1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 2 00:00:09,240 --> 00:00:12,719 Speaker 1: with Jonathan Farrell and Lisa Brown Witz Jay Leye. We 3 00:00:12,880 --> 00:00:16,800 Speaker 1: bring you insight from the best and economics, finance, investment, 4 00:00:17,079 --> 00:00:22,440 Speaker 1: and international relations. Find Bloomberg Surveillance and Apple Podcast, Suncloud, 5 00:00:22,840 --> 00:00:26,280 Speaker 1: Bloomberg dot com and of course on the Bloomberg terminal. 6 00:00:30,120 --> 00:00:34,400 Speaker 1: Here's our John Farrell with the Secretary of Labor. Let's listen. 7 00:00:34,600 --> 00:00:37,000 Speaker 1: I'm very place to say on TV on radio. We're 8 00:00:37,080 --> 00:00:39,720 Speaker 1: joined now by US Secretary of Labor Marty Walsh, to 9 00:00:39,760 --> 00:00:42,280 Speaker 1: get the White House response to these tremendous jobs numbers 10 00:00:42,280 --> 00:00:44,640 Speaker 1: that we've seen so far this morning. Mrs Extra great 11 00:00:44,680 --> 00:00:46,200 Speaker 1: to have you with us this morning. Let's get straight 12 00:00:46,240 --> 00:00:48,279 Speaker 1: to it. Demand has been stellar for a while now. 13 00:00:48,479 --> 00:00:50,800 Speaker 1: We've been waiting for the supply to turn up. A 14 00:00:50,920 --> 00:00:53,440 Speaker 1: youth confident was saying scientific that with this job's report 15 00:00:53,479 --> 00:00:56,360 Speaker 1: this morning, we certainly I mean, I think adding four 16 00:00:56,400 --> 00:01:00,640 Speaker 1: million jobs since the inauguration of President Biden, an average 17 00:01:01,040 --> 00:01:03,560 Speaker 1: of you know, eight hundred thousand plus jobs over the 18 00:01:03,640 --> 00:01:06,520 Speaker 1: last three months. We're seeing our economy were moving forward. 19 00:01:06,880 --> 00:01:09,080 Speaker 1: We're seeing people going back into all sectors. It's not 20 00:01:09,160 --> 00:01:11,720 Speaker 1: just leisure and hospitality, although that was our biggest game 21 00:01:11,760 --> 00:01:14,080 Speaker 1: again this month, but we saw people in education and 22 00:01:14,520 --> 00:01:18,760 Speaker 1: uh government education and also in manufacturing, so we're starting 23 00:01:18,800 --> 00:01:21,759 Speaker 1: to see different sectors getting busy as well. Mr Secretary, 24 00:01:21,800 --> 00:01:24,800 Speaker 1: What do you think is driving those supply constraints starting 25 00:01:24,840 --> 00:01:26,080 Speaker 1: to ease just a little bit? What do you think 26 00:01:26,080 --> 00:01:28,160 Speaker 1: it is driving that some people have pointed put towards 27 00:01:28,520 --> 00:01:31,280 Speaker 1: the expired unemployment benefits in some states half the states 28 00:01:31,280 --> 00:01:33,800 Speaker 1: across this country. What do you think it is? I 29 00:01:33,840 --> 00:01:36,440 Speaker 1: think there's more people vaccinated, more people feel uncomfortable. Now. 30 00:01:36,600 --> 00:01:38,240 Speaker 1: We obviously have to keep an eye on the delta 31 00:01:38,280 --> 00:01:40,360 Speaker 1: variants and where that takes us. But I think people 32 00:01:40,400 --> 00:01:42,640 Speaker 1: are feeling safer going out when you go to a restaurant, 33 00:01:42,640 --> 00:01:45,039 Speaker 1: more and more people coming out. Here in Washington, I 34 00:01:45,040 --> 00:01:47,319 Speaker 1: see more and more people doing doing on those tour buses. 35 00:01:47,560 --> 00:01:49,920 Speaker 1: So people are starting to travel. We were seeing more 36 00:01:49,920 --> 00:01:52,520 Speaker 1: travel in the airport. So it's comfort, it's it's people 37 00:01:52,560 --> 00:01:55,640 Speaker 1: feeling safe. Seventy of the American population has at least 38 00:01:55,640 --> 00:01:57,960 Speaker 1: one vaccination shot. But we have to we have to 39 00:01:58,000 --> 00:02:00,480 Speaker 1: be very cognizant of the delta variant and make sure 40 00:02:00,480 --> 00:02:02,360 Speaker 1: we don't let that spike and get out of control. 41 00:02:02,560 --> 00:02:04,480 Speaker 1: A higher wage is making it happen. Do we need 42 00:02:04,480 --> 00:02:06,840 Speaker 1: a higher price to bring that supply back in line 43 00:02:07,000 --> 00:02:09,799 Speaker 1: with demand? Four percent wage growth? Mr? Secret do you 44 00:02:09,880 --> 00:02:11,440 Speaker 1: think do you think we do we need to see 45 00:02:11,440 --> 00:02:14,799 Speaker 1: more of this? I think higher wage wage growth is good. 46 00:02:14,800 --> 00:02:16,600 Speaker 1: It's good for the American worker, it's good for people 47 00:02:16,720 --> 00:02:18,840 Speaker 1: going back to work. I think in some sectors we're 48 00:02:18,840 --> 00:02:21,120 Speaker 1: definitely gonna need to see higher wage growth for people 49 00:02:21,160 --> 00:02:23,119 Speaker 1: to come back to work. But but I think where 50 00:02:23,120 --> 00:02:26,200 Speaker 1: we're headed right now, I mean all signs are incrementally 51 00:02:26,200 --> 00:02:28,960 Speaker 1: going in a good positive direction. Companies have starting to 52 00:02:28,960 --> 00:02:32,280 Speaker 1: respond on the vaccine front, Tyson Food requiring all staff 53 00:02:32,320 --> 00:02:34,280 Speaker 1: to be vaccinated by November first. We heard the same 54 00:02:34,320 --> 00:02:37,960 Speaker 1: from the United Airlines. From your standpoint, is there something 55 00:02:38,040 --> 00:02:42,600 Speaker 1: you and the administration support companies mandating vaccines for their 56 00:02:42,639 --> 00:02:46,799 Speaker 1: labor force? Certainly the President said he supports companies when 57 00:02:46,800 --> 00:02:49,280 Speaker 1: they put those mandates in place. H He's taken the 58 00:02:49,480 --> 00:02:51,560 Speaker 1: different We're taking a different approach to the federal government. 