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Speaker 3: This is a joy.
Speaker 2: We're gonna get this out of the way right now.
Speaker 2: That's a seasonal traditionary. We go to David blench Flower.
Speaker 2: He is in Hannover, New Hampshire, or he's in Florida,
Speaker 2: or he's in where he's traveling in Wales or that
Speaker 2: David Danny blenched Flower described as we get to the
Speaker 2: job economy, describe the black full season in Handover, New Hampshire.
Speaker 3: It's like worse than the planet, isn't it it is?
Speaker 4: We we're now in mud season and we've had frozen
Speaker 4: ground for a very long time.
Speaker 3: I came back it from Florida.
Speaker 4: We've had two snowstorms since, and then what happens eventually
Speaker 4: is the frozen stuff in the ground eventually melts and
Speaker 4: water flows down and the black flies appear. So this
Speaker 4: is this is not the greatest month to be in Hannovany, Hampshire,
Speaker 4: but it's great to be with the students and it's
Speaker 4: been great. And when it stops snowing, it's been raining
Speaker 4: every day. So it makes you yearn for Florida and
Speaker 4: yearn for New York City. But you know, you do
Speaker 4: what you do.
Speaker 3: Right, David.
Speaker 2: I want to go back to the wage curve, and
Speaker 2: you're a correct study of the agony the pain of
Speaker 2: wage dynamics in the labor economy. The biggest single debate
Speaker 2: that I get in mail is people with bow tie
Speaker 2: saying the economy is pretty good, And thousands of people
Speaker 2: are telling me, Tom, you don't know what you're talking about.
Speaker 3: In three zip codes in.
Speaker 2: Manhattan, the labor economy is really weak, Professor Blanche Flower,
Speaker 2: Which is it?
Speaker 4: Well, obviously there's kind of two worlds, but I think
Speaker 4: the story actually, if you'd go back to the wage
Speaker 4: curve and subsequent stuff. The unemployment rate actually no longer
Speaker 4: tells you much of anything about the economy. Just to
Speaker 4: put it technically, it's unrelated to wages. So I think
Speaker 4: people give you the wrong steer from that. The right
Speaker 4: thing to look at is basically employment, and the US
Speaker 4: has a really big puzzle.
Speaker 3: Unlike every other.
Speaker 4: Country in the world, in the employment rate in the
Speaker 4: US today is below what it was in two thousand
Speaker 4: and eight and below what it was in two thousand,
Speaker 4: So that's an element of weakness. The other thing to
Speaker 4: say in that bas to back the conversation that you
Speaker 4: just had, if you look at what's happened on the
Speaker 4: employment on the household account, the decline in jobs in
Speaker 4: the last eight months or so is greater than it
Speaker 4: was in the months from February two thousand and eight
Speaker 4: through two thousand and seven. So there's conflicting evidence. Some
Speaker 4: people are really feeling weakness, other people are seeing strength.
Speaker 4: And I was just looking to think about that question, Tom.
Speaker 4: Obviously you look at the non van pails and it
Speaker 4: looks really good, and obviously the economy has been pretty resilient.
Speaker 4: But I was just looking at it in front of
Speaker 4: me as the conference Board, consumer confidence surveys, the Expectations Index,
Speaker 4: which basically predicts recession, is essentially saying we're in recession
Speaker 4: and been in recession for quite a long time. So
Speaker 4: there's this conflict, and obviously part of it is a
Speaker 4: political conflict. Republicans say the economy is doing pretty badly,
Speaker 4: and the Democrats say is doing pretty well. So it's
Speaker 4: a really pretty confusing picture. I think the answer is
Speaker 4: the economy has been more resilient, but we've had to
Speaker 4: put up with with an inflation shop. So it's a
Speaker 4: kind of poised answer. But I think, and I have
Speaker 4: a new paper that people can go and see in
Speaker 4: Economica where Phillips published his original paper, showing you that
Speaker 4: there's much more weakness here than you would have thought
Speaker 4: for the strength of the economy.
Speaker 5: Professor blanche are casting shade on the household survey Tom.
Speaker 5: I mean, it's clear he's an establishment survey kind of guy, but.
Speaker 3: No cruel and unusual.
Speaker 5: The big question facing markets, Professor Blanchard, for me anyway,
Speaker 5: isn't you know whether the Fed will cut reads?
Speaker 6: But why talk to us a little.
Speaker 5: Bit about whether or not you feel below target inflation
Speaker 5: is enough of a case for the FED to justify
Speaker 5: rate cuts this year, Well.
Speaker 4: It's probably not enough.
Speaker 3: I mean the analogy I.
Speaker 4: Always like to give is go back to think where
Speaker 4: you were in the say eightpril May June July two
Speaker 4: thousand and eight, and the discussion was much like this one, saying,
Speaker 4: you know our rate the cuts coming inflation is five percent,
Speaker 4: you know where it's going to be eight percent in
Speaker 4: the future. Well that story was clearly wrong. So the
Speaker 4: answer is, well, what is the FED going to do?
Speaker 4: I mean, I think the answer is we're waiting for
Speaker 4: some data. I mean I think the really important data
Speaker 4: is spent. Despite the consumer confidence there I've just talked about,
Speaker 4: people have continued to spend on services they coause, continue
Speaker 4: to go to the Broadway shows, the question is is
Speaker 4: there anything that's going to prevent that. The other thing
Speaker 4: I would say Damian to Tom And is that it
Speaker 4: always strikes me as kind of funny. I mean, I
Speaker 4: always thought when you said interest rates, your job was
Speaker 4: to think about what inflation was going to be in
Speaker 4: eighteen months time. So what the inflation print was this
Speaker 4: month or next month or the month after was only
Speaker 4: relevant if it was a surprise. So I just find
Speaker 4: it really hard to understand for someone who said interest
Speaker 4: rates thirty six times, why people think that a single
Speaker 4: data point is going to impact what the FED does.
