WEBVTT - Bloomberg Surveillance TV: June 12, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordernt. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify, 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:38.000 Bloomberg Terminal and the Bloomberg Business App. Team over at RBC, writing, 0:00:38.080 --> 0:00:41.120 while this may have temporarily calmed markets, households are still 0:00:41.159 --> 0:00:44.519 grappling with the after effects of significant inflation over the 0:00:44.520 --> 0:00:47.839 past five years. Francis Donald of RBC joined us now 0:00:47.840 --> 0:00:49.080 from More Francisco, Morning to You. 0:00:49.120 --> 0:00:49.640 Good Morning. 0:00:49.800 --> 0:00:51.559 Spoke to a lot of people yesterday and they all 0:00:51.600 --> 0:00:53.680 said a very similar thing. We're going to see the 0:00:53.680 --> 0:00:55.480 past through today. We're going to see it today. Then 0:00:55.480 --> 0:00:56.680 we didn't see it, and they said we're going to 0:00:56.720 --> 0:00:59.080 see it next month and the month after. Your team's 0:00:59.080 --> 0:01:01.560 taken a different approach to this. Just walk us through it. 0:01:01.560 --> 0:01:03.600 It's going to be a couple more months, and there's 0:01:03.640 --> 0:01:05.760 a range of reasons why, and one of them is 0:01:05.800 --> 0:01:08.600 you might remember this massive inventory build that we saw 0:01:08.640 --> 0:01:10.679 in the past few months. That means there's plenty of 0:01:10.720 --> 0:01:13.440 inventories that did not get hit with those tariffs yet, 0:01:13.680 --> 0:01:15.240 and that's going to take some time. We've got to 0:01:15.280 --> 0:01:18.520 see that inventory depletion. We saw this in twenty eighteen 0:01:18.520 --> 0:01:21.360 with washing machines, three to five months before we saw 0:01:21.400 --> 0:01:23.000 it show up in the data, so there is some 0:01:23.080 --> 0:01:25.600 precedent there. We also don't know how many of these 0:01:25.680 --> 0:01:28.600 tariffs are going to come through in CPI versus PPI, 0:01:28.920 --> 0:01:30.319 so we're still going it's going to be a couple 0:01:30.319 --> 0:01:32.200 more months before we see this. And I think that's 0:01:32.240 --> 0:01:34.800 the reason why. While I'm happy to see that inflation 0:01:34.920 --> 0:01:38.000 is not accelerating right now, two things One it's a 0:01:38.040 --> 0:01:41.679 bit early, and second, inflation is not just a tariff story. 0:01:42.000 --> 0:01:44.880 Inflation is actually also a story with respect to a 0:01:44.920 --> 0:01:48.440 tight labor market. We have a very strong ultra wealthy consumer, 0:01:48.480 --> 0:01:51.440 we have big governments, so there's structural forces under inflation 0:01:51.520 --> 0:01:54.640 as well. And actually, while tariffs are important, they're not 0:01:54.800 --> 0:01:56.440 the most important story with inflation. 0:01:56.640 --> 0:01:59.040 Credits even the tame for the approach you've taken so far. 0:01:59.120 --> 0:02:00.960 Let's sit on the labor mind. I think I agree 0:02:00.960 --> 0:02:03.240 with you that it's ultimately very important for the pass 0:02:03.320 --> 0:02:06.200 through and whether we can stomach it as consumers. This 0:02:06.240 --> 0:02:08.639 is something we discussed over the last several weeks. It's 0:02:08.639 --> 0:02:12.200 the labor market tight enough for individuals to demount high 0:02:12.240 --> 0:02:14.119 wages to fund high prices. 0:02:14.760 --> 0:02:17.840 So in my view, Americans don't need to worry about 0:02:17.880 --> 0:02:20.240 losing their jobs this year, but they do need to 0:02:20.280 --> 0:02:23.440 worry about their grocery bill. And in this particular case, 0:02:23.480 --> 0:02:26.480 we have to segment which consumer is doing what, because 0:02:26.480 --> 0:02:29.200 if you're a low in middle income household right now, yeah, 0:02:29.200 --> 0:02:32.919 you probably have a job, but rent food prices, those 0:02:32.960 --> 0:02:35.799 are up almost thirty percent in the past five years. 0:02:36.000 --> 0:02:39.240 And even though on aggregate we've seen wages rise more 0:02:39.320 --> 0:02:41.959 than the inflation over the past few years, that's not 0:02:41.960 --> 0:02:45.240 true for low and middle income Americans, whose inflation basket 0:02:45.560 --> 0:02:48.920 is tilted towards those areas that have seen larger inflation. 0:02:49.360 --> 0:02:51.960 So we can't paint the same brush with inflation or 0:02:52.000 --> 0:02:55.079 wages to the entire consumer household. Now, if you're trying 0:02:55.080 --> 0:02:56.680 to get a sense of what are retail sales going 0:02:56.720 --> 0:02:59.359 to do. If you're forecasting GDP, you pretty much are 0:02:59.360 --> 0:03:02.880 focusing proportionalately on that high income household and they're going 0:03:02.960 --> 0:03:06.280 to be just fine in this environment. But forecasting GDP 0:03:06.480 --> 0:03:08.840 and saying what's best for the American economy and American 0:03:08.880 --> 0:03:10.440 people is a very different thing. 0:03:10.520 --> 0:03:13.040 When you're talking about underline inflation, you're saying tariffs aren't 0:03:13.040 --> 0:03:13.680 the biggest story. 0:03:13.720 --> 0:03:14.280 What is it? 0:03:14.360 --> 0:03:16.519 Is it the labor market or is it big government? 0:03:16.560 --> 0:03:19.640 Well, there's structural forces and it's both these things. So 0:03:19.639 --> 0:03:22.560 when we talk about the labor market, we're not talking about, oh, 0:03:22.600 --> 0:03:25.440 there's so much cyclical demand here, the economy is booming. 0:03:25.639 --> 0:03:28.080 We're talking a lot about demographics, and we think of 0:03:28.080 --> 0:03:31.200 demographics as being a ten year horizon story, but the 0:03:31.200 --> 0:03:35.080 demographic crisis is accelerating. Every single month we see more 0:03:35.120 --> 0:03:38.680 retirees than we did the week before, the month before. 0:03:39.000 --> 0:03:42.000 That's creating huge exits out of this labor market, and 0:03:42.080 --> 0:03:45.240 there's not enough replacement demand. So that unemployment rate, even 0:03:45.280 --> 0:03:47.600 though we believe the economy will soften this year, we 0:03:47.680 --> 0:03:50.720 have it peaking around four five, four six percent. I mean, 0:03:50.760 --> 0:03:53.040 I'm well enough to remember when that was an extraordinarily 0:03:53.120 --> 0:03:55.320 strong labor market. That's going to be our bar for 0:03:55.360 --> 0:03:57.960 a weaker labor market right now. We can't use the 0:03:58.000 --> 0:04:01.280 unemployment rate anymore as a cyclical indicator of growth. We 0:04:01.360 --> 0:04:03.440 have to turn towards other area. You're talking about retirees. 0:04:03.480 --> 0:04:06.440 What about Trump's immigration policy, what's that doing to labor market? 0:04:06.560 --> 0:04:08.640 Well, that's going to amplify the issue that I remember 0:04:08.720 --> 0:04:11.240 being here at the end of twenty twenty five and saying, yeah, 0:04:11.240 --> 0:04:12.920 tariffs are going to be a big deal, but keep 0:04:12.920 --> 0:04:16.960 your eye on the immigration story. In our view, how 0:04:17.040 --> 0:04:19.200 much available labor is actually going to be the big 0:04:19.240 --> 0:04:21.800 issue in twenty twenty six and twenty twenty seven. We've 0:04:21.839 --> 0:04:25.520 said it before. America doesn't need jobs. America needs workers. 0:04:25.680 --> 0:04:27.360 And if you want to see a boom economy, you 0:04:27.400 --> 0:04:29.320 got to have people not just who are willing to 0:04:29.320 --> 0:04:32.360 do those jobs, but actually in the labor force. Sometimes 0:04:32.400 --> 0:04:33.840 we get pushed back and they say, oh, well, the 0:04:33.920 --> 0:04:36.520 labor force is that there's been a decline since two 0:04:36.520 --> 0:04:39.559 thousand and one. The labor force participation rate is around 0:04:39.600 --> 0:04:43.200 sixty three percent, but prime age worker labor force participation 0:04:43.360 --> 0:04:46.159 rate in the United States eighteen to fifty four is 0:04:46.200 --> 0:04:48.240 near its highest ever. So there's not a lot of 0:04:48.279 --> 0:04:50.400 folks sitting on the sidelines right now who are of 0:04:50.480 --> 0:04:53.040 that age. And this is having impact on a month 0:04:53.120 --> 0:04:55.919 to month data. Now a structural trend that's showing up 0:04:55.960 --> 0:04:57.800 in the cyclical data as something we need to monitor. 0:04:57.880 --> 0:04:59.480 It's going to take time to figure out, and we 0:04:59.520 --> 0:05:01.840 need to be a minded about potential outcomes because I've 0:05:01.839 --> 0:05:04.440 been surprised so many different ways since the pandemic with 0:05:04.480 --> 0:05:07.440 regards to the economy. How much flexibility does the Federal 0:05:07.440 --> 0:05:08.160 Reserve have with. 0:05:08.120 --> 0:05:11.120 That in mind, Well, not enough, and so the key 0:05:11.240 --> 0:05:12.880 is just going to be what side of the mandator 0:05:12.880 --> 0:05:15.680 are they focusing on and also how are they being 0:05:15.680 --> 0:05:18.200 flexible with respect to how the data is changing in 0:05:18.200 --> 0:05:22.640 this environment. CPI is one indication of what's happening with inflation, 0:05:22.800 --> 0:05:25.360 but we're going to see a dashboard of inflation that's 0:05:25.360 --> 0:05:27.760 going to see problems in some area of prices and 0:05:27.880 --> 0:05:29.960 other areas where it's going to be okay. So this 0:05:30.040 --> 0:05:32.800 isn't just a divergent economy in terms of growth in 0:05:32.880 --> 0:05:35.159 terms of consumers. It's also going to be a divergent 0:05:35.200 --> 0:05:38.279 economy with respective prices that's going to complicate the fence job. 0:05:38.320 --> 0:05:41.160 You've heard of Trump derangement syndrome, no data of Renmack 0:05:41.279 --> 0:05:43.880 is kinded a new term that the Treasury Secretary used yesterday, 0:05:43.960 --> 0:05:47.680 Tariff derangement syndrome. Does the Federal Reserve have TDS? 0:05:48.520 --> 0:05:50.800 Okay, Well, we don't know what the policy's going to 0:05:50.800 --> 0:05:53.120 be and we don't actually know exactly how it's going 0:05:53.120 --> 0:05:55.240 to impact the economy. So we have two sources of 0:05:55.320 --> 0:05:58.520 uncertainty in play. And that's why I say yes, tariffs 0:05:58.520 --> 0:06:01.440 are hugely important. When we look at inflation forecast, it 0:06:01.480 --> 0:06:03.560 can be as much as half a percentage point on 0:06:03.640 --> 0:06:06.120 headline CPI, which could be make or break for the Fed. 0:06:06.600 --> 0:06:08.359 But the time right now is to focus on what 0:06:08.400 --> 0:06:11.200 are these underlying trends that are happening this key shape 0:06:11.240 --> 0:06:14.600 that's involved in the economy. Massive government spending, which can 0:06:14.720 --> 0:06:18.080 argue is muting the economic cycle in play. We got 0:06:18.080 --> 0:06:20.520 to talk about that labor market and how things are changing, 0:06:20.680 --> 0:06:22.120 and we have to talk about some of these other 0:06:22.160 --> 0:06:25.440 issues like a very extended, troubled electrical grid that is 0:06:25.520 --> 0:06:28.279 limiting the ability to move forward. These are things that 0:06:28.360 --> 0:06:30.960 exist with or without trade in tariffs and I can 0:06:31.000 --> 0:06:33.360 come up with a whole economic view on which the 0:06:33.480 --> 0:06:35.400 teriff is sort of the whip cream on top of 0:06:35.440 --> 0:06:38.440 the ice cream, but not actually the core meal. Even 0:06:38.520 --> 0:06:40.200 if right now it's the area where we have the 0:06:40.200 --> 0:06:40.960 most volatility. 0:06:41.080 --> 0:06:43.440 Sometimes I'll take that's the cool meal. Francis donald a 0:06:43.520 --> 0:06:55.440 vampi sick just to turn back to the market. So 0:06:55.560 --> 0:06:57.800 let's talk about crude giving back some of the gangs today. 0:06:57.960 --> 0:07:01.000 After smiking on reports of rising tens in the Middle East, 0:07:01.040 --> 0:07:03.440 the US ordering some of its embassy staff and Bangtann 0:07:03.480 --> 0:07:06.440 to Leisa region due to heightened security risk. Joining US now, 0:07:06.440 --> 0:07:09.800 as the former senior US intelligence official Norman Rule, No'm 0:07:09.800 --> 0:07:11.920 welcome to the program, Sir. We always enjoy leaning on 0:07:11.960 --> 0:07:13.680 your expertise and a sign like this, could you just 0:07:13.720 --> 0:07:16.320 frame for us whether this is the real deal, something 0:07:16.360 --> 0:07:18.200 to be concerned about, or just one of those things 0:07:18.240 --> 0:07:21.440 that we typically see every few months out of this region. 0:07:22.640 --> 0:07:25.160 Good morning, Well, it's something to be concerned about. What 0:07:25.240 --> 0:07:28.559 we're watching her Three issues that are coming together after 0:07:28.880 --> 0:07:32.880 months of work, the lack of progress in the Iran talks, 0:07:32.960 --> 0:07:37.640 the dangerous expansion of Iran's nuclear program, and right now 0:07:37.720 --> 0:07:40.560 the IA Board of Governors finding that iron is in 0:07:40.680 --> 0:07:44.800 non compliance with its nuclear safeguard obligations under the Non 0:07:44.840 --> 0:07:49.840 Proliferation Treaty. The DUMP administration is committed to diplomacy, but 0:07:49.920 --> 0:07:53.400 it shows every sign of willing to use military force 0:07:53.440 --> 0:07:56.400 to prevent Iran from acquiring a nuclear weapon, and the 0:07:57.040 --> 0:07:59.760 actions taken over the last twenty four hours are meant 0:08:00.080 --> 0:08:05.520 signal Iran that that intent is indeed sincere without raising 0:08:06.200 --> 0:08:09.320 the temperature in the region significantly. 0:08:09.560 --> 0:08:11.600 Norman, what does it say to you that the ia 0:08:11.800 --> 0:08:14.680 Board of Governors is saying Iran is non compliant of 0:08:14.720 --> 0:08:16.960 its obligation? What does this mean? I mean we're going 0:08:17.000 --> 0:08:20.080 to see more countries take more action and sanctions on Tehran. 0:08:21.160 --> 0:08:24.520 Well, first, the issues that the iae has worked on 0:08:24.600 --> 0:08:28.280 in the last few weeks are long standing, in some 0:08:28.360 --> 0:08:33.280 cases for many years. But diplomacy has very slow wheels, 0:08:33.280 --> 0:08:36.000 and people put a lot of effort into trying to 0:08:36.040 --> 0:08:39.840 avoid this step. Indeed, this censure of Iran is the 0:08:39.880 --> 0:08:42.640 first time something like this has been done in twenty years. 0:08:43.720 --> 0:08:48.080 This will require now that the IAEA pushed this towards 0:08:48.120 --> 0:08:50.960 the UN Security Counsole for what is known to snap 0:08:51.120 --> 0:08:55.200 back to in essence, restore all UN Security Console sanctions 0:08:55.240 --> 0:08:58.800 on Iran, probably in September. They have until October, but 0:08:58.840 --> 0:09:02.600 since Russia takes over the UN Security Council in October, 0:09:02.600 --> 0:09:06.760 that's unlikely to happen. What we're seeing is that Europe 0:09:07.400 --> 0:09:12.200 is seeing that diplomacy is coming to its end. There 0:09:12.200 --> 0:09:14.720 are no other options here, and they are agreeing with 0:09:14.800 --> 0:09:17.600 the United States that the more severe pressure needs to 0:09:17.600 --> 0:09:20.920 be placed on Iran. And again, Iran's nuclear program is 0:09:20.960 --> 0:09:25.120 reaching a very advanced stage. Most of its enrichment capacity 0:09:25.160 --> 0:09:28.800 is now being devoted to military which is not nuclear weapons, 0:09:28.880 --> 0:09:31.839 but still military great enrichment for which it has no 0:09:32.559 --> 0:09:33.480 actual purpose. 0:09:34.280 --> 0:09:39.360 Well norm maybe in even further breach of IEA obligations. 0:09:39.400 --> 0:09:41.200 What we're hearing today is that Iran says they're going 0:09:41.240 --> 0:09:45.280 to establish a new uranium enrichment center in response to 0:09:45.320 --> 0:09:48.760 this decision. At the same time, the Omani foreign minister 0:09:49.000 --> 0:09:51.559 confirmed that the sixth round of talks between Iran and 0:09:51.600 --> 0:09:54.360 the United States is still set to go on on Sunday. 0:09:54.840 --> 0:09:57.280 How is there a path for diplomacy if Tehran is 0:09:57.280 --> 0:10:01.160 continuing to enrich uranium and announcing new centers. 0:10:01.720 --> 0:10:03.840 It's a great point. I think you're seeing several things here. 0:10:03.920 --> 0:10:07.120 At first, I think whatever Iran announces it planned to do, 0:10:07.160 --> 0:10:10.480 in any case, it's just using the IEA Board of 0:10:10.480 --> 0:10:14.720 Governor's resolution as an excuse. It's likely going to expand 0:10:14.840 --> 0:10:18.040 its scale of nuclear enrichment, as I say, to continue 0:10:18.160 --> 0:10:22.439 its program in this dangerous direction. We should be most 0:10:22.520 --> 0:10:27.200 concerned if it further restricts ie access to its program, 0:10:27.240 --> 0:10:29.360 which it has been doing for a number of years, 0:10:29.400 --> 0:10:32.760 that would be most concerning. Iran, however, has all the 0:10:32.800 --> 0:10:36.800 reason in the world to continue talks to drag out 0:10:36.840 --> 0:10:39.240 this process, and that is what has been of greatest 0:10:39.280 --> 0:10:43.240 concern to the Trump administration and others, because again, there 0:10:43.440 --> 0:10:47.480 has been no substantial progress in the talks. Iran refuses 0:10:47.520 --> 0:10:51.640 to halt domestic enrichment, to close any facilities, and to 0:10:51.720 --> 0:10:55.920 halt advanced research and development. And unless you have significant 0:10:56.040 --> 0:11:00.520 constraints on those activities, besides temporary constraints, do have a 0:11:00.559 --> 0:11:03.240 program that any moment can be turned into a nuclear 0:11:03.280 --> 0:11:04.160 weapons program? 0:11:04.440 --> 0:11:07.040 Normal, what kind of attack would it look like? Given 0:11:07.040 --> 0:11:09.360 the fact that we do have reports that Israel is 0:11:09.400 --> 0:11:13.079 ready to launch an operation into Iran, well, to. 0:11:13.040 --> 0:11:15.840 Be clear, there is no evidence that we're facing an 0:11:15.920 --> 0:11:19.240 imminent attack by the United States or Israel on Iran. 0:11:19.280 --> 0:11:22.560 Although such a likelihood is increasingly likely, it will grow 0:11:22.760 --> 0:11:26.640 likely more likely as a Uran refuses to cooperate. Such 0:11:26.679 --> 0:11:29.400 an attack would be would have a number of different 0:11:29.480 --> 0:11:32.440 elements to it. It is certainly unlikely to take place 0:11:32.520 --> 0:11:35.920 in a single strike. Iran knows this. Iran has almost 0:11:35.960 --> 0:11:41.160 certainly been preparing to live through such an attack and 0:11:41.240 --> 0:11:44.920 to respond with its own ballistic missiles and other tools 0:11:44.960 --> 0:11:51.240 against Israel. It will be a prolonged event, both diplomatically 0:11:51.320 --> 0:11:54.920 as well as militarily. But again, the United States has 0:11:55.080 --> 0:12:00.320 more than sufficient capacity to overwhelm anything Iran may seek 0:12:00.360 --> 0:12:01.920 to use to defend itself. 0:12:02.040 --> 0:12:03.839 And no, thanks for your signed today, no doubt will 0:12:03.840 --> 0:12:16.679 catch up against soon. Norman Roll there of csis I 0:12:16.800 --> 0:12:19.440 stand back to trade China, affirming a US trade deal 0:12:19.640 --> 0:12:22.320 announced earlier this week. Officials out in the country always 0:12:22.400 --> 0:12:25.360 quote keeps its word. Joining us now is Adam Posen 0:12:25.600 --> 0:12:28.800 of the Peniston Institute. Adam, welcome back to the program sir. 0:12:28.960 --> 0:12:31.440 Let's talk about what ultimately you've been engaged with over 0:12:31.480 --> 0:12:33.640 the past week or so. I think yesterday, after the 0:12:33.640 --> 0:12:36.880 inflation print, there might have been some excitement that maybe 0:12:36.880 --> 0:12:38.760 we could escape the higher prices off the back of 0:12:38.760 --> 0:12:42.400 the policy we've seen implemented over the last month or so. Adam, 0:12:42.440 --> 0:12:44.160 do you think maybe we're getting a little bit too 0:12:44.200 --> 0:12:45.040 excited too soon. 0:12:45.960 --> 0:12:48.520 I think we're being too excited too soon, Jonathan, for 0:12:48.559 --> 0:12:52.360 two reasons. First, as you imply, there is still a chance, 0:12:52.440 --> 0:12:54.839 and in fact, I think a very great chance, that 0:12:55.280 --> 0:12:58.240 we are just at the start of the terror cycle. 