WEBVTT - Surveillance: Gauging Growth With Goldman's Hatzius 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance podcast. I'm Tom Keene. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.320 Bloomberg dot com, and of course on the Bloomberg. This 0:00:27.360 --> 0:00:30.120 is an important interview for global Wall Street and frankly 0:00:30.160 --> 0:00:32.159 for those of you who not attached to Wall Street. 0:00:32.560 --> 0:00:35.400 It is of note Jan Hatzi has cut his teeth 0:00:35.400 --> 0:00:39.000 with Bill Dudley Uh years ago at Golden Sachs by 0:00:39.040 --> 0:00:42.480 focusing on the American consumer. He's done that too, great 0:00:42.520 --> 0:00:46.120 acclaim as their chief economists and Haud of Global Economics 0:00:46.159 --> 0:00:51.120 with great, great forecasting skill, always very cautious about the 0:00:51.240 --> 0:00:54.400 dream of higher interest rates, the dream of a greater 0:00:54.560 --> 0:00:58.720 gross domestic product. Dr Hassi has joins us UH this morning. Jan, 0:00:58.800 --> 0:01:01.960 thank you for joining Bloomberg Surveillance. You guys shook the 0:01:01.960 --> 0:01:05.360 world with a markdown yesterday and g d P. If 0:01:05.400 --> 0:01:09.640 we get stimulus from President Biden or a second term 0:01:09.680 --> 0:01:13.880 President Trump in January or February, how will you adjust? 0:01:15.200 --> 0:01:17.880 It's going to be to be with you, and you're 0:01:17.959 --> 0:01:20.840 obviously being way too kind there, but in terms of 0:01:20.880 --> 0:01:25.440 the outlook. We did take down the fourth quarter because 0:01:25.520 --> 0:01:31.200 of the reduced likelihood and very low likelihood now of 0:01:31.360 --> 0:01:34.120 a fiscal deal. We were at six percent quarter on 0:01:34.240 --> 0:01:38.120 quarter annualized. We're now three percent quarter on quarter annualized. 0:01:38.440 --> 0:01:41.840 In fact, a few weeks ago we had considered a 0:01:41.920 --> 0:01:45.640 larger downward revision than this in the event of no 0:01:46.080 --> 0:01:51.480 no deal between Democrats and Republicans, but we ended up 0:01:51.560 --> 0:01:54.560 with a somewhat more moderate downward revision in light of 0:01:54.640 --> 0:01:57.360 the fact that the end of the six hundred dollar 0:01:57.440 --> 0:02:00.200 per week payment to unemployed workers at the end of 0:02:00.280 --> 0:02:04.400 July doesn't seem to have had as large an impact 0:02:04.480 --> 0:02:08.640 on spending as we had we had thought, so it 0:02:08.680 --> 0:02:12.760 seems like the consumer is still holding up reasonably well. 0:02:12.800 --> 0:02:15.800 But nevertheless, a dullwood religion was necessary. Now. If we 0:02:15.840 --> 0:02:19.240 get into two thousand and twenty one and we have 0:02:20.000 --> 0:02:26.600 another fiscal easing under a President Biden with a Senate majority, 0:02:26.880 --> 0:02:30.560 or under under President Trump, then we would we would 0:02:30.639 --> 0:02:34.680 upgrade our numbers, probably because we're not really building in 0:02:34.720 --> 0:02:37.480 a significant amount of stimulus from here. We think there 0:02:37.480 --> 0:02:40.519 are other reasons why the economy may do pretty well 0:02:40.520 --> 0:02:43.240 in two thousand and twenty one, and they related to 0:02:43.680 --> 0:02:47.360 you know, COVID developments and and potentially a vaccine. But 0:02:47.440 --> 0:02:50.280 we're not building the stimulus at the moment, and your 0:02:50.320 --> 0:02:53.560 initial acclaim came off mortgage equity wouldraw and looking at 0:02:53.560 --> 0:02:57.280 the behavior of consumers in the housing boom of OH four, 0:02:57.400 --> 0:03:00.160 oh five and indeed into oh six as well, what 0:03:00.320 --> 0:03:03.760 is the behavior of consumers that you and Goldman Sex 0:03:03.840 --> 0:03:09.239 see right now? I think the main constraint on consumers 0:03:09.480 --> 0:03:13.040 is really the development of the of the pandemic. I mean, 0:03:13.120 --> 0:03:17.040 that's the reason why the economy turned down so sharply 0:03:17.080 --> 0:03:20.280 in March and April. And to the extent