1 00:00:05,080 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:08,480 --> 00:00:12,280 Speaker 1: with Jonathan Faroe and Lisa Abramowitz. Join us each day 3 00:00:12,320 --> 00:00:16,800 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,239 --> 00:00:22,000 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,239 --> 00:00:26,560 Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com, 6 00:00:26,600 --> 00:00:30,600 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Everyone will 7 00:00:30,600 --> 00:00:33,440 Speaker 1: get out there Newtonian calculus today to look at that, 8 00:00:33,520 --> 00:00:36,159 Speaker 1: to your Yale, they'll go to logs. Michael McKee and 9 00:00:36,159 --> 00:00:39,080 Speaker 1: I really, well, we really don't do that. Bramo doesn't 10 00:00:39,120 --> 00:00:42,199 Speaker 1: really do that. But someone that can go to logs 11 00:00:42,200 --> 00:00:44,960 Speaker 1: and look at the rates of change of our economy 12 00:00:45,479 --> 00:00:49,600 Speaker 1: is Lorettemester of the Cleveland Fed. She is definitive in 13 00:00:49,720 --> 00:00:53,520 Speaker 1: mathematics out of Columbia and Princeton and joins our Michael 14 00:00:53,600 --> 00:00:57,760 Speaker 1: McKee here at our world headquarters. Michael, thank you very much, Tom, 15 00:00:57,800 --> 00:01:00,600 Speaker 1: and we'd like to welcome Cleveland Fed President or Atemester, 16 00:01:00,720 --> 00:01:06,080 Speaker 1: to our viewers and listeners worldwide here on Bloomberg. Tom said, 17 00:01:06,200 --> 00:01:09,480 Speaker 1: you're the math expert. You look at the ADP numbers, 18 00:01:09,520 --> 00:01:11,200 Speaker 1: we might as well. Start with that because it's just 19 00:01:11,240 --> 00:01:14,800 Speaker 1: out one hundred forty five thousand. I know there's questions 20 00:01:14,800 --> 00:01:17,360 Speaker 1: about their methodology or what it means, but what do 21 00:01:17,440 --> 00:01:19,360 Speaker 1: you take away from it? Well, we have to look 22 00:01:19,400 --> 00:01:21,560 Speaker 1: at all the data, So that's a data point that 23 00:01:21,560 --> 00:01:23,000 Speaker 1: we're going to look at. We're going to get the 24 00:01:23,040 --> 00:01:25,640 Speaker 1: employment report on Friday, so there's just a lot of 25 00:01:25,720 --> 00:01:27,560 Speaker 1: data coming in and we're going to use that to 26 00:01:27,600 --> 00:01:31,160 Speaker 1: assess not only where the economy has been, but where 27 00:01:31,160 --> 00:01:34,160 Speaker 1: it's going, because, as you know, it's about where the 28 00:01:34,160 --> 00:01:38,280 Speaker 1: economy is going. That's really important for setting monetary policy. Well, 29 00:01:38,280 --> 00:01:39,880 Speaker 1: that was one of the questions that they were just 30 00:01:40,000 --> 00:01:45,800 Speaker 1: asking me in the surveillance studio. How do you know 31 00:01:46,640 --> 00:01:49,960 Speaker 1: what you're looking for when the data are in the 32 00:01:50,000 --> 00:01:53,080 Speaker 1: rearview mirror. Well, you know, the data and the rear 33 00:01:53,080 --> 00:01:56,040 Speaker 1: immunal is important because it tells you something about where 34 00:01:56,080 --> 00:01:58,720 Speaker 1: the economy is going. So you don't throw that data away. 35 00:01:59,080 --> 00:02:01,000 Speaker 1: But you also have to do a lot of other 36 00:02:01,080 --> 00:02:03,560 Speaker 1: kind of reconnaissance. So you know, the nice thing about 37 00:02:03,560 --> 00:02:05,920 Speaker 1: having feder reserve banks across the country is that we 38 00:02:05,920 --> 00:02:09,560 Speaker 1: can talk to contacts in our districts. You know, whether 39 00:02:09,600 --> 00:02:13,240 Speaker 1: it be labor market contacts or business contacts to really 40 00:02:13,240 --> 00:02:15,960 Speaker 1: find out what's happening on the ground at the moment, 41 00:02:16,320 --> 00:02:20,160 Speaker 1: and that information, anecdotal information is very helpful as well. 42 00:02:20,400 --> 00:02:23,240 Speaker 1: And then we do surveys and other kinds of work 43 00:02:23,400 --> 00:02:27,360 Speaker 1: timely information. So all of that goes into sort of 44 00:02:27,400 --> 00:02:31,680 Speaker 1: formulating monetary policy. So I think it's wrong to think like, oh, 45 00:02:31,720 --> 00:02:34,359 Speaker 1: we're looking only in the rearview mirror at data that's 46 00:02:34,440 --> 00:02:37,359 Speaker 1: from a month ago or two months ago. That data 47 00:02:37,480 --> 00:02:40,639 Speaker 1: is actually helpful for looking at trends. And then we 48 00:02:40,680 --> 00:02:43,880 Speaker 1: also augment that with other data about what's really happening 49 00:02:43,880 --> 00:02:46,600 Speaker 1: on the ground on main street for businesses that have 50 00:02:46,639 --> 00:02:49,960 Speaker 1: to cope with this economy, Well, what's happening on main street? 51 00:02:51,200 --> 00:02:53,680 Speaker 1: It kind of two parts in general, what are you 52 00:02:53,720 --> 00:02:56,120 Speaker 1: hearing and then what are you hearing from bankers in 53 00:02:56,160 --> 00:02:59,959 Speaker 1: your district about credit quality? Right, so credit quality is 54 00:03:00,120 --> 00:03:03,440 Speaker 1: still fine. Bankers are telling us that that isn't really 55 00:03:03,680 --> 00:03:07,399 Speaker 1: a problem. It might have ticked up a tad, but 56 00:03:07,600 --> 00:03:11,120 Speaker 1: it certainly is still low, very low by historical standards, 57 00:03:11,160 --> 00:03:15,200 Speaker 1: So that isn't a focus. Now the bankers have, you know, 58 00:03:15,639 --> 00:03:20,920 Speaker 1: struggled with retaining deposits storing the March tensions in the 59 00:03:20,960 --> 00:03:25,720 Speaker 1: banking industry, but that has stabilized since then in terms 60 00:03:25,720 --> 00:03:29,000 Speaker 1: of credit quality, in terms of credit standards. You know, 61 00:03:29,080 --> 00:03:32,400 Speaker 1: they had already been tightening credit standards as interest rates 62 00:03:32,400 --> 00:03:35,280 Speaker 1: went up, so they're continuing to do that. They're continuing 63 00:03:35,280 --> 00:03:40,080 Speaker 1: to monitor, you know, their customers, they're continuing to monitor 64 00:03:40,240 --> 00:03:43,400 Speaker 1: going forward in terms of making sure that their well 65 00:03:43,440 --> 00:03:47,400 Speaker 1: positioned for the economy with higher industrates. In terms of 66 00:03:47,400 --> 00:03:52,120 Speaker 1: the businesses themselves, of course, they are preparing right for 67 00:03:52,880 --> 00:03:56,000 Speaker 1: I would say some slowdown in the economy, but a 68 00:03:56,000 --> 00:03:58,520 Speaker 1: lot of the firms are still telling us that