Speaker 4: The FED should be thinking about what inflation is going
Speaker 4: to be in eighteen months, and as far as I
Speaker 4: can tell, all the indication are that it's going to
Speaker 4: be well below the target, which actually says you should
Speaker 4: be doing rate cuts. So that's the really big debate.
Speaker 4: Why does the FED think that a inflation print next
Speaker 4: month is going to severely change their feel about what
Speaker 4: interest rates will be an eighteen months.
Speaker 3: I mean, the reason being.
Speaker 4: That it takes eighteen months for anything for you to
Speaker 4: do to have an impact. So I find this discussion
Speaker 4: wholly disheartening. And in a sense it's like, well, well,
Speaker 4: why do they think changing interest rates will affect inflation
Speaker 4: in a week's time. It doesn't make any sense.
Speaker 3: Then we got to go, don't be a stranger.
Speaker 2: Thank you so much there, But I really wanted to
Speaker 2: get Professor Blanchet around with this huge response to time.
Speaker 3: You don't know what you're talking about.
Speaker 2: We're you're in a really eventful friday, JP Morgan, I'm
Speaker 2: with Alison Miller. I'm looking below you know I'm looking
Speaker 2: below the headline data rich is JP Morgan still down
Speaker 2: like four percent or something? Is it still like you know,
Speaker 2: underperformance City group was up one two as well.
Speaker 3: We'll see it's sort of a stew in futures toteriorate
Speaker 3: negative at thirty four.
Speaker 2: The conversation of the day, if not the week, on
Speaker 2: China Leland Miller is definitive China basebook. He's out of Darden, Charlottesville,
Speaker 2: absolutely a student of the microdata.
Speaker 3: China is Leland. As simple as I can thumb up
Speaker 3: or thumb down on China nominal GDP.
Speaker 7: I think thumbs up. But everything is relative. What are
Speaker 7: we basing this off of. I'd say, look, things are
Speaker 7: going relatively well early in the year, particularly compared to
Speaker 7: some of the disappointing data last year. But remember their
Speaker 7: goal is not to rock at GDP skyward. They're not
Speaker 7: trying to hit some high figure. They probably aren't even
Speaker 7: trying to hit the GDP growth target this year. What
Speaker 7: they're trying to do is establish some stabil some upward momentum,
Speaker 7: bring back a little bit of consumer confidence which has
Speaker 7: been crushed for the last several years. If they can
Speaker 7: do that, then this year will be a success even
Speaker 7: if they missed the GDP growth target.
Speaker 5: Leland all of Yon sold off this week. It's rallied
Speaker 5: a bit, but I mean it's now down one point
Speaker 5: seven percent this year, I think twelve point nine percent
Speaker 5: since twenty twenty one.
Speaker 6: It's been down in each of the last two years.
Speaker 5: We have claims of outright fraud at China Evergrand now
Speaker 5: you know, I think China Bank communicator, they're trying to
Speaker 5: go after Chimeo. You know, talk to us about the
Speaker 5: property sector, talk to us about Chinese deflation, what is
Speaker 5: going on there and how can investors take advantage?
Speaker 7: Well, first point is deflation. Everyone's been talking about Chinese deflation.
Speaker 7: China is not in broad deflation. You know, there's there
Speaker 7: have been you know, there has been a close calls
Speaker 7: at the end of last year. There is deflationary pressure,
Speaker 7: but there's not broad deflation in China. You're still seeing
Speaker 7: gains even though they've been much much slower than everywhere
Speaker 7: else in the world. So you know, that's reflection the
Speaker 7: fact that Chinese economy hasn't been doing particularly well. So
Speaker 7: you've got problems there, but you don't yet have this
Speaker 7: you know, deflationary way that's being exported out, like a
Speaker 7: lot of people are claiming. You know, property is interesting
Speaker 7: because it was an disaster last year. It's it's not
Speaker 7: going to be great at any time soon, but they
Speaker 7: have stabilized it in the first quarter. And I think
Speaker 7: the most important thing to take into consideration when you're
Speaker 7: talking about property is this is not a one year,
Speaker 7: two year, three year battle. This is a decade plus
Speaker 7: long battle. And what they need to do is essentially
Speaker 7: make sure that they're you know, lessening the impact of
Speaker 7: property as a growth driver. They want to take it
Speaker 7: down from twenty five percent of the economy or so
Speaker 7: down to much much lower, but at the same time
Speaker 7: not do it so precipitously that they shock the rest
Speaker 7: of the economy that they send it to a doom
Speaker 7: loop of confidence. This is really really tough to do.
Speaker 7: So they're being you know, they're tightening, they're tightening, they're
Speaker 7: tightening credit, and then when things get bad and cash
Speaker 7: flow freezes up, contagionous, threatened, then they step in and
Speaker 7: ease conditions a little bit, then they start over. So
Speaker 7: this is a long cycle and it's a really difficult one.
Speaker 5: Leland President, she hosted Business execs out of the US
Speaker 5: C suite executives just last week, trying to entice them,
Speaker 5: tell them, hey, China is open for business. Then just
Speaker 5: today China's telling telco carriers to phase out the use
Speaker 5: of foreign chips. Intel A MD. You know, what should
Speaker 5: we believe here? I mean, it's China really open for
Speaker 5: business from the perspective of a foreign investor.
Speaker 7: No, of course, not always watch what they do, not
Speaker 7: what they say. You know, we joke about that. On
Speaker 7: the stimulus front. They talk about stimulus every day of
Speaker 7: the week, but they're not stimulating in a big.
Speaker 3: Way, you know.
Speaker 7: So this, you know, it's the same thing applies to
Speaker 7: foreign investment. Twenty twenty three was the year of foreign
Speaker 7: investment in China, and how did they celebrate it by
Speaker 7: cracking down on foreign businesses, by shutting down external data sources,
Speaker 7: by shutting down internal data sources. Now, this is this
Speaker 7: is the incoherence that that characterizes China policy these days.
Speaker 8: Lela.
