WEBVTT - Surveillance: US May Jobs Report (Podcast)

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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<v Speaker 1>with the Jonathan Ferrill and Lisa Brownwitz Jay Lee. We

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<v Speaker 1>bring you insight from the best and economics, finance, investment,

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<v Speaker 1>and international relations. Find Bloomberg Surveillance and Apple Podcast, SoundCloud,

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<v Speaker 1>Bloomberg dot com, and of course on the Bloomberg Terminal

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<v Speaker 1>in New York City. I'm placed to say, on Bloomberg

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<v Speaker 1>TV and on Bloomberg Radio. We're joined now by the

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<v Speaker 1>US Labor Secretary, Mighty Wold secondly Welsh. First of all, sir,

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<v Speaker 1>I know you've been on one of the last couple

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<v Speaker 1>of days. Can you tell us if you're okay. I'm

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<v Speaker 1>doing all right, Yeah, if I feel a lot better.

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<v Speaker 1>It's a it's a thank goud and vax and boosted

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<v Speaker 1>because this thing it text share your immune system. But

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<v Speaker 1>I feel good, So thank you for that. We're a

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<v Speaker 1>good man for giving us some of your time. I've

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<v Speaker 1>agreed to shorten up the interview just so you don't

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<v Speaker 1>have to do much today. So let's start with this

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<v Speaker 1>one here. The Jobs Report, your assessments, the view from

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<v Speaker 1>the White House at the moment. Certainly it's a good

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<v Speaker 1>jobs report, three ninety thousand jobs. We're seeing good games there.

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<v Speaker 1>One thing that we looked at from when the president

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<v Speaker 1>took over. We are ten million people out of work

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<v Speaker 1>in America. It's down a four and fifty five thousand.

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<v Speaker 1>That's a good number. We're seeing steady and stable growth

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<v Speaker 1>here in the job reports. But we know, as they

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<v Speaker 1>say every month, we have more works to do. This, this, this,

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<v Speaker 1>uh what outpaced what the expectations were. But certainly we

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<v Speaker 1>know this work to do. We know we're still dealing

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<v Speaker 1>with inflation. We know we're still dealing with an economy

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<v Speaker 1>that people are concerned about, and the presidents laid out

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<v Speaker 1>a plan for it. You know the numbers, well, one

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<v Speaker 1>point nine jobs for every unemployed person in America right now,

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<v Speaker 1>the quits rate is elevated. That's a sign of confidence.

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<v Speaker 1>The unemployment rate didn't move over today, but still a

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<v Speaker 1>decent level of three point six percent. The worker, most

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<v Speaker 1>people are concluding, has a fair bit of bargaining power here.

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<v Speaker 1>So secondly, Welsh, with that in mind, what kind of

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<v Speaker 1>approach would you like to see. In the talks with

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<v Speaker 1>unions representing the workers on the ports on the West Coast,

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<v Speaker 1>we talked about this a few times over the last

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<v Speaker 1>few months. Watch your view now. Yeah, I think that

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<v Speaker 1>those conversations are going steady. I've been staying in contact

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<v Speaker 1>with the with the folks out on the West coast.

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<v Speaker 1>Right now, I think it's it's on a good pace

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<v Speaker 1>and they just need to continue to have those negotiations. Obviously,

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<v Speaker 1>anytime you have a negotiations like the ports, whether it's

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<v Speaker 1>on the west and East coast, but in this case

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<v Speaker 1>on the West coast, we want to keep a close

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<v Speaker 1>side because we know the impacts that that if if

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<v Speaker 1>it doesn't go well, what what will have? But I

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<v Speaker 1>feel pretty good about I feel confident where they're headed

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<v Speaker 1>on those conversations. Can you give us some idea of

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<v Speaker 1>why you're confident based on the conversations of the last month,

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<v Speaker 1>what the developments actually are specifically. Yeah, I think I've

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<v Speaker 1>spoken to both the companies and the unions and neither

