WEBVTT - Bloomberg Surveillance TV: May 15, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.440 Terminal and the Bloomberg Business App. David Kelly of JP 0:00:37.520 --> 0:00:41.400 Morgan Asset Management, Tom Porcelli of p JIM Fixed Income Gents, 0:00:41.440 --> 0:00:44.840 Good morning to you, David. First to you. Your reaction, Well, 0:00:44.880 --> 0:00:45.280 I think. 0:00:45.159 --> 0:00:48.519 What we've got is a moderates moderation in the US economy, 0:00:48.560 --> 0:00:53.040 both in terms of growth and inflation. Inflation is it's 0:00:53.159 --> 0:00:55.279 taking a sweet time coming down, but we still think 0:00:55.280 --> 0:00:57.600 it's a downward trend. And I think you know the 0:00:57.640 --> 0:00:59.680 reason for the market reaction is that we didn't get 0:00:59.760 --> 0:01:02.120 enough surprise. So we've now had three reports. Who've had 0:01:02.280 --> 0:01:06.120 the jobs report, then we have the consumer Sentimental Report, 0:01:06.200 --> 0:01:08.279 and now I've had the retail sales, repoard. They're all saying, 0:01:08.520 --> 0:01:11.320 you know, overall things are moderating here. When you look 0:01:11.360 --> 0:01:13.240 at the Jill's number, things are moderating, and we've got 0:01:13.240 --> 0:01:15.440 fewer job opening. So it looks like the economy is 0:01:15.480 --> 0:01:18.240 just easy itself into sort of a two percent card 0:01:18.400 --> 0:01:21.600 or of two percent growth, inflation gradually coming down. 0:01:21.480 --> 0:01:23.000 Towards two percent, And that's very good news. 0:01:23.000 --> 0:01:25.199 And I think the good news is that we didn't 0:01:25.240 --> 0:01:27.280 get another upside surprise in CPI today. 0:01:27.360 --> 0:01:29.120 Does that whisper of a July cut get up a 0:01:29.120 --> 0:01:31.560 little bit louder after this, or is July still too soon? 0:01:31.880 --> 0:01:34.000 I don't know if the whisper, I mean, it's already 0:01:34.000 --> 0:01:35.800 been a whisper. I don't know if it can become less. 0:01:35.640 --> 0:01:36.240 Of a whisper. 0:01:36.680 --> 0:01:38.240 I think it sort of stays where it is. 0:01:38.160 --> 0:01:40.199 Which is to say, you know what, around twenty five percent. 0:01:40.600 --> 0:01:42.800 I think that's probably reasonable. It doesn't go away, though. 0:01:42.800 --> 0:01:44.399 I think that's the important thing on the back of this, 0:01:44.480 --> 0:01:47.200 So I think he'd probably still linger. But I think 0:01:47.319 --> 0:01:49.920 as a practical matter, it's probably going to get pushed 0:01:49.920 --> 0:01:51.440 a little bit. And I have no challenge with that. 0:01:51.520 --> 0:01:55.000 In fact, one of the things that I've actually look, 0:01:55.040 --> 0:01:57.720 I've been sort of critical of Pal when it's been 0:01:57.720 --> 0:01:58.960 mostly deserved. 0:01:59.240 --> 0:02:02.040 But I pushed back around this type. 0:02:02.880 --> 0:02:04.520 But recently I think he's done a good job with 0:02:04.520 --> 0:02:05.120 the narrative, right. 0:02:05.280 --> 0:02:07.400 I think after the last presser and actually the pressure before, 0:02:07.680 --> 0:02:09.440 where he said, hey, look, we're not going to overreact 0:02:09.480 --> 0:02:11.480 to a couple of you know, sort of strong string 0:02:11.680 --> 0:02:15.720 of inflation reports, just like we didn't overreact to a 0:02:15.760 --> 0:02:19.040 really soft string the last go around. So I think 0:02:19.080 --> 0:02:21.720 that this, to me, is a chair who wants to cut. 0:02:21.840 --> 0:02:24.200 I think that, and you can easily see one. And 0:02:24.240 --> 0:02:26.040 I think I think if he has the opening, I 0:02:26.040 --> 0:02:28.040 think he'll do two. And I think data like this, 0:02:28.120 --> 0:02:30.960 if it persists, I think that that'll give him that opening. 