0:12:58.400 --> 0:13:01.400 I appeared before the Senate Finds Democrats and a hearing 0:13:01.520 --> 0:13:05.319 yesterday and there were small businesses, array of them sitting 0:13:05.320 --> 0:13:08.320 next to me talking about how they are having to 0:13:08.360 --> 0:13:11.920 make hard decisions on what teriffs to purchase or what 0:13:12.040 --> 0:13:14.680 to cut back on. And we're seeing that in all 0:13:14.760 --> 0:13:17.080 kinds of data, even though it's not in the New 0:13:17.160 --> 0:13:21.920 York Fed inflation expectations admittedly, and so I think the 0:13:21.960 --> 0:13:24.480 Fed's right to sit tight. But the other thing that's 0:13:24.520 --> 0:13:26.320 going on is we're not going to duck this as 0:13:26.360 --> 0:13:30.600 a real income hit. There's huge income hit because we're 0:13:30.640 --> 0:13:34.319 losing purchasing power of things people want to buy through TIFFs. 0:13:34.800 --> 0:13:37.640 Where it's a real income hit because uncertainty has gone 0:13:37.720 --> 0:13:40.360 up and it's going to remain up as the non 0:13:40.480 --> 0:13:44.480 deals of the last month's show, And so we might 0:13:44.679 --> 0:13:48.439 end up possibly with not that much inflation, but incomes 0:13:48.440 --> 0:13:49.040 are going to be. 0:13:49.040 --> 0:13:52.040 Hit, Adam. When you look at the core inflation yesterday 0:13:52.200 --> 0:13:56.079 we saw the decline was from airlines, cars, clothing. There 0:13:56.120 --> 0:13:57.720 was a drop across the board. When it comes to 0:13:57.880 --> 0:14:01.200 energy prices, when do you think it'll actually hit the 0:14:01.240 --> 0:14:01.839 hard data? 0:14:03.000 --> 0:14:06.320 It's a fair question. Memory And after four months of 0:14:07.040 --> 0:14:11.679 under expectations inflation, even somebody like me who's been forecasting 0:14:11.720 --> 0:14:14.360 inflation to go up, has to take a pause. Four 0:14:14.400 --> 0:14:18.320 months in a row is real information. But the fact 0:14:18.400 --> 0:14:21.760 remains that the used cars new and used cars number 0:14:21.840 --> 0:14:25.680 is weird, to use a technical term, given what we 0:14:25.840 --> 0:14:28.840 know is going on at Forward, at GM, at Toyota, 0:14:29.000 --> 0:14:31.800 stillantis at Honda, given what we know is happening to 0:14:31.840 --> 0:14:35.040 their supply chains, given what we know is happening to 0:14:35.120 --> 0:14:40.840 credit availability for cars. It's odd. Doesn't mean it's not 0:14:41.040 --> 0:14:43.960 literally true, but I wouldn't put too much weight on it. 0:14:44.480 --> 0:14:49.000 But more than that, I think it's just needs to 0:14:49.040 --> 0:14:52.000 be as the FED I think is rightly doing by waiting. 0:14:52.640 --> 0:14:54.680 You need to wait to see what happens if it 0:14:54.720 --> 0:14:59.720 turns out there isn't inflation, then great, and we just 0:14:59.800 --> 0:15:01.360 have to deal with the real income laws. 0:15:01.920 --> 0:15:05.200 Well, Adam, what about if we do get trade deals 0:15:05.240 --> 0:15:06.960 and this is all wrapped up in terms of the 0:15:07.040 --> 0:15:10.200 uncertainty by the middle or the end to the summer. 0:15:11.240 --> 0:15:15.160 It still doesn't fix the underlying problems. Emmery, I mean 0:15:15.480 --> 0:15:19.200 two things. First is again two things again, it's both 0:15:19.240 --> 0:15:23.240 direct and uncertainty. The direct effect is we still have 0:15:23.320 --> 0:15:26.920 tariffs that are twenty times on average as high as 0:15:26.960 --> 0:15:30.320 they were for eighty years, and that has to work 0:15:30.360 --> 0:15:34.760 through the system, and that is paid for by American 0:15:34.800 --> 0:15:38.560 companies or American consumers or American companies who buy inputs, 0:15:39.360 --> 0:15:44.040 so full stop, that's there. Second, because of the nature 0:15:44.080 --> 0:15:46.680 of the tariffs that they're not done through legislation, they're 0:15:46.680 --> 0:15:51.280 done through presidential emergency power, executive orders. And because everything 0:15:51.320 --> 0:15:55.480 gets negotiated, everything's up for negotiation at all times, the 0:15:55.560 --> 0:15:59.120 uncertainty doesn't go away. I know Jonathan hates it when 0:15:59.120 --> 0:16:01.600 I bring up Brexit, but the analogy is to Brexit. 0:16:01.680 --> 0:16:04.320 From twenty sixteen to twenty twenty, people kept saying, well, 0:16:04.320 --> 0:16:06.560 once the uncertainties resolves, once we know if it's a 0:16:06.560 --> 0:16:09.480 harder soft Brexit, It'll be okay. And I kept saying, 0:16:09.520 --> 0:16:11.920 the problem with Brexit is an uncertainty, the problem with 0:16:12.040 --> 0:16:15.760 about Brexit, problem with Brexit is Brexit, and so it's 0:16:15.800 --> 0:16:18.280 not the same thing. But there is that parallel here. 0:16:18.680 --> 0:16:20.800 The regime has changed, and we're seeing that in the 0:16:20.840 --> 0:16:23.560 fixed income markets. We're seeing that in the currency markets. 0:16:23.920 --> 0:16:27.160 People do not view the US assets, or US policy 0:16:27.280 --> 0:16:30.200 or US fiscal policy as safe as it once was. 0:16:30.560 --> 0:16:33.720 It's not gone to heck, but it is less safe 0:16:34.000 --> 0:16:37.440 more than zero risk asset, and that has a cascade 0:16:37.440 --> 0:16:39.480 of effects that will not go away. 0:16:40.120 --> 0:16:42.560 Adam, if you asked me seriously what Brexit is, what 0:16:42.600 --> 0:16:44.840 it was, I cann't tell you. I still following the 0:16:44.840 --> 0:16:46.680 conversation a long time ago. I just feel lucky to 0:16:46.680 --> 0:16:48.680 live in America and no longer than the UK. Is 0:16:48.720 --> 0:16:50.960 trite that story anymore? Did you give up to one, Marie, 0:16:51.040 --> 0:16:52.440 I sort of did. 0:16:52.680 --> 0:16:54.240 I did give up, especially because I moved to the 0:16:54.320 --> 0:16:57.800 UK at a one seventy two handle self Brexit breasit 0:16:57.840 --> 0:16:59.080 I'm still left after Brexit. 0:16:59.240 --> 0:17:01.000 Enough of that, Enough of that. I wanted to get 0:17:01.040 --> 0:17:03.400 your view on the next FED chair and the kind 0:17:03.400 --> 0:17:06.000 of characteristics that you would like to see from the 0:17:06.000 --> 0:17:08.560 incoming FED chair after of course, Cham and Paus steps 0:17:08.600 --> 0:17:09.880 aside next year. 0:17:10.560 --> 0:17:18.040 Right, I think Jonathan as Ben Burnanki, Thomas Lobocker, Rick 0:17:18.119 --> 0:17:21.600 Michian and I argued for after Greenspan, it should matter 0:17:21.680 --> 0:17:25.000 less who the chair is. It should be a system. 0:17:25.080 --> 0:17:28.440 It should be less about the personality. Obviously it does matter. 0:17:28.560 --> 0:17:31.560 J Powell has had unique attributes that have mostly been 0:17:31.640 --> 0:17:38.120 extremely great leadership. I think the next chair is going 0:17:38.160 --> 0:17:42.080 to end up having a very simple job because they're 0:17:42.160 --> 0:17:45.480 either going to get lucky because AI kicks in and so, 0:17:45.640 --> 0:17:48.240 like green Span in the mid nineties, you get higher 0:17:48.280 --> 0:17:51.240 growth and lower inflation and they can sit back and 0:17:51.359 --> 0:17:55.639 thereby please President Trump, or inflation will be obvious and 0:17:55.760 --> 0:17:57.920 the committee will leave them no choice and they'll have 0:17:57.960 --> 0:18:00.399 to hike. So there's going to be a lot of 0:18:00.480 --> 