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<v Speaker 1>one I've really said that that that there's any obstacles

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<v Speaker 1>that they're really concerned about right now. What they're doing

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<v Speaker 1>is they're having the negotiations that they have every few years,

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<v Speaker 1>and uh, you know, and certainly I think they've all

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<v Speaker 1>of the all the parties know what what with what

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<v Speaker 1>the American people have gone through over the last couple

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<v Speaker 1>of years with supply chain issues and what's happened in

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<v Speaker 1>the ports. So I think they also understand the importance

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<v Speaker 1>of getting a contract done. Secondly, wells just finally, because

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<v Speaker 1>I know you have to run. We've had some things

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<v Speaker 1>this week from some big players. Jamie Diamond talked about

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<v Speaker 1>a hurricane coming to the economy. We heard from Elon

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<v Speaker 1>mask of Tesla Royster's reporting that he sent an internal

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<v Speaker 1>email pausing hiring potentially cunning temper cent of the workforce.

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<v Speaker 1>Are you seeing much more of that in the conversations

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<v Speaker 1>you say you have with corporations week to week, day

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<v Speaker 1>to day. No, I have really never really brought that

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<v Speaker 1>up to me, but I'll tell you you know, the

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<v Speaker 1>President has been very, very focused on making sure that

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<v Speaker 1>we continue to to to tackle all the inflationary challenges

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<v Speaker 1>and the challenge of the economy. I mean, this is

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<v Speaker 1>a in all hands on deck approach that includes government

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<v Speaker 1>incorporations working collectively together. I think that we're kind of

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<v Speaker 1>like we're in a marathon here. This isn't a friend,

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<v Speaker 1>that's a marathon, and we have to just continue to

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<v Speaker 1>move forward. One day at a time. Secondly, Walsh, we

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<v Speaker 1>appreciate your time and I hope you get better soon

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<v Speaker 1>and we'll get your back in person hopefully. Thank you, sir,

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<v Speaker 1>thank you very much. Secondly, Money Welsh there random crosser

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<v Speaker 1>with it for some observations here of course with the

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<v Speaker 1>both schools Chicago, the former FED governor Ready, I want

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<v Speaker 1>to talk about what the FED actually does around the

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<v Speaker 1>table at the Echoes Building with this report. Do they

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<v Speaker 1>value an analysis of the inflation adjusted wage? Does the

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<v Speaker 1>real wage matter? S It does, because they're looking both

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<v Speaker 1>at the inflation to see where expectations are, what what

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<v Speaker 1>has happened in the labor market, and then they look

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<v Speaker 1>at adjusting for inflation. Um, are real wages exploding? They're

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<v Speaker 1>certainly not exploding. We've got inflation that's much higher than

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<v Speaker 1>than the the five roughly five and a half percent

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<v Speaker 1>growth of wages. And so I think, as you were saying,

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<v Speaker 1>the FED is going to take this as this is

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<v Speaker 1>kind of what we were anticipating, uh, that we're not

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<v Speaker 1>seeing an explosion on the wage side. We're not seeing

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<v Speaker 1>a collapse of the economy either. I mean, these are

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<v Speaker 1>still very strong numbers. The unemployment rate, at three point

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<v Speaker 1>six percent is still an extremely strong number. Is very

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<v Speaker 1>rare that the the US economy has a sustained unemployment

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<v Speaker 1>rate below four percent UM, and so I think it's

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<v Speaker 1>very much consistent with the fed's forecasts. And so that

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<v Speaker 1>means there's nothing that's going to stop them from continuing

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<v Speaker 1>this march of fifty basis point increases. And as my

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<v Speaker 1>my former colleague from from graduate school, Lele Brainard said,

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<v Speaker 1>they're going to be marching through at least September in

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<v Speaker 1>those fifty phases point rate increases. So that's exactly where

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<v Speaker 1>I wanted to go. Randy, does this job report give

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<v Speaker 1>credence to the idea that they could go fifty basis

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<v Speaker 1>points three meetings in a row and then follow it

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<v Speaker 1>on with another fifty basis point rate hike, even though

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<v Speaker 1>last week some including Raphael Bostick, we're talking about a pause.

