WEBVTT - Bloomberg Surveillance TV: August 30, 2024 0:00:00.120 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.760 Terminal and the Bloomberg Business app. We begin with the 0:00:36.800 --> 0:00:40.199 big issue. Good news is good news, stocksenting Kira as 0:00:40.320 --> 0:00:43.120 data shows the economy is in seemingly good shape, but 0:00:43.280 --> 0:00:46.720 Eric Friedman of US Banks staying cautious writing solid consumer 0:00:46.800 --> 0:00:50.519 spending and labor market dynamics continue bolstering economic growth and 0:00:50.560 --> 0:00:55.240 corporate earnings, but of both desalrated somewhat slightly constructive market 0:00:55.280 --> 0:00:58.760 signals and near neutral macro signals continue to warrant a 0:00:58.880 --> 0:01:03.240 cautiously optimist bias towards equities. Eric s Withers from More Eric, 0:01:03.440 --> 0:01:05.119 welcome back to the show. It's good to see us, sir. 0:01:05.360 --> 0:01:08.720 As always, you manage client money institutional money totaling I 0:01:08.720 --> 0:01:11.000 think something like five hundred billion. Can you share with 0:01:11.120 --> 0:01:12.960 us how much of that has been in cash, just 0:01:13.000 --> 0:01:15.560 sort of lazy money getting rewarded in money market funds, 0:01:15.680 --> 0:01:17.480 and how much of that has started to be deployed 0:01:17.720 --> 0:01:18.720 over the last month or so. 0:01:19.800 --> 0:01:21.679 Yeah, Jonathan, In a way, it's almost been like this 0:01:21.800 --> 0:01:26.920 nostalgic push from both institutional and wealth clients, just viewing 0:01:26.920 --> 0:01:29.480 that hey, look I can actually get something from the 0:01:29.600 --> 0:01:31.520 shorter end of the curve, so I'm going to stay there. 0:01:31.560 --> 0:01:33.360 And I think that you know, we saw balances go 0:01:33.440 --> 0:01:35.160 up as high as ten ten and a half percent 0:01:35.200 --> 0:01:37.480 in cash, and that's really worked its way down to 0:01:37.520 --> 0:01:39.480 about four and a half or five percent across our 0:01:39.520 --> 0:01:42.800 broad book of business. So that says to us that, look, 0:01:42.880 --> 0:01:46.880 investors are getting this idea of a repricing across the curve. 0:01:47.520 --> 0:01:51.080 And I think that that effective pivot in Jacksonville last 0:01:51.120 --> 0:01:53.400 week was all of the you know, just the consensus 0:01:53.480 --> 0:01:55.160 view that hey, look, we're not just going to have 0:01:55.200 --> 0:01:58.600 that nostalgic view in perpetuity. So we are seeing more 0:01:58.600 --> 0:02:02.480 of a gradual, let's call filtering into other parts of 0:02:02.200 --> 0:02:04.280 the of the marketplace. I thought least that a really 0:02:04.360 --> 0:02:06.840 nice tweet or ex whatever you call it. These days 0:02:07.440 --> 0:02:10.840 regarding flows into into bond funds, we're seeing that. We're 0:02:10.840 --> 0:02:13.840 also seeing though an extension in other parts of the 0:02:14.560 --> 0:02:16.800 of the broader global macro trade. 0:02:16.880 --> 0:02:19.560 So that's been a positive. We think that probably continues 0:02:19.560 --> 0:02:20.480 for the next couple of months. 0:02:20.520 --> 0:02:22.240 I think we just go with POST. I think just 0:02:22.280 --> 0:02:25.320 post just works. But whatever, Eric, when that cash position 0:02:25.360 --> 0:02:27.640 comes down from say ten to four and a half, five, 0:02:28.080 --> 0:02:30.240 how sticky is that four and a half, Because certainly 0:02:30.240 --> 0:02:32.160 people are lining up on this program, Tanning us that 0:02:32.280 --> 0:02:34.000 money is going to be deployed. If it's going to 0:02:34.040 --> 0:02:36.960 cut interest rates. Curve normalizes, you'll see that curve go 0:02:37.040 --> 0:02:39.920 out the curve and into equities nowsewhere beyond fixed income. 0:02:40.160 --> 0:02:43.240 How stick is that four and a half from your perspective, Yeah, 0:02:43.280 --> 0:02:43.639 we think. 0:02:43.480 --> 0:02:44.280 It's pretty sticky. 