59 00:02:51,680 --> 00:02:53,960 Speaker 1: We're asking people to get vaccinated, and if they don't 60 00:02:53,960 --> 00:02:56,200 Speaker 1: get vaccinated, we're going to do lots of testing. So 61 00:02:56,600 --> 00:02:58,359 Speaker 1: anything that we can do to encourage people to get 62 00:02:58,360 --> 00:03:00,560 Speaker 1: back into the workforce is important. I think there are 63 00:03:00,560 --> 00:03:02,880 Speaker 1: people that don't want to get vaccinated because of whatever 64 00:03:02,919 --> 00:03:05,519 Speaker 1: reason it might be. Some people have good, legitimate reasons, 65 00:03:05,560 --> 00:03:08,600 Speaker 1: but the majority of people that aren't getting vaccinated, it's 66 00:03:08,639 --> 00:03:10,680 Speaker 1: a political thing, and it shouldn't be a political political 67 00:03:10,680 --> 00:03:12,359 Speaker 1: issue if it's a political thing. So why do you 68 00:03:12,360 --> 00:03:14,760 Speaker 1: think minority groups in some cities like Washington, d C. 69 00:03:14,919 --> 00:03:17,400 Speaker 1: The city you're in, like New York City, Why some 70 00:03:17,480 --> 00:03:20,280 Speaker 1: of those minority groups have not been getting vaccinated? Why 71 00:03:20,320 --> 00:03:23,120 Speaker 1: those vaccination rates are so much lower? Is it just 72 00:03:23,200 --> 00:03:26,560 Speaker 1: politics or is something else happening? No. I think in 73 00:03:26,560 --> 00:03:28,920 Speaker 1: the community of Carlor, particularly in urban areas, it's a 74 00:03:28,960 --> 00:03:32,040 Speaker 1: distrust in the healthcare system over generations. I've seen it 75 00:03:32,040 --> 00:03:33,880 Speaker 1: when I was Mirror Boston, and we had to do 76 00:03:33,919 --> 00:03:35,280 Speaker 1: a lot of work to go out there and build 77 00:03:35,280 --> 00:03:39,040 Speaker 1: trust in the community. People of color, particularly African American community, 78 00:03:39,560 --> 00:03:42,080 Speaker 1: felt in some cases abandoned by hearts of the hospital 79 00:03:42,080 --> 00:03:44,080 Speaker 1: systems over years. So we have to do more work 80 00:03:44,120 --> 00:03:46,240 Speaker 1: there to encourage people to get vaccinated. And that's the 81 00:03:46,240 --> 00:03:48,920 Speaker 1: issue at playing right now. So, Mr Secretary, I wonder 82 00:03:48,960 --> 00:03:50,840 Speaker 1: what your thoughts on the following might be if we're 83 00:03:50,840 --> 00:03:53,520 Speaker 1: in a position now where large companies are starting to 84 00:03:53,560 --> 00:03:56,280 Speaker 1: say if you're not vaccinated, you can't work for us, 85 00:03:56,560 --> 00:03:58,720 Speaker 1: where cities like New York is starting to say if 86 00:03:58,720 --> 00:04:01,400 Speaker 1: you're not vaccinated, you can't dine here when you and 87 00:04:01,440 --> 00:04:04,920 Speaker 1: I buy both. Now, the vaccination rights of minority groups 88 00:04:04,960 --> 00:04:07,280 Speaker 1: just aren't high enough. You worried that they might be 89 00:04:07,320 --> 00:04:10,480 Speaker 1: frozen out of this economy. You know, I'm concerned, but 90 00:04:10,600 --> 00:04:12,640 Speaker 1: we But it's it's also outreach and marketing. We have 91 00:04:12,720 --> 00:04:14,560 Speaker 1: to go out into the communities and talk to people 92 00:04:14,800 --> 00:04:17,000 Speaker 1: to make sure people are comfortable with the vaccine. So 93 00:04:17,080 --> 00:04:20,080 Speaker 1: you can't just which really say, in certain communities in America, 94 00:04:20,160 --> 00:04:22,440 Speaker 1: like for example, in Boston, the communities of color that 95 00:04:22,480 --> 00:04:24,480 Speaker 1: you know force people to get vaccinated, we have to 96 00:04:24,520 --> 00:04:26,360 Speaker 1: go out and do an educational component of whites and 97 00:04:26,440 --> 00:04:28,359 Speaker 1: point to get vaccinated, just like we had to do 98 00:04:28,400 --> 00:04:30,680 Speaker 1: an educational component at the very beginning of the pandemic 99 00:04:30,800 --> 00:04:33,159 Speaker 1: to express why it was important to wear masks, fizzicle distance, 100 00:04:33,160 --> 00:04:35,159 Speaker 1: washing hands, and do all of those things. So what 101 00:04:35,200 --> 00:04:37,240 Speaker 1: are you doing right now to make that happen. What 102 00:04:37,279 --> 00:04:40,160 Speaker 1: does the outreach look like? Well, I mean I think 103 00:04:40,200 --> 00:04:41,919 Speaker 1: a lot of it. It's gonna be up to local governments. 104 00:04:41,920 --> 00:04:43,520 Speaker 1: I think that that you know, we're gonna be working 105 00:04:43,520 --> 00:04:46,400 Speaker 1: with mayors and states around the country about that to 106 00:04:46,440 --> 00:04:48,560 Speaker 1: reach out there. And I know that the COVID Task 107 00:04:48,600 --> 00:04:50,480 Speaker 1: Force at the White House is working on it as well. 108 00:04:50,560 --> 00:04:52,480 Speaker 1: Right now. I haven't had a meeting with them in 109 00:04:52,480 --> 00:04:53,760 Speaker 1: the last couple of weeks, but I know that they're 110 00:04:53,800 --> 00:04:55,800 Speaker 1: working on how do we deal with this issue of 111 00:04:56,200 --> 00:04:58,560 Speaker 1: the people in America that have decided not to get 112 00:04:58,640 --> 00:05:01,120 Speaker 1: vaccinated for whatever reason they are, How can we encourage 113 00:05:01,120 --> 00:05:03,120 Speaker 1: them to get vaccinated? So it's still it's still work 114 00:05:03,120 --> 00:05:04,880 Speaker 1: in progress. Do you think we need to get past 115 00:05:04,960 --> 00:05:08,159 Speaker 1: this lazy media narrative that it's just politics, that there's 116 00:05:08,240 --> 00:05:10,640 Speaker 1: much more dom and gone so that one more time 117 00:05:10,640 --> 00:05:11,839 Speaker 1: I missed that. Do you think we need to move 118 00:05:11,880 --> 00:05:14,920 Speaker 1: past the lazy media narrative that this is just politics, 119 00:05:15,160 --> 00:05:17,520 Speaker 1: that there's more going on in this country. You touched 120 00:05:17,520 --> 00:05:20,200 Speaker 1: on the distrust of government that's a lot more pervasive 121 00:05:20,200 --> 00:05:22,479 Speaker 1: than I think some people are willing to acknowledge. MS 122 00:05:22,560 --> 00:05:25,720 Speaker 1: the Secretary, would you agree, Yeah, there's no question about it, 123 00:05:25,720 --> 00:05:27,480 Speaker 1: And I'm acknowledging it because I saw it first hand 124 00:05:27,520 --> 00:05:29,440 Speaker 1: as the mayor of the City of Boston. But but 125 00:05:29,600 --> 00:05:31,080 Speaker 1: I do think there's a lot I think a lot 126 00:05:31,080 --> 00:05:33,240 Speaker 1: of this also has to do politics. I think that 127 00:05:33,240 --> 00:05:34,720 Speaker 1: that you know, when you look at some parts of 128 00:05:34,800 --> 00:05:36,760 Speaker 1: rural America, you look at some parts of what's happening 129 00:05:36,800 --> 00:05:40,680 Speaker 1: down in Florida, people refusing to get vaccinated. Uh, it's 130 00:05:40,680 --> 00:05:43,400 Speaker 1: not a political issue. Getting vaccinated is not a Democrat 131 00:05:43,480 --> 00:05:46,679 Speaker 1: or Republican issue. It's not a progressive or conservative issue. 