1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,880 Speaker 1: at Bloomberg dot com slash podcast. Let's get these uh 7 00:00:23,160 --> 00:00:26,239 Speaker 1: some handle, get a handle on these markets, which they 8 00:00:26,239 --> 00:00:29,600 Speaker 1: continue to rip. The SMP five up about one point 9 00:00:29,680 --> 00:00:33,400 Speaker 1: five percent, NASDAC even stronger, up point one point nine 10 00:00:33,760 --> 00:00:35,680 Speaker 1: per cents on the back of that better than expected 11 00:00:35,680 --> 00:00:39,560 Speaker 1: inflation data. Let's check in with Vince Signarolla, global macro 12 00:00:39,680 --> 00:00:43,640 Speaker 1: strategist with Bloomberg News. Vince, I mean, you know, we 13 00:00:43,720 --> 00:00:46,640 Speaker 1: had really good jobs numbers last week. We got better 14 00:00:46,680 --> 00:00:50,000 Speaker 1: than expected inflation here. The White House is rightfully so 15 00:00:50,120 --> 00:00:52,839 Speaker 1: taking victory lapse here. What do you make of it 16 00:00:52,880 --> 00:00:55,400 Speaker 1: and what do you make of the markets response? Well, 17 00:00:55,440 --> 00:00:58,400 Speaker 1: I think the market response is somewhat appropriate. We're seeing 18 00:00:58,400 --> 00:00:59,920 Speaker 1: a couple of things. We're always been seeing a bit 19 00:00:59,920 --> 00:01:02,480 Speaker 1: of risk with seeing energy prices coming off as inflation 20 00:01:02,560 --> 00:01:05,560 Speaker 1: balls over. Interesting thing is I'm talking to some traders 21 00:01:05,560 --> 00:01:08,960 Speaker 1: this morning. They're a little confused about the treasury market 22 00:01:08,959 --> 00:01:12,200 Speaker 1: move is selling in the in the back end. But 23 00:01:12,319 --> 00:01:15,120 Speaker 1: what that represents is there's been such a big trade 24 00:01:15,160 --> 00:01:18,320 Speaker 1: on inflation being sort of just here for the next 25 00:01:18,360 --> 00:01:20,360 Speaker 1: six maybe twelve months, and so there's been a lot 26 00:01:20,400 --> 00:01:22,760 Speaker 1: of selling in the front end um buying in the 27 00:01:22,800 --> 00:01:25,360 Speaker 1: back end. The traders now reversing that trade, and so 28 00:01:25,440 --> 00:01:29,720 Speaker 1: we're seeing some widening, uh narrowing of the inversion in 29 00:01:29,760 --> 00:01:32,839 Speaker 1: the two tents. And that's what's driving that I would 30 00:01:32,840 --> 00:01:34,680 Speaker 1: like to point out, and you know, I've been beating 31 00:01:34,680 --> 00:01:36,880 Speaker 1: this room for a while now about how the FITS 32 00:01:36,920 --> 00:01:41,000 Speaker 1: forecasts been terrible and that this is a transient situation 33 00:01:41,120 --> 00:01:44,240 Speaker 1: and they're just just rushing into something and not giving 34 00:01:44,240 --> 00:01:48,440 Speaker 1: the economy a chance to catch up from the pandemic 35 00:01:48,520 --> 00:01:52,680 Speaker 1: confusion of a huge amount of money and keeping weights 36 00:01:53,120 --> 00:01:55,360 Speaker 1: basically far too well for too long with a higher 37 00:01:55,400 --> 00:01:58,320 Speaker 1: balance sheet. The ft is actually operating. If you look 38 00:01:58,320 --> 00:02:01,960 Speaker 1: at this situation eight to this to the Fed being 39 00:02:02,000 --> 00:02:05,760 Speaker 1: like a Fortune five hundred company. They're trying to match 40 00:02:06,920 --> 00:02:10,720 Speaker 1: quarterly estimates to what the market is expecting and they 41 00:02:10,880 --> 00:02:12,960 Speaker 1: keep missing the mark. And for the Fed, it's an 42 00:02:12,960 --> 00:02:15,359 Speaker 1: even worst case basis, because they're being held accountable for 43 00:02:15,480 --> 00:02:18,639 Speaker 1: monthly numbers, and so we keep hearing from them. Don't 44 00:02:18,680 --> 00:02:21,239 Speaker 1: watch monthly numbers. Don't watch monthly numbers. We've got a 45 00:02:21,320 --> 00:02:23,600 Speaker 1: high jobs report. What do they do? Oh, we have 46 00:02:23,639 --> 00:02:26,280 Speaker 1: to say higher for longer because of higher jobs. They 47 00:02:26,520 --> 00:02:29,080 Speaker 1: they're just not incredible. I I honestly just don't know 48 00:02:29,160 --> 00:02:32,080 Speaker 1: why people keep trying to trade what the FED says 49 00:02:32,200 --> 00:02:35,560 Speaker 1: and losing money by by that. For for example, when 50 00:02:36,480 --> 00:02:39,120 Speaker 1: it's it's insane. I mean, there are academics who've never 51 00:02:39,160 --> 00:02:43,280 Speaker 1: said the word done but bence. So you don't expect 52 00:02:43,360 --> 00:02:47,400 Speaker 1: the FED to stick to a vulcal like um rate 53 00:02:47,600 --> 00:02:51,120 Speaker 1: rise regime. You think at some point this Fed is 54 00:02:51,160 --> 00:02:54,600 Speaker 1: going to turn around and start cutting rates. I don't 55 00:02:54,639 --> 00:02:56,840 Speaker 1: know that they're going to cut rates per se, because 56 00:02:56,880 --> 00:03:00,280 Speaker 1: we still have inflation a long long way away from 57 00:03:00,320 --> 00:03:02,000 Speaker 1: where they want to see it, so there's no real 58 00:03:02,040 --> 00:03:04,800 Speaker 1: reason to cut rates. But they really need to stop 59 00:03:05,080 --> 00:03:07,840 Speaker 1: and give the monetary policy a chance to work its 60 00:03:07,880 --> 00:03:10,480 Speaker 1: way through the system. Monetary policy. But we're only at 61 00:03:10,480 --> 00:03:13,440 Speaker 1: two and a half percent, like that's still still nothing, 62 00:03:14,320 --> 00:03:16,520 Speaker 1: of course, But why is everybody in such a hurry 63 00:03:16,520 --> 00:03:19,880 Speaker 1: to get rates to five percent. Monetary policy doesn't react 64 00:03:19,880 --> 00:03:22,919 Speaker 1: on a daily basis. I saw a tweet from someone 65 00:03:22,960 --> 00:03:25,160 Speaker 1: today who said, oh, my cup of coffee went down 66 00:03:25,160 --> 00:03:29,560 Speaker 1: for me. I mean prices to come I mean to 67 00:03:29,639 --> 00:03:32,240 Speaker 1: expect prices to come down. Paul checks the gas prices 68 00:03:32,360 --> 00:03:36,160 Speaker 1: every single day, plus he checks regular and we all 69 00:03:36,160 --> 00:03:39,400 Speaker 1: know that he tanks premium. So yeah, like see that's 70 00:03:39,480 --> 00:03:41,600 Speaker 1: I feel sorry for those out there on the premium scale. 71 00:03:41,600 --> 00:03:43,680 Speaker 1: But but but but so so that we've heard a 72 00:03:43,680 --> 00:03:47,200 Speaker 1: lot of FED speakers talk about the importance of front loading. 73 00:03:47,280 --> 00:03:50,000 Speaker 1: I don't personally know what it is why they want to, 74 00:03:50,880 --> 00:03:54,000 Speaker 1: but because they think that inflation is going to go 75 00:03:54,240 --> 00:03:58,280 Speaker 1: to and stay there, they could not be more dead along. 76 00:03:58,480 --> 00:04:01,119 Speaker 1: And I'll tell you exactly why and why this isn't 77 00:04:01,120 --> 00:04:02,760 Speaker 1: the seventies. And if I hear at one boy thought, 78 00:04:02,760 --> 00:04:05,839 Speaker 1: I'm gonna throw a textbook at so much. If you 79 00:04:05,920 --> 00:04:09,960 Speaker 1: have wage games that are not above capital letters above 80 00:04:10,080 --> 00:04:14,360 Speaker 1: the inflation rate, you cannot have sustaining inflation. The consumer 81 00:04:14,520 --> 00:04:18,040 Speaker 1: will pull back. They have absolutely no choice. I can't 82 00:04:18,080 --> 00:04:22,360 Speaker 1: spend what you don't have. Savings of creator disposable income 83 00:04:22,440 --> 00:04:26,159 Speaker 1: is creator wages are to keep your place with inflation revolving. 