WEBVTT - BlackRock Global Fixed Income CIO Rick Rieder Talks Fed Rates

0:00:02.520 --> 0:00:18.320
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:12.880 --> 0:00:17.439
<v Speaker 2>Data and earnings are painting a mixed picture of the economy, ism, services,

0:00:17.560 --> 0:00:21.640
<v Speaker 2>ADP employment. They come in solid challenger job cuts, those

0:00:21.760 --> 0:00:25.120
<v Speaker 2>jump to one of the worst octobers on record, ruining

0:00:25.160 --> 0:00:28.120
<v Speaker 2>these markets. Or the rally yesterday, let's try to get

0:00:28.120 --> 0:00:31.840
<v Speaker 2>a sense of direction. Bringing us that now is Rick Reader,

0:00:31.920 --> 0:00:34.320
<v Speaker 2>chief investment Officer of Global fixed Income.

0:00:34.280 --> 0:00:35.279
<v Speaker 3>At black Rock and Rick.

0:00:35.360 --> 0:00:37.200
<v Speaker 2>We always have you on a jobs day, and today

0:00:37.280 --> 0:00:40.240
<v Speaker 2>is decidedly a jobs day that should have been.

0:00:40.840 --> 0:00:43.600
<v Speaker 3>Are you just flying blind? I mean, this data depends

0:00:43.640 --> 0:00:44.319
<v Speaker 3>what you look at.

0:00:44.360 --> 0:00:47.080
<v Speaker 2>You can say the economy is great or things are

0:00:47.080 --> 0:00:47.680
<v Speaker 2>falling apart.

0:00:48.880 --> 0:00:50.839
<v Speaker 1>Yeah, yeah, it's fine, Thanks for having me on. By

0:00:50.880 --> 0:00:53.519
<v Speaker 1>the way, you know, it's a funny thing, you know.

0:00:53.560 --> 0:00:57.440
<v Speaker 1>I found that the industry's obsession with these individual days

0:00:57.440 --> 0:00:59.200
<v Speaker 1>the pay and by the way, pay reports a great,

0:00:59.320 --> 0:01:03.720
<v Speaker 1>great economic indicator, the CPI report. There is so much

0:01:04.000 --> 0:01:07.000
<v Speaker 1>information that comes through the system. By the way, my favorite,

0:01:07.160 --> 0:01:10.360
<v Speaker 1>I read tons, maybe too many corporate earnings reports, and

0:01:10.400 --> 0:01:14.520
<v Speaker 1>I look at what's happening with hiring, inventory management, receivables,

0:01:14.520 --> 0:01:17.119
<v Speaker 1>et cetera. So there's still I mean, you know, would

0:01:17.160 --> 0:01:19.399
<v Speaker 1>i'd rather have the data for sure. By the way,

0:01:19.440 --> 0:01:21.920
<v Speaker 1>I think the markets become hem strong, and I think

0:01:21.920 --> 0:01:23.680
<v Speaker 1>part of why the markets are acting in this sort

0:01:23.680 --> 0:01:25.920
<v Speaker 1>of paranoid you know, what, do people know? What's the

0:01:25.959 --> 0:01:28.119
<v Speaker 1>information out there manner?

0:01:28.160 --> 0:01:28.520
<v Speaker 4>Today?

0:01:28.720 --> 0:01:31.080
<v Speaker 1>I think the But you know, I feel pretty good

0:01:31.120 --> 0:01:34.679
<v Speaker 1>about knowing that the structural direction of travel. I think

0:01:34.720 --> 0:01:37.440
<v Speaker 1>the economy is in good shape. They're parts of it.

0:01:37.440 --> 0:01:40.960
<v Speaker 1>It's not operating on all its cylinders, which we're talking about.

0:01:41.000 --> 0:01:43.600
<v Speaker 1>Capex is great, how income is doing well, low income

0:01:43.640 --> 0:01:45.920
<v Speaker 1>in the in the consumer side not so much. But

0:01:45.959 --> 0:01:48.720
<v Speaker 1>I feel pretty good about understanding. And listen, I think

0:01:48.920 --> 0:01:50.880
<v Speaker 1>I think, I think we have a softening of the

0:01:50.960 --> 0:01:54.280
<v Speaker 1>labor market that is quite significant. And you see that

0:01:54.440 --> 0:01:57.600
<v Speaker 1>as you mentioned the Challenger jobs report, you see that

0:01:57.640 --> 0:01:59.560
<v Speaker 1>playing out. You certainly see that when I look at

0:01:59.560 --> 0:02:01.600
<v Speaker 1>all the corporate earnings in terms of that, we have

0:02:01.640 --> 0:02:04.480
<v Speaker 1>a softening labor market. And if we had the number today,

0:02:04.520 --> 0:02:06.560
<v Speaker 1>I think it would have been reflective thereof.