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<v Speaker 1>So I mean, um, you know, as they always say,

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<v Speaker 1>their data dependent, you know, we have to see how

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<v Speaker 1>the data did to come. But if you get reports

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<v Speaker 1>like this, it's going to give FED the confidence that

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<v Speaker 1>they are doing the right thing, that they're starting to

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<v Speaker 1>have a little bit of an impact on inflation, and

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<v Speaker 1>hopefully once they get in the two and a half

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<v Speaker 1>three percent range, they'll have more of an impact. Inflation

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<v Speaker 1>expectations have not gotten out of control. Um. The short

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<v Speaker 1>term expectations are super high, but that that makes a

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<v Speaker 1>lot of sense, But the intermediate to longer run expectations

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<v Speaker 1>are really not much out of the range where they've

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<v Speaker 1>been over the last decade. And this is why the

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<v Speaker 1>FED needs to act now. And this is why I

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<v Speaker 1>think Lale was out there saying, you know, we're gonna

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<v Speaker 1>be be tough on inflation because they have an opportunity.

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<v Speaker 1>The opportunity is to raise those rates now when the

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<v Speaker 1>uemployment rate is low without inflation expectations getting out of control.

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<v Speaker 1>As long as they stay well anchored, um, they can

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<v Speaker 1>move into let's say around three percent or so that

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<v Speaker 1>and then hopefully we'll start to see some of the

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<v Speaker 1>the inflations start to come down, and then they'll be

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<v Speaker 1>be sitting pretty because they won't have to raise rates

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<v Speaker 1>those double digit levels, which is where we were forty

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<v Speaker 1>years ago when inflation was this high. Trying to catch

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<v Speaker 1>out and Randy, get your thoughts on this running cross

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<v Speaker 1>in the University Chicago bas School. The conclusion for him

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<v Speaker 1>the work has the FETE has got more work to do.

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<v Speaker 1>Right now, joining us Jeffrey Rosenberg with black Rock and

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<v Speaker 1>Jeff perfect time to talk to you. I want to

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<v Speaker 1>know how the bond market responds to one of the

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<v Speaker 1>themes we've seen and maybe we see in this job's report,

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<v Speaker 1>which is we're gonna move from eight percent to five

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<v Speaker 1>percent inflation or four percent inflation and then there's a

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<v Speaker 1>massive Then what how do you position in bonds given

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<v Speaker 1>a by part move in in inflation and presumably in yield. Yeah,

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<v Speaker 1>and you know, a week from now we're gonna have

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<v Speaker 1>that conversation again with maybe a little bit more relevant

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<v Speaker 1>information focused on you know, the CPI report, but the

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<v Speaker 1>inflationary data that we get out of today, as you

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<v Speaker 1>guys have covered, it's a little bit of you know,

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<v Speaker 1>avoiding the worst case scenario. You get a little bit

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<v Speaker 1>of improvement on the labor force participation rate. I would

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<v Speaker 1>agree with whoever said that earlier. That's probably you know,

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<v Speaker 1>for the inflation story. The biggest important number that we

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<v Speaker 1>get out of the payroll report. Obviously there's an average

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<v Speaker 1>howity of the earnings as well, and and that you know,

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<v Speaker 1>avoided a negative disappointment in terms of you know, fast print.