84 00:04:26,200 --> 00:04:28,479 Speaker 1: Credit is the highest that's been in two thousand eight, 85 00:04:28,520 --> 00:04:31,880 Speaker 1: and that's credit card. That where does the Fed think 86 00:04:32,000 --> 00:04:34,640 Speaker 1: this money is coming from. It's certainly ain't coming to 87 00:04:34,720 --> 00:04:38,599 Speaker 1: my next pay hike from Bloomberg. Well, I mean, well, 88 00:04:38,680 --> 00:04:40,960 Speaker 1: yesterday we watched the President sign a bill that's going 89 00:04:41,000 --> 00:04:45,520 Speaker 1: to give fifty two billion dollars in subsidies to chip makers. 90 00:04:45,560 --> 00:04:49,560 Speaker 1: Those are private companies, you know, owned by shareholders, not 91 00:04:49,720 --> 00:04:52,800 Speaker 1: government companies. Um, so he's gonna give them the biggest 92 00:04:52,839 --> 00:04:55,720 Speaker 1: subsidy boost we've ever seen the federal government hand out. 93 00:04:56,360 --> 00:04:58,920 Speaker 1: That's one place the money can come from. Two things 94 00:04:58,960 --> 00:05:01,520 Speaker 1: about that build Number One, they've got more chips than 95 00:05:01,560 --> 00:05:03,240 Speaker 1: they know what to do with right now because they 96 00:05:03,279 --> 00:05:08,400 Speaker 1: frontloaded lovely phrase. They're buying from Taiwan because they thought 97 00:05:08,400 --> 00:05:11,279 Speaker 1: there was going to be this indefinite shortage. The US 98 00:05:11,320 --> 00:05:14,479 Speaker 1: companies in the chip industry are are are They still 99 00:05:14,520 --> 00:05:17,400 Speaker 1: get their chips from Taiwan and then they reperp them 100 00:05:17,400 --> 00:05:20,640 Speaker 1: through their customers there, so their end units users are 101 00:05:20,680 --> 00:05:23,240 Speaker 1: still paying hot crisis. The subsidies are going to be 102 00:05:23,240 --> 00:05:26,880 Speaker 1: a future situation, which will of course help curb inflation 103 00:05:26,920 --> 00:05:29,320 Speaker 1: because that will bring prices down. The other part of 104 00:05:29,320 --> 00:05:32,080 Speaker 1: that bill, which I love, which was the e V makers. 105 00:05:33,520 --> 00:05:37,640 Speaker 1: Auto analysts are basically saying, hardly any cars are going 106 00:05:37,680 --> 00:05:39,800 Speaker 1: to meet the standards as the government has put in 107 00:05:39,839 --> 00:05:42,880 Speaker 1: that bill to meet the credit. Well, I don't I 108 00:05:42,880 --> 00:05:46,360 Speaker 1: don't know, Vince. I mean, they're extending a credit or 109 00:05:46,400 --> 00:05:50,560 Speaker 1: giving a broader credit to automakers or two to consumers 110 00:05:50,640 --> 00:05:54,479 Speaker 1: rather um to buy e vs that are already sold 111 00:05:54,480 --> 00:05:57,159 Speaker 1: out with a two year waiting list. So they're just 112 00:05:57,240 --> 00:06:00,839 Speaker 1: pumping so much money into this system. A lot of 113 00:06:00,839 --> 00:06:05,280 Speaker 1: people would argue for no reason, and that's what causes inflation. 114 00:06:05,400 --> 00:06:07,320 Speaker 1: There's a very there's a very good reason. We have 115 00:06:07,360 --> 00:06:09,480 Speaker 1: mid term elections coming up to November. That's the only 116 00:06:09,520 --> 00:06:11,680 Speaker 1: reason for this bill. And it's the only reason why 117 00:06:11,720 --> 00:06:15,160 Speaker 1: all those credits don't show up until because if they 118 00:06:15,200 --> 00:06:17,160 Speaker 1: showed up now and no one could buy those cars 119 00:06:17,160 --> 00:06:19,919 Speaker 1: because they can't either find them or the credit doesn't 120 00:06:19,920 --> 00:06:22,080 Speaker 1: apply to them, it wouldn't do it. Damn things. So 121 00:06:22,240 --> 00:06:24,880 Speaker 1: the whole thing was the whole thing is ridiculous, by 122 00:06:24,920 --> 00:06:26,960 Speaker 1: the way, by the way, you want to hear ridiculous, 123 00:06:27,360 --> 00:06:30,440 Speaker 1: They're gonna so extend the credit. It's a seventy five 124 00:06:30,760 --> 00:06:35,560 Speaker 1: hundred dollar federal credit for electric vehicles like the Ford Lightning. 125 00:06:36,240 --> 00:06:38,159 Speaker 1: Paul and I are big fans of the Ford Lightning. 126 00:06:38,160 --> 00:06:40,480 Speaker 1: It's an awesome car. It's a hundred thousand dollar truck, 127 00:06:41,360 --> 00:06:43,560 Speaker 1: and Ford just raised the price of it by eight 128 00:06:43,560 --> 00:06:47,159 Speaker 1: thousand five d There you go. I saw that yesterday 129 00:06:47,200 --> 00:06:51,960 Speaker 1: exactly so. But you're gonna who's who's that? Who's that 130 00:06:52,040 --> 00:06:54,800 Speaker 1: subsidy for? You know what? The most interesting thing that 131 00:06:55,279 --> 00:06:57,520 Speaker 1: absolutely no one is talking about. It was a few 132 00:06:57,600 --> 00:07:00,960 Speaker 1: days ago the New York said, did their consumer expectation surfeit? 133 00:07:01,279 --> 00:07:04,520 Speaker 1: Do you know of which income group sees the inflation 134 00:07:04,640 --> 00:07:08,719 Speaker 1: moderating the most? Those people who make less than fifty dollars, 135 00:07:08,960 --> 00:07:13,120 Speaker 1: The people most impacted by inflation, who live paycheck to paycheck, 136 00:07:13,560 --> 00:07:16,560 Speaker 1: expect prices to come down. And why because they're beginning 137 00:07:16,560 --> 00:07:19,200 Speaker 1: to see it. They wouldn't expect it otherwise. So where 138 00:07:19,280 --> 00:07:22,560 Speaker 1: is this inflation coming from? You get fed smester saying 139 00:07:22,560 --> 00:07:24,760 Speaker 1: it's not affecting me. Well, thank you very much. Nice 140 00:07:24,800 --> 00:07:27,560 Speaker 1: to be in the one person where you can afford 141 00:07:29,320 --> 00:07:31,160 Speaker 1: she said. She said, I know prices are going up, 142 00:07:31,160 --> 00:07:33,280 Speaker 1: and it doesn't bother me because I have enough money. 143 00:07:33,480 --> 00:07:35,880 Speaker 1: I'll tell you. I'll tell you a truth. When I 144 00:07:35,920 --> 00:07:39,239 Speaker 1: was trading at US Bank, we replaced the global effex 145 00:07:39,280 --> 00:07:42,960 Speaker 1: manager with a lawyer who knew nothing about effects and rates. 146 00:07:43,240 --> 00:07:45,400 Speaker 1: My cousin was training at City Bank to five. I 147 00:07:45,440 --> 00:07:47,480 Speaker 1: told him what was going on. He said, best you 148 00:07:47,520 --> 00:07:51,080 Speaker 1: start looking for a job because anyone who's never said 149 00:07:51,080 --> 00:07:53,400 Speaker 1: the word done is not somebody you want to work 150 00:07:53,440 --> 00:07:56,080 Speaker 1: for in a risk market. So we are trying to 151 00:07:56,200 --> 00:07:58,760 Speaker 1: follow a fet We're the only person who's ever had 152 00:07:58,760 --> 00:08:01,400 Speaker 1: a real job is Powell. And they keep telling us 153 00:08:01,440 --> 00:08:03,360 Speaker 1: what's going to happen to the weights and efex and 154 00:08:03,400 --> 00:08:05,640 Speaker 1: they've never thought a trade in their looks? Why does 155 00:08:05,680 --> 00:08:07,960 Speaker 1: that make me feel good about these people? Why? Why 156 00:08:08,040 --> 00:08:12,440 Speaker 1: are they credible to anybody? So just ten ten seconds? 