1
00:00:02,400 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:11,680 --> 00:00:15,480
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,480 --> 00:00:18,720
Speaker 2: with Lisa Bromwitz and Amerie hortert join us each day

4
00:00:18,760 --> 00:00:22,320
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,440 --> 00:00:24,920
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,960 --> 00:00:27,680
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,720 --> 00:00:31,319
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,320 --> 00:00:33,960
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,040 --> 00:00:37,360
Speaker 2: Terminal and the Bloomberg Business app. Julian and Manuel, i've

10
00:00:37,360 --> 00:00:40,559
Speaker 2: ever call writing the increased probability of a bubble scenario

11
00:00:40,680 --> 00:00:43,040
Speaker 2: gives the S and P five hundred and thirty percent

12
00:00:43,120 --> 00:00:45,720
Speaker 2: chance to rise to nine K by year end twenty

13
00:00:45,760 --> 00:00:48,560
Speaker 2: twenty six. Judian joins us now for more. Julian, good morning,

14
00:00:48,600 --> 00:00:50,480
Speaker 2: Good morning. It's going to see you, sir. Let's put

15
00:00:50,479 --> 00:00:52,519
Speaker 2: some meat on those bones. Thirty percent chance of nine

16
00:00:52,600 --> 00:00:54,240
Speaker 2: K next year on the SMP.

17
00:00:54,640 --> 00:00:57,720
Speaker 3: So if you think about it, actually going back to

18
00:00:57,960 --> 00:01:01,440
Speaker 3: y two K right where all this sort of talk

19
00:01:01,480 --> 00:01:05,600
Speaker 3: of bubbles originated. Over the course of this last twenty

20
00:01:05,640 --> 00:01:11,680
Speaker 3: five years, you have had numerous bubbles, housing, global bond markets,

21
00:01:12,600 --> 00:01:16,959
Speaker 3: Chinese equities in twenty fifteen, meme stocks, this, that, and

22
00:01:17,000 --> 00:01:19,040
Speaker 3: the other, and frankly, when.

23
00:01:18,880 --> 00:01:20,200
Speaker 4: You add all that up.

24
00:01:20,360 --> 00:01:23,360
Speaker 3: First of all, academia would tell you that those many

25
00:01:23,400 --> 00:01:27,360
Speaker 3: bubbles in twenty five years is absolutely impossible. But when

26
00:01:27,400 --> 00:01:30,399
Speaker 3: you think about it, it really does speak to the

27
00:01:30,480 --> 00:01:34,480
Speaker 3: fact that number one, each bubble was larger than the last.

28
00:01:34,840 --> 00:01:37,480
Speaker 3: And from our point of view, when you think about

29
00:01:37,600 --> 00:01:40,920
Speaker 3: Y twok a twenty eight times earnings peak, it's very

30
00:01:40,959 --> 00:01:44,360
Speaker 3: reasonable to think about thirty times a three hundred dollars

31
00:01:44,440 --> 00:01:46,760
Speaker 3: number getting you to nine thousand the s and P

32
00:01:46,880 --> 00:01:52,120
Speaker 3: five hundred, But it's bigger, more grander every time.

33
00:01:52,200 --> 00:01:54,000
Speaker 2: Well, let's speak to this moment. They're our whists of

34
00:01:54,040 --> 00:01:57,920
Speaker 2: vendor financing. We see a video investing in some of

35
00:01:57,920 --> 00:02:00,640
Speaker 2: that companies and in some of that customers, and we

36
00:02:00,640 --> 00:02:01,800
Speaker 2: know that money is going to come back.

37
00:02:01,720 --> 00:02:02,400
Speaker 4: To that company.

38
00:02:02,680 --> 00:02:04,440
Speaker 2: What's different about this moment It seems to be the

39
00:02:04,440 --> 00:02:06,680
Speaker 2: strength of the balance sheets compared to where we were

40
00:02:06,680 --> 00:02:08,520
Speaker 2: in the late nineties and the absence of leverage on

41
00:02:08,520 --> 00:02:10,960
Speaker 2: those balance sheets are some of the major tech players.

42
00:02:11,080 --> 00:02:12,359
Speaker 2: Does that give this more legs?

43
00:02:12,560 --> 00:02:12,720
Speaker 4: Is that?

44
00:02:12,760 --> 00:02:13,880
Speaker 2: How do you think about things.

45
00:02:13,960 --> 00:02:16,920
Speaker 3: Well, again, when you think about the late nineties, you

46
00:02:17,000 --> 00:02:21,520
Speaker 3: were having companies that didn't have earnings, that had barely

47
00:02:21,600 --> 00:02:25,480
Speaker 3: had revenues. That we're doing all the spending on capex.

48
00:02:25,720 --> 00:02:28,359
Speaker 3: You don't have it this time. Most of the companies,

49
00:02:28,480 --> 00:02:33,040
Speaker 3: to your point, have incredibly strong balance sheets. But when

50
00:02:33,040 --> 00:02:35,480
Speaker 3: you think about what we've heard in the last couple

51
00:02:35,480 --> 00:02:39,799
Speaker 3: of weeks, the memory for us is this Japanese phrase

52
00:02:39,880 --> 00:02:44,160
Speaker 3: koretsu cross shareholdings. You saw it in the nineteen eighties

53
00:02:44,400 --> 00:02:48,800
Speaker 3: and the early nineteen nineties, which inflated valuations into the

54
00:02:48,880 --> 00:02:54,359
Speaker 3: Japanese equity market bubble. And look, if you're not concerned

55
00:02:54,480 --> 00:02:57,680
Speaker 3: about the potential knock on effects of all this kind

56
00:02:57,720 --> 00:03:02,560
Speaker 3: of cross shareholder relationships, you're probably not paying sufficient attention.

57
00:03:02,880 --> 00:03:04,959
Speaker 1: So it is this bullish or bearish you're talking nine thousand,

58
00:03:04,960 --> 00:03:06,760
Speaker 1: which sounds great, let's get in. And then you're talking

59
00:03:06,800 --> 00:03:09,040
Speaker 1: about a bubble that's bigger than anything we've ever seen before.

60
00:03:09,320 --> 00:03:12,680
Speaker 3: So and you have to think about it in terms

61
00:03:12,720 --> 00:03:16,680
Speaker 3: of cycles. Okay, what we have been very plain about

62
00:03:16,840 --> 00:03:22,880
Speaker 3: in getting ourselves around the idea that you invest in

63
00:03:22,919 --> 00:03:27,480
Speaker 3: a higher valuation environment is this notion that what end

64
00:03:27,639 --> 00:03:30,959
Speaker 3: structural bull markets. And to be very clear of what

65
00:03:31,000 --> 00:03:34,760
Speaker 3: we had in February to April was a cyclical bear

66
00:03:34,880 --> 00:03:38,560
Speaker 3: market in a structural bull market. What end structural bull

67
00:03:38,600 --> 00:03:41,760
Speaker 3: markets is a FED that's going to be hostile. If anything,

68
00:03:41,800 --> 00:03:45,080
Speaker 3: the FED is going to be perhaps too friendly to

69
00:03:45,120 --> 00:03:49,160
Speaker 3: the point about stalking inflation. Higher yields on the long end.

70
00:03:49,760 --> 00:03:54,680
Speaker 3: Amazing how quiescent the tenure yield has been. And then

71
00:03:55,000 --> 00:03:58,200
Speaker 3: you know recession that doesn't seem to be in the cars.

