1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,519 Speaker 2: Terminal and the Bloomberg Business App. Heading into this the 10 00:00:37,600 --> 00:00:41,160 Speaker 2: Fence Jackson Hole Economic Symposium, kicking off today in Wyoming, 11 00:00:41,440 --> 00:00:44,640 Speaker 2: Kansas City. FED President Jeffrey Smith sang officials will be 12 00:00:44,680 --> 00:00:48,760 Speaker 2: closely watching inflation data ahead of next month's interest rate decision. 13 00:00:48,800 --> 00:00:51,320 Speaker 2: He spoke with Bloomberg's My McKee just yesterday. 14 00:00:51,840 --> 00:00:55,880 Speaker 3: This is, you know, kind of an interesting month because 15 00:00:55,920 --> 00:00:59,600 Speaker 3: we've got Jackson Hole and then we've got quite a 16 00:00:59,600 --> 00:01:02,080 Speaker 3: few weeks of data to kind of pull in. So 17 00:01:03,440 --> 00:01:06,520 Speaker 3: I'm really I think everybody's quite interested in some of 18 00:01:06,560 --> 00:01:09,200 Speaker 3: the maybe the prints that happened in the last couple 19 00:01:09,200 --> 00:01:11,680 Speaker 3: of months and kind of where they go from here. 20 00:01:12,680 --> 00:01:15,679 Speaker 4: So I'm like everybody. 21 00:01:15,880 --> 00:01:21,319 Speaker 3: I think there was some fascinating conversations at the last FMC. 22 00:01:21,720 --> 00:01:24,480 Speaker 3: As you know, there were a couple of cents. I 23 00:01:24,520 --> 00:01:28,600 Speaker 3: think my interpretation of what's happening, especially in the labor market, 24 00:01:29,080 --> 00:01:31,840 Speaker 3: is that the first couple quarters, a lot of business 25 00:01:31,840 --> 00:01:35,720 Speaker 3: people were just saying, there's uncertainty enough, and I think 26 00:01:35,760 --> 00:01:38,200 Speaker 3: they kind of cooled a little bit on the higher side. 27 00:01:38,520 --> 00:01:40,680 Speaker 3: But the most recent couple of weeks that we've been 28 00:01:40,720 --> 00:01:43,640 Speaker 3: talking to businesses in the district, there seems to be 29 00:01:44,040 --> 00:01:47,640 Speaker 3: a burgeoning optimism again that they've kind of digested and 30 00:01:48,000 --> 00:01:50,200 Speaker 3: they've been agile enough to try to work their way 31 00:01:50,240 --> 00:01:53,600 Speaker 3: through some of the new policies from the administration, and 32 00:01:53,680 --> 00:01:56,520 Speaker 3: maybe going forward, maybe we'll see a little bit uptick. 33 00:01:56,840 --> 00:02:00,280 Speaker 3: That said, I still believe there's that the that the 34 00:02:00,280 --> 00:02:04,080 Speaker 3: inflation number is trending closer to three than two. 35 00:02:04,480 --> 00:02:06,720 Speaker 5: Well, we saw that in the minutes that in general 36 00:02:06,880 --> 00:02:09,919 Speaker 5: the Open Market Committee felt that inflation was a bigger 37 00:02:10,000 --> 00:02:11,120 Speaker 5: danger at this point. 38 00:02:11,440 --> 00:02:15,080 Speaker 4: Would you say that's your view now? It would be 39 00:02:15,120 --> 00:02:15,600 Speaker 4: my view now. 40 00:02:15,840 --> 00:02:18,920 Speaker 3: I think with an understanding that what may have happened 41 00:02:18,919 --> 00:02:21,119 Speaker 3: in the first couple quarters on the labor side, which 42 00:02:21,160 --> 00:02:26,480 Speaker 3: I think concerned several people on the committee and me included. 43 00:02:26,800 --> 00:02:31,240 Speaker 3: But I think this PPI was interesting, that print was interesting. 44 00:02:31,280 --> 00:02:34,880 Speaker 3: But I really believe that when we talked to a 45 00:02:34,919 --> 00:02:38,920 Speaker 3: lot of a lot of folks in our district, is 46 00:02:38,960 --> 00:02:42,240 Speaker 3: that if you had to kind of lean or have 47 00:02:42,320 --> 00:02:44,600 Speaker 3: a bias toward, it would be on the inflation side. 48 00:02:44,880 --> 00:02:48,400 Speaker 5: Maybe you've moved toward the middle in terms of whether 49 00:02:48,600 --> 00:02:51,000 Speaker 5: you should hold rates or cut rates. 50 00:02:51,560 --> 00:02:54,760 Speaker 3: You know, it's really fascinating you think about and you 51 00:02:54,760 --> 00:02:57,080 Speaker 3: have great experience in this when you get to the 52 00:02:57,120 --> 00:03:05,240 Speaker 3: policy table, when you're talking about it, everything's connected to 53 00:03:05,240 --> 00:03:09,600 Speaker 3: to the dual mandate, right, and when inflation is really 54 00:03:09,720 --> 00:03:13,040 Speaker 3: ramping up, you have a blunt instrument and you act, 55 00:03:13,120 --> 00:03:16,880 Speaker 3: which is what we did. Now, as you get closer 56 00:03:16,919 --> 00:03:21,560 Speaker 3: to the optimum dual mandate numbers, it actually becomes more 57 00:03:21,600 --> 00:03:24,639 Speaker 3: difficult to make decisions on the margin relative to where 58 00:03:24,639 --> 00:03:28,239 Speaker 3: that policy rate should go. And so I think that's 59 00:03:28,280 --> 00:03:31,240 Speaker 3: where you're seeing a lot of the debate now is 60 00:03:31,440 --> 00:03:34,440 Speaker 3: you know where's your lean is it? Where do you 61 00:03:34,480 --> 00:03:37,000 Speaker 3: believe things are too restrictive on the policy rate side 62 00:03:37,080 --> 00:03:40,520 Speaker 3: or not. I think they're modestly restrictive. I'm still trying 63 00:03:40,520 --> 00:03:44,120 Speaker 3: to find ways of what's being inhibited in the economy 64 00:03:44,360 --> 00:03:48,080 Speaker 3: from where our policy rate is today. But I think 65 00:03:48,120 --> 00:03:49,000 Speaker 3: we're on a good path. 66 00:03:49,400 --> 00:03:52,760 Speaker 5: So at this point, it probably would be a mistake 67 00:03:52,880 --> 00:03:56,600 Speaker 5: for Parenbau on Friday to say definitely we're going to 68 00:03:56,640 --> 00:03:57,840 Speaker 5: cut as he did last year. 69 00:03:57,960 --> 00:04:02,960 Speaker 3: Yeah, yeah, I always can't wait for that speech. I 70 00:04:03,000 --> 00:04:05,720 Speaker 3: think he keeps it close fast. I wouldn't front round 71 00:04:05,760 --> 00:04:09,240 Speaker 3: him even if I knew. But I think that we've 72 00:04:09,240 --> 00:04:13,680 Speaker 3: been doing so much work this year around the framework, 73 00:04:13,880 --> 00:04:18,240 Speaker 3: around around really getting into where how we get this 74 00:04:18,400 --> 00:04:22,800 Speaker 3: soft landing to two percent without breaking anything. So I 75 00:04:23,080 --> 00:04:25,360 Speaker 3: think he has a lot of different directions to go, 76 00:04:25,440 --> 00:04:29,080 Speaker 3: and I think it'll be a very anticipated discussion. 77 00:04:29,120 --> 00:04:32,000 Speaker 5: Well, how do you think you should communicate going forward? 78 00:04:32,040 --> 00:04:35,359 Speaker 5: Because there are some people who are candidates for to 79 00:04:35,400 --> 00:04:37,839 Speaker 5: be the next chair who say the FED talks too much. 80 00:04:38,160 --> 00:04:43,279 Speaker 3: Yeah, wow, Well you hear both sides of that coin 81 00:04:43,640 --> 00:04:46,240 Speaker 3: all the time, right, One, do we keep too much 82 00:04:46,279 --> 00:04:47,080 Speaker 3: to our best? 83 00:04:47,120 --> 00:04:47,360 Speaker 4: Two? 84 00:04:47,920 --> 00:04:53,360 Speaker 3: Why aren't we doing more kind of transmitting future crystal 85 00:04:53,400 --> 00:04:58,000 Speaker 3: ball or how are we interpreting the numbers to a 86 00:04:58,080 --> 00:05:02,160 Speaker 3: future event? You know, the SEP and the dot plot 87 00:05:02,560 --> 00:05:05,719 Speaker 3: is maybe some of that, but I don't hear a 88 00:05:05,760 --> 00:05:11,120 Speaker 3: lot that we don't talk enough or express ourselves enough. 