157 00:08:12,680 --> 00:08:15,520 Speaker 1: What context do you say done as a trader? Done 158 00:08:15,520 --> 00:08:17,560 Speaker 1: as a trader as you actually do a trade. Somebody 159 00:08:17,560 --> 00:08:19,240 Speaker 1: says that you make me a price, you do the 160 00:08:19,280 --> 00:08:23,240 Speaker 1: deal and say done. You know about that? That's traders 161 00:08:23,240 --> 00:08:25,800 Speaker 1: speak there, This is what we Why's why we have 162 00:08:25,840 --> 00:08:29,120 Speaker 1: you on. Vince shot out of a Ken and Vince Cignarella. 163 00:08:29,200 --> 00:08:32,520 Speaker 1: He does all the strategy stuff. He's traded rates, he's 164 00:08:32,520 --> 00:08:35,600 Speaker 1: traded FX. God knows what else he's traded, probably, you know, 165 00:08:35,760 --> 00:08:38,559 Speaker 1: standing in the pitch trading crude oil for all we know. 166 00:08:38,679 --> 00:08:41,800 Speaker 1: But he's a bloomberg at News. He talks to traders 167 00:08:41,880 --> 00:08:44,160 Speaker 1: all the time, and we'd love to get his call 168 00:08:44,280 --> 00:08:46,400 Speaker 1: on these markets, particularly when you got a big, big 169 00:08:46,400 --> 00:08:53,160 Speaker 1: move like we do today. It's bringing Lindsay Piegsa. She 170 00:08:53,440 --> 00:08:57,800 Speaker 1: is the chief economist for stephle Lindsay, you know, I'm 171 00:08:57,840 --> 00:09:01,760 Speaker 1: not an economist, thank goodness, um, but I do know 172 00:09:01,800 --> 00:09:03,920 Speaker 1: a good labor market. Last week, I do see the 173 00:09:03,920 --> 00:09:08,400 Speaker 1: print here on inflation. Today things look pretty good. How 174 00:09:08,400 --> 00:09:11,240 Speaker 1: do you put it all together? Well, I think from 175 00:09:11,240 --> 00:09:14,760 Speaker 1: the standpoint of the labor market. Last friday's job stumpers showed, 176 00:09:14,840 --> 00:09:18,000 Speaker 1: as the Fed has described, the labor market still solid growth, 177 00:09:18,480 --> 00:09:22,839 Speaker 1: keeping the FEDS eye on the inflation ball at this point, 178 00:09:22,880 --> 00:09:25,360 Speaker 1: while we could argue that the recessionary boxes have been 179 00:09:25,440 --> 00:09:30,199 Speaker 1: checked for the consumer, for manufacturing, for housing, the labor 180 00:09:30,240 --> 00:09:33,560 Speaker 1: market has really been that silver lining. But from an 181 00:09:33,600 --> 00:09:37,240 Speaker 1: inflationary standpoint, this morning's number was a little bit mixed. 182 00:09:37,600 --> 00:09:41,320 Speaker 1: It did give the more dubbish a lean as we 183 00:09:41,360 --> 00:09:43,480 Speaker 1: look at some of those numbers. Now the reprieve was 184 00:09:43,600 --> 00:09:46,679 Speaker 1: very minimal, and for the average American households at lower 185 00:09:46,720 --> 00:09:50,880 Speaker 1: gas prices, while welcomed, does not offset the painfully high 186 00:09:51,000 --> 00:09:54,800 Speaker 1: costs on nearly every other component of their monthly expenditures. 187 00:09:54,840 --> 00:09:57,080 Speaker 1: But still it was a step in the right direction. 188 00:09:57,200 --> 00:10:00,120 Speaker 1: So looking at investors bets, we do see that being 189 00:10:00,160 --> 00:10:02,920 Speaker 1: towards a smaller fifty basis point increase as opposed to 190 00:10:02,960 --> 00:10:07,520 Speaker 1: seventy five next month. But why but if you're the Fed, um, 191 00:10:07,600 --> 00:10:10,320 Speaker 1: wouldn't you want to just stay on course regardless of this? 192 00:10:10,480 --> 00:10:12,800 Speaker 1: You know, one data point does not a trend make 193 00:10:13,800 --> 00:10:17,120 Speaker 1: Oh absolutely, So this this is the problem. The market 194 00:10:17,280 --> 00:10:19,960 Speaker 1: is anxious to call a peak in inflation. The market 195 00:10:20,040 --> 00:10:22,920 Speaker 1: is anxious for the Fed to signal there almost done 196 00:10:22,920 --> 00:10:26,000 Speaker 1: fighting inflation, they're going to start to decelerate. But the 197 00:10:26,040 --> 00:10:29,560 Speaker 1: Fed has been very clear that they're keeping their eye 198 00:10:29,720 --> 00:10:32,040 Speaker 1: on the ball. They're going to continue to raise rates 199 00:10:32,080 --> 00:10:36,800 Speaker 1: until they're convinced by several consecutive reports that inflation is 200 00:10:36,920 --> 00:10:41,160 Speaker 1: on a meaningful and sustainable downward trend back towards that 201 00:10:41,240 --> 00:10:45,679 Speaker 1: two inflation targets. So right now the market is questioning 202 00:10:45,679 --> 00:10:49,360 Speaker 1: the Fed's resolved to remain resilient the FED says it will. 203 00:10:49,880 --> 00:10:53,480 Speaker 1: Whichever blinks first is going to determine the directional momentum 204 00:10:53,520 --> 00:10:55,880 Speaker 1: of raps from By the way, lindsay, I also am 205 00:10:55,920 --> 00:11:00,400 Speaker 1: anxious to have seen the peak in inflation, and I'm 206 00:11:00,440 --> 00:11:04,000 Speaker 1: anxious to see the FED slow down its rate hikes. 207 00:11:04,040 --> 00:11:08,040 Speaker 1: But um, does it really Is it really a bad 208 00:11:08,080 --> 00:11:11,080 Speaker 1: thing for the economy if the Fed keeps raking rate 209 00:11:11,200 --> 00:11:14,880 Speaker 1: hiking rates so long as inflation continues to come down 210 00:11:14,920 --> 00:11:18,800 Speaker 1: and we have these you know, five thousand job editions, Well, 211 00:11:18,840 --> 00:11:20,400 Speaker 1: I suppose it depends if you want to take your 212 00:11:20,400 --> 00:11:22,200 Speaker 1: medicine now or if you want to kick that down 213 00:11:22,240 --> 00:11:24,520 Speaker 1: the road. If the FED decides to take a more 214 00:11:24,600 --> 00:11:29,120 Speaker 1: benign policy pathway and doesn't root out the inflation dragon, 215 00:11:29,480 --> 00:11:32,720 Speaker 1: then we may run into the scenario of still elevated prices, 216 00:11:32,760 --> 00:11:36,079 Speaker 1: but now we have much more a much more prolonged 217 00:11:36,200 --> 00:11:40,440 Speaker 1: period of very minimal growth, or the conditions lining up 218 00:11:40,480 --> 00:11:43,800 Speaker 1: for stagflation. If, however, the FED is willing to push 219 00:11:43,880 --> 00:11:49,280 Speaker 1: us into maybe a temporarily deeper recessionary position but get 220 00:11:49,320 --> 00:11:52,120 Speaker 1: inflation under control, then we can talk about a more 221 00:11:52,280 --> 00:11:55,439 Speaker 1: robust recovery. On the flip side, lindsay, I'm trying to 222 00:11:55,520 --> 00:11:57,800 Speaker 1: make the case to my boss is that they should 223 00:11:57,800 --> 00:12:01,080 Speaker 1: send me out to Jackson Hole, Wyoming. Um, tell us 224 00:12:01,160 --> 00:12:03,439 Speaker 1: what happens in Jackson Hall, Wyoming in the month of 225 00:12:03,480 --> 00:12:07,959 Speaker 1: August every year, and should we pay attention? Well, Traditionally 226 00:12:08,080 --> 00:12:11,840 Speaker 1: the FED has used the Jackson Hole meeting to give 227 00:12:12,040 --> 00:12:15,440 Speaker 1: an increased assessment or an updated assessment of where policy 228 00:12:15,480 --> 