72
00:03:58,440 --> 00:04:01,480
Speaker 3: But the last thing, the fact that every one of

73
00:04:01,520 --> 00:04:07,720
Speaker 3: these capital market cycles has ended with an incredibly robust

74
00:04:08,280 --> 00:04:11,600
Speaker 3: corporate action pipeline and we're just starting to see that

75
00:04:11,720 --> 00:04:15,640
Speaker 3: form tells you that there's further to run. And as

76
00:04:15,720 --> 00:04:19,080
Speaker 3: difficult as it is, and it is difficult to invest

77
00:04:19,120 --> 00:04:24,560
Speaker 3: in these valuations, and we think that you need to stay.

78
00:04:24,279 --> 00:04:27,000
Speaker 1: Invested, You need to stay investor in the big tech players.

79
00:04:27,000 --> 00:04:28,760
Speaker 1: Does it say anything about the rest of the market

80
00:04:28,839 --> 00:04:31,279
Speaker 1: or is that just a completely different story in terms

81
00:04:31,320 --> 00:04:34,760
Speaker 1: of the economic drivers the areas outside of AI.

82
00:04:35,160 --> 00:04:40,360
Speaker 3: Well, look and again when you think about the demographics

83
00:04:40,960 --> 00:04:44,080
Speaker 3: and know that over the course of the coming decades,

84
00:04:44,520 --> 00:04:47,200
Speaker 3: demographics are going to be ahead when and they already

85
00:04:47,279 --> 00:04:51,480
Speaker 3: are in places like China. That's part of why AI

86
00:04:51,680 --> 00:04:54,520
Speaker 3: has had the impact that it's had. And this year

87
00:04:54,560 --> 00:04:59,960
Speaker 3: we're seeing other companies, the adopters and the adapters really

88
00:05:00,279 --> 00:05:05,000
Speaker 3: start to talk about how they're essentially driving revenue. We

89
00:05:05,160 --> 00:05:09,280
Speaker 3: always knew the cost saving story, but that is very,

90
00:05:09,400 --> 00:05:11,720
Speaker 3: very vital and for us. When you look at the

91
00:05:11,720 --> 00:05:14,599
Speaker 3: internals of the market, what's different between now in the

92
00:05:14,640 --> 00:05:18,919
Speaker 3: late nineteen nineties is that day to day the advancers

93
00:05:19,040 --> 00:05:24,280
Speaker 3: are beating the decliners. The troops, the people in the field,

94
00:05:24,320 --> 00:05:27,840
Speaker 3: the stocks that nobody talks about are going up day

95
00:05:27,880 --> 00:05:30,440
Speaker 3: in and day out, Whereas in the late nineties it

96
00:05:30,480 --> 00:05:31,400
Speaker 3: was all tech all.

97
00:05:31,320 --> 00:05:33,960
Speaker 5: The time, seeing billions of dollars being put towards AI,

98
00:05:34,200 --> 00:05:36,719
Speaker 5: but we're not seeing billions of dollars being put towards

99
00:05:36,760 --> 00:05:39,880
Speaker 5: electricity demand. What happens if the grid can't handle.

100
00:05:39,600 --> 00:05:43,880
Speaker 3: All of this, well, that's absolutely a concern, no question.

101
00:05:44,279 --> 00:05:47,880
Speaker 5: Nine thousand next year, if you can't even develop data.

102
00:05:47,640 --> 00:05:53,880
Speaker 3: Centers, that's a good question. And from our point of view, again,

103
00:05:54,600 --> 00:06:00,520
Speaker 3: it's less about the synchronization of the build out then

104
00:06:00,600 --> 00:06:05,600
Speaker 3: the fact that there is sufficient liquidity to you know,

105
00:06:05,880 --> 00:06:09,719
Speaker 3: really expect the build out to occur over over a time,

106
00:06:10,080 --> 00:06:13,080
Speaker 3: and again I go back to this idea, and frankly,

107
00:06:13,160 --> 00:06:15,920
Speaker 3: we're seeing it. This week was different. Not only did

108
00:06:15,960 --> 00:06:19,000
Speaker 3: you have the largest LBO in history, but I took

109
00:06:19,080 --> 00:06:23,360
Speaker 3: taxi cab rise and they started talking about the stock

110
00:06:23,440 --> 00:06:27,000
Speaker 3: market and they started talking about AI And that's different.

111
00:06:27,080 --> 00:06:29,840
Speaker 3: But that's part of every cycle, and that is how

112
00:06:29,880 --> 00:06:34,760
Speaker 3: you get to valuations that go from rational exuberance where

113
00:06:34,800 --> 00:06:37,119
Speaker 3: we are now to something more extreme.

114
00:06:37,160 --> 00:06:38,919
Speaker 2: I'm not thrown shade at all, but I think the

115
00:06:38,920 --> 00:06:41,120
Speaker 2: camp driver over the past five years has been more

116
00:06:41,120 --> 00:06:43,960
Speaker 2: dependable than the strategist on wolf straight in some ways.

117
00:06:44,360 --> 00:06:45,000
Speaker 2: Is that fair?

118
00:06:46,320 --> 00:06:50,880
Speaker 3: We got cautious, like everyone. We got bullish in April,

119
00:06:51,160 --> 00:06:52,000
Speaker 3: to be clear, but.

120
00:06:52,760 --> 00:06:54,320
Speaker 2: I don't know if that's been the country into kunda

121
00:06:54,320 --> 00:06:55,920
Speaker 2: in quite the same way that they were in the

122
00:06:55,960 --> 00:06:57,720
Speaker 2: nineteen twenties nineteen thirties.

123
00:06:57,760 --> 00:07:01,320
Speaker 3: Well, what's fascinating again is you go back to February

124
00:07:01,520 --> 00:07:05,359
Speaker 3: through April, and the public got this right. Literally for

125
00:07:05,400 --> 00:07:07,520
Speaker 3: the first time in the cycle. The public was the

126
00:07:07,560 --> 00:07:10,560
Speaker 3: buyer the whole way down. And the reason that the

127
00:07:10,640 --> 00:07:15,360
Speaker 3: market has been so unrelenting on the upside is because

128
00:07:15,400 --> 00:07:18,040
Speaker 3: professionals have found themselves under invested.

129
00:07:17,720 --> 00:07:19,720
Speaker 2: It was a shoeshine boy in the twenties, remember all

130
00:07:19,720 --> 00:07:22,520
Speaker 2: that stuff. The story is really different. The performance chase

131
00:07:22,520 --> 00:07:25,160
Speaker 2: gun into year end is coming from Wolf Street. Wouldn't

132
00:07:25,160 --> 00:07:27,320
Speaker 2: you agree I'm taking to clients that missed out in

133
00:07:27,360 --> 00:07:28,840
Speaker 2: the move in April in the last.

134
00:07:28,680 --> 00:07:31,920
Speaker 3: Six months, I would, But I would also say this

135
00:07:32,320 --> 00:07:35,160
Speaker 3: is that the dynamics of trading. They used to call

136
00:07:35,200 --> 00:07:39,120
Speaker 3: it day trading in the nineteen nineties. Now you're looking

137
00:07:39,200 --> 00:07:43,120
Speaker 3: at high frequency trading. But these zero dazed expiration options,

138
00:07:44,040 --> 00:07:48,760
Speaker 3: the gamma effect that causes hedgers to have to hedge

139
00:07:48,840 --> 00:07:52,400
Speaker 3: upside intra day is really unlike anything I've seen.

