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Speaker 1: We begin with the big issue payrolls, joining us naturalist gasses.

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Speaker 1: Mohammed al Aaron of Queen's College, Cambridge, black rocks are great,

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Speaker 1: a gentlemen, let's get straight to it, Muhammad, you'd take

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Speaker 1: on a payrolls data from thirty one minutes ago.

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Speaker 2: So understand alone, John goldilocks for markets and consistent with

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Speaker 2: a soft landing for the economy. Job creation, yes, slightly

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Speaker 2: less than expected, but nothing drastic, nothing suggesting a collapse

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Speaker 2: in the labor market. Unemployment rate just higher but very

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Speaker 2: varies little. And wage growth slightly down in terms of

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Speaker 2: what we've seen month and month and year on year.

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Speaker 2: So if you take all that, it reinforces what has

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Speaker 2: been a very dramatic week. The only thing I did

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Speaker 2: not like was labor force participation that came down. And

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Speaker 2: as Chair Powell said two days ago, and you saw

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Speaker 2: the reaction of the market, the market just loved it

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Speaker 2: because higher force, high labor force participation is good for growth,

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Speaker 2: for inflation, for starts, for bonds. We need to continue

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Speaker 2: to enhance the supply side, and unfortunately labor force participation

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Speaker 2: came down. But I think on the whole, this is

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Speaker 2: going to be welcomed both by markets and the economy.

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Speaker 1: Well, you said the market loves it, don market loves

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Speaker 1: it with down twelve basis points at a front end

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Speaker 1: on a two year four ready seven rick on a

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Speaker 1: ten year with down twelve to four fifty four.

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Speaker 3: So only a few.

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Speaker 1: Mondays ago we had a five handle on a ten year.

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Speaker 1: We nap back to about four point fifty on a

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Speaker 1: ten year rick. It's not amazing, it's not fantastic. It's

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Speaker 1: not terrible either, It's not brutal. What is it?

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Speaker 4: So so I take a couple of things I agree

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Speaker 4: with there the Muhamad said, around the around the numbers,

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Speaker 4: you know, the one thing, A couple of other points,

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Speaker 4: so I would make relative to that one is. You know,

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Speaker 4: it's interesting, you know we talked about in the show before.

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Speaker 4: If you look at things like healthcare and education another

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Speaker 4: eighty nine thousand jobs positive, there's only one fifty total.

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Speaker 4: You take that out and then take out leisure on hospitality,

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Speaker 4: which means wrong, the cyclical components continue to moderate down.

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Speaker 4: I think that's a really big deal. And then you

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Speaker 4: know the other side of it is, you know, if

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Speaker 4: you take all economic data we've gotten, it's all indicative

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Speaker 4: of an economy that's slowing moderately, very moderately, but slowing.

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Speaker 4: But the labor data has been solid. I mean, look

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Speaker 4: at the Jolts report this week, claims is still solid,

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Speaker 4: the ECI is still solid. Now you're starting to see

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Speaker 4: there is a lag dynamic. Now you're starting to see

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Speaker 4: that for the FED. It's a really big deal now

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Speaker 4: that you're starting to see labor be symmetric to what

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Speaker 4: you're seeing in other parts of the economy. Of the

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Speaker 4: economy and the economic data.

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Speaker 1: You's down big time. Dollar weaker, eurostronger, one of seven

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Speaker 1: for those of you just joining us going into the

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Speaker 1: open and in bout about twenty seven minutes from now,

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Speaker 1: equities ness session high ast positive a half of one percent.

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Speaker 1: Let's get to my mckeview on things. Mike, you've had

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Speaker 1: a third, fourth, fifth, look at this what stands out

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Speaker 1: for you?

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Speaker 5: Well, I pretty much agree with what Rick says. It

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Speaker 5: looks like a general slowing, but it isn't a terrible report.

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Speaker 5: You look at the number one hundred and fifty thousand

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Speaker 5: jobs created, and you have to remember that one hundred

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Speaker 5: that forty eight thousand of them were not counted because

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Speaker 5: of strike activity. Thirty three thousand of those in the

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Speaker 5: auto workers. We'll talk about that in just a second.