00:12:18,360 Speaker 1: makers are in terms of the longer term view for 229 00:12:18,400 --> 00:12:22,400 Speaker 1: the policy pathway. But this time around it's unlikely to 230 00:12:22,480 --> 00:12:26,319 Speaker 1: warrant much attention, as we've already heard from the Chairman 231 00:12:26,679 --> 00:12:29,760 Speaker 1: that decisions on policy are not being made on a 232 00:12:29,840 --> 00:12:34,480 Speaker 1: longer term, a longer term assessment of the economy, but 233 00:12:34,520 --> 00:12:37,360 Speaker 1: they're being made meeting to meeting. So just like the 234 00:12:37,400 --> 00:12:41,400 Speaker 1: market is overreacting arguably to one data point, so too 235 00:12:41,520 --> 00:12:45,560 Speaker 1: is the FED basing next month's decision on the incoming data, 236 00:12:45,640 --> 00:12:50,800 Speaker 1: the latest incoming data. Alright, So what are your expectations, lindsay, 237 00:12:50,880 --> 00:12:55,720 Speaker 1: for the US economy? Um, do we see in inflation 238 00:12:55,800 --> 00:12:59,200 Speaker 1: cooling back down closer to the two percent level? And 239 00:12:59,440 --> 00:13:03,480 Speaker 1: do we have recession? Well, that's that's those are some 240 00:13:03,520 --> 00:13:06,080 Speaker 1: big questions there. First off, I do think that growth 241 00:13:06,120 --> 00:13:09,960 Speaker 1: remains very minimal, throughout the year, and I do think 242 00:13:10,000 --> 00:13:13,960 Speaker 1: that looking backwards, the NBR will eventually acknowledge a recession 243 00:13:14,000 --> 00:13:17,160 Speaker 1: started either in the first or the second quarter from 244 00:13:17,200 --> 00:13:22,280 Speaker 1: an inflation from unemployment, absolutely, because I think the three 245 00:13:22,320 --> 00:13:25,800 Speaker 1: and a half percent unemployment rate is not necessarily capturing 246 00:13:26,280 --> 00:13:28,959 Speaker 1: the full, the full sense of what's happening in the 247 00:13:29,040 --> 00:13:32,000 Speaker 1: labor market. Remember, the growth that we've seen in job 248 00:13:32,080 --> 00:13:37,920 Speaker 1: creation is less about new jobs being created and more 249 00:13:37,960 --> 00:13:41,880 Speaker 1: about old jobs being replaced. Remember as of July, that's 250 00:13:41,920 --> 00:13:45,200 Speaker 1: when we recaptured the full twenty two million jobs lost 251 00:13:45,280 --> 00:13:47,840 Speaker 1: during the Great Recessions. So over the past eighty months, 252 00:13:48,280 --> 00:13:51,480 Speaker 1: essentially we've just clawed back to where we were. We're 253 00:13:51,480 --> 00:13:54,440 Speaker 1: not talking about new job creation above and beyond the 254 00:13:54,480 --> 00:13:56,880 Speaker 1: one's loss. So I do think when we look at 255 00:13:56,920 --> 00:14:00,079 Speaker 1: the loss of real income, the decline and manufacturing, the 256 00:14:00,160 --> 00:14:03,720 Speaker 1: laws of real spending, top line GDP, and negative territory, 257 00:14:04,040 --> 00:14:07,640 Speaker 1: even though the employment numbers are giving us an artificial 258 00:14:07,720 --> 00:14:11,880 Speaker 1: sense of solidity, I think that we are in processionary condition. 259 00:14:12,040 --> 00:14:14,559 Speaker 1: I don't know my my third of my fourth children 260 00:14:14,760 --> 00:14:17,120 Speaker 1: actually got a real, real job as they call it. 261 00:14:17,200 --> 00:14:20,480 Speaker 1: So to me, that is a wicked strong labor market 262 00:14:20,560 --> 00:14:22,880 Speaker 1: so nz PA, thanks so much for joining US. Chief 263 00:14:22,880 --> 00:14:27,200 Speaker 1: econras managing director at Steve giving us her thoughts here. 264 00:14:27,200 --> 00:14:30,160 Speaker 1: We love talking to Lindsay a nice perspective to the 265 00:14:30,200 --> 00:14:35,680 Speaker 1: market here. We were just talking to Bloomberg's Bevince Signarolla 266 00:14:36,240 --> 00:14:38,880 Speaker 1: just earlier this morning and he was making a comment 267 00:14:38,920 --> 00:14:41,840 Speaker 1: talking about chips, and he sent along some news here. 268 00:14:41,920 --> 00:14:45,040 Speaker 1: Demand for chips is collapsing, just as President Biden signs 269 00:14:45,040 --> 00:14:48,880 Speaker 1: a bill to jump start more US chip making, which 270 00:14:48,920 --> 00:14:51,240 Speaker 1: is very interesting because we've got some very mixed the 271 00:14:51,400 --> 00:14:53,400 Speaker 1: bad numbers coming out of some of these chipmakers over 272 00:14:53,400 --> 00:14:55,320 Speaker 1: the last a few days and kind of just kind 273 00:14:55,320 --> 00:14:58,120 Speaker 1: of goes to this, you know, strategic importance of having 274 00:14:58,400 --> 00:15:02,280 Speaker 1: chip manufacturing in the U. Keith Croc joins us. He's 275 00:15:02,280 --> 00:15:06,560 Speaker 1: a fan of Croc Institute for Tech Diplomacy at Purdue 276 00:15:06,800 --> 00:15:10,280 Speaker 1: University West Lafayette, Indiana. Some really good stuff there. They do. 277 00:15:10,320 --> 00:15:13,640 Speaker 1: It produced some smart engineering geeks that perdue, no question 278 00:15:13,720 --> 00:15:16,640 Speaker 1: about it. Hey, Cai talked to us about this chip 279 00:15:16,800 --> 00:15:19,080 Speaker 1: business because at the beginning of the pandemic, when China 280 00:15:19,160 --> 00:15:22,080 Speaker 1: shut down, we all the whole world shut down. We said, 281 00:15:22,080 --> 00:15:25,760 Speaker 1: oh boy, we need chips for a lot of stuff, 282 00:15:25,800 --> 00:15:27,600 Speaker 1: and we don't really make a lot of chips here. 283 00:15:27,640 --> 00:15:30,080 Speaker 1: So the talk really ramped up of you know, kind 284 00:15:30,080 --> 00:15:34,200 Speaker 1: of on shoring some chip manufacturing capability. And I think 285 00:15:34,240 --> 00:15:37,520 Speaker 1: that's what the Chips Act UH does. How should we 286 00:15:37,560 --> 00:15:41,920 Speaker 1: think about that? Well, I'll tell you what fellas I'm 287 00:15:41,960 --> 00:15:45,360 Speaker 1: here in Washington, d C. I was invited yesterday by 288 00:15:45,400 --> 00:15:49,200 Speaker 1: the White House UH for the for the signing. It 289 00:15:49,280 --> 00:15:52,960 Speaker 1: was a great deal for America, for national security, for 290 00:15:53,040 --> 00:15:57,520 Speaker 1: global economic security, and long term prosperity. You know, when 291 00:15:57,560 --> 00:16:01,720 Speaker 1: you talk about UH these quarterly results for the chip makers, 292 00:16:01,760 --> 00:16:04,920 Speaker 1: I would not be worried about that at all, because 293 00:16:04,960 --> 00:16:08,400 Speaker 1: this chip business is growing so fast. You know, a 294 00:16:08,520 --> 00:16:11,200 Speaker 1: slowdown from that means in on the average, it goes 295 00:16:11,240 --> 00:16:16,760 Speaker 1: from growth down to growth. We're under the capacity now, 296 00:16:17,680 --> 00:16:20,760 Speaker 1: you know. Let me tell you why, UH, this is 297 00:16:20,920 --> 00:16:24,920 Speaker 1: such an important bipartisan you know, two utter an eighty 298 00:16:24,960 --> 00:16:28,920 Speaker 1: billion dollar bill. First of all, it's about securing the 299 00:16:29,080 --> 00:16:34,480 Speaker 1: semiconductor supply chain that is critical for national security. The 300 00:16:34,640 --> 00:16:38,360 Speaker 1: second is this investment, which now is going to result 301 