0:02:44.280 --> 0:02:46.919 I think that the thing that would probably shift views 0:02:47.000 --> 0:02:49.480 out of that, Hey, let's get back into the broader 0:02:50.160 --> 0:02:52.920 macro ecosphere if you would probably be the idea of 0:02:52.960 --> 0:02:54.919 the back end of the curve really ripping high r 0:02:55.000 --> 0:02:57.160 That's something that your team has done a really nice 0:02:57.200 --> 0:02:59.640 job thinking about, like what are the factors would actually 0:02:59.720 --> 0:03:02.960 cause interest rates to go higher on the back end. 0:03:03.080 --> 0:03:06.000 We don't think there's necessarily an immediate catalyst. There's so 0:03:06.160 --> 0:03:08.960 much focus on when does the FED start cutting how 0:03:09.000 --> 0:03:10.919 deep will that be for the next couple of quarters. 0:03:11.320 --> 0:03:13.760 But we do think that what's on the horizon as 0:03:13.760 --> 0:03:17.000 we get hopefully more specific on policy is the risk 0:03:17.040 --> 0:03:19.600 of inflation actually picks back up again. That's not something 0:03:19.600 --> 0:03:22.320 that I think is really being discounted in commodities. It's 0:03:22.360 --> 0:03:24.639 being something that we think is probably worth talking about. 0:03:24.680 --> 0:03:27.160 As we get deeper into the third quarter and early 0:03:27.280 --> 0:03:30.360 early fourth quarter, probably September tenth, when we have the 0:03:30.400 --> 0:03:34.040 first and maybe the only presidential debates, there will hopefully 0:03:34.080 --> 0:03:37.200 be a little more specificity about tax planning and also 0:03:37.200 --> 0:03:39.960 about spending planning. That could be the catalyst sets up 0:03:40.320 --> 0:03:43.600 some of the noise away from FED and the immediacy 0:03:43.600 --> 0:03:46.440 of rate cuts and into more of the let's call 0:03:46.520 --> 0:03:49.440 it the inflationary considerations of policy, which we think is 0:03:49.480 --> 0:03:52.240 an it's an undiscounted risk right now. 0:03:52.440 --> 0:03:54.120 So just to put a bow on this, Eric and 0:03:54.160 --> 0:03:56.280 I think this there are all really interesting points to 0:03:56.360 --> 0:03:58.760 kind of challenge the idea that there's six trillion dollars 0:03:58.800 --> 0:04:01.760 of assets and money market funds just waiting for the 0:04:01.760 --> 0:04:03.400 FED to cut rates and then that's all going to 0:04:03.440 --> 0:04:07.000 be unleashed into longer duration bonds as well as into stocks. 0:04:07.280 --> 0:04:09.080 It sounds like you're kind of challenging that, and you're 0:04:09.120 --> 0:04:11.640 saying a lot of this is very sticky. Actually saw 0:04:11.680 --> 0:04:14.960 the biggest month of inflows into cash f like funds 0:04:15.440 --> 0:04:18.640 over the past a week, going back throughout the entirety 0:04:18.720 --> 0:04:22.560 of this year. You're saying that unless long had yields 0:04:22.560 --> 0:04:25.440 go higher, that's going to probably stay, and that any 0:04:25.560 --> 0:04:27.839 kind of optimism you have has to come from elsewhere. 0:04:27.880 --> 0:04:29.880 Is that Is that a correct characterization? 0:04:30.320 --> 0:04:33.640 Yeah, it's very, very succinct and much more eloquent than 0:04:33.680 --> 0:04:35.320 I put At least I think if you look at 0:04:35.360 --> 0:04:37.839 at fair value, we think for the ten years, probably 0:04:37.839 --> 0:04:39.000 closer like four percent. 0:04:39.040 --> 0:04:40.560 We'd three eighty five right now. 0:04:41.120 --> 0:04:43.839 So in a way, it's almost like duration is too 0:04:43.839 --> 0:04:46.680 expensive to buy more of, but it's not too expensive 0:04:46.720 --> 0:04:47.120 to sell. 0:04:47.160 --> 0:04:48.719 We're kind of in that middle. 