00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. 00:00:05 Speaker 3: Radio. News. 00:00:12 Speaker 1: This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. 00:00:27 Speaker 4: Stephen Major joins us now with all of his heritage on the Pacific Rim in London, and now, of course, Global Macro Advisor at Tradition. Stephen, you have called for a lower regime environment. I'm going to go to Jan Hatsias at Goldman Sachs, who makes clear, yeah, you may get rate increase, but we're not going to get three, four, five rate increases, and that this is a not idiosyncratic, but one-off move to a higher rate regime, the shocks will recede and we'll get back to Stephen Major lower rates. Discuss that. 00:01:03 Speaker 5: Yeah, it could be a one and done, Tom. So if you perhaps looked at the Fed chair's view of inflation, he would share what many people say about the near term inflationary impulse that comes from the AI and the infrastructure build out, all this kind of stuff. But his view would be that in the longer run, and this is going into next year, you start to get some of the disinflationary pressures coming through. Back in February of this year, before the war in this region, That was on the 27th of February. The yield on 10-year treasuries was below 4% and the market was implying three cuts. Here we are six, seven months later, we've got 5% 10-year yields and three hikes. So one thing I would say is that you've had a six rate hike move in the space of six, seven months. That's 150 basis points. That explains the entirety of that 10-year yield shift and a bit more, really. So I think that a lot of the narrative out there has got very bearish on bonds and it tends to talk about fiscal policy in the same breath as being bearish and about the supply of bonds and all of the inflation risk premium and what have you. I just don't really see it. The term premium hasn't gone up. People have been claiming that it has. It has not gone up. You can see it on the Bloomberg terminal. The curve has flattened. because it's been pricing in the rate hikes. Inflation expectations are controlled. Spot inflation is a bit higher. So I could see one hike and then next year we could be back into the easing mode. It's the war in this region that has ruined the best laid plans. 00:02:48 Speaker 4: I mean, Paul, under the press conference today, it's like Howard Johnson's. There's 28 flavors. Everybody's got an opinion. 00:02:54 Speaker 6: Which way is he going to go? 00:02:56 Speaker 2: Stephen, so given that background, I mean, is there a call here for, if I want to ask you where the tenure is going to be a year from now, would you say lower than where we are here? 00:03:08 Speaker 5: I'd say nearer to four than six. 00:03:11 Speaker 6: Okay. 00:03:12 Speaker 5: And so the starting point is five. So if we had a sportsman's bet on this, we could bet a coffee. 00:03:20 Speaker 4: A coffee each way. So if it's $ 4. 00:03:23 Speaker 5: 99, I win. 00:03:24 Speaker 3: If it's $ 5. 00:03:24 Speaker 4: 01, you win. 00:03:24 Speaker 5: We have plenty of coffee here at Bloomberg. 00:03:28 Speaker 7: Yeah. 00:03:32 Speaker 5: Yeah, so earlier this year, when yields were 4%, John Farrow asked me what was more likely, the yield on treasuries going down towards three or West Ham United staying up in the premiership. So it was an impossible question because I didn't know how to answer it, in fact. 00:03:52 Speaker 4: Here we are at. 00:03:53 Speaker 5: 5% and West Ham are top of the championship, just saying. 00:03:57 Speaker 3: There you go. 00:03:58 Speaker 2: Stephen, what are you going to be listening for from... Chairman Warshair, he's kind of in a tough situation. He's got a lot of pressures coming from different areas. What are you going to be looking for? 00:04:10 Speaker 5: Yeah, I'm tempted to give him a break in that he's still in his honeymoon phase. And frankly, it's been very difficult with the global geopolitical backdrop. What's happened is pretty unprecedented. So as I said, the best laid plans have been completely wrecked. 00:04:30 Speaker 4: Right. 00:04:32 Speaker 5: I think we have to we have to give it time. And I think I think committing to a series of rate hikes is very unlikely here. 00:04:38 Speaker 4: Stephen Major, talk about that. 00:04:39 Speaker 5: He's not going to signal anything. 00:04:41 Speaker 4: Talk about the real yield. I mean, I'm looking at the 10 year real yield. It gets my attention. But to me, almost historic is the 30 year inflation adjusted yield is really back to once in a lifetime highs way over three percent. Discuss the long term real yield. 00:05:00 Speaker 5: Yeah, so really interesting. I had a couple of calls this morning on the same subject. 