0:02:31.120 --> 0:02:32.760 And sorry, I'll meet this one last point. And I 0:02:32.760 --> 0:02:35.760 think David rightly highlighted this. You know, if if you 0:02:35.800 --> 0:02:39.160 look at that control number on retail sales, I mean 0:02:39.200 --> 0:02:42.880 it was pretty weak. And again, no one's making the 0:02:42.919 --> 0:02:44.840 case that we're sort of falling off a cliff here, 0:02:44.840 --> 0:02:47.359 but I think things are slowing down and that'd be 0:02:47.440 --> 0:02:48.040 consistent with. 0:02:47.960 --> 0:02:50.200 The FED having the ability to cut. 0:02:50.280 --> 0:02:52.040 We were just speaking with Ed Yar Denny, and he 0:02:52.120 --> 0:02:54.400 doesn't necessarily have the same kind of sanguine outlick that 0:02:54.440 --> 0:02:56.840 you do with respect to j. Powell, because he says, honestly, 0:02:56.840 --> 0:02:59.040 the consumer is strong that yeah, there was weakness to 0:02:59.080 --> 0:03:00.519 the control group, but it's Mike was saying. 0:03:00.520 --> 0:03:01.720 It has to do with auto sales. 0:03:01.840 --> 0:03:03.840 It's not the sort of broad based people not going 0:03:03.840 --> 0:03:06.280 out and spending things. So at what point, David, do 0:03:06.320 --> 0:03:08.360 you look at that and say, you know what, things 0:03:08.400 --> 0:03:10.880 are fine? Now? Why the rush to cut? I know 0:03:10.919 --> 0:03:12.760 you are in the police cut now and you should 0:03:12.760 --> 0:03:15.520 have already cut camp. Well, why is it not that 0:03:15.560 --> 0:03:17.600 we see things are just fine and you should stay 0:03:17.600 --> 0:03:19.880 in here and only a cut with turbocharge a rally, 0:03:19.880 --> 0:03:21.680 which is exactly the reaction we're getting today. 0:03:21.800 --> 0:03:25.040 Well, I think you should normalize interest rates. 0:03:25.080 --> 0:03:26.799 I think the Federal Reserve for a long time has 0:03:26.800 --> 0:03:29.359 been trying to micro manage the economy with race that 0:03:29.440 --> 0:03:32.079 got too low and too high. I think it messes 0:03:32.120 --> 0:03:35.240 with financial markets. And you know, the more the Federal Reserve, 0:03:36.440 --> 0:03:38.800 you know, tease all financial markets, the more financial markets 0:03:38.840 --> 0:03:40.520 sort of act like sort of babies here. I mean, 0:03:40.560 --> 0:03:43.040 you shouldn't have had this much of a reaction. But 0:03:43.320 --> 0:03:46.080 you get this reaction because of because you know, the 0:03:46.080 --> 0:03:48.520 Federal Reserve is so sensitive about saying anything that might 0:03:48.560 --> 0:03:49.960 offend the markets one way or the other than the 0:03:50.120 --> 0:03:53.080 when when you know, when economic numbers are a little 0:03:53.080 --> 0:03:53.760 bit off one way. 0:03:53.760 --> 0:03:55.840 There, I just say that reaction function is set up 0:03:56.160 --> 0:03:56.920 for us to be hind. 0:03:57.880 --> 0:04:01.240 I think market markets have an over reaction function. That's 0:04:01.280 --> 0:04:02.960 the problem. And so market does. 0:04:02.880 --> 0:04:05.200 Overreact and so the Federal Reserve you kind of have 0:04:05.280 --> 0:04:09.720 to expose the markets to normal policy, normal policies. If 0:04:09.760 --> 0:04:12.440 the economy is doing okay, rates ought to get back 0:04:12.480 --> 0:04:14.800 to normal levels. And I do think, you know, I 0:04:15.040 --> 0:04:17.840 don't think July, but I do think September is possible. 