their 69 00:03:58,720 --> 00:04:02,360 Speaker 1: conditions are still pretty good. They're worried about the economy 70 00:04:02,400 --> 00:04:05,480 Speaker 1: in general, and so they're being a little defensive now, 71 00:04:06,840 --> 00:04:11,040 Speaker 1: some pullback in some of their investments spending. But again, 72 00:04:11,400 --> 00:04:14,640 Speaker 1: it doesn't feel like everyone thinks that we're going to 73 00:04:14,720 --> 00:04:16,760 Speaker 1: have a deep recession. It's just they're trying to be 74 00:04:16,880 --> 00:04:20,160 Speaker 1: more cautious so that they're well prepared for whatever happens 75 00:04:20,680 --> 00:04:23,839 Speaker 1: in the economy in the future. Well, the recession argument 76 00:04:23,839 --> 00:04:25,640 Speaker 1: that a lot of people are making sort of depends 77 00:04:25,640 --> 00:04:28,479 Speaker 1: on the idea that the full weight of all the 78 00:04:28,600 --> 00:04:32,800 Speaker 1: cumulative weight of your rate increases hasn't hit the economy yet. 79 00:04:32,920 --> 00:04:35,800 Speaker 1: Plus we throw in the banking maybe tightening credit standards 80 00:04:35,839 --> 00:04:38,760 Speaker 1: a little more. Are you worried about the second half 81 00:04:38,760 --> 00:04:41,520 Speaker 1: of the year. Well, I do think that growth this 82 00:04:41,680 --> 00:04:44,200 Speaker 1: year is going to be well below trend. And you're 83 00:04:44,279 --> 00:04:48,920 Speaker 1: right the banking tensions certainly. Typically when you see that happening, 84 00:04:49,320 --> 00:04:54,039 Speaker 1: you do see banks pullback on their credit standards and 85 00:04:54,080 --> 00:04:58,120 Speaker 1: tightening their tightened their credit standards. We don't know right 86 00:04:58,160 --> 00:05:02,000 Speaker 1: now either the ration of those effects from what happened 87 00:05:02,000 --> 00:05:05,599 Speaker 1: in March or how strong those effects will be. So 88 00:05:06,000 --> 00:05:08,760 Speaker 1: we do expect that to happen, but right now we're 89 00:05:08,760 --> 00:05:11,720 Speaker 1: in that time where we're assessing, talking to the bankers, 90 00:05:11,839 --> 00:05:15,880 Speaker 1: looking at things like the SLUICE, which is the Senior 91 00:05:15,920 --> 00:05:19,159 Speaker 1: Loan Officer Opinion Survey, to get a really good sense 92 00:05:19,279 --> 00:05:23,440 Speaker 1: of where bankers are. As I said, even before the 93 00:05:23,480 --> 00:05:27,320 Speaker 1: March tensions in the industry, banking industry, you know, the 94 00:05:27,360 --> 00:05:30,240 Speaker 1: banks were pulling back and tightening credit standards, and that's 95 00:05:30,320 --> 00:05:33,680 Speaker 1: kind of normal. That's the normal flow of monetary policy 96 00:05:33,760 --> 00:05:36,760 Speaker 1: tightening throughout the economy. That's one of the ways it 97 00:05:36,800 --> 00:05:40,560 Speaker 1: gets pushed down into the economy. So that's fine. That's 98 00:05:40,680 --> 00:05:43,120 Speaker 1: kind of what we are intending in terms of making 99 00:05:43,160 --> 00:05:46,000 Speaker 1: sure that we can slow down demand so that we 100 00:05:46,120 --> 00:05:49,040 Speaker 1: get a better balance between demand and supply and reduce 101 00:05:49,120 --> 00:05:53,120 Speaker 1: those price pressures. And now we're assessing whether the tensions 102 00:05:53,120 --> 00:05:56,039 Speaker 1: in the banking industry have augmented that, and that's part 103 00:05:56,040 --> 00:05:58,440 Speaker 1: of what the evaluation will be as we go in 104 00:05:58,480 --> 00:06:02,600 Speaker 1: to the next FOMC meeting. In terms of calibrating monetary policy. Well, 105 00:06:02,600 --> 00:06:05,280 Speaker 1: you're in New York. All the big trading guests are 106 00:06:05,279 --> 00:06:09,080 Speaker 1: only a few blocks away from us, and they're calibrating 107 00:06:09,080 --> 00:06:11,400 Speaker 1: recession right now, and that you're going to be cutting 108 00:06:11,480 --> 00:06:14,839 Speaker 1: rates not once, two or three times before times by 109 00:06:15,000 --> 00:06:20,800 Speaker 1: next January. How do you process that view versus yours? Well, 110 00:06:20,839 --> 00:06:24,200 Speaker 1: you know, we've seen periods where the markets have one 111 00:06:24,279 --> 00:06:25,960 Speaker 1: view of what's going to happen in the economy and 112 00:06:26,000 --> 00:06:29,480 Speaker 1: the FED has another view, and you know, we certainly 113 00:06:29,560 --> 00:06:33,200 Speaker 1: take information from that. You know, we see what they're 114 00:06:33,240 --> 00:06:36,679 Speaker 1: doing and we're saying, Okay, that's their view, what's happening. 115 00:06:36,680 --> 00:06:39,280 Speaker 1: We have our own forecast. We just put out forecasts 116 00:06:39,279 --> 00:06:41,800 Speaker 1: at the last of home C meeting, and if you 117 00:06:41,839 --> 00:06:44,520 Speaker 1: look at those, we did say that growth this year 118 00:06:44,800 --> 00:06:49,120 Speaker 1: was going to be very much below trend growth, and 119 00:06:49,200 --> 00:06:51,920 Speaker 1: so I think we see things a little bit differently 120 00:06:51,920 --> 00:06:55,159 Speaker 1: in terms of what the appropriate monetary policy is given 121 00:06:55,839 --> 00:06:58,839 Speaker 1: where the economy is and where it's going. We certainly 122 00:06:58,839 --> 00:07:02,880 Speaker 1: are focused on in and making sure that inflation gets 123 00:07:02,920 --> 00:07:05,359 Speaker 1: back down to two percent over time. Well as the 124 00:07:05,440 --> 00:07:08,799 Speaker 1: idea of four rate cuts in the next year crazy, well, 125 00:07:08,839 --> 00:07:11,920 Speaker 1: it certainly isn't my policy path. I mean, I think 126 00:07:11,960 --> 00:07:13,680 Speaker 1: we're going to have to go a little bit higher 127 00:07:13,720 --> 00:07:17,520 Speaker 1: from where we are a little bit more and then 128 00:07:17,600 --> 00:07:20,679 Speaker 1: hold there for some time in order to make sure 129 00:07:20,760 --> 00:07:24,239 Speaker 1: that inflation is on that sustainable downward path to two percent. 