132 00:05:46,880 --> 00:05:48,919 Speaker 1: It's about taking care of yourself and your family and 133 00:05:48,920 --> 00:05:51,840 Speaker 1: your livelihood and keeping yourself alive. So I wish it 134 00:05:51,880 --> 00:05:55,239 Speaker 1: wasn't political. It shouldn't be political. Uh, wearing mass shouldn't 135 00:05:55,279 --> 00:05:57,440 Speaker 1: be political. It's has nothing to do with politics. It's 136 00:05:57,480 --> 00:06:00,200 Speaker 1: about your public health. It's about keeping yourself safe, and 137 00:06:00,320 --> 00:06:03,000 Speaker 1: ultimately it's about keeping our economy moving forward and keeping 138 00:06:03,000 --> 00:06:05,120 Speaker 1: our country moving. Mrs Extra, I know you've got to 139 00:06:05,200 --> 00:06:07,000 Speaker 1: keep moving. You've got a busy morning this morning. Thank 140 00:06:07,000 --> 00:06:08,600 Speaker 1: you for being with us. We appreciate at the U 141 00:06:08,600 --> 00:06:11,000 Speaker 1: S Secretary of LABE that Manti Walsh from New York 142 00:06:11,040 --> 00:06:13,320 Speaker 1: City for not audience worldwide. I'm ready out on TV 143 00:06:14,000 --> 00:06:23,320 Speaker 1: this as Bloin bug Jeff Rosenberg joining with black Rock 144 00:06:23,400 --> 00:06:25,880 Speaker 1: and what's so important here is so holistic and fixed 145 00:06:25,920 --> 00:06:29,040 Speaker 1: income and doing wonderful work in multi strategy as well. 146 00:06:29,560 --> 00:06:33,039 Speaker 1: Is it a regime change today, Jeff Rosenberg? When you 147 00:06:33,120 --> 00:06:35,560 Speaker 1: see the revisions, when you see one point eight eight 148 00:06:35,640 --> 00:06:39,560 Speaker 1: one non firm payrolls over sixty days, does it shift 149 00:06:39,800 --> 00:06:43,120 Speaker 1: the black Rock view? You know, it's a It's a 150 00:06:43,160 --> 00:06:45,479 Speaker 1: really good question, Tom, because I was thinking the exact 151 00:06:45,520 --> 00:06:48,080 Speaker 1: same thing that you know, we've had a lot of 152 00:06:48,240 --> 00:06:51,440 Speaker 1: kind of negative surprises, you know, focused really on the 153 00:06:51,480 --> 00:06:55,200 Speaker 1: delta variant. You know, it's important to remember that this 154 00:06:55,240 --> 00:07:00,400 Speaker 1: payroll report is really pre the CDC mask wearing change 155 00:07:00,400 --> 00:07:03,640 Speaker 1: in guidance. It doesn't really incorporate some of those more 156 00:07:03,680 --> 00:07:07,360 Speaker 1: recent changes yet to the extent that we follow the 157 00:07:07,440 --> 00:07:10,280 Speaker 1: pattern that we've seen in India and the UK where 158 00:07:10,320 --> 00:07:14,120 Speaker 1: the variant surges, but it's not a permanent surge. You know, 159 00:07:14,200 --> 00:07:17,560 Speaker 1: we could be seeing kind of the peaking of the 160 00:07:18,680 --> 00:07:22,040 Speaker 1: negative news that has has been really about the second 161 00:07:22,040 --> 00:07:25,200 Speaker 1: derivative and the slowdown, and that's manifested itself in a 162 00:07:25,280 --> 00:07:29,200 Speaker 1: pretty protracted rally and interest rates. You know, since interest 163 00:07:29,280 --> 00:07:31,760 Speaker 1: rates peaked at the beginning of March, I think the 164 00:07:31,840 --> 00:07:34,280 Speaker 1: next focus here, and you were just talking about it 165 00:07:34,560 --> 00:07:37,560 Speaker 1: in terms of average hourly earnings, Mike McKee spot on, 166 00:07:37,640 --> 00:07:41,720 Speaker 1: it's really hard to digest and and decouple the mixed 167 00:07:41,760 --> 00:07:45,880 Speaker 1: shift from the underlying data. But it's a strong print 168 00:07:46,080 --> 00:07:49,160 Speaker 1: even with the mixed shift that Mike was highlighting, and 169 00:07:49,200 --> 00:07:51,680 Speaker 1: that's really going to turn the focus on inflation. If 170 00:07:51,720 --> 00:07:55,320 Speaker 1: we add labor market strength, and let's be clear, this 171 00:07:55,400 --> 00:08:00,480 Speaker 1: is a very strong report across all metrics. There's there's 172 00:08:00,600 --> 00:08:03,920 Speaker 1: very little that you can point to here that's disappointing. 173 00:08:04,080 --> 00:08:07,200 Speaker 1: And if we add to that, you know, some signs 174 00:08:07,360 --> 00:08:10,840 Speaker 1: of a broadening out from that inflation that we're seeing 175 00:08:10,840 --> 00:08:13,760 Speaker 1: in the in the wages here, you know, this could 176 00:08:13,800 --> 00:08:17,240 Speaker 1: be that regime shift in terms of the direction that 177 00:08:17,320 --> 00:08:19,880 Speaker 1: we've had on interest rates that you were asking about, Jeff, 178 00:08:19,880 --> 00:08:24,240 Speaker 1: if the Fenent May team was tomorrow, what would I decide? Well, 179 00:08:24,280 --> 00:08:26,480 Speaker 1: I think you hit it, or someone talked about the 180 00:08:26,480 --> 00:08:30,600 Speaker 1: taper discussion. You know it's important here. The Fed is 181 00:08:30,800 --> 00:08:36,240 Speaker 1: very focused to separate the interest rate tightening path from 182 00:08:36,520 --> 00:08:39,960 Speaker 1: the tapering discussion. And so when you look at that 183 00:08:40,040 --> 00:08:43,280 Speaker 1: bond market reaction and and earlier, you know, we were 184 00:08:43,320 --> 00:08:45,840 Speaker 1: looking at talking about the two year versus the back 185 00:08:45,960 --> 00:08:49,760 Speaker 1: end of the curve, still a pretty muted response in 186 00:08:49,800 --> 00:08:54,280 Speaker 1: the very short maturities of the treasury market, the actions 187 00:08:54,320 --> 00:08:56,400 Speaker 1: in the back end of the curve, and that tells 188 00:08:56,440 --> 00:08:59,720 Speaker 1: you that, you know, the market is separating the path 189 00:08:59,840 --> 00:09:04,360 Speaker 1: of tightening from the pace or the calendar on tapering. 190 00:09:04,400 --> 00:09:07,880 Speaker 1: I think, you know, if anything, it pulls forward, maybe tapering, 191 00:09:08,120 --> 00:09:11,320 Speaker 1: but the Feds being very clear they want to avoid 192 00:09:11,360 --> 00:09:15,440 Speaker 1: the taper tantrum. And remember the taper tantrum was about 193 00:09:15,559 --> 00:09:22,080 Speaker 1: the market conflating tap tapering with earlier tightening. This is 194 00:09:22,080 --> 00:09:24,000 Speaker 1: not going to be an earlier tightening, but it could 195 00:09:24,040 --> 00:09:26,160 Speaker 1: be an earlier tame And Jeff, that's exactly what President 196 00:09:26,200 --> 00:09:28,760 Speaker 1: Kaplan tried to do this week, aggressively de link kiss 197 00:09:28,800 --> 00:09:32,320 Speaker 1: commentary about que from any kind of idea about hiking 198 00:09:32,440 --> 00:09:34,200 Speaker 1: rates anytime soon. Mike McKay, I want to bring it 199 00:09:34,200 --> 00:09:36,440 Speaker 1: back into the conversation. It is there reason to believe 200 00:09:36,800 --> 00:09:40,400 Speaker 1: that this can persist, These jobs gains can persist into September? 