00:16:38,440 --> 00:16:42,720 Speaker 1: in a three fifty billion dollars UH in the in 302 00:16:42,720 --> 00:16:47,880 Speaker 1: in chip manufacturing in the United States and to help 303 00:16:48,000 --> 00:16:50,800 Speaker 1: US maintain that lead as well as a two billion 304 00:16:50,840 --> 00:16:54,640 Speaker 1: dollar investment UH with direct funds in R and D. 305 00:16:55,160 --> 00:16:58,080 Speaker 1: And what that's gonna drive is jobs, jobs, jobs, and 306 00:16:58,200 --> 00:17:03,040 Speaker 1: not just any kind of jobs, highly skilled jobs. And 307 00:17:03,280 --> 00:17:06,919 Speaker 1: I think I think you fellas understand that. You know, 308 00:17:07,200 --> 00:17:14,080 Speaker 1: our adversaries pay an a four dimensional game of diplomatic, economic, military, 309 00:17:14,200 --> 00:17:17,679 Speaker 1: and cultural chess. That's john and they're playing well. And 310 00:17:17,800 --> 00:17:19,800 Speaker 1: they they're doing it the same way we are. Right 311 00:17:19,800 --> 00:17:23,440 Speaker 1: they had this centrally controlled economy. They're just passing out 312 00:17:23,480 --> 00:17:27,160 Speaker 1: money to companies and deciding who are winners and losers. 313 00:17:27,480 --> 00:17:30,280 Speaker 1: I don't understand this. I don't get why. And you 314 00:17:30,359 --> 00:17:32,760 Speaker 1: got your mba Harvard, so you probably know better than 315 00:17:32,800 --> 00:17:35,119 Speaker 1: I do. Know. He recently got a pH d and 316 00:17:35,240 --> 00:17:38,720 Speaker 1: some engineering stuff. So why on the economic side, why 317 00:17:38,720 --> 00:17:41,480 Speaker 1: don't we let the market, the free market decide, or 318 00:17:41,520 --> 00:17:43,800 Speaker 1: if it's such a national security issue, why don't we 319 00:17:43,840 --> 00:17:46,600 Speaker 1: take over this industry? Like why are we halfway here 320 00:17:46,640 --> 00:17:51,600 Speaker 1: between like um state controlled socialism and free market capitalism? 321 00:17:51,720 --> 00:17:54,359 Speaker 1: What are we doing Keith? These companies already make a 322 00:17:54,359 --> 00:17:56,680 Speaker 1: lot of money, These shareholders have already gotten very rich. 323 00:17:56,760 --> 00:17:59,639 Speaker 1: Why are we giving them, you know, billions tens and 324 00:17:59,720 --> 00:18:05,120 Speaker 1: ten of billions of dollars in government subsidies. Right, I'll 325 00:18:05,119 --> 00:18:09,040 Speaker 1: tell you exactly why. So my last role was under 326 00:18:09,040 --> 00:18:13,520 Speaker 1: Secretary of State for Economic Growth, Energy and the Environment. 327 00:18:13,560 --> 00:18:17,040 Speaker 1: Before that, I ran three public companies. I've been in 328 00:18:17,119 --> 00:18:21,800 Speaker 1: Silicon Valley most of my of my career. And here's 329 00:18:21,920 --> 00:18:27,320 Speaker 1: was happen. We invented the semi conductor business. Here's what happened. Countries, 330 00:18:27,400 --> 00:18:31,240 Speaker 1: particularly Asian countries, realized how strategic it is, and they 331 00:18:31,400 --> 00:18:36,720 Speaker 1: subsidized the semiconductors. So they literally pulled it off our shores. 332 00:18:36,920 --> 00:18:42,560 Speaker 1: And the investment that goes into these manufacturing facilities is humongous. 333 00:18:42,720 --> 00:18:45,439 Speaker 1: We did the largest onshore in history when I was 334 00:18:45,880 --> 00:18:50,080 Speaker 1: under Secretary of State, twelve billion dollars for one of 335 00:18:50,080 --> 00:18:54,120 Speaker 1: the most sophisticated chip plants ever. And by the way, 336 00:18:54,240 --> 00:18:59,040 Speaker 1: that has fifteen hundred workers on the production plot and 337 00:18:59,720 --> 00:19:04,159 Speaker 1: sit super said of them are either master's degrees or PhDs. 338 00:19:04,320 --> 00:19:08,159 Speaker 1: And we lost that talent alright, So give us a 339 00:19:08,200 --> 00:19:12,199 Speaker 1: sense of just how strategic you think ensuring some of 340 00:19:12,240 --> 00:19:16,520 Speaker 1: this capability is. Because again it became acutely aware even 341 00:19:16,560 --> 00:19:19,840 Speaker 1: to lay people like myself that uh, you know when 342 00:19:19,920 --> 00:19:24,160 Speaker 1: China shuts down, Taiwan shuts down for whatever reason. That's 343 00:19:24,160 --> 00:19:27,400 Speaker 1: a problem. Matt Miller can't get his well for other 344 00:19:27,440 --> 00:19:30,720 Speaker 1: industries should we be doing exactly It's taking me so 345 00:19:30,760 --> 00:19:34,080 Speaker 1: long to get this truck from Chevrolet. I'm very excited. 346 00:19:34,160 --> 00:19:37,000 Speaker 1: It's apparently coming up this month and I cannot wait. 347 00:19:37,040 --> 00:19:39,840 Speaker 1: It's the z R two UM, which I'm so pumped about. 348 00:19:39,880 --> 00:19:43,040 Speaker 1: But you know, if we're doing this for chips, why 349 00:19:43,080 --> 00:19:49,320 Speaker 1: aren't we doing it for planes or trains or automobiles. Well, 350 00:19:50,000 --> 00:19:55,240 Speaker 1: this is first of all, semiconductors is the most important 351 00:19:55,400 --> 00:19:59,320 Speaker 1: industry in the world because it lays the foundation not 352 00:20:00,040 --> 00:20:04,280 Speaker 1: only for everything in the tech area, but as you 353 00:20:04,280 --> 00:20:07,200 Speaker 1: guys say, in the in the automotive field, in the 354 00:20:07,359 --> 00:20:12,400 Speaker 1: energy field, you know, in the aerospace UH field. So 355 00:20:12,480 --> 00:20:18,119 Speaker 1: the important thing is to secure uh this supply line. 356 00:20:18,320 --> 00:20:21,880 Speaker 1: You guys saw what happened during during the pandemic, so 357 00:20:22,640 --> 00:20:26,440 Speaker 1: uh And and the other thing that is is absolutely 358 00:20:26,520 --> 00:20:32,760 Speaker 1: killed key is this skill set um you know, UH 359 00:20:32,960 --> 00:20:36,840 Speaker 1: we lost We've lost it uh here in the United States, 360 00:20:36,880 --> 00:20:40,680 Speaker 1: and now this is gonna bring it back. One other 361 00:20:40,720 --> 00:20:45,320 Speaker 1: great thing about this UH Chips and Science Act, it 362 00:20:45,520 --> 00:20:52,880 Speaker 1: also is funding UH research in critical national security sectors 363 00:20:53,280 --> 00:20:59,400 Speaker 1: like quantum computing, like six G, like biotech, and this 364 00:20:59,480 --> 00:21:02,240 Speaker 1: is this is in the area where you know, the 365 00:21:02,320 --> 00:21:04,560 Speaker 1: United States used to be number one in R and D. 366 00:21:04,960 --> 00:21:09,160 Speaker 1: We were down a number nine. And one last thing 367 00:21:09,520 --> 00:21:12,719 Speaker 1: is that when we presented we are when we architected 368 00:21:12,760 --> 00:21:16,120 Speaker 1: this bill, we presented the Senator Schumer and Senator Young 369 00:21:16,680 --> 00:21:19,760 Speaker 1: and what we showed them is with this level of investment, 370 00:21:20,080 --> 00:21:25,000 Speaker 1: you're gonna get it three times uh three, full additional 371 00:21:25,040 --> 00:21:29,080 Speaker 1: investment from the private sector. Keith, let me quickly ask you. 372 00:21:29,320 --> 00:21:31,879 Speaker 1: We only got thirty seconds here, but what do you 373 00:21:31,920 --> 00:21:34,920 Speaker 1: think about the e V credits? Is that subsidy also 