130 00:07:24,560 --> 00:07:27,600 Speaker 1: That doesn't mean we're going to continue to raise rates 131 00:07:27,720 --> 00:07:30,400 Speaker 1: until inflation gets back to two percent. We're going to 132 00:07:30,520 --> 00:07:34,600 Speaker 1: be sort of calibrating in order to see that inflation 133 00:07:34,680 --> 00:07:36,800 Speaker 1: is going to move down. In my own forecast is 134 00:07:36,840 --> 00:07:39,240 Speaker 1: that it will take some time to get inflation back down, 135 00:07:39,640 --> 00:07:41,360 Speaker 1: but I you know, I think we're going to make 136 00:07:41,400 --> 00:07:45,120 Speaker 1: some appreciable progress this year and then continue to make 137 00:07:45,160 --> 00:07:48,080 Speaker 1: progress next year and then hit two percent in twenty 138 00:07:48,160 --> 00:07:53,680 Speaker 1: twenty five. What's your trajectory for inflation? Where can we 139 00:07:53,800 --> 00:07:56,320 Speaker 1: end the year and how fast would we get there. Yeah, 140 00:07:56,360 --> 00:08:00,320 Speaker 1: so I'm about three and three quarters percent by the 141 00:08:00,400 --> 00:08:03,840 Speaker 1: end of this year, continued progress next year, maybe two 142 00:08:03,880 --> 00:08:06,280 Speaker 1: and three quarters, and then two percent in twenty twenty five. 143 00:08:06,360 --> 00:08:09,520 Speaker 1: And I think that's a good progress. But you got 144 00:08:09,520 --> 00:08:12,480 Speaker 1: to remember we've been at high inflation, well over two 145 00:08:12,480 --> 00:08:15,480 Speaker 1: percent for quite some time, and that's why it's imperative 146 00:08:15,480 --> 00:08:18,160 Speaker 1: that we continue to make progress and then we continue 147 00:08:18,200 --> 00:08:21,360 Speaker 1: on this path. Now, we're going to be judicious about it. 148 00:08:21,400 --> 00:08:24,040 Speaker 1: We're not going to, you know, you throw the baby 149 00:08:24,080 --> 00:08:26,320 Speaker 1: out with the bathwater, as they say. We're going to 150 00:08:26,400 --> 00:08:29,280 Speaker 1: make sure that we're making good judgments along the way. 151 00:08:29,520 --> 00:08:32,800 Speaker 1: But it is crucial that we get inflation back down 152 00:08:32,960 --> 00:08:36,120 Speaker 1: in a timely way to two percent. Well, you're talking 153 00:08:36,160 --> 00:08:38,480 Speaker 1: about throwing the baby out with the bathwater. But the 154 00:08:38,520 --> 00:08:41,640 Speaker 1: old adage is the Fed titans until something breaks. What 155 00:08:41,720 --> 00:08:44,840 Speaker 1: would you say the balance of risks is now between 156 00:08:45,400 --> 00:08:50,120 Speaker 1: something breaking on the growth side and unemployment side and inflation. Yeah, Well, 157 00:08:50,160 --> 00:08:53,360 Speaker 1: I'm hoping we don't tighten until something breaks. I don't 158 00:08:53,360 --> 00:08:56,079 Speaker 1: think that's the strategy that I would like to follow. 159 00:08:56,480 --> 00:08:58,800 Speaker 1: I think we've got to be judicious about and try 160 00:08:58,800 --> 00:09:02,000 Speaker 1: to calibrate our policy in the correct way. I mean, 161 00:09:02,040 --> 00:09:04,040 Speaker 1: we've made a lot of progress in terms of where 162 00:09:04,080 --> 00:09:06,920 Speaker 1: we started. When we started raising rates, we were at 163 00:09:07,000 --> 00:09:09,800 Speaker 1: zero right, and we've come a long way. So we're 164 00:09:09,840 --> 00:09:12,640 Speaker 1: making progress on getting to where we need to get to. 165 00:09:12,880 --> 00:09:14,920 Speaker 1: And my own view is that we're going to have 166 00:09:14,960 --> 00:09:17,840 Speaker 1: to go a little bit further, but we're certainly well 167 00:09:18,360 --> 00:09:20,040 Speaker 1: on the way of where we need to get to. 168 00:09:20,120 --> 00:09:23,040 Speaker 1: And then we hold for a while, and yes, we 169 00:09:23,080 --> 00:09:26,480 Speaker 1: can recalibrate our policy if the economy evolves differently than 170 00:09:26,559 --> 00:09:30,319 Speaker 1: we're anticipating, and that's the nature of monetary policy making. 171 00:09:30,440 --> 00:09:32,439 Speaker 1: You want to be able to take all the information 172 00:09:32,520 --> 00:09:36,680 Speaker 1: in set a policy path that is consistent with getting 173 00:09:36,720 --> 00:09:41,080 Speaker 1: back to full employment, maximum employment and price stability. And 174 00:09:41,120 --> 00:09:44,559 Speaker 1: then if the economy evolves differently than you anticipate, then 175 00:09:44,559 --> 00:09:46,640 Speaker 1: you might have to adjust your policy path and you 176 00:09:46,679 --> 00:09:49,120 Speaker 1: need to be open to that, and especially in a 177 00:09:49,880 --> 00:09:53,440 Speaker 1: situation like this where there is high uncertainty. There were 178 00:09:52,960 --> 00:09:57,000 Speaker 1: high uncertainty and the economy before we had the tensions 179 00:09:57,000 --> 00:09:59,840 Speaker 1: in the banking system. That tension in the banking sy 180 00:10:00,080 --> 00:10:02,760 Speaker 1: some of the stresses in the bank in those banks 181 00:10:03,120 --> 00:10:05,720 Speaker 1: has added more uncertainty, and so you've got to be 182 00:10:05,800 --> 00:10:08,360 Speaker 1: willing to sort of take in more information, look at 183 00:10:08,440 --> 00:10:12,120 Speaker 1: it and reassess if need be in terms of where 184 00:10:12,200 --> 00:10:14,440 Speaker 1: policy needs to get to. Well, you say we should 185 00:10:14,480 --> 00:10:18,760 Speaker 1: do a little more. The consensus median dot was five 186 00:10:18,760 --> 00:10:21,520 Speaker 1: point one, which would be one more rate move. Are 187 00:10:21,559 --> 00:10:23,959 Speaker 1: you in the group that was above that? How far 188 00:10:24,000 --> 00:10:26,960 Speaker 1: do you think? Well, I see a little more inflation 189 00:10:27,000 --> 00:10:32,079 Speaker 1: pressures than the median in the SAP from the December 190 00:10:32,280 --> 00:10:34,920 Speaker 1: sep so I probably am a little bit higher than 191 00:10:35,360 --> 00:10:38,920 Speaker 1: the median dot. But again, I'm open to making sure 192 00:10:39,000 --> 00:10:42,439 Speaker 1: that we're setting policy to get inflation back down to 193 00:10:42,480 --> 00:10:45,080 Speaker 1: two percent. So I'm open in terms of let's take 194 00:10:45,120 --> 00:10:47,880 Speaker 1: in what the economy is telling us about where it's going. 195 00:10:48,480 --> 00:10:51,559 Speaker 1: Let's make sure that we get inflation on that sustainable 196 00:10:51,600 --> 00:10:54,760 Speaker 1: downward path. So I'm not you know, we've made a 197 00:10:54,760 --> 00:10:57,080 Speaker 1: lot of progress, and I'm willing to sort of let's 198 00:10:57,120 --> 00:10:59,480 Speaker 1: take it in and look at where the economy is going. 199 00:11:00,040 --> 00:11:02,640 Speaker 1: Own view is that we'll have to go above five percent, 200 00:11:03,000 --> 00:11:06,440 Speaker 1: but exactly how much, precisely how much, and precisely how 201 00:11:06,440 --> 00:11:08,560 Speaker 1: long it has to stay above. We've got to be 202 00:11:08,600 --> 00:11:12,480 Speaker 1: open to allowing the economy to tell us is great 203 00:11:12,520 --> 00:11:15,760 Speaker 1: increase on May third, a certainty basically locked in at 204 00:11:15,760 --> 00:11:20,040 Speaker 1: this point too soon. I heard the promo before you're right. 