201 00:09:40,760 --> 00:09:43,120 Speaker 1: And was this a stress test for the theory that 202 00:09:43,160 --> 00:09:46,520 Speaker 1: if you remove additional unemployment insurance, the workers will show 203 00:09:46,679 --> 00:09:48,480 Speaker 1: Some people have made the argument I don't hold a 204 00:09:48,520 --> 00:09:50,880 Speaker 1: position here. I'm just wondering, Mike, is the proof of 205 00:09:50,920 --> 00:09:53,440 Speaker 1: that this morning? Now there's no proof of it this morning. 206 00:09:53,800 --> 00:09:56,800 Speaker 1: We don't have data that show that. The research that 207 00:09:56,920 --> 00:09:59,640 Speaker 1: has been done suggests there has been no effect from 208 00:09:59,640 --> 00:10:02,280 Speaker 1: it over are all. In about two weeks, will get 209 00:10:02,320 --> 00:10:05,319 Speaker 1: the state employment numbers and we'll see if any particular 210 00:10:05,360 --> 00:10:09,120 Speaker 1: states that cut off unemployment benefits see arise. But one 211 00:10:09,200 --> 00:10:11,719 Speaker 1: thing that may be at work here, John, is that 212 00:10:11,840 --> 00:10:15,480 Speaker 1: in the summertime, schools are never in session, so the 213 00:10:15,600 --> 00:10:19,480 Speaker 1: daycare issue may have not been a problem UH in 214 00:10:19,520 --> 00:10:23,160 Speaker 1: the sense of the seasonal adjustment that is done because 215 00:10:23,200 --> 00:10:25,920 Speaker 1: they expect people to be out of the labor force 216 00:10:25,960 --> 00:10:28,880 Speaker 1: to a certain extent taking care of their kids. And 217 00:10:28,960 --> 00:10:32,880 Speaker 1: let me also mention that the education component that was 218 00:10:32,960 --> 00:10:37,480 Speaker 1: expected to add two jobs certainly did. UH. Jobs in 219 00:10:37,720 --> 00:10:41,440 Speaker 1: education two hundred and twenty three thousand more in the 220 00:10:41,520 --> 00:10:46,520 Speaker 1: seasonally adjusted UH area than in non seasonally adjusted so 221 00:10:46,559 --> 00:10:49,400 Speaker 1: they've added two hundred twenty three thousand jobs to the total. 222 00:10:49,440 --> 00:10:51,840 Speaker 1: Otherwise we would have had seven d and twenty thousand. 223 00:10:52,080 --> 00:10:55,600 Speaker 1: So definitely a major seasonal adjustment question here. But UH, 224 00:10:55,640 --> 00:10:57,960 Speaker 1: the issue is does anybody at the FED really care 225 00:10:58,000 --> 00:11:00,680 Speaker 1: about seasonal adjustment and when are trying to think of 226 00:11:01,360 --> 00:11:05,120 Speaker 1: whether it's substantial additional progress. Jeff Rosenberg as an investor, 227 00:11:05,160 --> 00:11:08,240 Speaker 1: what do you do with this information? Well, as we 228 00:11:08,360 --> 00:11:11,320 Speaker 1: as we talked about, I think this is a possible 229 00:11:11,440 --> 00:11:15,000 Speaker 1: shift here in the rate dynamic. You know, we we 230 00:11:15,080 --> 00:11:19,200 Speaker 1: really have to follow this up with some inflation data 231 00:11:19,200 --> 00:11:20,920 Speaker 1: if if that's gonna if that's really going to be 232 00:11:20,960 --> 00:11:24,640 Speaker 1: the case. But just going back to the labor market peace, 233 00:11:24,679 --> 00:11:28,240 Speaker 1: because you know, you look at what's driving the FED 234 00:11:28,360 --> 00:11:30,760 Speaker 1: and and and market expectations around the FED, and it's 235 00:11:30,800 --> 00:11:33,280 Speaker 1: it's it's labor markets, and it's inflation. And on the 236 00:11:33,360 --> 00:11:38,880 Speaker 1: labor market side, this is certainly contributing to accelerating mostly 237 00:11:38,960 --> 00:11:40,800 Speaker 1: the taper discussion. I think the FED is going to 238 00:11:40,880 --> 00:11:44,000 Speaker 1: do a lot to try to separate out taper from 239 00:11:44,160 --> 00:11:47,040 Speaker 1: from tightening, and I think that's the main takeaway. I 240 00:11:47,040 --> 00:11:50,079 Speaker 1: want to just add that there is some little piece 241 00:11:50,120 --> 00:11:54,079 Speaker 1: of information here that participation rate did tick up a tenth. 242 00:11:54,480 --> 00:11:57,440 Speaker 1: That's quite helpful. Uh, We're gonna be focused on that 243 00:11:57,480 --> 00:12:00,160 Speaker 1: participation rate as we roll off the rest of the 244 00:12:00,240 --> 00:12:04,160 Speaker 1: unemployment insurance to see whether the supply side starts to 245 00:12:04,280 --> 00:12:07,120 Speaker 1: ease and you start to see the labor market grow 246 00:12:07,200 --> 00:12:10,040 Speaker 1: from that end. Jeff, does this report it change the 247 00:12:10,080 --> 00:12:13,599 Speaker 1: balance of risks with respect to overheating in the economy 248 00:12:13,840 --> 00:12:18,840 Speaker 1: or perhaps going into more of a sagflationary environment. I 249 00:12:18,880 --> 00:12:21,400 Speaker 1: don't think it does. I mean, I think that you've 250 00:12:21,480 --> 00:12:24,360 Speaker 1: had that balance of risk. You know, look at Clarita's 251 00:12:24,880 --> 00:12:27,600 Speaker 1: speech from a couple of days ago, and I think 252 00:12:27,640 --> 00:12:30,240 Speaker 1: the balance of risk that he highlighted is is to 253 00:12:30,320 --> 00:12:34,440 Speaker 1: the upside on inflation. And while that you know, there's 254 00:12:34,480 --> 00:12:37,520 Speaker 1: certainly hawks and doves, both within the Fed and within 255 00:12:37,559 --> 00:12:41,360 Speaker 1: the market. I think that balance of risk to higher inflation, 256 00:12:42,000 --> 00:12:45,720 Speaker 1: uh is something we had before the report. But certainly 257 00:12:45,800 --> 00:12:49,800 Speaker 1: this report, particularly you know what Mike highlighted on average 258 00:12:49,800 --> 00:12:55,079 Speaker 1: hourly earnings, only reinforces that risk on the balance of 259 00:12:55,160 --> 00:12:59,240 Speaker 1: risks being towards higher inflation. John Farrow Jason Furman with 260 00:12:59,320 --> 00:13:02,679 Speaker 1: a blister rain tweet He's never seen a more constructive 261 00:13:02,679 --> 00:13:05,920 Speaker 1: report like this. He calls it a wonderful set of data. 262 00:13:06,280 --> 00:13:09,600 Speaker 1: Neil Dutta is heated that this is a massive start 263 00:13:09,920 --> 00:13:11,880 Speaker 1: to qu three. It's what we all wanted to say. 264 00:13:12,080 --> 00:13:14,400 Speaker 1: Jeff is going to catch up set Jeff Roisenberg of 265 00:13:14,480 --> 00:13:23,679 Speaker 1: black Rock Gina Martin Adams now on the equity market consequences. 266 00:13:23,960 --> 00:13:28,079 Speaker 1: Gin I see a churn to equities, but nevertheless a 267 00:13:28,240 --> 00:13:32,520 Speaker 1: VIX that signals a bowl market. Neil Dutta at Renaissance 268 00:13:32,559 --> 00:13:35,680 Speaker 1: suggests this is a bang up start to queue three. 