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<v Speaker 1>You know that I think the market this morning is

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<v Speaker 1>maybe reacting on the headline. You know, there's a pretty

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<v Speaker 1>big drag to that headline number from retail. Uh. You know,

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<v Speaker 1>so if you if you if you discount that this

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<v Speaker 1>was actually a little bit stronger report, you know, perhaps

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<v Speaker 1>that's what we're seeing in terms of the market. And

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<v Speaker 1>as Randy just said, you know, take a step backand

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<v Speaker 1>this is this is still a very very strong and

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<v Speaker 1>too strong labor markets. So we need to see that

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<v Speaker 1>slow and you know that's in the expectations and you're

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<v Speaker 1>getting a little bit of that, maybe a little bit

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<v Speaker 1>of disappointment in terms of the slowing. I would read

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<v Speaker 1>too much into it. And to your question, Tom, you

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<v Speaker 1>know that the jury is still out in terms of

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<v Speaker 1>the inflationary tragic actory. We're we're projecting it. We have

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<v Speaker 1>expectations that we're going to see that decline. But you

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<v Speaker 1>can't get the FED really out of the business of

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<v Speaker 1>focusing on the number one priority, which is getting inflation down,

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<v Speaker 1>until you start to really see definitively that show up.

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<v Speaker 1>And until that happens, it's going to be a very

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<v Speaker 1>tough time to be thinking about you know, bonds in

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<v Speaker 1>the portfolio as a as a as an equity hedge

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<v Speaker 1>bonds as you know, stable source so of income and

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<v Speaker 1>preservation of principle, because they've got to adjust. Now. The

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<v Speaker 1>good news is there's been a lot of adjustments, so

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<v Speaker 1>I think the pain that we've seen in the first

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<v Speaker 1>quarter unlikely to be repeated. But too early here on

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<v Speaker 1>this report to to say it's all clear. As trade

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<v Speaker 1>has passed through the numbers, you are seeing a bit

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<v Speaker 1>more of a lift to yields priced down on bonds

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<v Speaker 1>to your point, Jeff, And you're also seeing stocks get

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<v Speaker 1>hit a little bit more, perhaps because it is still

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<v Speaker 1>too hot for the FED. I wonder though, how much, Jeff,

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<v Speaker 1>this market continues to be faith based in terms of

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<v Speaker 1>pick your data point, pick your narrative, confirm it and

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<v Speaker 1>move on. How much is that sort of what you're

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<v Speaker 1>feeling right now? Yeah, I mean, look, we all are

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<v Speaker 1>going to have various interpretations on the data, and so

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<v Speaker 1>will the so will the FED. But eventually the data

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<v Speaker 1>will show up and it's not just one data point

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<v Speaker 1>or two from which we extrapolate, and we have to

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<v Speaker 1>be a little bit of patient. We have to be

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<v Speaker 1>a little bit patient to see that trajectory play out.

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<v Speaker 1>The market may not be patient, you know, one comment

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<v Speaker 1>from from Bostick, and everybody says, oh, it's it's okay,

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<v Speaker 1>you know, they're gonna pause, and then brainerd you know,

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<v Speaker 1>tries to put that back in the bottle. So really

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<v Speaker 1>we got to focus not on you know, being sort

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<v Speaker 1>of yanked around by various comments, but understand that the

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<v Speaker 1>priority here is inflation and that means a consecutive set

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<v Speaker 1>of inflation prints monthly, you know, So we've we've got

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<v Speaker 1>to really follow this over the course of the summer

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<v Speaker 1>into the fall. But where we can really, uh, definitively

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<v Speaker 1>claim that the projections, the faith based projections, and the

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<v Speaker 1>consensus expectations are actually being realized. Jeff, it's a chart

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<v Speaker 1>that we have tattooed to our brains, and certainly you

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<v Speaker 1>do with all your work at Carnegie mellon the tenure

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<v Speaker 1>real yield, the inflation adjusted tenure yield, however you want

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<v Speaker 1>to measure it. We're nowhere near back to normal our way.

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<v Speaker 1>What is your measurement of normal given these uncertain times

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<v Speaker 1>that the real yield has to get back to. Yeah,

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<v Speaker 1>it's a it's a great question Tom, because it really

0:11:35.520 --> 0:11:40.160
<v Speaker 1>is kind of the north star for thinking about FED policy.

0:11:40.200 --> 0:11:42.360
<v Speaker 1>You know, the FED wants to get back to neutral.