374 00:21:35,000 --> 00:21:40,440 Speaker 1: important for American jobs and carmakers? Well, I can, I can, 375 00:21:40,680 --> 00:21:42,800 Speaker 1: I can tell you what I think being you know, 376 00:21:42,880 --> 00:21:46,960 Speaker 1: former CEO Docum signed and the REBA is that these 377 00:21:46,960 --> 00:21:50,520 Speaker 1: guys are on the ninety days shot clock, right, and 378 00:21:50,640 --> 00:21:54,680 Speaker 1: so to be this enables you to look long term, 379 00:21:54,960 --> 00:21:57,199 Speaker 1: and that's key. And by the way, for the for 380 00:21:57,280 --> 00:22:01,320 Speaker 1: the e V credits is long is that technology is 381 00:22:01,359 --> 00:22:05,600 Speaker 1: developed in the US. Because Shina owns solar panels, so 382 00:22:05,680 --> 00:22:08,800 Speaker 1: we've got to do something about that, all right, Keith, 383 00:22:08,840 --> 00:22:12,600 Speaker 1: great stuff really appreciate getting your perspective. Keith Croc, founder 384 00:22:12,640 --> 00:22:16,880 Speaker 1: of the Croc Institute for Tech Diplomacy at Perdue UH. 385 00:22:16,920 --> 00:22:20,000 Speaker 1: He was also the former US Under Secretary of State 386 00:22:20,040 --> 00:22:24,320 Speaker 1: for Economic Growth, Energy, and the Environment. Million jobs, million degrees. 387 00:22:24,560 --> 00:22:26,760 Speaker 1: The guy used to be a VP at General Motors 388 00:22:26,760 --> 00:22:28,439 Speaker 1: as well. I know, I've got to get him back on. 389 00:22:28,440 --> 00:22:30,000 Speaker 1: He's done everything you gotta get. We'll get him back on. 390 00:22:30,040 --> 00:22:31,440 Speaker 1: We'll get him next time he's in a sign, We'll 391 00:22:31,440 --> 00:22:37,640 Speaker 1: get him here in the studio again. Some good economic 392 00:22:37,680 --> 00:22:39,480 Speaker 1: data for the past few days. Let's check in with 393 00:22:39,560 --> 00:22:41,679 Speaker 1: Jeff Cleveland. He does this for a living. He's a 394 00:22:41,720 --> 00:22:44,560 Speaker 1: director in chief economist for Peyton and Regal. Hey, Jeff, 395 00:22:44,560 --> 00:22:48,000 Speaker 1: you put today's CPI data together with you know, a 396 00:22:48,080 --> 00:22:52,320 Speaker 1: really strong jobs report last week. I don't know what 397 00:22:52,400 --> 00:22:55,800 Speaker 1: do you take away from that? Well, you know, it's 398 00:22:55,840 --> 00:23:00,199 Speaker 1: interesting the month to month reading on core cp I, 399 00:23:00,920 --> 00:23:03,960 Speaker 1: which slowed to point three. It could be just a 400 00:23:04,000 --> 00:23:06,760 Speaker 1: fake out. We had a similar slow down back in 401 00:23:06,800 --> 00:23:09,359 Speaker 1: the I guess was the March data that we got 402 00:23:09,400 --> 00:23:13,480 Speaker 1: in April, so and then we saw core cp I 403 00:23:13,560 --> 00:23:16,720 Speaker 1: re accelerate. So for my money, I think it's too 404 00:23:16,720 --> 00:23:21,240 Speaker 1: soon to claim victory mission accomplished on on core inflation 405 00:23:21,680 --> 00:23:24,639 Speaker 1: could be still moving higher and point three months of 406 00:23:24,680 --> 00:23:27,119 Speaker 1: months isn't. Then I don't think that's enough to change 407 00:23:27,160 --> 00:23:30,840 Speaker 1: the FEDS view here and then as it regards to 408 00:23:31,680 --> 00:23:33,359 Speaker 1: you think the FEDS still gonna go seventy five at 409 00:23:33,359 --> 00:23:36,600 Speaker 1: the next meeting. Yeah, we're gonna get another CPI report, 410 00:23:36,640 --> 00:23:40,160 Speaker 1: We're gonna get another jobs report. So as of now, 411 00:23:40,200 --> 00:23:43,360 Speaker 1: we're sticking with the seventy The reason being, I think 412 00:23:43,400 --> 00:23:45,760 Speaker 1: you have to put on your central banker hat and 413 00:23:45,800 --> 00:23:49,360 Speaker 1: you have to think, Okay, how do they think that 414 00:23:49,480 --> 00:23:52,159 Speaker 1: policy effects inflation? And the way they look at it 415 00:23:52,320 --> 00:23:55,320 Speaker 1: is that they need to get interest rates up enough 416 00:23:55,880 --> 00:23:58,960 Speaker 1: to push up the unemployment rate. That's their goal. Once 417 00:23:58,960 --> 00:24:02,200 Speaker 1: the unemployment rate starts a rise, then wage pressure comes off, 418 00:24:02,200 --> 00:24:05,080 Speaker 1: and then inflation core inflation slows. We haven't had that 419 00:24:05,119 --> 00:24:07,399 Speaker 1: happen yet. We had a really strong jobs report, the 420 00:24:07,480 --> 00:24:10,679 Speaker 1: unemployment rate moved to cycle low. So if you're a 421 00:24:10,680 --> 00:24:14,080 Speaker 1: central banker, you I think you're still keeping your your 422 00:24:14,200 --> 00:24:17,760 Speaker 1: foot on the break in terms of monetary policy, not 423 00:24:18,000 --> 00:24:21,120 Speaker 1: slowing down it and definitely not on a a welcome 424 00:24:21,440 --> 00:24:24,359 Speaker 1: But it could just be one month of soft CPI data. 425 00:24:24,680 --> 00:24:30,159 Speaker 1: Isn't it enough if they just keep wage increases below 426 00:24:30,200 --> 00:24:32,320 Speaker 1: the level of inflation? Or do they really have to 427 00:24:32,640 --> 00:24:36,000 Speaker 1: do we really have to see jobs losses? Well, I 428 00:24:36,000 --> 00:24:38,560 Speaker 1: think they're gonna be really unhappy with five and a 429 00:24:38,600 --> 00:24:44,879 Speaker 1: half percent UH average hourly earnings, frauductivity at zero or 430 00:24:44,880 --> 00:24:49,520 Speaker 1: even falling. UM that situation and the implication for unit 431 00:24:49,600 --> 00:24:51,560 Speaker 1: labor costs we saw yesterday, I think that's a really 432 00:24:51,800 --> 00:24:54,480 Speaker 1: really bad mix. Is going to be very unhappy with that. 433 00:24:54,840 --> 00:24:56,440 Speaker 1: So I do I do think they want they don't 434 00:24:56,440 --> 00:24:58,800 Speaker 1: want to admit it in public, but they want to 435 00:24:58,800 --> 00:25:00,840 Speaker 1: see the unemployment rate right that. They want to see 436 00:25:01,160 --> 00:25:04,479 Speaker 1: wage growth slow back down somewhere. Maybe. I think closer 437 00:25:04,480 --> 00:25:07,240 Speaker 1: to two to three percent is a good ballpark. Damn. 438 00:25:07,320 --> 00:25:12,439 Speaker 1: I want a raise that that's equal to or greater 439 00:25:12,520 --> 00:25:16,960 Speaker 1: than headline cp I. Yeah, you didn't get that. You know, well, 440 00:25:18,160 --> 00:25:20,800 Speaker 1: I still have the request in and I feel like 441 00:25:20,880 --> 00:25:24,719 Speaker 1: American workers are gonna want that too. I'm always sending 442 00:25:24,720 --> 00:25:27,679 Speaker 1: that requested. It keeps getting rejected. So I I hear you. 443 00:25:28,040 --> 00:25:30,679 Speaker 1: I think that's the that's the that's the correct thinking. 