3% real yields, basically 2% higher than the Fed's indication of its neutral rate. So maybe we have to meet in the middle, but 3%, 2% more. The attraction of TIPS is the immediate consideration here. So TIPS should be good value with a 3% real yield. The problem is TIPS investors, TIPS traders know that if you had a risk-off, you'd be in one of the worst possible products. Because in a risk-off, illiquid instruments like TIPS would massively underperform And markets would start to price disinflation and deflation. So I think the positioning should favor nominals. So you buy nominals because the real yield is high. It doesn't mean to say you buy tips. Inflation expectations are under control. And the real yield, I think, is quite juicy. It's way above where the Fed's saying neutral is. And even if you met in the middle, it's still 100 basis points high. 00:06:03 Speaker 4: My good, I shaved my beard today, folks. Tottenham scored a goal yesterday against Liverpool. I finally shaved. So we got to do this. Americans, I want you to understand. Imagine if the New York Mets, the San Francisco Giants, the LA Angels, worst in class, were worried about being relegated down to AAA baseball. to play the Rochester Red Wings next year. Now, Steve Major, we know, in East London, of course, diehard West Ham United fan, as John Farrow's mentioned. Explain this weekend, Steve Major, when in your childhood, your West Ham United will visit, is it Millwall? I mean, this is the mother of all derbies. And now, because West Ham has been so weak, they're down in the Championship League. Is this a big deal in East London? 00:06:52 Speaker 5: Well, it is, and it's quite historical because it goes back to the Docklands and the workers in the docks and their rival teams and rival unions. And so it predates me. It's more my father's era. So that history is there, and the resentment somehow has carried on to today. The truth of it is we don't really care because we're a premiership team and they're not. 00:07:16 Speaker 8: How about that? 00:07:18 Speaker 4: How do you get from West Ham? How do you get from the league below championship? Think AAA baseball in America, folks. What's the process to get back up to Premier League? You just got to win games, right? 00:07:32 Speaker 5: Yeah, but you see, it doesn't happen in America because relegation isn't there. So the reason the valuation of American teams is so much higher than their British equivalents in sporting terms is because the discounted cash flow is going to be more attractive when you don't have the relegation problem. You see, the thing is the revenues and the income from TV and sponsorship, it collapses when you get relegated. That's why American teams are worth more. 00:08:00 Speaker 4: Stephen Major, thank you so much for that briefing. He's with Tradition. Stay with us. More from Bloomberg Surveillance coming up after this. 00:08:17 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:08:23 Speaker 9: Eastern. 00:08:23 Speaker 1: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. 00:08:30 Speaker 4: You can do this with Alicia Levine. I mean, BNY, CIO, and all that with prodigious math abilities. Oh, we're going to go to logs on a Wednesday. 00:08:38 Speaker 6: No, thank you. 00:08:38 Speaker 4: That's what you do. You go to logs. 00:08:40 Speaker 7: Okay. 00:08:41 Speaker 4: That's logarithms, folks. 00:08:42 Speaker 7: Okay. 00:08:43 Speaker 4: And it's where you get a perspective on percentage movement, not just the media blather about, OMG, we're at 5%. So if I take the great moderation, and I go back to 1986, before you were born, if I do that, Alicia, I got an average yield smack dab where we are now in the great moderation. 00:09:04 Speaker 10: Correct. 00:09:04 Speaker 4: Is the yield space today for this Fed madness today, is this normal? 00:09:11 Speaker 7: Look, we're going back to a pre-GFC world. It's clear, you know, on inflation, on rates, on, you know, more industrial economy, less of a financialization of the economy. 00:09:24 Speaker 10: And you can see it. 00:09:25 Speaker 7: COVID really was the break in what we had before. And we're going back to what we all grew up with. 00:09:31 Speaker 10: And, yes, I was born, you know, after 1987. 00:09:34 Speaker 7: But but five percent in a world where we're growing six and a half percent in a world where the market has increasingly priced in rates. You know, if I told you oils at one hundred and five dollars a barrel, the 10 years at five percent, the 30s at five point three. And by the way, the S & P is up double digits and small cap is also up double digits, outpacing the S & P. 00:09:59 Speaker 10: Would you believe? 00:10:00 Speaker 3: Me? 00:10:00 Speaker 10: The answer is no. And by the way, an AI bot will not take the place of a strategist because of that. 00:10:06 Speaker 6: We hope. A Fed hike today, maybe the beginning of maybe one or two or three hikes. Does that end the bull market? 