0:11:42.720 --> 0:11:45.480
<v Speaker 1>You know what is neutral? What? Well, first of all,

0:11:45.679 --> 0:11:48.880
<v Speaker 1>neutral in real terms is a lot closer to zero,

0:11:49.320 --> 0:11:52.720
<v Speaker 1>probably between zero and a half a percent. But to

0:11:52.840 --> 0:11:55.319
<v Speaker 1>get there you need, you know, both an increase in

0:11:55.440 --> 0:11:59.680
<v Speaker 1>in nominal yields and a decrease in inflation. And if

0:11:59.679 --> 0:12:03.800
<v Speaker 1>in lation doesn't do its part to decrease, then you

0:12:03.840 --> 0:12:07.240
<v Speaker 1>need more increases in nominal yields. So when when people

0:12:07.320 --> 0:12:10.040
<v Speaker 1>kind of think about the three percent that the Fed

0:12:10.120 --> 0:12:12.280
<v Speaker 1>is going to very quickly get to, you know, by

0:12:12.280 --> 0:12:15.440
<v Speaker 1>the end of this year early part of next year,

0:12:15.720 --> 0:12:18.400
<v Speaker 1>the presumption there is that the inflation is also going

0:12:18.440 --> 0:12:21.080
<v Speaker 1>to decline and do its part, and that's gonna bring

0:12:21.400 --> 0:12:24.880
<v Speaker 1>real yields back to something that's closer to neutral. So

0:12:25.000 --> 0:12:28.280
<v Speaker 1>if you don't get that contribution from inflation, then you

0:12:28.520 --> 0:12:31.640
<v Speaker 1>are gonna need to see more on the nominal rate

0:12:31.679 --> 0:12:35.040
<v Speaker 1>hikes to to get closer to neutral. So there's two

0:12:35.080 --> 0:12:38.200
<v Speaker 1>parts to that nominal rate forecast that's kind of embedded

0:12:38.240 --> 0:12:40.680
<v Speaker 1>in bond prices, and a big part of that is

0:12:40.720 --> 0:12:43.240
<v Speaker 1>a is a steady decline in the inflation rate, Jeff.

0:12:43.240 --> 0:12:45.320
<v Speaker 1>In about two hours, President Biden is going to come

0:12:45.320 --> 0:12:47.559
<v Speaker 1>out and talk about how the strength of this labor

0:12:47.600 --> 0:12:51.120
<v Speaker 1>market is going to allow the nation to navigate through

0:12:51.160 --> 0:12:53.640
<v Speaker 1>a difficult period of time. You will talk about how

0:12:53.640 --> 0:12:56.640
<v Speaker 1>it's one of the strongest labor markets in history. How

0:12:56.679 --> 0:12:59.439
<v Speaker 1>do you look at that and then confirm the sort

0:12:59.440 --> 0:13:02.319
<v Speaker 1>of barish tilt of the market that's looking to recession,

0:13:02.360 --> 0:13:05.120
<v Speaker 1>that's looking to a slowdown, and looking to an increase

0:13:05.160 --> 0:13:11.000
<v Speaker 1>in the unemployment rate. Well, it's about kind of setting expectations.

0:13:11.040 --> 0:13:12.559
<v Speaker 1>I think some of the things we've seen from the

0:13:12.600 --> 0:13:17.840
<v Speaker 1>administration is trying to get out ahead of labor market

0:13:18.280 --> 0:13:22.760
<v Speaker 1>slow down, but but also slow down here is a

0:13:22.840 --> 0:13:25.440
<v Speaker 1>good thing. And that's a little bit tricky of a

0:13:25.480 --> 0:13:28.440
<v Speaker 1>message for them to say, because it's all been about

0:13:28.480 --> 0:13:31.559
<v Speaker 1>these great job numbers and how good that is. Now

0:13:31.600 --> 0:13:35.200
<v Speaker 1>they've got a pivot to talk about the sustainability of

0:13:35.240 --> 0:13:37.439
<v Speaker 1>the economy and that too much of a good thing

0:13:37.559 --> 0:13:40.319
<v Speaker 1>is actually a bad thing because of its impact on inflation.