Speaker 2: You know, Damie and I really like to talk. We
Speaker 2: went to China. We're experts on China. We go to
Speaker 2: the Mandarin in Hong Kong, we go to the Piece
Speaker 2: Hotel in Shanghai. You know's sometimes it's Saint Regis in
Speaker 2: Beijing and we say we went deep into China. Leland Miller,
Speaker 2: what's China's consumer like right now, away from the madness
Speaker 2: of Global Wall Street, going to three zip codes in
Speaker 2: mainland China.
Speaker 7: That's exactly the right way to characterize it. Cyclically, March,
Speaker 7: the first quarter looked better than it has been for
Speaker 7: a while. We were seeing retail pickup services pick up,
Speaker 7: So cyclically speaking, you know, the consumer was better off
Speaker 7: in the first quarter. You know, spent more than they
Speaker 7: had in a long time. So that's it's it's it's
Speaker 7: bullish cyclically, but the most important backdrop is always the
Speaker 7: structural backdrop consumpt There is no consumer wave, there is
Speaker 7: no consumption push. There is no shift from investment to
Speaker 7: consumption happening in China because the Chinese economic model disincentivizes households,
Speaker 7: it disincentivizes consumer spending. So you're not going to see
Speaker 7: any big time shift. Structurally speaking, China is slowing down massively.
Speaker 7: There's enormous pressure on consumption. But look sickly speaking, we
Speaker 7: had a nice month in March and we had a
Speaker 7: solid first quarter.
Speaker 5: Leel, I've got some pretty weak data on the trade
Speaker 5: front overnight, but I'm looking ahead to Tuesday of next week.
Speaker 5: Property prices, activity data, retail sales IP, you get your
Speaker 5: GDP print.
Speaker 6: What are you looking for there? What data point is
Speaker 6: most important to you?
Speaker 7: Well, most of these things were ignoring the trade for instance.
Speaker 7: You know the numbers are weak, but it's off a
Speaker 7: pretty high base from last year. This makes it somewhat difficult.
Speaker 7: I think the most important thing to keep in mind
Speaker 7: is how are retail and services doing. How's the consumption
Speaker 7: side of the economy doing compared to last year. The
Speaker 7: answer is it's doing better so far. Has property stabilized?
Speaker 7: Property is stabilized so far this year. How's manufacturing doing.
Speaker 7: Manufacturing did well in March, it didn't do well in
Speaker 7: January February, but everyone thought it was collapsing last year,
Speaker 7: and I think we were the only people in the
Speaker 7: world saying no, it's actually doing fine, and it is
Speaker 7: doing fine. So the economy's up from last year, and
Speaker 7: I think that's positive, but you just have to have
Speaker 7: mild expectations in terms of where that's going.
Speaker 3: Leland, thank you so much. Never enough time.
Speaker 2: We've got to get you on for three hours at
Speaker 2: some point the Leland Miller Show. She was at Harvard
Speaker 2: and went downstreamed the Massachusetts Institute of Technology, one of
Speaker 2: the most prestigious professorships in economics, the gramlk Professor of
Speaker 2: Public Policy at Michigan and now holding court at the
Speaker 2: Boston Fed. It is a perfect time for Susan Collins
Speaker 2: to speak to our Michael McKee.
Speaker 3: Let's listen, let's start with the elephant in the room.
Speaker 9: CPI came in hotter than expected this past month, and
Speaker 9: now you have yourself and others suggesting we're not in
Speaker 9: any hurry to cut interest rates. Market seemed to be
Speaker 9: taking this as a policy turning point, is it?
Speaker 10: I wouldn't characterize it as a turning point. So let
Speaker 10: me you're absolutely right that the inflation numbers that came
Speaker 10: in this week were on what I would call a
Speaker 10: high end of what was expected, and if you look
Speaker 10: at the first quarter, certainly inflation is elevated compared to
Speaker 10: where it was as we ended twenty twenty three. At
Speaker 10: the same time, it doesn't change my baseline outlook that
Speaker 10: inflation will continue to come down with a healthy labor market.
Speaker 10: I just think it will take more time, and it's
Speaker 10: premature to tell whether the elevated numbers that we just
Speaker 10: saw are a bump along that path or something more concerning.
Speaker 10: So I don't see it as a significant turn, but
Speaker 10: important to continue to look at the data holistically and
Speaker 10: let the data tell us what's really going on.
Speaker 9: The markets to go back to them have priced out
Speaker 9: everything except maybe one and a half rate cuts by
Speaker 9: the end of the year. Is it fair to say that,
Speaker 9: unlike them, you really don't know what.
Speaker 11: You're going to do well.
Speaker 10: Policy is not on a preset path, and I think
Speaker 10: that's important. I think there's a maybe understand and desire
Speaker 10: to have us map out exactly what's going to happen.
Speaker 10: But in the current environment, what's really called for is
Speaker 10: patients being very methodical and looking at the whole constellation
Speaker 10: of information, not just focusing on one data reading or
Speaker 10: another one. And so what I would say is that
Speaker 10: we're continuing to form our outlook, recognizing that there are
Speaker 10: lots there are uncertainties in their risks. So I call
Speaker 10: myself a realistic optimist in that sense, realistic about those
Speaker 10: risks and uncertainties, but still for lots of reasons, very
Speaker 10: optimistic that we will see inflation come back down and
Speaker 10: that labor markets will remain healthy.
Speaker 9: Well, how unconvinced are you that inflation is not going
Speaker 9: to come down as rapidly as you might have thought.
Speaker 10: So I do think that we're going to have to
Speaker 10: be patient and it may take more time. That is
Speaker 10: one of my takeaways from some of the data that
Speaker 10: we've seen. You know, at the same time, the data
Speaker 10: are mixed, Mike. So, yes, the most recent inflation numbers
Speaker 10: have been elevated compared to what I might have hoped for.