89 00:05:11,320 --> 00:05:14,760 Speaker 3: I think it's more important where the American public is concerned. 90 00:05:14,800 --> 00:05:17,559 Speaker 3: As they understand, we do a better job on helping 91 00:05:17,600 --> 00:05:19,000 Speaker 3: them understand. 92 00:05:18,560 --> 00:05:20,280 Speaker 4: What we're doing and why we're doing it. 93 00:05:21,120 --> 00:05:24,400 Speaker 3: And the dual mandate and the christness of those two 94 00:05:24,400 --> 00:05:25,960 Speaker 3: mandates help us help us. 95 00:05:25,880 --> 00:05:28,159 Speaker 4: A lot in the role we have. 96 00:05:28,720 --> 00:05:31,520 Speaker 5: I have to ask you about the latest presidential tweets 97 00:05:31,600 --> 00:05:36,479 Speaker 5: and the attack on Lisa Cook, Governor Cook. I know 98 00:05:36,560 --> 00:05:39,760 Speaker 5: that FED officials will always say, we don't let politics 99 00:05:39,800 --> 00:05:42,280 Speaker 5: come into the boardroom. We do just what we think 100 00:05:42,320 --> 00:05:43,840 Speaker 5: we should do. On the ECCONUOM, we don't even talk 101 00:05:43,839 --> 00:05:46,480 Speaker 5: about it. But you've got to be getting sick of this. 102 00:05:48,279 --> 00:05:53,680 Speaker 3: Well, Look, I'm a little philosophical about the whole conversation 103 00:05:53,760 --> 00:05:58,160 Speaker 3: of FED independence and where our role is in the 104 00:05:58,520 --> 00:06:02,360 Speaker 3: American economy. We're almost two hundred and fifty years old 105 00:06:02,360 --> 00:06:05,200 Speaker 3: as a nation. I think there's something to be said. 106 00:06:05,240 --> 00:06:08,360 Speaker 3: We were built on words, and we continue to debate 107 00:06:08,400 --> 00:06:15,680 Speaker 3: those words legislatively and judicially, whatever friction we might have 108 00:06:15,880 --> 00:06:19,719 Speaker 3: with other branches of the government. I think great steels 109 00:06:19,760 --> 00:06:22,960 Speaker 3: tested by fire so what we can always be better. 110 00:06:22,960 --> 00:06:25,880 Speaker 3: We can always do this better. But I think the 111 00:06:26,000 --> 00:06:31,200 Speaker 3: nature of independence and I think, don't believe me, believe 112 00:06:31,240 --> 00:06:35,200 Speaker 3: other nations that have central banks and don't it seems 113 00:06:35,240 --> 00:06:38,560 Speaker 3: to work. But I'm always open for the conversation of 114 00:06:38,560 --> 00:06:39,479 Speaker 3: how do we make it better? 115 00:06:39,680 --> 00:06:42,400 Speaker 5: Well, do you think the FED has suffered to hit 116 00:06:42,400 --> 00:06:45,679 Speaker 5: to credibility by the constant attacks from Washington? 117 00:06:46,960 --> 00:06:50,800 Speaker 3: So I think the credibility issue is more in are 118 00:06:50,839 --> 00:06:54,680 Speaker 3: we fulfilling our responsibility and role around the actions of 119 00:06:55,320 --> 00:06:59,760 Speaker 3: monetary policy and monetary operations? And I think the work 120 00:06:59,800 --> 00:07:02,599 Speaker 3: we do on behalf of the American people is very 121 00:07:02,640 --> 00:07:08,240 Speaker 3: important to their lifestyle and their living and I want 122 00:07:08,279 --> 00:07:11,560 Speaker 3: to make sure that our reputations stay strong around the 123 00:07:11,600 --> 00:07:15,880 Speaker 3: things that we're mandated to do by Congress. Other than that, 124 00:07:16,200 --> 00:07:19,440 Speaker 3: there's a lot of noise outside of that dual mandate. 125 00:07:20,080 --> 00:07:24,080 Speaker 3: And look, you take this chair, you do this job, 126 00:07:24,120 --> 00:07:27,400 Speaker 3: and people are going to have opinions, and I'm fine 127 00:07:27,440 --> 00:07:27,640 Speaker 3: with that. 128 00:07:27,840 --> 00:07:30,360 Speaker 5: Then when you talk to people, do they understand why 129 00:07:30,360 --> 00:07:31,720 Speaker 5: you're not lowering interest rates? 130 00:07:33,040 --> 00:07:37,200 Speaker 3: Actually, it's interesting. So we're going to have two sets 131 00:07:37,200 --> 00:07:39,000 Speaker 3: of folks that we would talk to. One are going 132 00:07:39,040 --> 00:07:42,200 Speaker 3: to be business people and finance people that really they 133 00:07:42,280 --> 00:07:45,080 Speaker 3: understand because they have to. I mean, I'm a former banker. 134 00:07:45,680 --> 00:07:48,920 Speaker 3: You have to risk manage the cycles of rates to 135 00:07:49,120 --> 00:07:55,160 Speaker 3: run your bank well and profitably. It's the general public 136 00:07:55,240 --> 00:07:58,720 Speaker 3: that we continue to try to reach to give them 137 00:07:58,760 --> 00:08:01,480 Speaker 3: some sense of what this do mandate means to them. 138 00:08:02,520 --> 00:08:05,360 Speaker 3: And I think there's a little bit of perfection in 139 00:08:05,880 --> 00:08:11,720 Speaker 3: the healthy friction between full employment and stable prices. And 140 00:08:11,760 --> 00:08:14,760 Speaker 3: I actually like that friction, and it allows us to 141 00:08:14,880 --> 00:08:17,640 Speaker 3: kind of balance and rebalance what we're doing on their behalf. 142 00:08:17,920 --> 00:08:20,720 Speaker 3: And it's one hundred percent on their behalf. If you 143 00:08:20,880 --> 00:08:24,360 Speaker 3: reach full employment and if you keep prices stable, people 144 00:08:24,400 --> 00:08:28,000 Speaker 3: can work and thrive. And I think that's an important 145 00:08:28,000 --> 00:08:29,000 Speaker 3: piece of what FED does. 146 00:08:30,360 --> 00:08:32,800 Speaker 2: I was in Kansas City, FED President Jeffrey Smith sitting 147 00:08:32,840 --> 00:08:35,439 Speaker 2: down with Bloomberg's my McKee. It is five point thirty 148 00:08:35,440 --> 00:08:37,840 Speaker 2: am at Jackson Homeway. I make sunrise at about forty 149 00:08:37,840 --> 00:08:40,440 Speaker 2: five minutes or so. My McKee's safely and comfortable in 150 00:08:40,480 --> 00:08:42,480 Speaker 2: his hotel room. I believe, Mike, good morning. He's a 151 00:08:42,480 --> 00:08:45,560 Speaker 2: fantastic exchange. As always, this line stood out for us 152 00:08:45,559 --> 00:08:47,320 Speaker 2: all if you had to lean or have a bus 153 00:08:47,360 --> 00:08:50,839 Speaker 2: towards it would be on the inflation side. Will Chairman 154 00:08:50,960 --> 00:08:52,760 Speaker 2: Powell be in the same boat tomorrow. 155 00:08:56,760 --> 00:08:59,320 Speaker 5: He's probably in the same boat. The issue is whether 156 00:08:59,360 --> 00:09:01,520 Speaker 5: he will talk about it at length enough for us 157 00:09:01,559 --> 00:09:04,440 Speaker 5: to know where he lands. And I think he's going 158 00:09:04,480 --> 00:09:06,480 Speaker 5: to try to avoid that because at this point they 159 00:09:06,480 --> 00:09:08,679 Speaker 5: don't know what the next data are going to show. 160 00:09:09,120 --> 00:09:11,600 Speaker 1: It was interesting I thought that Schmid, who has. 161 00:09:11,520 --> 00:09:13,480 Speaker 5: Been one of the most hawkish members on the FED 162 00:09:13,559 --> 00:09:17,560 Speaker 5: and has pushed against rate cuts anytime soon, is now 163 00:09:17,600 --> 00:09:20,320 Speaker 5: saying he's open to it if the data show that 164 00:09:20,520 --> 00:09:22,480 Speaker 5: they need to do that. So if we get a 165 00:09:22,600 --> 00:09:28,319 Speaker 5: bad employment report and a reasonably moderate inflation number, then 166 00:09:28,360 --> 00:09:31,000 Speaker 5: you might see more people on the Fed than Waller 167 00:09:31,120 --> 00:09:34,120 Speaker 5: and Bowman who are willing to vote for a rate 168 00:09:34,200 --> 00:09:35,160 Speaker 5: cut in September. 