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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leie.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Steve

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Speaker 1: Weisman coming into the studio this morning, and the first

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Speaker 1: thing he says to me, I've got a joke. It's

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Speaker 1: about CEOs. We'll let me tell it. And I'm like,

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Speaker 1: should we do this? At the top of the conversation.

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Speaker 1: Should we do this? It's clean and it's good. So

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Speaker 1: I'm gonna let Steve Weisman do his joke. Heisman Group

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Speaker 1: Newberger Berman Sr. Portfolio Manager, Good morning to Steve. Morning.

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Speaker 1: I didn't know you're a comedian as well, So let's

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Speaker 1: talk about it. Give us the joke off the top.

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Speaker 1: What is it? All right? So the joke is guy

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Speaker 1: who comes the CEO of a company reports to work

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Speaker 1: on the first day, has lunked with the old CEO,

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Speaker 1: and the old CEO says, I got a gift for you.

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Speaker 1: Is him a box? And then the box he opens it,

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Speaker 1: there's three envelopes and then numbered one, two, and three.

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Speaker 1: He says, don't open them until you have your first crisis.

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Speaker 1: Then open up the first envelope. So he said, okay,

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Speaker 1: he puts the box in a drawer. Three years go by,

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Speaker 1: he's got his first crisis, doesn't know what to do.

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Speaker 1: He remembers the envelope, so he opens up the first envelope.

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Speaker 1: He reads it and it says, blame your predecessor, and

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Speaker 1: he says genius. So he does it, and crisis averted.

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Speaker 1: Believe me, we've all seen this. And then two more

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Speaker 1: years go by there's another crisis. He was from the envelope.

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Speaker 1: So he opens up the second envelope and it says,

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Speaker 1: take a huge restructuring charge, and it goes genius, and

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Speaker 1: he takes a huge restructuring charge and crisis averted. And

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Speaker 1: another three years go by. It doesn't know what to

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Speaker 1: do because it's another crisis. He opens up the third

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Speaker 1: envelope and that says, prepare three envelopes. That is fantastic,

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Speaker 1: all right? So who your trust to? The which of

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Speaker 1: your lungs? Right? You know, Steve, because it really strikes

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Speaker 1: close to home. How many times have you seen that

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Speaker 1: We're all wondering at LEASA points now you're talking about

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Speaker 1: which company that I'm not going to say, but you are.

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Speaker 1: I will say that I saw New Burger, I saw

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Speaker 1: a CEO of a company that I'm sure and I

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Speaker 1: will mention it because it's not fair. And as I

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Speaker 1: was and I was thinking, and as you see it

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Speaker 1: was presenting it, it it wasn't a great presentation, thinking this

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Speaker 1: guy could just really use the three ovel are we talking?

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Speaker 1: Let's talk about Elon Musk. Shall we test high profile

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Speaker 1: short for many people? Steve, it's a short that you

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Speaker 1: had and no longer have. How are you thinking about

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Speaker 1: the company at the moment? What made you cover the short?

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Speaker 1: Other than just getting your face ripped off? Imagine if

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Speaker 1: you're getting a couple of at night. Everybody has a

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Speaker 1: threshold of pain. Mine's pretty high. But when you look

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Speaker 1: at when the stock started to go crazy on look,

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Speaker 1: it started to go crazy because the deliveries were better

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Speaker 1: than expected. It's probably better to expected than I expected.

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Speaker 1: But you know, you started to read things about how

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Speaker 1: you know in two thousand thirty two the company will

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Speaker 1: make you know three thousand dollars per share or whatever.

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Speaker 1: You know that there's no way to argue against that

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Speaker 1: because it's ten years from now or twenty years from now,

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Speaker 1: So you know when when when the narrative of stock

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Speaker 1: starts to become like that, the best thing to do

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Speaker 1: is at least to walk away stave. Anyone that's familiar

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Speaker 1: with your work nice. How much homework you do, how

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Speaker 1: well thought out every single position is. This isn't just

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Speaker 1: done on a whim. But are the lessons to be

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Speaker 1: learned when there is a popular short like the Testlas

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Speaker 1: short for someone like yourself. Is that a red flag?

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Speaker 1: Is that something you want to get involved in? Is

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Speaker 1: that something you walk away from at the moment and

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Speaker 1: thinks I'm not I'm not. I'm not afraid of getting

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Speaker 1: involved with shorts that are heavily shorted. I don't like

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Speaker 1: the constructed entire short portfolio of heavily shorted stocks. But

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Speaker 1: if if I really believe in something i'll get, I'll

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Speaker 1: get involved with it. But you have to be careful.

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Speaker 1: So you you're made famous by the big short, right,

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Speaker 1: But as the era of short shorting kind of ended,

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Speaker 1: and I'm wondering because another of your shorts, Zillo back

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Speaker 1: in October, has searched, you know, more than six since then,

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Speaker 1: and a lot of people are saying, perhaps the fundamentals

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Speaker 1: are getting disconnected from the market action, or it's very

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Speaker 1: it's just funny, my zillok. I'm still short, zilo um.

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Speaker 1: It was. What's very strange about that short is that

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Speaker 1: when they report third quarter numbers, you know, if you

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Speaker 1: looked at it carefully, the fundamentals actually deteriorated, and yet

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Speaker 1: the narrative was positive. So that does sometimes make a

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Speaker 1: stock difficult. At least it race is a good point

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Speaker 1: his state just how much the price action has become

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Speaker 1: divorced from the fundamentals. As you point out, you look

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Speaker 1: at the numbers coming out of Zelo and it justifies

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Speaker 1: in your mind as shut. But then the price actually

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Speaker 1: is just doing something completely. I'm willing to stick with

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Speaker 1: something if I think the fundamentals are actually deteriorating or

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Speaker 1: fundamentally deteriorating the problem with with the Tesla short was

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Speaker 1: the fundamental start to improve and and you know then

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Speaker 1: then all you are left with is evaluation short. And

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Speaker 1: one rule I have is I'm never sure of stock

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Speaker 1: just because of evaluation, because in an age of both

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Speaker 1: of disruption and free money, it's a recipe for just

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Speaker 1: That's where I want to go. I mean the card

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Speaker 1: rule is short says you short alausy company in a

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Speaker 1: lausy group and allowsy market. That's pretty easy to do.