00:10:14 Speaker 7: So I don't think it ends the bull market, but we cannot pretend that hikes are good for multiples or good for marginal areas of the market that require funding. So we can't talk ourselves in out of like it doesn't matter. So I think the rotation you're seeing. Some of the struggles you're seeing in duration, that is going to be real. 00:10:38 Speaker 10: This is more of a dispersed market. 00:10:40 Speaker 7: The top line of the S & P is hung in there, less than 3% from the high, because other sectors are going to work when others are negative. Very, very hard here, I think, just market-wise. You're best off, I think, just buying the index, because some will work very well in this environment. 00:10:58 Speaker 6: It's been an earnings-driven equities market here. Can we expect... Not the same earnings next year that we've been getting this year, but still decent earnings next year? 00:11:06 Speaker 7: Look, we just did this exercise this week. We raised our earnings for next year for mid-range about $ 430 in S & P share. 00:11:12 Speaker 10: We were at $ 395. Was Jeffrey Yu medicated? 00:11:14 Speaker 6: No. 00:11:23 Speaker 7: But our price targets have not changed on the S & P because we have to confront the fact that the multiple is moving lower. 00:11:31 Speaker 10: We're at 19 times now. 00:11:34 Speaker 7: The tech sector is at 21 times forward earnings. 00:11:38 Speaker 10: In 1999, that was 46 times. 00:11:38 Speaker 9: Right. 00:11:40 Speaker 7: So we're not really expensive by any stretch of the imagination. 00:11:44 Speaker 10: So we're going to have a muddle through into midterms. 00:11:47 Speaker 4: Alexis, can I do partial differentials this morning? Oh, I would love for you to. Okay, partial differentials with Alicia Levine, BNY. So I got nominal GDP as two players, inflation and real GDP. They're dynamic. is they raise rates one-eighth, two-eighth, three-eighth, whatever the number is. Which of those two, which partial differential there is going to move the most to bring nominal GDP down from a banana republic level? 00:12:13 Speaker 7: So, look, I think it's probably a little bit on the growth side because ultimately the inflation is being driven by supply shocks. Yeah. And the Fed needs to raise rate because the market's telling the Fed it needs to raise rates. And- the rhetoric has been that if we don't, we lose credibility, and so therefore they have to. Like, it's a circular argument, but there it is. I think the issue is, and for me, I think that the hawks must explain why inflation is not higher. Because if you think about the shocks we've had, we've had tariffs. We've had an oil shock for six months. We've had two wars. We've had a supply shock in the biggest AI- Plus your kid's tuition bill. Plus my kid's tuition bill. You should see what's going on with housing in Ithaca. 00:12:59 Speaker 10: Oh, my God. 00:13:00 Speaker 7: And why is core inflation at 2.4%? And so I see the need for the Fed to hike, but the hawks really have to explain why inflation's not higher. That's why I don't think that the hiking cycle is necessarily- going to affect the inflation that we're seeing and that we all feel that we all talk about like let's not pretend it's not real it is definitely real but it's going to affect growth on the margin it will. 00:13:25 Speaker 6: You say you like materials is that a commodities call there. 00:13:29 Speaker 7: So it's about the AI build-out, but it's also on the commodity side. We just raised our allocation to real assets about two months ago. 00:13:35 Speaker 6: Real assets being? 00:13:37 Speaker 10: Infrastructure, commodities, real estate. 00:13:40 Speaker 7: Because we are in that 3% inflationary world because we are post-GFC. 00:13:45 Speaker 10: We are back to the future. We are in a nominal world. 00:13:49 Speaker 7: We're in a world where central banks may be hiking, but we're not getting back to 2% anytime soon. And we are in a reshoring world. I don't want to call it deglobalization, but we are in a block world. You know, we've got the Western Hemisphere. We've got what's going on with China. And then we've got Europe and maybe Canada, too. 00:14:08 Speaker 6: Is part of that. 00:14:10 Speaker 7: Which, whatever it is, it's 2% of the world economy. But in the end, you know, we are in that nominal world and you need real assets in a nominal world. So that's why we like materials, because it's also part of the industrialization. The global manufacturing PMI, It's extraordinary. You've got 90% of regions in expansion. 00:14:32 Speaker 10: It's extraordinary. So we have a global investing cycle here. 00:14:36 Speaker 6: Interesting. What's the AI trade for you guys these days? 00:14:40 Speaker 4: It's always evolving. 00:14:41 Speaker 2: Now we've got the whole discussion of whether we need guardrails on AI. 00:14:45 Speaker 6: And people are trying to figure out what that means for spending. 