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Speaker 5: But you get one hundred and eighty thousand jobs in

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Speaker 5: that case, which is what the estimate was. Net revisions

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Speaker 5: for the last two months. Down one hundred and one

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Speaker 5: thousand doesn't really surprise people because the number was so

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Speaker 5: big last month. Unemployment rate does tick up by a

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Speaker 5: little bit. And here's an interesting thing, the saw rule.

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Speaker 5: You've got to go up half a percent based on

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Speaker 5: a three month rolling average. We're up four tenths Now,

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Speaker 5: are we getting to the point where you might see recession?

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Speaker 3: Yeah, hard to say in this point.

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Speaker 5: In this case, average hourly earning certainly cooperating down to

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Speaker 5: a four point one percent annual rate, which is what

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Speaker 5: the FED wants to see. Now, let's talk about this

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Speaker 5: strike activity. Forty eight one hundred people were found off

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Speaker 5: the job during the month of October, and thirty three

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Speaker 5: thousand of those were auto workers. So what you get

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Speaker 5: when you look at the overall is one hundred and

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Speaker 5: eighty thousand, or one hundred and ninety eight thousand if

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Speaker 5: you put all the strikers back in, And that would

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Speaker 5: have been an interesting question for the markets, and maybe

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Speaker 5: you can ask Rick Muhammad, what would the markets have

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Speaker 5: done if we'd gotten one hundred and eighty or one

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Speaker 5: hundred ninety eight thousand For a headline, Auto manufacturing, as

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Speaker 5: I mentioned, lost thirty three thousand jobs. Manufacturing in total

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Speaker 5: lost thirty five thousand, but take away the autoworkers and

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Speaker 5: it's only a loss of two thousand jobs, And in

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Speaker 5: three of the last four months, manufacturing's lost two thousand jobs. Construction, though,

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Speaker 5: is up private sector jobs only ninety nine thousand. That

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Speaker 5: might be something to keep an eye on as we're

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Speaker 5: looking for slowing. And then, of course something people will

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Speaker 5: debate is we lost two hundred one thousand people from

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Speaker 5: the labor force and three hundred and forty eight thousand

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Speaker 5: in terms of household employment. That's very different than the

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Speaker 5: one point fifty that the Establishment survey found, So people

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Speaker 5: may be debating that. But is this a bad report?

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Speaker 3: Doesn't really look like it.

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Speaker 5: It's bad compared to last month, but overall it just

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Speaker 5: shows the economy slowing a little bit.

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Speaker 1: My McKay, thank you, sir Mi McKay t to summer

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Speaker 1: have it. Let's go there. If we add it back

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Speaker 1: in the auto workers with this conversation this morning be

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Speaker 1: different at all.

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Speaker 2: I don't think so, John, It would have been exactly

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Speaker 2: the same because look at it over time. In fact,

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Speaker 2: the expectation, the consensus number of one eighty had that

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Speaker 2: already adjusted. So I don't think we'd be having a

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Speaker 2: different conversation. I also don't think we'd be having a

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Speaker 2: different conversation about policies. No, we would be having a

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Speaker 2: different conversation. What's going to drive the bond market?

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Speaker 3: Rick? Do you agree?

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Speaker 2: So?

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Speaker 3: I think so?

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Speaker 4: I mean, I you know, I generally agree. Listen, I

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Speaker 4: think the Fed's done. I mean, you know, I think

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Speaker 4: that's it. I mean, we needed to see the pair.

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Speaker 4: You know, everything else is moderating, Andy, the way you

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Speaker 4: look at the manufacturing data, including the earnings reports we

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Speaker 4: got almost across the board, and then obviously you look

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Speaker 4: at it to the extent that which the FED should

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Speaker 4: look at the global conditions. Europe is really slowing. So

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Speaker 4: I think you should assume at this point the feed

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Speaker 4: is done. By the way month on month we were

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Speaker 4: looking at average early earnings and the aggregate hours and

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Speaker 4: so you had flat income growth.

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Speaker 3: I mean, that's you know, for the FED.

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Speaker 4: I think that's a big deal that it corroborates inflation

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Speaker 4: is coming down, that straight line payroll is starting, Labor

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Speaker 4: now is finally starting to come off a bit.