444 00:25:30,800 --> 00:25:32,960 Speaker 1: I just, um, I don't know how realistic that is 445 00:25:33,000 --> 00:25:35,560 Speaker 1: for me or for you? All right, Jeff, again, I 446 00:25:35,920 --> 00:25:39,360 Speaker 1: asked our guests here, should we expect anything from jackson Hole? Uh? 447 00:25:39,560 --> 00:25:43,240 Speaker 1: This month? Should I make my book my trip out there? Well? 448 00:25:43,280 --> 00:25:45,840 Speaker 1: Sometimes jackson Hole is sort of s O Terek Rite 449 00:25:45,960 --> 00:25:50,160 Speaker 1: some fringe kind of topics, maybe not really mainline monetary 450 00:25:50,200 --> 00:25:53,439 Speaker 1: policy topics. But I feel like this year, maybe this 451 00:25:53,520 --> 00:25:56,440 Speaker 1: year is different. Maybe this year is is surrounding the 452 00:25:56,520 --> 00:25:58,680 Speaker 1: question that we're going to talk about here, which is 453 00:25:59,119 --> 00:26:01,520 Speaker 1: how much does the unemployment rate need to rise to 454 00:26:01,560 --> 00:26:04,000 Speaker 1: get to get inflation back down? Sort of I don't 455 00:26:04,000 --> 00:26:07,120 Speaker 1: know bread and butter monetary policy questions, so it might 456 00:26:07,200 --> 00:26:11,199 Speaker 1: actually be more more central to markets then maybe it 457 00:26:11,200 --> 00:26:14,919 Speaker 1: has been in the last couple of years. So this 458 00:26:14,960 --> 00:26:17,440 Speaker 1: FED seems less esoteric. I mean they seem to care 459 00:26:17,440 --> 00:26:21,479 Speaker 1: about headline inflation, not just core PC right, um, at 460 00:26:21,560 --> 00:26:26,360 Speaker 1: least it seems important to to to Powell, well, headline 461 00:26:26,400 --> 00:26:29,359 Speaker 1: is tied to gas prices, and gas prices are tied 462 00:26:29,400 --> 00:26:33,280 Speaker 1: to consumer inflation expectations, So that's I think they're right 463 00:26:33,320 --> 00:26:35,520 Speaker 1: to care about that. They care about inflation of expectations. 464 00:26:35,800 --> 00:26:39,760 Speaker 1: The question for me is still Okay, where is inflation? 465 00:26:39,760 --> 00:26:42,800 Speaker 1: Where is the underlying trend of inflation, and I still 466 00:26:42,840 --> 00:26:45,840 Speaker 1: think looking at headline month to month does not help 467 00:26:45,920 --> 00:26:48,800 Speaker 1: you with that. You gotta look um later this morning, 468 00:26:48,840 --> 00:26:51,480 Speaker 1: look at media and CPI from the Sleeveland Fed. Look 469 00:26:51,480 --> 00:26:54,680 Speaker 1: at the trim mean, look at the underlying sticky measures, 470 00:26:54,800 --> 00:26:58,280 Speaker 1: and you're still seeing pretty strong. I look at gasoline 471 00:26:58,280 --> 00:27:00,600 Speaker 1: and that is it. I'm an equity He's gotta keep 472 00:27:00,600 --> 00:27:03,679 Speaker 1: it nice and simple and coming down. So that's good stuff. 473 00:27:03,760 --> 00:27:07,080 Speaker 1: Jeff Cleveland, Director and chief Economists at paid In in 474 00:27:07,119 --> 00:27:11,720 Speaker 1: the Regal joining us right now in our Bloomberg Interactive 475 00:27:11,720 --> 00:27:14,880 Speaker 1: Broker studios. Rob Barnett, he's the senior anals. He leads 476 00:27:14,880 --> 00:27:18,000 Speaker 1: our energy coverage in Europe. He's based in London, but 477 00:27:18,040 --> 00:27:22,119 Speaker 1: we got him here in New York. He's with Bloomberg Intelligence. Uh. Rob, 478 00:27:22,600 --> 00:27:24,800 Speaker 1: a story that I think it just fascinates me because 479 00:27:24,800 --> 00:27:26,679 Speaker 1: I think it's gonna get really, really bad. So I'd 480 00:27:26,680 --> 00:27:29,119 Speaker 1: love to get your perspective. We talk a lot about 481 00:27:29,119 --> 00:27:32,840 Speaker 1: global energy and we know that in Europe, primarily due 482 00:27:32,880 --> 00:27:36,360 Speaker 1: to the war in Ukraine, Europeans and folks in the UK, 483 00:27:36,440 --> 00:27:39,600 Speaker 1: you guys are preparing for a really tough winter. Give 484 00:27:39,640 --> 00:27:42,359 Speaker 1: just framed that out for us. Yeah, so for anyone 485 00:27:42,400 --> 00:27:46,399 Speaker 1: who's not following the gas market, gas in Europe is 486 00:27:46,600 --> 00:27:50,399 Speaker 1: over sixty dollars per mmbtu right now, and where does 487 00:27:50,400 --> 00:27:53,919 Speaker 1: it typically trade? Fractions of that? I mean, and the 488 00:27:54,000 --> 00:27:56,959 Speaker 1: US is at around eight dollars per mm btu, so 489 00:27:57,000 --> 00:27:59,959 Speaker 1: we're eight x where the US is at the moment today. 490 00:28:00,040 --> 00:28:04,720 Speaker 1: A this is going to be a very challenging winter. Now, 491 00:28:04,920 --> 00:28:08,879 Speaker 1: tariffs are actually regulated by the government, so consumers haven't 492 00:28:09,000 --> 00:28:12,520 Speaker 1: really had to mark to market what they're paying yet, 493 00:28:12,920 --> 00:28:16,879 Speaker 1: so it's going to be tough as the government's phase 494 00:28:17,040 --> 00:28:21,040 Speaker 1: in those higher prices. And yeah, I'm stocking up on sweaters, 495 00:28:21,080 --> 00:28:24,840 Speaker 1: just getting ready for colder showers, sweaters, everything that we 496 00:28:24,880 --> 00:28:27,840 Speaker 1: can do to Uh, you're in England, right, I mean 497 00:28:27,880 --> 00:28:29,600 Speaker 1: you're You're in London, so it's not gonna get that 498 00:28:29,640 --> 00:28:32,840 Speaker 1: bad for you. In Berlin, which is basically in Poland, 499 00:28:32,880 --> 00:28:35,760 Speaker 1: it's going to be really really cold this winter. And 500 00:28:35,800 --> 00:28:40,160 Speaker 1: the Germans, I'm gonna ask you why decided to put 501 00:28:40,240 --> 00:28:43,000 Speaker 1: all of their eggs in Vladimir Putin's basket? Why did 502 00:28:43,080 --> 00:28:49,320 Speaker 1: angel A miracle Um make her nations so reliant on 503 00:28:49,480 --> 00:28:53,000 Speaker 1: this Russian dictator? Well, I think as as many of 504 00:28:53,080 --> 00:28:56,000 Speaker 1: you may know, Germany has had a long history with 505 00:28:56,080 --> 00:28:59,479 Speaker 1: nuclear power, and they've actually phased most of their nuclear 506 00:28:59,520 --> 00:29:04,080 Speaker 1: power plan out at this point. Despite Angela Merkel's history. 507 00:29:04,160 --> 00:29:07,520 Speaker 1: She she was a nuclear engineer by training, right, So 508 00:29:07,800 --> 00:29:10,920 Speaker 1: it's interesting choice he made. But the decisions all got 509 00:29:10,960 --> 00:29:15,240 Speaker 1: made post Fukushima. Everyone got scared about nuclear a little 510 00:29:15,240 --> 00:29:19,360 Speaker 1: over a decade ago, and that really drove a lot 511 00:29:19,480 --> 00:29:23,720 Speaker 1: of the decision making around the reliance on gas because 512 00:29:23,760 --> 00:29:27,840 Speaker 1: Europe's got a very strong green angle, particularly in Germany, 513 00:29:27,920 --> 00:29:30,960 Speaker 1: so they wanted to get off coal. They were concerned 514 00:29:31,000 --> 00:29:34,040 Speaker 1: about nuclear, and they hitched themselves to gas, and it's 515 00:29:34,120 --> 00:29:36,520 Speaker 1: turning around. It's going to bite them hard, even though 516 00:29:37,000 --> 00:29:41,200 Speaker 1: you know, the problem in Fukushima was an earthquake, yes, 517 00:29:41,400 --> 00:29:45,720 Speaker 1: what do you call that? Giant waves tsunami right, which 518 00:29:45,760 --> 00:29:48,920 Speaker 1: is so unlikely from the Bowden's a right, if that's 519 00:29:48,960 --> 00:29:51,960 Speaker 1: not going to happen in Germany. And yet they ran 520 00:29:53,160 --> 00:29:56,040 Speaker 1: straight to Moscow for all of their energy needs. I 521 00:29:56,120 --> 00:29:57,840 Speaker 1: used to talk to Dan Burriette a lot when he 522 00:29:57,880 --> 00:30:00,200 Speaker 1: was Energy Secretary, and he