140
00:07:54,280 --> 00:07:57,760
Speaker 2: Stay with us more Bloomberg surveillance coming up after this.

141
00:08:06,920 --> 00:08:08,920
Speaker 2: Let's turn to the Federal Reserve traders looking ahead to

142
00:08:08,960 --> 00:08:11,280
Speaker 2: the FMC minutes due out at two pm Eastern time

143
00:08:11,360 --> 00:08:14,000
Speaker 2: in Lincoln of BIMO writing twenty five basis point cuts

144
00:08:14,000 --> 00:08:17,800
Speaker 2: in October and December are already a foregun conclusion as

145
00:08:17,880 --> 00:08:20,640
Speaker 2: long as there isn't a more dramatic down to in

146
00:08:20,720 --> 00:08:22,880
Speaker 2: risk assets in joints now for more income mornits.

147
00:08:22,880 --> 00:08:23,600
Speaker 4: So it's good to see you.

148
00:08:23,760 --> 00:08:25,480
Speaker 2: Happy to be here when a Federal reserve is in

149
00:08:25,560 --> 00:08:28,200
Speaker 2: risk management mode. If they don't have the data, are

150
00:08:28,240 --> 00:08:29,680
Speaker 2: they cutting or are they holding?

151
00:08:30,400 --> 00:08:32,480
Speaker 6: I think that they're going to continue to cut, simply

152
00:08:32,520 --> 00:08:35,000
Speaker 6: because the data shift that we saw over the course

153
00:08:35,000 --> 00:08:38,000
Speaker 6: of the summer, including the bitchmark revisions on the jobs front,

154
00:08:38,280 --> 00:08:41,959
Speaker 6: suggests that we are cooling as an economy and getting

155
00:08:42,000 --> 00:08:44,319
Speaker 6: back to normal policy rates. Seems to make sense in

156
00:08:44,400 --> 00:08:46,160
Speaker 6: that With that background.

157
00:08:45,840 --> 00:08:48,360
Speaker 1: I just wonder what you think of this dissonance between

158
00:08:48,480 --> 00:08:50,920
Speaker 1: a labor market that seems to be cooling, in GDP

159
00:08:51,040 --> 00:08:53,200
Speaker 1: that seems to be going strong well.

160
00:08:53,240 --> 00:08:57,520
Speaker 6: As you've been discussing the AI investment capex, everything associated

161
00:08:57,559 --> 00:09:00,880
Speaker 6: with that has not only been driving business spending so

162
00:09:01,040 --> 00:09:05,040
Speaker 6: keeping up the momentum of the real economy, but we

163
00:09:04,679 --> 00:09:08,960
Speaker 6: all faces we are also seeing upside inequities and that

164
00:09:09,080 --> 00:09:11,640
Speaker 6: is fueling consumption because we know the top ten percent

165
00:09:11,960 --> 00:09:14,840
Speaker 6: account for fifty percent consumption in the US, and I

166
00:09:14,880 --> 00:09:16,920
Speaker 6: think that that has been a key driver. And when

167
00:09:16,960 --> 00:09:20,360
Speaker 6: I make the observation about a potential downturn in risk assets,

168
00:09:20,679 --> 00:09:23,360
Speaker 6: if we are going to slip into a recession at

169
00:09:23,400 --> 00:09:26,359
Speaker 6: some point, it's probably going to come from a repricing

170
00:09:26,400 --> 00:09:28,680
Speaker 6: of risk assets. But that certainly is not onknow one's

171
00:09:28,760 --> 00:09:29,800
Speaker 6: radar At this point.

172
00:09:29,679 --> 00:09:32,000
Speaker 1: I guess I'm trying to understand whether it makes sense

173
00:09:32,040 --> 00:09:34,360
Speaker 1: for the FED to cut rights to protect jobs given

174
00:09:34,360 --> 00:09:36,640
Speaker 1: the fact that there is clearly a sluggishness to the

175
00:09:36,720 --> 00:09:40,120
Speaker 1: labor market. You're seeing peripheral spending data showing a slow

176
00:09:40,120 --> 00:09:42,079
Speaker 1: down in September as while I was looking at Citigroup

177
00:09:42,160 --> 00:09:44,320
Speaker 1: data this morning, I just wonder if it makes sense

178
00:09:44,320 --> 00:09:48,400
Speaker 1: to do that if you potentially pose the risk of turbocharging.

179
00:09:48,600 --> 00:09:51,440
Speaker 1: What some people are saying is bubblishest types of behavior

180
00:09:51,679 --> 00:09:54,400
Speaker 1: in other sectors, AI be one of them.

181
00:09:54,760 --> 00:09:56,560
Speaker 6: Well, I think that that's what the FED needs to

182
00:09:56,600 --> 00:09:58,880
Speaker 6: decide over the course of the rest of the year,

183
00:09:59,000 --> 00:10:02,160
Speaker 6: whether they're going to get back to three percent or

184
00:10:02,240 --> 00:10:05,760
Speaker 6: three point five, depending on what estimates you look at,

185
00:10:05,960 --> 00:10:08,400
Speaker 6: or is there a risk that there's still more to

186
00:10:08,440 --> 00:10:10,880
Speaker 6: be seen on the tariff side, Even setting aside the

187
00:10:10,880 --> 00:10:13,280
Speaker 6: bubble issue, I still think that there's tariff passed through

188
00:10:13,559 --> 00:10:16,120
Speaker 6: to inflation that has yet to be realized, and so

189
00:10:16,200 --> 00:10:19,160
Speaker 6: we could see some sticky CPI prints when we finally

190
00:10:19,200 --> 00:10:22,000
Speaker 6: get them. And that's the big unknown is when does

191
00:10:22,000 --> 00:10:23,640
Speaker 6: a government start publishing data again?

192
00:10:23,720 --> 00:10:24,839
Speaker 2: So what are you tracking right now?

193
00:10:24,880 --> 00:10:27,520
Speaker 1: Given the fact that we're not really getting anything official

194
00:10:27,559 --> 00:10:29,200
Speaker 1: from a lot of the sources.

195
00:10:29,600 --> 00:10:31,520
Speaker 6: So I think that we do have ADP, and we

196
00:10:31,600 --> 00:10:33,679
Speaker 6: have ISM, and we have some of the private data.

197
00:10:33,880 --> 00:10:36,000
Speaker 6: But at the end of the day, we're really just

198
00:10:36,040 --> 00:10:38,520
Speaker 6: looking at the day count of the shutdown because the

199
00:10:38,600 --> 00:10:41,600
Speaker 6: longer it goes, the more uncertainty there'll be. And when

200
00:10:41,640 --> 00:10:44,200
Speaker 6: the FED meets later this month, the one piece of

201
00:10:44,240 --> 00:10:46,880
Speaker 6: information that they will really have is whether or not

202
00:10:46,920 --> 00:10:49,800
Speaker 6: the government has been reopened or if we're going to

203
00:10:49,800 --> 00:10:53,120
Speaker 6: push that record long thirty four day shutdown window.

204
00:10:53,320 --> 00:10:55,000
Speaker 5: Do you guys have a base case of how long

205
00:10:55,040 --> 00:10:56,880
Speaker 5: you think the governershupdown will last.