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Speaker 3: So I think it's a big deal. And I think

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Speaker 3: at this point that the FED is.

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Speaker 4: Going to be on hold for a while, and it

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Speaker 4: probably could take December out of your calculation.

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Speaker 1: Mohammad, you heard it. The Fed's done, Rick Reader, Andrew

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Speaker 1: Honholt City also the FED is done. Mohammed, what do

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Speaker 1: you say?

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Speaker 2: I agree with that. Not only do I think the

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Speaker 2: FED is done. I think the FED should be done,

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Speaker 2: and I think those numbers are just confirmation as to

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Speaker 2: why the FED should be done.

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Speaker 1: When you hear lines like this one second paragraph Mohammed

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Speaker 1: in the FED statement tight to financial and credit conditions

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Speaker 1: for households and businesses are likely to weigh on economic activity, hiring,

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Speaker 1: and inflation. And then you look at the move we've

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Speaker 1: had this week forty basis points lower on a ten

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Speaker 1: year Mohammed, do you think we're unwinding some of what

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Speaker 1: the FED stated just a couple of days ago, to

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Speaker 1: the extent that maybe they have to take some of

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Speaker 1: it back.

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Speaker 2: Yeah, I mean, you know they're getting into these vicious cycles,

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Speaker 2: and they've got to be careful. You know. I often

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Speaker 2: think the FED doesn't understand enough how their words are

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Speaker 2: heard and read. But John, there is a bigger point,

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Speaker 2: and you've heard me. I've sat consistently on your show

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Speaker 2: starting over a year ago. There is no reason for

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Speaker 2: the US to fall into recession twenty twenty three. I

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Speaker 2: do worry, however, about twenty twenty four. I do worry

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Speaker 2: about the cumulative effects of all these rate increases. As

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Speaker 2: Rick rightly said, you see weakness happening all over the place,

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Speaker 2: and we hope it's a soft landing, but keep an

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Speaker 2: eye on it. Certainly, the global environment is not going

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Speaker 2: to help us. The global environment will be a headwind

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Speaker 2: to the economy. So I worry that not only are

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Speaker 2: we slowing and the FED is done, I worry that

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Speaker 2: the cumuli effects of everything that's been that has happened

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Speaker 2: may push us down too far.

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Speaker 1: I'm with him, Hahmmed it matters, is why the Fed's done.

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Speaker 1: So Rick, let's go there. You said the FED is done,

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Speaker 1: let's from in the data. We're seeing a slow down

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Speaker 1: in the economy. It's not a bit cool to make

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Speaker 1: We just had close to five percent GDP growth in

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Speaker 1: the third quarter. You kind of see that slowed down,

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Speaker 1: no doubt, Rick, is that sufficient reason to sit here

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Speaker 1: and say I want to buy risk, I want to

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Speaker 1: buy stocks, I want to buy credit.

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Speaker 4: So listen, and this is a pretty unique point in

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Speaker 4: time that the yield you know, we've dropped, like you say,

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Speaker 4: we've dropped treasury rates of drops significantly, ha'd some spread tightening.

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Speaker 4: I still think these yield levels, particularly the front to

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Speaker 4: the belly of the yield curve, you can clip. I mean,

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Speaker 4: buying a quality fixed income a portfolio you can still clip.

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Speaker 4: You know, we put together portfolios there six and a

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Speaker 4: half seven of some letter that we feel really good

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Speaker 4: about that are seven and a half yield without really

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Speaker 4: dipping down the credit spectrum.

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Speaker 3: That is pretty I mean not to me into.

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Speaker 4: If you go on in twenty twenty four and think about, Gosh,

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Speaker 4: I can build a lot of income. I don't have

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Speaker 4: to do it by going down into low quality sovereign

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Speaker 4: or corporate. That's pretty attractive. And then listen, I think

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Speaker 4: equities will do their job. I mean, listen, if you

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Speaker 4: don't go into significantly deep recession, which I really don't

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Speaker 4: think is going to happen. I still think there's a

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Speaker 4: there seven almost seven trillion sitting in money market funds.