169 00:09:35,440 --> 00:09:37,400 Speaker 2: What was interesting there is that we did get about 170 00:09:37,440 --> 00:09:40,160 Speaker 2: employment report and he hasn't changed his views. So when 171 00:09:40,200 --> 00:09:42,000 Speaker 2: you look at the Federal Reserve min it's from yesterday, 172 00:09:42,000 --> 00:09:44,520 Speaker 2: and everyone turns around and says the super stale that dated, 173 00:09:44,800 --> 00:09:47,800 Speaker 2: ignore them. I just wonder how many people have maintained 174 00:09:47,800 --> 00:09:51,200 Speaker 2: those views from that Federal Reserve meetings even with the 175 00:09:51,240 --> 00:09:53,199 Speaker 2: payrolls report, Because two days later. 176 00:09:56,960 --> 00:09:59,760 Speaker 5: You probably have most of the board retaining those views 177 00:10:00,000 --> 00:10:04,920 Speaker 5: because basically it was seventeen, well sixteen against eighteen, since 178 00:10:04,960 --> 00:10:09,120 Speaker 5: Coogler didn't vote, saying that inflation was the bigger risk, 179 00:10:09,280 --> 00:10:13,400 Speaker 5: and so there's a bias going into September that they 180 00:10:13,440 --> 00:10:16,600 Speaker 5: shouldn't move, which is not at all what the markets think. 181 00:10:17,000 --> 00:10:19,200 Speaker 5: And they're going to want to see the data, and 182 00:10:19,240 --> 00:10:21,160 Speaker 5: again it's going to come down to a question of 183 00:10:21,200 --> 00:10:24,240 Speaker 5: how bad the employment report is and how bad the 184 00:10:24,280 --> 00:10:28,480 Speaker 5: inflation report is. If inflation shows signs of really picking up, 185 00:10:28,840 --> 00:10:31,520 Speaker 5: then probably September seventeenth is going to be a tough 186 00:10:31,559 --> 00:10:32,680 Speaker 5: sell for a raid cut. 187 00:10:32,800 --> 00:10:36,400 Speaker 2: Mike, just quickly. The increased scrutiny of this institution, an 188 00:10:36,400 --> 00:10:40,000 Speaker 2: institution that you've covered for a long long time. It's 189 00:10:40,080 --> 00:10:42,600 Speaker 2: kind of the elephant in the room in Jackson hallw Wyoming. Now, 190 00:10:42,880 --> 00:10:45,080 Speaker 2: the pressure that's coming from the White House and elsewhere 191 00:10:45,080 --> 00:10:48,240 Speaker 2: in Washington, d C. They clearly want to change this institution. 192 00:10:48,600 --> 00:10:51,280 Speaker 2: They're clearly pursuing that objective in different ways. Mike, I 193 00:10:51,440 --> 00:10:53,320 Speaker 2: just wonder what the reaction's been on the ground in 194 00:10:53,360 --> 00:10:55,040 Speaker 2: the last few days while you've been there. 195 00:10:59,040 --> 00:11:01,959 Speaker 5: Well, basically everybody agrees that something needs to change in 196 00:11:02,000 --> 00:11:04,880 Speaker 5: the Fed's framework, which Jay Powell is expected to outline 197 00:11:04,960 --> 00:11:08,000 Speaker 5: on Friday, because they put a lot more weight on 198 00:11:08,120 --> 00:11:12,040 Speaker 5: employment in the last framework, and obviously inflation is now 199 00:11:12,360 --> 00:11:14,719 Speaker 5: a bigger issue for most of them. And then the 200 00:11:14,800 --> 00:11:18,280 Speaker 5: question becomes, what's the new leader going to do? What's 201 00:11:18,320 --> 00:11:21,880 Speaker 5: he going to pursue in terms of FED policy. Some 202 00:11:21,960 --> 00:11:24,440 Speaker 5: have said, as we were discussing in the interview with 203 00:11:24,679 --> 00:11:27,480 Speaker 5: Jeff Schmidt, that the FED talks too much. They should 204 00:11:27,520 --> 00:11:32,200 Speaker 5: dial back on their community individual communications and try to 205 00:11:32,280 --> 00:11:35,920 Speaker 5: explain more about what they're doing. But does that really 206 00:11:35,960 --> 00:11:39,120 Speaker 5: make a difference in the sense of American people paying 207 00:11:39,160 --> 00:11:42,400 Speaker 5: attention to this? Wall Street pays attention minute to minute, 208 00:11:42,400 --> 00:11:44,800 Speaker 5: But do the American people pay attention to it other 209 00:11:44,880 --> 00:11:47,000 Speaker 5: than basically when they go to the grocery store. 210 00:11:47,800 --> 00:11:51,280 Speaker 2: Stay with us? Multiple implex savanas coming up off to this. 211 00:12:00,400 --> 00:12:04,120 Speaker 2: The Federal Reserve heading into Jackson hold facing down upside 212 00:12:04,200 --> 00:12:07,400 Speaker 2: risk to inflation and downside risk to employment. The minutes 213 00:12:07,400 --> 00:12:10,440 Speaker 2: from the Fed's last meeting indicating quote, a majority of 214 00:12:10,480 --> 00:12:13,920 Speaker 2: participants judge the upside risk to inflation as the greater 215 00:12:14,400 --> 00:12:17,080 Speaker 2: of these two risks. The former FED governor Bessie Jude 216 00:12:17,160 --> 00:12:19,400 Speaker 2: joined us now for more. Bessie, welcome back to the program. 217 00:12:19,440 --> 00:12:21,920 Speaker 2: It's good to lean on your experience. As always, Let's 218 00:12:21,920 --> 00:12:23,760 Speaker 2: just start with the premise of the issue. Do you 219 00:12:23,880 --> 00:12:27,000 Speaker 2: believe that we do see as your mandate in conflict. 220 00:12:28,679 --> 00:12:30,319 Speaker 6: I'm not sure it's quite in conflict. 221 00:12:30,400 --> 00:12:30,679 Speaker 1: Yet. 222 00:12:30,960 --> 00:12:33,520 Speaker 7: When you look at the unemployment numbers and you go 223 00:12:33,640 --> 00:12:37,120 Speaker 7: back to the last projections that the FED did, the 224 00:12:37,240 --> 00:12:42,200 Speaker 7: median participant thought that the long term rate of unemployment 225 00:12:42,240 --> 00:12:44,240 Speaker 7: would be a four point two, which is exactly where 226 00:12:44,280 --> 00:12:48,560 Speaker 7: we are. So I'm not sure that the number of 227 00:12:48,679 --> 00:12:53,000 Speaker 7: jobs created because of supply side issues, as you were discussing, 228 00:12:53,480 --> 00:12:56,560 Speaker 7: is enough to consider that out of whack. 229 00:12:57,000 --> 00:13:00,400 Speaker 2: So Betsy, going into the speech from Chairman Powell, wonder 230 00:13:00,400 --> 00:13:02,600 Speaker 2: how much has actually changed for him since we got 231 00:13:02,640 --> 00:13:05,559 Speaker 2: that payroll report a few fridays ago. 232 00:13:06,440 --> 00:13:08,120 Speaker 6: I don't think a lot has changed. 233 00:13:08,640 --> 00:13:13,000 Speaker 7: The payroll numbers are the most unreliable indicator that you 234 00:13:13,160 --> 00:13:17,079 Speaker 7: get because they're so frequently revised, and the revisions, I 235 00:13:17,120 --> 00:13:19,559 Speaker 7: think the average revision is one hundred thousand jobs, so 236 00:13:20,320 --> 00:13:24,240 Speaker 7: that is huge. I'll tell you one story when I 237 00:13:24,280 --> 00:13:27,439 Speaker 7: was at the FED with Jay and we were discussing 238 00:13:27,520 --> 00:13:30,960 Speaker 7: launching QE three, and there was a lot of concern 239 00:13:31,200 --> 00:13:34,880 Speaker 7: amongst Jay, myself and Jeremy. 240 00:13:36,480 --> 00:13:39,360 Speaker 6: About launching Q three, and we got a bad payroll number. 241 00:13:39,400 --> 00:13:41,360 Speaker 6: We launched Q three a. 242 00:13:41,360 --> 00:13:43,920 Speaker 7: Year later, when you look at how that number had 243 00:13:43,920 --> 00:13:47,240 Speaker 7: been adjusted, it would not have justified launching Q three 244 00:13:47,240 --> 00:13:48,640 Speaker 7: at all. 245 00:13:48,720 --> 00:13:53,120 Speaker 8: So, then, Betsy, this time around, if he's having to 246 00:13:53,160 --> 00:13:56,760 Speaker 8: deal with those inputs, but then also having to deal 247 00:13:57,080 --> 00:14:02,320 Speaker 8: with Muslim daily ironically cooked who have all turned more Dubvish, 248 00:14:02,640 --> 00:14:07,480 Speaker 8: does Powell necessarily need to incorporate those views when he speaks. 