205 00:11:20,080 --> 00:11:21,520 Speaker 1: I'm going to tell you that we have a lot 206 00:11:21,600 --> 00:11:24,920 Speaker 1: more data to get to and we'll see as we 207 00:11:24,960 --> 00:11:27,720 Speaker 1: get there what's happening in the economy. Again, the economy 208 00:11:27,800 --> 00:11:30,160 Speaker 1: is going to tell us where it wants us to 209 00:11:30,200 --> 00:11:33,839 Speaker 1: get to. Well, Loretta Mester says, I'm right, and so 210 00:11:33,880 --> 00:11:36,240 Speaker 1: that's a great place to stop the interview. Thank you 211 00:11:36,400 --> 00:11:40,320 Speaker 1: very much for joining us today here in New York, 212 00:11:40,360 --> 00:11:43,280 Speaker 1: and we'll look on May third to see if I'm 213 00:11:43,280 --> 00:11:46,480 Speaker 1: still right. I'll send it back to you, Michael McKee, 214 00:11:46,480 --> 00:11:49,040 Speaker 1: thank you so much. We are here in our studios 215 00:11:49,040 --> 00:11:52,480 Speaker 1: looking at markets on the move off that ADP report, 216 00:11:52,559 --> 00:11:55,959 Speaker 1: maybe even off what we heard from doctor Mester as well. 217 00:11:56,120 --> 00:11:59,200 Speaker 1: My major takeaway there I heard elements of dragging is 218 00:11:59,240 --> 00:12:03,280 Speaker 1: Loretta Mester are confidently looked out to twenty twenty five, 219 00:12:03,880 --> 00:12:06,400 Speaker 1: a longer timeline than maybe what we would see for 220 00:12:06,520 --> 00:12:20,120 Speaker 1: many One of the great joys of speaking with Claudia 221 00:12:20,200 --> 00:12:23,320 Speaker 1: Sam Yes a former FED economist and Sam consulting and 222 00:12:23,360 --> 00:12:26,960 Speaker 1: writing for Bloomberg Opinion and always controversial. I got eight 223 00:12:26,960 --> 00:12:29,160 Speaker 1: ways to go here, folks, and I'm gonna go to 224 00:12:29,240 --> 00:12:32,840 Speaker 1: the sam you don't know which is she voraciously reads 225 00:12:33,520 --> 00:12:37,480 Speaker 1: top flight fed research. Claudia, Sam, you go to San 226 00:12:37,520 --> 00:12:41,560 Speaker 1: Francisco and Adam Shapiro, and you say his mix of 227 00:12:41,600 --> 00:12:45,120 Speaker 1: what is driving this inflation is something we need to 228 00:12:45,160 --> 00:12:49,040 Speaker 1: focus on, and that is the part of inflation off 229 00:12:49,040 --> 00:12:53,120 Speaker 1: of the plant pandemic that is supply driven or supply side. 230 00:12:53,440 --> 00:12:57,800 Speaker 1: Explain that. I think a big mistake that we're making 231 00:12:57,800 --> 00:13:00,600 Speaker 1: at this point is acting like we can use past 232 00:13:00,640 --> 00:13:03,720 Speaker 1: relationships in the economy to tell us what to do. 233 00:13:04,960 --> 00:13:09,120 Speaker 1: The pandemic was extremely disruptive, and we see that across 234 00:13:09,160 --> 00:13:12,720 Speaker 1: many of our peer countries. Set aside monetary policy, set 235 00:13:12,720 --> 00:13:16,440 Speaker 1: aside fiscal policy, and I'm concerned as time passes that 236 00:13:16,440 --> 00:13:18,440 Speaker 1: that gets pushed to the side. And that's why I 237 00:13:18,480 --> 00:13:20,760 Speaker 1: go to Adam Shapiro's research. I think he is one 238 00:13:20,800 --> 00:13:24,640 Speaker 1: of many who is carefully trying to figure out that 239 00:13:24,800 --> 00:13:28,240 Speaker 1: supply that demand. The theme that I'm seeing into the 240 00:13:28,280 --> 00:13:31,880 Speaker 1: IMF and World Bank meetings in my conversation Claudia tomorrow 241 00:13:31,880 --> 00:13:36,679 Speaker 1: with doctor Georgieva at the IMF is that the analysis 242 00:13:36,800 --> 00:13:41,920 Speaker 1: now like I've never seen, is linking monetary policy with 243 00:13:42,040 --> 00:13:46,040 Speaker 1: our fiscal debt and our fiscal dynamics as well. Can 244 00:13:46,040 --> 00:13:50,640 Speaker 1: we meld together monetary and fiscal analysis, whether we agree 245 00:13:50,800 --> 00:13:56,160 Speaker 1: or agree to disagree, There are definitely some connections. I'm 246 00:13:56,200 --> 00:13:59,199 Speaker 1: not sure the ones that we're making in terms of 247 00:13:59,320 --> 00:14:02,760 Speaker 1: financing the fiscal debt. I mean that is a direct 248 00:14:02,760 --> 00:14:06,080 Speaker 1: effect of these interest rates going up so quickly. I 249 00:14:06,120 --> 00:14:09,160 Speaker 1: have pushed for and I think you're seeing some signs 250 00:14:09,160 --> 00:14:12,280 Speaker 1: of it, particularly in Europe, understanding we cannot let the 251 00:14:12,320 --> 00:14:15,760 Speaker 1: FED go it alone on inflation. The tools they use 252 00:14:15,840 --> 00:14:18,480 Speaker 1: are going to cause a lot of pain, and there 253 00:14:18,520 --> 00:14:22,000 Speaker 1: are things that fiscal authorities can do. It's just we 254 00:14:22,000 --> 00:14:24,280 Speaker 1: don't have a lot of practice at that. Claudia, have 255 00:14:24,320 --> 00:14:27,000 Speaker 1: you been surprised by how resilient the economic data has 256 00:14:27,000 --> 00:14:31,200 Speaker 1: been up until this point. I've been very thankful. I mean, 257 00:14:31,240 --> 00:14:35,840 Speaker 1: the Fed is trying to get a slow path back 258 00:14:35,920 --> 00:14:39,360 Speaker 1: to inflation down, so no recession, no severe recession. That's 259 00:14:39,400 --> 00:14:42,560 Speaker 1: where markets disagree with them. And the only way the 260 00:14:42,600 --> 00:14:44,960 Speaker 1: Fed gets that done with the kind of rate increases 261 00:14:45,000 --> 00:14:49,120 Speaker 1: they've had is if the consumers keep coming back, right 262 00:14:49,160 --> 00:14:52,160 Speaker 1: and if the jobs remain there, even if it slows 263 00:14:52,280 --> 00:14:55,400 Speaker 1: down like we are starting from a position of strength 264 00:14:55,440 --> 00:14:58,120 Speaker 1: that has never been the case going into one of 265 00:14:58,120 --> 00:15:01,560 Speaker 1: these cycles. How high should the Barbie Claudia for the 266 00:15:01,600 --> 00:15:04,680 Speaker 1: Fed to cut rates, given that they still do have 267 00:15:05,000 --> 00:15:11,720 Speaker 1: the issue of inflation very much front and center. Again, 268 00:15:11,760 --> 00:15:14,280 Speaker 1: we have this disagreement about what kind of recession, if 269 00:15:14,320 --> 00:15:16,280 Speaker 1: any were faced. I think if we go into a 270 00:15:16,320 --> 00:15:19,240 Speaker 1: severe recession and the Fed holds on to this, we 271 00:15:19,480 --> 00:15:22,840 Speaker 1: must stay the course no matter what, that would be 272 00:15:22,880 --> 00:15:26,920 Speaker 1: a big mistake, you know. But I take them at 273 