206
00:10:57,559 --> 00:10:59,800
Speaker 6: I think that it will get through the end of

207
00:11:00,080 --> 00:11:02,920
Speaker 6: next week and at the earliest before we start to

208
00:11:02,920 --> 00:11:05,280
Speaker 6: see any movement, because at that point people will stop

209
00:11:05,280 --> 00:11:07,719
Speaker 6: getting paychecks. I assume that there'll be more rhetoric and

210
00:11:07,800 --> 00:11:11,480
Speaker 6: more headlines out of Washington. But it's also a question

211
00:11:11,559 --> 00:11:14,320
Speaker 6: of how the Democrats are going to be polling as

212
00:11:14,360 --> 00:11:16,760
Speaker 6: a result of this, going into what will be the

213
00:11:16,800 --> 00:11:19,079
Speaker 6: run up to the midterm and the politics around that,

214
00:11:19,120 --> 00:11:20,400
Speaker 6: and that's always difficult testamy.

215
00:11:20,520 --> 00:11:22,800
Speaker 5: So the FED will be walking in potentially with that

216
00:11:22,920 --> 00:11:26,440
Speaker 5: base case, with a job report, but not inflation data.

217
00:11:26,840 --> 00:11:29,000
Speaker 5: How concerning is that when the likes of Neil Koshkari

218
00:11:29,040 --> 00:11:32,400
Speaker 5: are sounding alarms on two fastive interest rate cuts might

219
00:11:32,440 --> 00:11:34,400
Speaker 5: be a problem, and there's stiflationary fears.

220
00:11:35,160 --> 00:11:37,560
Speaker 6: I do think that if they happen to have the

221
00:11:37,720 --> 00:11:40,840
Speaker 6: jobs data in hand, that that will be part of

222
00:11:40,880 --> 00:11:46,040
Speaker 6: the story that they can justify cutting because a weaker

223
00:11:46,120 --> 00:11:48,880
Speaker 6: job market is disinflationary on a forward basis.

224
00:11:48,559 --> 00:11:50,400
Speaker 4: And that is again information.

225
00:11:50,800 --> 00:11:52,520
Speaker 6: I do think it would be ideal if they had

226
00:11:52,640 --> 00:11:54,880
Speaker 6: a full set of information, but at the end of

227
00:11:54,920 --> 00:11:59,480
Speaker 6: the day, they're going to adjust to the reality as

228
00:11:59,480 --> 00:11:59,920
Speaker 6: it comes out.

229
00:12:00,200 --> 00:12:02,520
Speaker 2: And since the Fed last night mid September, two year

230
00:12:02,520 --> 00:12:05,320
Speaker 2: bon yields are slightly higher, ten year bon yields a higher,

231
00:12:05,480 --> 00:12:07,599
Speaker 2: The whole curve is shifted higher. What it think that

232
00:12:07,679 --> 00:12:08,120
Speaker 2: speaks to.

233
00:12:09,000 --> 00:12:11,600
Speaker 6: I think we're just in an arrange consolidation mode for

234
00:12:11,679 --> 00:12:14,760
Speaker 6: the market. I think that we now know the direction

235
00:12:14,840 --> 00:12:18,080
Speaker 6: of travel of rates. We have some uncertainty associated with

236
00:12:18,160 --> 00:12:20,959
Speaker 6: the shutdown and what that means more than likely for

237
00:12:21,000 --> 00:12:23,120
Speaker 6: the beginning next year as opposed to the balance of

238
00:12:23,160 --> 00:12:28,000
Speaker 6: this year, and we don't have enough convincing evidence to

239
00:12:28,160 --> 00:12:31,400
Speaker 6: get back to three ninety five ten year yields, but

240
00:12:31,440 --> 00:12:34,040
Speaker 6: also not to get back to four fifty. We're just

241
00:12:34,160 --> 00:12:36,520
Speaker 6: in a range as we see how things play out.

242
00:12:36,640 --> 00:12:39,000
Speaker 2: Don't you think also that the rate story has stabilized,

243
00:12:39,040 --> 00:12:41,520
Speaker 2: because subsequently after the FED meeting, we found out this

244
00:12:41,640 --> 00:12:44,920
Speaker 2: FED is far more divided than was actually revealed in

245
00:12:44,960 --> 00:12:47,559
Speaker 2: that news conference with Chairman Powell. That maybe for a

246
00:12:47,600 --> 00:12:49,880
Speaker 2: lot of people they thought this was the start of

247
00:12:49,920 --> 00:12:54,280
Speaker 2: a bigger rate cutting cycle, something down towards three and quickly.

248
00:12:54,600 --> 00:12:56,880
Speaker 2: And what I've heard subsequently since there's a bunch of

249
00:12:56,920 --> 00:13:00,400
Speaker 2: FED speakers with very different views about the future mentioned

250
00:13:00,440 --> 00:13:03,240
Speaker 2: Neil Kashgawi, there are some individuals that aren't ready to

251
00:13:03,280 --> 00:13:06,199
Speaker 2: go again, never mind go another one hundred. Isn't that

252
00:13:06,280 --> 00:13:08,120
Speaker 2: part of this story as well? How big a feature

253
00:13:08,200 --> 00:13:08,480
Speaker 2: is that?

254
00:13:09,080 --> 00:13:09,240
Speaker 4: Well?

255
00:13:09,280 --> 00:13:11,240
Speaker 6: I think that what the future's market is telling us

256
00:13:11,440 --> 00:13:14,160
Speaker 6: is we're comfortable with a glide path back to three

257
00:13:14,200 --> 00:13:17,160
Speaker 6: percent sometime in the middle of next year. But as

258
00:13:17,200 --> 00:13:20,880
Speaker 6: you point out, there are competing voices on the committee,

259
00:13:20,880 --> 00:13:24,960
Speaker 6: and there do tend to be competing voices when we're

260
00:13:25,000 --> 00:13:27,960
Speaker 6: at an inflection point, and we were at an inflection point.

261
00:13:28,160 --> 00:13:31,400
Speaker 6: I think that Powell's comments in particular, were an effort

262
00:13:31,480 --> 00:13:34,760
Speaker 6: to ensure that there was as much flexibility as possible,

263
00:13:35,160 --> 00:13:37,320
Speaker 6: and he didn't want to pre commit to an October

264
00:13:37,480 --> 00:13:39,200
Speaker 6: or a December move. So I think it's more of

265
00:13:39,240 --> 00:13:42,280
Speaker 6: a business as usual than it is something particularly frightening.

266
00:13:42,520 --> 00:13:45,160
Speaker 1: This is sort of a perverse question, but it looks

267
00:13:45,200 --> 00:13:47,040
Speaker 1: like right now in polymarket it's only a twenty five

268
00:13:47,080 --> 00:13:49,880
Speaker 1: percent chance that the shutdown ends before October fifteenth. You

269
00:13:49,880 --> 00:13:51,959
Speaker 1: said that this is the one piece of data that the.

270
00:13:51,880 --> 00:13:52,679
Speaker 4: FED is going to have.

271
00:13:52,720 --> 00:13:54,600
Speaker 1: It's new which just how long the shutdown's going on.

272
00:13:54,880 --> 00:13:58,000
Speaker 4: Is that bond positive at the end of the day.