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Speaker 1: Right now, you've got a central bank strategy massively pushing

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Speaker 1: against a short belief? Does does long short just walk

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Speaker 1: away from short until Chairman Powell changes his tune. I

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Speaker 1: still think you can be long short. I think you

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Speaker 1: have to have a very long bias right now, which

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Speaker 1: I do. I think you can be selectively short individual

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Speaker 1: names like you know. For example, I'm short of stock

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Speaker 1: called ad Talum, which is a ad Talum. It's a

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Speaker 1: for profit education company. It used to be called Davy,

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Speaker 1: but they sold the actual part of the company called

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Speaker 1: Davray for a dollar plus assumption of debt, which tells

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Speaker 1: you how much on what's left is a nursing school

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Speaker 1: and a medical school. I have no ethical issues about

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Speaker 1: what dev is doing, and the biggest part of the

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Speaker 1: company is nursing And the short these is very simply

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Speaker 1: is that over the last couple of years has been

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Speaker 1: new entrance of nonprofit schools that are doing exactly the

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Speaker 1: same thing as devirived for half the price. Two other

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Speaker 1: names that come to mind regarding your positioning HSBC standard charted? Yes,

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Speaker 1: what are things looking like right now for you? I'm

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Speaker 1: still short though, and we connected those shorts more to

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Speaker 1: China than we are to Brexit. How do you think

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Speaker 1: this has got nothing to do with Brexit? Nothing? It's

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Speaker 1: it's it's that HSBC is about, off the top of

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Speaker 1: my head, Hong Kong UH standard charters like Hong Kong

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Speaker 1: UM and Hong Kong's in a recession and so they'll

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Speaker 1: have credit issues. Period. Have you ever been less short

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Speaker 1: stocks though? I mean you're talking about specific names, but

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Speaker 1: you said you know you are. You've got a very

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Speaker 1: long bias, and so I'm wondering, you know, the sort

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Speaker 1: of longs to short ratios sort of over that's about

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Speaker 1: as long as I get. Okay, I'm about six at

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Speaker 1: long right now, and that's as long as you get,

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Speaker 1: as long as I can go. Okay, And how long

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Speaker 1: have you been the longest you can go? Late last year?

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Speaker 1: What's the biggest mistake rookies make? Shorting? There's a lot

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Speaker 1: of people out there. They don't believe in the FED strategy.

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Speaker 1: They believe the Fed's gonna make John. Are we modeling

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Speaker 1: one or two ray cuts? Right? Now wonder two. Okay, Fine,

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Speaker 1: someday that's gonna end, and everybody's gonna want to go, Okay,

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Speaker 1: I'm gonna get back on the short band record. What's

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Speaker 1: the rookie mistake in shorting? I think the mistake people

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Speaker 1: make is that because they think that it's wrong for

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Speaker 1: the FED to have a free money policy, therefore they

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Speaker 1: should shortstocks. Is because you think the Feds wrong. So

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Speaker 1: what they have the FED? That's something you could you

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Speaker 1: could think, but so many people have struggled with this.

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Speaker 1: One struggled this smart. You know, don't fight the FED? Well,

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Speaker 1: but does that does that sort of change the equation

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Speaker 1: for specific names too? Well? They would you would need

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Speaker 1: if you were going to fight the FED. And look,

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Speaker 1: I did fight the FED in two thousand and seven

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Speaker 1: and eight, um, but what you what What you had

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Speaker 1: then was deteriorating credit. So if you're going to fight

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Speaker 1: the FED, you need deteriorating credit quality. The problem is

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Speaker 1: that credit quality United States is perfect. There's no problems anywhere,

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Speaker 1: which is why you like the US banks one reason.

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Speaker 1: But I only like the large banks. I think investing

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Speaker 1: in anything outside of the large banks with very few exceptions,

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Speaker 1: as a waste of time because they can't spend the

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Speaker 1: money on acknowledging. Steve Icean, thank you so much from

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Speaker 1: his appearances with Bloomberg saveillas today. I'm sure we'll write

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Speaker 1: a whole bunch of we should cut that joke in theme.

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Speaker 1: I was about to say, I play it a few times.

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Speaker 1: I mean it was good. I did, like we should.

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Speaker 1: We should play it when we talk about certain companies

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Speaker 1: and what they're doing. You could play that joke for years.

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Speaker 1: We will, I think happened. When are you going to

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Speaker 1: tell us about which company you were talking about? Come on, no,

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Speaker 1: I won't do it. Steve Issis at the Interview of

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Speaker 1: the Day on these odd times in the markets will

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Speaker 1: look short term, will look long term as well. In

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Speaker 1: Paul Sweeney, we can do this to the gentleman, the

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Speaker 1: only one we could speak to who actually knew fluidly

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Speaker 1: how to use a bunker remo. Douglas Cast joined some

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Speaker 1: series a few years ago, licking House at Putnam other

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Speaker 1: venues looking at individual security selection. Doug Cast good morning, um,

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Speaker 1: just to get to the perspective of a bunker remo

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Speaker 1: from a few years ago. This, folks is pre Bloomberg

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Speaker 1: is well have you ever seen a parabolic move of

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Speaker 1: a company of the substance of Tesla. We've seen him,

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Speaker 1: but have we really ever seen it with something is

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Speaker 1: tangible as Tesla. Well, Tesla is almost a metaphor for

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Speaker 1: the market um. The market caps a hundred forty five

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Speaker 1: billion dollars. It's bigger than Costco. It's twice as big

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Speaker 1: as Cat's, three times the size of GM, six times

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Speaker 1: the size of Kellogg. When it is trading over eight

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Speaker 1: hundred bucks. I think on Tuesday, fifty million shares of

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Speaker 1: Tesla traded an average price of seven fifty. That equates

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Speaker 1: to a nominal value of thirty five billion dollars, or

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Speaker 1: one third it's market cap. Let's think about that. Tesla

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Speaker 1: maybe the future and the company has obviously established first

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Speaker 1: mover advantage in orders and batteries. But the share the

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Speaker 1: dramatically overpriced and um, as you said, it's recent ascent

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Speaker 1: radically eclipse his previous speculative urges of past cycles. Paul

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Speaker 1: wants to jump in, but dutcasts quickly here, how are

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Speaker 1: you a position this morning? And your trading accounts? You know,

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Speaker 1: we talk a lot about price targets and whether we're

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Speaker 1: bearish of bullish, and we don't spend enough time generally

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Speaker 1: talking about conviction levels, and this is a period of

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Speaker 1: time in which my conviction level is low. On the

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Speaker 1: least few weeks, we've gotten the taste of a new

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Speaker 1: regime of volatility, not only in Tesla but in the

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Speaker 1: market as a whole. So all markets are not created equal.

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Speaker 1: So Doug, and just on the Tesla, we're down about

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Speaker 1: ten and a half percent here below eight hundreds. Of

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Speaker 1: the volatility around Tesla shares continues. So, Doug, are you

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Speaker 1: surprised at the resiliency in the equity markets in the

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Speaker 1: face of I would say that you know the latest

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Speaker 1: exogenous shock, which is the coronavirus and the impact that

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Speaker 1: might have on global GDP. Are you surprising the resiliency

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Speaker 1: the equity markets? I am not really. I'm certainly not

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Speaker 1: surprised about the volatility, which I've been expecting. And I

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Speaker 1: just think as we look at I think that the

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Speaker 1: contour of the stock market is going to be importantly

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Speaker 1: influenced in shape by both profits and politics, and I

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Speaker 1: think we'll probably a lot of surprises in both ends.

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Speaker 1: So do with with your loads of experience, how do

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Speaker 1: you typically position yourself in an election year, particularly one

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Speaker 1: which could be particularly contentious. Well, as I said, not

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Speaker 1: all markets are creative equal. We shouldn't have conviction levels

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Speaker 1: the same at all levels of the market, and the

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Speaker 1: same applies to the election. Um, there's a great deal

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Speaker 1: of uncertainty. Um. I think what I have learned is

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Speaker 1: to expect the unexpected. Um. Just look at two thousand nineteen.

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Speaker 1: No one looked for a rise in the SMP. No one.