0:04:17.880 --> 0:04:19.520 It's it's there, and I think one of the I 0:04:19.520 --> 0:04:22.040 think j Powe himself will actually make a decision as 0:04:22.080 --> 0:04:24.279 he heads towards this about whether he wants it himself, 0:04:24.440 --> 0:04:26.359 because the one thing that we've seen about Jay Powell 0:04:26.360 --> 0:04:29.160 which is very clear, is he wants to build consensus 0:04:29.200 --> 0:04:31.600 and he works hard and actually lobbying. I wouldn't say 0:04:31.640 --> 0:04:35.000 lobbing necessary is the right word, but he does talk. 0:04:35.200 --> 0:04:37.440 I think it's amazing that he talks to all nineteen 0:04:37.440 --> 0:04:41.560 participants in the fmc C meeting before the meeting and 0:04:41.680 --> 0:04:43.120 just you know, this is my view and so forth, 0:04:43.120 --> 0:04:45.080 and that's why he's been able to get so much consensus. 0:04:45.120 --> 0:04:47.800 So if he thinks that, look, let's get going on 0:04:47.839 --> 0:04:51.520 a slow rate cut cycle before the election, so you know, 0:04:51.560 --> 0:04:54.400 and let's let's get it going here so we can't 0:04:54.440 --> 0:04:56.479 be accused of playing politics, I think I think he 0:04:56.720 --> 0:04:58.440 might well do that in September. 0:04:58.080 --> 0:05:00.600 To No, I agree. 0:05:00.800 --> 0:05:03.960 I think David is completely spot on. Look, I think 0:05:03.960 --> 0:05:06.720 this is just a recalibration cycle. You know, this is 0:05:06.760 --> 0:05:08.680 not you know, people here cuts, and I think that 0:05:08.760 --> 0:05:10.960 immediate immediately conscious of the images of the FED like 0:05:10.960 --> 0:05:12.960 getting aggressive, like, we don't think that that's the case. 0:05:12.960 --> 0:05:14.479 We think that this is going to be a sort 0:05:14.480 --> 0:05:16.359 of a very modest reduction in funds. 0:05:16.480 --> 0:05:19.159 But talking about markets as baby his babies, right, this 0:05:19.240 --> 0:05:22.240 question of how they react react has been basically a 0:05:22.279 --> 0:05:24.359 feature and not a book of financial policy. This was 0:05:24.360 --> 0:05:27.120 the transmission mechanism we've been talking about. 0:05:26.880 --> 0:05:29.120 This also, how much do we get a. 0:05:29.160 --> 0:05:30.960 Rally on the on the idea that we're going to 0:05:30.960 --> 0:05:32.240 get a cut, And that's going to be a problem. 0:05:32.240 --> 0:05:34.000 It's going to set us back further and. 0:05:34.040 --> 0:05:37.600 Actually cause this to be more of a problem and 0:05:37.640 --> 0:05:38.200 more sticky. 0:05:38.279 --> 0:05:40.960 Well, I think the Federals, Federal you know, the Federal Reserve, 0:05:41.000 --> 0:05:43.080 makes a big deal about how they don't lack politics 0:05:43.120 --> 0:05:46.760 over overall what they're doing. They should also do the 0:05:46.800 --> 0:05:48.159 same thing about market reactions. 0:05:48.200 --> 0:05:49.960 So they should not overreact. 0:05:49.440 --> 0:05:52.000 To how the market reacts to either economic numbers of 0:05:52.000 --> 0:05:54.640 their own policy. But also what they need to do 0:05:54.720 --> 0:05:56.480 is and I completely agree with you on a recalib 0:05:56.839 --> 0:05:59.320 calibration here, because what they just talk about is not 0:05:59.480 --> 0:06:02.880 monetary easing, but monetary normalization. The truth is, I don't 0:06:02.880 --> 0:06:05.440 think that we're heading into a you know, a higher 0:06:05.440 --> 0:06:07.479 for longer environment. I think we're heading into a normal, 0:06:07.560 --> 0:06:10.719 for longer environment. There's nothing there's nothing wrong with four 0:06:10.720 --> 0:06:11.800 and a half percent on a. 0:06:11.839 --> 0:06:14.040 Ten year treasury That's actually about right. 0:06:14.200 --> 0:06:17.680 Given two percent normal for Fed funds, I think, I 0:06:17.720 --> 0:06:19.880 personally think normal for Fed funds is somewhere between three 0:06:20.000 --> 0:06:22.560 fifty and four. I mean, in the fifty years before 0:06:22.560 --> 0:06:26.239 the financial crisis it was two percent above core CPI inflation. 