0:02:06.440 --> 0:02:08.920
<v Speaker 5>Yeah, I mean, I'm flying blind. I couldn't agree with

0:02:08.960 --> 0:02:10.680
<v Speaker 5>you more and no one cares what I think. But

0:02:10.720 --> 0:02:13.480
<v Speaker 5>Bob Michael of JP Morgan has made this point. Rich Clarita,

0:02:14.520 --> 0:02:16.880
<v Speaker 5>former vice chair of the FED confirmed they have like

0:02:16.960 --> 0:02:20.280
<v Speaker 5>five hundred economists, they have twelve regional banks. They're talking

0:02:20.320 --> 0:02:23.640
<v Speaker 5>to participants, to companies, to institutions every single day, so

0:02:23.680 --> 0:02:26.280
<v Speaker 5>they have a pretty good handle on the economy even

0:02:26.320 --> 0:02:29.160
<v Speaker 5>without it. I wonder about what you guys have at Blackrock.

0:02:29.160 --> 0:02:32.440
<v Speaker 5>I mean, you have ten trillion dollars of assets under management, right,

0:02:32.480 --> 0:02:36.360
<v Speaker 5>what kind of signals are you looking at? What kind

0:02:36.360 --> 0:02:38.760
<v Speaker 5>of proprietary information are you getting that helps you in

0:02:38.840 --> 0:02:39.239
<v Speaker 5>your job?

0:02:39.320 --> 0:02:42.280
<v Speaker 4>Rick? You know, Matt, it's a great question.

0:02:42.320 --> 0:02:45.239
<v Speaker 1>By the way, this morning we went through credit card data,

0:02:45.760 --> 0:02:49.000
<v Speaker 1>so you you know, it's all available information. So we

0:02:49.120 --> 0:02:51.800
<v Speaker 1>end up we had a gentleman named Randy Burker with

0:02:51.840 --> 0:02:54.840
<v Speaker 1>who drives every day. We look at what's happening in

0:02:54.919 --> 0:02:57.200
<v Speaker 1>terms of you know, you go through the internet, you

0:02:57.280 --> 0:02:59.400
<v Speaker 1>splice some of the credit card data that comes out,

0:02:59.440 --> 0:03:02.640
<v Speaker 1>you get amazing amount of high frequency data.

0:03:02.919 --> 0:03:03.680
<v Speaker 4>So we'll use that.

0:03:04.120 --> 0:03:07.000
<v Speaker 1>We use a series of data assimilation tools, by the way,

0:03:07.040 --> 0:03:08.160
<v Speaker 1>text mining.

0:03:08.000 --> 0:03:11.200
<v Speaker 4>Understand what companies are saying. So anyway, we're trying.

0:03:11.040 --> 0:03:12.560
<v Speaker 1>And by the way, we don't have figured it out yet,

0:03:12.840 --> 0:03:14.880
<v Speaker 1>but you know, we're trying to be pretty cutting edge

0:03:14.919 --> 0:03:17.160
<v Speaker 1>around the amount of tools we use and how AI

0:03:17.280 --> 0:03:19.360
<v Speaker 1>is helping us, you know, by the way, also in

0:03:19.440 --> 0:03:21.680
<v Speaker 1>things like how do you think about scenario analysis? How

0:03:21.680 --> 0:03:24.119
<v Speaker 1>do you think about you know, the first derivative rate

0:03:24.160 --> 0:03:25.880
<v Speaker 1>of change on inflation and growth?

0:03:25.919 --> 0:03:26.959
<v Speaker 4>So listen.

0:03:27.000 --> 0:03:29.160
<v Speaker 1>I think part of the why is most exciting times

0:03:29.160 --> 0:03:31.200
<v Speaker 1>for investing ever is the amount of tools you can

0:03:31.320 --> 0:03:34.480
<v Speaker 1>utilize that allow you to get more verse around what

0:03:34.520 --> 0:03:38.280
<v Speaker 1>the direction to travel in is is pretty intense today.

0:03:38.400 --> 0:03:40.720
<v Speaker 1>So you know, we're still working and trying to figure

0:03:40.720 --> 0:03:43.360
<v Speaker 1>out more tools we could use, but there it's so

0:03:43.480 --> 0:03:46.640
<v Speaker 1>much different than quite frankly five years ago, ten years ago.