0:04:48.440 --> 0:04:52.080 Ground, if you will, where tens, twenties, thirties, probably not 0:04:52.120 --> 0:04:53.920 a lot of issuance. Again, you did a good job 0:04:53.960 --> 0:04:56.960 of covering the auction yesterday if you look at the 0:04:57.000 --> 0:05:01.280 net participation of buyers across most auctions, it has not 0:05:01.320 --> 0:05:03.599 been foreign buyers. So who's going to be the marginal 0:05:03.640 --> 0:05:08.120 buyer of longer term paper. Probably not the usual suspects, 0:05:08.160 --> 0:05:10.240 if you will. So again, with a ten year at 0:05:10.279 --> 0:05:12.280 three eighty five, we think very valigant is closer to 0:05:12.279 --> 0:05:15.120 about four. We're in this position where without a lot 0:05:15.160 --> 0:05:18.680 of definite policy genders from either party, we're in a 0:05:18.680 --> 0:05:21.440 bit of a no man's land, if you will, with 0:05:22.040 --> 0:05:25.039 that trade. So duration we think is probably a little pricey. 0:05:25.520 --> 0:05:29.040 We think that the unwind of cash probably goes elsewhere, 0:05:29.520 --> 0:05:31.440 and that will probably be more of a trickling type 0:05:31.480 --> 0:05:33.840 of phenomenon over the next couple of weeks and months. 0:05:33.920 --> 0:05:36.400 To take this a step further, Michael hartnett Over at 0:05:36.400 --> 0:05:40.560 Bank of America is talking about swapping out commodities in 0:05:40.640 --> 0:05:44.560 place of bonds and the sixty four sixty forty portfolio 0:05:44.640 --> 0:05:46.920 because of some of the concerns that you're talking about. 0:05:47.480 --> 0:05:49.200 I don't know that you're going to say, you know, 0:05:49.360 --> 0:05:52.000 sixty should be all commodities or whatever it would have you. 0:05:52.120 --> 0:05:55.800 But there's a question of whether you start to on 0:05:55.880 --> 0:06:01.359 the margins shift more into inflation hedges in lieu of 0:06:01.400 --> 0:06:02.520 some of the bond holdings. 0:06:03.320 --> 0:06:04.760 Yeah, at least I think it's a great point. 0:06:04.800 --> 0:06:06.880 I mean, if you look at at the considerations on 0:06:06.960 --> 0:06:09.560 commodities when you're in an environment like this, again, we 0:06:09.640 --> 0:06:14.120 run relative performance money, and so you're giving up about 0:06:14.160 --> 0:06:16.720 thirty five or forty basis points a month if you're 0:06:16.760 --> 0:06:19.720 invested in commodities versus bonds. That's a pretty big hurdle 0:06:20.320 --> 0:06:22.920 for an investoral like us to think about. 0:06:22.960 --> 0:06:25.240 Now. One of the things that has really not. 0:06:25.360 --> 0:06:27.920 Worked, in fact, one of the few dislocations and markets 0:06:28.000 --> 0:06:31.000 right now is the petrochemical cycle. If you look at 0:06:31.000 --> 0:06:33.840 what's happening with with things like natural gas, which is 0:06:33.880 --> 0:06:37.200 effectively known as the widow maker for investors because it's 0:06:37.200 --> 0:06:39.960 so hard to trade, and also things like oil and 0:06:40.040 --> 0:06:42.880 other other components of petrochemicals, you know you're in an 0:06:42.960 --> 0:06:46.919 environment where the caring cost of being wrong is extremely high. 0:06:47.000 --> 0:06:49.000 So we don't think that now is the time to 0:06:49.040 --> 0:06:52.040 necessarily be really bold and take a huge amount of 0:06:52.080 --> 0:06:55.400 capital in the commodities. But you can piece into it. Again, 0:06:55.480 --> 0:06:59.520 Golds really work, silvers really work, but industrial metals petro 0:06:59.600 --> 0:07:02.800 chemicals have not worked. So well, that could be interesting. Again, 0:07:02.839 --> 0:07:05.719 we'd be very incremental here, especially as you look for 0:07:05.760 --> 0:07:10.000 optionality on policy risk coming out later this year. But 0:07:10.440 --> 0:07:12.360 again you have to be mindful that carrying costs which 0:07:12.360 --> 0:07:12.880 is quite. 