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Speaker 4: As long as you believe we're not going to get

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Speaker 4: bludgeon capital won't get bludgeoned by by the central buying

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Speaker 4: continuing to raise rates. Yeah, I think it's a pretty

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Speaker 4: good environment both for equities and examp. We listen, our

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Speaker 4: equity is going to have the sort of incredible performance

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Speaker 4: they had, particularly the big tech seven, magnificent seven. No,

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Speaker 4: I don't think so, but the but I think it

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Speaker 4: can still a pretty good return in some of these

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Speaker 4: risk assets and the yielding assets. You know, if the

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Speaker 4: feds are going to raise rates, you're carried that you

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Speaker 4: having somebody's income producing assets in high quality are pretty

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Speaker 4: darn attractive. And so, by the way, the last few

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Speaker 4: days you've seen some pretty good, pretty good buying of those.

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Speaker 1: Muhammed, we talked about this bond market losing its anchors,

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Speaker 1: the ECB, the BOJ developments in China, the Federal Reserve.

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Speaker 1: All it's taken is a thirty basis point move this

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Speaker 1: week on a ten year and you get the feeing

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Speaker 1: that people are starting to sense that maybe the old

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Speaker 1: world it's just around the corner. Have we fully internalized

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Speaker 1: Mohammed this new regime.

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Speaker 2: John, We have to understand that we're in transition. For

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Speaker 2: two years now, the bond market, in my opinion, has

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Speaker 2: been influenced mainly by central bank policy, whether it's twenty

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Speaker 2: twenty two the Fed and others having to catch up

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Speaker 2: on inflation and hiking way fair aggressively, or this year

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Speaker 2: when markets had to recognize that weight you're going to

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Speaker 2: stay higher for longer. I think the Fed actually and

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Speaker 2: other central banks are going to be less of an influence.

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Speaker 2: And when we look to next year, we're going to

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Speaker 2: be talking about who's buying US treasuries. We're going to

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Speaker 2: be spending a lot of time looking at auctions. It's

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Speaker 2: going to be a different narrative. I must tell you

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Speaker 2: this is a really hard market also to figure out

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Speaker 2: the technicals. For example, and Wick is better placed. If

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Speaker 2: you're an investor in high yield, in forty eight hours,

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Speaker 2: you've seen sixty to seventy basis points of care, we

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Speaker 2: disappear from whatever you were going to buy. Forget about

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Speaker 2: a week. In forty eight hours, John, we have seen

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Speaker 2: a massive spread compression, and we've seen in addition, what's

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Speaker 2: happened to treasury So when the yields moved this much,

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Speaker 2: it's not clear to me whether you attract more buyers

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Speaker 2: or whether people stay on the sideline just wanting this

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Speaker 2: volatility to go down. And there's no one better than

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Speaker 2: Wick to give us a sense for how the technicals

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Speaker 2: are going to play out.

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Speaker 1: And rack the floor is yours.

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Speaker 3: So can I just go ahead? Mom ha said?

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Speaker 4: Next week we're going to get treasury supply of five

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Speaker 4: hundred billion dollars. Next week we're gonna get I mean reiterate, that's,

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Speaker 4: by the way, that's forty gross supply. That's forty percent higher.

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Speaker 4: This week is forty percent higher than this week last year.

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Speaker 4: The numbers staggering, the amount of bills we're going to

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Speaker 4: we're going to have a treasury were funding next week.

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Speaker 4: Let's take the other side of it, the technicals, the

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Speaker 4: in the in the higher market. The whole higher market's

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Speaker 4: trillion and a half dollar market. But we're getting five

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Speaker 4: hundred million of treasuries next week. The whole high markets

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Speaker 4: are trillion and a half and the issuance level is late,

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Speaker 4: to say the least. I've never seen a more technically

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Speaker 4: driven market. By the way, the equity market part of

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Speaker 4: why the technicals error so well supported this year. I

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Speaker 4: think it's eight hundred billion of authorized by back, there's

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Speaker 4: a nineteen billion of IPOs, so yeah, buying, no selling,

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Speaker 4: and the treasury issuing immense amounts of debt. So I mean,

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Speaker 4: in my career, I don't recall a more technically driven

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Speaker 4: market than we're seeing today. And it's part of why

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Speaker 4: some of these markets, single names are so shallow. The

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Speaker 4: depth of these markets is atrocious. It's because it's an

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Speaker 4: incredibly technical market in almost all forms today.