0:03:46.920 --> 0:03:49.760
<v Speaker 2>I would be very interested to know if any of

0:03:49.840 --> 0:03:52.120
<v Speaker 2>that data, any of the tools that you've been using

0:03:52.120 --> 0:03:54.880
<v Speaker 2>and look and looked at, have changed some of your

0:03:54.880 --> 0:03:57.600
<v Speaker 2>allocations or how you're thinking about BINK right now.

0:03:59.400 --> 0:04:01.120
<v Speaker 4>So it's great us, thanks for asking that man.

0:04:01.280 --> 0:04:03.880
<v Speaker 1>So Bink, you know, there is something that is I

0:04:03.880 --> 0:04:05.960
<v Speaker 1>think pretty intense around so Bank you know.

0:04:06.000 --> 0:04:07.600
<v Speaker 4>Has had has had a good run.

0:04:07.680 --> 0:04:09.640
<v Speaker 1>We feel good about where it's going and more and

0:04:09.640 --> 0:04:12.520
<v Speaker 1>more people coming into it. The thing that it's allowed

0:04:12.600 --> 0:04:15.480
<v Speaker 1>us to think through is today you've got you've obviously

0:04:15.560 --> 0:04:17.640
<v Speaker 1>got the way the Fed's going to interpret the data,

0:04:18.560 --> 0:04:21.000
<v Speaker 1>which is not always what I agree with, but the

0:04:21.000 --> 0:04:23.520
<v Speaker 1>Fed's going to interpret the data is you've got inflation

0:04:23.640 --> 0:04:26.880
<v Speaker 1>that's a little sticky high, and then the employment that's moderating.

0:04:27.279 --> 0:04:29.080
<v Speaker 1>So we thank you you're in this and by the way,

0:04:29.080 --> 0:04:30.960
<v Speaker 1>not just the FAT, the ECB, the Bank of England,

0:04:31.000 --> 0:04:33.159
<v Speaker 1>the RBA, they're in this point of let's sit back

0:04:33.200 --> 0:04:35.640
<v Speaker 1>and watch the data. So the way we move our

0:04:35.680 --> 0:04:38.440
<v Speaker 1>positions around is we've reduced a little bit of our

0:04:38.480 --> 0:04:40.920
<v Speaker 1>interest rate sensitivity. We've pulled some of our interest rate

0:04:41.000 --> 0:04:43.279
<v Speaker 1>sensitivity out of the front end of the yield curve

0:04:43.640 --> 0:04:46.640
<v Speaker 1>and say, gosh, let's just get carry. We can reduce

0:04:46.640 --> 0:04:48.800
<v Speaker 1>a little bit of our duration. We've reduced a little

0:04:48.800 --> 0:04:50.760
<v Speaker 1>bit of our investment great more than a little bit

0:04:50.800 --> 0:04:53.960
<v Speaker 1>of our investment great credit because quite frankly, today, where

0:04:54.000 --> 0:04:56.400
<v Speaker 1>spreads are, it doesn't do a lot for us. And

0:04:56.440 --> 0:05:00.440
<v Speaker 1>if rates are pretty stable, mortgages become agency. Org has

0:05:00.440 --> 0:05:04.160
<v Speaker 1>become much more interesting in the low coupon agency mortgage

0:05:04.160 --> 0:05:06.760
<v Speaker 1>has become much more interesting in the portfolio. So we've

0:05:06.760 --> 0:05:08.919
<v Speaker 1>been doing that. By the way we look at the data,

0:05:08.960 --> 0:05:12.200
<v Speaker 1>including last night, you're seeing with the mortgage rate coming

0:05:12.279 --> 0:05:15.760
<v Speaker 1>down a bit of prepayment faster PREVAIM, so we do

0:05:15.880 --> 0:05:19.080
<v Speaker 1>some high coupon mortgages. We've had a lot of technical there,

0:05:19.080 --> 0:05:21.000
<v Speaker 1>but some stuff moving on.

0:05:21.440 --> 0:05:23.600
<v Speaker 5>We should point out for viewers who don't know, BINK

0:05:23.680 --> 0:05:26.159
<v Speaker 5>is the I Shares Flexible Income ETF that Rick runs

0:05:26.279 --> 0:05:28.680
<v Speaker 5>at Blackrock. Rick is going to stay with us through

0:05:28.720 --> 0:05:31.520
<v Speaker 5>the opening bell into the equities trade next.

0:05:31.320 --> 0:05:32.600
<v Speaker 3>This is Bloomberg.