273
00:13:58,000 --> 00:14:00,560
Speaker 6: I think it is because it's more uncertain and we've

274
00:14:00,600 --> 00:14:04,400
Speaker 6: spent a lot of the the last four or five

275
00:14:04,440 --> 00:14:08,679
Speaker 6: months with a TREBUTI will related on uncertainty as well

276
00:14:08,720 --> 00:14:11,800
Speaker 6: as now shut down related uncertainty, and that has led

277
00:14:11,840 --> 00:14:14,400
Speaker 6: to a stalling out on the labor front, and until

278
00:14:14,440 --> 00:14:16,480
Speaker 6: we have more clarity, I think people are going to

279
00:14:16,520 --> 00:14:19,640
Speaker 6: be a lot more reluctant to hire, more reluctant to spend,

280
00:14:19,800 --> 00:14:22,800
Speaker 6: and I think it's going to eventually be gone positive.

281
00:14:25,080 --> 00:14:28,600
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.

282
00:14:37,880 --> 00:14:40,640
Speaker 2: The analyst David Deck Obama, TD Cow and covers some

283
00:14:40,680 --> 00:14:43,400
Speaker 2: of the companies that Trump administration has invested in, and

284
00:14:43,440 --> 00:14:46,440
Speaker 2: has this to say, Investors have to ask who's next.

285
00:14:46,600 --> 00:14:49,400
Speaker 2: Stocks are moving fantastically on this news, no matter what

286
00:14:49,440 --> 00:14:52,120
Speaker 2: the actual details are. David joins US Now for more.

287
00:14:52,240 --> 00:14:55,000
Speaker 2: David Gomardick, morning, Thanks for having me. Your job has changed,

288
00:14:55,400 --> 00:14:57,440
Speaker 2: It has changed. Indeed, sure the White House is now

289
00:14:57,440 --> 00:14:59,800
Speaker 2: picking the winners. How does that change your approach?

290
00:15:01,080 --> 00:15:05,120
Speaker 7: You know, similar to my comments before, it was interesting

291
00:15:05,120 --> 00:15:07,920
Speaker 7: in their prior conversation here talking about, you know, what's

292
00:15:07,960 --> 00:15:09,920
Speaker 7: the process behind all of this and what's the intention?

293
00:15:10,120 --> 00:15:12,920
Speaker 7: And I think real really it's true for the administration

294
00:15:13,040 --> 00:15:15,720
Speaker 7: one to some extent to make an investment on behalf

295
00:15:15,720 --> 00:15:18,040
Speaker 7: of taxpayers, but also I think to raise the profile

296
00:15:18,080 --> 00:15:20,840
Speaker 7: for the general investing public that these companies are a

297
00:15:20,880 --> 00:15:24,000
Speaker 7: priority and that these industries are a priority. And now

298
00:15:24,040 --> 00:15:26,480
Speaker 7: everyone obviously has their hands out and you've seen companies

299
00:15:26,520 --> 00:15:29,360
Speaker 7: openly talking about and disclosing. We're having conversations with the

300
00:15:29,480 --> 00:15:33,280
Speaker 7: USDO Department of War, We're having conversations with the Pentagon,

301
00:15:33,960 --> 00:15:36,880
Speaker 7: and I think it just sets the stage for what

302
00:15:37,640 --> 00:15:41,200
Speaker 7: should be triggering a multi year investment process in the

303
00:15:41,240 --> 00:15:42,400
Speaker 7: broader material sector.

304
00:15:42,560 --> 00:15:44,680
Speaker 1: Theoretically, a lot of people could get behind this, and

305
00:15:44,720 --> 00:15:47,720
Speaker 1: it seems like it does make sense at least according

306
00:15:47,760 --> 00:15:50,200
Speaker 1: to both sides of the aisle. And what they've put

307
00:15:50,240 --> 00:15:52,800
Speaker 1: out there is the administration picking the right names.

308
00:15:53,600 --> 00:15:57,040
Speaker 7: So I would say, with their first investment, and I'm

309
00:15:57,120 --> 00:15:59,120
Speaker 7: not going to speak on Intel, so let's look at

310
00:15:59,120 --> 00:16:02,160
Speaker 7: them P Materials. They're the largest rare earth miner in

311
00:16:02,200 --> 00:16:05,680
Speaker 7: the Western Hemisphere. I think that was a very logical

312
00:16:05,760 --> 00:16:09,240
Speaker 7: chosen champion for this administration to get behind because it

313
00:16:09,320 --> 00:16:12,640
Speaker 7: unlocks multiple parts of the supply chain for rare earth

314
00:16:12,920 --> 00:16:16,120
Speaker 7: and ultimately magnets. You also saw a follow up deal

315
00:16:16,160 --> 00:16:17,880
Speaker 7: with Apple right on the heels of that, So I

316
00:16:17,880 --> 00:16:21,400
Speaker 7: think all of these things were connected. In the context

317
00:16:21,480 --> 00:16:25,560
Speaker 7: with lithium Americas, the government was already involved with a

318
00:16:25,600 --> 00:16:28,520
Speaker 7: substantial loan that the DOE had approved under the Biden

319
00:16:28,520 --> 00:16:33,120
Speaker 7: administration under the ATVM loan program, which sought to really

320
00:16:33,160 --> 00:16:36,880
Speaker 7: propel the lithium supply chain in North America, largely around

321
00:16:36,920 --> 00:16:38,640
Speaker 7: the proliferation of electric vehicles.

322
00:16:38,920 --> 00:16:39,840
Speaker 4: We've walked back.

323
00:16:39,720 --> 00:16:41,960
Speaker 7: A lot of the EV tax credits and incentives there,

324
00:16:42,400 --> 00:16:44,720
Speaker 7: but I think there was still partly a recognition on

325
00:16:44,760 --> 00:16:46,480
Speaker 7: the part of the government that were already in bed

326
00:16:46,480 --> 00:16:49,320
Speaker 7: with this company from a loan process. Let's sort of

327
00:16:49,360 --> 00:16:52,120
Speaker 7: rework some of the terms. Did it actually improve the

328
00:16:52,160 --> 00:16:55,440
Speaker 7: outlook for Lithium America's I would argue perhaps, no, it

329
00:16:55,480 --> 00:16:58,920
Speaker 7: really just diluted there, really deluted the equity holder at

330
00:16:58,960 --> 00:17:01,200
Speaker 7: that point. But it does obviously raise the profile and

331
00:17:01,240 --> 00:17:03,720
Speaker 7: the stock moved up well over one hundred percent, you know,

332
00:17:03,760 --> 00:17:05,920
Speaker 7: without really caring what the details were.

333
00:17:06,280 --> 00:17:08,760
Speaker 1: So can you just basically look at whoever the US

334
00:17:08,840 --> 00:17:10,760
Speaker 1: is given a loan to and say that probably will

335
00:17:10,760 --> 00:17:11,440
Speaker 1: be equitized.