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Speaker 1: Rick, when you say the depth of this market is atrocious,

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Speaker 1: you're also talking about the treasury market and how much

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Speaker 1: of a change is that.

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Speaker 4: So you know, the depth of the treasury market generally

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Speaker 4: is pretty good. It moves around with and an envioment

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Speaker 4: set it the auctions that we're going to get. We

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Speaker 4: are just going to be continued focused on can we

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Speaker 4: keep pumping this much dead into the system on the

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Speaker 4: risk free rate? And that will be how you interpolate

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Speaker 4: every other asset classes.

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Speaker 3: That's that's a tremendous of the depth. Generally. The treasure

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Speaker 3: market's pretty good. It's not as good as it.

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Speaker 4: Normally is, because people are uncertain about whether it's geopolitics,

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Speaker 4: whether it's these big rate moves, the depth of single

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Speaker 4: name equities, the depth of some of the some of

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Speaker 4: the risk markets generally are pretty thin. And you know,

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Speaker 4: a lot of that is geopolitical risks. People don't want

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Speaker 4: to get in the way of it, and a lot

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Speaker 4: of it is just people sitting on their hands for

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Speaker 4: a while, you know, keep by the way here to four.

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Speaker 4: Sitting in money market funds and clipping five plus percent

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Speaker 4: or bills and getting five sixty has been an attractive

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Speaker 4: way to play it. So that's why part of why

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Speaker 4: you've got shallow depth and a lot of other markets.

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Speaker 1: Rick, do you need to see stability and treasuries before

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Speaker 1: you see stability elsewhere?

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Speaker 3: Yeah?

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Speaker 4: I mean, so listen, I think that Well. I think

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Speaker 4: the first thing is the FED. You know, the concept

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Speaker 4: of now that the FED has data that is consistent inflation, employment,

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Speaker 4: that shows this moderation, that's a big deal. So you

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Speaker 4: don't the central bank that is twisting around in terms

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Speaker 4: of the thought process.

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Speaker 3: So I think that's a big deal.

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Speaker 4: And then the others, like you say, is can we

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Speaker 4: keep digesting this much supply of treasuries.

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Speaker 3: Listen, as long as the backdrop.

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Speaker 4: Is pretty good around the data and the FED, I

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Speaker 4: think you'll start to see people push out of money

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Speaker 4: market funds. We saw it, as Kemahmad said, you saw

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Speaker 4: it in the last three or four days. And my

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Speaker 4: senses that will be durable.

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Speaker 3: Is it?

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Speaker 4: Like you said question, Listen, at some point we're gonna

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Speaker 4: have to deal with how much treasury, how much government

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Speaker 4: death there is, and that is that to me, is

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Speaker 4: still a big governor on the risk markets for a while.

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Speaker 1: I have a just fund a word I sense from you,

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Speaker 1: you know, anticipating that stability anytime soon come into twenty

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Speaker 1: twenty four.

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Speaker 2: I'm hoping for it, John, I'm really hoping for it.

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Speaker 2: We've got to recognize that US treasuries are the benchmark

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Speaker 2: not only internally but internationally. And this crazy volatility, I

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Speaker 2: mean seriously crazy crazy volatility means you complicate financial into mediation,

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Speaker 2: you lower the standing of the US globally, and you

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Speaker 2: wish greating something. So I'm really hoping for greatest stability now.

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Speaker 2: It's not going to be just the FED and FED

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Speaker 2: communication has got to improve, It really has got to improve.

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Speaker 2: There's been now several studies showing that part of the

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Speaker 2: volatility we've had is associated with the way things are

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Speaker 2: said by Fed officials. Let's hope that we do get

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Speaker 2: it because it's central to so many things. As Rick

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Speaker 2: Rightley says.

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Speaker 1: Well, they're getting plenty of practice, Mohammad, A lot of

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Speaker 1: opportunities to talk again, Mohammed, Thank you, Mohamed Alarian, Rick

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Speaker 1: read it's some of the very best every pay rolls Friday.

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Speaker 1: I always enjoy your contributions. Jens, thank you.