that we 0:03:20.400 --> 0:03:24.840 can unwind um these these losses, I think it's going 0:03:24.880 --> 0:03:29.120 to reflect improvements in our ability to cope with the 0:03:29.320 --> 0:03:32.640 with the disease, to reduce infection risk, and ultimately to 0:03:32.720 --> 0:03:34.680 come up with a vaccine. That's at the at the 0:03:34.680 --> 0:03:37.080 top of the list for me. But of course income 0:03:37.320 --> 0:03:41.480 plays an important role as well, and government government programs 0:03:41.480 --> 0:03:45.080 to shore up incomes during the worst part of the pandemic, 0:03:45.120 --> 0:03:49.160 I think we're extremely helpful for me. The most amazing 0:03:49.200 --> 0:03:53.600 statistic of this entire period has been the fact that 0:03:53.880 --> 0:03:57.880 the second quarter saw the biggest decline ever in real 0:03:57.920 --> 0:04:01.680 GDP going back at least two ninety seven, but also 0:04:01.760 --> 0:04:05.920 the biggest increase ever in real household disposible income. That's 0:04:05.960 --> 0:04:09.080 that that was really key, I think in turning around 0:04:09.640 --> 0:04:13.880 the downturn of margin April in subsequent months. But of 0:04:13.880 --> 0:04:16.920 course this story isn't over yet, and right now we've 0:04:16.960 --> 0:04:20.039 seen seen a setback it seems like, and what happens 0:04:20.080 --> 0:04:22.760 to fiscal policy as we go into two thousand twenty 0:04:22.800 --> 0:04:25.680 one is going to be important. Well, yeah, that's the issue. 0:04:25.760 --> 0:04:27.760 And Bob Prince over a Bridgewater has taught to us 0:04:27.760 --> 0:04:30.640 a couple of times about the duration mismatch. This pandemic 0:04:30.640 --> 0:04:32.200 will go on for a whole lot longer than the 0:04:32.240 --> 0:04:35.040 three month band aid that the fiscal authorities keep applying. 0:04:35.400 --> 0:04:37.400 And I just wanted from your perspective, we managed to 0:04:37.480 --> 0:04:42.120 offset that income crisis, that income shock of six months ago. 0:04:42.480 --> 0:04:45.240 Do you think the nature of the slowdown changes if 0:04:45.279 --> 0:04:48.640 the appetites to apply another fiscal band aid isn't there. 0:04:49.560 --> 0:04:52.839 I do. I think there is a very strong case 0:04:52.920 --> 0:04:56.479 for keeping policies both on the monetary side and on 0:04:56.520 --> 0:05:01.120 the fiscal side, very accommodative. I'm generally lee on the 0:05:01.120 --> 0:05:05.040 more optimistic side of the debate as far as the 0:05:05.160 --> 0:05:08.640 economic outlook is concerned these days, and I do think 0:05:08.680 --> 0:05:11.279 that we're making significant headway, but at the same time, 0:05:11.680 --> 0:05:14.760 we're clearly still very far away from full employment. The 0:05:14.800 --> 0:05:18.520 pandemic is definitely not behind us, and the economy still 0:05:18.560 --> 0:05:21.200 needs a lot of support. So on the monetary side, 0:05:21.480 --> 0:05:24.640 I would say, I'm I'm pretty comforted by global central 0:05:24.720 --> 0:05:28.800 banks willingness to continue to provide support. I think there 0:05:28.880 --> 0:05:32.160 is there's a very strong consensus there that the economy 0:05:32.240 --> 0:05:34.520 is still needed. But on the on the fiscal side, 0:05:34.520 --> 0:05:38.280 of course, it's a more political decision, and especially in 0:05:38.360 --> 0:05:42.760 a hyper politicized environment as as as as what we 0:05:42.800 --> 0:05:46.520 have currently given the impending election, it's much easier to 0:05:46.560 --> 0:05:48.960 see a setback, and clearly we have just seen a setback, 0:05:49.000 --> 0:05:52.120 and I think it would be very helpful if we 0:05:52.200 --> 0:05:56.960 could get another round of support. What's interesting about your 0:05:56.960 --> 0:05:59.280 cold though, Yan, as you cunt growth for the end 0:05:59.320 --> 0:06:01.400 of this year, you boost growth for Q two Q 0:06:01.600 --> 0:06:04.760 four at the back end. There's some people, are there 0:06:04.839 --> 0:06:06.880 some economists who believe that if we don't grow quickly 0:06:06.960 --> 0:06:09.919 enough now, the potential growth in the future has to 0:06:09.960 --> 0:06:11.919 come down as well. What is it that you see 0:06:12.080 --> 0:06:13.839 that makes you think that even if growth has to 0:06:13.880 --> 0:06:16.280 come in in the near term, it can pick up 0:06:16.560 --> 0:06:19.680 in the longer term, or at least the medium term. Well, 0:06:19.720 --> 0:06:25.120 I think that if you're restoring less activity in some 0:06:25.240 --> 0:06:29.400 of the sectors that have been hardest hit the consumer 0:06:29.480 --> 0:06:35.560 services sector, sectors like transportation and restaurants and areas like that, 0:06:35.560 --> 0:06:39.080 that does give you somewhat more upside potential further down 0:06:39.120 --> 0:06:43.240 the road. Eventually, I think these sectors are going to normalize, 0:06:43.320 --> 0:06:47.279 especially in an environment where the pandemic is just less 0:06:47.320 --> 0:06:51.320 of a threat, perhaps because a vaccine is available and 0:06:51.320 --> 0:06:53.799 will have been broadly distributed by the middle of next 0:06:54.160 --> 0:06:56.440 next year. So I think it's it's sort of natural 0:06:56.520 --> 0:06:59.880 to offset at least a part of any near charm 0:07:00.080 --> 0:07:03.240 changes in your in your growth forecast with changes in 0:07:03.240 --> 0:07:06.159 the opposite direction, you know, a few quarters down down 0:07:06.200 --> 0:07:09.760 the road. And I think in this case that strikes 0:07:09.840 --> 0:07:12.280 us as the most likely outcome. I'll go. Of course, 0:07:12.320 --> 0:07:15.360 there's a lot of uncertainty about what happens further down 0:07:15.400 --> 0:07:20.000 the road. And I think also that the idea that 0:07:20.040 --> 0:07:22.440 if you have a larger hit in the in the 0:07:22.520 --> 0:07:26.720 near drama that that can weigh on your ability to 0:07:26.760 --> 0:07:30.320 restore activity much further down the road because of scarring effects. 0:07:30.520 --> 0:07:32.480 And there's something to that as well, But I think 0:07:32.480 --> 0:07:35.680 that's that operates on a somewhat longer horizon. Probably. Yeah, 0:07:36.000 --> 0:07:38.240 let's build on this because when you talk about the 0:07:38.280 --> 0:07:41.800 potential for faster growth in two thousand twenty one, even 0:07:41.880 --> 0:07:44.120 as we see slower growth now, that also flies in 0:07:44.120 --> 0:07:47.880 the face of the market's expectation for inflation, when market 0:07:48.200 --> 0:07:51.280 aspect of this week's action has been a steady drip 0:07:51.320 --> 0:07:55.520 drip lower in five to ten year inflation expectations. Do 0:07:55.560 --> 0:07:57.640 you think that the market is wrong and that the 0:07:57.640 --> 0:08:00.400 FED is right in thinking that they can get two 0:08:00.400 --> 0:08:05.080 percent inflation in the near term. Well, the Fed doesn't 0:08:05.120 --> 0:08:08.560 have two percent inflation for at least the next couple 0:08:08.560 --> 0:08:12.280 of years, so it still takes a while, and I 0:08:12.960 --> 0:08:15.600 would agree with that. I think will be below two 0:08:15.600 --> 0:08:21.480 percent for core PC inflation for the next several years. However, 0:08:22.160 --> 0:08:24.600 right now we're at one point two percent for core 0:08:24.640 --> 0:08:28.040 PC inflation, and I think it's significant. Part of the 0:08:28.080 --> 0:08:31.600 gap between that one point two and two is probably 0:08:31.600 --> 0:08:37.800 related to more temporary factors basically distortions or or disruptions 0:08:37.920 --> 0:08:41.640 rather in the most COVID affected sectors. I think that 0:08:41.760 --> 0:08:44.360 is going to unwind over the next year. I think 0:08:44.400 --> 0:08:47.120 that is going to push inflation higher, but you know, 0:08:47.160 --> 0:08:48.920 maybe to the one and a half to one and 0:08:49.000 --> 0:08:52.120 three quarter percent range. So you're still below where you 0:08:52.400 --> 0:08:54.760 would want to be and what would be needed for 0:08:55.000 --> 0:08:58.200 the FED to even think about hiking rates. But but 