249 00:14:07,640 --> 00:14:10,240 Speaker 8: Does he need to also have some of that Dubvish 250 00:14:10,320 --> 00:14:13,679 Speaker 8: lean incorporated into his outlook because. 251 00:14:13,360 --> 00:14:15,439 Speaker 1: Some of the rest of the FMC is going there. 252 00:14:16,760 --> 00:14:19,480 Speaker 7: He is always aware of where every member of the 253 00:14:19,560 --> 00:14:22,560 Speaker 7: FOMC is because the job of the Chairman is to lead. 254 00:14:22,640 --> 00:14:27,440 Speaker 7: It's not to set policy and force everybody to agree. 255 00:14:27,600 --> 00:14:29,360 Speaker 6: The job of the chairman is to lead. 256 00:14:29,160 --> 00:14:31,880 Speaker 7: And to know where all of the participants, all the 257 00:14:31,920 --> 00:14:34,680 Speaker 7: members of the FMC are at any given time. 258 00:14:36,080 --> 00:14:38,680 Speaker 8: If his speech, though, also has to do with cementing 259 00:14:38,720 --> 00:14:42,560 Speaker 8: his legacy, Betsy, considering where we go from here, considering 260 00:14:42,560 --> 00:14:45,360 Speaker 8: there will be a new fed governor in twenty twenty six. 261 00:14:45,800 --> 00:14:47,480 Speaker 8: You know the man, Well, what do you expect that 262 00:14:47,680 --> 00:14:48,280 Speaker 8: to look like? 263 00:14:48,440 --> 00:14:49,120 Speaker 1: From Powell? 264 00:14:49,120 --> 00:14:51,520 Speaker 8: What does it sound like to have a FED chair 265 00:14:51,600 --> 00:14:54,600 Speaker 8: who tries to come out and defend independence and have 266 00:14:54,640 --> 00:14:58,160 Speaker 8: that legacy but without provoking the politics of the moment 267 00:14:58,200 --> 00:14:58,920 Speaker 8: and the White House. 268 00:15:00,160 --> 00:15:00,600 Speaker 6: I think J. 269 00:15:00,800 --> 00:15:03,440 Speaker 7: Powell, in terms of his legacy is looking at what 270 00:15:03,560 --> 00:15:06,720 Speaker 7: happens to his mandate, what happens to inflation, what happens 271 00:15:06,720 --> 00:15:10,080 Speaker 7: to employment, and how well does he manage that. It's 272 00:15:10,120 --> 00:15:14,600 Speaker 7: not any single speech, and I would would be shocked 273 00:15:14,680 --> 00:15:15,960 Speaker 7: if he was viewing. 274 00:15:15,760 --> 00:15:16,160 Speaker 4: It that way. 275 00:15:16,360 --> 00:15:18,200 Speaker 2: Event See, do you think there is a bias when 276 00:15:18,240 --> 00:15:21,360 Speaker 2: it comes to handling and targeting inflation over say, the 277 00:15:21,400 --> 00:15:23,920 Speaker 2: prospects for the labor market? Do you have a bias? 278 00:15:24,040 --> 00:15:27,440 Speaker 2: Is there an inherent bias on the committee to prioritize 279 00:15:27,440 --> 00:15:28,160 Speaker 2: one over the other? 280 00:15:29,720 --> 00:15:32,960 Speaker 7: You know, so everybody who comes on the committee ultimately 281 00:15:33,000 --> 00:15:36,680 Speaker 7: gets led as a hawk or a dove. I don't 282 00:15:36,680 --> 00:15:41,600 Speaker 7: think it's that clear cut. I think for myself, I 283 00:15:41,640 --> 00:15:44,120 Speaker 7: probably do have a bit of a bias on inflation, 284 00:15:44,320 --> 00:15:47,920 Speaker 7: because you know, I started my career in the seventies 285 00:15:47,920 --> 00:15:49,120 Speaker 7: and the vulgar years, when. 286 00:15:49,160 --> 00:15:51,040 Speaker 6: When inflation was just out of control. 287 00:15:51,240 --> 00:15:54,000 Speaker 7: But I don't think there's a real bias inside the 288 00:15:54,080 --> 00:15:56,520 Speaker 7: room one way or the other. It's more a matter 289 00:15:56,560 --> 00:15:58,680 Speaker 7: of which one seems the most difficult to manage at 290 00:15:58,680 --> 00:15:59,280 Speaker 7: the time. 291 00:15:59,480 --> 00:16:01,000 Speaker 2: And what do you think is the most difficult to 292 00:16:01,040 --> 00:16:01,800 Speaker 2: manus Right now? 293 00:16:02,720 --> 00:16:04,840 Speaker 6: I still think inflation is much more difficult. 294 00:16:05,280 --> 00:16:06,800 Speaker 2: And do you think it gets harder in the months 295 00:16:06,840 --> 00:16:08,880 Speaker 2: to come? Do you suspect we will see more passed 296 00:16:08,880 --> 00:16:10,360 Speaker 2: through from the tariffs? 297 00:16:10,360 --> 00:16:13,040 Speaker 7: Well, yeah, it's going to be very hard to determine 298 00:16:13,200 --> 00:16:16,360 Speaker 7: once you start getting passed through. Is that passed through 299 00:16:16,400 --> 00:16:18,640 Speaker 7: a one time price change or is it going to 300 00:16:18,680 --> 00:16:21,840 Speaker 7: be persistent? And you really, really, they're going to be 301 00:16:21,880 --> 00:16:26,080 Speaker 7: watching what expectations are. Inflation expectations are going to be 302 00:16:26,080 --> 00:16:29,960 Speaker 7: the key over the next year or two. If inflation 303 00:16:30,160 --> 00:16:32,160 Speaker 7: expectations get out of line, then the that will be 304 00:16:32,280 --> 00:16:33,000 Speaker 7: very concerned. 305 00:16:33,080 --> 00:16:35,040 Speaker 8: But Betty, isn't there an argument to be made which 306 00:16:35,120 --> 00:16:38,080 Speaker 8: Neil Dutta Renaissance Macro makes that it's the direction of 307 00:16:38,120 --> 00:16:41,000 Speaker 8: travel that's troubling. That inflation, for the most part has 308 00:16:41,000 --> 00:16:43,360 Speaker 8: been traveling in the right way, but the labor market 309 00:16:43,440 --> 00:16:44,720 Speaker 8: is traveling in the wrong way. 310 00:16:47,200 --> 00:16:50,760 Speaker 7: Again, I just don't see that. I think inflation has 311 00:16:50,840 --> 00:16:54,280 Speaker 7: been fairly steady. It hasn't been coming down as much 312 00:16:54,320 --> 00:16:58,360 Speaker 7: as I would have expected if the current setting of 313 00:16:58,400 --> 00:17:01,640 Speaker 7: monetary policy was restrictive as some seem to think. 314 00:17:02,000 --> 00:17:04,600 Speaker 8: So, Betsy, just bringing me all back around about what 315 00:17:04,640 --> 00:17:07,080 Speaker 8: we're going to get from the Fed governor tomorrow. Do 316 00:17:07,119 --> 00:17:09,840 Speaker 8: you expect there to be any change for how we 317 00:17:09,960 --> 00:17:11,920 Speaker 8: view where the path of policy is. 318 00:17:12,119 --> 00:17:13,600 Speaker 1: After we hear from Jay Powell? 319 00:17:13,880 --> 00:17:17,399 Speaker 8: Or will tomorrow be inconsequential as far as that goes. 320 00:17:17,680 --> 00:17:20,919 Speaker 7: If where we means where we the media, where we 321 00:17:20,960 --> 00:17:23,399 Speaker 7: investors think policy is going, I think there may be 322 00:17:23,440 --> 00:17:28,280 Speaker 7: a change because I don't see any any chance that 323 00:17:28,359 --> 00:17:30,800 Speaker 7: there's a nod toward a September cut or any promise 324 00:17:30,920 --> 00:17:33,399 Speaker 7: to September cut. I think he's going to first focus 325 00:17:33,440 --> 00:17:39,560 Speaker 7: primarily on the decision framework and not give any indication 326 00:17:39,680 --> 00:17:41,120 Speaker 7: of where he's leaning for sept Chamber. 