0:07:12.760 --> 0:07:15.240 High, and that's the reason why some of maybe the 0:07:15.280 --> 0:07:18.080 forty percent of fixed income would go toward that, but 0:07:18.160 --> 0:07:20.080 not the whole thing when it comes to the sixty 0:07:20.120 --> 0:07:23.320 percent or maybe even higher. If you are bullish on stocks, 0:07:23.320 --> 0:07:26.440 I am wondering how you are cautious at a time 0:07:26.680 --> 0:07:29.640 where the risks are bifurcated in nature. What does that 0:07:29.720 --> 0:07:33.160 mean in terms of how you're approaching allocations right now? 0:07:33.160 --> 0:07:35.880 There, Yeah, this is a space for you know, we 0:07:35.920 --> 0:07:39.960 are actually modestly overweight domestic equities and overweight equities overall. 0:07:40.000 --> 0:07:43.000 On our Portflois, we expressed that since late April in 0:07:43.120 --> 0:07:45.880 equal weight to S ANDP we were early, which means 0:07:45.880 --> 0:07:48.480 we were wrong. In the last couple of months we've 0:07:48.720 --> 0:07:51.440 been right, which is really again been a benefit. But 0:07:51.560 --> 0:07:53.560 we think this is an environment least when there's just 0:07:53.640 --> 0:07:57.000 not that much dislocation. Again, since you had the low 0:07:57.040 --> 0:07:59.560 print in the S and P at nine thirty one 0:07:59.560 --> 0:08:03.400 am on August fifth, which just spoke to how aggressive 0:08:03.440 --> 0:08:05.960 the position squaring it had to be. There just has 0:08:06.000 --> 0:08:08.920 been such a quick reflectionive move upward across all assets 0:08:08.960 --> 0:08:11.560 that this is about relative value. So again, we like 0:08:11.680 --> 0:08:14.160 stocks over bonds, we like equal weight over ag we 0:08:14.280 --> 0:08:16.960 like equal weight over munis. But you know, you have 0:08:17.040 --> 0:08:19.920 to we think kind of pair off as opposed to 0:08:20.000 --> 0:08:23.080 looking at at large, deep dislocations that just aren't there 0:08:23.080 --> 0:08:23.800 in the marketplace. 0:08:23.880 --> 0:08:26.800 So we're cautious about taking really bold moves. 0:08:26.840 --> 0:08:29.800 We do think that collecting income is an interesting thing 0:08:29.840 --> 0:08:32.920 to do for investors, so things like municipal high yield, 0:08:33.080 --> 0:08:35.720 things like non agency mortgages, even things like reinsurance and 0:08:35.760 --> 0:08:38.280 closed and funds. That's a good way to pick up 0:08:38.360 --> 0:08:41.640 carry and kind of wait for more specificity without taking 0:08:41.720 --> 0:08:43.800 a ton of directional risk, because there really isn't a 0:08:43.800 --> 0:08:47.720 lot out there from a market dislocation standpoint to pick through. 0:08:47.760 --> 0:08:50.840 Besides, again commodities which just haven't done very well. 0:08:50.880 --> 0:08:52.719 Equal Way has certainly been working just to put a 0:08:52.720 --> 0:08:54.760 bow on it all, Eric, we've been asking this question 0:08:54.800 --> 0:08:56.800 a week just to set us out for payros Friday 0:08:56.840 --> 0:08:59.679 this time next week, always just as vulnerable going into 0:08:59.720 --> 0:09:02.240 sept ten to sixth as we work against a walk 0:09:02.240 --> 0:09:03.959 a second or things changed. 0:09:05.080 --> 0:09:07.600 You know, I think things had changed, Jonathan, in the 0:09:07.640 --> 0:09:10.679 sense of again that that the taps on the shoulders 0:09:10.400 --> 0:09:13.360 with the end carried trade positioning, those have already happened. 0:09:13.360 --> 0:09:16.840 Now again, investors have very short memories, and so we're 0:09:16.840 --> 0:09:19.160 not you know, naive enough to think that there isn't 0:09:19.160 --> 0:09:22.319 some potential for being off sides. But again to your point, 0:09:22.360 --> 0:09:25.600 if we saw something beyond consensus, which I think is 0:09:25.600 --> 0:09:28.319 like for a one sixty one sixty five print, if 0:09:28.360 --> 0:09:31.280 you'd have to see something like sub one ten one hundred, 0:09:31.720 --> 0:09:35.400 we think with also a pretty not sharp rise, well 0:09:35.440 --> 0:09:37.640 it's called a headline unemployment rate of north of four 0:09:37.640 --> 0:09:39.559 and a half or you know, four point four or 0:09:39.559 --> 0:09:42.719 four point five percent, that would signal a little more 0:09:42.760 --> 0:09:45.600 weakness than perhaps is priced in. We don't think that's 0:09:45.640 --> 0:09:47.480 our base case. Our economics team is a little more 0:09:47.520 --> 0:09:50.040 bullish on what the print may look like. But you know, 0:09:50.040 --> 0:09:52.640 I think that with positions squaring a little bit tighter 0:09:52.679 --> 0:09:56.440 than where it was back in the August print, you know, 0:09:56.480 --> 0:09:58.760 we're not as vulnerable, but it would take we think, 0:09:58.760 --> 0:10:01.080 a pretty pretty significant downside surprise. 