0:08:58.240 --> 0:08:59.600 I don't think you're going to be quite as low 0:08:59.640 --> 0:09:02.880 as where all now as far as markets are concerned, 0:09:02.920 --> 0:09:06.520 inflation markets in particular, yes, I mean ten ure CPI 0:09:06.679 --> 0:09:10.400 inflation expectations or break even inflation rates of one point 0:09:10.400 --> 0:09:13.640 six percent. That does strike me as as law, and 0:09:13.679 --> 0:09:16.720 it's moved law, as you say, and so I would 0:09:16.760 --> 0:09:20.720 say I'm disagreeing a little bit more strongly with the 0:09:21.360 --> 0:09:24.640 market pricing on on on these break even rates than 0:09:24.679 --> 0:09:28.000 I than I did, say a couple of weeks ago 0:09:28.040 --> 0:09:29.640 when it was a bit higher. I think I think 0:09:29.640 --> 0:09:31.839 that's the upside there. This is crucial, and this is 0:09:31.880 --> 0:09:33.679 one of the most heated debates on Wall Street and 0:09:33.760 --> 0:09:35.880 Black Rock coming out and sort of speaking to the 0:09:35.920 --> 0:09:38.040 debate that John and Tom are having earlier about the 0:09:38.040 --> 0:09:41.120 rejiggering of supply chains in the wake of the de globalization, 0:09:41.160 --> 0:09:44.719 and have that alone could really increase inflation, perhaps more 0:09:44.760 --> 0:09:47.960 than markets are expecting. Why is that not a thesis 0:09:48.000 --> 0:09:50.640 that you follow based on your expectation to one for 0:09:50.760 --> 0:09:53.560 one and a half to less than two percent in 0:09:53.600 --> 0:09:57.520 the near term for inflation. I think it's a factor. 0:09:57.800 --> 0:10:01.480 I mean, I think it's it's going to be potentially 0:10:01.600 --> 0:10:06.080 a factor for the good sector of the economy. But 0:10:06.320 --> 0:10:09.599 I also would say that the service sector is significantly 0:10:09.640 --> 0:10:14.600 more important, accounts for you know, sevent of the basket. 0:10:15.040 --> 0:10:18.679 The good sector only accounts for about thirty percent of 0:10:18.760 --> 0:10:23.680 the basket. And also the potential impact of changes in 0:10:23.720 --> 0:10:26.520 supply chains, I think it's going to be spread over 0:10:26.920 --> 0:10:29.360 a period of time. I don't think it's something that's 0:10:29.360 --> 0:10:32.040 going to have, you know, a huge impact in the 0:10:32.160 --> 0:10:35.480 very short term. But what what does have much bigger 0:10:35.520 --> 0:10:38.200 effects in the very short term, I think is these 0:10:38.640 --> 0:10:42.880 distortions or disruptions that we're seeing in COVID effected sectors, 0:10:43.280 --> 0:10:47.080 which are probably going to unwind more more quickly. So, 0:10:47.640 --> 0:10:49.800 you know, I think both of these factors are probably 0:10:49.920 --> 0:10:53.400 reasons to expect somewhat higher inflation. But but I think 0:10:53.400 --> 0:10:56.520 the disruptions are more important. Yeah, and when did you 0:10:56.640 --> 0:11:02.320 last wear a tie? March? I have not worn since March. 0:11:02.800 --> 0:11:08.520 But I am not wearing just that's I think for 0:11:08.600 --> 0:11:13.120 the pandemic of Goldman sacks. Tom, I don't know what 0:11:13.240 --> 0:11:15.240 I think of this, the new trend on on Wall 0:11:15.320 --> 0:11:18.960 Street have no ties. I like to be a little bit. 0:11:19.320 --> 0:11:21.000 I got a lot of people lobby and you know, 0:11:21.200 --> 0:11:23.440 I'm into the stubble. We see what the no taie 0:11:23.520 --> 0:11:27.000 thing looks like. Look at this and by the way, 0:11:27.400 --> 0:11:30.240 it's not a skinny tie. I learned it's a slim 0:11:30.600 --> 0:11:33.320 is a slim tie? Yeah, it's a slim tie. Just 0:11:33.360 --> 0:11:36.240 have you know it doesn't look great. John, now put 0:11:36.240 --> 0:11:38.400 it back on. Oh really, Tom, we're doing that again. 