Speaker 10: But at the same time, if you look at things
Speaker 10: like wage rates, so wage growth has been faster than
Speaker 10: it was pre pandemic, But once you factor in the
Speaker 10: past price increases and importantly the productivity gains we've seen,
Speaker 10: the wage growth that we're seeing is consistent with that
Speaker 10: trajectory back down to two percent inflation, and I think
Speaker 10: that's good news for workers as well. But my point
Speaker 10: is that you need to look at the range of
Speaker 10: data and not focus too much on one piece and
Speaker 10: take the time to really see what the takeaways should be.
Speaker 9: Well, you said yesterday that the danger of overtightening is
Speaker 9: kind of moved out of the picture at this point.
Speaker 9: Growth is strong, unemployment remains low, inflation is at least sticky.
Speaker 9: If nothing else, why cut rates at all.
Speaker 10: So I wouldn't say that that there is no risk
Speaker 10: of us, you know, waiting too long. I do think
Speaker 10: that it's two sided. But to your point, I certainly
Speaker 10: do see more reason to focus on making sure that
Speaker 10: we don't start easing too quickly.
Speaker 1: We're resolute.
Speaker 10: I'm certainly resolute about that commitment to bring inflation back
Speaker 10: down to two percent. You know, I do see policy
Speaker 10: as being moderately restrictive at this point, and in my.
Speaker 4: View, will be appropriate.
Speaker 10: As we get closer to that trajectory, it will be
Speaker 10: appropriate to begin easing. But we're not there yet, so
Speaker 10: I don't think that we would definitely certainly want to
Speaker 10: stay where we are. My baseline would still have us
Speaker 10: starting to ease later this year. But when I see
Speaker 10: as likely to be later than I had been previously thinking, I.
Speaker 9: Have to ask, because everybody's going to bring up the
Speaker 9: question is does the election interfere with.
Speaker 10: Absolutely not? You know, as I've said a number of times,
Speaker 10: focusing holistically on the data is really what determines appropriate policy,
Speaker 10: and I have to say there's enough of that to
Speaker 10: keep us very busy. So that is my focus and
Speaker 10: that's the focus of the committee.
Speaker 9: You mentioned policy is moderately restrictive. What tells you that
Speaker 9: and how do you know what level of restrictiveness you need?
Speaker 10: So in terms of the last piece, that's where watching
Speaker 10: the data comes from. Are we seeing the balance of
Speaker 10: performance that we're looking for over time? You know, certainly
Speaker 10: there's evidence of some restriction. We've seen housing market reactions,
Speaker 10: We've seen some increase in delinquencies, We've seen some declines
Speaker 10: in capital spending, and so there clearly is evidence in
Speaker 10: a variety of places labor markets are coming into better balance,
Speaker 10: and that's a really important one. At the same time,
Speaker 10: consumption and demand have remained perhaps surprisingly strong given where
Speaker 10: interest rates are and what we might have thought based
Speaker 10: on history. But you know, we've seen in a lot
Speaker 10: of contexts the ways that the current context is somewhat different.
Speaker 10: So I would characterize where we are as policy is
Speaker 10: having a restrictive effect, which is what we want, but
Speaker 10: it's perhaps moderately restrictive, and that calls again for patients
Speaker 10: and being methodical as we look at all of the data.
Speaker 9: We've now got pricing basically for a December right cut
Speaker 9: as markets move back and forth. But my nerdy economist
Speaker 9: friends have spent the last two days putting PPI and
Speaker 9: CPI into the PCE calculations, and everybody is saying PCE
Speaker 9: is going to come in much milder than both of those.
Speaker 9: If that's the case, can we say June might be
Speaker 9: back on the table.
Speaker 10: So I don't want to speculate again, you know, not
Speaker 10: a preset path, and I think we have to wait
Speaker 10: to se see what the data tell us. But to
Speaker 10: my earlier point, the data have been mixed, and CPI
Speaker 10: and PCE don't always move in lockstep. They certainly are
Speaker 10: very closely related, and so I think we have to
Speaker 10: wait and let the data tell us what's happening. And again,
Speaker 10: it's not just the PCE, although that is certainly the
Speaker 10: preferred measure that we are focusing on when we look
Speaker 10: at our two percent target, it's all of it and
Speaker 10: how it comes together collectively. So wage data will be important.
Speaker 10: When I look at the price data, I also want
Speaker 10: to disaggregate and look at what's happening to the different components,
Speaker 10: because the dynamics there are different, and that's informative for
Speaker 10: trying to understand where we might be going, not just
Speaker 10: where we've been. Key question is where are we going
Speaker 10: and what's that outlook like, and trying to get to
Speaker 10: greater confidence before we change the policy stance for Saint Lewis.
Speaker 9: FED President Jim Bullard once said, during the aftermath of
Speaker 9: the financial crisis, whatever you think the right rate for
Speaker 9: the country is, this isn't it. Are you anxious to cut?
Speaker 9: Do you want to cut? Do we need a cut?
Speaker 9: Or can we live with rates at this level?
Speaker 10: Well, in the near term, I don't see urgency. I
Speaker 10: had been a bit concerned earlier in the year, very
Speaker 10: early in the year, that there might be some signs
Speaker 10: of labor market fragility. I'm seeing much less reason for concern.
Speaker 10: But that again is why I see the risks as
Speaker 10: being too cited. So I don't see urgency, and I
Speaker 10: see lots of reasons for patients. And over the longer term,
Speaker 10: I think we'll My expectation is that we will ease
Speaker 10: and that over the longer term inflation interest rates will
Speaker 10: be at lower levels. But exactly what that looks like,
Speaker 10: it's really premature to be too specific.
Speaker 9: The data may be mixed, but what are CEOs in
Speaker 9: your district saying about both employment growth and also about
Speaker 9: whether or not they're still having to raise salaries and
Speaker 9: whether they're going to have to raise prices.