0:05:35.800 --> 0:05:39.279
<v Speaker 5>Let's bring back Blackrock Chief Investment Officer of Global Fixed

0:05:39.279 --> 0:05:40.920
<v Speaker 5>Income Rick Reader and Rick.

0:05:40.920 --> 0:05:42.080
<v Speaker 3>Can I ask you about that?

0:05:42.240 --> 0:05:47.000
<v Speaker 5>I mean, is this market to frothy our valuations? Are

0:05:47.000 --> 0:05:49.080
<v Speaker 5>we getting too far ahead of ourselves here? Because I

0:05:49.120 --> 0:05:53.240
<v Speaker 5>was looking at the other day the Warren Buffett you know,

0:05:53.400 --> 0:05:57.800
<v Speaker 5>valuation awe stocks, market capital versus GDP. It's at the

0:05:57.880 --> 0:06:00.279
<v Speaker 5>highest level at least since two thousand and The same

0:06:00.360 --> 0:06:05.400
<v Speaker 5>is true of the case the Shielder case cape ratio. Sorry,

0:06:05.839 --> 0:06:08.359
<v Speaker 5>you can see this great chart here that shows you

0:06:08.440 --> 0:06:10.960
<v Speaker 5>we're pretty highly valued on these two measures. Are you

0:06:11.000 --> 0:06:12.480
<v Speaker 5>worried about the AI froth?

0:06:13.800 --> 0:06:15.120
<v Speaker 4>So you know there's something.

0:06:15.120 --> 0:06:16.560
<v Speaker 1>By the way, this is a time of year you

0:06:16.640 --> 0:06:19.720
<v Speaker 1>tend to get momentum gets chased out of the markets,

0:06:20.480 --> 0:06:23.480
<v Speaker 1>particularly today, we have ambiguity around some trends that are

0:06:23.480 --> 0:06:25.800
<v Speaker 1>taking place. So, by the way, I know, I don't

0:06:25.800 --> 0:06:27.520
<v Speaker 1>think it's an AI bubble, and I don't think there's

0:06:27.520 --> 0:06:28.240
<v Speaker 1>too much froth.

0:06:28.480 --> 0:06:29.280
<v Speaker 4>And depending on.

0:06:29.200 --> 0:06:31.120
<v Speaker 1>Where you go, if you look at some of the

0:06:31.120 --> 0:06:34.919
<v Speaker 1>big hyperscalers that trade a twenty to twenty five twenty

0:06:34.960 --> 0:06:37.560
<v Speaker 1>six times earnings and they throw off roe return on

0:06:37.560 --> 0:06:41.080
<v Speaker 1>equity of thirty thirty five forty percent, and you look

0:06:41.120 --> 0:06:43.279
<v Speaker 1>at their free cash flow, I've never seen in my

0:06:43.440 --> 0:06:46.640
<v Speaker 1>career free cash flow generation. We can talk about top

0:06:46.680 --> 0:06:49.440
<v Speaker 1>line revenue growth. When you can have that much free

0:06:49.440 --> 0:06:51.599
<v Speaker 1>cash flow generation allows you to do your cap ax,

0:06:51.640 --> 0:06:56.080
<v Speaker 1>which is extraordinary today, build R and D, which is

0:06:56.120 --> 0:06:58.800
<v Speaker 1>your future cash flow, and then you can buy back

0:06:58.839 --> 0:06:59.239
<v Speaker 1>your stock.

0:06:59.320 --> 0:07:02.279
<v Speaker 4>So it's happened. I you have an unbelievable dynamic. And

0:07:02.320 --> 0:07:03.200
<v Speaker 4>by the way, we're now.

0:07:03.120 --> 0:07:06.479
<v Speaker 1>About to open the buyback window that you have this

0:07:06.600 --> 0:07:09.200
<v Speaker 1>dynamic that you throw off immense amounts of free cash flow,

0:07:09.720 --> 0:07:11.679
<v Speaker 1>and so there's multiples are not scary.

0:07:11.960 --> 0:07:12.720
<v Speaker 4>There are parts.

0:07:12.720 --> 0:07:14.400
<v Speaker 1>I see it in the private market, and I see

0:07:14.400 --> 0:07:16.680
<v Speaker 1>it in some places where you're seeing businesses that have

0:07:16.680 --> 0:07:18.400
<v Speaker 1>no cash flow for a number of years. How much

0:07:18.400 --> 0:07:21.240
<v Speaker 1>would you finance those? So I do see froth in

0:07:21.280 --> 0:07:25.480
<v Speaker 1>some areas, but in the traditional big market cap stuff.