0:11:38.400 --> 0:11:41.120 We're doing his own radio. I think this this might work, 0:11:41.400 --> 0:11:46.720 taking social and radio like Tom without the bow tie. 0:11:47.480 --> 0:11:49.319 I mean I looked at those things with Tom on 0:11:49.360 --> 0:11:56.959 the weekend, and Tom has a bow tie. It works 0:11:57.000 --> 0:12:00.360 to get to those markets. Let's do the markets, those markets, mhm. 0:12:05.000 --> 0:12:08.000 Let's get a conversation started with Amy wou Silverman, obviously 0:12:08.040 --> 0:12:11.360 Capital markets equity derivative strategist joins us right now, Amy, 0:12:11.640 --> 0:12:14.600 fantastic to catch up with you. This market not too 0:12:14.600 --> 0:12:20.440 concerned about October on November, very preoccupied with December. Why Amy, 0:12:22.200 --> 0:12:25.520 Hey guys, good morning. Yeah, I mean December seems to 0:12:25.640 --> 0:12:28.320 be uh the focus. You know. Part of it is 0:12:28.360 --> 0:12:33.079 there is this December four deadline when the state electors 0:12:33.120 --> 0:12:36.319 are supposed to submit their ballots. And obviously the conversation 0:12:36.360 --> 0:12:38.960 has gone on for quite a while that we're going 0:12:39.000 --> 0:12:42.640 to have a contested election election where logistics and mechanics 0:12:43.040 --> 0:12:45.959 matter a lot um. You know, what one nuance I 0:12:46.000 --> 0:12:49.240 would point to is this is very true for SMPN vix, 0:12:49.400 --> 0:12:53.080 which has been pricing a higher for longer elevated volatility. 0:12:53.520 --> 0:12:56.520 This is not true in naztech, and it's not true 0:12:56.520 --> 0:12:59.679 in Russell. The options term structure that we look at 0:13:00.160 --> 0:13:03.360 is actually lower December than in November. It's flipped in 0:13:03.559 --> 0:13:06.960 SMPN mix. And so I actually think that's pretty interesting 0:13:07.360 --> 0:13:10.160 because the market has been so so much driven by 0:13:10.200 --> 0:13:12.600 this you know, tech versus value tree that that is 0:13:12.640 --> 0:13:15.640 not being reflected in those indices. He me, what portion 0:13:15.720 --> 0:13:19.040 of this pullback, this correction is simply due to a 0:13:19.120 --> 0:13:22.679 bet on weaker economic growth? Does that play in big 0:13:23.000 --> 0:13:27.000 or is it just another small factor? You know, you know, 0:13:27.120 --> 0:13:29.040 I think that definitely. You know, we sort of saw 0:13:29.080 --> 0:13:33.080 the market react to some of the data that came 0:13:33.080 --> 0:13:36.439 out as well as pals comments. Uh. If I put 0:13:36.480 --> 0:13:39.720 add a third layer to that, there have obviously been 0:13:40.000 --> 0:13:46.360 substantial option dynamics at play ever since August and even earlier, 0:13:46.720 --> 0:13:49.440 you know, referring to the soft bank trades as well 0:13:49.480 --> 0:13:52.439 as the retail option buying. So you know, the third 0:13:52.480 --> 0:13:56.120 factor that I see in play is also that there 0:13:56.240 --> 0:13:59.720 is this options dynamic we refer to as gamma, where 0:13:59.760 --> 0:14:02.640 you know, it slices both ways. We saw that exacerbate 0:14:02.679 --> 0:14:05.680 the move up and we are seeing it exacerbate the 0:14:05.720 --> 0:14:09.720 move down. Uh. In you know, look in mainly tech names. 0:14:09.760 --> 0:14:12.440 But but as goes tech as goes the market because 0:14:12.440 --> 0:14:14.840 of the heavy weighting that it has had in the market. 0:14:15.360 --> 0:14:18.520 UM in recent times, you talk about tech and you 0:14:18.559 --> 0:14:22.600 talk about how volatility has largely been focused on what 0:14:22.680 --> 0:14:24.960 you call the fang a man stocks. I call them 0:14:24.960 --> 0:14:28.640 the fan mag stocks. Pick your poison. How much risk 0:14:28.800 --> 0:14:30.920 is there too big tech if we do get a 0:14:31.000 --> 0:14:34.320 vaccine in other words, do they potentially suffer losses or 0:14:34.400 --> 0:14:39.040 just underperform? Versus the rest of the index. Yeah, it's 0:14:39.280 --> 0:14:43.160 kind of a million dollar question. Um, so far it 0:14:43.200 --> 0:14:46.920 has been very resilient. One keep point that we look 0:14:47.000 --> 0:14:49.800 at the kind of look as a litmus test too 0:14:49.920 --> 0:14:54.400 to that answer is how an options, uh call option 0:14:54.520 --> 0:14:57.960 prices way over put option prices, So those have all 0:14:58.000 --> 0:15:01.200 been inverted through the entire some are meeting people are 0:15:01.240 --> 0:15:04.280 so exuberant on tech. We've actually now started to see 0:15:04.320 --> 0:15:08.240 that the change in particular in in the fangnag names 0:15:08.320 --> 0:15:10.520 or what have you. And so that makes me nervous. 0:15:10.560 --> 0:15:13.119 That makes me think that if there is a reversion, 0:15:13.280 --> 0:15:16.240 it'll come hard. Let's go back to John Maggie one 0:15:16.280 --> 0:15:20.240 oh one, Amy, Well, we're just very simply here are 0:15:20.240 --> 0:15:22.800 we seeing a breakdown of a bull market? Can you 0:15:22.880 --> 0:15:27.880 call intermediate bear? Are you talking out right there? So 0:15:28.480 --> 0:15:32.360 you know, from our perspective, when we look at how 0:15:32.400 --> 0:15:35.880 the options went from complete exuberance and now I would 0:15:35.920 --> 0:15:39.760 say back to average levels, the the investors who are 0:15:39.760 --> 0:15:43.160 expressing their views are starting to show more bare sentiment. 0:15:43.280 --> 0:15:45.920 And then obviously that's sort of on a very short 0:15:46.000 --> 0:15:48.560 term basis. So everything we look at in terms of 0:15:49.040 --> 0:15:51.480 the option prices are always sort of one month to 0:15:51.600 --> 0:15:54.040 three months. But if you look at those, we went 0:15:54.200 --> 0:15:58.240 from peak exuberance to historical relationships we never saw in 0:15:58.360 --> 0:16:01.400 terms of how bullish they were, to now back to 0:16:01.960 --> 0:16:05.600 even slightly varish. And so as we head into an 0:16:05.600 --> 0:16:09.400 election and we get to focus more on index trades 0:16:09.480 --> 0:16:12.080 as opposed to single stock trades, I can see that, 0:16:12.200 --> 0:16:14.360 you know, turning us into an environment where people are 0:16:14.400 --> 0:16:16.640 much more focused on hedging and focus on the downside. 0:16:16.680 --> 0:16:20.080 Rusk Am he grant to catch up as old whites, 0:16:20.160 --> 0:16:26.880 especially this morning Amy with Silvan that of obviously Jim 0:16:26.880 --> 0:16:30.440 Paulson has huge advantage. He's not in the three zip 0:16:30.480 --> 0:16:34.520 codes of Wall Street, of the city in London, Jim 0:16:34.560 --> 0:16:37.480 Paulson in Minnesota with the Loo loose old group. Jim, 0:16:37.480 --> 0:16:39.800 how have you changed your opinion in the last two 0:16:39.800 --> 0:16:45.080 weeks and this this chaos we're in, Well, I I guess, 0:16:45.080 --> 0:16:47.120 you know, I kind of look at it. You know, 0:16:47.400 --> 0:16:49.960 with the ferociousness of the rally off the march los, 0:16:50.240 --> 0:16:52.840 you knew that we're going to get correction at some 0:16:52.960 --> 0:16:57.800 point and um and generally corrections do their job. They 0:16:57.920 --> 0:17:02.400 scare you a lot. And uh, I agree this this 0:17:02.400 --> 0:17:06.000 could have further to go. I really don't know, um, 0:17:06.119 --> 0:17:09.640 but UM, I mean, it wouldn't surprise me if we, 0:17:10.000 --> 0:17:12.920 you know, we do fall from high to some point. 0:17:13.200 --> 0:17:16.000 It doesn't have to, but it certainly could. But I 0:17:16.359 --> 0:17:19.879 guess for me, I think there's quite a bit of 0:17:20.600 --> 0:17:26.800 fundamental economic momentum here coming into this, and I think 0:17:26.840 --> 0:17:29.879 it's likely to continue to carry into the fourth quarter 0:17:29.960 --> 0:17:33.880 and beyond UM and I think that's gonna that's gonna 0:17:33.880 --> 0:17:38.120 eventually turn this correction a little bit. And we're growing 0:17:38.640 --> 0:17:42.040 north in the current quarter in real GDP, maybe the 0:17:42.080 --> 0:17:47.160 fastest quarterly growth grade ever and UM expectations right now 0:17:47.760 --> 0:17:51.200 private sector economists for the fourth quarter for red off 0:17:51.200 --> 0:17:55.720 Bloomberg or five, which is really strong. I think it 0:17:55.800 --> 0:17:57.639 might even come in stronger than that if you just 0:17:57.720 --> 0:18:01.320 look at look at housing yesterday, look at the Bloomberg 0:18:01.520 --> 0:18:06.359 consumer Comfort index that came out yesterday. Um. That is 0:18:06.880 --> 0:18:10.240 it's interesting that Bloomberg consumer comfort is in the upper 0:18:10.320 --> 0:18:14.480 courttile of its history right now. But John Ferrell, this 0:18:14.560 --> 0:18:17.159 is Jim is so good to bring this up as well. 0:18:17.440 --> 0:18:20.280 You know what, John, I don't see up thirty in 0:18:20.320 --> 0:18:21.879 the streets of New York. Do you see it on 0:18:21.920 --> 0:18:24.960 the streets of London. Not really, but there is a 0:18:24.960 --> 0:18:26.840 mechanical point to be my head tell him you go 0:18:26.880 --> 0:18:29.560 from shutdown to reopening the light selfie, switch it back 0:18:29.560 --> 0:18:32.640 on again. There's a mechanical improvement. It's just there. It's 0:18:32.680 --> 0:18:34.919 just basic maths. And I just want to Jim, what 0:18:35.000 --> 0:18:37.720 are you saying that's mechanical just to bounce back from 0:18:37.720 --> 0:18:40.240 being shut down to reopening and what are you saying 0:18:40.240 --> 0:18:43.120 that it's self sustaining. You use the word momentum where 0:18:43.160 --> 0:18:46.920 you expecting the momentum to come from. I totally agree 0:18:46.960 --> 0:18:49.240 with you, Tom, there's a big chunk of this, you know, 0:18:49.359 --> 0:18:52.280 bounce that we've had was just turning the switch off 0:18:52.320 --> 0:18:54.600 and then back on. There's no doubt of that. But 0:18:54.680 --> 0:18:57.639 I do think that turn switch back on creates a 0:18:57.720 --> 0:19:01.159 two momentum. I mean, we had a lot more fear 0:19:01.840 --> 0:19:06.240 when we had to switch off among consumers, among businesses, um, 0:19:06.320 --> 0:19:09.840 and that fear caused them to pull in, spending even more, 0:19:10.200 --> 0:19:14.760 costs even harder. That fear is less now, in part 0:19:14.840 --> 0:19:18.199 because we allowed some things to come back on, so 0:19:18.240 --> 0:19:21.560 there's greater confidence. You know, we still have an eight 0:19:22.440 --> 0:19:27.680 savings rate among the household sector. Let's say they bring 0:19:27.760 --> 0:19:31.439 that back down to to twelve per cent or something 0:19:31.920 --> 0:19:35.200 over over the next few quarters or something like that. 0:19:35.480 --> 0:19:38.240 If they do that, that would be that would equate 0:19:38.320 --> 0:19:42.120 to dramatic growth in personal consumption expentures just that alone, 0:19:42.640 --> 0:19:44.359 and all you really need to do that is just 0:19:44.440 --> 0:19:47.760 to generate some confidence. The other thing I'd like to 0:19:47.800 --> 0:19:51.399 point out is we've already dumped a lot of stimulus 0:19:51.440 --> 0:19:54.520 on this thing, and most of that really hasn't started 0:19:54.520 --> 0:19:58.360 to help yet, because it takes about a year historically 0:19:58.440 --> 0:20:02.800 before it starts to really show benefits in the economy. 0:20:02.880 --> 0:20:05.359 But as we go into the fourth quarter into the 0:20:05.400 --> 0:20:08.399 first quarter, that one year leg is going to be 0:20:08.440 --> 0:20:11.720 mad and I think that will we'll start to improve 0:20:11.760 --> 0:20:16.760 economic conditions. Look at the impact that a lower mortgage 0:20:16.880 --> 0:20:21.080 rate has had on housing activity and auto sales in 0:20:21.119 --> 0:20:26.440 this country. Imagine what the impact of money growth fifteen 0:20:27.440 --> 0:20:30.000 fiscal spending, which I don't even think showed up yet, 0:20:30.400 --> 0:20:33.240 might have starting in the fourth, first and second quarter 0:20:33.320 --> 0:20:36.240 of the coming year. Jim, perhaps the phrase of the 0:20:36.280 --> 0:20:40.240 week is a healthy correction. Pretty Much almost every note 0:20:40.280 --> 0:20:43.600 that I've read has somewhere around healthy correction in it. 0:20:43.800 --> 0:20:46.280 Yours included and you also say it won't be the last, 0:20:46.440 --> 0:20:49.399 and you reiterate the idea that we're in this bull market. 