269 00:13:35,920 --> 00:13:41,440 Speaker 1: How will that change the standard and poor's estimate game? Yeah, 270 00:13:41,440 --> 00:13:44,080 Speaker 1: I think that analysts are still pretty cautious frankly on 271 00:13:44,120 --> 00:13:46,720 Speaker 1: the outlook, and certainly what we've seen over the course 272 00:13:46,720 --> 00:13:48,959 Speaker 1: of the last six weeks or eight weeks or so 273 00:13:49,559 --> 00:13:52,720 Speaker 1: is a rotation into more defensive strategies really driving the 274 00:13:52,760 --> 00:13:56,079 Speaker 1: market higher. So to the degree that we have much 275 00:13:56,160 --> 00:14:00,679 Speaker 1: faster than expected growth and persistent growth, two things are 276 00:14:00,760 --> 00:14:03,720 Speaker 1: very important. We get both of those. Over the course 277 00:14:03,720 --> 00:14:05,480 Speaker 1: of the next several quarters, we're going to continue to 278 00:14:05,480 --> 00:14:09,119 Speaker 1: see upward estimate revision. So far, analysts are only revising 279 00:14:09,240 --> 00:14:12,880 Speaker 1: estimates higher because second quarter numbers beat, and that's been 280 00:14:12,920 --> 00:14:17,280 Speaker 1: consistent throughout the entire pandemic. Analysts are very cautious with 281 00:14:17,320 --> 00:14:20,160 Speaker 1: respect to the outlook, and even though numbers are still 282 00:14:20,200 --> 00:14:22,640 Speaker 1: going higher, they're only going higher because companies are telling 283 00:14:22,640 --> 00:14:25,080 Speaker 1: them that they should go higher. It's not that analysts 284 00:14:25,120 --> 00:14:27,360 Speaker 1: are getting overly optimates. So if we continue to see 285 00:14:27,400 --> 00:14:29,640 Speaker 1: numbers like this, we're going to see upward estimate revision 286 00:14:29,880 --> 00:14:34,120 Speaker 1: all the way into how is use of cash changed 287 00:14:34,440 --> 00:14:37,960 Speaker 1: or your gues estimate of use of cash. Robert Schiffman 288 00:14:38,040 --> 00:14:41,720 Speaker 1: published moments ago of a forty billion share buy back 289 00:14:41,800 --> 00:14:45,640 Speaker 1: up Microsoft. They've got the powder to do that, etcetera, etcetera, 290 00:14:45,920 --> 00:14:49,840 Speaker 1: all of Bloomberg intelligence. How has use of cash changed 291 00:14:50,240 --> 00:14:53,960 Speaker 1: to sustain this bull market? Yeah, so so far this 292 00:14:54,080 --> 00:14:56,560 Speaker 1: year it's all been it's been all about buy backs 293 00:14:56,560 --> 00:14:59,080 Speaker 1: and M and A. Those two things have really been 294 00:14:59,160 --> 00:15:02,960 Speaker 1: the dominant fact 's behind cash utilization by companies. So 295 00:15:03,080 --> 00:15:05,160 Speaker 1: to degree that they're willing to part with their cash, 296 00:15:05,240 --> 00:15:08,560 Speaker 1: which is still a limited amount of companies doing so, 297 00:15:08,920 --> 00:15:11,640 Speaker 1: they're spending it on re engaging in buying buy backs 298 00:15:11,640 --> 00:15:15,720 Speaker 1: that they cut in and increasing buy backs over time. 299 00:15:16,160 --> 00:15:19,120 Speaker 1: They're also buying companies. We are seeing M and A 300 00:15:19,200 --> 00:15:23,040 Speaker 1: trends improve and we've seen that really since. What they're 301 00:15:23,080 --> 00:15:24,840 Speaker 1: not doing so far, and I think where we have 302 00:15:24,880 --> 00:15:28,080 Speaker 1: the greatest potential to sustain a longer term, faster pace 303 00:15:28,160 --> 00:15:32,080 Speaker 1: of economic recovery is capital spending. Companies are still not 304 00:15:32,240 --> 00:15:35,520 Speaker 1: parting with their cash in the most optimistic method, and 305 00:15:35,560 --> 00:15:40,200 Speaker 1: that is spending it on future business potential outside of 306 00:15:40,240 --> 00:15:42,320 Speaker 1: buy backs and m and A. So we've got to 307 00:15:42,360 --> 00:15:46,280 Speaker 1: see capital spending improve. There's certainly capacity to do so. 308 00:15:46,360 --> 00:15:49,280 Speaker 1: Just to get back to average share of capital spending 309 00:15:49,360 --> 00:15:53,360 Speaker 1: relative to sales, we should see capex rise twenty over 310 00:15:53,400 --> 00:15:55,840 Speaker 1: the course of the next twelve to eighteen months. If 311 00:15:55,840 --> 00:15:58,520 Speaker 1: we get that kind of figure, that's going to increase 312 00:15:58,600 --> 00:16:01,880 Speaker 1: the confidence that analysts have of and certainly increased the 313 00:16:01,960 --> 00:16:06,040 Speaker 1: durability um and the perceived durability and rate of growth 314 00:16:06,080 --> 00:16:07,920 Speaker 1: that we likely are going to see over the course 315 00:16:07,920 --> 00:16:10,120 Speaker 1: of the cycle. Gina is stick with us. We're just 316 00:16:10,120 --> 00:16:12,720 Speaker 1: sort of parsing through the numbers. Michael McKee is looking 317 00:16:12,840 --> 00:16:15,280 Speaker 1: at the more granular aspects of this report. And when 318 00:16:15,280 --> 00:16:18,520 Speaker 1: we talked about the dissonance between corporate earnings coming in 319 00:16:18,600 --> 00:16:21,640 Speaker 1: so much harder than people had expected yet economic data 320 00:16:21,680 --> 00:16:24,880 Speaker 1: lagging behind, perhaps the economic data just had and caught 321 00:16:24,920 --> 00:16:28,200 Speaker 1: up with itself. Mike, what are the details, Well, we're 322 00:16:28,200 --> 00:16:31,320 Speaker 1: looking at revisions to the prior months. You add in 323 00:16:31,800 --> 00:16:37,000 Speaker 1: the numbers that were added back for June and May 324 00:16:37,080 --> 00:16:40,680 Speaker 1: nine hundred and thirty eight thousand jobs were created in June. 325 00:16:40,680 --> 00:16:43,960 Speaker 1: We had thought that was eight fifty, so a significantly 326 00:16:44,040 --> 00:16:47,880 Speaker 1: better report for the month of June and total one 327 00:16:48,440 --> 00:16:51,400 Speaker 1: nineteen thousand over those two months, so job creation has 328 00:16:51,440 --> 00:16:53,400 Speaker 1: been a lot stronger than we had thought it was. 329 00:16:53,480 --> 00:16:56,320 Speaker 1: We had some reports we thought were disappointing. Turns out 330 00:16:56,320 --> 00:16:58,920 Speaker 1: they weren't as bad. Meanwhile, Gina Martin that I'm still 331 00:16:58,960 --> 00:17:01,080 Speaker 1: with us, and I'm looking at the action in the 332 00:17:01,120 --> 00:17:03,560 Speaker 1: equity market in response to this, pretty much as you 333 00:17:03,560 --> 00:17:07,440 Speaker 1: would expect. NAZAC futures a way underperforming the SMP, which 334 00:17:07,480 --> 00:17:10,920 Speaker 1: is basically