00:15:26,960 --> 00:15:29,120 Speaker 1: their word, I really do. They are going to keep 274 00:15:29,160 --> 00:15:32,280 Speaker 1: at this until inflation is moving down two percent. Whether 275 00:15:32,360 --> 00:15:35,120 Speaker 1: I agree with that or not. Tell me about the 276 00:15:35,160 --> 00:15:38,360 Speaker 1: speeds that were worth right now? Geta gopinath that the 277 00:15:38,360 --> 00:15:41,040 Speaker 1: IMF talks about this about. I think it's like a 278 00:15:41,160 --> 00:15:46,200 Speaker 1: general policy English if you will, for Notonian calculus. The 279 00:15:46,360 --> 00:15:49,440 Speaker 1: rates of change right now, including the huge surgery saw 280 00:15:49,440 --> 00:15:52,720 Speaker 1: on interest rates, has to be front and center. What 281 00:15:52,880 --> 00:15:56,520 Speaker 1: are those speeds right now that we're seeing in interest 282 00:15:56,600 --> 00:16:01,440 Speaker 1: rates as it folds into Fed policy. This is one 283 00:16:02,000 --> 00:16:04,640 Speaker 1: contention I have with how the Fed thinks about the 284 00:16:04,680 --> 00:16:08,000 Speaker 1: interest rates. They're very focused on the level, like getting 285 00:16:08,040 --> 00:16:13,320 Speaker 1: the inflation adjusted function above and it's like, come on, 286 00:16:13,480 --> 00:16:16,200 Speaker 1: like you raised interest rates so quickly, we know interest 287 00:16:16,320 --> 00:16:18,720 Speaker 1: rate risk is there. That if we don't learn any 288 00:16:18,800 --> 00:16:21,600 Speaker 1: lesson from Silicon Valley Bank in terms of the interest 289 00:16:21,680 --> 00:16:25,840 Speaker 1: rate risk and monetary policy, that isn't absolutely missed opportunity. 290 00:16:26,040 --> 00:16:31,080 Speaker 1: And as Lauretta Mester was saying, we see the effects 291 00:16:31,080 --> 00:16:34,600 Speaker 1: in the standards, lending standards. It is there, it's coming. 292 00:16:34,720 --> 00:16:37,600 Speaker 1: The last place it shows up is inflation, right, you 293 00:16:37,800 --> 00:16:40,400 Speaker 1: know it's in train. I want to cite this carefully 294 00:16:40,400 --> 00:16:42,520 Speaker 1: off of Gopenf's work. We'll be talking with gy to 295 00:16:42,560 --> 00:16:45,320 Speaker 1: gopen Ff here next week at the IMF gy to 296 00:16:45,360 --> 00:16:49,280 Speaker 1: Gopenef talking about the speed effects that are out there. 297 00:16:49,640 --> 00:16:53,240 Speaker 1: What would be the effect doctor, some of lower rates 298 00:16:53,400 --> 00:16:56,680 Speaker 1: or a pause? Dare I say how about pause? Pause? Pause? 299 00:16:57,160 --> 00:17:02,120 Speaker 1: Would our world fall apart? No? I think it would 300 00:17:02,160 --> 00:17:04,640 Speaker 1: give the world a chance to catch up with what 301 00:17:04,680 --> 00:17:07,720 Speaker 1: the FED has been doing. J. Powell has been very 302 00:17:07,720 --> 00:17:11,960 Speaker 1: clear we have started a disinflationary cycle. We know it's 303 00:17:12,000 --> 00:17:15,080 Speaker 1: coming in housing that that just is a LaGG Just 304 00:17:15,680 --> 00:17:18,439 Speaker 1: let everybody catch up. This is a speed issue. The 305 00:17:18,480 --> 00:17:20,959 Speaker 1: FED went really fast. There is an argument for it. 306 00:17:21,920 --> 00:17:25,280 Speaker 1: Just let it work right, have some faith in what 307 00:17:25,320 --> 00:17:28,880 Speaker 1: you've done so far, and that's why pushing harder it 308 00:17:28,920 --> 00:17:32,080 Speaker 1: could go to a very bad I can't say how 309 00:17:32,160 --> 00:17:35,600 Speaker 1: controversial the tone is there from doctor some within the 310 00:17:35,720 --> 00:17:38,639 Speaker 1: economics now she is just saying, there's a school of Thunnis. 311 00:17:38,720 --> 00:17:42,960 Speaker 1: Would everyone just calm down, stop listening and watching bluebird 312 00:17:43,040 --> 00:17:46,760 Speaker 1: surveillance and just slow down and breathe that's out there 313 00:17:47,080 --> 00:17:50,000 Speaker 1: and analyze what exactly has happened to change the labor 314 00:17:50,040 --> 00:17:53,320 Speaker 1: market really kind of fundamentally since the pandemic, Claudia, can 315 00:17:53,359 --> 00:17:56,040 Speaker 1: you make sense of this? There was a recent study 316 00:17:56,040 --> 00:17:59,080 Speaker 1: that came out that showed Americans are spending substantially less 317 00:17:59,080 --> 00:18:02,080 Speaker 1: time working and they were pre pandemic about about half 318 00:18:02,080 --> 00:18:05,200 Speaker 1: an hour, which doesn't sound like a lot. But this 319 00:18:05,280 --> 00:18:08,000 Speaker 1: is adding to the constraints in the labor market. How 320 00:18:08,080 --> 00:18:11,800 Speaker 1: much is the FED taking into consideration some pretty profound 321 00:18:11,840 --> 00:18:14,480 Speaker 1: structural changes when they look to what they need to 322 00:18:14,520 --> 00:18:17,280 Speaker 1: see with respect to unemployment rates as well as wages. 323 00:18:18,520 --> 00:18:21,800 Speaker 1: So not enough, But this is not a criticism of 324 00:18:21,840 --> 00:18:25,679 Speaker 1: the Fed. Again, we are in some uncharted territory and 325 00:18:25,880 --> 00:18:28,160 Speaker 1: just because we get a study last week doesn't mean 326 00:18:28,160 --> 00:18:30,680 Speaker 1: they were able to integrate it in the rate decision 327 00:18:30,680 --> 00:18:32,879 Speaker 1: in January. Right, this is there are a lot of 328 00:18:32,920 --> 00:18:36,480 Speaker 1: pieces coming together, whether it's work from home, whether it's 329 00:18:36,680 --> 00:18:40,000 Speaker 1: getting the retirement done. They're just a lot going on. 330 00:18:40,080 --> 00:18:42,679 Speaker 1: And I have a lot of concern that when they 331 00:18:42,680 --> 00:18:46,240 Speaker 1: are doing the forecasting, those models are based on past 332 00:18:46,320 --> 00:18:50,399 Speaker 1: relationships and they're not able to integrate what community members 333 00:18:50,440 --> 00:18:52,800 Speaker 1: are telling them. I mean, I saw this. That's really 334 00:18:52,840 --> 00:18:55,480 Speaker 1: hard to bring in in real time. It's really hard 335 00:18:55,480 --> 00:18:58,240 Speaker 1: to bring research in. The bar is high to use 336 00:18:58,280 --> 00:19:02,080 Speaker 1: these things in policymaking. Claudias, well, we'll have to leave it. 337 00:19:02,080 --> 00:19:04,120 Speaker 1: There are out of time, Claudia. But doctor Sam, thank 338 00:19:04,160 --> 00:19:05,919 Speaker 1: you so much for joining us today, of course her 339 00:19:06,000 --> 00:19:14,720 Speaker 1: work with a fed Claudia sim Consulting. Joining us now 340 00:19:14,960 --> 00:19:17,280 Speaker 1: is Khaki Chountry, the