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Speaker 1: It was a universal view that interest rates, let's say

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Speaker 1: the ten year was going to a three and a

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Speaker 1: half percent yield, into the opposite occurred. So I think

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Speaker 1: this year could be and out of the vix thinking

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Speaker 1: and a mean reversion invaluation, stocks and profits. Doug cast

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Speaker 1: for Partners will be with us a generous amount of

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Speaker 1: time in this half hour. Doug, I've gotta go to

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Speaker 1: what sticks out like a sore thumb and everybody you know,

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Speaker 1: you're out on Twitter and you're the pin launch. Oh quiet,

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Speaker 1: I don't want to go there, Doug. I mean I've

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Speaker 1: been medicating that you've just given us a division title. Yes, Doug,

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Speaker 1: I mean did Sandy call you up and just say

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Speaker 1: this is the greatest things? Slice bread, Palmer said it

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Speaker 1: was the stupidest deal he's ever heard. You give a

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Speaker 1: franchise player unproven just because of a luxury tax. Okay,

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Speaker 1: we're gonna rip up the scripture, folks. We gotta, we gotta,

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Speaker 1: we gotta let the Red or the Knicks. Doug Cast Folks, Wisconsin, Florida,

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Speaker 1: next to a guy named Palmer. He used to throw

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Speaker 1: the orb for the Baltimore Orioles as well. We're honored

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Speaker 1: to speak with Mr Palmer one day. One of my

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Speaker 1: true heroes as a kid. Doug Cast. Jim Palmer says,

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Speaker 1: this was a bad trade, awful trade. I'll get him

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Speaker 1: on the phone next time I'm on you kill him.

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Speaker 1: You just know, you know it was you Just to

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Speaker 1: face reality. One of the mark say, good morning one

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Speaker 1: or six one FM Boston. I got my black arm,

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Speaker 1: but trust me, Doug Kiss, I want to go to

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Speaker 1: What's so different for you? Which is a five year,

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Speaker 1: six year, ten year conviction on Amazon. Let's start with

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Speaker 1: the idea. How rare is it for you to have

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Speaker 1: a big company long term conviction like that? I think

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Speaker 1: that Amazon will trade of five thousand a share by

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Speaker 1: three um in the last ten years has only been

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Speaker 1: two companies that have exceeded organic growth, Google and Amazon

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Speaker 1: and their modest tom are just getting deeper and deeper.

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Speaker 1: The concerned about regulatory reform and how would impact the

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Speaker 1: p N l UH is no longer a factor, and

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Speaker 1: their mode is getting deeper and deeper and more impenetrable.

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Speaker 1: UM I said to you about six or nine months

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Speaker 1: ago that I expected a hockey stick in earnings growth

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Speaker 1: foreign excess ten greater in two thousand, twenty to twenty

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Speaker 1: two than the consensus forecast for on the south side

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Speaker 1: of with regard to earnings, and I suspect that they're

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Speaker 1: about nine months ahead ahead of my timetable based upon

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Speaker 1: the last quarter, which is two dollars to share better

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Speaker 1: than expectations, and indeed estimates rose by the reason cast

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Speaker 1: comes on. He says he knows I'm doing logarithms on

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Speaker 1: the Bloomberg on what he's saying. These are outlandish phrases

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Speaker 1: by Mr Cass, No, they're not. If you take the

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Speaker 1: long term regression of Amazon, folks back to the horrific

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Speaker 1: bottom of oh one, you get out to a Cassian

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Speaker 1: four thousand eight, five thousand three at the end of

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Speaker 1: twenty three. So Doug, this is important. Doug's outrageous called

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Speaker 1: Paul Sweeney is the linear log regression of the stock.

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Speaker 1: He's stating the obvious employees either loan in doing that. Interesting, Doug,

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Speaker 1: I mean you brought the regulatory overhang for not just Amazon,

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Speaker 1: but some of these other big technology companies like Facebook

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Speaker 1: and and Google. This is an alphabet free studio, so

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Speaker 1: we call it Google. So, but for Amazon in particular, Doug,

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Speaker 1: why do you think the regulatory risk is not that material? Um?

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Speaker 1: I think that the more regulation placed on Amazon, the

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Speaker 1: more it will increase their mode and their market share. Um.

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Speaker 1: They're such first mover advantage. Now no one's, no one's

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Speaker 1: even in the same league as they are, so it

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Speaker 1: would actually be self defeating. Interesting to see the stock.

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Speaker 1: It's amazing that Jeff Baso so another two billion dollars

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Speaker 1: worth the stock and the stock is up fifty dollars

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Speaker 1: in the last in the last two days. Interesting. So

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Speaker 1: the and by the way, Thomas Thomas, Yes, speaking of

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Speaker 1: linear lag regression. I teachum Robert Schiller's course at the

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Speaker 1: Yale School of Management that I actually spent three hours

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Speaker 1: on that last year. This is important, folks, This is

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Speaker 1: going to logs, Doug All of US, Paul Sweeney, Douglas Cass,

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Speaker 1: and I remember when the Securities Exchange Commission was afraid

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Speaker 1: to use logs publicly because they thought it would confuse

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Speaker 1: the public. And yet this is what adults do in

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Speaker 1: the market, because the core equation is an exponential function.

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Speaker 1: F E equals PV one plus out of the t

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Speaker 1: Doug Cass, what's the biggest mistake in extrapolation people make?

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Speaker 1: I mean, you're extrapolating out three weeks or three months

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Speaker 1: or even up may I suggest five years with Amazon.

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Speaker 1: What's the biggest extrapolation mistake investors make? I think, um, oddly, Um,

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Speaker 1: the extrapolation of parabolic moves is a major trading an

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Speaker 1: investment mistake. And I'm thinking obviously of Tesla. Um. You know,

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Speaker 1: Tesla was has Tesla started the year at four under

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Speaker 1: in eighteen dollars a share and traded to nine dollars. Now,

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Speaker 1: Tesla is not going to automatically brush our teeth, and

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Speaker 1: that it's not gonna walk our dog. That's not gonna

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Speaker 1: heal the sick, it's not gonna cure the blind, it's

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Speaker 1: not going to solve global warning warming it's not going

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Speaker 1: to deliver world peace. Um. When you have parabolic moves

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Speaker 1: and you extend that and traders by the relative strength,

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Speaker 1: we have to remember that parabolic moves almost always returned

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Speaker 1: to the point of breakout, and we're seeing that this morning.

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Speaker 1: There's also another important lesson. It's not your question specifically,

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Speaker 1: I see Tesla down another sixty dollars. It's an important

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Speaker 1: lesson about short selling. UM. I, as a matter of practice,

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Speaker 1: as you know, have as a basic tenant of my

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Speaker 1: short selling, to avoid any stock with a large short

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Speaker 1: interest relative to the average daily trading volume and or

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Speaker 1: the float. For example, Tesla has twenty eight million shares short,

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Speaker 1: a hundred and forty million share a float, which is

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Speaker 1: really overstated because probably thirty million of that is in

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Speaker 1: Ron Barron's hands and other law committed long term investor

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Speaker 1: investors and cult members. So um that's a dangerous thing.

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Speaker 1: And look I lived through Robert Wilson short Squeezeer Resorts International.