0:13:40.600 --> 0:13:44.960
<v Speaker 1>And so seeing the steady decline in payroll figures is

0:13:44.960 --> 0:13:48.440
<v Speaker 1>actually something that we should look forward to and would

0:13:48.480 --> 0:13:50.240
<v Speaker 1>be a good outcome. So I think it's it's kind

0:13:50.240 --> 0:13:53.079
<v Speaker 1>of turning their narrative. It's what the market is looking

0:13:53.120 --> 0:13:57.360
<v Speaker 1>for as well. Uh and and and that's where this

0:13:57.600 --> 0:13:59.920
<v Speaker 1>kind of good bad news is good news in some sense,

0:14:01.280 --> 0:14:03.720
<v Speaker 1>is in the market expectations. Jeff Frozenberg, thank you so

0:14:03.800 --> 0:14:10.800
<v Speaker 1>much with black Rocket. Jerome Schneider, most patient man on

0:14:10.840 --> 0:14:13.680
<v Speaker 1>the planet joins us now with PIMCO. Jerome seriously, thank

0:14:13.720 --> 0:14:16.600
<v Speaker 1>you with your valuable time for staying with us here

0:14:17.200 --> 0:14:20.800
<v Speaker 1>to the end of this hour. Does the yield market

0:14:21.600 --> 0:14:25.600
<v Speaker 1>game the FED? Or is the FED watching the Jerome

0:14:25.680 --> 0:14:31.360
<v Speaker 1>Schneider's space. Yeah, the FED is watching both spaces, quite honestly,

0:14:31.600 --> 0:14:35.120
<v Speaker 1>eyes firmly fixated on both ends of the spectrum, quite honestly.

0:14:35.520 --> 0:14:38.600
<v Speaker 1>On one side, they're probably a little bit relieved this

0:14:38.680 --> 0:14:42.960
<v Speaker 1>morning that early signs of economic you know, transition or

0:14:43.000 --> 0:14:46.480
<v Speaker 1>perhaps that even inflection is coming along um and they

0:14:46.560 --> 0:14:49.360
<v Speaker 1>they're sort of seeing that, you know, the market is

0:14:49.400 --> 0:14:51.920
<v Speaker 1>becoming a little bit the jobs market, the labor market

0:14:51.960 --> 0:14:54.600
<v Speaker 1>is becoming a little bit more tentative. And and maybe

0:14:54.680 --> 0:14:56.800
<v Speaker 1>there's some you know, if on hand one the other

0:14:56.880 --> 0:15:00.320
<v Speaker 1>meaning retail numbers were down, as you noted, uh, pret viously,

0:15:00.400 --> 0:15:02.480
<v Speaker 1>and hospitality was higher, so some of that is the

0:15:02.480 --> 0:15:05.760
<v Speaker 1>pivot from goods to you know, goods to services, and

0:15:06.000 --> 0:15:09.040
<v Speaker 1>that probably is a good thing in the fed's mind

0:15:09.080 --> 0:15:13.160
<v Speaker 1>and the FEDS construct so they're probably continuing and will

0:15:13.200 --> 0:15:17.120
<v Speaker 1>continue to be fixated on those longer term inflation expectations

0:15:17.120 --> 0:15:19.520
<v Speaker 1>and that they look at where the data is today

0:15:19.640 --> 0:15:23.160
<v Speaker 1>and more importantly, the next three jobs reports that we

0:15:23.200 --> 0:15:26.920
<v Speaker 1>have before the September jobs report. You know, that's actually

0:15:27.040 --> 0:15:30.160
<v Speaker 1>pretty data dependent. It makes them a little bit data dependent,

0:15:30.160 --> 0:15:33.360
<v Speaker 1>but it actually goes into the calculus that perhaps this