336
00:17:12,240 --> 00:17:14,359
Speaker 7: Sure, you could certainly build. I mean, you've seen a

337
00:17:14,359 --> 00:17:17,040
Speaker 7: lot of names already moving in anticipation that they're going

338
00:17:17,080 --> 00:17:21,000
Speaker 7: to receive funding in some form, and logically you would

339
00:17:21,040 --> 00:17:23,639
Speaker 7: anticipate that every single company in the material space that

340
00:17:23,680 --> 00:17:26,399
Speaker 7: has a project at least on the whiteboard at this

341
00:17:26,480 --> 00:17:29,800
Speaker 7: moment is having active conversations. So I think you can

342
00:17:29,840 --> 00:17:32,800
Speaker 7: probably still make money that way, because at some point

343
00:17:32,880 --> 00:17:34,760
Speaker 7: you have to ask how does this all end? You know,

344
00:17:34,880 --> 00:17:36,439
Speaker 7: is the government going to be trading out of these

345
00:17:36,440 --> 00:17:39,119
Speaker 7: equity positions. It's not as though there's always a contribution

346
00:17:39,200 --> 00:17:42,880
Speaker 7: that's coming with this, and at this point, I think

347
00:17:42,880 --> 00:17:44,520
Speaker 7: it's safe to say that there.

348
00:17:44,400 --> 00:17:45,520
Speaker 4: Is no end in sight for this.

349
00:17:45,880 --> 00:17:48,160
Speaker 5: Well, some people think that this is just the beginning

350
00:17:48,160 --> 00:17:50,080
Speaker 5: of potentially US sovereign wealth fund.

351
00:17:50,680 --> 00:17:51,320
Speaker 4: How you do it?

352
00:17:51,640 --> 00:17:54,959
Speaker 7: I mean, I think in some cases that's already very

353
00:17:55,040 --> 00:17:58,080
Speaker 7: much the case, except you know, in theory, I suppose

354
00:17:58,119 --> 00:17:59,840
Speaker 7: this is being done with tax payer money. And you've

355
00:17:59,840 --> 00:18:03,360
Speaker 7: seen some funds reallocated from areas like the Chips Act

356
00:18:03,359 --> 00:18:05,840
Speaker 7: and some other funding, and I think it's really just

357
00:18:05,880 --> 00:18:09,360
Speaker 7: going to try to accelerate a lot of these investment opportunities.

358
00:18:09,400 --> 00:18:12,320
Speaker 5: One official was talking about, there's hundreds of deals that

359
00:18:12,480 --> 00:18:14,520
Speaker 5: right now are being proposed. Could you see by the

360
00:18:14,600 --> 00:18:17,560
Speaker 5: end of Trump's first term, hundreds of companies the US

361
00:18:17,640 --> 00:18:18,760
Speaker 5: government has a stake.

362
00:18:18,560 --> 00:18:21,639
Speaker 7: In, And theory short, look look at all these stakes.

363
00:18:21,640 --> 00:18:23,640
Speaker 7: And what's interesting about a five to ten percent stake

364
00:18:23,640 --> 00:18:25,880
Speaker 7: because some of these are coming with board membership, right,

365
00:18:25,960 --> 00:18:31,679
Speaker 7: so the government is becoming an active member of management oversight.

366
00:18:32,200 --> 00:18:34,720
Speaker 7: They're not necessarily helping with execution, but they can help

367
00:18:34,720 --> 00:18:38,480
Speaker 7: on the contracting side. And if you think about, you know,

368
00:18:38,840 --> 00:18:41,480
Speaker 7: hundreds of companies out there, taking a five percent equity

369
00:18:41,480 --> 00:18:43,960
Speaker 7: interest in some of these companies that's coming costless to

370
00:18:44,000 --> 00:18:47,359
Speaker 7: the government. Sure in theory, right and if you're an

371
00:18:47,359 --> 00:18:49,440
Speaker 7: executive right now and you see the potential to re

372
00:18:49,600 --> 00:18:52,960
Speaker 7: rate your equity by hundreds of percent and then on

373
00:18:53,000 --> 00:18:55,359
Speaker 7: the back of that perhaps raise additional capital in the

374
00:18:55,400 --> 00:18:58,600
Speaker 7: markets just by giving the company, you know, the government

375
00:18:58,600 --> 00:19:00,840
Speaker 7: five percent of your company. That's a very difficult deal

376
00:19:00,880 --> 00:19:02,679
Speaker 7: not to side long term. What does this do for

377
00:19:02,760 --> 00:19:07,159
Speaker 7: competition in this space, Well, I think that it does welcome,

378
00:19:07,160 --> 00:19:10,880
Speaker 7: at least in the United States, that everyone can get

379
00:19:10,920 --> 00:19:13,000
Speaker 7: involved in the supply chain. Look at rare Earth's for

380
00:19:13,000 --> 00:19:16,159
Speaker 7: instance right now. Yes, they've championed MP they've given them

381
00:19:16,200 --> 00:19:19,720
Speaker 7: a floor price, and you've seen actually the the NDPR

382
00:19:20,160 --> 00:19:23,600
Speaker 7: market for rare earths, you've seen pricing move substantially higher

383
00:19:23,880 --> 00:19:26,360
Speaker 7: up to ninety dollars a kilo. In August they gave

384
00:19:26,400 --> 00:19:28,359
Speaker 7: them one hundred and ten dollars a heilo price floor.

385
00:19:28,560 --> 00:19:31,520
Speaker 7: I think that it provides opportunity for everyone within the

386
00:19:31,640 --> 00:19:34,720
Speaker 7: within the United States and really allied nations to come

387
00:19:34,760 --> 00:19:37,320
Speaker 7: forward with projects to try to re short of the supply.

388
00:19:37,080 --> 00:19:38,360
Speaker 4: Chain as quickly as possible.

389
00:19:40,080 --> 00:19:43,359
Speaker 2: Stay with US multiple IMPEX savidance coming up off to

390
00:19:43,440 --> 00:19:54,280
Speaker 2: this right to that kind of ay Right and his

391
00:19:54,359 --> 00:19:56,520
Speaker 2: right camp bat now expecting the Feds and low interests

392
00:19:56,560 --> 00:19:59,840
Speaker 2: right back to back Masinx right rights in the following this,

393
00:20:00,000 --> 00:20:04,080
Speaker 2: it's increasingly fragile backdrop, compounded by data vacuum and policy uncertainty.

394
00:20:04,320 --> 00:20:06,800
Speaker 2: It's likely to tell the balance of FED policy makers

395
00:20:06,800 --> 00:20:09,080
Speaker 2: correct joint just now for more. Greg and Mornik, Good morning,

396
00:20:09,480 --> 00:20:10,880
Speaker 2: No data, no problem.

397
00:20:11,760 --> 00:20:15,320
Speaker 8: No data means more caution when it comes to how

398
00:20:15,400 --> 00:20:19,240
Speaker 8: business leaders, how economists, how FED policy makers are going

399
00:20:19,280 --> 00:20:22,320
Speaker 8: to react. I've been talking with a lot of business

400
00:20:22,400 --> 00:20:25,199
Speaker 8: executives that are concerned about the fact that we're not

401
00:20:25,200 --> 00:20:28,160
Speaker 8: getting a pulse on the economy, and as we were

402
00:20:28,200 --> 00:20:31,680
Speaker 8: getting before this government shut down, a lot of mixed signals.

403
00:20:31,840 --> 00:20:34,960
Speaker 8: There's growing uncertainty as to the underlying pace of the economy.