head of I Shares Investment Strategy 341 00:19:17,320 --> 00:19:19,480 Speaker 1: Americas at black Rock. Khaki, wanderful to catch up with 342 00:19:19,480 --> 00:19:21,639 Speaker 1: you and good to see you as always, Ghak. I 343 00:19:21,640 --> 00:19:23,320 Speaker 1: think we all want to know just how much demand 344 00:19:23,440 --> 00:19:26,200 Speaker 1: is they're still for treasuries based on what you're saying, 345 00:19:27,880 --> 00:19:31,120 Speaker 1: Good morning, guys, great to be here, and a tremendous 346 00:19:31,160 --> 00:19:33,439 Speaker 1: amount of demand is what I'm going to say. So 347 00:19:33,600 --> 00:19:37,080 Speaker 1: just looking at ETF flows for the first quarter of 348 00:19:37,160 --> 00:19:41,040 Speaker 1: the seventy four odd billion that came into all ETFs, 349 00:19:41,080 --> 00:19:45,400 Speaker 1: about seventy percent of that within fixed income. And more specifically, 350 00:19:45,440 --> 00:19:47,760 Speaker 1: what I thought that these was really interesting was that 351 00:19:47,920 --> 00:19:52,760 Speaker 1: investors gravitated towards the highest quality parts of the fixed 352 00:19:52,800 --> 00:19:57,119 Speaker 1: income market. So you were seeing investors move towards government bonds, 353 00:19:57,160 --> 00:19:59,560 Speaker 1: towards treasuries to at the very front end of the 354 00:19:59,600 --> 00:20:02,320 Speaker 1: treasury curve, and then the belly. So the seven to 355 00:20:02,400 --> 00:20:05,600 Speaker 1: ten year something like the IF which gives you exposure 356 00:20:05,640 --> 00:20:07,200 Speaker 1: to the ten year part of the curve had its 357 00:20:07,320 --> 00:20:12,640 Speaker 1: biggest inflow ever. So investors definitely want fixed income here, 358 00:20:12,720 --> 00:20:15,440 Speaker 1: they want the highest quality fixed income and they want 359 00:20:15,480 --> 00:20:19,000 Speaker 1: treasuries at these well, not great yields, but better yields 360 00:20:19,000 --> 00:20:21,960 Speaker 1: than it was about a year ago. So gegy, within 361 00:20:22,080 --> 00:20:26,320 Speaker 1: crisis and within fear, we need to find courage. What 362 00:20:26,560 --> 00:20:29,920 Speaker 1: part of the ETF world is the courage need to 363 00:20:29,960 --> 00:20:33,720 Speaker 1: be applied? Where should we be investing away from our 364 00:20:33,720 --> 00:20:38,400 Speaker 1: full faith and credit fears? Sure term, you're absolutely right, 365 00:20:38,440 --> 00:20:41,560 Speaker 1: I think investors need to stay invested. I think one 366 00:20:41,560 --> 00:20:44,480 Speaker 1: thing we've learned, especially when we look at the price 367 00:20:44,520 --> 00:20:47,800 Speaker 1: action in both January as well as March, where we 368 00:20:47,880 --> 00:20:51,240 Speaker 1: wouldn't have necessarily expected the S and P to be 369 00:20:51,359 --> 00:20:53,280 Speaker 1: up or the NAZ that to be up as much 370 00:20:53,320 --> 00:20:56,119 Speaker 1: as it was. So now where should investors go in 371 00:20:56,160 --> 00:20:58,800 Speaker 1: this slightly volatile environment. We look at that in our 372 00:20:58,840 --> 00:21:02,040 Speaker 1: second quarter outlook that we just came out with. Number one, 373 00:21:02,440 --> 00:21:05,720 Speaker 1: think about quality in the equity markets and the fixed 374 00:21:05,760 --> 00:21:08,960 Speaker 1: and come markets. So within the equity market, that looks 375 00:21:09,000 --> 00:21:13,640 Speaker 1: at companies that have strong cash flows, high margins, and 376 00:21:13,760 --> 00:21:17,119 Speaker 1: really have the ability to have strong balance streets. So 377 00:21:17,240 --> 00:21:21,119 Speaker 1: looking at quality as well as looking at growth companies, 378 00:21:21,600 --> 00:21:24,920 Speaker 1: not just STACK, but all growth companies that are at 379 00:21:24,960 --> 00:21:27,679 Speaker 1: a reasonable price and that can be taxed something like 380 00:21:27,680 --> 00:21:31,400 Speaker 1: an X and but also can be global energy companies 381 00:21:31,400 --> 00:21:34,199 Speaker 1: like an I X. So that's the equity side, and 382 00:21:34,240 --> 00:21:36,359 Speaker 1: then on the fixed and come side, you guys know this. 383 00:21:36,440 --> 00:21:38,760 Speaker 1: I've talked about this on your show a bunch. We 384 00:21:38,880 --> 00:21:42,520 Speaker 1: think that the new regime is one of you should 385 00:21:42,560 --> 00:21:45,480 Speaker 1: be buying every backup in yels. I think we're in 386 00:21:45,520 --> 00:21:50,400 Speaker 1: a generational opportunity for investors to get really high quality 387 00:21:50,520 --> 00:21:53,479 Speaker 1: income in the fixed and come markets. Today's yield levels 388 00:21:53,720 --> 00:21:56,159 Speaker 1: not fantastic. I think the FED is not going to 389 00:21:56,160 --> 00:21:58,760 Speaker 1: cut two and a half times by the end of 390 00:21:58,760 --> 00:22:02,760 Speaker 1: this year. But retan we get a backup by bonds 391 00:22:02,880 --> 00:22:05,040 Speaker 1: by the front end and when we get to about 392 00:22:05,080 --> 00:22:08,640 Speaker 1: four percent by the agg and gargie. Certainly, index strategies 393 00:22:08,720 --> 00:22:12,080 Speaker 1: work very well when you're talking about broad bond indexes. 394 00:22:12,320 --> 00:22:15,680 Speaker 1: But does index based investing allow for the stock specific 395 00:22:15,720 --> 00:22:18,000 Speaker 1: type of analysis that you're talking about. Do you see 396 00:22:18,040 --> 00:22:23,240 Speaker 1: investors starting to shift away from equity index strategies as 397 00:22:23,240 --> 00:22:28,040 Speaker 1: they start to shift toward greater quality. It's a great question, Lisa, 398 00:22:28,160 --> 00:22:30,480 Speaker 1: So I'd say that obviously, I mean, this was a 399 00:22:30,520 --> 00:22:34,720 Speaker 1: great month. March was a great month for influence, inter 400 00:22:34,880 --> 00:22:37,879 Speaker 1: qua l quality pickers. And if we look at broad 401 00:22:38,000 --> 00:22:41,640 Speaker 1: mutual funds as well as ETFs industries, I mean there 402 00:22:41,680 --> 00:22:45,840 Speaker 1: has been an outflow from mutual funds as such, unusual 403 00:22:45,880 --> 00:22:48,800 Speaker 1: funds and ETFs when it comes to US equity specifically. 404 00:22:49,000 --> 00:22:51,679 Speaker 1: But I think the crux of your question is, you know, 405 00:22:51,920 --> 00:22:54,760 Speaker 1: is there a role for both active as well as 406 00:22:54,800 --> 00:22:59,720 Speaker 1: index investing for investors portfolios? And the answer is absolutely yes. 407 00:23:00,080 --> 00:23:02,440 Speaker 1: One of the things that I'm most fashionate about is 408 00:23:02,720 --> 00:23:06,960 Speaker 1: the fact that investors can add ETFs to their portfolios. 