Speaker 10: So and we do have many conversations with people throughout
Speaker 10: our district, large firms, small firms throughout New England. And
Speaker 10: what I'm hearing is a couple of things. One is
Speaker 10: quite a bit of optimism in terms of the economy's
Speaker 10: performance overall. I'm hearing information consistent with labor markets really
Speaker 10: coming into better balance, being easier to hire, except in
Speaker 10: a couple of sectors like healthcare, where that can still
Speaker 10: be quite a challenge. So you know, it's their differences
Speaker 10: across different sectors and localities, but that firms have not
Speaker 10: been expecting the same kinds of wage increases that they
Speaker 10: had needed before to retain workers, quit rates or way down,
Speaker 10: much less turnover, and that helps with productivity, right because
Speaker 10: if you are focused continually on having to fill those
Speaker 10: gaps because people are leaving and then you have to
Speaker 10: train people to come up to speed, it's hard to
Speaker 10: maintain that productivity that that firms really need. And that's
Speaker 10: part of the good productivity story that we've seen that
Speaker 10: has helped with economic growth and helped us to bring
Speaker 10: inflation down as much as we did in twenty twenty three,
Speaker 10: despite the fact that growth has been continued to be
Speaker 10: so robust. So there's a strong supply side story there
Speaker 10: as well.
Speaker 7: Well.
Speaker 9: Productivity is one half of potential growth, and you're talking
Speaker 9: about productivity being good. A lot of argument these days
Speaker 9: that we're seeing more immigration than we're really accounting for,
Speaker 9: and that basically potential growth is higher than we thought
Speaker 9: it was.
Speaker 3: Do you agree with that?
Speaker 10: So I certainly have seen increases and labor supply as
Speaker 10: being a key part of that supply improvement story that
Speaker 10: has certainly benefited the economy. And the labor supply increases
Speaker 10: have included immigration, and there's been a lot of work
Speaker 10: which has come from different people finding similar stories in
Speaker 10: terms of the increase in immigration playing a role. But
Speaker 10: we've also seen an increase in labor force participation, particularly
Speaker 10: in prime age workers that was not anticipated, and really
Speaker 10: notably among prime age women, even though we know that
Speaker 10: the childcare challenges continue and those are really quite stark.
Speaker 10: So there have been some surprising supply improvement news, and
Speaker 10: we'll have to see the extent to which those continue,
Speaker 10: but it's certainly been an important part of the story
Speaker 10: so far.
Speaker 9: One last question for our money market desk friends is
Speaker 9: you had a staff briefing in a discussion of whether
Speaker 9: or not and when to taper quantitative tightening. The agreement,
Speaker 9: apparently according to the minutes, was that you should announce
Speaker 9: it fairly soon. Can we expect something like that at
Speaker 9: the June meeting, So.
Speaker 10: No decisions were made.
Speaker 3: The minutes.
Speaker 10: Summarized the discussion that we had, and it really draws
Speaker 10: from lessons from the past period of quant tative tightening
Speaker 10: from twenty seventeen to twenty nineteen, and some of the
Speaker 10: key lessons from that experience are the importance of doing
Speaker 10: the you know, the tightening, in other words, run off
Speaker 10: of the balance sheet in a way that is smooth
Speaker 10: and does not cause stresses. You know that proverbial should
Speaker 10: be like watching paint dry, right, It shouldn't be unexpected.
Speaker 10: And so there was broad agreement that slowing the pace,
Speaker 10: which is currently about twice as fast as it had
Speaker 10: been in that earlier period, and doing so sooner to
Speaker 10: ensure that it continues to be quiet and orderly and
Speaker 10: passive in the backgrounds. Broad agreement for that and also
Speaker 10: to start that sooner, but no specific decisions have been
Speaker 10: made yet, so we could.
Speaker 9: Get taper before we get a rit cut.
Speaker 10: Those things are I see them as being independent, so
Speaker 10: that could happen.
Speaker 9: Susan Collins, thank you very much for joining us today
Speaker 9: here at Bloomberg on Bloomberg Radio, on top of and World.
Speaker 3: What will send it back to? Michael mckeeth, Thank you
Speaker 3: so much.
Speaker 8: With a gentle lady from the Boston said.
Speaker 3: This is really important.
Speaker 2: I'll put out a tweet and it'll be like some announcement.
Speaker 2: I'll go dot dot dot anticipated. This is the anticipated
Speaker 2: book of the fall. Christopher Whalen and his staff are
Speaker 2: knee deep and through the summer rewrites of his classic
Speaker 2: Inflated How Money and Debt Built the American Dream first edition.
Speaker 2: We're gonna give you a front run on the second
Speaker 2: edition right now. Your book's got to be radically different
Speaker 2: given the debt and deficit mess we're in right now.
Speaker 11: Oh, certainly, Tom, and thank you for that wonderful plug.
Speaker 11: The last two chapters have to be rewritten. In the past,
Speaker 11: we were more worried about the dollar.
Speaker 3: Does the election matter to you?
Speaker 10: No?
Speaker 11: Not In the grand scheme of things. I think it's
Speaker 11: we're nearing the end of the progressive wave of the
Speaker 11: past century, which was largely driven by my ancestory. So
Speaker 11: it's no, it's just when a society takes on too much.
Speaker 11: Eventually the demographics tell you what's going to happen. And
Speaker 11: we have fewer and fewer workers and more and more
Speaker 11: old people, so we're going to be consuming capital.
Speaker 3: You know.
Speaker 11: Bob dougger the retired partner at Tudor, wrote a great
Speaker 11: piece about the coming drought of savings in International Economy magazine,
Speaker 11: and that's that's what's going to drive policy.
Speaker 2: Bob Douggar is one of the most original, outfront thinkers
Speaker 2: I've known in the act for years. Yes, he's like
Speaker 2: really twisted in different Damian dives.
Speaker 6: Well, Tom, I mean, I appreciate you. Plug. I'm gonna
Speaker 6: plug another book.
Speaker 5: I'm gonna take you back to twenty fourteen, Chris Well,
Speaker 5: and let's talk about financial stability, fraud, confidence in the
Speaker 5: wealth of the nations your book back then, let's think
Speaker 5: about the lessons learned from the last global financial crisis
Speaker 5: and now what we're seeing today with these markets.