0:07:25.520 --> 0:07:28.840
<v Speaker 1>And I would say related to that in semis in

0:07:28.960 --> 0:07:33.440
<v Speaker 1>healthcare technology, where you're seeing rapid change but real cash

0:07:33.520 --> 0:07:36.840
<v Speaker 1>flow alongside of it. It is the exact dichotomy I

0:07:36.920 --> 0:07:37.720
<v Speaker 1>think you saw in two.

0:07:38.680 --> 0:07:42.320
<v Speaker 2>Why then do you have these large cap giants tapping

0:07:42.360 --> 0:07:44.800
<v Speaker 2>the bond market to the degree they are, and not

0:07:44.920 --> 0:07:48.920
<v Speaker 2>just the broadly syndicate market, but also raising capital off

0:07:49.000 --> 0:07:51.360
<v Speaker 2>balance sheet too. If they were so confident and have

0:07:51.440 --> 0:07:54.560
<v Speaker 2>such robust cash flows, is that not a concerning turn

0:07:54.600 --> 0:07:57.960
<v Speaker 2>of events that they're instead building up on debt piles.

0:07:59.160 --> 0:08:01.160
<v Speaker 1>So so, first of all, when you look at the

0:08:01.480 --> 0:08:04.360
<v Speaker 1>when you look at any measure debty, but you look

0:08:04.400 --> 0:08:06.400
<v Speaker 1>at their debt to book cap, debt to market cap,

0:08:06.480 --> 0:08:09.640
<v Speaker 1>these companies are under geared or under levered. Their cap

0:08:09.680 --> 0:08:14.120
<v Speaker 1>structure is so low in terms of leverage relative certainly

0:08:14.160 --> 0:08:16.880
<v Speaker 1>relevant their market cap, but relevan their book cap. If

0:08:16.880 --> 0:08:19.640
<v Speaker 1>you were running a big mature company and you think

0:08:19.680 --> 0:08:22.680
<v Speaker 1>about what does your normal cap structure look like, and

0:08:22.760 --> 0:08:24.920
<v Speaker 1>if you're going to fund near term cap X over

0:08:25.000 --> 0:08:27.440
<v Speaker 1>the next couple of years, if you can do it

0:08:27.520 --> 0:08:29.360
<v Speaker 1>out the yields curve, which is where you see a

0:08:29.360 --> 0:08:32.280
<v Speaker 1>lot of that financing take place to say, gosh, I am.

0:08:32.200 --> 0:08:33.560
<v Speaker 4>Throwing off a lot of cash flow.

0:08:33.880 --> 0:08:35.800
<v Speaker 1>But if I can lock in these rates, and if

0:08:35.800 --> 0:08:38.080
<v Speaker 1>I'm as a shareholder of any of these companies, I say,

0:08:38.280 --> 0:08:40.840
<v Speaker 1>why in a world would you fund everything with equity

0:08:41.320 --> 0:08:43.480
<v Speaker 1>or why wouldn't we put a little bit of debt,

0:08:43.520 --> 0:08:46.120
<v Speaker 1>get a little bit of gear, and get your ROE higher.

0:08:46.440 --> 0:08:49.720
<v Speaker 1>So I just think it's a natural evolution of Gosh,

0:08:49.800 --> 0:08:51.600
<v Speaker 1>this is how you run a big company, and this

0:08:51.640 --> 0:08:53.400
<v Speaker 1>is what a normal cap structure looks like.

0:08:53.520 --> 0:08:55.720
<v Speaker 5>I mean, we were just talking about global bond sales

0:08:55.800 --> 0:08:59.959
<v Speaker 5>hitting six trillion dollars, an all time record.

0:09:01.000 --> 0:09:02.160
<v Speaker 3>That's pretty incredible.

0:09:02.240 --> 0:09:04.440
<v Speaker 5>And the and the and the return on fixed income

0:09:04.520 --> 0:09:06.680
<v Speaker 5>has been great this year as well.

0:09:06.720 --> 0:09:10.480
<v Speaker 3>Finally, how how.

0:09:10.880 --> 0:09:15.079
<v Speaker 5>Could we be in a world with tight financial conditions

0:09:15.120 --> 0:09:17.640
<v Speaker 5>when this is happening. It just doesn't make any sense

0:09:17.679 --> 0:09:19.400
<v Speaker 5>to me why the FED would want to be cutting

0:09:19.400 --> 0:09:19.839
<v Speaker 5>into this.