409 00:23:07,000 --> 00:23:10,360 Speaker 1: I share ETFs hopefully in their portfolios. Active investors can 410 00:23:10,440 --> 00:23:14,199 Speaker 1: do that to generate alpha in a really liquid manner 411 00:23:14,280 --> 00:23:17,200 Speaker 1: in their portfolios. So yes, you can have your active 412 00:23:17,200 --> 00:23:20,200 Speaker 1: A locations, but there is a role for ETFs for liquidity, 413 00:23:20,240 --> 00:23:23,560 Speaker 1: for access, for transparency as well. Just pick up on 414 00:23:23,600 --> 00:23:25,280 Speaker 1: some of the words you used. I think this is important. 415 00:23:25,280 --> 00:23:29,080 Speaker 1: You called this a generational opportunity, which implies that maybe 416 00:23:29,119 --> 00:23:31,080 Speaker 1: it doesn't stick around, that you have to get in 417 00:23:31,160 --> 00:23:33,399 Speaker 1: NAT's pickup yield. But then you said by the front end, 418 00:23:33,480 --> 00:23:35,359 Speaker 1: which made me think, well, okay, if you're running by 419 00:23:35,440 --> 00:23:37,159 Speaker 1: the front end, you're not really locking it in for 420 00:23:37,320 --> 00:23:39,720 Speaker 1: very long Khaki, which is it wants in a generation 421 00:23:39,760 --> 00:23:43,240 Speaker 1: opportunity or something that's going to stick around. So I 422 00:23:43,400 --> 00:23:47,000 Speaker 1: really hope that it sticks around. But unfortunately, every time, 423 00:23:47,359 --> 00:23:49,960 Speaker 1: what we've seen is as soon as yields back up 424 00:23:50,040 --> 00:23:54,040 Speaker 1: to about that four percent level, we have investors both 425 00:23:54,160 --> 00:23:57,000 Speaker 1: from sort of institutional investors that are pension funds, insurance 426 00:23:57,000 --> 00:24:01,040 Speaker 1: companies as well as retail investors gravity towards the add 427 00:24:01,160 --> 00:24:04,680 Speaker 1: gravitate towards duration. So you know, when we do get 428 00:24:04,720 --> 00:24:07,000 Speaker 1: that back up, and I think we will most likely 429 00:24:07,040 --> 00:24:10,719 Speaker 1: get a backup back to about three point seven once 430 00:24:10,760 --> 00:24:15,240 Speaker 1: some of this fear around the banking crisis has dissipated somewhat. 431 00:24:15,840 --> 00:24:18,960 Speaker 1: So I think that it's a generational opportunity when we 432 00:24:19,000 --> 00:24:21,800 Speaker 1: get that backup, But for now, you should still be 433 00:24:21,960 --> 00:24:25,600 Speaker 1: invested in fix income. So for now, I think allocating 434 00:24:25,640 --> 00:24:27,959 Speaker 1: to the front end makes a lot of steps. Gaggy, 435 00:24:28,040 --> 00:24:30,480 Speaker 1: thank you. Always enjoy catching up with you. Gagi Chatry. 436 00:24:30,400 --> 00:24:43,000 Speaker 1: That a flat rock. Absolutely the bond market. The uncertainty 437 00:24:43,040 --> 00:24:45,640 Speaker 1: in Washington is off the chart as well. We had 438 00:24:45,680 --> 00:24:49,600 Speaker 1: a huge response to the attendance on Bloomberg Surveillance a 439 00:24:49,640 --> 00:24:52,800 Speaker 1: few days ago of Michael Zelden to say he's a 440 00:24:52,840 --> 00:24:57,680 Speaker 1: former federal prosecutor and an American University Washington College of Law. 441 00:24:57,760 --> 00:25:03,480 Speaker 1: Barely describes his commitment not only to prosecutetorial law, but 442 00:25:03,600 --> 00:25:06,760 Speaker 1: to explaining it on TV. He's one of those people 443 00:25:07,080 --> 00:25:10,000 Speaker 1: that comes on in his crystal clear let's go law 444 00:25:10,040 --> 00:25:14,119 Speaker 1: one on one here, sir. We did not see misdemeanors yesterday. 445 00:25:14,560 --> 00:25:17,840 Speaker 1: All of the headlines today speak of felony. Explained the 446 00:25:17,920 --> 00:25:23,040 Speaker 1: distinction for the former president of misdemeanor versus felony charges. 447 00:25:24,440 --> 00:25:28,399 Speaker 1: A misdemeanor is something less serious than a felony. The 448 00:25:28,480 --> 00:25:32,800 Speaker 1: misdemeanors in this case would have been the mere entry 449 00:25:32,960 --> 00:25:37,560 Speaker 1: of false data on the books and records of the business. However, 450 00:25:37,960 --> 00:25:40,880 Speaker 1: they couldn't directly charge that because that has a two 451 00:25:40,960 --> 00:25:44,400 Speaker 1: year statute of limitations, and this occurred longer than two 452 00:25:44,440 --> 00:25:46,280 Speaker 1: years ago. So they had to figure out a way 453 00:25:46,280 --> 00:25:51,520 Speaker 1: to make those misdemeanor business record false statements into a felony. 454 00:25:51,720 --> 00:25:55,280 Speaker 1: And what they did was they said that that misdemeanor 455 00:25:55,400 --> 00:25:59,240 Speaker 1: was undertaken for the purpose of promoting another crime, in 456 00:25:59,280 --> 00:26:02,119 Speaker 1: this case hiding from the people of New York. The 457 00:26:02,200 --> 00:26:05,520 Speaker 1: true intent of what Trump was doing, which they allege, 458 00:26:05,760 --> 00:26:09,080 Speaker 1: is to deprive the people of information that would have 459 00:26:09,119 --> 00:26:13,480 Speaker 1: been relevant to their decision of who to vote for. Specifically, 460 00:26:13,800 --> 00:26:19,720 Speaker 1: they paid three people, Stormy Stormy Daniels, McDougall at a 461 00:26:19,800 --> 00:26:23,960 Speaker 1: doorman money to suppress their stories so that the voting 462 00:26:24,040 --> 00:26:27,120 Speaker 1: public wouldn't know what Trump was up to in this 463 00:26:27,160 --> 00:26:30,719 Speaker 1: sort of misogynistic way prior to the election. It's an 464 00:26:30,760 --> 00:26:33,800 Speaker 1: interesting theory. We'll see how it plays out in practice. 465 00:26:33,920 --> 00:26:37,200 Speaker 1: We could talk an hour today, Michael about this nuance. 466 00:26:37,359 --> 00:26:39,639 Speaker 1: I'm going to go to what I witnessed yesterday and 467 00:26:39,760 --> 00:26:44,280 Speaker 1: the silliness of microanalysis by non pros like you of 468 00:26:44,440 --> 00:26:48,000 Speaker 1: who held the door for whom? Did you see a 469 00:26:48,040 --> 00:26:52,639 Speaker 1: normal process yesterday? Does it matter that we're analyzing who's 470 00:26:52,720 --> 00:26:57,880 Speaker 1: holding the door for a given defendant? Not at all. 471 00:26:58,200 --> 00:27:00,600 Speaker 1: In fact, for a few minutes I turned on the 472 00:27:00,640 --> 00:27:04,160 Speaker 1: television and I heard that comment as well, and I thought, boy, 473 00:27:04,200 --> 00:27:07,760 Speaker 1: they really are struggling to fill airtime because they expected 474 00:27:07,760 --> 00:27:11,000 Speaker 1: this arrangement to take place more quickly than it did. 475 00:27:11,760 --> 00:27:14,679 Speaker 1: That had nothing to do with anything of substance. The 476 00:27:14,720 --> 00:27:17,960 Speaker 1: only thing that mattered yesterday was that Donald Donald Trump 477 00:27:18,000 --> 00:27:21,719 Speaker 1: was charged for the thirty four belonies. He pleaded not guilty. 