0:06:26.279 --> 0:06:28.400 That would be four in the long run. 0:06:28.720 --> 0:06:31.200 I think, you know, someone three fifty three, seventy five 0:06:31.200 --> 0:06:31.720 to for me? 0:06:31.760 --> 0:06:33.360 Bet right, No, I mean I just found my new 0:06:33.400 --> 0:06:33.919 best friend. 0:06:35.279 --> 0:06:37.080 I love carry on. 0:06:37.360 --> 0:06:39.040 No, I think I. 0:06:38.680 --> 0:06:41.160 Yes, I agree, I mean I think that's I think 0:06:41.200 --> 0:06:44.000 it's exactly quite right. I think that this, to me 0:06:44.320 --> 0:06:47.040 is I think this is the right way of thinking 0:06:47.120 --> 0:06:49.640 about about where we're going. I think, you know, three 0:06:49.640 --> 0:06:53.360 and a half to four percent is probably the right range. 0:06:53.120 --> 0:06:54.120 To consider this in. 0:06:54.520 --> 0:06:57.039 And you know the good thing about that is, you 0:06:57.080 --> 0:06:59.080 know that is that that is roughly what the market 0:06:59.120 --> 0:07:01.120 is expecting. So I don't think that there has to 0:07:01.160 --> 0:07:03.680 be some big recalibration as it leads to the market, 0:07:03.839 --> 0:07:07.120 because expectations seem to be roughly right, although the market 0:07:07.320 --> 0:07:09.000 has tended to take things way too far. 0:07:09.360 --> 0:07:10.280 Let's be honest on that. 0:07:10.320 --> 0:07:12.120 We'll get to the market right now. Equity features are 0:07:12.200 --> 0:07:14.240 positive off the back of this economic data. I know 0:07:14.360 --> 0:07:16.280 a few of you just tuning in, this is what 0:07:16.360 --> 0:07:19.080 you miss. Zero point three percent is the number for CPI. 0:07:19.200 --> 0:07:21.520 Zero point four was the estimate on a headline basis, 0:07:21.520 --> 0:07:24.160 stripping out food and energy zero point three against an 0:07:24.240 --> 0:07:26.400 estimate of zero point three. The rustle out perform and 0:07:26.440 --> 0:07:29.200 a small caps up by one point four percent. Thank 0:07:29.240 --> 0:07:31.720 you to the bond market, treasuries running and yields drop 0:07:31.720 --> 0:07:33.640 in across the curve. The two yet down about seven 0:07:33.680 --> 0:07:37.040 basis points now to four seventy four. Mike McKee, still 0:07:37.040 --> 0:07:39.360 alongside us, Mike, you've had longer to read through this. 0:07:39.400 --> 0:07:40.280 What stands out now? 0:07:40.840 --> 0:07:43.600 Well, A couple of the categories that people watch closely 0:07:43.760 --> 0:07:47.920 perform pretty much as expected, in that used cars were 0:07:47.960 --> 0:07:51.800 down one point four percent, insurance health insurance only up 0:07:51.800 --> 0:07:55.240 three tenths of eight percent, but unfortunately auto insurance still 0:07:55.320 --> 0:07:57.680 posting a big gain one point eight percent, down a 0:07:57.680 --> 0:08:00.760 little bit from last month, but still an our size gain. 0:08:00.880 --> 0:08:03.880 And John, you had a probably good discount on your 0:08:03.920 --> 0:08:07.560 trip to Paris this week because airfares were down eight 0:08:07.600 --> 0:08:09.440 tenths of eight percent, which is. 0:08:09.440 --> 0:08:11.680 Kind of interesting because the CPI tends to. 0:08:11.640 --> 0:08:15.240 Include what people are buying for vacation time ahead. So 0:08:15.720 --> 0:08:19.320 we'll see if airline fars can continue to behave. 0:08:19.800 --> 0:08:22.440 Just for the record, it was Taylor Swift weekend in Paris, 0:08:23.160 --> 0:08:25.960 and I booked the flight I think a day before 0:08:26.000 --> 0:08:28.400 I got it, So Mike McKay, that was not cheap 0:08:28.440 --> 0:08:29.920 at all. Just for the record, did you. 0:08:29.960 --> 0:08:30.680 Enjoy the concert? 