404
00:20:35,080 --> 00:20:37,160
Speaker 8: I think one thing that's key to remember is that

405
00:20:37,359 --> 00:20:40,640
Speaker 8: there are three fragile pillars to the economy that all

406
00:20:40,640 --> 00:20:43,359
Speaker 8: start with an A. You have essentially affluent workers that

407
00:20:43,400 --> 00:20:46,600
Speaker 8: are supporting consumer spending. You have the AI investment boom

408
00:20:46,640 --> 00:20:49,240
Speaker 8: and potentially a bubble there, and then you have the

409
00:20:49,320 --> 00:20:53,440
Speaker 8: asset price increases. They're all correlated and they're all fragile.

410
00:20:53,720 --> 00:20:56,240
Speaker 8: If you get any type of disruption to one of

411
00:20:56,240 --> 00:21:00,560
Speaker 8: those three that could portend to a slower economic outlook and.

412
00:21:00,480 --> 00:21:03,640
Speaker 4: Then the need for morpheed easing. As we navigate into

413
00:21:03,640 --> 00:21:04,360
Speaker 4: twenty twenty.

414
00:21:04,160 --> 00:21:06,040
Speaker 1: Six, when you talk about caution, it seems to be

415
00:21:06,040 --> 00:21:08,919
Speaker 1: a deceleration in growth or euphoria in market. It's not

416
00:21:08,960 --> 00:21:11,160
Speaker 1: necessarily the acceleration in inflation.

417
00:21:11,520 --> 00:21:12,960
Speaker 4: Why well, I think.

418
00:21:12,840 --> 00:21:15,080
Speaker 8: When you're thinking about the economy right now, what you're

419
00:21:15,119 --> 00:21:18,480
Speaker 8: seeing is essentially the acceleration in inflation that is induced

420
00:21:18,560 --> 00:21:21,159
Speaker 8: by terriffs. And the key question is whether this is

421
00:21:21,200 --> 00:21:24,600
Speaker 8: an embedded acceleration in inflation or something that's likely to

422
00:21:24,640 --> 00:21:25,359
Speaker 8: be transitory.

423
00:21:25,520 --> 00:21:27,480
Speaker 4: And you and I have talked about this in the past.

424
00:21:27,760 --> 00:21:31,040
Speaker 8: We are in an environment where labor market demand is softening.

425
00:21:31,480 --> 00:21:34,760
Speaker 8: It's not because we're seeing slower payroll growth only. It's

426
00:21:34,760 --> 00:21:37,160
Speaker 8: because we're seeing a hiring rate that's at a twelve

427
00:21:37,240 --> 00:21:39,680
Speaker 8: year low. It's because we are seeing continuing claims for

428
00:21:39,760 --> 00:21:42,800
Speaker 8: unemployment that have been gradually rising. It's because job cut

429
00:21:42,840 --> 00:21:46,400
Speaker 8: announcements are up fifty five percent relative to last year.

430
00:21:46,440 --> 00:21:51,600
Speaker 8: So all these indicators indicate softening labor market demand, notwithstanding

431
00:21:51,680 --> 00:21:54,159
Speaker 8: the massive negative shock that we've seen in terms of

432
00:21:54,200 --> 00:21:57,680
Speaker 8: net migration, there is underlying weakness and softness in the

433
00:21:57,760 --> 00:22:01,280
Speaker 8: labor market, which means there's unlikely to be this desire

434
00:22:01,359 --> 00:22:04,560
Speaker 8: to raise wages, and so what we're seeing is essentially

435
00:22:04,760 --> 00:22:08,080
Speaker 8: this increase in prices, which is eroding consumer spending power,

436
00:22:08,280 --> 00:22:11,000
Speaker 8: and in turn, businesses that have to contend with these

437
00:22:11,080 --> 00:22:14,719
Speaker 8: higher cost pressures are not going to be hiring more freely.

438
00:22:14,840 --> 00:22:17,520
Speaker 8: They're not going to be allowing for higher wages, and

439
00:22:17,560 --> 00:22:20,080
Speaker 8: therefore that's going to continue to weigh on income and

440
00:22:20,119 --> 00:22:21,240
Speaker 8: on consumer spending activey.

441
00:22:21,280 --> 00:22:22,520
Speaker 4: There's a lot to unpack there.

442
00:22:22,960 --> 00:22:25,000
Speaker 1: I just would ask, can I sound like a broken

443
00:22:25,000 --> 00:22:28,080
Speaker 1: record should ask this a lot? Would really cutting rates

444
00:22:28,080 --> 00:22:30,880
Speaker 1: help that picture in any way? Would it get people jobs?

445
00:22:31,160 --> 00:22:34,000
Speaker 1: Given the fact that ultimately a lot of companies are

446
00:22:34,040 --> 00:22:37,280
Speaker 1: turning to AI and they have every capital market opening

447
00:22:37,280 --> 00:22:38,760
Speaker 1: that they possibly could imagine.

448
00:22:38,920 --> 00:22:40,879
Speaker 8: I think that's the broader question as to how the

449
00:22:40,880 --> 00:22:44,000
Speaker 8: FED reacts to supply shocks. We are in this environment

450
00:22:44,040 --> 00:22:47,240
Speaker 8: where what we're seeing is massive supply shocks to the economy,

451
00:22:47,240 --> 00:22:50,000
Speaker 8: whether it's on the side of AI or on the

452
00:22:50,040 --> 00:22:52,800
Speaker 8: side of net migration in the labor market. The FED

453
00:22:52,880 --> 00:22:56,000
Speaker 8: has a limited number of tools to address any type

454
00:22:56,000 --> 00:22:58,920
Speaker 8: of imbalance in the economy, and in this instance, it's

455
00:22:58,960 --> 00:23:01,960
Speaker 8: a supply shockading to inflationary pressures and.

456
00:23:01,960 --> 00:23:03,120
Speaker 4: Reduce growth volumes.

457
00:23:03,240 --> 00:23:05,760
Speaker 8: Now, your question is very interesting because what we're seeing

458
00:23:06,000 --> 00:23:09,480
Speaker 8: is essentially a growing spread between short term rates and

459
00:23:09,480 --> 00:23:12,080
Speaker 8: long term rates. Short term rates are pricing more fed

460
00:23:12,119 --> 00:23:13,360
Speaker 8: easing over the course.

461
00:23:13,119 --> 00:23:14,159
Speaker 4: Of the next twelve months.

462
00:23:14,359 --> 00:23:17,840
Speaker 8: Long term rates have to contend with higher inflation expectations,

463
00:23:18,080 --> 00:23:21,119
Speaker 8: a fiscal situation that is concerning, even more so in

464
00:23:21,160 --> 00:23:23,920
Speaker 8: the midst of a government shutdown, and then fed pressures

465
00:23:23,920 --> 00:23:27,680
Speaker 8: from the administration. The three f's there are very important

466
00:23:27,760 --> 00:23:31,159
Speaker 8: to contend with when it comes to the trajectory of

467
00:23:31,200 --> 00:23:32,640
Speaker 8: where the economy is going to head.

468
00:23:32,840 --> 00:23:35,200
Speaker 5: When you look at tariff induced inflation, though we haven't

469
00:23:35,240 --> 00:23:36,640
Speaker 5: really seen it yet.

470
00:23:36,840 --> 00:23:38,760
Speaker 4: Not broad base, not broad based.