478 00:27:21,880 --> 00:27:25,520 Speaker 1: They set a next court appearance in December, and between 479 00:27:25,560 --> 00:27:28,880 Speaker 1: now and then they'll be a whole host of motions 480 00:27:28,920 --> 00:27:32,560 Speaker 1: filed by Trump's lawyers to try to either change the 481 00:27:32,640 --> 00:27:36,000 Speaker 1: venue of this case and or to dismiss it on 482 00:27:36,080 --> 00:27:39,639 Speaker 1: various legal theories. That's what's going to play out between 483 00:27:39,680 --> 00:27:42,040 Speaker 1: now and December. But let's go to the media circus, Michael, 484 00:27:42,080 --> 00:27:44,480 Speaker 1: because as a former federal prosecutor, how much do you 485 00:27:44,480 --> 00:27:47,400 Speaker 1: have to factor that in to a what you prosecute 486 00:27:47,400 --> 00:27:49,800 Speaker 1: it and be how you prosecute it given a lot 487 00:27:49,840 --> 00:27:52,560 Speaker 1: of interest in a given case. Well, you have to 488 00:27:52,600 --> 00:27:56,480 Speaker 1: be very careful about that. Every individual defendant is entiled 489 00:27:56,520 --> 00:27:59,040 Speaker 1: to a fair trial, and you don't want to poison 490 00:27:59,400 --> 00:28:02,880 Speaker 1: the possible ability of that through a media circus. Now, 491 00:28:02,880 --> 00:28:05,520 Speaker 1: I think the prosecutors are going to be very circumspect 492 00:28:05,600 --> 00:28:08,120 Speaker 1: about how they proceed. I think they're going to try 493 00:28:08,119 --> 00:28:12,000 Speaker 1: to rein in their witnesses, particularly Michael Cohen, who's an 494 00:28:12,040 --> 00:28:16,720 Speaker 1: ever present presence on television, which I find surprising. But 495 00:28:17,359 --> 00:28:19,239 Speaker 1: I think that the biggest problem is going to be 496 00:28:19,680 --> 00:28:23,520 Speaker 1: can Donald Trump follow the admonition of the judge to 497 00:28:23,640 --> 00:28:28,920 Speaker 1: try to temper his I guess commentary on the case, 498 00:28:29,320 --> 00:28:32,040 Speaker 1: and yesterday at moral ago he seemed to have ignored 499 00:28:32,080 --> 00:28:35,280 Speaker 1: what the judge said on day one. As you see, Michael, 500 00:28:35,440 --> 00:28:37,280 Speaker 1: how this is playing out in the media, and how 501 00:28:37,400 --> 00:28:40,320 Speaker 1: this playing out politically with the Republican Party coalescing behind 502 00:28:40,360 --> 00:28:43,040 Speaker 1: the former president. Do you think that this case was 503 00:28:43,080 --> 00:28:46,800 Speaker 1: a mistake by Alvin Bragg, Well, it depends on what 504 00:28:46,840 --> 00:28:49,880 Speaker 1: you mean by mistake. If you're thinking was this a 505 00:28:49,920 --> 00:28:52,440 Speaker 1: mistake to be the first case if there are going 506 00:28:52,480 --> 00:28:55,120 Speaker 1: to be other cases against Donald Trump, maybe it's not 507 00:28:55,160 --> 00:29:00,240 Speaker 1: the strongest case. If you're thinking, what about accountability, Well, 508 00:29:00,280 --> 00:29:03,640 Speaker 1: the president did all the activities that are charging this 509 00:29:04,000 --> 00:29:06,840 Speaker 1: indictment while he was a private citizen, before he was 510 00:29:06,920 --> 00:29:12,160 Speaker 1: even elected president, and most people in that circumstance would 511 00:29:12,200 --> 00:29:15,440 Speaker 1: be charged with this crime. When you ask your guests 512 00:29:15,440 --> 00:29:19,400 Speaker 1: as they come on for future segments this morning, asked 513 00:29:19,440 --> 00:29:22,120 Speaker 1: them if they were in their business and they entered 514 00:29:22,520 --> 00:29:25,880 Speaker 1: falsely these types of records, would they fear being charged? 515 00:29:25,920 --> 00:29:28,360 Speaker 1: I think the answer would be, of course. Nobody would 516 00:29:28,360 --> 00:29:31,120 Speaker 1: get away with that sort of business crimes in Manhattan. 517 00:29:31,360 --> 00:29:36,840 Speaker 1: So it's accountability versus political strength of the media and 518 00:29:36,880 --> 00:29:41,120 Speaker 1: the courts and the public perception. And I think I 519 00:29:41,160 --> 00:29:44,280 Speaker 1: go with accountability. Well, Michael, what you described was the 520 00:29:44,360 --> 00:29:48,240 Speaker 1: leagal lot of turning a misdemeanor into a fenone from 521 00:29:48,240 --> 00:29:53,080 Speaker 1: a d A. This likes to turn fenony's into misdemeanors. Michael, 522 00:29:53,080 --> 00:29:56,600 Speaker 1: it's not not somewhat concerning to you. Well, you know, 523 00:29:57,280 --> 00:30:00,120 Speaker 1: I got a direct message from a friend of one 524 00:30:00,240 --> 00:30:03,840 Speaker 1: yesterday saying she wished that he would be as tough 525 00:30:04,000 --> 00:30:06,280 Speaker 1: on other types of crimes as he appears to be 526 00:30:06,400 --> 00:30:08,720 Speaker 1: on Donald Trump and this type of crime. And I 527 00:30:08,800 --> 00:30:12,520 Speaker 1: guess the point is fair enough. But it seems to 528 00:30:12,560 --> 00:30:15,960 Speaker 1: me that if you believe that what the president did 529 00:30:16,320 --> 00:30:19,640 Speaker 1: or the handy it did in order to win the 530 00:30:19,680 --> 00:30:24,239 Speaker 1: presidency was a crime, then you bring that crime, and 531 00:30:24,320 --> 00:30:26,680 Speaker 1: you bring it for all its worth, which is the 532 00:30:26,680 --> 00:30:30,040 Speaker 1: fellow he charges. Michael, Thanks for bamanas today, Fellful stuffs 533 00:30:30,080 --> 00:30:33,000 Speaker 1: always Michaels out in a at the American University Washington, 534 00:30:33,040 --> 00:30:37,080 Speaker 1: College of Lord Sam. Subscribe to the Bloomberg Surveillance podcast 535 00:30:37,160 --> 00:30:41,040 Speaker 1: on Apple, Spotify, and anywhere else you get your podcasts. 536 00:30:41,400 --> 00:30:45,520 Speaker 1: Listen live every weekday starting at seven am Easter. I'm 537 00:30:45,520 --> 00:30:49,560 Speaker 1: Bloomberg dot Com, the iHeartRadio app, tune In, and the 538 00:30:49,560 --> 00:30:53,600 Speaker 1: Bloomberg Business app. You can watch us live. I'm Bloomberg 539 00:30:53,640 --> 00:30:57,840 Speaker 1: Television and always I'm the Bloomberg Terminal. Thanks for listening. 540 00:30:58,320 --> 00:31:01,040 Speaker 1: I'm Tom Keane and this is Plumber