Policy, Terry, thank you. 741 00:35:59,560 --> 00:36:03,480 Speaker 2: Subscribe the Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere 742 00:36:03,520 --> 00:36:06,880 Speaker 2: else you get your podcasts. Listen live every weekday starting 743 00:36:06,880 --> 00:36:09,960 Speaker 2: at seven am Eastern on Bloomberg dot Com, the iHeartRadio 744 00:36:10,000 --> 00:36:11,239 Speaker 2: app tune In, and. 745 00:36:11,360 --> 00:36:12,600 Speaker 1: The Bloomberg Business app. 746 00:36:12,880 --> 00:36:16,160 Speaker 2: You can watch us live on Bloomberg Television and always 747 00:36:16,239 --> 00:36:19,680 Speaker 2: on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz, 748 00:36:19,719 --> 00:36:20,759 Speaker 2: and this is Bloomberg