flat. NASTAC futures are down a little less 335 00:17:11,080 --> 00:17:12,760 Speaker 1: than a half a percent, or they were in just 336 00:17:12,840 --> 00:17:15,320 Speaker 1: a couple of minutes ago. I'm wondering, from your perspective, 337 00:17:15,640 --> 00:17:18,760 Speaker 1: if the NASAC can post gains through year end if 338 00:17:18,760 --> 00:17:23,400 Speaker 1: treasure yields continue to rise, very unlikely. Um at least 339 00:17:23,400 --> 00:17:26,080 Speaker 1: they will lag the NASTAC should certainly lag the SMP. 340 00:17:26,200 --> 00:17:30,920 Speaker 1: Five and more cyclically oriented, sort of value centric segments 341 00:17:30,960 --> 00:17:33,880 Speaker 1: of the market could rise faster in an environment where 342 00:17:33,960 --> 00:17:37,840 Speaker 1: rates are rising in inflation expectations are rising. In my mind, 343 00:17:38,200 --> 00:17:41,200 Speaker 1: the recovery that we saw in the NASAAC in big 344 00:17:41,240 --> 00:17:43,800 Speaker 1: cap tech in particular, over the course of the last 345 00:17:43,840 --> 00:17:48,199 Speaker 1: couple of months, what's really about analysts and investors generally 346 00:17:48,200 --> 00:17:50,480 Speaker 1: getting a little bit more cautious about the growth outlook. 347 00:17:50,520 --> 00:17:53,600 Speaker 1: So if you continue to have surprises on growth, continue 348 00:17:53,640 --> 00:17:57,280 Speaker 1: to have surprises on inflation numbers, that trade depletes over 349 00:17:57,320 --> 00:17:59,160 Speaker 1: the course of the rest of them of the year, Gina, 350 00:17:59,160 --> 00:18:01,720 Speaker 1: Marty adamsyk you soone's too short of visit this morning. 351 00:18:07,200 --> 00:18:11,080 Speaker 1: It's the only reason Jerome Schneider agreed to appear with 352 00:18:11,160 --> 00:18:16,159 Speaker 1: us this morning was sure sureser. Max Scherzer killed it 353 00:18:16,440 --> 00:18:20,360 Speaker 1: for the Dodgers in the last forty eight hours, striking 354 00:18:20,359 --> 00:18:24,679 Speaker 1: out ten against the Astros. Schneider is so buffuddled by 355 00:18:24,720 --> 00:18:27,560 Speaker 1: West Coast baseball. That's the only reason we got him 356 00:18:27,560 --> 00:18:30,440 Speaker 1: on air. He's dazzled. I mean, Jerome, it's fun from 357 00:18:30,480 --> 00:18:34,440 Speaker 1: Seattle on down to San Diego. It's West Coast Baseball time, 358 00:18:34,520 --> 00:18:37,880 Speaker 1: isn't it? It is? It is? Unfortunately, you know the 359 00:18:37,920 --> 00:18:39,600 Speaker 1: angel through of our hit and myths, and you know 360 00:18:39,760 --> 00:18:42,440 Speaker 1: you don't mention him. But but you know what I'll 361 00:18:42,480 --> 00:18:44,199 Speaker 1: tell you. You know this, I'm a Yankee stand so 362 00:18:44,320 --> 00:18:46,879 Speaker 1: I trade that have gone on. You know, it's uh, 363 00:18:46,920 --> 00:18:49,760 Speaker 1: it's very funny, funny. Hopefully that pizzas will come together 364 00:18:49,760 --> 00:18:52,400 Speaker 1: in I can't I don't know, I can't continue this. 365 00:18:53,800 --> 00:18:57,480 Speaker 1: I'm gonna just I don't know. Jerome, watch out. And 366 00:18:56,640 --> 00:18:59,440 Speaker 1: I've got to say, folks, they went back and forth 367 00:18:59,480 --> 00:19:02,560 Speaker 1: with Doug asked the Yankees, I left for dead, and Jerome, 368 00:19:02,600 --> 00:19:05,160 Speaker 1: You've got to admit with the trades, this is gonna 369 00:19:05,200 --> 00:19:08,480 Speaker 1: be fun. You know, we always talked about inciting actions 370 00:19:08,480 --> 00:19:11,159 Speaker 1: for markets. This is definitely an exciting action for for 371 00:19:11,280 --> 00:19:13,320 Speaker 1: the the team. But you know, it's a long season. 372 00:19:13,400 --> 00:19:15,119 Speaker 1: It's all stats. We'll see how it comes together. A 373 00:19:15,119 --> 00:19:17,080 Speaker 1: couple of home runs, you know, get the ball rolling. 374 00:19:17,200 --> 00:19:20,119 Speaker 1: So you are in the trenches, Jerome, on a bond 375 00:19:20,119 --> 00:19:24,119 Speaker 1: desk of global repute, and you get a regime change 376 00:19:24,200 --> 00:19:28,240 Speaker 1: like this job's report and its revision. How does your 377 00:19:28,320 --> 00:19:31,760 Speaker 1: desk think when you get a sea change like this? 378 00:19:32,840 --> 00:19:34,800 Speaker 1: I mean, I'll be honest, Tom, regime change is a 379 00:19:34,880 --> 00:19:38,040 Speaker 1: pretty strong word. Um, I think it. You know obviously 380 00:19:38,560 --> 00:19:41,080 Speaker 1: hints that progress and some of that progress we've seen 381 00:19:41,160 --> 00:19:43,320 Speaker 1: for quite some time. You know, we shouldn't be surprised 382 00:19:43,320 --> 00:19:46,760 Speaker 1: by that healing process and growth continuing. Uh and and 383 00:19:46,840 --> 00:19:50,040 Speaker 1: necessarily I don't think it necessarily changes they calculus all 384 00:19:50,080 --> 00:19:52,880 Speaker 1: that much. Some of it's some goods back from last month. 385 00:19:53,320 --> 00:19:55,919 Speaker 1: We clearly see that in a household report. Um. But 386 00:19:56,000 --> 00:19:59,359 Speaker 1: I think ultimately what it does is puts bear in 387 00:19:59,400 --> 00:20:01,920 Speaker 1: the center. It's really your goal, you know, similar to 388 00:20:01,960 --> 00:20:03,800 Speaker 1: the Inkies trying to get to the World Series. The 389 00:20:03,840 --> 00:20:06,240 Speaker 1: goal of dead is to is to effectively get to 390 00:20:06,280 --> 00:20:07,720 Speaker 1: the end of the year and get to that point 391 00:20:07,760 --> 00:20:10,600 Speaker 1: where they view ustential further progress is being made. And 392 00:20:10,880 --> 00:20:13,200 Speaker 1: that's sort of been the mantra that we've been operating 393 00:20:13,200 --> 00:20:15,679 Speaker 1: here at PIMCO, is that that growth will continue, that 394 00:20:15,680 --> 00:20:17,720 Speaker 1: you'll see an unemployment rate close at about four and 395 00:20:17,760 --> 00:20:19,840 Speaker 1: a half percent by the by the end of the year, 396 00:20:19,920 --> 00:20:22,600 Speaker 1: and and those things are the metrics social help that 397 00:20:22,720 --> 00:20:26,600 Speaker 1: tapering process and digested rather easily. The concern for us 398 00:20:26,680 --> 00:20:28,919 Speaker 1: is that digestion, and I think that's the focus for 399 00:20:30,080 --> 00:20:34,960 Speaker 1: we need to make substantial further progress. With a Mets fan, Yeah, 400 00:20:34,960 --> 00:20:37,359 Speaker 1: it was about to say, I take issue, are you 401 00:20:37,480 --> 00:20:41,000 Speaker 1: comparing the Federal Reserve to the Yankees? But I digress, Jerome. 