0:10:01.440 --> 0:10:03.080 The drive markets much lower. 0:10:02.840 --> 0:10:05.440 That would be bad news, and that would be bad news. 0:10:05.600 --> 0:10:05.800 Eric. 0:10:05.800 --> 0:10:07.960 Thank you, sir Eric Friedman of US Bank. Have a 0:10:07.960 --> 0:10:20.640 good long weekend. Here's the latest, A little under two 0:10:20.679 --> 0:10:23.280 hours away from a fresh read on the US economy 0:10:23.320 --> 0:10:26.040 with core PCE and personal income and spending data due 0:10:26.040 --> 0:10:28.640 at eight thirty Eastern time. Claudia Salm of New Century 0:10:28.640 --> 0:10:31.520 Advisors writing, none of our output metrics point to a 0:10:31.600 --> 0:10:34.440 growth scare, and none argue against the FED rate cut either. 0:10:34.720 --> 0:10:37.520 With the expansion of the labor supply and higher productivity growth, 0:10:37.640 --> 0:10:41.040 recent growth has not shown signs of an overheating economy. 0:10:41.280 --> 0:10:44.040 The soft landing remains the base case. A good friend 0:10:44.080 --> 0:10:46.040 of this program, good friend of us, Claudia joined us 0:10:46.080 --> 0:10:48.600 now for more. Claudia, welcome back to the program. We 0:10:48.640 --> 0:10:51.079 started this morning in this hour with this quote, and 0:10:51.120 --> 0:10:52.400 I wanted to share it with you. It came from 0:10:52.400 --> 0:10:56.680 the Dollar General CEO on low income sharpers inflations continue 0:10:56.679 --> 0:10:59.520 to negatively impact these households, with more than sixty percent 0:10:59.559 --> 0:11:04.240 claiming they've had to sacrifice some purchasing basic necessities. It's 0:11:04.280 --> 0:11:06.680 difficult to really get a complete read of what's happening 0:11:06.679 --> 0:11:08.719 with the consumer right now. Claudia, if you'll rask and 0:11:08.760 --> 0:11:11.360 I'll ask you, how would you characterize the overall situation 0:11:11.480 --> 0:11:16.000 for consumption and the consumer in America? 0:11:16.320 --> 0:11:19.640 So I think this is what is always difficult with 0:11:19.880 --> 0:11:23.560 us consumers. We have a population that has very different, 0:11:24.000 --> 0:11:28.000 very different income and wealth and needs. And it absolutely 0:11:28.000 --> 0:11:30.680 makes sense that right now we are years into inflation 0:11:30.800 --> 0:11:34.120 that has been higher than normal, and it's going to 0:11:34.240 --> 0:11:37.719 hit people at the bottom hardest. So that's why it's 0:11:37.720 --> 0:11:41.040 so important in particular to keep the expansion going, to 0:11:41.040 --> 0:11:44.000 get the labor market, have the hiring rates, the jobs there. 0:11:44.080 --> 0:11:47.960 These are the consumers that absolutely depend on their paychecks 0:11:48.400 --> 0:11:51.120 to make things work. So overall the picture is good, 0:11:51.120 --> 0:11:53.320 but that does not mean that it's good enough, and 0:11:53.360 --> 0:11:56.120 it doesn't mean that it stays that way, particularly for 0:11:56.240 --> 0:11:57.959 certain groups that are under stress like that. 0:11:58.160 --> 0:11:59.880 I know. That's why one of the reasons why you 0:12:00.040 --> 0:12:02.120 happy with the shift from cham and Pale in the 0:12:02.160 --> 0:12:05.000 speech just last week. A question we've explored through this 0:12:05.040 --> 0:12:07.240 week is how much daylight that might be between him 0:12:07.559 --> 0:12:09.760 and other members of the committee. Do you see this 0:12:09.760 --> 0:12:12.360 whole committee moving in the same direction, or you're starting 0:12:12.400 --> 0:12:15.079 to see some division, some split, some cracks. 