would come to Berlin every 523 00:30:00,200 --> 00:30:02,400 Speaker 1: time he was there trying to pedal um l en 524 00:30:02,440 --> 00:30:05,200 Speaker 1: G terminals because he wanted to sell more US gas 525 00:30:05,240 --> 00:30:08,360 Speaker 1: and they turned him away, and and they are trying 526 00:30:08,400 --> 00:30:11,720 Speaker 1: to make amends for that. Now. Germany and other parts 527 00:30:11,760 --> 00:30:16,120 Speaker 1: of Europe are sprinting to get l en G import 528 00:30:16,280 --> 00:30:19,040 Speaker 1: terminals built, but those things take a while. So this 529 00:30:19,120 --> 00:30:22,200 Speaker 1: is a multi year process with no easy solutions in 530 00:30:22,240 --> 00:30:24,360 Speaker 1: the next twelve to twenty four months, right, and in 531 00:30:24,400 --> 00:30:27,320 Speaker 1: which time period we could see the Rhine River completely 532 00:30:27,440 --> 00:30:30,320 Speaker 1: dry up. We were told that um the level on 533 00:30:30,640 --> 00:30:34,200 Speaker 1: the Rhine could drop to sixteen inches by Friday, making 534 00:30:34,200 --> 00:30:37,720 Speaker 1: it virtually impassable for the big coal and diesel barges 535 00:30:37,760 --> 00:30:40,200 Speaker 1: that need to normally deliver energy through those roots. What's 536 00:30:40,200 --> 00:30:43,000 Speaker 1: gonna happen, Yes, so there's stockpiles for a little bit 537 00:30:43,040 --> 00:30:47,880 Speaker 1: of short duration disruption, but if we see this continue, 538 00:30:48,000 --> 00:30:52,040 Speaker 1: it's just one more factor that's really putting pressure on 539 00:30:52,160 --> 00:30:55,120 Speaker 1: that gas price that we talked about at the beginning here, 540 00:30:55,280 --> 00:30:59,360 Speaker 1: and there really aren't easy alternatives in the near term. 541 00:30:59,720 --> 00:31:02,400 Speaker 1: So you know, how bad does it get? I mean 542 00:31:02,640 --> 00:31:06,600 Speaker 1: the reasonable there there's terminology they're they're talking about. The 543 00:31:06,760 --> 00:31:13,800 Speaker 1: reasonable worst case scenario includes mandated power outages and things 544 00:31:13,840 --> 00:31:16,680 Speaker 1: like that in many of the economies, So we'll see 545 00:31:17,040 --> 00:31:21,240 Speaker 1: cities go dark already seeing that? Are you already seeing that? 546 00:31:21,280 --> 00:31:23,880 Speaker 1: In Germany? Oh? Yeah, I mean Berlin was pretty much 547 00:31:23,920 --> 00:31:25,160 Speaker 1: dark at night to begin with because they don't have 548 00:31:25,240 --> 00:31:28,040 Speaker 1: enough money to pay for power before the surge in prices. 549 00:31:28,520 --> 00:31:30,640 Speaker 1: Now they've got the big boom in prices. Plus all 550 00:31:30,640 --> 00:31:33,160 Speaker 1: the rivers are drying up, those that are cooling nuclear 551 00:31:33,280 --> 00:31:35,600 Speaker 1: plants are are too hot to do, so, I mean 552 00:31:35,640 --> 00:31:37,880 Speaker 1: they've just got hit by it like a triple whammy, right, 553 00:31:38,000 --> 00:31:40,280 Speaker 1: And we've just taken all of this for granted. I 554 00:31:40,320 --> 00:31:43,400 Speaker 1: think in the West, we've just always been able to 555 00:31:43,440 --> 00:31:46,200 Speaker 1: flip the switch and assume that the power is going 556 00:31:46,280 --> 00:31:49,080 Speaker 1: to work. I think a lot of folks in society 557 00:31:49,160 --> 00:31:51,920 Speaker 1: clearly took their eye off the ball. And it's gonna 558 00:31:52,040 --> 00:31:54,400 Speaker 1: take a lot of time to figure this out. And 559 00:31:54,480 --> 00:31:57,320 Speaker 1: renewables are great. I'm I'm very pro renewable energy. It's 560 00:31:57,320 --> 00:32:01,040 Speaker 1: gonna but this stuff is a multidecade kind of solutions, 561 00:32:01,080 --> 00:32:04,080 Speaker 1: and they're obviously intermittent. You've got to figure out hydrogen 562 00:32:04,120 --> 00:32:06,520 Speaker 1: and battery storage and all of these things that we 563 00:32:06,600 --> 00:32:08,680 Speaker 1: know are on the horizon, but none of them are 564 00:32:08,800 --> 00:32:12,000 Speaker 1: kind of really here for prime time today. So the 565 00:32:12,040 --> 00:32:16,120 Speaker 1: reality is today you've got to have some gas supply solutions, 566 00:32:16,400 --> 00:32:18,880 Speaker 1: you've got to have coal in the mix. And you know, 567 00:32:18,960 --> 00:32:22,160 Speaker 1: for better or worse, Germany should be doing everything it 568 00:32:22,240 --> 00:32:25,080 Speaker 1: can to keep the nukes that they still have remaining running. 569 00:32:25,200 --> 00:32:28,560 Speaker 1: They still have the potential to uh, they have some 570 00:32:28,600 --> 00:32:30,600 Speaker 1: plants I think three that are running and they have 571 00:32:31,000 --> 00:32:33,240 Speaker 1: the possibility of stretching it out. They're supposed to face 572 00:32:33,280 --> 00:32:35,840 Speaker 1: them out by the end of the year, and the question, well, 573 00:32:35,880 --> 00:32:37,720 Speaker 1: I don't think they can. By the way, Rob, have 574 00:32:37,760 --> 00:32:43,400 Speaker 1: you seen there's a Norwegian drama called Occupied, which is 575 00:32:43,560 --> 00:32:47,960 Speaker 1: really fantastic. It's about like, the premise is that Norway 576 00:32:48,040 --> 00:32:51,720 Speaker 1: decides to stop exporting gas and oil, and so the 577 00:32:51,800 --> 00:32:56,480 Speaker 1: EU allows Russia to occupy Norway, which sounds crazy, but 578 00:32:56,680 --> 00:32:58,560 Speaker 1: or it did at the time. Now it sounds so 579 00:32:58,640 --> 00:33:02,840 Speaker 1: realistic that you politics of energy in Europe are just 580 00:33:02,960 --> 00:33:06,880 Speaker 1: absolutely fascinating, and you're right to point out Norway is 581 00:33:06,920 --> 00:33:11,040 Speaker 1: so important to the gas equation. One of our analysts 582 00:33:11,080 --> 00:33:13,680 Speaker 1: who covers Equinore, he had a focus idea in them 583 00:33:13,720 --> 00:33:17,040 Speaker 1: earlier this year because they were really poised to benefit 584 00:33:17,920 --> 00:33:21,200 Speaker 1: because of being the number two gas supplier into Europe. 585 00:33:21,240 --> 00:33:23,240 Speaker 1: And you've got all these high prices, so some people 586 00:33:23,280 --> 00:33:25,560 Speaker 1: are actually printing money because of where we are today, 587 00:33:25,640 --> 00:33:28,479 Speaker 1: Larry putin up into all right, Rob, thanks so much 588 00:33:28,480 --> 00:33:31,520 Speaker 1: for joining. Rob Barnett senior analysts covering energy out of 589 00:33:31,520 --> 00:33:33,520 Speaker 1: our London office. He joins us live here on our 590 00:33:33,520 --> 00:33:38,800 Speaker 1: Bloomberg Interactive Broker studio. He's a Bloomberg Intelligence. Thanks for 591 00:33:38,840 --> 00:33:42,320 Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and 592 00:33:42,400 --> 00:33:46,440 Speaker 1: listen to interviews of Apple podcasts or whatever podcast platform 593 00:33:46,480 --> 00:33:50,120 Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller. 594 00:33:51,640 --> 00:33:54,200 Speaker 1: Pet On Ball Sweeney I'm on Twitter at pt Sweeney. 595 00:33:54,240 --> 00:33:56,920 Speaker 1: Before the podcast, you can always catch us worldwide at 596 00:33:56,920 --> 00:33:57,920 Speaker 1: Bloomberg Radio