0:15:33.360 --> 0:15:35.800
<v Speaker 1>this this inflection point does give them a little bit

0:15:35.800 --> 0:15:39.600
<v Speaker 1>of ability to be less hawkish potentially. And again it's

0:15:39.640 --> 0:15:41.400
<v Speaker 1>all in the data. And so I sort of point

0:15:41.400 --> 0:15:44.480
<v Speaker 1>to that because you know, inevitably the next meetings in

0:15:44.600 --> 0:15:47.400
<v Speaker 1>June and July or fifty and and you probably have

0:15:47.800 --> 0:15:50.280
<v Speaker 1>Jackson Hole and then you have September. It get does

0:15:50.320 --> 0:15:51.880
<v Speaker 1>give me a little bit of time to at least

0:15:52.240 --> 0:15:55.640
<v Speaker 1>be uh be be putting some bets on the optionality

0:15:55.680 --> 0:15:58.080
<v Speaker 1>that they ever so love well Jackson Ho. I'm glad

0:15:58.080 --> 0:15:59.320
<v Speaker 1>you reminded me that I have to put in a

0:15:59.360 --> 0:16:02.440
<v Speaker 1>request for the surveillance jet to get out the Jackson Hole.

0:16:02.520 --> 0:16:05.520
<v Speaker 1>But Jerale we've got the balance sheet, the FED beginning

0:16:05.520 --> 0:16:08.520
<v Speaker 1>to roll off this you know, close to nine you know,

0:16:08.560 --> 0:16:10.600
<v Speaker 1>trillion dollar balance sheet. What does that mean for the

0:16:10.680 --> 0:16:13.040
<v Speaker 1>short term end of the market. What should we be

0:16:13.040 --> 0:16:15.720
<v Speaker 1>looking for? Yeah, as I said previously, I think that

0:16:15.720 --> 0:16:18.000
<v Speaker 1>there's two things. One is that you know, this cycle's

0:16:18.040 --> 0:16:20.760
<v Speaker 1>runoff is going to be substantively larger and ramp up

0:16:20.760 --> 0:16:24.400
<v Speaker 1>faster than the previous one. So the this tool, which

0:16:24.480 --> 0:16:27.800
<v Speaker 1>obviously mini fed UM governors don't want to readily admit to,

0:16:27.880 --> 0:16:31.080
<v Speaker 1>but this tool is one which actually has a little

0:16:31.120 --> 0:16:34.680
<v Speaker 1>bit less precision, and so we might be able to

0:16:34.720 --> 0:16:36.920
<v Speaker 1>deduct what's going on from the previous time we tried

0:16:36.960 --> 0:16:38.800
<v Speaker 1>to tighten the balance sheet to this one. But it's

0:16:38.800 --> 0:16:40.600
<v Speaker 1>not going to be the exact same science at all.

0:16:40.640 --> 0:16:42.640
<v Speaker 1>It's going to be very much an art And so

0:16:42.960 --> 0:16:45.240
<v Speaker 1>while we were ramping up here pretty quickly over the

0:16:45.280 --> 0:16:49.360
<v Speaker 1>next three months to that arrogant number UM, the reality

0:16:49.440 --> 0:16:52.760
<v Speaker 1>is that it's going to be a pretty defensive situation

0:16:52.800 --> 0:16:56.360
<v Speaker 1>whereby access reserves are drained pretty quickly. Now that's one

0:16:56.400 --> 0:16:58.560
<v Speaker 1>aspect of it. The second aspect is we still have

0:16:58.720 --> 0:17:02.240
<v Speaker 1>a tremendous amount of excess reserves, so the inflection point

0:17:02.240 --> 0:17:05.200
<v Speaker 1>again to be thinking in use that term um further

0:17:05.240 --> 0:17:07.639
<v Speaker 1>out for liquidity may not necessarily be anything in the

0:17:07.640 --> 0:17:10.159
<v Speaker 1>near term over the next three months or so, but

0:17:10.280 --> 0:17:12.600
<v Speaker 1>it's going to be longer term as those excess reserves

0:17:12.640 --> 0:17:15.639
<v Speaker 1>get depleted and more importantly get placed in the proper

0:17:15.640 --> 0:17:18.280
<v Speaker 1>locations away from the reversary fo facility that has two

0:17:18.320 --> 0:17:20.520
<v Speaker 1>troyon in it. So for investors, and what does that mean?