0:09:21.400 --> 0:09:24.280
<v Speaker 1>So, uh so you got good, You've got I would argue,

0:09:24.360 --> 0:09:28.120
<v Speaker 1>there's an immense amount of cash that came from certainly

0:09:28.200 --> 0:09:31.360
<v Speaker 1>years ago at fiscal monetary stimulus. So you know, I

0:09:31.360 --> 0:09:34.440
<v Speaker 1>don't think financial conditions drive financial business are great for

0:09:34.520 --> 0:09:38.000
<v Speaker 1>older savers in the economy. The interest rate tool today

0:09:38.679 --> 0:09:41.640
<v Speaker 1>is incredibly powerful on parts of the economy that are

0:09:41.640 --> 0:09:45.880
<v Speaker 1>really struggling, low income, small business, the housing market. By

0:09:45.880 --> 0:09:47.880
<v Speaker 1>the way, the government debt since eighty nine percent of

0:09:47.960 --> 0:09:49.839
<v Speaker 1>what the government funds is and zero a two year

0:09:49.880 --> 0:09:51.400
<v Speaker 1>part of the yield curve, so it has a huge

0:09:51.440 --> 0:09:55.880
<v Speaker 1>influence on what tax payers are paying for for debt today.

0:09:56.320 --> 0:09:59.200
<v Speaker 1>So my view today, what the interest rate tool does.

0:09:59.280 --> 0:10:01.120
<v Speaker 1>You know the idea it affects in place. I've been

0:10:01.160 --> 0:10:03.720
<v Speaker 1>saying this for months. It's very hard for the Fed

0:10:03.760 --> 0:10:08.800
<v Speaker 1>to bring down sticky inflation. Healthcare, education, insurance not terribly robust,

0:10:09.520 --> 0:10:11.560
<v Speaker 1>but you do Actually, if you bring the rate down,

0:10:11.840 --> 0:10:14.559
<v Speaker 1>we'll bring down the mortgage rate, which you're seeing play out.

0:10:14.520 --> 0:10:16.240
<v Speaker 3>Well, but for more Americans.

0:10:16.320 --> 0:10:19.520
<v Speaker 5>Rick Diane Swank has said, you know, bringing down these

0:10:19.600 --> 0:10:23.360
<v Speaker 5>rates is not going to affect subprime rates, and twenty

0:10:23.360 --> 0:10:27.320
<v Speaker 5>five percent of the country is below six ninety with

0:10:27.400 --> 0:10:29.960
<v Speaker 5>a credit score. Also, I don't see how a lower

0:10:30.040 --> 0:10:35.160
<v Speaker 5>rate adds jobs in an environment where companies are cutting

0:10:35.240 --> 0:10:38.960
<v Speaker 5>headcount to try and offset higher tariffs to their margins.

0:10:39.960 --> 0:10:42.480
<v Speaker 1>So you know, I've said this for months now. I

0:10:42.480 --> 0:10:45.120
<v Speaker 1>would say one thing The FED doesn't create jobs directly,

0:10:45.679 --> 0:10:48.560
<v Speaker 1>but you think about what happens small business does forty

0:10:48.600 --> 0:10:49.480
<v Speaker 1>four percent of the hiring in.

0:10:49.440 --> 0:10:51.360
<v Speaker 4>The US a small business. The rate's too high for

0:10:51.400 --> 0:10:52.080
<v Speaker 4>small business.

0:10:52.559 --> 0:10:55.960
<v Speaker 1>Second, you think about what happens in the housing market.

0:10:56.400 --> 0:10:58.760
<v Speaker 1>We put three point one people to work for every

0:10:58.760 --> 0:11:01.160
<v Speaker 1>home built in this country. If you get the mortgage rate,

0:11:01.160 --> 0:11:02.280
<v Speaker 1>by the way, you don't have to get it down

0:11:02.280 --> 0:11:04.000
<v Speaker 1>that much. But if you've got it down twenty five

0:11:04.040 --> 0:11:07.720
<v Speaker 1>to fifty basis points, you increase labor mobility. Your point

0:11:07.760 --> 0:11:11.200
<v Speaker 1>is right, companies, we are in a productivity revolution. Companies

0:11:11.240 --> 0:11:14.600
<v Speaker 1>are going to cut jobs. But if you increase labor

0:11:14.640 --> 0:11:16.920
<v Speaker 1>mobility because people can sell our house, move to another

0:11:16.920 --> 0:11:17.520
<v Speaker 1>state where.

0:11:17.320 --> 0:11:17.920
<v Speaker 4>They get a job.