0:18:04.480 hype around who's the next year and if there is 0:18:04.520 --> 0:18:07.080 a crisis, it matters whether it's been Burnanki or not. 0:18:07.359 --> 0:18:10.080 I don't mean to dismiss that, sure, but I think 0:18:10.119 --> 0:18:13.040 people are overdoing it. The FED will do what the 0:18:13.080 --> 0:18:13.680 FED does. 0:18:14.119 --> 0:18:15.800 Let's talk about Adam. Let's talk about what the FED 0:18:15.880 --> 0:18:17.879 will do and what they'll do next. You said for 0:18:17.960 --> 0:18:19.360 quite a while there's a real risk of the next 0:18:19.400 --> 0:18:21.720 move might be an interest rate hike. And you also 0:18:21.760 --> 0:18:24.440 acknowledge this morning that four months of self that expected 0:18:24.480 --> 0:18:27.320 inflation is not nois it's information. So Adam, with that 0:18:27.359 --> 0:18:28.920 in mind, what's the view now and what you would 0:18:28.960 --> 0:18:30.159 expect to come from. 0:18:30.000 --> 0:18:32.919 The Fed, you're right to call me on that. I 0:18:32.920 --> 0:18:35.480 had been expecting higher inflation this year, and I was 0:18:35.520 --> 0:18:38.159 expecting that the FED would be hiking before the end 0:18:38.200 --> 0:18:41.119 of the year a few months ago, even before this 0:18:41.200 --> 0:18:44.240 run of data, I changed my forecast. It was still 0:18:44.280 --> 0:18:46.920 out of market, out of consensus, and remains a bit 0:18:47.000 --> 0:18:50.160 so that the Fed is not going to be cutting 0:18:50.880 --> 0:18:54.159 until November December at the earliest, and if they do, 0:18:54.240 --> 0:18:56.280 it's only going to be two cuts before the end 0:18:56.280 --> 0:18:58.439 of the year. There are a bunch of reasons for 0:18:58.520 --> 0:19:01.240 them to sit still. Some of them were articulately by 0:19:01.240 --> 0:19:06.920 feder Atlanta president Raphael Bostick the other day. The general 0:19:07.000 --> 0:19:09.679 sense of the committee, I think is broadly right that 0:19:10.440 --> 0:19:13.320 we're not falling off a cliff in terms of unemployment 0:19:13.359 --> 0:19:16.520 or growth. So anyway forecasts, they're going to sit tight 0:19:16.760 --> 0:19:19.280 and they're going to sit tight at least through September, 0:19:19.520 --> 0:19:23.680 probably till fourth quarter, and I think if they do 0:19:23.760 --> 0:19:25.879 puty cuts in the fourth quarter that are likely you're 0:19:25.880 --> 0:19:27.640 going to have still likely to have to take them 0:19:27.640 --> 0:19:29.600 back by in the middle of twenty twenty six. 0:19:29.840 --> 0:19:33.520 Interesting, Adam, we get new information, the outlook changes. I 0:19:33.560 --> 0:19:36.880 appreciate the update. Adam Poston at the Peterson Institute. Thank you, sir, 0:19:37.080 --> 0:19:49.920 Thank you very much. Still ahead, Ben last on this afternoon, 0:19:50.119 --> 0:19:53.119 thirty year debck coming to market, Lindsay Rosno, Goldent Sachs. 0:19:53.359 --> 0:19:55.120 It's with us around the table for a preview, Linday, 0:19:55.160 --> 0:19:55.680 it's going to see you. 0:19:55.800 --> 0:19:56.399 Thanks for having me. 0:19:56.480 --> 0:19:58.200 Let's talk about fixed income, the kind of risks out 0:19:58.240 --> 0:20:00.439 that lots of people worried about the long bomb, the 0:20:00.480 --> 0:20:01.600 thirty year issue. 0:20:01.560 --> 0:20:04.159 Yes, and that has been trading more like risk asset 0:20:04.440 --> 0:20:06.639 than it has been trading as a flight to quality, 0:20:06.680 --> 0:20:09.040 which I think we're used to. The big thing here 0:20:09.160 --> 0:20:11.040 is just trying to figure out where fiscal is on 0:20:11.080 --> 0:20:13.240 the going forward, and what we've been telling clients is 0:20:13.280 --> 0:20:15.200 there's no need to go into the thirty year bond. 0:20:15.359 --> 0:20:17.000 There are a lot of bombs in the belly and 0:20:17.040 --> 0:20:19.159 the very short end of the curve. Stay there and 0:20:19.560 --> 0:20:20.920 you'll be better served. 0:20:20.680 --> 0:20:22.879