0:17:20.760 --> 0:17:24.119
<v Speaker 1>It ultimately means focus on liquidity conditions. These are reasons

0:17:24.160 --> 0:17:27.040
<v Speaker 1>probably still to be defensive and PIMCO parlance, you know,

0:17:27.119 --> 0:17:30.600
<v Speaker 1>our view of the anti Goldilocks outcome, which relies upon

0:17:30.680 --> 0:17:33.160
<v Speaker 1>higher liquidity conditions and being a little bit more defensive

0:17:33.160 --> 0:17:35.920
<v Speaker 1>with risk and credit assets at least at least a

0:17:35.960 --> 0:17:39.639
<v Speaker 1>nearer term is something that probably still holds fast. One

0:17:39.720 --> 0:17:42.040
<v Speaker 1>final question, Joe, we got to go to some breaking news.

0:17:42.520 --> 0:17:45.320
<v Speaker 1>Does this mean that we just extend the X axis.

0:17:45.359 --> 0:17:48.760
<v Speaker 1>Does this mean in our in our media analysis, if

0:17:48.800 --> 0:17:51.680
<v Speaker 1>we want everything to be short term and everything is

0:17:51.680 --> 0:17:54.879
<v Speaker 1>going to be stretched out longer, Well, I think it's

0:17:54.920 --> 0:17:57.200
<v Speaker 1>the other way around, actually, Tom, I think the reality is,

0:17:57.240 --> 0:18:00.639
<v Speaker 1>has we spent years making X access. I think that

0:18:00.720 --> 0:18:04.120
<v Speaker 1>it's shorter than it really was bringing forward expectations of earnings,

0:18:04.320 --> 0:18:06.920
<v Speaker 1>funding revisions, things like that, and so all we're doing

0:18:06.960 --> 0:18:09.520
<v Speaker 1>is reverting to an x access which is normalized, meaning

0:18:09.800 --> 0:18:12.280
<v Speaker 1>that where we need to be thinking about how things

0:18:12.320 --> 0:18:14.720
<v Speaker 1>can evolve over the next year, which can be pretty

0:18:14.840 --> 0:18:16.880
<v Speaker 1>drastic different than they were in the past. The assumptions

0:18:16.880 --> 0:18:19.960
<v Speaker 1>for long term assumptions are frankly what what people can't

0:18:19.960 --> 0:18:22.360
<v Speaker 1>be relying upon as they were in the past. JOm Schneider,

0:18:22.440 --> 0:18:24.920
<v Speaker 1>thank you so much again Yeoman's duty here helping us

0:18:25.119 --> 0:18:29.120
<v Speaker 1>before and after the conversation with Secretary Wassh. Mr Schneider

0:18:29.320 --> 0:18:33.520
<v Speaker 1>with Pimple, This is the Bloomberg Surveillance Podcast. Thanks for listening.

0:18:33.880 --> 0:18:37.240
<v Speaker 1>Join us live weekdays from seven to ten am Eastern

0:18:37.480 --> 0:18:41.480
<v Speaker 1>on Bloomberg Radio and on Bloomberg Television each day from

0:18:41.560 --> 0:18:46.840
<v Speaker 1>six to nine am for insight from the best in economics, finance, investment,

0:18:46.960 --> 0:18:52.040
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0:18:52.080 --> 0:18:55.879
<v Speaker 1>Apple podcast, SoundCloud, Bloomberg dot com, and of course on

0:18:56.000 --> 0:19:00.000
<v Speaker 1>the terminal. I'm Tom Keene and this is Bloomer