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Speaker 1: I have the scars on my back shorting stocks at

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Speaker 1: the dot cop dot com era a bit early. It

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Speaker 1: worked out fine, but they show we're painful for a

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Speaker 1: period of time. Doug Cass for the reason, of course

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Speaker 1: in Florida, and uh is better than good. We protect

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Speaker 1: the copyright of all of our guests. If you want

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Speaker 1: Mr Casss literature, you know where to go for him.

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Speaker 1: John Hudack with us, and this is important. There's a

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Speaker 1: lot of punditry on politics and that. But who Deck

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Speaker 1: is with Brookings. He's with their governance study group, and

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Speaker 1: he takes very seriously the accesses of all this punditry

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Speaker 1: and politics. He joins us. Now, John, you know we

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Speaker 1: knew we were going to have you. That was before

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Speaker 1: the Iowa blow up. I mean talk about a failed process.

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Speaker 1: John Farrell mentioned it earlier. Is modern technology and voting,

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Speaker 1: is it officially dead? Well, I don't think it's officially dead.

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Speaker 1: You know, there's a lot of contractors out there who

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Speaker 1: are looking to get party money, so I wouldn't declare

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Speaker 1: it dead yet. But I think this is a lesson

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Speaker 1: that a lot of Americans look at and they say,

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Speaker 1: if our systems can get hacked by Russia, if our

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Speaker 1: systems can sail. I think they look back to a

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Speaker 1: paper ballot system or the old metal voting boots with

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Speaker 1: the curtain and see that the good old thing. I

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Speaker 1: mean John, I don't know what they do in England

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Speaker 1: here the coolest thing You should go voting day and

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Speaker 1: your father mother would pick you up and you could

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Speaker 1: hit the little tabby things in the metal booth and

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Speaker 1: the curtain closed. And did they have it? And when

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Speaker 1: I used to vote in the UK, I just go

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Speaker 1: and sign a piece of paper, just a little tick

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Speaker 1: with a quill to the name. How did you do

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Speaker 1: at least? Did you think you've got the wrong person here?

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Speaker 1: I think it's Tom that used to turn up with

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Speaker 1: a quill. Are you guys who really wound up to that?

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Speaker 1: I will say if there were a little um levers

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Speaker 1: that you pulled and then that big thing and we

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Speaker 1: have a guest, John, are you John? Are we going

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Speaker 1: back to that? You know, we're probably not going back

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Speaker 1: to that. But I think the nostalgia around that and

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Speaker 1: the security that people felt around that is going to

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Speaker 1: make them furiously questioned. These new technological advances that people

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Speaker 1: are promising will be flawless and secure, and I think

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Speaker 1: it's going to be a serious conversation within the party

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Speaker 1: about what what the future holds and what kind of

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Speaker 1: backup systems in particular, will have to avoid chaos, Johns,

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Speaker 1: at the end of the caucus. I would hope it's

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Speaker 1: the end of the Iowa caucuses. I mean, these are outdated.

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Speaker 1: They force a system in play where not everyone can participate.

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Speaker 1: To see them on TV or to see them in person.

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Speaker 1: Uh that they're foolish looking, and I think the party

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Speaker 1: needs to recognize that this is not the direction of

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Speaker 1: American politics right now, and it certainly shouldn't be its future.

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Speaker 1: But a lot of criticism of the party in the

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Speaker 1: last couple of days, for that matter, the last few

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Speaker 1: months about how they order the states and who goes

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Speaker 1: to vote first, whether you should do priorities and have

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Speaker 1: no caucus anymore, Johnny, is there going to be a

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Speaker 1: serious rethink at the very top of the party about

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Speaker 1: how to achieve the best outcome, come up with the

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Speaker 1: best candidate on a national level, and stop playing around

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Speaker 1: in New Hampshire and Iowa. You know, it's not just

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Speaker 1: the past few months that that criticism has been happening,

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Speaker 1: and it's happened for both parties. I think if you

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Speaker 1: asked me five or six years ago if that serious

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Speaker 1: conversation was going to happen, I would say no. But

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Speaker 1: what we saw after six is the Democratic Party responding

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Speaker 1: by saying, we need to make some reforms And there

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Speaker 1: were some serious reforms that were made at the state

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Speaker 1: level and at the national level of how to select

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Speaker 1: a president. And I think after this election, you're going

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Speaker 1: to see that same conversation broadened to be more encompassing

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Speaker 1: about more issues. John, there's also a question about the

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Speaker 1: narrative emerging from the Iowa caucus. First of all, it's

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Speaker 1: one of dysfunction. But second of all, it's the lack

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Speaker 1: of a response to President Trump, who has basically going

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Speaker 1: to herald the economy in his re election campaign, which

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Speaker 1: we saw last night the State of the Union address.

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Speaker 1: What should Democrats do in order to counter that or

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Speaker 1: how important is it for them to get that narrative together.

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Speaker 1: It's critically important for them to get that narrative together.

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Speaker 1: What we have as a president who has a lot

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Speaker 1: of economic data to brag about, and that is the

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Speaker 1: president's prerogative. If the economy is doing well, um talk

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Speaker 1: about it. And you know, part of the reason Republicans

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Speaker 1: did so poorly in was that the President talked about

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Speaker 1: immigration and not a booming economy, but the economic recovery

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Speaker 1: and the continued economic success has not to everyone equally,

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Speaker 1: and there are a lot of people who are struggling

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Speaker 1: out there. And that's the message for Democrats, and they

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Speaker 1: haven't crafted it properly yet. John. Let's take the punditry

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Speaker 1: and bring it over to your serious political science. Mr Carville,

427
00:24:13,800 --> 00:24:16,320
Speaker 1: who I adore, I've worked with them another time. James

428
00:24:16,400 --> 00:24:19,800
Speaker 1: Carville of Louisiana says, I'm scared to death for the

429
00:24:19,840 --> 00:24:24,280
Speaker 1: Democratic Party. That's a moderate voice. Is anyone listening to

430
00:24:24,359 --> 00:24:27,720
Speaker 1: the Carvilles of the Democratic Party? Well, I will say

431
00:24:27,760 --> 00:24:30,280
Speaker 1: there are a lot of moderate voices who are saying

432
00:24:30,320 --> 00:24:33,199
Speaker 1: that who are scared to death of progressives who are

433
00:24:33,240 --> 00:24:35,760
Speaker 1: scared to death of what that might mean for the

434
00:24:35,760 --> 00:24:39,359
Speaker 1: future of the party. I'm not ready to pronounce the

435
00:24:39,400 --> 00:24:42,480
Speaker 1: Democratic Party dead, but what I do think is that

436
00:24:42,640 --> 00:24:46,760
Speaker 1: there are these moments in a party's history in which

437
00:24:47,160 --> 00:24:51,439
Speaker 1: they face real challenges, a real question marks, and uh,

438
00:24:51,520 --> 00:24:54,680
Speaker 1: we don't know what the future of the Democratic Party

439
00:24:54,680 --> 00:24:57,800
Speaker 1: will hold. It could be the progressive is nominated and

440
00:24:57,880 --> 00:25:00,840
Speaker 1: that progressive wins, and then we reset everything and say

441
00:25:01,080 --> 00:25:04,040
Speaker 1: progressive politics is the wave of the future, or that

442
00:25:04,119 --> 00:25:07,960
Speaker 1: progressive loses to Donald Trump and we say progressivism is dead,

443
00:25:08,600 --> 00:25:12,560
Speaker 1: you know, long live uh Centrism. Depending on the outcome

444
00:25:12,600 --> 00:25:15,960
Speaker 1: of this election will determine quite a bit about what

445
00:25:16,040 --> 00:25:19,600
Speaker 1: the future of both the Democratic and Republican Party will be.