327 00:17:42,720 --> 00:17:46,159 Speaker 2: Stay with us. Mulblanberg, Savannah's coming up off to this. 328 00:17:54,880 --> 00:17:57,400 Speaker 2: John Stelfhis of w Oppenheimer, the biggest bull on Wall 329 00:17:57,400 --> 00:18:01,000 Speaker 2: Street writing some profit taking without fomo to be expected 330 00:18:01,240 --> 00:18:04,600 Speaker 2: with Pounds address on Friday, a catalyst capable of moving 331 00:18:04,640 --> 00:18:07,159 Speaker 2: the direction of the market. John joins a staff and 332 00:18:07,200 --> 00:18:09,639 Speaker 2: more junk of mornic. Good morning, John, How are you 333 00:18:09,680 --> 00:18:11,360 Speaker 2: explaining the last few days to clients? 334 00:18:11,800 --> 00:18:14,720 Speaker 9: Well, I would say very simply, it is to be 335 00:18:14,840 --> 00:18:18,280 Speaker 9: expected that after a tremendous run up from the lows 336 00:18:18,280 --> 00:18:21,840 Speaker 9: on April eighth that were tested and then all of 337 00:18:21,920 --> 00:18:25,080 Speaker 9: a sudden, we came back very powerfully over the course 338 00:18:25,119 --> 00:18:27,280 Speaker 9: of I guess the last three weeks or so. You 339 00:18:27,320 --> 00:18:30,359 Speaker 9: can't go up every day, and we've got a great 340 00:18:30,440 --> 00:18:36,600 Speaker 9: catalyst for bears, skeptics and nervous investors to take profits 341 00:18:36,640 --> 00:18:40,639 Speaker 9: without FOMO right now or fear of missing out myths. 342 00:18:41,920 --> 00:18:45,359 Speaker 9: What's likely a secular ball market because you have the 343 00:18:45,440 --> 00:18:49,760 Speaker 9: FED on Friday at Jackson Hole. Then beyond that, everybody's 344 00:18:49,840 --> 00:18:52,080 Speaker 9: looking for the first week in September where you get 345 00:18:52,119 --> 00:18:54,639 Speaker 9: the jobs number. What's the story going to be or 346 00:18:54,640 --> 00:18:57,080 Speaker 9: we're going to get another set of worrisome revisions. 347 00:18:57,840 --> 00:18:59,760 Speaker 1: Is it going to be a big miss. 348 00:18:59,400 --> 00:19:02,840 Speaker 9: In terms of expectations and all that really in the 349 00:19:02,880 --> 00:19:08,119 Speaker 9: process of some really heavy duty transitions related to technology 350 00:19:08,200 --> 00:19:11,760 Speaker 9: and innovation related to AI, as well as an administration 351 00:19:12,320 --> 00:19:14,880 Speaker 9: that really, you know, for all the criticism it gets 352 00:19:14,960 --> 00:19:17,920 Speaker 9: in some ways is dealing with cans that have been 353 00:19:18,880 --> 00:19:22,520 Speaker 9: kicked down the proverbial road for decades by both sides 354 00:19:22,520 --> 00:19:25,400 Speaker 9: of the aisle. And so with that kind of uncertainty, 355 00:19:25,480 --> 00:19:28,479 Speaker 9: what happens is you get some turbulence in the market, 356 00:19:28,520 --> 00:19:31,240 Speaker 9: but we say, don't just buy. You don't want to 357 00:19:31,240 --> 00:19:33,720 Speaker 9: buy the dips just blindly. You want to look for 358 00:19:33,760 --> 00:19:36,679 Speaker 9: babies that get thrown out with the bath water. For 359 00:19:36,880 --> 00:19:41,000 Speaker 9: intermediate long term investors, very interesting time, I think to 360 00:19:41,040 --> 00:19:44,720 Speaker 9: see things like that. And for traders in any turbulence, 361 00:19:44,760 --> 00:19:46,080 Speaker 9: that's where they make their money. 362 00:19:46,119 --> 00:19:48,240 Speaker 2: And so John, some paksibodies. You make two big points, 363 00:19:48,320 --> 00:19:50,600 Speaker 2: one of the fat the other onnce Tex stocks. Let's 364 00:19:50,600 --> 00:19:53,119 Speaker 2: deal with them individually. Want to start with the Federal serve. Okay, 365 00:19:53,160 --> 00:19:56,240 Speaker 2: the minute yesterday showed just how oftside this committee was 366 00:19:56,240 --> 00:19:58,800 Speaker 2: gone into the payroll report two days after the meet. Think, well, 367 00:19:58,840 --> 00:20:00,359 Speaker 2: we're all trying to gage. It's just how much that 368 00:20:00,400 --> 00:20:03,520 Speaker 2: payroll support has changed things on this committee. If so, 369 00:20:03,960 --> 00:20:06,159 Speaker 2: by how much and how much will that change this 370 00:20:06,200 --> 00:20:07,920 Speaker 2: address that we get from Sham and Pounds tomorrow. 371 00:20:08,200 --> 00:20:10,119 Speaker 9: I don't think a heck of a lot really, because 372 00:20:10,160 --> 00:20:12,399 Speaker 9: the FED is one thing it's shown since March of 373 00:20:12,440 --> 00:20:16,960 Speaker 9: twenty twenty two, incredible sensitivity that is related to its 374 00:20:17,000 --> 00:20:19,760 Speaker 9: dual mandate. So there'll be some kind of a balance 375 00:20:19,800 --> 00:20:22,640 Speaker 9: here because the idea the dual mandate is relatively simple 376 00:20:23,000 --> 00:20:28,040 Speaker 9: in concept, difficult to implement and practice, but essentially provide 377 00:20:28,040 --> 00:20:33,040 Speaker 9: an an interest rate regime that is conducive to sustainable 378 00:20:33,080 --> 00:20:36,560 Speaker 9: growth without untoward levels of inflation, and on the other 379 00:20:36,640 --> 00:20:39,760 Speaker 9: side of that, without overturning the apple card for the 380 00:20:39,840 --> 00:20:42,800 Speaker 9: jobs market. So I think, you know, we still expect 381 00:20:42,840 --> 00:20:44,960 Speaker 9: a twenty five BIPs cut in September. 382 00:20:46,200 --> 00:20:48,600 Speaker 4: We could even see a pair of or. 383 00:20:50,240 --> 00:20:53,639 Speaker 9: A pair of cuts this year, with something in December 384 00:20:54,440 --> 00:20:56,480 Speaker 9: another twenty five. I don't think they're going to cut 385 00:20:56,520 --> 00:20:58,920 Speaker 9: a lot, but I think they make another down payment 386 00:20:59,600 --> 00:21:02,280 Speaker 9: for both Wall Street and Main Street to show that 387 00:21:02,359 --> 00:21:06,280 Speaker 9: indeed the FED hike cycle is beginning to end, if 388 00:21:06,320 --> 00:21:10,040 Speaker 9: not at the same pace everybody wants and the independence 389 00:21:10,080 --> 00:21:12,679 Speaker 9: of the Fed, John I think is an imperative. I 390 00:21:12,680 --> 00:21:15,800 Speaker 9: think Powell has done an excellent job. He missed it 391 00:21:16,119 --> 00:21:19,880 Speaker 9: before before March of twenty twenty two, then he got 392 00:21:19,880 --> 00:21:23,560 Speaker 9: on the case. They've raised rates eleven times, been on 393 00:21:23,720 --> 00:21:29,200 Speaker 9: pause I think for something like fourteen times or so 394 00:21:29,800 --> 00:21:34,679 Speaker 9: in terms of the FOMC meetings and no recession yet extraordinary, 395 00:21:34,920 --> 00:21:38,159 Speaker 9: and now it's going to be you know, it's he's 396 00:21:38,240 --> 00:21:41,359 Speaker 9: walking the type rope like Leon Russell might have said. 397 00:21:41,600 --> 00:21:43,359 Speaker 8: By the way, apparently there's a Wall Street Journal that 398 00:21:43,440 --> 00:21:45,600 Speaker 8: story that said Powell swims three times a week and 399 00:21:45,640 --> 00:21:47,639 Speaker 8: has a personal trainer to try to relieve some of 400 00:21:47,680 --> 00:21:49,920 Speaker 8: this stress. So I guess it's working to your point. 401 00:21:49,920 --> 00:21:54,360 Speaker 8: But John, if we get a Powell who doesn't enforce 402 00:21:54,680 --> 00:21:57,040 Speaker 8: a twenty five basis point cut, if odds of a 403 00:21:57,080 --> 00:22:00,000 Speaker 8: cut go to something like fifty percent from eighty percent 404 00:22:00,160 --> 00:22:05,000 Speaker 8: right now, is that for so you'd get a short 405 00:22:05,040 --> 00:22:06,600 Speaker 8: term you're going to get volatility. 406 00:22:06,640 --> 00:22:09,680 Speaker 9: But the trend is fairly is fairly clear of where 407 00:22:09,680 --> 00:22:12,560 Speaker 9: we're headed. I mean, when you consider that what it 408 00:22:12,600 --> 00:22:16,800 Speaker 9: was in twenty twenty one, we had nine point seven 409 00:22:16,920 --> 00:22:23,080 Speaker 9: percent inflation versus one point four percent inflation. Based on 410 00:22:23,119 --> 00:22:26,320 Speaker 9: what BLS was saying, you know, it's remarkable. We're now 411 00:22:26,359 --> 00:22:29,600 Speaker 9: around somewhere. But depending what gauge, the FED uses somewhere 412 00:22:29,640 --> 00:22:32,520 Speaker 9: around two point eight to three percent inflation. Whether you 413 00:22:32,600 --> 00:22:37,200 Speaker 9: take x CPI core you tell or you take it 414 00:22:37,240 --> 00:22:40,680 Speaker 9: on the headline remarkably done. And he's a tough guy, 415 00:22:40,800 --> 00:22:44,760 Speaker 9: he's an attorney, he's a former a private equity guy. 416 00:22:45,160 --> 00:22:46,200 Speaker 1: This is not this is. 417 00:22:46,160 --> 00:22:49,480 Speaker 9: Not a shrinking, violent and a good match for the administration. 418 00:22:49,920 --> 00:22:53,480 Speaker 9: And the administration is used to high leverage. It's based on, 419 00:22:53,920 --> 00:22:57,160 Speaker 9: you know, real estate and making the art of the deal. 420 00:22:57,720 --> 00:22:59,440 Speaker 9: And what we like to say is when we look 421 00:22:59,480 --> 00:23:02,399 Speaker 9: at a ten or treasury, around four percent from a 422 00:23:02,560 --> 00:23:06,520 Speaker 9: historical perspective, going all the way back probably to the Venetians, 423 00:23:06,960 --> 00:23:09,840 Speaker 9: four percent for borrowing for a ten year period makes 424 00:23:09,840 --> 00:23:10,520 Speaker 9: a lot of sense. 425 00:23:10,840 --> 00:23:12,080 Speaker 8: I guess this is part of the thing of what 426 00:23:12,119 --> 00:23:13,960 Speaker 8: we've been seeing the past couple of days. Though some 427 00:23:14,000 --> 00:23:16,920 Speaker 8: people have looked at tech selling off and gotten excited 428 00:23:17,080 --> 00:23:19,399 Speaker 8: that it might mean finally a rotation is happening, that 429 00:23:19,520 --> 00:23:21,959 Speaker 8: unloved parts of the market. To your point, the babies 430 00:23:22,000 --> 00:23:25,080 Speaker 8: with the bathwater can finally be bought. But how necessary 431 00:23:25,160 --> 00:23:28,760 Speaker 8: is it to get cuts in force, not just twenty 432 00:23:28,760 --> 00:23:31,639 Speaker 8: five and twenty five and then pausing, but real cuts 433 00:23:31,680 --> 00:23:34,359 Speaker 8: to bring us something to neutral or below neutral to 434 00:23:34,400 --> 00:23:35,240 Speaker 8: see that broadening out? 435 00:23:35,280 --> 00:23:38,080 Speaker 1: Well, I think we've already seen the broadening out, Danny. 436 00:23:38,119 --> 00:23:41,920 Speaker 9: If you consider I'm just looking at the spxl one 437 00:23:42,000 --> 00:23:46,320 Speaker 9: on GRR on a Bloomberg. You know, a communications services 438 00:23:46,359 --> 00:23:49,159 Speaker 9: that's about eighty percent tech tech because it's got the 439 00:23:50,200 --> 00:23:53,239 Speaker 9: watcher McCall, it's the search engines, and it's got the 440 00:23:53,400 --> 00:23:55,879 Speaker 9: social media, and it's got the streamers in it. But 441 00:23:55,920 --> 00:24:00,000 Speaker 9: then next, the second best performing is communication service up 442 00:24:00,040 --> 00:24:02,720 Speaker 9: fourteen point six percent year to date. But the second 443 00:24:02,760 --> 00:24:06,480 Speaker 9: best performer is industrials. That's a broadening fourteen and a 444 00:24:06,520 --> 00:24:08,000 Speaker 9: half percent year to date. 445 00:24:08,400 --> 00:24:11,040 Speaker 1: It's just a nine bits. 446 00:24:10,800 --> 00:24:12,639 Speaker 4: Short of where tech is. 447 00:24:12,960 --> 00:24:16,320 Speaker 9: Third best performer year to date is utilities, the utes, 448 00:24:16,400 --> 00:24:18,879 Speaker 9: up thirteen point three percent. You're going to tell me 449 00:24:18,920 --> 00:24:22,200 Speaker 9: that it hasn't broadened. The fourth best performing is info 450 00:24:22,320 --> 00:24:25,040 Speaker 9: tech up twelve and a half. Financials are up nine 451 00:24:25,080 --> 00:24:28,359 Speaker 9: point one seven. That's a value sector. Materials are up eight. 452 00:24:29,280 --> 00:24:32,760 Speaker 9: Consumer staples that's coke, smokes, and soaps, as we used 453 00:24:32,800 --> 00:24:34,840 Speaker 9: to say in the old days, up seven. 454 00:24:34,560 --> 00:24:35,399 Speaker 4: Point three six. 455 00:24:35,760 --> 00:24:39,080 Speaker 9: Real estate, all kinds of real estate up two and 456 00:24:39,160 --> 00:24:39,560 Speaker 9: a half. 457 00:24:39,640 --> 00:24:40,879 Speaker 1: So, I mean that's pretty humble. 458 00:24:41,160 --> 00:24:44,399 Speaker 9: Healthcare is negative about a little bit less than a 459 00:24:44,480 --> 00:24:49,359 Speaker 9: quarter of a percentage point. Consumer discretionary, the consumer remarkably resilient, 460 00:24:49,680 --> 00:24:54,000 Speaker 9: the sector still being somewhat brutalized down four around zero 461 00:24:54,040 --> 00:24:56,760 Speaker 9: point three six percent. And energy you think we didn't 462 00:24:56,800 --> 00:24:59,919 Speaker 9: use gasoline, but we are a wash in oil ten 463 00:25:00,160 --> 00:25:03,119 Speaker 9: of a percent down, so I think it has broadened. 464 00:25:03,160 --> 00:25:05,200 Speaker 2: So what extent is some of that just derivative of 465 00:25:05,240 --> 00:25:08,280 Speaker 2: the same story you mentioned utilities aps connected to the 466 00:25:08,280 --> 00:25:10,840 Speaker 2: AI theme. Are we all in one theme or there's 467 00:25:10,840 --> 00:25:12,680 Speaker 2: several things playing cast simultaneously. 468 00:25:12,960 --> 00:25:13,639 Speaker 1: It's both in. 469 00:25:13,760 --> 00:25:16,360 Speaker 9: Several themes playing out simultaneously. 470 00:25:16,480 --> 00:25:16,840 Speaker 4: Right now. 471 00:25:16,840 --> 00:25:19,679 Speaker 9: With a belief within the market for more than just 472 00:25:19,720 --> 00:25:22,560 Speaker 9: a few corners that the FED is in the process 473 00:25:22,640 --> 00:25:26,000 Speaker 9: of lightening up on the tightening cycle, utes are less 474 00:25:26,040 --> 00:25:30,000 Speaker 9: exposed being considered a bond market proxy, a bond proxy, 475 00:25:30,400 --> 00:25:33,160 Speaker 9: so the yield to look more attractive as rates come 476 00:25:33,280 --> 00:25:36,880 Speaker 9: down at the FED short end of the curves their 477 00:25:37,240 --> 00:25:41,280 Speaker 9: competition a lot of the time. Then for industrials, we're 478 00:25:41,359 --> 00:25:45,480 Speaker 9: just about to build all these factories and all these fabs, vocalists, 479 00:25:45,520 --> 00:25:48,480 Speaker 9: fabs and stuff with that, you're going to need a 480 00:25:48,480 --> 00:25:52,080 Speaker 9: lot of industrial equipment. Whenever I travel anywhere in the 481 00:25:52,200 --> 00:25:57,120 Speaker 9: United States, every road is clogged with construction vehicles, you know. 482 00:25:57,440 --> 00:25:59,879 Speaker 1: Bulldozers, back hos, all kinds of s. 483 00:26:00,680 --> 00:26:05,360 Speaker 9: There's always agriculture, you know, and commercial aerospace defense. I mean, 484 00:26:05,480 --> 00:26:08,240 Speaker 9: there's a lot of stuff happening, and financials should do 485 00:26:08,320 --> 00:26:12,359 Speaker 9: better as the year yield curve can it steepens to 486 00:26:12,440 --> 00:26:14,879 Speaker 9: a more traditional sense. 487 00:26:14,960 --> 00:26:16,880 Speaker 2: What's more traditional? What do you expecting? 488 00:26:17,080 --> 00:26:20,199 Speaker 9: Well, I mean you'd probably expect you expected right now. 489 00:26:20,240 --> 00:26:22,000 Speaker 9: I think we're pretty close to it with the thirty 490 00:26:22,080 --> 00:26:24,680 Speaker 9: year almost at five. It should probably be at five, 491 00:26:25,080 --> 00:26:28,760 Speaker 9: and the four probably vacillating depending upon the given month, 492 00:26:28,880 --> 00:26:32,720 Speaker 9: somewhere between three and a half and four point eight. 493 00:26:33,200 --> 00:26:34,840 Speaker 9: Just to put the scare into people. 494 00:26:34,680 --> 00:26:36,399 Speaker 2: What did the METII she's at Florence pay for ten 495 00:26:36,480 --> 00:26:39,399 Speaker 2: year money? What did the Metichi's at Florence pay for 496 00:26:39,480 --> 00:26:41,480 Speaker 2: ten year money? I mentioned the Venetians. 497 00:26:41,640 --> 00:26:44,359 Speaker 9: Obviously I looked at the Venetians. It depends what we read. 498 00:26:44,640 --> 00:26:46,680 Speaker 9: I'll have to think about the Vedicians. You're going to 499 00:26:46,720 --> 00:26:49,320 Speaker 9: send me back. I'll have to talk to Tom Keane 500 00:26:49,320 --> 00:26:52,320 Speaker 9: about TK. Probably nice, Probably, I'm probably nice. 501 00:26:53,040 --> 00:26:56,520 Speaker 2: Stay with us. Multilintex Savana is coming up. After this 502 00:27:06,000 --> 00:27:09,600 Speaker 2: upside surprise on jobless claims and continuing claims, equity is 503 00:27:09,640 --> 00:27:12,440 Speaker 2: just about unchanged. The bonyards still start to make a move. 504 00:27:12,640 --> 00:27:14,240 Speaker 2: We were up a basis port of two across the 505 00:27:14,280 --> 00:27:17,320 Speaker 2: curve just about unchanged now at the front end on twos. 506 00:27:17,400 --> 00:27:19,280 Speaker 2: The two year, ten year, and thirty year look like this, 507 00:27:19,359 --> 00:27:20,920 Speaker 2: so we can switch at the board. Could take a 508 00:27:20,920 --> 00:27:23,439 Speaker 2: look at bon yards right now, yields unchanged on a 509 00:27:23,440 --> 00:27:26,359 Speaker 2: two year at three seventy four fifty five. With us 510 00:27:26,359 --> 00:27:29,359 Speaker 2: around the table, Claudio Irigoza of Bank for America joins us. 511 00:27:29,400 --> 00:27:31,639 Speaker 2: Now for more, Claudia goomonic. It's going to see it 512 00:27:31,800 --> 00:27:34,480 Speaker 2: going into that payrolls report lifetime around. Based on the 513 00:27:34,480 --> 00:27:37,640 Speaker 2: minutes that we've all seen, this federal reserve sounds tremendously 514 00:27:37,680 --> 00:27:40,920 Speaker 2: offside labor markets solid. Only two people on the committee 515 00:27:40,920 --> 00:27:43,000 Speaker 2: seem to be worried about it. They are putting all 516 00:27:43,000 --> 00:27:46,480 Speaker 2: the emphasis on inflation. How much changed with that one 517 00:27:46,520 --> 00:27:48,080 Speaker 2: report and all those revisions. 518 00:27:49,080 --> 00:27:51,359 Speaker 10: I think the most important thing to the thinking about 519 00:27:51,359 --> 00:27:53,880 Speaker 10: the labor market is thinking in terms of unemployment rate 520 00:27:54,280 --> 00:27:57,560 Speaker 10: and vacancy rachis because you're having also a supply shock, 521 00:27:57,760 --> 00:28:01,800 Speaker 10: which is the tighten of immigration. That makes the reason 522 00:28:01,800 --> 00:28:04,119 Speaker 10: of payroll a little bit tricky because you can have 523 00:28:04,680 --> 00:28:08,720 Speaker 10: a supply driven reduction in payrolls that doesn't increase unemployment rate, 524 00:28:08,800 --> 00:28:13,880 Speaker 10: and therefore DEFEC should not overreact to that revision. It's 525 00:28:13,920 --> 00:28:18,199 Speaker 10: going to be interesting how Power frame it tomorrow. I 526 00:28:18,240 --> 00:28:22,280 Speaker 10: think Power tomorrow probably will tell the market that September 527 00:28:22,400 --> 00:28:27,680 Speaker 10: is not a done deal because business taflational environment. It's 528 00:28:27,720 --> 00:28:32,240 Speaker 10: going to be probly lower activity, probably higher inflation, and 529 00:28:32,280 --> 00:28:34,560 Speaker 10: the fair will have a tough job deciding which one 530 00:28:35,040 --> 00:28:38,360 Speaker 10: to sort of not ignore, but which want to pay 531 00:28:38,400 --> 00:28:39,080 Speaker 10: more attention to. 532 00:28:39,800 --> 00:28:42,320 Speaker 1: Clarly, you though say no cuts. 533 00:28:42,560 --> 00:28:44,440 Speaker 8: You make the case for no cuts this year, but 534 00:28:44,440 --> 00:28:46,080 Speaker 8: there are plenty of people who look at this labor 535 00:28:46,080 --> 00:28:49,480 Speaker 8: market and say, sure, supply is playing a role, but 536 00:28:49,600 --> 00:28:52,520 Speaker 8: still you're finding companies who are not hiring people. Just 537 00:28:52,600 --> 00:28:55,320 Speaker 8: look at the continuing claims that the trend is one 538 00:28:55,320 --> 00:28:59,280 Speaker 8: of weakening and that in itself necessitates cuts before it's 539 00:28:59,320 --> 00:28:59,720 Speaker 8: too late. 540 00:29:00,040 --> 00:29:00,800 Speaker 1: What do you say to that? 541 00:29:01,200 --> 00:29:05,320 Speaker 10: I would say that companies are facing a lot of uncertainty, 542 00:29:05,440 --> 00:29:09,120 Speaker 10: and when you face uncertainty, you are more careful about hiring, 543 00:29:09,360 --> 00:29:12,240 Speaker 10: You're more careful about fighting, and you are more careful 544 00:29:12,240 --> 00:29:15,040 Speaker 10: about increasing prices because you don't want to lose market share. 545 00:29:15,560 --> 00:29:18,000 Speaker 10: So we're going to see tardis on inflation. We are 546 00:29:18,040 --> 00:29:19,720 Speaker 10: starting to see that, and we're going to see it 547 00:29:19,760 --> 00:29:20,719 Speaker 10: more over the time. 548 00:29:21,400 --> 00:29:24,040 Speaker 1: The way Tramp negotiated. 549 00:29:23,440 --> 00:29:26,440 Speaker 10: With countries like fifty percent, if and you have ninety 550 00:29:26,480 --> 00:29:28,760 Speaker 10: days to come up with a plan, Gibbs companies a 551 00:29:28,800 --> 00:29:31,920 Speaker 10: lot of incentives to front run imports, bill cushions, and 552 00:29:31,960 --> 00:29:34,720 Speaker 10: therefore you're going to have probably not a spiking inflation, 553 00:29:34,880 --> 00:29:37,360 Speaker 10: but a lot of persistence. 554 00:29:36,760 --> 00:29:37,760 Speaker 1: Towards the end of the year. 555 00:29:37,800 --> 00:29:41,120 Speaker 2: The runway is longer. Yes, Does that make the job 556 00:29:41,160 --> 00:29:42,280 Speaker 2: easier for the fat. 557 00:29:42,120 --> 00:29:45,720 Speaker 10: No, much more difficult because the problem they might have. 558 00:29:45,880 --> 00:29:48,720 Speaker 10: I mean, I think power things in terms of Okay, 559 00:29:48,840 --> 00:29:51,200 Speaker 10: let's suppose I make a mistake, which one is more 560 00:29:51,240 --> 00:29:55,440 Speaker 10: costly cutting rates and then inflation peaks in December or 561 00:29:55,520 --> 00:29:57,800 Speaker 10: January a three point two three point three core pc 562 00:29:58,640 --> 00:30:01,240 Speaker 10: or staying on wold, and then that employment rate gods up, 563 00:30:01,440 --> 00:30:04,800 Speaker 10: and I think creability wise, the first one is a 564 00:30:05,880 --> 00:30:07,400 Speaker 10: bigger cost the first mistake. 