00:14:47 Speaker 2: And that's been driving not just the tech space, but maybe the global economy in terms of. 00:14:52 Speaker 7: Well, look, it definitely drives GDP because it's about one-third to one-half of U.S. GDP this year because the imports are so high for AI. The imports are taking away from top-line GDP because you have to subtract it. Think of the chips we're importing from Korea and Taiwan. 00:15:09 Speaker 4: I've got to get this in this morning. Paul and I are going to discuss this later. Thomas Friedman over at the New York Times, the blistering. Are you guys kidding me on AI? So you're in a meeting with all the abilities of BNY. We had a mutual fund manager in yesterday. He's number one holding bank, which I thought was very cool. Alicia Levine, how should our listeners and viewers maintain their holdings in mag seven, given the uproar that Tom Friedman and Parmi Olson and others described? 00:15:41 Speaker 10: Look, I think two things are true at the same time. I think we have to maybe pause. It's also true. We're in a foot race with. 00:15:46 Speaker 7: China and, And it is naive and worse to think it doesn't matter. Like this is about the national defense. This is about national security. Ultimately, I think we all know that. But these models are smart. I mean, you see how they learn. It's actually quite extraordinary. In the end, you keep the holdings. You keep the holdings, and you have to do— you can't start picking sectors here. I think it's too volatile, but what we know is that the investment will continue. It's still continuing, and it's an industrialization. 00:16:17 Speaker 4: Are you cashing out your NVIDIA to buy three bedrooms, two baths up in Ithaca? I mean, this is like the parent thing. 00:16:25 Speaker 10: I want to be a landlord in Ithaca. 00:16:26 Speaker 4: You want to be a landlord in Ithaca. 00:16:27 Speaker 10: I want to be a landlord. 00:16:28 Speaker 7: I want to buy those dilapidated houses and charge God knows what. 00:16:32 Speaker 4: High above Cayuga's waters. You're going to go up there. Are you really going to do this? 00:16:36 Speaker 10: I thought about it, actually. 00:16:37 Speaker 4: You thought about it. 00:16:38 Speaker 10: Yes, real assets, right? 00:16:39 Speaker 7: Real assets because it's a nominal world. And so your investing has to take into account real assets and a higher inflationary world. 00:16:48 Speaker 10: We are underweight fixed income. 00:16:51 Speaker 4: Right. 00:16:51 Speaker 7: And nevertheless, nevertheless... High yield's done well. Emerging market debt has done well. 00:16:57 Speaker 10: Like, it's really extraordinary. You've got a global growth going on there. 00:17:02 Speaker 4: Did I see you at the U.S. 00:17:03 Speaker 3: Open? 00:17:04 Speaker 10: Yeah, no, you did not. 00:17:05 Speaker 4: You weren't at the U.S. Open? 00:17:06 Speaker 10: I was in Maine, no. 00:17:07 Speaker 6: She's saving for the house in Ithaca. 00:17:09 Speaker 8: She couldn't afford the tickets. 00:17:11 Speaker 4: She's got this beautiful necklace on. I thought it was something Sabalenka wore. Alicia Levine, wear this. Stay with us. More from Bloomberg Surveillance coming up after this. 00:17:29 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:17:35 Speaker 9: Eastern. 00:17:36 Speaker 1: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. 00:17:42 Speaker 4: This is a joy. Jay Goldberg has a huge experience. in semis out of Berkeley, among other parchment, just hugely esteemed. Jay Goldberg, all of us have a stereotype of the ups and downs of the SOX index years ago. How is the new semiconductor business different from the stereotypes we carry? 00:18:08 Speaker 3: That's a tough one because I think in some ways it's not that different. Semiconductors are still cyclical. They go up and they go down. This time it may be a while before it goes down again. I think this is the strongest semiconductor upswing cycle any of us have ever seen. 00:18:30 Speaker 8: It's just an incredible massive cycle. growth everywhere. 00:18:36 Speaker 3: And I think there are some people who think that maybe this time is different. There are some signs that there are some structural changes in the industry that will even out the cyclicality in the future. I'm not quite there yet, but I can see their reasoning. 00:18:50 Speaker 2: Jay, anytime I see a graphic of the AI space And it's a flywheel of all these companies doing deals with each other, who's buying what from whom, sitting right smack in the middle of that graphic is usually NVIDIA. 00:19:05 Speaker 6: You have a sell on NVIDIA. Walk us through the logic there. 