Speaker 6: I mean, how should investors be.
Speaker 5: Looking more importantly, what indicators should they be looking at
Speaker 5: to say, you know, hey, things aren't right here, Things.
Speaker 11: Don't smell it well the way I look at banks.
Speaker 11: You know, we published some bank indices earlier this year
Speaker 11: and we weighted quality versus size. Now you can't ignore size.
Speaker 11: But my attitude is if you want to be safe
Speaker 11: with banks, you want to own the top twenty five
Speaker 11: out of the top one hundred. So that's a pretty
Speaker 11: harsh cut. You're basically saying you want to avoid two
Speaker 11: thirds of them or three quarters of them.
Speaker 3: Daman, JP Morgan one ninety six under one eighty eight.
Speaker 6: Oh well, let's just talk about that, Chris. It's unpacked
Speaker 6: that a bit.
Speaker 5: You're talking about owning from an investors standpoint, right, you're
Speaker 5: not talking about keeping your deposits with bak no.
Speaker 11: But whether you care about income or alpha, you want
Speaker 11: to know where the good ones are. And so, for example,
Speaker 11: we just wrote a piece about BANKO'ZK George Gleeson. Well,
Speaker 11: George is a little bank, but he produces a lot
Speaker 11: of construction and development loans. People make the mistake of
Speaker 11: thinking he's in commercial real estate lending. He's not in
Speaker 11: the beginning of the life cycle of the asset. Then
Speaker 11: he gets out very smart.
Speaker 5: So talk to us about the big bank little bank,
Speaker 5: you know, talk to us about that dynamic you know,
Speaker 5: I mean, is that not going away soon? Do you
Speaker 5: see that wedge, that divergence in the performance between big
Speaker 5: and small banks continue well?
Speaker 11: In terms of financial performance, the smaller banks do better.
Speaker 11: They have more pricing power. They tend to have much
Speaker 11: more operating leverage, too much lower efficiency ratios. And this
Speaker 11: is why Jamie Timon is so remarkable. Since he bought
Speaker 11: First Republic, his efficiency ratio has been in the mid fifties,
Speaker 11: which is painful for everyone else because they're in the
Speaker 11: sixties low seventies. If you want to compete with Jamie,
Speaker 11: you've got to have a five handle on efficiency.
Speaker 2: Inflated is a twisted book chapter to chapter chapter. It's
Speaker 2: the only one I know that comes close to you
Speaker 2: is Marianna Mosicado, who's doing a Marxist thing over in England,
Speaker 2: and Masakado and Ugo chapter the chapter to say, hey,
Speaker 2: you can't understand Bloomberg surveillance unless you know your history.
Speaker 3: Are we in and towards the.
Speaker 2: Fifth Nash Bank of the United States in a combo
Speaker 2: of JP Morgan and Bank of America.
Speaker 11: I think America is headed to a large restructuring that
Speaker 11: is very similar to the nineteen thirties when the Reconstruction
Speaker 11: Finance Corp essentially restructured everything that wasn't solving, right.
Speaker 2: I got a shift gearser Damien, I want you to
Speaker 2: climb on board this insight. CIRE and Wayland's led the
Speaker 2: discussion on this is different now because we have Twitter.
Speaker 3: So you're at home or whatever, you're out on the road.
Speaker 2: I'm walking vet Bill and I got Twitter up and
Speaker 2: it's one guy with a genius walk through about something
Speaker 2: that was one hundred million is now eighteen million in
Speaker 2: real estate, I mean social media, Damien has changed a
Speaker 2: CRI tobacco.
Speaker 5: No, I agree with that. And look, I mean there's
Speaker 5: been a lot of talk about the death of cre
Speaker 5: and clos and other securitized products for that matter in
Speaker 5: this environment, and so you know, just to move away
Speaker 5: from that, I really just want to kind of focus
Speaker 5: more on this concept of the big banks and how
Speaker 5: you know, the big twenty and those are the ones
Speaker 5: you want to focus on.
Speaker 6: That's still twenty banks, right, and there's a big difference between.
Speaker 5: City Group and JP Morgan. So yeah, help educate you need, Like,
Speaker 5: what are you looking for? How do you differentiate between
Speaker 5: those big banks in terms of making an investment gape
Speaker 5: one way or the other.
Speaker 11: Well, you know, I've been doing this for a while.
Speaker 11: We've been building bank analytics for thirty years, and over
Speaker 11: time you decide what's important. So equity returns, total market return,
Speaker 11: operating leverage, price to book, all of those things tell
Speaker 11: you a kind of sort of the same thing, but
Speaker 11: from a different perspective. You know, for example, George's got
Speaker 11: one of the best performing banks in the country at
Speaker 11: Banko's EK, but he's still trading around book. Yeah, American
Speaker 11: expresses five times book. Okay, very different, right franchises?
Speaker 2: Well, if you're a market update here, Damien, get ready
Speaker 2: for another question with Christopher. Well, we're down two eleven
Speaker 2: in the Dow, negative thirty two, pretty much lows here
Speaker 2: where the market open fifty one sixty seven SPX.
Speaker 3: We are moments away from ninety two, Brent, We're not
Speaker 3: there yet.
Speaker 2: Ninety one eighty four just made a dash, didn't get
Speaker 2: there eighty seven and change on Imax Gold twenty four sixteen,
Speaker 2: and I sound that this sounds like a data chet
Speaker 2: from twenty years ago.
Speaker 5: You know when you look at banks that I mean
Speaker 5: just coming back, I mean you look at an interest
Speaker 5: rate sensitive sector, right and so you know, I guess
Speaker 5: for me, you know, if I'm believing all this kool
Speaker 5: aid that's going on in the market right now, and
Speaker 5: I want to get defensive. You know, Chris, walk me through,
Speaker 5: how do you think about protecting investor assets in this market?
Speaker 3: Is it gold?