565 00:30:07,720 --> 00:30:10,920 Speaker 8: So would you also say, then, looking at the revisions 566 00:30:10,960 --> 00:30:14,360 Speaker 8: we had, capture that uncertainty, does that mean that the 567 00:30:14,400 --> 00:30:17,320 Speaker 8: next payroll report could look stronger? And if it doesn't 568 00:30:17,360 --> 00:30:20,320 Speaker 8: look stronger, does that mean it's something more than just uncertainty. 569 00:30:20,400 --> 00:30:22,680 Speaker 8: Now that we have more of the tariffs, more of 570 00:30:22,680 --> 00:30:26,520 Speaker 8: the rates, more certainty under our belt could be. 571 00:30:27,240 --> 00:30:30,800 Speaker 10: We estimate that equilibrium payrolls, which is the number of 572 00:30:30,920 --> 00:30:32,920 Speaker 10: jobs that you need to create to keep an employment 573 00:30:33,000 --> 00:30:36,440 Speaker 10: rate constant, when from probably one ten, one hundred and 574 00:30:36,440 --> 00:30:38,680 Speaker 10: twenty when you had the immigration boonm to something like 575 00:30:38,800 --> 00:30:43,160 Speaker 10: seventy and we estimate payols towards towards fifty k towards 576 00:30:43,200 --> 00:30:44,680 Speaker 10: the end of the year. So you're on to have 577 00:30:44,800 --> 00:30:47,640 Speaker 10: some demand destruction, but the big chain is going to 578 00:30:47,640 --> 00:30:49,680 Speaker 10: be supplied. So as long as an employment rate that 579 00:30:49,760 --> 00:30:52,440 Speaker 10: does not shut up, the fair will never react, will 580 00:30:52,480 --> 00:30:53,720 Speaker 10: not overreact to those number. 581 00:30:53,720 --> 00:30:55,600 Speaker 2: What you're saying is really important, So let's get through. 582 00:30:55,640 --> 00:30:57,360 Speaker 2: I want to give you some more time. What you're 583 00:30:57,400 --> 00:30:59,440 Speaker 2: essentially saying is you can have a massive step down 584 00:30:59,440 --> 00:31:02,960 Speaker 2: in payrolls growth, but not an increase in slack. Yes, 585 00:31:03,000 --> 00:31:05,720 Speaker 2: and labor market slack should ultimately be the focus of 586 00:31:05,720 --> 00:31:06,520 Speaker 2: this Federal Reserve. 587 00:31:06,600 --> 00:31:06,840 Speaker 4: Yes. 588 00:31:07,560 --> 00:31:11,440 Speaker 2: Can the Chairman articulate that tomorrow and a speech without 589 00:31:11,480 --> 00:31:12,760 Speaker 2: sending this market nuts. 590 00:31:13,280 --> 00:31:16,800 Speaker 10: I think the Chairman will will say two things, will 591 00:31:17,440 --> 00:31:19,880 Speaker 10: say sort of what he said in the press conference, 592 00:31:19,880 --> 00:31:23,840 Speaker 10: and you can transpire from THEFORMC minutes yesterday, and he 593 00:31:23,880 --> 00:31:26,880 Speaker 10: would say, look, there is a tremendous amount of uncertainty. 594 00:31:27,800 --> 00:31:30,360 Speaker 10: We have two more patron numbers because we have one 595 00:31:30,400 --> 00:31:35,480 Speaker 10: revision and one payroll, we have one inflation print, and 596 00:31:35,840 --> 00:31:38,080 Speaker 10: we need to balance the risks. And I think he 597 00:31:38,160 --> 00:31:40,880 Speaker 10: will talk a lot about risks. And I think probably 598 00:31:41,000 --> 00:31:44,800 Speaker 10: given that is the last speech as a chairman, assume 599 00:31:45,040 --> 00:31:46,280 Speaker 10: that this is the last peech as a channel. I 600 00:31:46,280 --> 00:31:49,880 Speaker 10: don't think it's going to be relected but reappointed. But 601 00:31:50,440 --> 00:31:52,320 Speaker 10: as the last speech, he will probably put a lot 602 00:31:52,320 --> 00:31:56,320 Speaker 10: of focus on the importance of preserving press stability. 603 00:31:57,520 --> 00:31:59,360 Speaker 8: So if you put a lot of focus on that, 604 00:31:59,360 --> 00:32:01,640 Speaker 8: that would be writing off a lot of the other 605 00:32:01,800 --> 00:32:06,240 Speaker 8: changing views at the FET You've had cook daily Muslim, 606 00:32:06,400 --> 00:32:08,880 Speaker 8: a lot of the more kind of maybe hawkish leaning 607 00:32:08,920 --> 00:32:11,680 Speaker 8: ones start to sound more dubbsh and saying that that 608 00:32:11,760 --> 00:32:14,280 Speaker 8: last Job's report did change their mind. 609 00:32:14,680 --> 00:32:16,440 Speaker 1: Does how need to reflect any of that. 610 00:32:17,360 --> 00:32:24,080 Speaker 10: Look, I think there is still consensus that inflation is 611 00:32:24,400 --> 00:32:25,320 Speaker 10: still the biggest risk. 612 00:32:26,520 --> 00:32:27,120 Speaker 4: That's why I. 613 00:32:27,000 --> 00:32:29,160 Speaker 10: Said before, I think going to be important how Powell 614 00:32:30,160 --> 00:32:32,720 Speaker 10: conveys the message of the revisions. I mean, is that 615 00:32:32,920 --> 00:32:36,840 Speaker 10: important or not. We haven't seen yet an increasing unemployment rate. 616 00:32:37,560 --> 00:32:40,800 Speaker 10: An employment rate today's four point two percent. A year 617 00:32:40,800 --> 00:32:45,080 Speaker 10: ago employment was four point two percent. And the path 618 00:32:45,200 --> 00:32:49,320 Speaker 10: for tariffs at the path for inflation as at look great. 619 00:32:50,080 --> 00:32:52,040 Speaker 10: You're going to be probably at the end of the 620 00:32:52,120 --> 00:32:56,880 Speaker 10: year one percentage point above the target. So ironically you 621 00:32:56,920 --> 00:33:00,520 Speaker 10: are further away on your inflation target. You have a 622 00:33:00,520 --> 00:33:04,200 Speaker 10: more deviation from your inflation target than from your employment target. 623 00:33:04,880 --> 00:33:07,440 Speaker 8: So if you do have a feedough that decides to cut, 624 00:33:07,560 --> 00:33:10,440 Speaker 8: and they're cutting because of labor market weakness, that to 625 00:33:10,720 --> 00:33:12,880 Speaker 8: what you're saying, is more due to the supply side, 626 00:33:12,880 --> 00:33:16,840 Speaker 8: that cuts don't actually help what happens at that point? 627 00:33:17,040 --> 00:33:19,480 Speaker 8: How big of a policy mistake would it be to 628 00:33:19,520 --> 00:33:20,400 Speaker 8: cut in this environment? 629 00:33:22,040 --> 00:33:25,360 Speaker 10: We want to see right away, two months later what 630 00:33:25,440 --> 00:33:28,560 Speaker 10: happen to inflation and to a labor market. But I 631 00:33:28,600 --> 00:33:29,880 Speaker 10: asked this, I'm a company. 632 00:33:30,200 --> 00:33:31,520 Speaker 4: I have a lot of uncertainty. 633 00:33:31,840 --> 00:33:33,400 Speaker 10: I don't know how the rules of the game are 634 00:33:33,400 --> 00:33:35,840 Speaker 10: going to look like six months from now. I'm not 635 00:33:35,880 --> 00:33:40,360 Speaker 10: going best because interest rates are seventy five percent basis 636 00:33:40,400 --> 00:33:41,520 Speaker 10: point lower, probably not. 637 00:33:42,400 --> 00:33:44,280 Speaker 1: So you risk. 638 00:33:45,520 --> 00:33:48,120 Speaker 10: The dynamics of inflation expectations and you're not going to 639 00:33:48,160 --> 00:33:51,560 Speaker 10: gain much in terms of employment, setting, politics, aciety. 640 00:33:52,640 --> 00:33:56,200 Speaker 2: This is the Bloomberg's Events podcast, bringing you the best 641 00:33:56,200 --> 00:33:59,520 Speaker 2: in markets, economics, angier politics. You can watch the show 642 00:33:59,600 --> 00:34:02,880 Speaker 2: live Bloomberg TV weekday mornings from six am to nine 643 00:34:02,920 --> 00:34:06,640 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 644 00:34:06,680 --> 00:34:09,280 Speaker 2: anywhere else you listen, and as always, on the Bloomberg 645 00:34:09,360 --> 00:34:11,239 Speaker 2: Terminal and the Bloomberg Business app