0:08:30.800 --> 0:08:32.720 I didn't get to watch the concept, but it was 0:08:32.840 --> 0:08:34.760 very busy. Can you imagine me a Tyler Swift conw 0:08:34.880 --> 0:08:36.920 Mohammed went, I know, Mohamma's going to be in a 0:08:36.920 --> 0:08:38.200 program on Friday. 0:08:37.920 --> 0:08:39.280 Great pink, fantastic. 0:08:39.640 --> 0:08:40.320 It was amazing. 0:08:40.400 --> 0:08:42.280 Did he really think he wouldn't be seen on that 0:08:42.360 --> 0:08:42.800 T shirt? 0:08:42.800 --> 0:08:42.920 Oh? 0:08:42.960 --> 0:08:44.320 I know he's now a swifty. 0:08:44.480 --> 0:08:46.440 Mohamma's going to join us Friday for a review of 0:08:46.440 --> 0:08:49.520 the economic data and apparently a review of the Taylor 0:08:49.520 --> 0:08:52.640 Swift performance in Paris, France over the weekend. David Kelly, 0:08:52.679 --> 0:08:54.120 I want to come back to the Federal Reserve, certainly 0:08:54.160 --> 0:08:57.120 not on Tyler Swift. You've said repeatedly that the Federal 0:08:57.120 --> 0:08:59.320 Reserve should just have faith in the calendar. This is 0:08:59.320 --> 0:09:01.800 going to work its self foul for the next twelve months, 0:09:01.880 --> 0:09:04.400 regardless of how restrictive they think they are. Is that's 0:09:04.400 --> 0:09:05.080 still your stunce. 0:09:05.160 --> 0:09:05.640 Absolutely. 0:09:05.960 --> 0:09:08.120 If you look at airline fares, I mean, you know, 0:09:08.400 --> 0:09:11.720 we've got we've actually got to air travel back above 0:09:11.760 --> 0:09:12.760 pre pandemic levels. 0:09:12.760 --> 0:09:13.559 There's plenty of. 0:09:13.480 --> 0:09:16.240 Demand out there, but the airline industry is competitive enough 0:09:16.280 --> 0:09:19.240 for airline fers to come down. But overall, you know, 0:09:19.280 --> 0:09:22.400 in some areas of services and throughout the goods industries. 0:09:22.559 --> 0:09:26.040 What we're seeing is enough competition to gradually push inflation down. 0:09:26.360 --> 0:09:28.880 So this is not an inflationary economy. The only time 0:09:28.880 --> 0:09:31.120 it's an inflationary economy is when you have a huge 0:09:31.160 --> 0:09:35.319 supply chain disruption and you have huge fiscal stimus where 0:09:35.320 --> 0:09:38.040 you're giving money to low and middle income households. That 0:09:38.200 --> 0:09:41.080 is the one way you can generate long stant or 0:09:41.240 --> 0:09:44.520 significant inflation year. Once you take that away, inflation will 0:09:44.520 --> 0:09:46.400 gradually drift down, and that's exactly what it's doing. 0:09:46.440 --> 0:09:47.840 It's just very gradual. Tom. 0:09:47.880 --> 0:09:49.439 Do you think a lot of this market reaction though, 0:09:49.480 --> 0:09:51.720 is actually the CPI or the retail sales because CPI 0:09:51.840 --> 0:09:54.160 is pretty much in line. Retail sales was much softer. 0:09:54.360 --> 0:09:56.000 Yeah, I mean, you know, it could also be a 0:09:56.040 --> 0:09:58.439 sort of a better than feared because as we were saying, 0:09:58.480 --> 0:10:00.240 I think before we were on camera, you know, could 0:10:00.240 --> 0:10:02.520 have easily been a four tenth. So I think it 0:10:02.559 --> 0:10:05.200 could be some of some of that for for sure. 0:10:05.520 --> 0:10:07.600 You know the thing too about inflation, I just think, look, 0:10:08.240 --> 0:10:10.640 I don't know about the wisdom of stripping out an 0:10:10.679 --> 0:10:13.600 assortment of different things, like you know, super core, I mean, 0:10:13.640 --> 0:10:15.680 you're stripping out fifty percent or more of the weight 0:10:15.679 --> 0:10:17.720 of inflation, which I look, I have no problem stripping 0:10:17.760 --> 0:10:20.800 things out of inflation. But what I would say is, 0:10:20.840 --> 0:10:24.920 if you want to do that, then go the next step, right, 0:10:24.920 --> 0:10:27.040 because what we know is that auto insurance has been 0:10:27.040 --> 0:10:30.200 a thorn in the side of inflation. That is, there's 0:10:30.320 --> 0:10:32.840 nothing the FED can do about that, and if you 0:10:32.840 --> 0:10:34.880 strip that out, inflation looks even a little bit better. 