446
00:25:19,680 --> 00:25:21,600
Speaker 1: But John, we've seen the outcome of things like this

447
00:25:21,720 --> 00:25:24,760
Speaker 1: again and again and again. This comes back to a

448
00:25:24,840 --> 00:25:27,639
Speaker 1: question that I've seen being asked in the United Kingdom constantly,

449
00:25:27,680 --> 00:25:29,879
Speaker 1: a question of the left. Does it just have to

450
00:25:29,920 --> 00:25:31,960
Speaker 1: come down to a purity test? Is it just about

451
00:25:32,200 --> 00:25:35,439
Speaker 1: maintaining holding on to the moral high ground? Is that

452
00:25:35,480 --> 00:25:37,240
Speaker 1: the hill you want to die on? If you really

453
00:25:37,240 --> 00:25:39,040
Speaker 1: want to make change, you've got to govern, and to

454
00:25:39,119 --> 00:25:41,320
Speaker 1: govern you've got to win. And John, from what I

455
00:25:41,359 --> 00:25:43,439
Speaker 1: see right now, it's not a party that putting themselves

456
00:25:43,480 --> 00:25:46,199
Speaker 1: in a position to really make the massive effort needed

457
00:25:46,560 --> 00:25:50,200
Speaker 1: to win. You know, I think you're absolutely right about that.

458
00:25:50,320 --> 00:25:53,959
Speaker 1: The purity tests that exists are ones the alienate voters

459
00:25:54,240 --> 00:25:58,919
Speaker 1: and in purposefully alienate voters. And I think you're right.

460
00:25:58,920 --> 00:26:01,200
Speaker 1: In order to govern you have to win. But also

461
00:26:01,240 --> 00:26:04,280
Speaker 1: in order to govern, you have to govern. And what

462
00:26:04,320 --> 00:26:07,960
Speaker 1: we have right now are candidates in this race both

463
00:26:08,119 --> 00:26:10,880
Speaker 1: you know, some centrists and certainly some on the left

464
00:26:11,160 --> 00:26:14,160
Speaker 1: who are putting plans out there that will never pass

465
00:26:14,200 --> 00:26:16,480
Speaker 1: the United States Congress. And what worries me is someone

466
00:26:16,480 --> 00:26:20,159
Speaker 1: who studies governance is the conversation is never extended to

467
00:26:20,200 --> 00:26:23,480
Speaker 1: say this is the ideal, but here's the path we're

468
00:26:23,480 --> 00:26:26,840
Speaker 1: going to go through to get there. Elizabeth Warren has

469
00:26:26,840 --> 00:26:28,840
Speaker 1: tried this a little bit to say, if we can't

470
00:26:28,880 --> 00:26:31,920
Speaker 1: have the perfect, here's our alternative done. And she's been

471
00:26:31,920 --> 00:26:35,200
Speaker 1: slammed for this. John, It's it chases a really important

472
00:26:35,200 --> 00:26:37,159
Speaker 1: point and exactly where I wanted to go, which is

473
00:26:37,240 --> 00:26:39,600
Speaker 1: what proposals have you heard, either out of President Trump

474
00:26:39,720 --> 00:26:42,840
Speaker 1: or the Democrats that you think are feasible, doable that

475
00:26:42,920 --> 00:26:46,280
Speaker 1: markets should be taking more into account. You know, I

476
00:26:46,280 --> 00:26:48,960
Speaker 1: think for Elizabeth Warren and for some of the other

477
00:26:49,000 --> 00:26:54,200
Speaker 1: centrist candidates, they've talked about how difficult um health care

478
00:26:54,280 --> 00:26:56,240
Speaker 1: is in the United States and how they need to

479
00:26:56,280 --> 00:26:58,840
Speaker 1: work across the aisle that they're not going to get

480
00:26:59,200 --> 00:27:01,560
Speaker 1: the Republic and send it to sign on to medicare

481
00:27:01,600 --> 00:27:04,680
Speaker 1: for all, and that's something that is realistic. It's something

482
00:27:04,720 --> 00:27:07,480
Speaker 1: that you know, markets don't have to think about medicare

483
00:27:07,520 --> 00:27:09,639
Speaker 1: for all because Medicare for all is not going to happen.

484
00:27:09,680 --> 00:27:13,399
Speaker 1: After the election, no matter whose president, but there's a

485
00:27:13,400 --> 00:27:16,600
Speaker 1: lot of variation in what the alternatives are. John Hudeck,

486
00:27:16,640 --> 00:27:28,760
Speaker 1: thank you so much. With Brookings, why don't you bring

487
00:27:28,760 --> 00:27:31,040
Speaker 1: in Francisco Blondest Lisa. I mean, this guy is just

488
00:27:31,119 --> 00:27:35,399
Speaker 1: like this is that gift for Lisa? That's nice for me.

489
00:27:38,000 --> 00:27:40,439
Speaker 1: It's a very exciting time in oil. You're looking right

490
00:27:40,440 --> 00:27:44,399
Speaker 1: now at oil prices rebounding up three per cent after

491
00:27:44,600 --> 00:27:47,600
Speaker 1: absolutely being clawbered, with a lot of people saying that

492
00:27:47,640 --> 00:27:50,520
Speaker 1: there was a secular shift in the entire crude market.

493
00:27:50,520 --> 00:27:54,040
Speaker 1: Francisco Blanche of Bank of American Marrilage, head of Global Commodities,

494
00:27:54,080 --> 00:27:55,520
Speaker 1: thank you so much for being with us. This would

495
00:27:55,560 --> 00:27:58,560
Speaker 1: love to get your sense right now of where we are.

496
00:27:58,600 --> 00:28:01,240
Speaker 1: The biggest one day rally since December. Is this the

497
00:28:01,280 --> 00:28:05,800
Speaker 1: beginning of some sort of revival of oil prices? Hi?

498
00:28:06,119 --> 00:28:08,800
Speaker 1: Thanks for having me. Look. I mean, I think a

499
00:28:08,840 --> 00:28:11,080
Speaker 1: lot of it depends on how China balls from here.

500
00:28:11,760 --> 00:28:15,200
Speaker 1: We've we've played out three scenarios at base case, major

501
00:28:15,280 --> 00:28:18,399
Speaker 1: China slowdown scenario and a coal contingent scenario for for

502
00:28:18,440 --> 00:28:22,120
Speaker 1: the coronavirus. But the base case we haven't really changed.