0:12:16.559 --> 0:12:20.920 It's important for there to be differences of opinion and 0:12:20.960 --> 0:12:23.360 a robust and a bit among the committee. We should 0:12:23.360 --> 0:12:26.040 be most worried when they're all singing in the same song, right, Like, 0:12:26.080 --> 0:12:29.400 this is a really complicated question. Are we moving in 0:12:29.480 --> 0:12:32.680 the direction the chair Powell laid out? Absolutely? And I 0:12:32.679 --> 0:12:34.640 think you can even see that in the minutes from 0:12:34.679 --> 0:12:37.880 the last meeting before we started, before we got the 0:12:37.960 --> 0:12:41.719 July employment data that was so disconcerting. So I think 0:12:41.760 --> 0:12:44.560 that's where we're headed. I expect we'll continue to get 0:12:44.559 --> 0:12:45.720 good news on inflation. 0:12:45.960 --> 0:12:46.520 That's important. 0:12:46.559 --> 0:12:48.360 That's why interest rates are high is to help get 0:12:48.360 --> 0:12:52.120 inflation down. We're making a lot of progress there, which 0:12:52.200 --> 0:12:56.480 means that can really pay attention to the slowing in 0:12:56.559 --> 0:13:00.240 the labor market and with maximum employment, what you want 0:13:00.360 --> 0:13:03.880 is the most employment possible without creating inflation. If we 0:13:03.920 --> 0:13:06.760 are making progress on the inflation check, they can ease 0:13:06.840 --> 0:13:08.880 up some on the interest rates, and they should ease 0:13:08.960 --> 0:13:12.040 up some on the interest rates so that the labor 0:13:12.080 --> 0:13:14.000 market can kind of get its footing back and bring 0:13:14.040 --> 0:13:16.680 some more of these workers back back online. 0:13:16.840 --> 0:13:19.160 Claudia said, get its footing back. Where do we have 0:13:19.160 --> 0:13:21.800 a sense that the labor market is losing its footing. 0:13:23.440 --> 0:13:26.760 At this point when you see the job games have slowed. 0:13:27.320 --> 0:13:31.320 Most worrisome is the fact that the hiring rate so 0:13:31.400 --> 0:13:33.880 for people who are coming into the labor force, whether 0:13:33.920 --> 0:13:36.880 it's coming out of schooling in their first job or 0:13:37.440 --> 0:13:39.880 or you know that we have a larger immigrant workforce, 0:13:39.920 --> 0:13:42.959 at this point, it is harder for them to find jobs. 0:13:42.960 --> 0:13:45.640 And there's a real disconnect between you know, what the 0:13:45.720 --> 0:13:48.800 hiring rates look like, which are much lower than just 0:13:49.120 --> 0:13:50.840 you know, a couple of years ago, and frankly go 0:13:50.920 --> 0:13:54.160 back to kind of twenty fourteen, twenty fifteen, that wasn't 0:13:54.160 --> 0:13:57.560 a great labor market. So we need people coming in 0:13:57.679 --> 0:14:00.520 to bring their talents. And it's not just about the fact, yes, 0:14:00.600 --> 0:14:03.080 layoff rates or at all time lows that is that 0:14:03.200 --> 0:14:06.320 is excellent. Let's get hiring rates up to all time 0:14:06.400 --> 0:14:09.359 highs again. So that's I think we've got some disconnect 0:14:09.360 --> 0:14:12.120 in terms of who is really getting hit in terms 0:14:12.200 --> 0:14:16.240 of you know, opportunities, and we just you know, kind 0:14:16.240 --> 0:14:18.040 of even it out. We're still coming out of an 0:14:18.040 --> 0:14:21.600 adjustment and there's no reason for further cooling in the 0:14:21.680 --> 0:14:23.920 labor market. We don't need it to get inflation down 0:14:24.120 --> 0:14:26.960 and it's a real loss in terms of our you know, 0:14:27.000 --> 0:14:29.240 what we can do as an economy if we have 0:14:29.360 --> 0:14:30.640 people on the sidelines. 