00:19:10 Speaker 3: So I always position this to clients as an underperformed rating rather than, you know, I'm not telling people to go out and short NVIDIA. I think it's just going to underperform the rest of the semis, the rest of the AI complex. And And that's just, I think, partly a function of it's gotten very big and so it's harder and harder for it to move the needle. Expectations are always very high and it's increasingly hard to beat them. And on top of that, they're sold out, right? They're sold out, they said, for this year, probably for next year. And once you're sold out, what's the upside? And so I think there's a strong argument to say that the stock is, you know, it's just going to be hard to perform. 00:19:49 Speaker 8: It's hard to beat anyone else. 00:19:50 Speaker 2: So, Jay, I'm sure you're probably getting a lot of phone calls from clients over the last week, if not longer, just about what we're hearing from some of these leaders of the AI space, the Altmans, the Elon Musk's of the world about maybe putting some guardrails on this whole thing. How do you frame that discussion out for your institutional investor clients? 00:20:08 Speaker 3: Well, just to be honest, I didn't take any investor calls last week because I was in Italy. But I've been following this debate more than I should have. 00:20:20 Speaker 4: And I. 00:20:23 Speaker 3: Think there's a lot of complexity here. I think what you see is the two big companies, OpenAI and Anthropic, have realized that There are very serious cybersecurity threats capable from their tools. That's already very clear. And I think some degree of coordination is going to have to take place. And the rest is just debating exactly what that coordination looks like. There are some who are calling for full-on government regulation. There are industry standards. I think if you take out the AI is going to kill us all sort of aspect of it, Industries regulate, right? 00:21:03 Speaker 4: Industries standardize. 00:21:04 Speaker 8: There's lots of ways to do it. 00:21:05 Speaker 3: It doesn't have to be big and ugly, but they're going to have to do something here. 00:21:11 Speaker 4: What is the significance of the new Apple iPhone, the A20 chip? And folks, this chip is from Taiwan Semi, and it's not three nanometers, it's two nanometers. Is that just the future to come, Jay? Just as continued innovation? 00:21:29 Speaker 3: Well, if you look at semiconductor manufacturing processes, which is what those three nanometer and two nanometer refer to, and the idea is you can get more and more packed into each chip. That's Moore's law. I'm not sure how much longer that goes on, right? It's Moore's law, this idea that compute gets denser, doubles every two years. That's slowed down considerably. We're still getting advances, but we're having to work harder for each one. And I mean, the Apple chip is remarkable for a lot of reasons, but I think we're having to work ever harder to get those strengths. 00:22:04 Speaker 4: Jay, thank you so much. Jay Goldberg, Seaport Research Partners with us on the semiconductor business. Stay with us. More from Bloomberg Surveillance coming up after this. 00:22:22 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. 00:22:35 Speaker 4: Right to it. And David, I want to set this up off what we heard from Dr. Constam yesterday is he's got a Warsh School and a Waller School. The Warsh School is saying the trend of inflation oil, da-da-da-da-da, is price up. And the Waller School is saying, yeah, but it's all shocks and they're going to go away. Are you in the Worsh camp or the Waller camp? 00:23:00 Speaker 5: Hi, Tom. 00:23:01 Speaker 8: Well, what do you think? I'm in the Waller camp. 00:23:05 Speaker 3: I'm shocked. 00:23:06 Speaker 8: And I knew you would be. 00:23:09 Speaker 9: But, you know, I would say that it's one of the reasons why treasury yields are where they are. I mean, people are talking about, say, the oil price. But WTI today is at the same level it was back on April 30th when the 10-year note was actually south of 4.5%. So I think we've had a couple of watersheds. We had the last set of dot plots on June 17th move from a cut this year to a hike. Now the market's pricing it almost two hikes. So that was a watershed. And then Warsh set the bar really low for a rate hike at Jackson Hole. So a lot of this has been, as far as the treasury market's concerned, a reset in Fed expectations. I mean, is oil breaking out to new highs? No, you could argue it's at the high end of the range. But what I find interesting really about Warsh is that for ages, he was talking about his preferred measure being the Dallas Fed trim mean, And that's running at 2.3% year over year. It's a full percentage point before the headline core PC deflator, which is pretty unusual because they tend historically to run right on top of each other. There's a full percentage point gap. But he went on record as saying before he turned hawkish that his favorite inflation indicator, although he doesn't really trust any of them, is running at 2.3%. And this time last year, it's running at 2.7%. And yet then at Jackson Hole, he laments the fact that the underlying inflation trend isn't moving down. Meanwhile, it's 40 basis points lower than it was this time last year. So it's just, I think, injected a lot of confusion as far as I'm concerned. 