503
00:28:22,119 --> 00:28:24,720
Speaker 1: Our numbers were still was still look for sixty twos

504
00:28:24,720 --> 00:28:27,280
Speaker 1: in average for rent and fifty seven for w t

505
00:28:27,400 --> 00:28:29,600
Speaker 1: I for the year. Uh I said, I haven't had

506
00:28:29,640 --> 00:28:34,359
Speaker 1: all of the forecasts, um, partly because our economists think

507
00:28:34,440 --> 00:28:37,760
Speaker 1: that the that the China s lowlan is gonna be

508
00:28:37,760 --> 00:28:41,400
Speaker 1: a one quarter issue. So as long as that remains

509
00:28:41,440 --> 00:28:45,360
Speaker 1: the case, this is a good buying opportunity for commodity markets. Obviously,

510
00:28:45,360 --> 00:28:50,120
Speaker 1: the risk is that that UM the situation in China's

511
00:28:50,120 --> 00:28:52,360
Speaker 1: and stabilize, in which in which case you may have

512
00:28:52,360 --> 00:28:56,840
Speaker 1: a major slowdown or worse, a pandemic, in which case obviously, uh,

513
00:28:57,120 --> 00:28:59,120
Speaker 1: you know, you would get hit pretty hard on in

514
00:28:59,240 --> 00:29:02,000
Speaker 1: terms of all market would get hit harder. Yeah, but

515
00:29:02,040 --> 00:29:04,640
Speaker 1: that's really the story here. I mean, the nand could

516
00:29:04,640 --> 00:29:06,920
Speaker 1: really swing by a million barrel's day or about one

517
00:29:06,960 --> 00:29:10,880
Speaker 1: percent of global of global demand. So that's that's the

518
00:29:10,920 --> 00:29:13,960
Speaker 1: issue here, a buying opportunity. I'm wondering how the dollar

519
00:29:14,040 --> 00:29:17,000
Speaker 1: factors into this. Jane Follio of Rubble Bank just telling

520
00:29:17,080 --> 00:29:19,600
Speaker 1: us she expects the dollar to continue to strengthen. How

521
00:29:19,640 --> 00:29:21,960
Speaker 1: much does that pressure commodities and does that factor into

522
00:29:22,000 --> 00:29:25,440
Speaker 1: your call at all? Um? It is it is a factor,

523
00:29:25,440 --> 00:29:30,320
Speaker 1: no question and remember that all are actually weakened a

524
00:29:30,320 --> 00:29:33,520
Speaker 1: little bit against some of the European currencies. Um as

525
00:29:33,680 --> 00:29:36,200
Speaker 1: rates came down, but not rates are going up obviously

526
00:29:36,240 --> 00:29:39,080
Speaker 1: again as as the U. S. Economy, to your point earlier,

527
00:29:39,160 --> 00:29:43,400
Speaker 1: is really really humming. Um So it's a factor. But

528
00:29:43,640 --> 00:29:46,800
Speaker 1: I do think that I do think that ultimately we

529
00:29:46,800 --> 00:29:49,360
Speaker 1: were in the early stages of a global recovery. I'm

530
00:29:49,360 --> 00:29:51,640
Speaker 1: open a half ago, driven by the U. S. China

531
00:29:51,720 --> 00:29:54,640
Speaker 1: trade deal and and also importantly by the massive he

532
00:29:54,800 --> 00:29:57,160
Speaker 1: seeing that the Federal Reserve has given us as well

533
00:29:57,160 --> 00:29:59,440
Speaker 1: as many centil facts we've had. We have three cuts

534
00:29:59,520 --> 00:30:01,720
Speaker 1: last year by the FED, and we also had a

535
00:30:01,720 --> 00:30:04,080
Speaker 1: big balance heat reversal. I think we talked about this

536
00:30:04,440 --> 00:30:07,320
Speaker 1: in the past that the balancy of contraction was a

537
00:30:07,360 --> 00:30:10,040
Speaker 1: massive tail, a massive headwind for the economy. Now with

538
00:30:10,120 --> 00:30:13,400
Speaker 1: the FED, expanmies bouncy and and cutting reads, we have

539
00:30:13,480 --> 00:30:16,280
Speaker 1: a huge style wind a couple with whatever else the

540
00:30:16,360 --> 00:30:19,120
Speaker 1: central bines are doing. So so that's why risk assets

541
00:30:19,120 --> 00:30:22,479
Speaker 1: are so excited um and and ultimately this will come

542
00:30:22,520 --> 00:30:24,720
Speaker 1: down to commodities as well. But we do need China,

543
00:30:24,760 --> 00:30:27,640
Speaker 1: we do need emerging markets to to us his strong

544
00:30:27,680 --> 00:30:30,280
Speaker 1: consumption Francisco. As you point out, we've been in the

545
00:30:30,320 --> 00:30:33,680
Speaker 1: early stages of a recovery. That recovery was not secured,

546
00:30:33,760 --> 00:30:35,840
Speaker 1: not in Europe, not in Asia for that matter either.

547
00:30:36,280 --> 00:30:38,480
Speaker 1: If it's really a one quarter event, what gives you, guys,

548
00:30:38,560 --> 00:30:40,360
Speaker 1: the confidence that we come out the other side in

549
00:30:40,400 --> 00:30:44,160
Speaker 1: this V shaped recovery when the situation was not secure

550
00:30:44,200 --> 00:30:47,640
Speaker 1: to begin with. Well, I mean again, I'm not I'm

551
00:30:47,680 --> 00:30:49,760
Speaker 1: not saying it will be. I'm not a virologist, so

552
00:30:49,800 --> 00:30:51,440
Speaker 1: I can't I can't really make that call. I mean,

553
00:30:51,440 --> 00:30:53,720
Speaker 1: I've just laid other three Francis are just based on

554
00:30:53,760 --> 00:30:56,000
Speaker 1: the disruptions that you see to supply chains right now,

555
00:30:56,160 --> 00:30:58,600
Speaker 1: the sudden stop to launch chunks of the Chinese economy

556
00:30:58,680 --> 00:31:00,880
Speaker 1: right now. I agree with you, we shouldn't get into

557
00:31:00,920 --> 00:31:02,680
Speaker 1: the medical issues, will leave that to the doctors. But

558
00:31:02,760 --> 00:31:07,040
Speaker 1: as things stand right now, what gives you that confidence? Well, look,

559
00:31:07,080 --> 00:31:08,840
Speaker 1: I mean one of the one of the big issues

560
00:31:09,120 --> 00:31:12,120
Speaker 1: that that we had passed eighteen months is that inventories

561
00:31:12,160 --> 00:31:14,520
Speaker 1: around the world came down a long and they came

562
00:31:14,560 --> 00:31:17,240
Speaker 1: down a lot, because once you start playing around with Harris,

563
00:31:17,240 --> 00:31:20,239
Speaker 1: people slow down their purchases. If you look at if

564
00:31:20,240 --> 00:31:23,440
Speaker 1: you look at where global trade growth was running in

565
00:31:23,440 --> 00:31:26,800
Speaker 1: in UH seventeen and eighteens, running around five percent year

566
00:31:26,840 --> 00:31:29,760
Speaker 1: and year, following years of growth of two or three percent.