0:20:49.560 --> 0:20:53.240 You did say, however, say we are refreshing valuations. What 0:20:53.320 --> 0:20:57.639 does that mean? Yeah, you know, at leasta, I concur 0:20:57.760 --> 0:21:00.959 a little bit with your healthy correction. That's why I 0:21:01.000 --> 0:21:04.160 think maybe we have to have a moment deeper correction yet, 0:21:04.560 --> 0:21:08.320 because even myself, I'm just not scared enough yet. So 0:21:08.760 --> 0:21:11.600 maybe maybe it has to further, and maybe guys like 0:21:11.680 --> 0:21:13.919 Meal quit say a healthy correction by the time it 0:21:14.000 --> 0:21:16.480 actually is getting closer to the end. I kind of 0:21:16.520 --> 0:21:19.720 concurred with that. You know what, I think there's a 0:21:20.359 --> 0:21:24.960 What I mean by refreshing regulations UM is that that 0:21:25.280 --> 0:21:29.480 we're bringing down the price of the market UM at 0:21:29.520 --> 0:21:33.680 the same time that we're starting to bring back up earnings. 0:21:34.040 --> 0:21:38.720 I mean, earnings estimates are climbing UM nearly everywhere, nearly 0:21:38.800 --> 0:21:44.720 crossed all sectors UM. And right now you've got uh 0:21:45.080 --> 0:21:51.760 SMP roughly and you've got one one year forward earnings 0:21:51.960 --> 0:21:55.120 estimate from the street right now. You know, that puts 0:21:55.160 --> 0:21:58.560 it back down I think around two times or something. 0:21:59.400 --> 0:22:01.600 It was a lot higher not that long ago. So 0:22:01.680 --> 0:22:05.680 we are we aren't doing some damage evaluations and as 0:22:05.720 --> 0:22:08.879 we as we go along further, I suspect those earnings 0:22:08.960 --> 0:22:11.040 estiments are going to come up even more. So the 0:22:11.119 --> 0:22:13.640 market might look even cheaper by the end of this year, 0:22:13.680 --> 0:22:15.480 even if it goes higher in the media. In the 0:22:18.440 --> 0:22:20.840 Jim right a half of me said Jim Paulson of 0:22:21.000 --> 0:22:29.560 Luthlthwayden right now on our politics, it is good to 0:22:29.600 --> 0:22:32.320 go abroad to get a different view. Julie Norman is 0:22:32.320 --> 0:22:35.960 at the University College London, or political science professor with 0:22:36.200 --> 0:22:40.800 wonderful credit on the Levant and the Palestinian and Israeli experience, 0:22:40.880 --> 0:22:44.560 but she joins us now on the Battle Royal in Washington. 0:22:44.880 --> 0:22:50.360 Julie Norman calculate this weekend is the two candidates adapt 0:22:50.440 --> 0:22:56.240 and adjust to a debate four days away right on. 0:22:56.480 --> 0:22:58.840 So there's obviously a lot that's going to be going 0:22:58.880 --> 0:23:02.960 on this weekend. We expect that tomorrow that Trump's will 0:23:03.000 --> 0:23:06.439 announce the next Supreme Court nominee and that will of 0:23:06.480 --> 0:23:09.080 course just set off a really quite part is in 0:23:09.200 --> 0:23:12.760 Battle in Washington moving into the week of the debate, 0:23:12.920 --> 0:23:16.760 with really both parties trying to double down on a 0:23:16.840 --> 0:23:19.800 lot of the key issues that will resonate for their voters. 0:23:19.840 --> 0:23:22.040 A lot of that, of course, coming on the backdrop 0:23:22.160 --> 0:23:25.960 of Trump's recent comments this week about the potential non 0:23:26.000 --> 0:23:28.560 peaceful transport of power after the election. So all that's 0:23:28.560 --> 0:23:31.200 going to be on the table going into the debate. Wait, 0:23:31.640 --> 0:23:35.639 going after the undecided, forget about changing somebody's vote, just 0:23:35.760 --> 0:23:40.439 going after the undecided versus getting the turnout of your base. 0:23:40.760 --> 0:23:45.719 Wait that balance right now? Yeah, So this is going 0:23:45.760 --> 0:23:49.680 to be a challenge for both parties right now Trump's 0:23:49.680 --> 0:23:52.840 and continuously Trump has had a very strong following of 0:23:52.920 --> 0:23:55.640 his base, but trying to get other people beyond that 0:23:55.680 --> 0:23:59.119 into his coalition has been a challenge. But again, the 0:23:59.160 --> 0:24:02.520