0:11:17.960 --> 0:11:20.160
<v Speaker 1>If we actually put people to work in building houses,

0:11:20.200 --> 0:11:23.720
<v Speaker 1>you bring down shelter inflation. The FED can't create jobs,

0:11:24.040 --> 0:11:26.960
<v Speaker 1>but you can ameliorate some of the stress that's happening

0:11:27.000 --> 0:11:30.240
<v Speaker 1>because of productivity. And people talk about productivity is like AI.

0:11:30.800 --> 0:11:34.240
<v Speaker 1>It is happening everywhere. We talk about freight, how we

0:11:34.320 --> 0:11:37.319
<v Speaker 1>do logistics, how we do inventory management, how we do

0:11:37.840 --> 0:11:41.960
<v Speaker 1>customer procurement. Productivity is exploding. We don't need as much

0:11:42.080 --> 0:11:45.600
<v Speaker 1>labor collectively in the country, you know, bringing that rate

0:11:45.640 --> 0:11:48.840
<v Speaker 1>down in the places that can actually help will actually

0:11:48.880 --> 0:11:52.120
<v Speaker 1>at the margin help help a labor dynamic. I think

0:11:52.160 --> 0:11:54.360
<v Speaker 1>today you'll see not just where you're seeing in the

0:11:54.400 --> 0:11:56.040
<v Speaker 1>last four months, what you're going to see for the

0:11:56.120 --> 0:11:56.959
<v Speaker 1>next couple of years.

0:11:57.040 --> 0:12:00.520
<v Speaker 2>And with these conversations and especially your viewpoint is made

0:12:00.559 --> 0:12:04.199
<v Speaker 2>all the more important. We have to ask because last week,

0:12:04.200 --> 0:12:06.920
<v Speaker 2>the beginning of last week, Secretary of Scott Besson confirmed

0:12:06.920 --> 0:12:09.880
<v Speaker 2>his list for FED picks, your name among them. How

0:12:09.920 --> 0:12:11.080
<v Speaker 2>have those conversations gone?

0:12:13.280 --> 0:12:16.559
<v Speaker 1>No, I can't, you know, I can't really comment. I

0:12:16.600 --> 0:12:18.320
<v Speaker 1>wake up in the morning and I try to figure

0:12:18.320 --> 0:12:20.800
<v Speaker 1>out the supline of the yield curve and what your

0:12:20.800 --> 0:12:23.120
<v Speaker 1>comments about fast food versus FED like, should we be

0:12:23.160 --> 0:12:24.640
<v Speaker 1>buying this stock or that stock?

0:12:24.960 --> 0:12:26.480
<v Speaker 4>That's what I got to focus on.

0:12:26.400 --> 0:12:31.000
<v Speaker 1>That and so anyway, that's uh, that's what I'm doing today,

0:12:30.800 --> 0:12:31.640
<v Speaker 1>the most.

0:12:31.440 --> 0:12:32.560
<v Speaker 4>Exciting time to do it.

0:12:33.000 --> 0:12:33.840
<v Speaker 3>Rick, Even if.

0:12:33.760 --> 0:12:36.400
<v Speaker 5>You're not confirmed his FED chair, everybody has a view

0:12:36.440 --> 0:12:38.800
<v Speaker 5>about what they would do differently at the FED.

0:12:38.880 --> 0:12:40.640
<v Speaker 3>What what what are some of the changes that you

0:12:40.679 --> 0:12:41.079
<v Speaker 3>would make?

0:12:43.160 --> 0:12:44.439
<v Speaker 4>You know, I'm a listen.

0:12:44.480 --> 0:12:46.440
<v Speaker 1>I mean, I'll all point to is what I've said

0:12:46.440 --> 0:12:48.760
<v Speaker 1>for many months now is I think there are some

0:12:48.880 --> 0:12:51.760
<v Speaker 1>things too that you can do that to create velocity

0:12:51.800 --> 0:12:54.160
<v Speaker 1>in the system. You know, nobody borrows off the overnight

0:12:54.160 --> 0:12:57.800
<v Speaker 1>funds right anymore. Velocity happens where financing happens out the

0:12:57.880 --> 0:13:01.239
<v Speaker 1>yield curve. Things you could do to keep that stability

0:13:01.280 --> 0:13:03.480
<v Speaker 1>of the back end of the yield curve, to keep

0:13:03.520 --> 0:13:05.959
<v Speaker 1>the mortgage rate in a place where we get real

0:13:06.040 --> 0:13:09.120
<v Speaker 1>velocity existing home sales moving. So I think there's some

0:13:09.160 --> 0:13:11.240
<v Speaker 1>things that are that are that can be done, that

0:13:11.280 --> 0:13:14.200
<v Speaker 1>are that are that are interesting and listen, mat I mean,

0:13:14.320 --> 0:13:16.240
<v Speaker 1>you know, I've said it publicly for many months now.