00:24:58 Speaker 2: David, you point out in your breakfast note this morning that if they do raise rates today, it'll be the first time since July of 2023. And a lot of folks are asking, will this be one and done or we should be getting ready for maybe two or three? 00:25:14 Speaker 9: Well, I think it's going to be situational. There's some things that are happening that are very important, and one of them is on September 30th when the BEA is going to do a whole revisit and reset and revision on the PC deflator. And my sense is how much will the trend be revised down? That's why I'm so surprised that Kevin Warsh started sounding so hawkish in light of the fact that September 30th is a very important date in terms of what this newly revised deflator data are going to show. And then he establishes these committees, these task forces. 00:26:00 Speaker 8: One of them is on inflation. And we don't know what the results of that yet. 00:26:05 Speaker 4: Were you invited to be on the task force? 00:26:08 Speaker 8: No, I wasn't. 00:26:13 Speaker 9: But that's not a surprise either. David, help me here. I'm not a statistician, but let's just say that it's hard to say right now. The situation is so fluid. I mean, it wasn't that long ago when the market was priced for a rate cut. Now it's priced for two hikes that the Fed actually had it. Back in March, had a rate cut in the stock plot. So it can shift the other way, too, depending on how the economy goes in the next few months. 00:26:40 Speaker 4: David, take us back to Merrill Lynch, page three of a Rosenberg report. People stole them off desks. And there was a column on page three of 400 gazillion inflation parameters. Which inflation series now, David Rosenberg, indicate trend or disinflation? away from the angst that we all feel? 00:27:05 Speaker 8: It's a great question. 00:27:06 Speaker 9: Look, the whole thing comes down to the oil price and whatever spillovers we've had into airfares and delivery services. There's been other idiosyncratic developments that have taken place in financial services, for example, and telecom services. Like I said, those are idiosyncratic. But what am I looking at? Are we seeing monetary inflation, M2, just over 5%, But money velocity peaked in March and is rolling over. I'm not saying true monetary inflation. What about the housing market, right? New home prices are down 1% year over year. Rental rates nationwide are still declining, albeit moderately. There's no inflation out of the housing market. I'm not seeing monetary inflation. And what about the labor market? Where is the inflation in the labor market? When labor costs are running at 1.4% year over year, this time last year they were 2%. This is the sort of stuff you see that deep thinkers... like Greenspan and like Bernanke and like Yellen would be talking about right now. So how are you going to get any sustained inflation from oil when you're not seeing monetary, housing, or labor market inflation? 00:28:15 Speaker 8: In fact, you're seeing disinflation in those three principal areas of the economy. 00:28:19 Speaker 4: David, your shop, you should see the gnomes of Toronto, David Rosenberg's shop. You just published your retail sales takeout. And I'm sorry, David Rosenberg, but Rosenberg Research, this is a really plus, plus, plus. view on inflation, on retail rather, I should say, is nominal GDP going to come down? 00:28:43 Speaker 9: I expect that nominal GDP growth will be decelerating because, you know, notwithstanding the very good retail sales report, it did come off, you know, a negative level. in July, it looks as though real retail sales are running somewhere below 2% annualized for the third quarter, so not too hot, not too cold. But keep in mind that one thing that's going to happen post-November the 3rd, after the midterms, is we get fiscal gridlock that's going to replace six years of unrelenting fiscal stimulus, and that's going to cut in aggregate demand. And I do think that, you know, again, the assumption is what do oil prices do, but I do think that the trend in underlying inflation is going to be coming down So I'm in the camp that thinks that nominal GDP growth is not going to go negative. 00:29:29 Speaker 8: But do I think that if I had to choose. 00:29:31 Speaker 9: Between deceleration or acceleration or just staying the same, I think it's going to decelerate. 00:29:36 Speaker 4: I think we need you on the task force. David Rosenberg of Canada. of Toronto. Obviously, Rosenberg Research. Thank you so much. 00:29:44 Speaker 1: This is the Bloomberg Surveillance Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.