Speaker 5: Is it cash? Is it money markets? Is it something else?
Speaker 11: Well, I would be very careful with financials because we're
Speaker 11: still coming out of the COVID period when we had
Speaker 11: zero interest rates. This both helped and hurt. It caused
Speaker 11: problems and it also solved problems. But going forward, you know,
Speaker 11: everyone was fixated on net interest margin. You guys had
Speaker 11: a piece on the Bloomberg this morning. No, it's about
Speaker 11: spreads and guess what is totally flat rest of the year.
Speaker 2: What's so important, folks of Bloomberg surveyllance worldwide.
Speaker 3: What you just heard from mister Whylan is a.
Speaker 2: Completely different way world from Gina Martin Adams, and yet
Speaker 2: that came to the same conclusion on financials.
Speaker 3: That's really important to.
Speaker 2: Twisted orinery different views, and the same conclusion is to
Speaker 2: be careful out there.
Speaker 6: Yeah, and dividan.
Speaker 5: The yields are now, I mean, earning yields are now
Speaker 5: far less than fixing the fields you can get in
Speaker 5: fixed income, right, So I mean, you know, it's got
Speaker 5: that mountain to climb. Also, if we go into sort
Speaker 5: of a risk off environment, you know, last question, Chris,
Speaker 5: I mean talk to us a little bit about you know,
Speaker 5: when you do look at equities and you take a
Speaker 5: step back, how do you approach that? Are you looking
Speaker 5: at big versus small caps? Are you looking at tech
Speaker 5: versus other sectors? I mean we talk about the banking sector,
Speaker 5: but what else is out there?
Speaker 11: Well, look, half of my book is either preferred or debt.
Speaker 11: The other half is equity. I rode in Vidia UP.
Speaker 11: I kept stepping off because it was too big. It
Speaker 11: was a third in my portfolio at one point, and
Speaker 11: finally I got out a couple months ago. So there
Speaker 11: are opportunities. I owned Chevron, I owned some other things,
Speaker 11: but in terms of the banks, I own US Bank,
Speaker 11: Common and Wells. That's it. Everything else is a preferred.
Speaker 11: So if you want exposure to financials, look at the
Speaker 11: preferreds because there's a lot less folatility in Paris.
Speaker 2: Are the real controversial book out who says we got
Speaker 2: to get back to the time we remember where dividends matter.
Speaker 2: Are stock buybacks a dividend equivalent, Chris Whaler?
Speaker 11: No, No, it's a it's a different to discuss that.
Speaker 11: Stock buybacks are basically about feeding the street. It's kind
Speaker 11: of the big you have to pay to the guy
Speaker 11: on the corner, you know who works for Blackstone or
Speaker 11: you know whatever. So to me, dividends are a more
Speaker 11: honest way to return cash to shareholders because I don't
Speaker 11: have to pay a fee, right you know.
Speaker 2: Yeah, we're trying to get you here in ninety two
Speaker 2: a barrel to create something.
Speaker 11: I'm with you talk, Come on, give me the tick.
Speaker 3: Guys, triple digits, but I need Are you predicting triple digit.
Speaker 11: Oil when that missile flies and hits real estate in Israel? Yes, Look,
Speaker 11: the world is at war. We never talk about this.
Speaker 11: The world is in a low intensity conflict that's about
Speaker 11: to get honor. And that's why Jamie Dumman, by the way,
Speaker 11: is talking about geopolitical when everybody else wants to talk
Speaker 11: about Neil.
Speaker 6: Let me think about what Chris is saying here.
Speaker 5: Since the October seventh invasion, right and Hamas spreads are tighter,
Speaker 5: oil is relatively I'm going to be a little bit
Speaker 5: higher now, but really the dollars weaker data.
Speaker 3: We can stay in the script, Damen. We got to
Speaker 3: go to the news here.
Speaker 2: There's a lot of news that Chris Whalen, I know
Speaker 2: you're in from Mono video, Don't be a Stranger, Chris
Speaker 2: Whalen with a book album that will be must must read.
Speaker 3: Now I'll look at the front pages.
Speaker 6: What's making news around the world?
Speaker 2: Your daily roundup of today's headlines from major publications. Bloomberg
Speaker 2: Surveillance our daily newspaper segment, The Lisa Matteo Hour, brought
Speaker 2: you by Interactive Brookers. Interactive Brookers they charge dollar margin
Speaker 2: load rates from five point eight three percent to six
Speaker 2: point eight three percent rates subject to change. Learn more
Speaker 2: at ibkr dot com slash compare. I thought the newspapers
Speaker 2: were thick with stories today? What did you choose?
Speaker 3: Lisa?
Speaker 1: All right, so we're starting with the Wall Street Journal.
Speaker 12: Have you noticed around the office we have them a
Speaker 12: lot here at Bloomberg Couches, Right, they're everywhere.
Speaker 1: Everyone loves the couches.
Speaker 12: Companies trying to make the offices seem a little bit
Speaker 12: less stuffy to get people to come back in. Okay,
Speaker 12: So workers are saying they're more comfortable. Managers are saying
Speaker 12: it helps.
Speaker 1: Them think of these big ideas, you.
Speaker 12: Know, but experts are saying it's actually bad for your back.
Speaker 1: And this is the issue with you know, you're.
Speaker 12: Balancing this laptop as you're trying to sit on the sofa.
Speaker 1: And then you know that can be an issue.
Speaker 12: And then it's also becoming more expensive in a way
Speaker 12: because people are not taking care of their sofas, so
Speaker 12: they're spilling their coffee, they're eating their food.
Speaker 1: So now the companies have to make this expense and
Speaker 1: have this so it's cleaned every so often. Your pretzels
Speaker 1: are all over the place.
Speaker 2: And I'm on the Jesus, yes, and you know I
Speaker 2: clean up after myself with the Jesus.
Speaker 3: This is the same, Damien, What do you think here?