0:13:16.960 --> 0:13:19.600
<v Speaker 1>I think if we're running break even, you can buy

0:13:19.640 --> 0:13:21.640
<v Speaker 1>in the market that a five year inflation break evens

0:13:21.640 --> 0:13:24.280
<v Speaker 1>a two point three five percent. I think the funds

0:13:24.320 --> 0:13:26.480
<v Speaker 1>rate should be a three and I just think you

0:13:26.520 --> 0:13:28.240
<v Speaker 1>could move it there and then you don't have to

0:13:28.280 --> 0:13:30.680
<v Speaker 1>go much further. I just think the price. You know,

0:13:30.720 --> 0:13:32.840
<v Speaker 1>in markets, if something's price wrong, you get it there.

0:13:33.160 --> 0:13:34.920
<v Speaker 1>I just think we can get it there and then

0:13:35.080 --> 0:13:37.120
<v Speaker 1>and then look at when then take another view on

0:13:37.200 --> 0:13:39.640
<v Speaker 1>where are we today and do you have to move

0:13:39.720 --> 0:13:42.600
<v Speaker 1>higher or lower? But anyway I would I think we

0:13:42.640 --> 0:13:43.800
<v Speaker 1>could move right a bit lower.

0:13:43.920 --> 0:13:47.240
<v Speaker 2>Well, you know, it does have this feeling that whoever

0:13:47.559 --> 0:13:49.560
<v Speaker 2>is next and whoever's next leading the FED, that there

0:13:49.600 --> 0:13:52.040
<v Speaker 2>will be this difference in tone when we have the

0:13:52.120 --> 0:13:55.480
<v Speaker 2>scenario where Chair Powell's term is up and we have

0:13:55.840 --> 0:13:58.400
<v Speaker 2>our next chair and waiting, whoever that might be. How

0:13:58.440 --> 0:14:02.559
<v Speaker 2>should that person hand that kind of lame duck gray period.

0:14:04.240 --> 0:14:07.640
<v Speaker 4>From an investor point of view or just communication.

0:14:07.160 --> 0:14:10.480
<v Speaker 2>To the markets, how should that look when Shairpala's term

0:14:10.600 --> 0:14:13.800
<v Speaker 2>is over and we're waiting for the newly confirmed FED chair.

0:14:15.280 --> 0:14:16.960
<v Speaker 1>Listen, I think it's trick, Jim, And you know, I

0:14:17.000 --> 0:14:21.200
<v Speaker 1>have incredible sympathy for and frankly, you know the sanctity

0:14:21.240 --> 0:14:23.720
<v Speaker 1>of what that institution is. I think what they will

0:14:23.720 --> 0:14:25.720
<v Speaker 1>continue to do and I think what they do today

0:14:25.800 --> 0:14:28.760
<v Speaker 1>is they make judgment based on here's the data that

0:14:28.800 --> 0:14:31.840
<v Speaker 1>we have to interpret, what is the right thing for

0:14:31.960 --> 0:14:34.920
<v Speaker 1>the population at large in terms of managing that policy.

0:14:34.960 --> 0:14:37.120
<v Speaker 1>And you know, I really believe in this, and I

0:14:37.160 --> 0:14:39.560
<v Speaker 1>certainly believe in this Fed, Shair and this FED committee

0:14:39.720 --> 0:14:41.600
<v Speaker 1>that I think they're going to make the decision based

0:14:41.640 --> 0:14:44.760
<v Speaker 1>on let's evaluate the data, interpret the data and make

0:14:44.800 --> 0:14:46.720
<v Speaker 1>a decision based on that. And I don't think there's

0:14:46.720 --> 0:14:49.480
<v Speaker 1>any reasonab believe that happens any other way than that.

0:14:49.760 --> 0:14:51.600
<v Speaker 2>Well, Rick, you certainly do that for us, and we

0:14:51.640 --> 0:14:54.520
<v Speaker 2>are very appreciated, appreciative of it to get all of

0:14:54.520 --> 0:14:56.920
<v Speaker 2>your thoughts from what's going on with Bink to the

0:14:57.000 --> 0:14:59.480
<v Speaker 2>labor market and beyond, Rick Reader, thank you so much

0:14:59.800 --> 0:15:00.760
<v Speaker 2>for joining us.