0:14:30.840 --> 0:14:33.440 Claudia, you created the rule that so many people have 0:14:33.600 --> 0:14:36.920 been citing over the past few months from the Fed 0:14:37.080 --> 0:14:40.200 and Beyond the sum rule, which talks about zero point 0:14:40.200 --> 0:14:43.600 five percentage point increase in the unemployment rate over a 0:14:43.640 --> 0:14:46.520 six month period of time. We have seen that. What 0:14:46.600 --> 0:14:49.960 would give you much more pause in this upcoming report 0:14:49.960 --> 0:14:53.360 that we get next Friday, that maybe this is really 0:14:53.360 --> 0:14:56.440 truly a much more quickly deteriorating labor market than we 0:14:56.480 --> 0:14:59.160 otherwise had thought. 0:15:00.120 --> 0:15:02.160 Is true. You one's got to take big picture view. 0:15:02.320 --> 0:15:04.440 A lot of the information we've gotten outside of the 0:15:04.520 --> 0:15:07.840 labor market looks pretty solid, right, So there's no one 0:15:07.920 --> 0:15:10.840 report that's going to be game changing in terms of 0:15:10.840 --> 0:15:14.920 how we think. Clearly, we're looking for the unemployment rate 0:15:14.960 --> 0:15:16.680 to maybe come back a little bit. Some of that 0:15:16.840 --> 0:15:19.400 was a temporary layoffs that you know, a blip in it. 0:15:19.880 --> 0:15:23.440 We want to see the payroll numbers stabilize things that 0:15:23.560 --> 0:15:27.200 look worse or we don't unwind some mutually is going 0:15:27.240 --> 0:15:30.240 to give pause, but really it's watching this. We're looking 0:15:30.280 --> 0:15:33.440 at trends we're looking at contours. There's no magic number 0:15:33.480 --> 0:15:37.320 here with this Sam rule to try to get a 0:15:37.360 --> 0:15:41.520 sense of it really is about the direction, and we 0:15:41.560 --> 0:15:45.720 should expect to see over the next several months, probably 0:15:46.080 --> 0:15:49.680 still some more softening in the labor market. Just because 0:15:50.600 --> 0:15:54.760 Chair Pale or the Fed gets going doesn't mean everything 0:15:54.960 --> 0:15:57.040 changes on a dime, right, Like we really do have 0:15:57.120 --> 0:16:00.000 to see policy change, and then you know understand by 0:16:00.240 --> 0:16:02.600 how things are evolving in the labor market, and you 0:16:02.600 --> 0:16:05.640 know the confidence of businesses to hire is an important 0:16:05.640 --> 0:16:06.520 piece of it as well. 0:16:06.800 --> 0:16:08.640 Claudia, were always lucky to catch up with you. Thanks 0:16:08.680 --> 0:16:11.000 for your time this morning. Clodia Sam of New Century 0:16:11.000 --> 0:16:23.160 Advisors on the labor market, on the consumer and a 0:16:23.240 --> 0:16:28.080 housing Tausei Advisory Group, maintaining and outperform rating following learnings, 0:16:28.320 --> 0:16:31.440 noting solid results and saying a reduced outlook comes there's 0:16:31.480 --> 0:16:34.200 no surprise against moderated expectations. Dan and joins us now 0:16:34.200 --> 0:16:35.880 for more. Good morning to you, Good morning, Thank you 0:16:35.920 --> 0:16:38.400 for busy. How many companies under your coverage you've reported 0:16:38.400 --> 0:16:38.720 this week? 0:16:38.800 --> 0:16:41.160 We had twenty two companies this week. Don't tell me 0:16:41.200 --> 0:16:44.160 about a slow week this week. It was anything but slow. 0:16:44.200 --> 0:16:46.080 Because we now have the pulse of the consumer. 0:16:46.200 --> 0:16:48.280 Let's pick up on that word slow. How slow are 0:16:48.280 --> 0:16:50.120 things things have slowed down. 0:16:50.440 --> 0:16:52.080 You want to call it discerning, you want to call 0:16:52.120 --> 0:16:54.800 it more cautious, whatever it may be. July was a 0:16:54.840 --> 0:16:57.720 week month. August is definitely a little bit better. But 0:16:57.760 --> 0:16:59.680 the planning for the back half of the year has 0:16:59.720 --> 0:17:02.800 taken tick down. And you look at the fourth quarter 0:17:02.800 --> 0:17:06.200 where you have five fewer days between Thanksgiving and Christmas. 0:17:06.520 --> 0:17:09.960 Retailers have to plan cautiously. Some have called out, is 0:17:10.000 --> 0:17:12.720 that a three percent hit to sales in the fourth 0:17:12.800 --> 0:17:15.399 quarter because of those fewer days? It easily could be. 0:17:15.640 --> 0:17:17.600 So this is the confusion that I'm having. You had 0:17:17.680 --> 0:17:20.040 personal consumption that was revised up in the second quarter. 0:17:20.119 --> 0:17:22.919 You have certain companies that are doing just fine. You 0:17:23.000 --> 0:17:27.320 see travel that still is going pretty strong. Where are 0:17:27.320 --> 0:17:28.160 we seeing. 0:17:27.880 --> 0:17:30.880 The bulk of this weakness in a couple places? Look 0:17:30.920 --> 0:17:34.000 what you've seen with luxury spending. Luxury spending is slowed. 0:17:34.000 --> 0:17:37.160 You're not getting the international tourists come over. You're looking 0:17:37.240 --> 0:17:40.439 at discretionary spending in the department stores. Look at some 0:17:40.480 --> 0:17:44.119 of the Macy's numbers, the Dillard's numbers. They're weaker than expected. 0:17:44.320 --> 0:17:47.720 Look at urban outfitters. You have consumers that are intentionally 0:17:47.760 --> 0:17:52.000 spending and innovation is driving demand. It's not everyone. Look 0:17:52.000 --> 0:17:55.119 at Birkenstock, they had very good results, double digit increases. 0:17:55.359 --> 0:17:58.840 Take a look at Abercrombie. The Hollister accelerated. You're still 0:17:58.880 --> 0:18:02.879 seeing strong double gains at the Abercrombie brand. Look at 0:18:02.920 --> 0:18:07.479 footwear deckers on running. You've had innovation and newness drive demand. 0:18:07.680 --> 0:18:10.840 But look what you've also had. The off pricers outperformed 0:18:11.080 --> 0:18:14.639 four percent comps at TJX and ross five percent comps 0:18:14.640 --> 0:18:18.280 at Burlington. Look at Walmart and target the consumers searching 0:18:18.320 --> 0:18:21.080 for value because they don't have the stimulus dollars they 0:18:21.119 --> 0:18:22.000 had a couple of years ago. 0:18:22.080 --> 0:18:24.040 This might be a bridge too far, but is this 0:18:24.119 --> 0:18:27.080 a lot of people who are higher income searching for 0:18:27.119 --> 0:18:32.480 more value but the lower income families still actually really struggling. 0:18:32.480 --> 0:18:33.560 In other words, are. 0:18:33.400 --> 0:18:36.040 We getting a signal from the fact that off price 0:18:36.440 --> 0:18:38.879 places are doing well, but the dollar generals of the 0:18:38.920 --> 0:18:41.240 world are flat out of bax and can't get a break. 0:18:41.560 --> 0:18:43.080 And it's a little bit of everyone. I mean, you 0:18:43.119 --> 0:18:44.960 take a look at the dollar generals, but look who's 0:18:45.000 --> 0:18:47.960 taking share. The Walmart's, the Targets, the Ross, the TJ's, 0:18:48.000 --> 0:18:50.879 the Burlington, they all did well. Some of the dollar 0:18:50.920 --> 0:18:52.920 stores they're cutting back on their raid and new store 0:18:52.960 --> 0:18:56.840 openings five below being one of them, so it's more competitive. 0:18:57.040 --> 0:18:59.760 You take a look yesterday Old Navy and that's search 0:18:59.800 --> 0:19:03.560 for value. It definitely feels what you mentioned. Every income 0:19:03.640 --> 0:19:06.719 level has turned the needle up a little bit un 0:19:06.720 --> 0:19:07.840 searching for more value. 0:19:08.040 --> 0:19:10.320 Let's get alulu, why is it up in the pre market? 0:19:10.400 --> 0:19:11.119 Why is it running? 0:19:11.480 --> 0:19:13.919 The reason why because when you take a look at 0:19:13.960 --> 0:19:17.000 the reset guidance, the stock's already been weak. It's taken 0:19:17.040 --> 0:19:20.359 into account this already, and frankly, the guidance they gave 0:19:20.880 --> 0:19:23.440 wasn't worse than some of the whisper numbers out there. 0:19:23.640 --> 0:19:25.520 So it's beatable, which is what we've heard from other 0:19:25.560 --> 0:19:28.320 analysts as well. Let's talk about problems. Where are they 0:19:28.359 --> 0:19:31.000