402 00:20:41,440 --> 00:20:44,240 Speaker 1: You you're talking about the adjustment and how that will 403 00:20:44,240 --> 00:20:47,520 Speaker 1: occur in markets, and I'm just noting that there was 404 00:20:47,560 --> 00:20:50,000 Speaker 1: a flood of cash into money market funds over the 405 00:20:50,000 --> 00:20:53,120 Speaker 1: past couple of weeks. There's just move toward a risk 406 00:20:53,240 --> 00:20:58,520 Speaker 1: averse stance, and how quickly could that potentially change? Could 407 00:20:58,560 --> 00:21:01,280 Speaker 1: that potentially get turned on its head if people start 408 00:21:01,320 --> 00:21:04,960 Speaker 1: to buy into a four percent wage increase year over year, 409 00:21:05,240 --> 00:21:07,560 Speaker 1: which is what we just got. Yeah, you know, I 410 00:21:07,560 --> 00:21:09,679 Speaker 1: think there's a few reasons why you seem general trends, 411 00:21:09,680 --> 00:21:11,320 Speaker 1: and I think if you take a step back, you've 412 00:21:11,320 --> 00:21:13,760 Speaker 1: actually seen move out of money market funds for the 413 00:21:13,800 --> 00:21:16,520 Speaker 1: previous few months and now it's come back slightly. There's 414 00:21:16,520 --> 00:21:18,800 Speaker 1: a few reasons to that one. Frankly, investors are worried 415 00:21:18,840 --> 00:21:21,879 Speaker 1: about capital loss either some volatility and broader markets and 416 00:21:21,920 --> 00:21:25,159 Speaker 1: equities and certainty with growth outlooks. That's one area. The 417 00:21:25,200 --> 00:21:27,800 Speaker 1: second area is simply concerned about higher rates. And so 418 00:21:28,280 --> 00:21:30,280 Speaker 1: the mark to market, if you will, is owning duration, 419 00:21:30,400 --> 00:21:34,480 Speaker 1: owning interest rate exposure. Specifically, longer duration comes with a lift. 420 00:21:34,600 --> 00:21:36,959 Speaker 1: Sure you are an income, but you can have loss 421 00:21:37,000 --> 00:21:40,280 Speaker 1: of that price evaluation, and that is potential loss for 422 00:21:40,359 --> 00:21:43,080 Speaker 1: people who have taken a lot more interest rate risk. Uh, 423 00:21:43,160 --> 00:21:46,200 Speaker 1: And that and that renewed growth expectation or concerns about 424 00:21:46,240 --> 00:21:49,199 Speaker 1: inflation really eat into that. And then the second, the 425 00:21:49,280 --> 00:21:53,439 Speaker 1: third thing really is that inflationary discussion, possibility of negative 426 00:21:53,440 --> 00:21:56,920 Speaker 1: real returns. You've highlighted very many times about the real 427 00:21:57,280 --> 00:22:00,200 Speaker 1: real rates. Those are real practical implications for that. There's 428 00:22:00,200 --> 00:22:02,879 Speaker 1: sort of way to mitigate that is being in those 429 00:22:02,920 --> 00:22:06,840 Speaker 1: cash elements and more importantly, trying to navigate the difference 430 00:22:06,920 --> 00:22:09,720 Speaker 1: between being at zero cash interest rates where key builds 431 00:22:09,760 --> 00:22:12,440 Speaker 1: and demand deposits and things like and try to find 432 00:22:12,480 --> 00:22:17,000 Speaker 1: some modest marginal appetite to close those inflationary headwinds from 433 00:22:17,160 --> 00:22:19,679 Speaker 1: from being in cash and not earning returns. So it 434 00:22:19,720 --> 00:22:22,920 Speaker 1: really is a whole discussion of risinication in that process. Here, 435 00:22:23,200 --> 00:22:25,480 Speaker 1: let's do a modest dated check here with the Dow 436 00:22:25,560 --> 00:22:27,439 Speaker 1: up a hundred and fifty one points, we're out at 437 00:22:27,480 --> 00:22:30,240 Speaker 1: record has thirty five thousand, two one five on the 438 00:22:30,320 --> 00:22:34,920 Speaker 1: Dow sp X nine. Lisa, I just did a fancy Bloomberg. 439 00:22:34,960 --> 00:22:38,000 Speaker 1: This is a te function on the Bloomberg. This is 440 00:22:38,040 --> 00:22:41,400 Speaker 1: two standard deviations out. How far is up for standard 441 00:22:41,440 --> 00:22:45,200 Speaker 1: and pores four four six seven would be a two 442 00:22:45,240 --> 00:22:49,040 Speaker 1: standard deviation trend move we're not there. But nevertheles a 443 00:22:49,160 --> 00:22:53,639 Speaker 1: nice two ten percent lived out to a record high SPX. Critically, Lisa, 444 00:22:54,119 --> 00:22:56,919 Speaker 1: those real yields and bonds that do move but don't 445 00:22:57,000 --> 00:23:00,840 Speaker 1: move all that much off about nine forty am just 446 00:23:00,880 --> 00:23:04,400 Speaker 1: as one measure the thirty year bond. One I had 447 00:23:04,400 --> 00:23:06,280 Speaker 1: to mention the thirty year bond just because it drives 448 00:23:06,400 --> 00:23:08,360 Speaker 1: er Ome nuts. That's great, Yeah, but it's right, it's 449 00:23:08,400 --> 00:23:10,680 Speaker 1: out of his purview. He is focused on the here 450 00:23:10,680 --> 00:23:12,639 Speaker 1: and the now. Uh. And I thought that you'd be 451 00:23:12,680 --> 00:23:14,800 Speaker 1: really excited to talk about this time, considering that this 452 00:23:14,880 --> 00:23:17,040 Speaker 1: is the bulk of your portfolio and triple leverage cash. 453 00:23:17,119 --> 00:23:20,840 Speaker 1: But when we talk about cash, let's talk about corporations 454 00:23:20,960 --> 00:23:23,399 Speaker 1: and how much cash they have the fact that they 455 00:23:23,440 --> 00:23:25,880 Speaker 1: are putting it in the bank at a time when 456 00:23:25,920 --> 00:23:28,760 Speaker 1: banks are hoping to lend to them and failing. What 457 00:23:28,960 --> 00:23:31,960 Speaker 1: happens if they start to deploy that cash. What is 458 00:23:32,000 --> 00:23:35,520 Speaker 1: the mechanics behind that drome? Yeah, I think that's exactly 459 00:23:35,600 --> 00:23:37,679 Speaker 1: what you want. It would be less concerned about, you know, 460 00:23:37,720 --> 00:23:41,280 Speaker 1: how you create that liquidity, etceter. The liquidity is clearly 461 00:23:41,280 --> 00:23:43,520 Speaker 1: there and those things, but it really translates into growth 462 00:23:43,520 --> 00:23:46,680 Speaker 1: and it translates into capital expenditure and ways to demandage 463 00:23:46,720 --> 00:23:49,080 Speaker 1: it or delivering balance sheets which has obviously increased in 464 00:23:49,200 --> 00:23:52,560 Speaker 1: leverage over the past, your your plus and so those 465 00:23:52,560 --> 00:23:55,480 Speaker 1: are probably positive and nurtes things for where they for 466 00:23:55,560 --> 00:23:58,680 Speaker 1: the overall environment to minds, productivity growth, things like that. 467 00:23:58,760 --> 00:24:01,439 Speaker 1: So while you might see on on the in the 468 00:24:01,520 --> 00:24:03,439 Speaker 1: data in the minutia, the data that you know, if 469 00:24:03,440 --> 00:24:05,439 Speaker 1: there are some models, there are some wage pressure buildings, 470 00:24:05,440 --> 00:24:09,560 Speaker 1: specifically in lower areas, there's still pretty pretty pretty dominant 471 00:24:09,560 --> 00:24:13,040 Speaker 1: themes that create some pretty good clip profitability in those regards. 