Speaker 5: I think companies have long tried to make the office
Speaker 5: a little b less stuffy. They do, uh, you know,
Speaker 5: restaurants out to terraces, they have signature sense, you know,
Speaker 5: these little diffusers in the office to make it smell nice.
Speaker 6: Smell nice. We have that in my house.
Speaker 5: My wife loves that stuff. It smells beautiful in my house.
Speaker 2: You know.
Speaker 5: Now i'd say it's like that hotel collection.
Speaker 6: I don't know my wife. I mean, I gotta ask
Speaker 6: my interpreter. You know, she controls my names account.
Speaker 2: So what do you think, because I mean, this is
Speaker 2: a huge debate where people are saying. People are saying
Speaker 2: that we're coming back to the office, and Paul and
Speaker 2: I were really pushing against it.
Speaker 3: We're not sure we see it.
Speaker 1: Monday, we don't say it's it.
Speaker 12: Mondays and Fridays it still seems kind of quiet around here.
Speaker 12: But you know, Tuesday through Thursday, I think everyone just
Speaker 12: needs to kind of come back.
Speaker 1: I don't know, I'm kind of.
Speaker 2: I have to do it.
Speaker 5: I feel like everybody else.
Speaker 3: What do you got next?
Speaker 12: Okay, the battle between boomers and millennials, it's starting to
Speaker 12: cheat a shift because millennials are now going to start
Speaker 12: competing with other millennials.
Speaker 1: Here's a reason why.
Speaker 12: Okay, So when they first entered the adult world twenty tens, right,
Speaker 12: so they bonded. They have this against adversity because it's
Speaker 12: harder for them to say for homes, right, so they
Speaker 12: bonded together millennials. Yes, they're going against the boomers, but
Speaker 12: now it's changing, Boomers starting to evade enforce the new competition.
Speaker 12: Here's a reason millennials who have benefited from family wealth.
Speaker 1: So you see the competition, the tension there.
Speaker 12: So now you have these millennials who can't afford to
Speaker 12: by their home, but you have these other millennials who
Speaker 12: can because their parents gave them the money for it.
Speaker 5: So it's his tim I think the interesting statistic here,
Speaker 5: I mean, Lisa, is the fact that the average millennial
Speaker 5: had thirty has thirty percent less wealth than the average
Speaker 5: boomer by the age of thirty five. That's an amazing statistic.
Speaker 5: And I mean boomers they owned homes, they had you know,
Speaker 5: home equity wealth, whereas you know, I mean today's millennial
Speaker 5: I don't think owns all that much.
Speaker 6: Realistic.
Speaker 2: This is the first time I've mentioned that we're going
Speaker 2: to feature the sub Monday with bank earnings today in
Speaker 2: a really full schedule, which you're going to slide it
Speaker 2: to Monday. Bloomberg News has done the absolutely definitive research
Speaker 2: project on majors in colleges and to me, the divide,
Speaker 2: Lisa is people that went to college like Damian Sassaur
Speaker 2: and got a real degree.
Speaker 3: Versus a lot of.
Speaker 2: Other people that just sort of slid through and they
Speaker 2: got this degree or that degree. And to me, that's
Speaker 2: the millennial divide is people with you know, a legit
Speaker 2: stem high energy degree. And the Bloomberg Research Paulina Kacheco
Speaker 2: has this, The Bloomberg Research is absolutely definitive. Will feature
Speaker 2: that on Monday.
Speaker 12: And it's tough because colleges are so expensive too, So
Speaker 12: that's the science that folds that into it.
Speaker 5: Yes, pay four hundred thousand dollars to be a major
Speaker 5: in sociology.
Speaker 6: That's fun.
Speaker 3: That works for you.
Speaker 9: There you go, you.
Speaker 1: Love radio speaking to colleges, Sorre. I want to shift
Speaker 1: to a lot more elite schools.
Speaker 12: They're returning to those standardized tests. So now Harvard Caltech
Speaker 12: they're starting to bring back.
Speaker 1: The SATs kind of did this backtrack.
Speaker 12: They were going to make it optional for a few
Speaker 12: more years, but they changed their mind. Caltech did the
Speaker 12: same thing, so they're starting to bring it back. But
Speaker 12: the shift started to happen, which is interesting after the
Speaker 12: Supreme Court ruling that schools can't consider race and admissions.
Speaker 1: And this is where things started to shift a little bit.
Speaker 1: That's what the article is saying.
Speaker 3: Damien's living this in real time.
Speaker 5: Oh yeah, I mean, look, I mean all I know
Speaker 5: is I'm a pan of standardized tests.
Speaker 6: I do.
Speaker 5: I think you need that number to kind of differentiate,
Speaker 5: you know, the cream from the crop.
Speaker 6: And you know, so I'm a fan of it.
Speaker 5: But at the end of the day, if I had
Speaker 5: a weaker student, who a son or daughter who wasn't
Speaker 5: a great test taker, I understand that it's it can
Speaker 5: be a pretty big ask to ask them to sit
Speaker 5: down to spend.
Speaker 6: Hundreds of dollars on tutors.
Speaker 1: He's gonna say, I just amount of money tutors.
Speaker 2: Granted, COVID was in the way, but they've had too
Speaker 2: many professors to tell me it's been an unmitigated disaster.
Speaker 2: They you know, finally Harvard's catching up with Dartmouths and
Speaker 2: Brown and and there'll be a zillion.
Speaker 3: This was like MIT and Georgetown leading away.
Speaker 6: Yeah.
Speaker 2: Absolutely, But the bottom line is, professor say, they got
Speaker 2: kids in class, they just can't do the work.
Speaker 5: That's the bottom moll Criefing is donating money to the
Speaker 5: public school system down in Miami to address just this
Speaker 5: issue because the COVID kids ages, and we're in grade
Speaker 5: sixteen eight, you know, are suffering.
Speaker 2: Lisa Mateo, thank you. Just really strong newspapers all through
Speaker 2: the week. There, Lisa Miteo with.
Speaker 3: One of our most popular efforts.
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