0:10:34.960 --> 0:10:38.200 So to me, that's the Just keep in mind there 0:10:38.200 --> 0:10:42.040 are some idiosyncratic sort of sectors that are really impacting 0:10:42.040 --> 0:10:44.280 inflation that the FED has no ability to control. So 0:10:44.280 --> 0:10:46.080 in that context, I think it's even better. 0:10:46.120 --> 0:10:47.960 And also, I mean, the FED have a good reason 0:10:48.520 --> 0:10:50.880 sets a target of two percent, but no conomists will 0:10:50.880 --> 0:10:52.800 honestly tell you there's a big difference between one or 0:10:52.840 --> 0:10:55.040 two and three. You know, so long as you're there 0:10:55.080 --> 0:10:58.160 or thereabouts, you know you're okay. And then what you 0:10:58.200 --> 0:11:00.679 do is do no evil, do not do or financial 0:11:00.720 --> 0:11:04.120 markets by having rates at a significantly incorrect level. 0:11:04.280 --> 0:11:06.000 So then should the that just be targeting two to 0:11:06.040 --> 0:11:06.600 three percent? 0:11:07.160 --> 0:11:09.960 Well, in Canada they have a range of one to 0:11:10.000 --> 0:11:11.840 three percent, and I kind of like the idea of 0:11:11.840 --> 0:11:14.079 a range of one to three percent as a target. 0:11:14.160 --> 0:11:15.480 We get in that range, we're fine. 0:11:15.520 --> 0:11:17.960 I totally agree. In fact, I always used the RBA. 0:11:18.040 --> 0:11:18.839 I know it is terrible. 0:11:18.840 --> 0:11:24.040 I'm sorry for you all the weight condemn. 0:11:25.679 --> 0:11:28.560 It was using Canada. I've used the RBA as a 0:11:28.559 --> 0:11:29.080 great example. 0:11:29.160 --> 0:11:31.200 The RBA has a range, and I think a range 0:11:31.240 --> 0:11:34.400 is a saying two point zero percent to me, like 0:11:34.559 --> 0:11:38.000 just strikes me as like the pinnacle of hubris. I mean, 0:11:38.080 --> 0:11:40.240 like you rarely see it at two point zero percent 0:11:40.280 --> 0:11:42.240 for any period of time. I think a range is 0:11:42.400 --> 0:11:43.680 really the right way of thinking. 0:11:43.679 --> 0:11:47.320 And it actually caused tremendous problems last decade because they 0:11:47.400 --> 0:11:49.480 kept raids way too low for way too long as 0:11:49.480 --> 0:11:51.240 they were trying to get inflation up to that two 0:11:51.280 --> 0:11:53.400 percent target, and that fueled a lot of the asset 0:11:53.440 --> 0:11:56.360 bubbles and real estate bubbles that they were now suffering from. 0:11:56.480 --> 0:11:59.160 So anyone who took the survey, the University of Michigan 0:11:59.280 --> 0:12:01.760 survey last Frido was listening to this, says, what are 0:12:01.800 --> 0:12:05.360 they talking about? They're in goldilocks land. Everything is amazing. 0:12:05.600 --> 0:12:07.760 It's going to be a great economy. Stocks are going 0:12:07.800 --> 0:12:11.120 to keep rallying. We can sustain this. J Powell is great. 0:12:11.480 --> 0:12:14.800 Where is the disconnect here between the important Okay. 0:12:14.720 --> 0:12:17.800 Yeah, sorry, So it's an important idea. I think about 0:12:17.840 --> 0:12:20.280 like my parents, right who having the foggiest idea what 0:12:20.320 --> 0:12:20.880 I do for a living? 