471
00:23:38,800 --> 00:23:40,679
Speaker 8: But if you lift the hood and you look at

472
00:23:40,760 --> 00:23:45,160
Speaker 8: the underlying drivers of inflation, if you look at grocery prices,

473
00:23:45,200 --> 00:23:47,240
Speaker 8: if you look at apparel prices, if you look at

474
00:23:47,240 --> 00:23:50,520
Speaker 8: car prices, if you look at furniture prices, all of

475
00:23:50,520 --> 00:23:54,240
Speaker 8: these elements have been rising and lifting inflation by about

476
00:23:54,240 --> 00:23:57,240
Speaker 8: a third, essentially a third of the inflation increase over

477
00:23:57,240 --> 00:23:59,399
Speaker 8: the course of the past four months has been driven

478
00:23:59,720 --> 00:24:02,679
Speaker 8: by these categories. What I would also note is that

479
00:24:02,720 --> 00:24:05,440
Speaker 8: you're also seeing that pass through to services. A lot

480
00:24:05,440 --> 00:24:10,760
Speaker 8: of services that we consume are actually using goods and equipment.

481
00:24:11,480 --> 00:24:14,800
Speaker 8: You think of medical care, you think of car or

482
00:24:14,800 --> 00:24:18,440
Speaker 8: repair shops. There are services that use a lot of

483
00:24:18,480 --> 00:24:22,080
Speaker 8: equipment that have an imported component into them, and that

484
00:24:22,280 --> 00:24:26,080
Speaker 8: essentially see these upward pressures in terms of prices. We're

485
00:24:26,080 --> 00:24:28,199
Speaker 8: not going to see the same type of increase that

486
00:24:28,240 --> 00:24:30,320
Speaker 8: we saw back in twenty one and twenty two. We're

487
00:24:30,359 --> 00:24:32,680
Speaker 8: not going back to nine percent inflation, but we are

488
00:24:32,720 --> 00:24:35,800
Speaker 8: going away from two percent inflation towards three three and

489
00:24:35,800 --> 00:24:39,080
Speaker 8: a half percent inflation, which is hurting families across the country.

490
00:24:39,080 --> 00:24:41,080
Speaker 5: Will this haunt the FED next year because they seemed

491
00:24:41,080 --> 00:24:42,879
Speaker 5: to be ignoring it completely in the bias is to

492
00:24:43,040 --> 00:24:43,639
Speaker 5: labor market.

493
00:24:44,000 --> 00:24:47,479
Speaker 8: I think you may see the hints of this hurting

494
00:24:47,520 --> 00:24:50,520
Speaker 8: the FED next year because the rotation of voters is

495
00:24:50,560 --> 00:24:53,080
Speaker 8: going to be more hawkish. So if there is more

496
00:24:53,119 --> 00:24:56,480
Speaker 8: easing this year, you're going to see more hawkish members

497
00:24:56,560 --> 00:25:00,280
Speaker 8: next year that may be on the dockets saying, actually,

498
00:25:00,640 --> 00:25:03,359
Speaker 8: we ease too much and we now need to either

499
00:25:03,440 --> 00:25:04,760
Speaker 8: hold for longer or.

500
00:25:04,720 --> 00:25:05,840
Speaker 4: Tighten monetary policy.

501
00:25:05,880 --> 00:25:08,600
Speaker 8: That's going to be the twenty twenty six debate because

502
00:25:08,600 --> 00:25:11,280
Speaker 8: the rotation of Fed palsy makers is going to become

503
00:25:11,280 --> 00:25:11,760
Speaker 8: more hockey.

504
00:25:11,760 --> 00:25:13,520
Speaker 2: It's super hard to protect what the Fed's going to

505
00:25:13,560 --> 00:25:16,119
Speaker 2: do a year out. The Federal Reserve has difficulty protecting

506
00:25:16,160 --> 00:25:18,200
Speaker 2: what the Federal Reserve's going to do a year out.

507
00:25:18,240 --> 00:25:20,760
Speaker 2: Given what you just said, you're going to have this mix,

508
00:25:20,840 --> 00:25:25,240
Speaker 2: this collision between a hawkish rotation and that maybe a

509
00:25:25,359 --> 00:25:28,480
Speaker 2: very douvish rotation at the very top of the Central Bank.

510
00:25:28,520 --> 00:25:31,639
Speaker 2: How difficult will this committee be to lead beyond my

511
00:25:31,760 --> 00:25:32,240
Speaker 2: next year?

512
00:25:32,440 --> 00:25:35,520
Speaker 8: Extreme polarization is going to be the situation when it.

513
00:25:35,440 --> 00:25:37,439
Speaker 4: Comes to the Fed. We're already seeing hints of that.

514
00:25:37,480 --> 00:25:40,280
Speaker 8: There's one hundred and fifty basis points spread between the

515
00:25:40,320 --> 00:25:43,480
Speaker 8: most hawkish dot in the and famous dot plot of

516
00:25:43,520 --> 00:25:47,040
Speaker 8: the Fed and the most douvish policy maker. So that

517
00:25:47,160 --> 00:25:50,640
Speaker 8: polarization is going to remain firmly in place, and we're

518
00:25:50,680 --> 00:25:54,560
Speaker 8: going to get a cacophany of speeches that go in

519
00:25:54,600 --> 00:25:57,959
Speaker 8: different directions when it comes to interpreting the direction of

520
00:25:58,000 --> 00:26:01,359
Speaker 8: the US economy next year, and that's going to be

521
00:26:01,920 --> 00:26:05,639
Speaker 8: very hard to read from a policymakers standpoint, but also

522
00:26:05,960 --> 00:26:07,680
Speaker 8: also from a business leader standpoint.

523
00:26:07,760 --> 00:26:10,480
Speaker 4: Let's not forget what we really are.

524
00:26:10,359 --> 00:26:14,520
Speaker 8: Concerned about is the direction of investment, the direction of employment,

525
00:26:14,720 --> 00:26:17,159
Speaker 8: and the direction of consumer spending. If you have a

526
00:26:17,240 --> 00:26:19,560
Speaker 8: lack of clarity as to what the Fed is going

527
00:26:19,600 --> 00:26:23,520
Speaker 8: to be doing because it interprets conditions as EI either

528
00:26:23,560 --> 00:26:26,840
Speaker 8: being extremely loose on the financial front, or because it

529
00:26:26,960 --> 00:26:29,760
Speaker 8: sees that there's more of a drag from the labor

530
00:26:29,840 --> 00:26:33,680
Speaker 8: demand side or labor supply side, whether there are different views,

531
00:26:33,720 --> 00:26:38,000
Speaker 8: diverging views, very divergent views. Potentially, that's going to confuse

532
00:26:38,359 --> 00:26:41,159
Speaker 8: policy makers, it's going to confuse investors, and it's going

533
00:26:41,200 --> 00:26:44,679
Speaker 8: to confuse business executives as to what decisions they should make.

534
00:26:45,480 --> 00:26:49,040
Speaker 2: This is the Bloombergs Events podcast, bringing you the best

535
00:26:49,080 --> 00:26:52,400
Speaker 2: in markets, economics, angient politics. You can watch the show

536
00:26:52,440 --> 00:26:55,399
Speaker 2: live on Bloomberg TV weekday mornings from six am to

537
00:26:55,520 --> 00:26:59,280
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify

538
00:26:59,400 --> 00:27:01,639
Speaker 2: or anywhere tells you listen, and as always on the

539
00:27:01,680 --> 00:27:08,640
Speaker 2: Bloomberg Terminal and the Bloomberg Business out Mm hmm