567
00:31:30,160 --> 00:31:33,880
Speaker 1: Then basically last year global trade shut down completely. We

568
00:31:33,960 --> 00:31:37,720
Speaker 1: had essentially a contraction because of the large increase in

569
00:31:37,720 --> 00:31:41,160
Speaker 1: your STARTUS. And and now this year we just need

570
00:31:41,440 --> 00:31:44,560
Speaker 1: we just need to see a inventory restocking cycle, um

571
00:31:44,640 --> 00:31:47,440
Speaker 1: because consumption is strong, because labor growth is strong, because

572
00:31:48,080 --> 00:31:52,239
Speaker 1: the the service economy is still doing so. So I

573
00:31:52,280 --> 00:31:54,720
Speaker 1: think we need to bring those goods, those goods to

574
00:31:55,000 --> 00:31:57,280
Speaker 1: the economy now longer term for sure. To your point,

575
00:31:57,320 --> 00:31:59,800
Speaker 1: you're gonna have this disruptions and supply chains, and this

576
00:31:59,840 --> 00:32:04,520
Speaker 1: is gonna change the Catholic cycle. So and we argue

577
00:32:04,560 --> 00:32:06,760
Speaker 1: that in some of our pieces we will see a

578
00:32:06,880 --> 00:32:10,320
Speaker 1: restocking cycle, but not a Catholic cycle under until there

579
00:32:10,400 --> 00:32:13,120
Speaker 1: is claddity as to where this thing is going, Francis,

580
00:32:13,680 --> 00:32:15,840
Speaker 1: we've gotta leave it there. Thank you so much. I

581
00:32:15,880 --> 00:32:29,320
Speaker 1: appreciate this morning with the Bank of America. Right now

582
00:32:29,400 --> 00:32:32,040
Speaker 1: Lindsay piegsa whether she writes brilliantly for step phil and

583
00:32:32,040 --> 00:32:34,880
Speaker 1: what I love about her latest work. Dr Piazza says

584
00:32:35,080 --> 00:32:40,160
Speaker 1: moderate growth as expected Lindsay, congratulations on a middle road here.

585
00:32:40,240 --> 00:32:44,640
Speaker 1: How have you adjusted your moderate growth view given this

586
00:32:44,680 --> 00:32:48,240
Speaker 1: morning's data and given serious Chinese issues of the last

587
00:32:48,240 --> 00:32:51,800
Speaker 1: two weeks. Well, I think moderate is sort of the

588
00:32:51,800 --> 00:32:54,480
Speaker 1: new normal for but we do have to put it

589
00:32:54,480 --> 00:32:59,160
Speaker 1: in perspective that moderate is not great. The bar of

590
00:32:59,240 --> 00:33:02,400
Speaker 1: expectations has been lowered so dramatically that it seems the

591
00:33:02,440 --> 00:33:06,560
Speaker 1: market is celebrating even mediocrity at this point. Keep in

592
00:33:06,600 --> 00:33:09,240
Speaker 1: mind that two percent is really the bare minimum that

593
00:33:09,280 --> 00:33:12,760
Speaker 1: we should expect from the economy, assuming one percent gains population,

594
00:33:13,200 --> 00:33:17,000
Speaker 1: one percent gains from productivity, and we're also just achieving

595
00:33:17,040 --> 00:33:21,160
Speaker 1: that bare minimum with bloated government balance sheets an extremely

596
00:33:21,200 --> 00:33:24,520
Speaker 1: low rate. So my concern is that moderate growth is here,

597
00:33:25,000 --> 00:33:27,440
Speaker 1: but is it here to stay? Or does the economy

598
00:33:27,560 --> 00:33:31,200
Speaker 1: lose momentum as we move further into Lindsay, I'm just

599
00:33:31,280 --> 00:33:33,320
Speaker 1: not sure how many people are interested in the January

600
00:33:33,360 --> 00:33:35,840
Speaker 1: data right now. It's just a rush to show me February.

601
00:33:35,880 --> 00:33:39,360
Speaker 1: Just show me what February looks like for the global economy. Lindsay,

602
00:33:39,400 --> 00:33:42,120
Speaker 1: how much can we read into the Jenuary economic data worldwide?

603
00:33:42,200 --> 00:33:45,479
Speaker 1: You're being You're being cruel and unusual to lindsay, because

604
00:33:45,720 --> 00:33:49,000
Speaker 1: it's February five, how are we supposed to look into

605
00:33:49,040 --> 00:33:52,880
Speaker 1: February to read through in terms of the coronavirus is

606
00:33:52,960 --> 00:33:57,080
Speaker 1: impact and down absolutely pretty much everyone, I think Lindsay

607
00:33:57,200 --> 00:33:59,280
Speaker 1: thoughts right, so so so the market is looking for

608
00:33:59,360 --> 00:34:01,600
Speaker 1: some cleaned and saying how much of this is just

609
00:34:01,680 --> 00:34:05,360
Speaker 1: a temporary bliff because of this coronavirus and the fear

610
00:34:05,400 --> 00:34:08,480
Speaker 1: of the spread as opposed to fundamental weakness. And I

611
00:34:08,520 --> 00:34:10,440
Speaker 1: do think it's very difficult to pass this out. But

612
00:34:10,480 --> 00:34:13,120
Speaker 1: what we can see is this declining trend that was

613
00:34:13,200 --> 00:34:17,320
Speaker 1: well established before the first coronavirus. We saw momentum in

614
00:34:17,360 --> 00:34:19,960
Speaker 1: the U. S economy slowing. We saw the consumer, yes,

615
00:34:20,360 --> 00:34:22,880
Speaker 1: still out in the marketplace spending, but spending it a

616
00:34:22,960 --> 00:34:26,720
Speaker 1: noticeably slower clip. And so I do expect those trends

617
00:34:26,760 --> 00:34:30,520
Speaker 1: once we get clean data excluding the impact of the coronavirus,

618
00:34:30,920 --> 00:34:34,160
Speaker 1: we do expect that trend to continue into and I

619
00:34:34,160 --> 00:34:36,600
Speaker 1: think we we've seen that with some breaking news around

620
00:34:36,640 --> 00:34:41,440
Speaker 1: maybe these closing stores, slower manufacturing data producers being very

621
00:34:41,480 --> 00:34:45,760
Speaker 1: concerned that outside of the coronavirus, again, global growth, global

622
00:34:45,800 --> 00:34:49,200
Speaker 1: demand is not an extremely steady footing as we look

623
00:34:49,200 --> 00:34:52,600
Speaker 1: out to February and more importantly beyond MADI an estimate

624
00:34:52,800 --> 00:34:54,759
Speaker 1: year end from the economist that we track on more

625
00:34:54,800 --> 00:35:00,960
Speaker 1: straight lines as real GDP for the U S economy. Lindsey,

626
00:35:00,960 --> 00:35:02,160
Speaker 1: what are you modeling at the moment? What are you

627
00:35:02,200 --> 00:35:04,960
Speaker 1: looking for? Well? I think one point day for an

628
00:35:04,960 --> 00:35:09,360
Speaker 1: annual GDP growth is reasonable. It's continuing with that loss

629
00:35:09,360 --> 00:35:11,960
Speaker 1: of momentum. I would say a longer term trend for

630
00:35:12,000 --> 00:35:15,600
Speaker 1: the domestic economy is closer to one point five. The

631
00:35:15,719 --> 00:35:19,000
Speaker 1: fact a little more optimistic at one point nine. Again,

632
00:35:19,040 --> 00:35:21,759
Speaker 1: what we're what we're seeing is that there is a

633
00:35:21,920 --> 00:35:26,640
Speaker 1: lack of fundamental growth in the domestic economy, and in fact,

634
00:35:26,680 --> 00:35:30,800
Speaker 1: what we're doing is increasingly relying on non traditional supports

635
00:35:30,840 --> 00:35:34,360
Speaker 1: from the FED and the federal government. Are you modeling

636
00:35:34,680 --> 00:35:40,560
Speaker 1: sub four current nominal GDP? I think that's very reasonable?