0:12:20.920 --> 0:12:22.600 I mean, after me trying to explain it to them. 0:12:22.880 --> 0:12:25.440 But you know when I when I tell them, when 0:12:25.440 --> 0:12:27.840 I tell them, look, you know inflation is because they 0:12:27.960 --> 0:12:30.040 was asking what's happening when inflation's like, oh, it's improving, 0:12:30.080 --> 0:12:30.800 you know, not to fear. 0:12:30.840 --> 0:12:33.120 And my father loves to say, like, what the hell 0:12:33.120 --> 0:12:33.840 are you talking about. 0:12:33.880 --> 0:12:35.280 He's like, I'm going to the store. I'm still paying 0:12:35.280 --> 0:12:37.720 a lot more for stuff. And that's the disconnect between 0:12:37.720 --> 0:12:40.280 Main Street and Wall Street. Like we look at the 0:12:40.640 --> 0:12:43.160 percent change and they look at price level terms, and 0:12:43.200 --> 0:12:46.600 price level terms, it's still incredibly elevated. And that's a problem, 0:12:46.640 --> 0:12:49.480 by the way, from a consumption perspective, because a lot 0:12:49.520 --> 0:12:52.240 of these things are fixed costs, like auto insurance or 0:12:52.280 --> 0:12:55.160 like food prices that will actually continue to chew into 0:12:55.200 --> 0:12:55.960 disposable income. 0:12:56.000 --> 0:12:57.640 Okay, that's been basically the theory. 0:12:58.200 --> 0:13:00.400 I have to say, you need to fade that University 0:13:00.400 --> 0:13:03.000 of Michigan Sentiment Index surprise because they had a change 0:13:03.000 --> 0:13:05.480 in methodology and they started they're starting interviewing people on 0:13:05.520 --> 0:13:06.840 the web as opposed on the phone. 0:13:06.880 --> 0:13:08.520 And apparently people I've. 0:13:08.360 --> 0:13:10.240 Been waiting for that cod for agous. 0:13:12.040 --> 0:13:12.480 Lucky people. 0:13:12.480 --> 0:13:15.680 Well, yeah, exactly exactly one that now you get. You 0:13:15.720 --> 0:13:17.480 get asked on the web and apparently you're more gloomy 0:13:17.520 --> 0:13:18.320 when you look on the screen. 0:13:18.480 --> 0:13:20.240 How antiquated is callings on the phone? 0:13:20.559 --> 0:13:21.880 No problem, no problem at all. 0:13:21.920 --> 0:13:22.760 But the problem. 0:13:22.760 --> 0:13:25.640 But the problem is that they moved, they changed methodology, 0:13:25.760 --> 0:13:28.280 and they didn't do a level adjustment for the bias 0:13:28.280 --> 0:13:30.640 that they know it's actually causing their data. They put 0:13:30.640 --> 0:13:32.880 something out, I mean, it's this is really technical. 0:13:32.440 --> 0:13:37.080 But just it's not what's going to happen. They filed answers. 0:13:37.400 --> 0:13:39.440 I think inflations can be twenty percent if they. 0:13:39.320 --> 0:13:41.040 Don't, If they don't do a fix to this, the 0:13:41.120 --> 0:13:44.040 University of Michigan survey will be about six point six 0:13:44.040 --> 0:13:47.120 percentage or index points below where it was a few 0:13:47.160 --> 0:13:50.480 months ago forever. So so it's it just this change 0:13:50.480 --> 0:13:52.880 in methodology actually messes up the number. So I know, 0:13:52.920 --> 0:13:55.160 if it gets excited for a number of misses consensus 0:13:55.200 --> 0:13:56.240 by a loss and that. 0:13:56.240 --> 0:13:59.760 Happened, but it was just a technical technical web. 0:14:00.320 --> 0:14:02.120 You're again just the Apple fire. I mean, just keep 0:14:02.160 --> 0:14:05.440 in mind, for whatever the confidence numbers are worth. Confidence 0:14:05.440 --> 0:14:08.960 has been pretty downbeat, yet spending has been pretty robust 0:14:09.000 --> 0:14:09.880 on relative basis. 0:14:09.960 --> 0:14:12.800 Right, So we're feeders of the Michigan numbers. Two But 0:14:13.240 --> 0:14:15.000 I think now, yeah. 0:14:14.640 --> 0:14:17.559 Exactly, but I think, but I think the the inflation 0:14:17.800 --> 0:14:20.600 expectations numbers within Michigan I think are really useful. 0:14:20.760 --> 0:14:22.800 Sometimes it's nice to get along chance. This was great, 0:14:23.000 --> 0:14:37.680 Thank you. Alongside David Kelly, f JP Morgan, President Biden 0:14:37.760 --> 0:14:40.680 unfanning a sweeping new round of tariffs on Chinese imports 0:14:40.720 --> 0:14:43.720 ahead of the November election. The decision looks to escalate 0:14:43.760 --> 0:14:46.760 measures first put in place by former President Donald Trump. 0:14:46.960 --> 0:14:50.240 The former House Speaker Kevin McCarthy joins US now speak, McCarthy, 0:14:50.280 --> 0:14:51.680 go to see you, good to see you, great to 0:14:51.720 --> 0:14:53.240 catch up, sir. What did you think of that from 0:14:53.240 --> 0:14:55.840 President Biden? Did Biden just out Trump? Trump? 0:14:56.200 --> 0:14:57.080 No, he can't do that. 0:14:57.120 --> 0:15:01.440 I mean, Biden opposed these terrorists will four and I 0:15:01.520 --> 0:15:04.120 actually believe when it was only Nixon can go to China. 0:15:04.240 --> 0:15:07.640 I think a Republican administration always has a better relationship 0:15:07.680 --> 0:15:10.120 with China and a stronger one. We've watched in this 0:15:10.240 --> 0:15:14.440 current administration. They've created like an access of evil with Russia, 0:15:14.800 --> 0:15:18.480 Iran and China, something we haven't seen since the nineteen thirties. 0:15:18.520 --> 0:15:20.160 And you know, there's an interesting. 0:15:19.840 --> 0:15:22.840 Piece by Henry Kissinger before he passed in Graham Allison 0:15:23.320 --> 0:15:28.080 seventy nine, seventy nine and nine seventy nine years since 0:15:28.080 --> 0:15:32.000 a Great War, seventy nine years since a nuclear weapon 0:15:32.080 --> 0:15:35.160 was used, and only nine countries with the potential of 0:15:35.160 --> 0:15:38.440 a nuclear which in the seventies you thought there would 0:15:38.480 --> 0:15:39.680 be twenty five or thirty. 0:15:40.280 --> 0:15:41.600 That doesn't just happen. 0:15:41.960 --> 0:15:45.360 So foreign policy really matters. The world is in a 0:15:45.400 --> 0:15:49.040 different place that they're looking for a strong kind of 0:15:49.080 --> 0:15:53.200 American Western leadership, and I think that's the challenges that 0:15:53.240 --> 0:15:58.200 we have. And Biden's decision in Afghanistan and what he's 0:15:58.240 --> 0:16:01.840 just doing with Israel, it's really harming the world known 0:16:01.800 --> 0:16:05.760 in America, and I think greater stability will go a. 0:16:05.720 --> 0:16:08.240 Long way when it comes to China. Though Biden and 0:16:08.280 --> 0:16:10.760 Trump are largely on the same path. Trump is talking 0:16:10.800 --> 0:16:14.280 about sixty percent tariffs on imports coming from China on 0:16:14.360 --> 0:16:17.520 top of potentially a ten percent tariff wall for all imports. 0:16:17.840 --> 0:16:18.960 Isn't that trajectory? 0:16:19.400 --> 0:16:21.360 Isn't that the only place you know this well that 0:16:21.360 --> 0:16:23.760 there's bipartisanship in Washington. 0:16:23.400 --> 0:16:25.200 When it comes to China, well, you want to look 0:16:25.200 --> 0:16:25.440 at it. 0:16:26.600 --> 0:16:29.480 Trump's policies on China he believed long before he was 0:16:29.480 --> 0:16:33.240 ever elected. Biden has flipped his position on China in 0:16:33.280 --> 0:16:36.440 the last year, So it's kind of what you believe. 0:16:36.480 --> 0:16:39.280 And I think in China's position, China always looks long term, 0:16:39.440 --> 0:16:42.160 so if they have somebody in there with a strong position, 0:16:42.320 --> 0:16:44.440 you usually can negotiate something there. 0:16:44.960 --> 0:16:46.120 I believe, and I. 0:16:46.080 --> 0:16:49.440 Think looking at the New York Times latest polling Trump 0:16:49.760 --> 0:16:52.080