472 00:24:13,080 --> 00:24:16,040 Speaker 1: I think you have to what the problemtary investors is 473 00:24:16,040 --> 00:24:20,280 Speaker 1: is trying to reconcile that to really what's the valuations 474 00:24:20,320 --> 00:24:22,400 Speaker 1: that have been already priced into the market. And that's 475 00:24:22,440 --> 00:24:25,280 Speaker 1: where you know, indigestion or or palatability comes in. To 476 00:24:25,359 --> 00:24:26,800 Speaker 1: try to fige out if that's the right way to 477 00:24:26,800 --> 00:24:29,560 Speaker 1: take risk, whether it's through credit or equity risk, etcetera. 478 00:24:29,760 --> 00:24:34,280 Speaker 1: Drum Schneider on nine hundred forty four gazillion dollars of 479 00:24:34,400 --> 00:24:38,119 Speaker 1: overnight repose the wall of liquidity out there and what 480 00:24:38,160 --> 00:24:41,439 Speaker 1: I call the trust market. Jerome Schneider, what does it 481 00:24:41,480 --> 00:24:45,080 Speaker 1: do in the coming months. Yeah, I wouldn't necessarily take 482 00:24:45,320 --> 00:24:48,960 Speaker 1: too much in terms of that number because you think, 483 00:24:49,000 --> 00:24:51,600 Speaker 1: here one you have sea build supply which is lower, 484 00:24:51,600 --> 00:24:54,040 Speaker 1: so people need to find a home for that cash. Fortunately, 485 00:24:54,080 --> 00:24:55,800 Speaker 1: we have the stage of reverse reep facility that you 486 00:24:55,920 --> 00:24:59,600 Speaker 1: mentioned at n billion and and it's rather unlimited. There's 487 00:24:59,640 --> 00:25:02,919 Speaker 1: some the potential constraints that were not anywhere near that. 488 00:25:03,040 --> 00:25:04,879 Speaker 1: We would expect that to actually grow to maybe one 489 00:25:04,880 --> 00:25:08,159 Speaker 1: point five trillion before we had any immediate concerns. So 490 00:25:08,200 --> 00:25:10,639 Speaker 1: this is simply finding another avenue of one of the 491 00:25:10,680 --> 00:25:13,960 Speaker 1: cheapest assets out there at five basis points. Again cheap 492 00:25:14,000 --> 00:25:18,840 Speaker 1: being relative, so you're in five uhcent on that overnight cash. 493 00:25:19,240 --> 00:25:21,880 Speaker 1: The other side to this is the set has been 494 00:25:21,920 --> 00:25:25,960 Speaker 1: really focused on not only financial conditions but liquidity conditions, 495 00:25:26,080 --> 00:25:28,359 Speaker 1: and we've seen them announce this in the standing repo 496 00:25:28,480 --> 00:25:31,640 Speaker 1: facility back in the FLMC minutes the past the past 497 00:25:31,680 --> 00:25:34,320 Speaker 1: few weeks, and so we actually published a blog posted 498 00:25:34,400 --> 00:25:38,000 Speaker 1: on this this morning that the standards standing repo facility 499 00:25:38,200 --> 00:25:41,159 Speaker 1: does a lot to alleviate concerns of liquidity on the 500 00:25:41,200 --> 00:25:44,480 Speaker 1: other side, meaning providing funding to the marketplace. And although 501 00:25:44,520 --> 00:25:48,960 Speaker 1: it's not perfect, there's some issues with transition transaction mechanisms 502 00:25:49,119 --> 00:25:52,000 Speaker 1: and how we actually think about it. Um The reality 503 00:25:52,040 --> 00:25:54,000 Speaker 1: is that you have comfort on both sides how to 504 00:25:54,040 --> 00:25:56,680 Speaker 1: invest cash and how to borrow cash, and so that 505 00:25:56,800 --> 00:26:00,440 Speaker 1: focus on liquidity is a bright, bright spotlight some of 506 00:26:00,480 --> 00:26:03,199 Speaker 1: the market mechanisms that have been frankly weak spots over 507 00:26:03,240 --> 00:26:05,840 Speaker 1: the past few decades. Jerome, we just have about thirty seconds. 508 00:26:05,880 --> 00:26:08,199 Speaker 1: Does this apply to the broader fed balance sheet that 509 00:26:08,240 --> 00:26:09,879 Speaker 1: they have to keep it as big as it is 510 00:26:10,000 --> 00:26:14,439 Speaker 1: or bigger from liquidity perspectives, from technical perspectives, well, I 511 00:26:14,480 --> 00:26:17,560 Speaker 1: think that their main focus is making sure markets are stable. 512 00:26:17,680 --> 00:26:19,720 Speaker 1: I think when they really focus on another thing to 513 00:26:19,800 --> 00:26:22,359 Speaker 1: have to turn their eye to how that liquidity transit 514 00:26:22,680 --> 00:26:27,520 Speaker 1: transmission mechanism actually works. And it's it works in old 515 00:26:27,720 --> 00:26:31,800 Speaker 1: old sense meaning going through going through dealers, primary dealers, etcetera. 516 00:26:31,880 --> 00:26:33,960 Speaker 1: But it doesn't necessarily hit all the end of users 517 00:26:33,960 --> 00:26:37,360 Speaker 1: to borrowords or have cash. And so I think that 518 00:26:37,359 --> 00:26:39,919 Speaker 1: that second derivative of where that cash actually ends up 519 00:26:39,920 --> 00:26:41,800 Speaker 1: in equity is just going to be come a focus. 520 00:26:41,840 --> 00:26:44,920 Speaker 1: But ultimately for investors, this is a period of very 521 00:26:44,960 --> 00:26:47,879 Speaker 1: low rates, very low cash for a considerable period of 522 00:26:47,880 --> 00:26:49,400 Speaker 1: time and trying to figure out how to manage around 523 00:26:49,400 --> 00:26:51,960 Speaker 1: that with the FED context is what the is, what 524 00:26:52,040 --> 00:26:55,240 Speaker 1: the difficult conversations can be for the next two years. 525 00:26:55,280 --> 00:26:58,080 Speaker 1: Thank you so much. Had a short term portfolio management 526 00:26:58,600 --> 00:27:03,560 Speaker 1: at RIM. This is the Bloomberg Surveillance Podcast. Thanks for listening. 527 00:27:03,920 --> 00:27:06,680 Speaker 1: Join us live weekdays from seven to ten a m. 528 00:27:06,800 --> 00:27:11,200 Speaker 1: Eastern on Bloomberg Radio and on Bloomberg Television each day 529 00:27:11,320 --> 00:27:14,679 Speaker 1: from six to nine a m. For insight from the 530 00:27:14,680 --> 00:27:19,920 Speaker 1: best in economics, finance, investment, and international relations. And subscribe 531 00:27:19,960 --> 00:27:24,880 Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, 532 00:27:24,960 --> 00:27:28,200 Speaker 1: and of course on the terminal. I'm Tom keene In. 533 00:27:28,320 --> 00:27:30,240 Speaker 1: This is Bloomberg