637
00:35:41,360 --> 00:35:44,520
Speaker 1: Is okay, lindsay you're great at this? Is this politically

638
00:35:44,560 --> 00:35:49,120
Speaker 1: acceptable in this nation? Republican or Democrat? Can Can any

639
00:35:49,200 --> 00:35:55,839
Speaker 1: politician move forward assuming sub four animal spirit? I think so.

640
00:35:56,120 --> 00:36:00,319
Speaker 1: I think the expectation of the average market participant or

641
00:36:00,440 --> 00:36:04,080
Speaker 1: orn that the average American has come down so dramatically

642
00:36:04,239 --> 00:36:07,719
Speaker 1: that two percent real GDP um even one and a half,

643
00:36:07,760 --> 00:36:11,279
Speaker 1: let's round up to two percent real GDP? Is good enough?

644
00:36:11,760 --> 00:36:14,799
Speaker 1: Good enough? That's the new metric for the economy. Is

645
00:36:14,840 --> 00:36:17,440
Speaker 1: it good enough to get by? We're not looking for

646
00:36:17,480 --> 00:36:20,640
Speaker 1: great we're not looking for a stellar boomer economy. Now

647
00:36:20,719 --> 00:36:23,480
Speaker 1: the expectation is is it just good enough? Lindsay, what's

648
00:36:23,480 --> 00:36:27,880
Speaker 1: the line between stall speed and goldilocks. Well, that's a

649
00:36:28,000 --> 00:36:30,480
Speaker 1: very fine line. And my bigger concern when we talk

650
00:36:30,520 --> 00:36:33,520
Speaker 1: about the economy losing momentum is not that we fall

651
00:36:33,560 --> 00:36:35,800
Speaker 1: into recession, but as you point out, we go into

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00:36:35,800 --> 00:36:37,799
Speaker 1: that stall motor what I like to call a non

653
00:36:37,880 --> 00:36:41,680
Speaker 1: accelerating economy, and that would be less than one percent.

654
00:36:42,160 --> 00:36:45,640
Speaker 1: And we're not that far away from that very clear

655
00:36:45,800 --> 00:36:48,640
Speaker 1: danger zone. Because if we do get to less than

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00:36:48,640 --> 00:36:51,600
Speaker 1: one percent, there's going to be an even larger reliance

657
00:36:52,040 --> 00:36:57,720
Speaker 1: on non traditional, non organic metrics to continue to perpetuate growth,

658
00:36:57,800 --> 00:36:59,960
Speaker 1: Meaning we're going to rely more and more on government

659
00:37:00,080 --> 00:37:03,120
Speaker 1: spending more and more on lower rates, and it's going

660
00:37:03,200 --> 00:37:06,800
Speaker 1: to be increasingly difficult. It's not impossible for then organic

661
00:37:06,840 --> 00:37:09,480
Speaker 1: momentum to get us back into a stage of longer

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00:37:09,600 --> 00:37:13,440
Speaker 1: term prosperity. And so what we could see is perpetual

663
00:37:13,560 --> 00:37:18,640
Speaker 1: growth below one for five ten Lindsay is going to

664
00:37:18,680 --> 00:37:20,799
Speaker 1: sit there and accept that exactly, that's right. We wanted

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00:37:20,840 --> 00:37:24,000
Speaker 1: to go what's fed policy off of your call? Looks

666
00:37:24,040 --> 00:37:27,319
Speaker 1: the feed has been forecasting perpetual two percent GDP and

667
00:37:28,000 --> 00:37:31,239
Speaker 1: they double down down their commitment to getting prices back

668
00:37:31,280 --> 00:37:35,520
Speaker 1: to not near but back to two. And so I

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00:37:35,560 --> 00:37:38,600
Speaker 1: do think that as the data continues to underperform, they

670
00:37:38,640 --> 00:37:40,960
Speaker 1: have backed themselves into a corner and they're going to

671
00:37:41,040 --> 00:37:43,520
Speaker 1: need to take action sooner than later. I don't think

672
00:37:43,520 --> 00:37:47,440
Speaker 1: it's it's unreasonable to expect two additional basis point moves

673
00:37:47,760 --> 00:37:50,760
Speaker 1: within the coming months. Did they have the fiscal space

674
00:37:50,800 --> 00:37:52,640
Speaker 1: to attach to that? I mean, if you're running a

675
00:37:52,680 --> 00:37:55,560
Speaker 1: trillion dollar deficity, you goose it out to one point

676
00:37:55,600 --> 00:37:58,680
Speaker 1: three one point four trillion dollars to assist in your

677
00:37:58,719 --> 00:38:02,760
Speaker 1: double rate cut? Why not? The FET is not concerned

678
00:38:02,800 --> 00:38:05,960
Speaker 1: about Come, Lindsay, it's a free lunch. I mean, I mean,

679
00:38:06,360 --> 00:38:11,080
Speaker 1: what's the price of your really important analysis of sub

680
00:38:11,120 --> 00:38:14,600
Speaker 1: two forward? There's got to be a there's gotta be

681
00:38:14,640 --> 00:38:17,360
Speaker 1: a price to it. There there is a price, but

682
00:38:17,400 --> 00:38:19,640
Speaker 1: it's a longer term consequence that the FET is not

683
00:38:19,640 --> 00:38:22,680
Speaker 1: going to concern themselves with near term. Their near term

684
00:38:22,719 --> 00:38:26,000
Speaker 1: mandate is getting inflation back on track. And so whether

685
00:38:26,040 --> 00:38:27,960
Speaker 1: that means growing the balance sheet back to four and

686
00:38:27,960 --> 00:38:30,920
Speaker 1: a half, five and a half, what's six trillion among friends,

687
00:38:31,280 --> 00:38:33,640
Speaker 1: that's how they're going to sell it. They're going to say, look,

688
00:38:33,640 --> 00:38:36,200
Speaker 1: we need to get the economy back on track. This

689
00:38:36,239 --> 00:38:38,399
Speaker 1: is how we do it. We can continue to hold

690
00:38:38,400 --> 00:38:41,080
Speaker 1: these securities. We don't have to mark to market. We

691
00:38:41,120 --> 00:38:43,920
Speaker 1: can hold these securities to maturity and let the cards

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00:38:44,200 --> 00:38:46,600
Speaker 1: lay where they will longer term. This has been fabulous.

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Speaker 1: We'll have us out on podcast folks. Dr Piexo with

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00:38:48,960 --> 00:38:51,920
Speaker 1: Steeple just really really important there on a on a

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00:38:52,040 --> 00:38:53,840
Speaker 1: view of how you get to a sub two percent

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00:38:54,040 --> 00:39:01,279
Speaker 1: called Lindsay, thank you so much this morning. Thanks for

697
00:39:01,360 --> 00:39:05,799
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

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00:39:05,920 --> 00:39:11,640
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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00:39:12,200 --> 00:39:15,560
Speaker 1: I'm on Twitter at Tom Keene before the podcast, you

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00:39:15,560 --> 00:39:18,960
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio