1
00:00:03,360 --> 00:00:12,640
Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast and I'm Tom

2
00:00:12,720 --> 00:00:15,720
Speaker 1: Keene Jay Lee. We bring you insight from the best

3
00:00:15,800 --> 00:00:21,240
Speaker 1: in economics, finance, investment, and international relations. Find Bloomberg Surveillance

4
00:00:21,280 --> 00:00:25,720
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,

5
00:00:26,040 --> 00:00:30,200
Speaker 1: on the Bloomberg audience worldwide on Bloomberg TV and Bloomberg Radio.

6
00:00:30,240 --> 00:00:31,960
Speaker 1: We can get the White House reactions this and number.

7
00:00:32,000 --> 00:00:33,720
Speaker 1: I'm very pleased to say that joining us now is

8
00:00:33,760 --> 00:00:38,600
Speaker 1: Larry Cudlow, National Economic Council Director. Larry, let's start right

9
00:00:38,600 --> 00:00:43,400
Speaker 1: there downside surprise on the payrolls report. People we speak

10
00:00:43,479 --> 00:00:46,040
Speaker 1: to in the last hour, the last ninety minutes will

11
00:00:46,040 --> 00:00:48,440
Speaker 1: say the same thing. This makes it more likely to

12
00:00:48,479 --> 00:00:50,879
Speaker 1: get a deal down in d C. Does it make

13
00:00:50,880 --> 00:00:54,840
Speaker 1: it a difference to you, Larry? Well, look, I just

14
00:00:54,880 --> 00:00:58,160
Speaker 1: want to say, I don't think this is such a

15
00:00:58,200 --> 00:01:01,960
Speaker 1: bad jobs report. Okay, it may have come in a

16
00:01:02,080 --> 00:01:06,559
Speaker 1: wee bid under expectations, but I don't know what that means.

17
00:01:06,880 --> 00:01:10,800
Speaker 1: Six point seven percent unemployment rate is big news. The

18
00:01:10,880 --> 00:01:16,160
Speaker 1: CBO and others didn't expect single digits until early so

19
00:01:16,240 --> 00:01:18,760
Speaker 1: we got the single digits the last couple of months.

20
00:01:18,800 --> 00:01:22,720
Speaker 1: Six point seven and incidentally importantly to everybody, UH, if

21
00:01:22,760 --> 00:01:27,040
Speaker 1: you look under the hood, the biggest drops in unemployment

22
00:01:27,400 --> 00:01:32,640
Speaker 1: were in the minority groups African Americans, Hispanics, Asians, and

23
00:01:32,720 --> 00:01:35,520
Speaker 1: let me adds not a minority group, it's a majority group.

24
00:01:35,840 --> 00:01:39,280
Speaker 1: Another big drop in unemployment came from women. That is

25
00:01:39,319 --> 00:01:41,600
Speaker 1: not just people leaving the labor for us, I beg

26
00:01:41,680 --> 00:01:45,360
Speaker 1: to differ. We also scored in the household survey. Private

27
00:01:45,440 --> 00:01:49,880
Speaker 1: jobs were up nearly five hundred thousand. That's a strong number.

28
00:01:50,240 --> 00:01:54,360
Speaker 1: And it's true we have ten million unemployed. I understand

29
00:01:54,360 --> 00:01:57,120
Speaker 1: that there's still a lot of hardship left, no question. However,

30
00:01:57,520 --> 00:01:59,920
Speaker 1: let's keep in mind that the peak of that number

31
00:02:00,080 --> 00:02:02,440
Speaker 1: is twenty three million. And when we look at the

32
00:02:02,480 --> 00:02:05,200
Speaker 1: other statistics, and I'm sure you will want to know

33
00:02:05,520 --> 00:02:10,280
Speaker 1: talk about that. Other statistics on retail sales and housing

34
00:02:10,360 --> 00:02:15,800
Speaker 1: and capex UH are very strong. And Atlanta f GDP

35
00:02:15,919 --> 00:02:19,520
Speaker 1: now is looking for Q four. That's their number, not ours.

36
00:02:19,560 --> 00:02:22,359
Speaker 1: But I'm just saying I think the economy is very

37
00:02:22,440 --> 00:02:24,760
Speaker 1: much in a V shape percovery. The P M I

38
00:02:24,919 --> 00:02:26,959
Speaker 1: s were strong, the I S M s were strong.

39
00:02:27,200 --> 00:02:30,440
Speaker 1: So let's put this in some perspective. The job numbers

40
00:02:30,480 --> 00:02:34,200
Speaker 1: are not the only stat and six point seven cent

41
00:02:34,320 --> 00:02:37,760
Speaker 1: unemployment is awful good number. So Larry, you and I

42
00:02:37,760 --> 00:02:40,120
Speaker 1: could debate the state of the economy. I think what

43
00:02:40,200 --> 00:02:42,679
Speaker 1: matters is how you read the economy, how the administration

44
00:02:42,720 --> 00:02:45,040
Speaker 1: sees the economy, and what it means, how it put

45
00:02:45,120 --> 00:02:47,960
Speaker 1: together a policy package. So Larry, talk to me about it.

46
00:02:48,000 --> 00:02:51,280
Speaker 1: Where are you on stimulus talks right now? Well, I

47
00:02:51,320 --> 00:02:55,239
Speaker 1: think what we've got, um, senter McConnell's talking to House

48
00:02:55,240 --> 00:02:59,839
Speaker 1: Speaker Pelosi. Our team is of course in touch part

49
00:03:00,040 --> 00:03:05,760
Speaker 1: clearly with Senator McConnell and UH Republican House Leader Kevin McCarthy. UM,

50
00:03:05,800 --> 00:03:08,720
Speaker 1: people are glad to see that the other team has

51
00:03:08,760 --> 00:03:12,560
Speaker 1: come down in its numbers. On the other hand, there

52
00:03:12,600 --> 00:03:17,880
Speaker 1: are still policy differences that remain. Um. I think Mitch

53
00:03:17,919 --> 00:03:21,240
Speaker 1: McConnell sounds to me I've known him quite some time,

54
00:03:21,280 --> 00:03:24,600
Speaker 1: a little more optimistic. But I can't say one way

55
00:03:24,680 --> 00:03:26,360
Speaker 1: or other what the outcome is going to be. I

56
00:03:26,400 --> 00:03:29,320
Speaker 1: don't want to dare predict that. I will add this

57
00:03:29,400 --> 00:03:32,840
Speaker 1: point from our standpoint, and I think Santor McConell agrees

58
00:03:32,880 --> 00:03:35,640
Speaker 1: with this. We have for many many months. You and

59
00:03:35,680 --> 00:03:40,200
Speaker 1: I've talked about it. Here, she'll argue for targeted assistance.

60
00:03:40,320 --> 00:03:44,040
Speaker 1: Targeted assistance in a few key areas. One is the

61
00:03:44,120 --> 00:03:48,200
Speaker 1: small businesses to resurrect the p p P. Two is

62
00:03:48,560 --> 00:03:53,000
Speaker 1: unemployment assistance, because we're going to continue, as you have noted,

63
00:03:53,440 --> 00:03:56,760
Speaker 1: we still have a lot of hardship in the unemployment area.

64
00:03:56,840 --> 00:04:03,560
Speaker 1: That's tough stuff. Uh. School COVID related spending is good. Um,

65
00:04:03,560 --> 00:04:06,360
Speaker 1: maybe certain industries have to be helped out. And I

66
00:04:06,360 --> 00:04:08,960
Speaker 1: will add to that. In terms of the figures that

67
00:04:09,000 --> 00:04:13,000
Speaker 1: are flowing around, you've got roughly four hundred and fifty

68
00:04:13,000 --> 00:04:17,760
Speaker 1: billion dollars available from unspent treasury funds and a hundred

69
00:04:17,720 --> 00:04:22,160
Speaker 1: and thirty five billion dollars available from unspent PPP funds.

70
00:04:22,200 --> 00:04:24,840
Speaker 1: Now in round numbers, i'm gonna call that six hundred

71
00:04:24,880 --> 00:04:28,120
Speaker 1: billion plus or minus. It would be good to use

72
00:04:28,279 --> 00:04:34,160
Speaker 1: that money, which has already been appropriated once, use it

73
00:04:34,200 --> 00:04:41,360
Speaker 1: to redeploy it um and reappropriate it. And in a sense, uh,

74
00:04:41,400 --> 00:04:44,159
Speaker 1: in a sense, the bookkeeping is okay, you're not really

75
00:04:44,200 --> 00:04:49,919
Speaker 1: adding above what the legislators suggested way back last winter

76
00:04:49,960 --> 00:04:51,719
Speaker 1: and a little bit this summer. There's this a good

77
00:04:51,760 --> 00:04:54,080
Speaker 1: way to do that around six I'm not going to

78
00:04:54,160 --> 00:04:56,560
Speaker 1: get into a numbers game. That's up the Center McConnell,

79
00:04:56,640 --> 00:04:59,320
Speaker 1: Speaker Pelosi. I'm just saying, get into a numbers game

80
00:04:59,400 --> 00:05:05,400
Speaker 1: right now. I'm just saying, there's a key targeted areas

81
00:05:05,440 --> 00:05:11,559
Speaker 1: that could be funded by redeployed appropriations hundred and sixty billion.

82
00:05:11,720 --> 00:05:14,000
Speaker 1: That's the State eight in the bipartisan plan. This has

83
00:05:14,000 --> 00:05:15,720
Speaker 1: been a story for the last several months. Let's just

84
00:05:15,760 --> 00:05:18,320
Speaker 1: get right down to it. That has been the red

85
00:05:18,360 --> 00:05:22,159
Speaker 1: line for Senate Republicans. State eight. Have we moved the

86
00:05:22,200 --> 00:05:26,520
Speaker 1: dial on that story, Larry, I don't know. Senator O'Connell

87
00:05:26,560 --> 00:05:30,440
Speaker 1: has indicated that he's not happy with that part of

88
00:05:30,600 --> 00:05:35,400
Speaker 1: the bipartisan group or the Speaker Pelosi, he's not happy

89
00:05:35,400 --> 00:05:39,120
Speaker 1: with it. I'm going to leave that those are his decisions. Um,

90
00:05:39,160 --> 00:05:41,200
Speaker 1: he's never been happy with a big bail out of

91
00:05:41,240 --> 00:05:43,920
Speaker 1: states and localities. A lot of these blue states are

92
00:05:43,920 --> 00:05:48,360
Speaker 1: poorly managed pension funds and so forth. COVID related funding

93
00:05:49,120 --> 00:05:54,520
Speaker 1: is um very popular. That's different though, than a broad based,

94
00:05:55,080 --> 00:05:59,040
Speaker 1: so huge omnibus appropriation to states and localities. I will

95
00:05:59,120 --> 00:06:02,720
Speaker 1: leave that to Center McConnell. But I'm just saying, um,

96
00:06:02,800 --> 00:06:06,720
Speaker 1: that's always been a difficult hurdle to get through. Well,

97
00:06:06,760 --> 00:06:09,200
Speaker 1: you representing the administration this morning without lucky to have

98
00:06:09,320 --> 00:06:11,320
Speaker 1: you with the President sign a bill that has a

99
00:06:11,400 --> 00:06:15,440
Speaker 1: hundred and sixty billion dollars of state aided it. I

100
00:06:15,480 --> 00:06:18,560
Speaker 1: wouldn't be able to say that. You'll have to ask him.

101
00:06:19,000 --> 00:06:21,600
Speaker 1: I was with him last evening talking about the job

102
00:06:21,680 --> 00:06:25,799
Speaker 1: numbers and related matters. Um, the President is in favor

103
00:06:26,320 --> 00:06:29,520
Speaker 1: of a new assistance package. Okay, he is in favor

104
00:06:29,560 --> 00:06:34,120
Speaker 1: of that, but the details, the targeting that I discussed

105
00:06:34,160 --> 00:06:37,839
Speaker 1: earlier is absolutely crucial. And as you know, Jonathan, the

106
00:06:37,880 --> 00:06:43,760
Speaker 1: President has always opposed a large scale appropriation for state

107
00:06:43,880 --> 00:06:48,360
Speaker 1: and local governments that he President Trump believes have been

108
00:06:48,400 --> 00:06:54,120
Speaker 1: mismanaged for many years. This idea that these states have

109
00:06:54,200 --> 00:06:56,479
Speaker 1: been mismanaged, Larry, is that what this all comes down

110
00:06:56,480 --> 00:07:00,400
Speaker 1: to a political debate about what you guys see as

111
00:07:00,440 --> 00:07:03,880
Speaker 1: the mismanagement of state finances at a time when we're

112
00:07:03,880 --> 00:07:07,000
Speaker 1: in a pandemic. We're seeing more restrictions in California, New

113
00:07:07,080 --> 00:07:09,120
Speaker 1: York and by the way, in Republican states as well.

114
00:07:09,760 --> 00:07:11,800
Speaker 1: Is this what it's going to come down to, Larry.

115
00:07:12,400 --> 00:07:15,960
Speaker 1: I don't know that. I don't want to declare that

116
00:07:16,600 --> 00:07:20,400
Speaker 1: I want to go back to targeted assistance, particularly small

117
00:07:20,440 --> 00:07:26,720
Speaker 1: businesses unemployment assistance. These are temporary measures. UM and COVID

118
00:07:26,760 --> 00:07:31,560
Speaker 1: relations dealing matters can be each other. Larry. That doesn't

119
00:07:31,600 --> 00:07:34,760
Speaker 1: sound the deal. That doesn't sound like a compromise, Jonathan.

120
00:07:35,000 --> 00:07:36,800
Speaker 1: I'm not going to make a deal with you. I

121
00:07:36,840 --> 00:07:39,440
Speaker 1: hope you understand that. I don't expect to. I don't

122
00:07:39,440 --> 00:07:46,600
Speaker 1: expect to negotiate with me. But the two plans for

123
00:07:46,760 --> 00:07:52,960
Speaker 1: just planet five hundreds of sixty, Larry, don't do that.

124
00:07:53,040 --> 00:07:54,840
Speaker 1: Come on, let's finish on a good note. We've had

125
00:07:54,880 --> 00:07:56,840
Speaker 1: We've done really well for three or four years. My

126
00:07:56,920 --> 00:07:59,160
Speaker 1: position not taught to each other like that. I'll give

127
00:07:59,160 --> 00:08:01,400
Speaker 1: you the time, Jeff, just laying out the question. We've

128
00:08:01,400 --> 00:08:04,280
Speaker 1: got two plans and nine intered eight billion dollar proposal

129
00:08:04,680 --> 00:08:09,000
Speaker 1: and a five billion dollar proposal in the biparlisan proposal

130
00:08:09,160 --> 00:08:11,600
Speaker 1: is a hundred and sixty billion dollars of state eight Larry.

131
00:08:11,640 --> 00:08:13,440
Speaker 1: That's what it's going to come down. So we can

132
00:08:13,480 --> 00:08:16,200
Speaker 1: either make a deal in the middle or we can

133
00:08:16,880 --> 00:08:19,360
Speaker 1: and it doesn't sound like we can. Can you convince

134
00:08:19,440 --> 00:08:25,720
Speaker 1: the audience otherwise? I can only give you the facts, Okay,

135
00:08:25,760 --> 00:08:29,320
Speaker 1: as I've laid them out, and as I've said, the

136
00:08:29,320 --> 00:08:34,160
Speaker 1: president's view, the majority leader's view, Mrs McConnell, my view

137
00:08:34,200 --> 00:08:37,719
Speaker 1: is certainly Steve Minution's view over a treasury as we

138
00:08:38,080 --> 00:08:41,880
Speaker 1: UH have targeted areas of assistance that we think would

139
00:08:41,880 --> 00:08:47,800
Speaker 1: strengthen the economy, and those include most particularly um p

140
00:08:48,000 --> 00:08:51,520
Speaker 1: PP for small businesses which are in need dealing with

141
00:08:51,600 --> 00:08:54,960
Speaker 1: COVID spikes that we expect even more in the Christmas

142
00:08:54,960 --> 00:09:00,520
Speaker 1: holiday season, and some unemployment assistance which also we would

143
00:09:00,559 --> 00:09:04,080
Speaker 1: like to have again to get us through UH the

144
00:09:04,240 --> 00:09:09,760
Speaker 1: COVID UH spikes and recovery elsewhere is pretty strong. Now

145
00:09:09,880 --> 00:09:13,880
Speaker 1: let me add this point. Help is on the way.

146
00:09:14,080 --> 00:09:19,280
Speaker 1: The vaccines will be distributed. Early distribution in a week

147
00:09:19,640 --> 00:09:23,920
Speaker 1: or two. Okay, I was at Vice President Pence's COVID

148
00:09:24,120 --> 00:09:27,760
Speaker 1: task Force a week or two. They are expecting, these

149
00:09:27,760 --> 00:09:31,520
Speaker 1: are the experts UH at least twenty million by the

150
00:09:31,600 --> 00:09:34,840
Speaker 1: end of December, and at least another twenty million to

151
00:09:34,840 --> 00:09:38,200
Speaker 1: get the forty million by January, on their way to

152
00:09:38,280 --> 00:09:42,880
Speaker 1: one hundred million in March. Now that becomes awfully important,

153
00:09:43,040 --> 00:09:46,640
Speaker 1: not only for the health and safety of Americans, but

154
00:09:46,840 --> 00:09:51,360
Speaker 1: also it will help keep businesses open, which is our view,

155
00:09:51,400 --> 00:09:54,320
Speaker 1: we do not want businesses closed, and it will help

156
00:09:54,400 --> 00:09:58,400
Speaker 1: keep schools open, which is our view as President Trump's you,

157
00:09:58,679 --> 00:10:01,880
Speaker 1: we do not want school uh closed. So that is

158
00:10:01,920 --> 00:10:06,080
Speaker 1: going to be an enormous boost. And we have to

159
00:10:06,160 --> 00:10:10,480
Speaker 1: kind of lean through this period of the spiking COVID.

160
00:10:10,520 --> 00:10:12,920
Speaker 1: We get that, that's what our experts are telling us.

161
00:10:13,200 --> 00:10:16,720
Speaker 1: But help is on the way. And um, we have

162
00:10:16,840 --> 00:10:21,320
Speaker 1: this massive program, Operation Warp Speed, which is panning out

163
00:10:21,720 --> 00:10:23,880
Speaker 1: and then it's gonna be great boon for America. Is

164
00:10:23,920 --> 00:10:26,960
Speaker 1: gonna be great boon for the American economy. So coming

165
00:10:27,000 --> 00:10:30,560
Speaker 1: back to the stimulus package, I'm gonna say again we

166
00:10:30,720 --> 00:10:36,400
Speaker 1: see important targeted areas, most particularly I'll narrow it down

167
00:10:36,400 --> 00:10:41,199
Speaker 1: to a couple, frankly, most particularly small businesses. The p

168
00:10:41,360 --> 00:10:45,800
Speaker 1: p P program, which probably saved fifty million jobs. In fact,

169
00:10:46,240 --> 00:10:49,720
Speaker 1: the temporary lawyoups. Now roughly two thirds of them have

170
00:10:49,840 --> 00:10:53,320
Speaker 1: gone back to work, which is terrific. Um. Secondly, some

171
00:10:53,440 --> 00:10:58,280
Speaker 1: unemployment assistance because as I've acknowledged, despite much better than

172
00:10:58,360 --> 00:11:01,360
Speaker 1: expected jobs numbers for the last seven months, there are

173
00:11:01,400 --> 00:11:03,440
Speaker 1: still hardships that we need to help out on that.

174
00:11:03,600 --> 00:11:06,320
Speaker 1: I would say those are the two biggest and perhaps

175
00:11:06,600 --> 00:11:10,800
Speaker 1: COVID related assistance UM to schools. We want to keep

176
00:11:10,840 --> 00:11:13,040
Speaker 1: the schools open. We want to keep the business open.

177
00:11:13,480 --> 00:11:17,000
Speaker 1: We've got a strong economy and retail sales and housing

178
00:11:17,280 --> 00:11:20,280
Speaker 1: and capital goods and durable good sales. One of my

179
00:11:20,400 --> 00:11:22,840
Speaker 1: favorite best indicators I've seen. I get a lot of

180
00:11:22,880 --> 00:11:27,280
Speaker 1: material from the Wall Street friends. Uh Ed Hyman, one

181
00:11:27,280 --> 00:11:31,240
Speaker 1: of the top economists, has a Christmas Tree survey. Christmas.

182
00:11:31,280 --> 00:11:33,719
Speaker 1: He's a wonderful guy as a brilliant guy. He has

183
00:11:33,800 --> 00:11:37,360
Speaker 1: his Christmas Tree survey. It's up twenty nine percent year

184
00:11:37,440 --> 00:11:41,320
Speaker 1: over year. That's a good holiday spirit number. That tells

185
00:11:41,400 --> 00:11:46,280
Speaker 1: me we are in fact in the v shape recovery. Larry,

186
00:11:46,320 --> 00:11:48,640
Speaker 1: I gave you three full minutes then, so you and

187
00:11:48,679 --> 00:11:51,440
Speaker 1: I can finish on good terms. One final question, sir.

188
00:11:51,800 --> 00:11:54,679
Speaker 1: We've gone back and forth together for three or four years,

189
00:11:54,720 --> 00:11:56,959
Speaker 1: sometimes with a little bit of rough and tumble. We've

190
00:11:56,960 --> 00:11:59,760
Speaker 1: always got our points across. Let me give the opportunity

191
00:11:59,800 --> 00:12:03,080
Speaker 1: to do one final thing for your success. What's advice?

192
00:12:03,160 --> 00:12:08,920
Speaker 1: Full of them? I've never met him. Um, I'm not

193
00:12:08,960 --> 00:12:12,040
Speaker 1: gonna give him policy advice because I fear we have

194
00:12:12,160 --> 00:12:16,600
Speaker 1: some significant disagreements. But we're in a honeymoon period of sorts. Look,

195
00:12:17,080 --> 00:12:20,360
Speaker 1: anyc director is a fabulous job. It's a great honor

196
00:12:20,400 --> 00:12:22,920
Speaker 1: for me to have had that. It's a great honor

197
00:12:22,960 --> 00:12:25,840
Speaker 1: for me to serve our country as well as this president.

198
00:12:26,720 --> 00:12:31,120
Speaker 1: NBC is a very powerful UH Council. It gets involved

199
00:12:31,120 --> 00:12:35,680
Speaker 1: in nearly every aspect of economic, life, of trade, life

200
00:12:35,760 --> 00:12:39,800
Speaker 1: of national security matters. As sits on the National Security Council,

201
00:12:40,280 --> 00:12:44,160
Speaker 1: it is involved across the board almost every conceivable thing

202
00:12:44,679 --> 00:12:47,560
Speaker 1: in the NBC. It's a great job. I wish him luck,

203
00:12:48,080 --> 00:12:51,400
Speaker 1: I do. I pray for him. I do um he

204
00:12:51,559 --> 00:12:53,920
Speaker 1: better be ready to work hard hours. But I'm sure

205
00:12:53,920 --> 00:12:57,120
Speaker 1: he knows that he has served in government before. It's

206
00:12:57,120 --> 00:13:00,240
Speaker 1: a terrific job, and I am blessed to have held

207
00:13:00,280 --> 00:13:03,040
Speaker 1: that job for nearly three years. As I say, it's

208
00:13:03,040 --> 00:13:05,720
Speaker 1: a high point in my professional career. And I've always

209
00:13:05,720 --> 00:13:08,920
Speaker 1: thanked President Trump on that, and I thank everybody else

210
00:13:08,960 --> 00:13:11,800
Speaker 1: for the opportunity to do this. I just loved the job,

211
00:13:13,679 --> 00:13:15,760
Speaker 1: and we thank you for your contribution to this program.

212
00:13:15,800 --> 00:13:17,800
Speaker 1: Larry Cudlo, Thank you, sir. I have a good Christmas

213
00:13:17,800 --> 00:13:19,679
Speaker 1: and we don't catch up. Larry Cudlo. They're the National

214
00:13:19,720 --> 00:13:27,080
Speaker 1: Economic Council directed from the market. You want to us now,

215
00:13:27,120 --> 00:13:31,120
Speaker 1: pre A misraa TV Securities global head of Rates Strategy, Preyer,

216
00:13:31,320 --> 00:13:33,880
Speaker 1: the number in about one hour and twenty five minutes.

217
00:13:33,920 --> 00:13:36,480
Speaker 1: Does it matter to you? It doesn't matter. I think

218
00:13:36,520 --> 00:13:40,320
Speaker 1: I've been watching the momentum. Clearly that December number is

219
00:13:40,320 --> 00:13:42,679
Speaker 1: going to matter more because that's when the COVID restrictions

220
00:13:42,679 --> 00:13:46,320
Speaker 1: should show up in the data. But our economists do

221
00:13:46,440 --> 00:13:49,120
Speaker 1: have a much weaker number, and I think this market

222
00:13:49,160 --> 00:13:51,760
Speaker 1: that's forward looking, that's pricing in the end of the

223
00:13:51,960 --> 00:13:54,160
Speaker 1: you know, the light at the end of the tunney,

224
00:13:54,200 --> 00:13:58,120
Speaker 1: if the tunnel is long, and you know, scary because

225
00:13:58,160 --> 00:14:02,800
Speaker 1: we're heading into a period of weaker economic growth. I

226
00:14:02,800 --> 00:14:05,000
Speaker 1: think the market, that at least the rates market, is

227
00:14:05,000 --> 00:14:08,320
Speaker 1: not pricing in much of that weakness. The tenure is

228
00:14:08,400 --> 00:14:10,600
Speaker 1: almost at one percent, so I think the market is

229
00:14:10,600 --> 00:14:14,480
Speaker 1: really pricing in this vaccine fuel recovery stimulus. Well, we

230
00:14:14,520 --> 00:14:17,680
Speaker 1: may have to deal with a lower growth environment and

231
00:14:17,720 --> 00:14:20,160
Speaker 1: the FED doing more, so I think you actually do

232
00:14:20,280 --> 00:14:22,240
Speaker 1: get a reaction in the rates market if it's anything

233
00:14:22,320 --> 00:14:25,320
Speaker 1: less than four hundred, three hundred thousand, and our economists

234
00:14:25,320 --> 00:14:28,120
Speaker 1: of two hundred thousand, So we're actually going into this

235
00:14:28,320 --> 00:14:31,280
Speaker 1: number long treasurees. Prea, I gotta make some money here.

236
00:14:31,320 --> 00:14:34,000
Speaker 1: The kids wanted a twenty Christmas tree, so you know,

237
00:14:34,080 --> 00:14:37,480
Speaker 1: I get broke the bank yesterday. What I want to know, Prea,

238
00:14:37,640 --> 00:14:40,200
Speaker 1: is do I step in here and buy fixed income

239
00:14:40,280 --> 00:14:44,080
Speaker 1: by bonds, notes and bills because we've had a nice

240
00:14:44,160 --> 00:14:46,720
Speaker 1: move in yield and now is the opportunity to look

241
00:14:46,720 --> 00:14:50,680
Speaker 1: for lower yields later. I think so yes. I don't

242
00:14:50,680 --> 00:14:53,040
Speaker 1: know if it's going to get you your your Christmas tree,

243
00:14:53,240 --> 00:14:54,960
Speaker 1: but I think you have to buy a lot more

244
00:14:55,160 --> 00:14:58,600
Speaker 1: treasuries just because the the extent of rate move I'm

245
00:14:58,600 --> 00:15:00,640
Speaker 1: looking for is like twenty base points. You know, do

246
00:15:00,720 --> 00:15:03,880
Speaker 1: we get to seventy eight basis points on the tenure?

247
00:15:04,200 --> 00:15:06,680
Speaker 1: So so there is a floor. We're just very low,

248
00:15:07,040 --> 00:15:09,280
Speaker 1: you know, close to zero. But I do think we've

249
00:15:09,320 --> 00:15:12,840
Speaker 1: sold off in treasuries pricing in all the good news

250
00:15:12,880 --> 00:15:15,360
Speaker 1: out there. There is a key FED meeting coming up,

251
00:15:15,400 --> 00:15:17,800
Speaker 1: and our views that they're going to make Quei state

252
00:15:17,880 --> 00:15:20,880
Speaker 1: contingent and they're going to extend the average maturity of

253
00:15:20,960 --> 00:15:23,600
Speaker 1: QUIE purchases. They just kind of have to do it,

254
00:15:23,720 --> 00:15:27,040
Speaker 1: the markets forcing them to do it, and they've realized

255
00:15:27,080 --> 00:15:29,480
Speaker 1: that they could be longer term scarring. We still have

256
00:15:29,560 --> 00:15:32,280
Speaker 1: so much uncertainty about the vaccine, So I think rates

257
00:15:32,280 --> 00:15:34,720
Speaker 1: have sort of priced in too much of that good news,

258
00:15:34,720 --> 00:15:36,240
Speaker 1: and we haven't quite priced in that we have a

259
00:15:36,240 --> 00:15:39,880
Speaker 1: long way to go before that COVID recovery is is

260
00:15:39,960 --> 00:15:42,680
Speaker 1: upon us. Built a little bit on this idea that

261
00:15:42,720 --> 00:15:45,720
Speaker 1: the market is forcing the FED to extend the duration

262
00:15:45,880 --> 00:15:48,000
Speaker 1: of its purchases. I'm looking right now at a tenure

263
00:15:48,400 --> 00:15:52,160
Speaker 1: zero point nine two six percent, not exactly screaming we're

264
00:15:52,240 --> 00:15:55,960
Speaker 1: running away with higher yield that could potentially threaten financial conditions.

265
00:15:56,320 --> 00:15:59,000
Speaker 1: Why do you think that they are forcing the Fed's hand?

266
00:15:59,080 --> 00:16:01,280
Speaker 1: And what does bond what do boundary able to do

267
00:16:01,640 --> 00:16:05,240
Speaker 1: if they do not confirm the market's expectation. So I'm

268
00:16:05,240 --> 00:16:08,040
Speaker 1: going to say the FED is the only marginal buyer

269
00:16:08,120 --> 00:16:11,520
Speaker 1: of treasuries right right now, particularly in the long end.

270
00:16:11,720 --> 00:16:13,640
Speaker 1: You know, the front end is so anchored by the

271
00:16:13,680 --> 00:16:17,080
Speaker 1: FED because of their faith policy, because of just inflation

272
00:16:17,160 --> 00:16:19,840
Speaker 1: being low, that if investors want to be in treasuries,

273
00:16:19,840 --> 00:16:21,960
Speaker 1: they want to be in that front end. Meanwhile, the

274
00:16:22,080 --> 00:16:24,320
Speaker 1: U S treasuries is showing a lot of long dated

275
00:16:24,400 --> 00:16:27,160
Speaker 1: paper and that's really only happened in the last few

276
00:16:27,200 --> 00:16:31,000
Speaker 1: months that they've you know, they've increased long end coupon

277
00:16:31,040 --> 00:16:34,800
Speaker 1: sizes significantly. So the market right now is expecting the

278
00:16:34,840 --> 00:16:37,360
Speaker 1: Fed to do something in December, which is why we're

279
00:16:37,400 --> 00:16:41,160
Speaker 1: at one percent. If that meeting happens with nothing, I

280
00:16:41,200 --> 00:16:44,960
Speaker 1: think we're breaking through that one. You know, do are

281
00:16:44,960 --> 00:16:48,040
Speaker 1: we the brink of a taper tantrum? And I think

282
00:16:48,040 --> 00:16:50,960
Speaker 1: the Fed knows that, which is why we expect them

283
00:16:51,000 --> 00:16:52,880
Speaker 1: to come in and sort of tell us that they're

284
00:16:52,880 --> 00:16:56,040
Speaker 1: going to keep conditions accommodative. It's a wife from your remit,

285
00:16:56,120 --> 00:16:58,240
Speaker 1: but I'm going to go there. Are we back to

286
00:16:58,320 --> 00:17:02,360
Speaker 1: two thousand five and two thousands six of the silly

287
00:17:02,440 --> 00:17:05,920
Speaker 1: season of parsing out every hundreds of a basis point

288
00:17:06,400 --> 00:17:10,239
Speaker 1: of investment grade, high yield leverage loan yield? I mean,

289
00:17:10,280 --> 00:17:15,040
Speaker 1: are we back to the silliness of reaching out for yield? Yeah?

290
00:17:15,080 --> 00:17:17,040
Speaker 1: I don't know if you call it silliness, but we

291
00:17:17,119 --> 00:17:20,760
Speaker 1: are in a very serious reach for yield environment. And

292
00:17:20,800 --> 00:17:23,400
Speaker 1: the question is that sometimes people don't understand the risk

293
00:17:23,440 --> 00:17:28,360
Speaker 1: they're taking, but they're forced into different alternative assets. Um, yes,

294
00:17:28,440 --> 00:17:31,600
Speaker 1: I think we're you know, I would suggest people should

295
00:17:31,640 --> 00:17:35,560
Speaker 1: do credit work because defaultress is miss priced in certain products.

296
00:17:35,560 --> 00:17:38,040
Speaker 1: But in the investment grade sector where you're not worried

297
00:17:38,040 --> 00:17:41,080
Speaker 1: about default risk and you're not worried about interest rates

298
00:17:41,080 --> 00:17:44,560
Speaker 1: going higher, I think like anything is fair game in

299
00:17:44,680 --> 00:17:46,800
Speaker 1: terms of how do I get that extra yield. And

300
00:17:46,840 --> 00:17:50,200
Speaker 1: we're seeing it in people selling volatility at historic laws.

301
00:17:50,520 --> 00:17:53,840
Speaker 1: People are selling ball, They're taking spread risk, they're taking

302
00:17:53,840 --> 00:17:56,320
Speaker 1: effects risk. So I think if interest rates are not

303
00:17:56,359 --> 00:17:57,960
Speaker 1: going to give you that return, you're going to have

304
00:17:58,040 --> 00:18:00,040
Speaker 1: to go into other products to get that written on.

305
00:18:00,440 --> 00:18:03,240
Speaker 1: And you know that's the intended consequence of QUI. That's

306
00:18:03,280 --> 00:18:06,480
Speaker 1: what the portfolio balance channel is. You take duration risk out,

307
00:18:06,520 --> 00:18:09,600
Speaker 1: the central bank takes duration risk out and force investors

308
00:18:09,600 --> 00:18:12,360
Speaker 1: into the risk spectrum, and the hope is that that

309
00:18:12,800 --> 00:18:17,359
Speaker 1: translates somewhere into an economic recovery and then everything makes sense.

310
00:18:17,840 --> 00:18:19,919
Speaker 1: I mean, there's a big hope in there that you

311
00:18:19,960 --> 00:18:23,720
Speaker 1: don't see this disconnect between the economy and markets. We

312
00:18:23,800 --> 00:18:26,080
Speaker 1: all hope it makes sense. In the end, we spent

313
00:18:26,119 --> 00:18:29,240
Speaker 1: ten years debating whether it made sense. A decade ago prayer,

314
00:18:29,320 --> 00:18:35,840
Speaker 1: Thank you, TV Securities. I'm gonna put it on a

315
00:18:35,960 --> 00:18:40,359
Speaker 1: terminal at nine strength in Chinese Yuan, that just racing

316
00:18:40,440 --> 00:18:43,600
Speaker 1: since June, and we see that across the Pacific rim folding.

317
00:18:43,640 --> 00:18:46,359
Speaker 1: All this in has been chatting in all of Morgan

318
00:18:46,440 --> 00:18:50,760
Speaker 1: Stanley Economics. The leadership of Allen Zetner, their chief US economists,

319
00:18:50,760 --> 00:18:54,040
Speaker 1: has been extraordinary to try to figure out the ebbs

320
00:18:54,080 --> 00:18:57,479
Speaker 1: and flows of g d P and how it folds

321
00:18:57,480 --> 00:19:01,720
Speaker 1: into appending jobs report early in January of next year.

322
00:19:01,840 --> 00:19:05,920
Speaker 1: Msentner joins us this morning, Ellen, by great definition, today's

323
00:19:06,960 --> 00:19:11,359
Speaker 1: discussion today's jobs report really is a look back. What

324
00:19:11,600 --> 00:19:15,360
Speaker 1: is the data you see now for the January report?

325
00:19:15,640 --> 00:19:20,120
Speaker 1: What does December look like? Yeah, So as we rolled forward,

326
00:19:20,160 --> 00:19:24,320
Speaker 1: I think we continue to see job growth slow here. Um.

327
00:19:24,359 --> 00:19:26,600
Speaker 1: I think we do still hang on to some net

328
00:19:26,680 --> 00:19:30,760
Speaker 1: job gains because the economy isn't shut down broadly as

329
00:19:30,800 --> 00:19:34,280
Speaker 1: we did earlier this year. Um, but certainly the amount

330
00:19:34,320 --> 00:19:37,240
Speaker 1: of folks coming back to the labor market and absolutely

331
00:19:37,240 --> 00:19:40,320
Speaker 1: in that service side of the economy, Um, it just

332
00:19:40,400 --> 00:19:42,240
Speaker 1: has to slow further. I mean, it's going to be

333
00:19:42,280 --> 00:19:46,119
Speaker 1: a difficult winter. We know this, We're married to this idea.

334
00:19:46,200 --> 00:19:48,800
Speaker 1: We're all disappointed in what the winter is going to

335
00:19:48,920 --> 00:19:52,840
Speaker 1: look like. But these peril reports are getting overshadowed by

336
00:19:53,000 --> 00:19:56,560
Speaker 1: positive news on the vaccine front and the fiscal headlines.

337
00:19:57,400 --> 00:20:01,520
Speaker 1: Are we going to see services dison, inflations stay where

338
00:20:01,520 --> 00:20:05,280
Speaker 1: it is with a slowdown in the service sector, or

339
00:20:05,280 --> 00:20:09,720
Speaker 1: do we get back to normal inflation dynamics between services

340
00:20:09,760 --> 00:20:13,240
Speaker 1: and goods. Well, that's those. So those are the two

341
00:20:13,240 --> 00:20:16,200
Speaker 1: biggest drivers of our inflation forecast for next year. I

342
00:20:16,240 --> 00:20:20,040
Speaker 1: mean goods inflation has been driving the numbers this year

343
00:20:20,080 --> 00:20:22,720
Speaker 1: because the good side of the economy that has been

344
00:20:22,720 --> 00:20:26,760
Speaker 1: growing and driving output, that consumer demand for durable goods.

345
00:20:26,840 --> 00:20:29,479
Speaker 1: But next year, as we roll into next year and

346
00:20:29,640 --> 00:20:32,880
Speaker 1: activity starts to pick up, as we move further through

347
00:20:32,920 --> 00:20:36,520
Speaker 1: getting the vaccine rolled out and activity picking up, that

348
00:20:36,640 --> 00:20:40,240
Speaker 1: services side does come back. And that is the lion's

349
00:20:40,280 --> 00:20:42,800
Speaker 1: share of consumer demand. It's the lion share and what

350
00:20:42,880 --> 00:20:47,080
Speaker 1: drives the price indusease. So goods prices decelerating, but services

351
00:20:47,119 --> 00:20:51,040
Speaker 1: prices pick up. Services prices representing the bulk of the

352
00:20:51,080 --> 00:20:55,399
Speaker 1: price induseries means inflation will be higher next year. Ellen.

353
00:20:55,640 --> 00:20:57,840
Speaker 1: Everyone is saying that the economy will come back in

354
00:20:59,000 --> 00:21:01,159
Speaker 1: and certainly that is in census, and it's easy to

355
00:21:01,200 --> 00:21:03,240
Speaker 1: see how that could be. The case, but the post

356
00:21:03,240 --> 00:21:07,200
Speaker 1: pandemic economy will look quite different in terms of consolidation

357
00:21:07,280 --> 00:21:10,520
Speaker 1: of companies being stronger and bigger at the top and

358
00:21:10,560 --> 00:21:12,800
Speaker 1: the smaller companies that have gone out of business. What

359
00:21:12,840 --> 00:21:16,880
Speaker 1: does that mean longer term for the labor market. Yeah,

360
00:21:16,880 --> 00:21:20,040
Speaker 1: so you know, the small businesses are the driver of

361
00:21:20,040 --> 00:21:23,240
Speaker 1: of job growth UM and part of the loss of

362
00:21:23,280 --> 00:21:26,520
Speaker 1: wage bargaining power over time has been the rise of

363
00:21:26,600 --> 00:21:30,960
Speaker 1: mega companies and company density uh. And so that is

364
00:21:31,000 --> 00:21:35,080
Speaker 1: something that when you add that to the other inequities

365
00:21:35,080 --> 00:21:38,359
Speaker 1: that have been exposed further exposed by COVID On the

366
00:21:38,400 --> 00:21:42,359
Speaker 1: household side, I think it's a heavy lift that the

367
00:21:42,400 --> 00:21:44,840
Speaker 1: Democratic Party is going to focus on in terms of

368
00:21:44,880 --> 00:21:49,199
Speaker 1: that fiscal policy activism that overall tries to raise the

369
00:21:49,320 --> 00:21:52,480
Speaker 1: labor share of of profits UM and that is has

370
00:21:52,520 --> 00:21:55,920
Speaker 1: been part of our longer run thesis on wise inflation

371
00:21:56,080 --> 00:21:58,520
Speaker 1: over the long run would be structurally higher. I think

372
00:21:58,560 --> 00:22:01,080
Speaker 1: that's going to be the focus going forward, not just

373
00:22:01,119 --> 00:22:04,960
Speaker 1: household inequities, but inequities on the business side as well.

374
00:22:06,200 --> 00:22:08,080
Speaker 1: And we spend a lot of time on programs like

375
00:22:08,119 --> 00:22:10,719
Speaker 1: this beating up on the south side, I have to say,

376
00:22:10,800 --> 00:22:13,639
Speaker 1: let's just take a moment to really talk about. One

377
00:22:13,720 --> 00:22:16,280
Speaker 1: of the calls coming out of this crisis, and that

378
00:22:16,320 --> 00:22:18,800
Speaker 1: was from you and the team that this recovery would

379
00:22:18,800 --> 00:22:21,920
Speaker 1: be quick, This recovery would be sharp, it would look

380
00:22:21,960 --> 00:22:24,040
Speaker 1: like a v And that was something we heard from

381
00:22:24,040 --> 00:22:27,120
Speaker 1: politicians down in Washington. But many people just did not believe.

382
00:22:27,560 --> 00:22:30,000
Speaker 1: This has been so underappreciated in the same way the

383
00:22:30,000 --> 00:22:33,280
Speaker 1: equity market record highs are hated. And what did everyone

384
00:22:33,280 --> 00:22:35,399
Speaker 1: get wrong? What do we learn from the lesson and

385
00:22:35,400 --> 00:22:38,680
Speaker 1: how do we apply it for the months still to come. Well,

386
00:22:38,720 --> 00:22:41,560
Speaker 1: I think you know, from for me, there's a there's

387
00:22:41,600 --> 00:22:45,600
Speaker 1: a story that's missing in that that V shape recovery. Um.

388
00:22:45,680 --> 00:22:47,720
Speaker 1: And to me, it's you know, when you open up

389
00:22:47,800 --> 00:22:52,720
Speaker 1: from nothing to something, it's a very big jumping activity. Uh.

390
00:22:52,720 --> 00:22:56,080
Speaker 1: And this was not a cyclical downturn. This is very

391
00:22:56,119 --> 00:23:00,280
Speaker 1: structural downturn. So the way the virus would play out away,

392
00:23:00,400 --> 00:23:03,200
Speaker 1: vaccine development would play out the way the economy and

393
00:23:03,480 --> 00:23:07,520
Speaker 1: opens up. That's what's dictating that V shape in the economy.

394
00:23:07,600 --> 00:23:10,600
Speaker 1: Where I am still greatly disappointed and where I think

395
00:23:10,600 --> 00:23:13,000
Speaker 1: there's still a lot of heavy lifting to do is

396
00:23:13,040 --> 00:23:16,280
Speaker 1: exactly what share Pal and the feather looking at as well.

397
00:23:16,320 --> 00:23:19,639
Speaker 1: I'm looking at women's labor force participation rates, I'm looking

398
00:23:19,640 --> 00:23:23,600
Speaker 1: at the unemployment rate of minority communities, of the unemployment

399
00:23:23,680 --> 00:23:26,200
Speaker 1: rate of those that are concentrated in low wage paying

400
00:23:26,240 --> 00:23:29,280
Speaker 1: service sectors. That you're going to see longer term damage

401
00:23:29,320 --> 00:23:31,480
Speaker 1: from this, and so I do think that there is

402
00:23:31,520 --> 00:23:36,280
Speaker 1: a great need and focus on further fiscal support so

403
00:23:36,480 --> 00:23:40,240
Speaker 1: that these longer term unemployed folks don't leave the labor

404
00:23:40,280 --> 00:23:44,240
Speaker 1: market all together. Because if that's the case, then it

405
00:23:44,280 --> 00:23:47,720
Speaker 1: doesn't matter that we've got a V shape recovery. It's

406
00:23:47,720 --> 00:23:50,840
Speaker 1: going to matter that longer run potential growth has been advantage.

407
00:23:51,800 --> 00:23:53,720
Speaker 1: So this is important, Adam. The big call from Marcin

408
00:23:53,760 --> 00:23:56,720
Speaker 1: Stanley was this V shaped recovery at the headline level.

409
00:23:57,080 --> 00:24:00,600
Speaker 1: The complication you're talking about is the disparency beneath. Have

410
00:24:00,720 --> 00:24:03,440
Speaker 1: we already done sufficient damage that it could take years,

411
00:24:03,480 --> 00:24:06,400
Speaker 1: maybe even a decade to recover from what we've experienced

412
00:24:06,440 --> 00:24:09,720
Speaker 1: that or can we actually do something about it? No?

413
00:24:09,840 --> 00:24:11,920
Speaker 1: I think we can do something about it. I mean,

414
00:24:11,960 --> 00:24:15,960
Speaker 1: the the biggest way that that you can UH affect

415
00:24:16,960 --> 00:24:21,960
Speaker 1: help those underlying UH components of the labor market is

416
00:24:22,040 --> 00:24:26,439
Speaker 1: by running a tight labor market, meaning a hot economy,

417
00:24:27,240 --> 00:24:32,639
Speaker 1: very easy monetary policy, accommodation, targeted fiscal policies right up front,

418
00:24:33,000 --> 00:24:37,280
Speaker 1: more as clearly needed. Uh, and we expect more to come. Um.

419
00:24:37,320 --> 00:24:40,120
Speaker 1: But those kinds of things can get you as kind

420
00:24:40,200 --> 00:24:42,200
Speaker 1: of a labor market, so as low of an unemployment

421
00:24:42,280 --> 00:24:45,320
Speaker 1: rate as possible, as quickly as possible, And we do

422
00:24:45,400 --> 00:24:48,840
Speaker 1: think by the end of with that kind of focus,

423
00:24:48,880 --> 00:24:51,399
Speaker 1: we can push the unemployment rate down back down to

424
00:24:51,440 --> 00:24:54,680
Speaker 1: around four percent, so getting close to the Fed's goal

425
00:24:54,760 --> 00:24:59,040
Speaker 1: of maximum employment. But without that, you know, I think

426
00:24:59,119 --> 00:25:02,560
Speaker 1: the literature, there's a there's a broad body of literature

427
00:25:02,600 --> 00:25:06,560
Speaker 1: that shows that if you have a sluggish recovery after

428
00:25:06,680 --> 00:25:11,040
Speaker 1: a deep downturn, that you do see permanent scarring to

429
00:25:11,160 --> 00:25:13,720
Speaker 1: the economy. So I can't stress enough that we need

430
00:25:13,760 --> 00:25:16,719
Speaker 1: to be doing all of this upfront now in order

431
00:25:16,720 --> 00:25:19,280
Speaker 1: to push the unemployment right down as quickly as possible

432
00:25:19,640 --> 00:25:22,560
Speaker 1: and get those folks back reattached to the labor market

433
00:25:22,600 --> 00:25:26,480
Speaker 1: and re employed. Ellen, given the high flying stocks, given

434
00:25:26,480 --> 00:25:28,760
Speaker 1: the fact that equity markets are at new highs again

435
00:25:28,920 --> 00:25:32,439
Speaker 1: and again, does that complicate the urgency to try to

436
00:25:32,480 --> 00:25:35,160
Speaker 1: get something done? As you say, on the fiscal side,

437
00:25:35,160 --> 00:25:38,159
Speaker 1: in other words, is the high the high valuation of

438
00:25:38,200 --> 00:25:44,080
Speaker 1: equities actually hampering the fundamental recovery of the economy. Uh. Well,

439
00:25:44,119 --> 00:25:49,840
Speaker 1: the hampering the fundamental recovery, uh No, but hampering what

440
00:25:50,040 --> 00:25:55,080
Speaker 1: typically are drivers of Congress to act quickly. Yes. Uh.

441
00:25:55,119 --> 00:25:57,560
Speaker 1: And you know there's there's nothing like good old market

442
00:25:57,600 --> 00:26:01,040
Speaker 1: volatility and sell off and really bad data coming in

443
00:26:01,080 --> 00:26:04,159
Speaker 1: to get Congress to act quickly. Uh. And we've just

444
00:26:04,200 --> 00:26:07,720
Speaker 1: not been forced by that. We're trying to before looking

445
00:26:07,720 --> 00:26:10,639
Speaker 1: here and call for fiscal you know, further fiscal support

446
00:26:10,720 --> 00:26:13,920
Speaker 1: before we see broad swass of the labor market gets

447
00:26:13,920 --> 00:26:18,159
Speaker 1: sent back home if the the virus tightens its grip

448
00:26:18,280 --> 00:26:22,080
Speaker 1: over the winter, uh, and we see further shutdowns. Um.

449
00:26:22,240 --> 00:26:25,240
Speaker 1: But certainly, you know, if we got that negative payroll's

450
00:26:25,240 --> 00:26:28,639
Speaker 1: print today, which we're not expecting. Um. But as John

451
00:26:28,680 --> 00:26:30,720
Speaker 1: pointed out, there's a big spread and there are some

452
00:26:30,760 --> 00:26:35,440
Speaker 1: expectations for a negative number, certainly that would impress urgency

453
00:26:35,520 --> 00:26:38,640
Speaker 1: upon Congress to do something. I think the bizarre thing

454
00:26:38,680 --> 00:26:41,439
Speaker 1: out of today's payroll print print is if it is

455
00:26:41,680 --> 00:26:45,119
Speaker 1: a bad print, folks might take that as a good

456
00:26:45,119 --> 00:26:48,639
Speaker 1: thing because it might push Congress to act. Ellen. I

457
00:26:48,680 --> 00:26:51,240
Speaker 1: want you to help your colleague Mike's Mike Wilson. I

458
00:26:51,280 --> 00:26:53,480
Speaker 1: know he listens, he hangs on your every word. But

459
00:26:53,520 --> 00:26:56,320
Speaker 1: I want you to play equity strategist right now because

460
00:26:56,359 --> 00:26:59,760
Speaker 1: it is part of economics. Nance deck went a hundred off.

461
00:26:59,840 --> 00:27:04,480
Speaker 1: The financial crisis trend is out three standard deviations. It's

462
00:27:04,520 --> 00:27:08,280
Speaker 1: an exceptionally elegant chart and it shows the monetary and

463
00:27:08,320 --> 00:27:11,560
Speaker 1: fiscal of the nation, which is driven equities. There's no

464
00:27:11,640 --> 00:27:15,600
Speaker 1: question about that. Do you just assume a mean mean

465
00:27:15,680 --> 00:27:19,520
Speaker 1: reversion of equities within a five or ten year view?

466
00:27:19,840 --> 00:27:22,040
Speaker 1: Is that just part of your playbook that you got

467
00:27:22,040 --> 00:27:26,159
Speaker 1: to tell Mike Wilson about. Yeah, I don't think I

468
00:27:26,240 --> 00:27:28,760
Speaker 1: give him advice on where equities will be. And as

469
00:27:28,800 --> 00:27:31,600
Speaker 1: you know, when economists put on a strategist had it

470
00:27:31,640 --> 00:27:36,639
Speaker 1: can be pretty dangerous. Um. But he's gonna target on

471
00:27:36,800 --> 00:27:38,760
Speaker 1: SMP at the end of next year, and I think

472
00:27:38,800 --> 00:27:40,800
Speaker 1: where I think people are going to be surprised at

473
00:27:40,840 --> 00:27:44,280
Speaker 1: how much economic activity we pick back up over the

474
00:27:44,320 --> 00:27:46,560
Speaker 1: course of the year as we're rolling out the vaccine.

475
00:27:46,880 --> 00:27:50,360
Speaker 1: I can tell you from just a personal experience, as

476
00:27:50,400 --> 00:27:53,679
Speaker 1: soon as the efficacy rates of the vaccine began getting

477
00:27:53,680 --> 00:27:57,040
Speaker 1: reported that we're so positive. Um, you try to pick

478
00:27:57,119 --> 00:28:00,119
Speaker 1: any summer travel place and have it with a with

479
00:28:00,160 --> 00:28:04,520
Speaker 1: a with a healthy cancelation policy. Uh. And the two

480
00:28:04,600 --> 00:28:06,600
Speaker 1: of the top three places we wanted to go to

481
00:28:06,680 --> 00:28:09,520
Speaker 1: more already booked. People were booking that quickly. So I

482
00:28:09,520 --> 00:28:12,440
Speaker 1: think we will be surprised at how quickly activity comes back,

483
00:28:12,680 --> 00:28:15,160
Speaker 1: and I think investors are looking forward to that. That's

484
00:28:15,200 --> 00:28:21,199
Speaker 1: a very yesterday, Ellen, thank you, and thank you for

485
00:28:21,280 --> 00:28:24,439
Speaker 1: phenomenal guidance through much of this year. Allen Setta of

486
00:28:24,480 --> 00:28:31,240
Speaker 1: Morgan Stanley, thank you very much. Were on policy is

487
00:28:31,320 --> 00:28:35,040
Speaker 1: John Farrell mentions a key topic with Mr Caudlow, Henrietta

488
00:28:35,080 --> 00:28:37,919
Speaker 1: tres joins us. Henrietta is the ink drying on a

489
00:28:37,920 --> 00:28:40,640
Speaker 1: stimulus bill right now? Are you that certain it can

490
00:28:40,680 --> 00:28:44,240
Speaker 1: get done? I've actually I felt pretty great about it. Honestly.

491
00:28:44,280 --> 00:28:46,760
Speaker 1: I know that's crazy talk after the last six months

492
00:28:46,800 --> 00:28:49,560
Speaker 1: of inaction, but um, I don't think there's a question

493
00:28:49,600 --> 00:28:51,400
Speaker 1: of whether or not we're going to get a bill anymore.

494
00:28:51,400 --> 00:28:53,520
Speaker 1: I think it's what is the size and scope going

495
00:28:53,560 --> 00:28:56,400
Speaker 1: to be. So I am optimistic. I would say low

496
00:28:56,560 --> 00:28:59,280
Speaker 1: and six that we get a bill done in the

497
00:28:59,320 --> 00:29:02,040
Speaker 1: next two weeks. Okay, I'm looking right now. The tenure

498
00:29:02,320 --> 00:29:05,040
Speaker 1: Yield believes your message. Right now, Yields breaking out, as

499
00:29:05,120 --> 00:29:08,760
Speaker 1: John was pointing out earlier, almost now up to basis

500
00:29:08,800 --> 00:29:12,720
Speaker 1: points as people price in the greater likelihood of some

501
00:29:12,800 --> 00:29:15,600
Speaker 1: sort of fiscal support package passed in Washington on the

502
00:29:15,680 --> 00:29:19,440
Speaker 1: heels of this labor market report. Do you believe that Henrietta,

503
00:29:19,520 --> 00:29:22,920
Speaker 1: that this was a bad enough report to push any

504
00:29:23,000 --> 00:29:26,360
Speaker 1: of the laggards on the Capitol Hill into passing something.

505
00:29:27,160 --> 00:29:29,600
Speaker 1: I really do. I had an interesting conversation with a

506
00:29:29,640 --> 00:29:32,600
Speaker 1: client yesterday who is still sort of looking at stimulus

507
00:29:32,680 --> 00:29:35,200
Speaker 1: is unnecessary and saying, you know, the market clearly doesn't

508
00:29:35,200 --> 00:29:39,040
Speaker 1: need stimulus. And I think that's an outdated way of

509
00:29:39,080 --> 00:29:42,760
Speaker 1: thinking about how DC considers economic policy. This is an

510
00:29:42,760 --> 00:29:46,120
Speaker 1: anomaly under the Trump administration that anyone cared about the

511
00:29:46,120 --> 00:29:49,360
Speaker 1: stock market in Washington, d C. It's about the fundamental data.

512
00:29:49,640 --> 00:29:51,920
Speaker 1: It's about the jobs data, it's about the unemployment NUBER,

513
00:29:51,960 --> 00:29:55,080
Speaker 1: it'spect GDP data. It's slow moving, but it's exactly that.

514
00:29:55,160 --> 00:29:58,280
Speaker 1: It's kind of print that makes members in d C say,

515
00:29:58,360 --> 00:30:02,320
Speaker 1: oh right, I mean us their stantial amount of unemployed,

516
00:30:02,520 --> 00:30:06,240
Speaker 1: were massive increase in COVID. We're going into the holidays,

517
00:30:06,240 --> 00:30:07,760
Speaker 1: We're not going to be here for another month and

518
00:30:07,760 --> 00:30:12,160
Speaker 1: a half something now. Package expect it will be somewhere

519
00:30:12,160 --> 00:30:15,280
Speaker 1: in the six billion dollar range. That includes three hundred

520
00:30:15,320 --> 00:30:18,680
Speaker 1: billion dollars roughly in money that has already been allocated

521
00:30:18,760 --> 00:30:22,280
Speaker 1: in previous iterations of stimulus, whether the Care's Act or

522
00:30:22,280 --> 00:30:24,480
Speaker 1: the p p P program or the E s F

523
00:30:24,560 --> 00:30:27,760
Speaker 1: programs at the Fed and Treasury level. But there's gonna

524
00:30:27,800 --> 00:30:29,760
Speaker 1: be somewhere in the range of about three hundred billion

525
00:30:29,760 --> 00:30:32,400
Speaker 1: dollars in new funding that goes out just to extend

526
00:30:32,600 --> 00:30:36,880
Speaker 1: the pandemic unemployment assistance. Where does McConnell stand, just Henriette,

527
00:30:36,880 --> 00:30:39,120
Speaker 1: I'm wondering the key sticking points we've been talking about

528
00:30:39,160 --> 00:30:41,160
Speaker 1: all morning and frankly for a couple of months now

529
00:30:41,520 --> 00:30:44,160
Speaker 1: is the funding to state and local governments. What's sort

530
00:30:44,160 --> 00:30:46,680
Speaker 1: of the tipping point for McConnell to get on board

531
00:30:46,880 --> 00:30:50,600
Speaker 1: with this nine eight billion dollar bipartisan agreement or something

532
00:30:50,840 --> 00:30:53,720
Speaker 1: that still includes some aid to state and local governments.

533
00:30:54,440 --> 00:30:56,720
Speaker 1: State and local is absolutely the sticking point, because you

534
00:30:56,760 --> 00:31:00,680
Speaker 1: still have this divide mentality amongst Midwestern senator in the

535
00:31:00,760 --> 00:31:03,000
Speaker 1: red blue state divide. But I think if you can

536
00:31:03,080 --> 00:31:07,600
Speaker 1: drill down and stop discussing just state and local broadly,

537
00:31:07,640 --> 00:31:12,080
Speaker 1: but get into schools need this aid, specifically buses, rail transit,

538
00:31:12,280 --> 00:31:15,160
Speaker 1: um subways. These programs are going to lay off ten

539
00:31:15,200 --> 00:31:20,640
Speaker 1: thousand workers. They're slashing um their provided provisions by in

540
00:31:20,840 --> 00:31:23,760
Speaker 1: d C, in New York, in Chicago, they are making

541
00:31:23,920 --> 00:31:26,280
Speaker 1: a lot of noise at the transit level. So I

542
00:31:26,320 --> 00:31:28,720
Speaker 1: think if you can start talking about transit funding and

543
00:31:28,800 --> 00:31:32,880
Speaker 1: specific segment, come on, Henrietta, Henrietta, I take issue with

544
00:31:32,960 --> 00:31:38,960
Speaker 1: this after talking to Patrick Foyd, Washington hates transportation because

545
00:31:38,960 --> 00:31:42,120
Speaker 1: they're Democrats in big cities. Is that going to change

546
00:31:42,120 --> 00:31:45,520
Speaker 1: in the next forty eight hours? I think I think

547
00:31:45,600 --> 00:31:47,960
Speaker 1: there's enough of a push, honestly to get you a

548
00:31:48,040 --> 00:31:52,000
Speaker 1: small basket of funding for those sectors include air lines.

549
00:31:52,160 --> 00:31:55,040
Speaker 1: By the way, um, there's you know, a long way

550
00:31:55,040 --> 00:31:59,360
Speaker 1: to go there. But I do think that fundamental unders

551
00:31:59,600 --> 00:32:03,000
Speaker 1: and there is something that has shifted in the last

552
00:32:03,000 --> 00:32:06,000
Speaker 1: couple of months. Yes, and it's a bit of disruption

553
00:32:06,160 --> 00:32:07,800
Speaker 1: on your line, but we'll stick with it because this

554
00:32:07,880 --> 00:32:11,760
Speaker 1: conversation is important. How important are the things that we're

555
00:32:11,760 --> 00:32:15,160
Speaker 1: discussing right now to the January five runoffs in Georgia.

556
00:32:16,400 --> 00:32:19,760
Speaker 1: I think that's a really critical question. Obviously. Um, it's

557
00:32:19,840 --> 00:32:22,480
Speaker 1: important because you need to. It's enough funding to keep

558
00:32:22,480 --> 00:32:26,120
Speaker 1: Democrats at home and not enough to alienate your Republican base.

559
00:32:26,680 --> 00:32:29,680
Speaker 1: So that package that I just walked through, roughly six

560
00:32:29,760 --> 00:32:32,880
Speaker 1: hundred billion dollars or so in spending, does just that.

561
00:32:33,000 --> 00:32:36,360
Speaker 1: It's no bail out. There's no three D six hundred

562
00:32:36,360 --> 00:32:39,280
Speaker 1: dollars a week unemployment insurance booster at the federal level,

563
00:32:39,520 --> 00:32:42,040
Speaker 1: no direct payment to individuals, none of that, you know,

564
00:32:42,480 --> 00:32:47,600
Speaker 1: democratic socialist minded stuff that will get the Republican senators

565
00:32:47,600 --> 00:32:50,080
Speaker 1: in trouble Senators per New and Laffler. But it is

566
00:32:50,120 --> 00:32:53,000
Speaker 1: also enough to provide aid to the Democrats or the

567
00:32:53,080 --> 00:32:56,120
Speaker 1: members of the Georgia community who needed the most, mostly

568
00:32:56,120 --> 00:32:59,160
Speaker 1: in that unemployment insurance aid, to get them to potentially

569
00:32:59,200 --> 00:33:01,360
Speaker 1: stay home. This is going to be the largest turnout

570
00:33:01,400 --> 00:33:05,200
Speaker 1: runoff in the state of Georgia. Per the electoral officials expectations.

571
00:33:05,600 --> 00:33:09,560
Speaker 1: The margins are exceedingly tight. UM. The latest data shows

572
00:33:09,600 --> 00:33:12,280
Speaker 1: that as Up is up fifty to produce forty eight,

573
00:33:12,640 --> 00:33:15,720
Speaker 1: whereas Warnock is up fifty two too lawful forty five

574
00:33:16,280 --> 00:33:18,840
Speaker 1: UM in the polls and Georgia polls. For what it's worth,

575
00:33:18,840 --> 00:33:22,120
Speaker 1: we're pretty accurate in November. So, um, there needs to

576
00:33:22,160 --> 00:33:24,880
Speaker 1: be a concerted effort to turn out the Republican base,

577
00:33:24,920 --> 00:33:28,800
Speaker 1: which means the stimulus needs to be relatively small, but

578
00:33:28,920 --> 00:33:31,040
Speaker 1: there needs to be enough to keep the Democrats home

579
00:33:31,160 --> 00:33:34,080
Speaker 1: as well, which creates some concern around whether President Trump

580
00:33:34,160 --> 00:33:37,120
Speaker 1: should or should not go to Georgia. UM or whether

581
00:33:37,240 --> 00:33:39,000
Speaker 1: or not they should or should not passed even a

582
00:33:39,040 --> 00:33:42,160
Speaker 1: minimal stimulus bill this cycle. I so I think they will.

583
00:33:42,320 --> 00:33:44,960
Speaker 1: I think that's threading the needle from McConnell's perspective, and

584
00:33:44,960 --> 00:33:47,920
Speaker 1: that's what they'll get. This is not part of the

585
00:33:47,920 --> 00:33:51,080
Speaker 1: conversation on Wall Street, Henrietta. It barely comes up. The

586
00:33:51,080 --> 00:33:54,800
Speaker 1: outlooks for one hardly even include January five. There is

587
00:33:54,840 --> 00:33:57,600
Speaker 1: just an assumption that we have a divided government down

588
00:33:57,600 --> 00:34:01,360
Speaker 1: in Washington, d C. Do you think that's a mistake. Well,

589
00:34:01,440 --> 00:34:04,920
Speaker 1: if we do see the Democrats pick up the next

590
00:34:04,920 --> 00:34:07,400
Speaker 1: two seats in Georgia, there will be the definition of

591
00:34:07,440 --> 00:34:12,239
Speaker 1: divided in the is not a function majority. Um, We're

592
00:34:12,239 --> 00:34:16,000
Speaker 1: gonna need to watch the teams at risks for flipping sides.

593
00:34:16,120 --> 00:34:19,120
Speaker 1: That would be maybe Lisa Murkowski or Joe Mansion, a

594
00:34:19,200 --> 00:34:22,040
Speaker 1: Democrat out of West Virginia. Um, you're gonna look at

595
00:34:22,440 --> 00:34:26,400
Speaker 1: a sixty vote threshold for any legislation, regardless of what

596
00:34:26,440 --> 00:34:29,200
Speaker 1: happens in Georgia. In my opinion, Um, that is what

597
00:34:29,920 --> 00:34:32,719
Speaker 1: President of Like Biden is signaling. He will make in

598
00:34:32,800 --> 00:34:35,720
Speaker 1: State of the Union address about his inaugural speech about

599
00:34:35,840 --> 00:34:40,640
Speaker 1: and concentrate on exclusively the coronavirus, on the need for stimulus,

600
00:34:40,640 --> 00:34:43,160
Speaker 1: and that will occupy all of the first quarter at

601
00:34:43,239 --> 00:34:46,400
Speaker 1: least until they get it. And then if there is

602
00:34:46,560 --> 00:34:50,120
Speaker 1: a fifty seat Democratic uh you know, quote unquote majority,

603
00:34:50,480 --> 00:34:53,600
Speaker 1: they'll try to pursue things like reconciliation instructions and get

604
00:34:53,640 --> 00:34:56,520
Speaker 1: more funding. But you're not gonna see any more legislation pass.

605
00:34:56,600 --> 00:34:58,840
Speaker 1: So I encourage our clients to focus on things that

606
00:34:58,880 --> 00:35:01,080
Speaker 1: can change at the regulatory level. And then of course

607
00:35:01,520 --> 00:35:04,840
Speaker 1: trade policy US China, relations to US EU, relations to

608
00:35:05,000 --> 00:35:08,520
Speaker 1: US Japan. That's the focus for the future. It's a

609
00:35:08,600 --> 00:35:11,040
Speaker 1: conversation for another time, Henriet said, we always enjoy catching

610
00:35:11,120 --> 00:35:13,640
Speaker 1: up with you. Thank you and read traice that Vati Potus,

611
00:35:13,719 --> 00:35:17,000
Speaker 1: the director of Economic Policy, Thanks for listening to the

612
00:35:17,040 --> 00:35:23,520
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple podcasts. SoundCloud,

613
00:35:23,880 --> 00:35:28,120
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

614
00:35:28,160 --> 00:35:32,440
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

615
00:35:32,880 --> 00:35:33,960
Speaker 1: I'm Bloomberg Radio