WEBVTT - Carl Weinberg Talks  Supply Chain 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. He is magnificent. The

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<v Speaker 1>essay at High Frequency Economics is a yield based analysis

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<v Speaker 1>of the economy. It is what Karl Weinberg did at

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<v Speaker 1>Lehman Brothers for decades, and it was just thrilled that

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<v Speaker 1>he could join us here this morning.

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<v Speaker 2>Karl.

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<v Speaker 1>I love your research note and that you say the

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<v Speaker 1>labor market's going to hover, but GDP may be light

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<v Speaker 1>link the two together into the first part of twenty

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<v Speaker 1>twenty six.

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<v Speaker 3>Hi Tom, good morning, Thanks for having me back on

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<v Speaker 3>the show. It's been a while. You know, we're at

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<v Speaker 3>full employment. That's my assessment anyhow, others might not agree

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<v Speaker 3>with that. But even at a four and a half

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<v Speaker 3>percent unemployment rate, which I think, by the way, is

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<v Speaker 3>going to go down in this morning's report, and we'll

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<v Speaker 3>get a revision downward to the figure that we saw

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<v Speaker 3>for in November. But when we're at full employment like this,

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<v Speaker 3>all right, the economy has trouble growing. The only way

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<v Speaker 3>it can grow is either by immigration or getting more

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<v Speaker 3>people in the labor force, or by increasing productivity. So

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<v Speaker 3>productivity was really strong in the third quarter. The economy

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<v Speaker 3>grew well, but there's no promise that those productivity gains

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<v Speaker 3>are going to continue into the fourth quarter. So GDP

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<v Speaker 3>growth may be capped, if you will, by the economy

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<v Speaker 3>being at full employment right now.

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<v Speaker 1>I really I'm more focused, folks on the SAGGI GDP

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<v Speaker 1>outlook of selected economists. Mister Myron want six rate cuts

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<v Speaker 1>one and a half percent? Down? Down down? Is that

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<v Speaker 1>a Carl Weinberg theme.

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<v Speaker 3>Absolutely not. I think Myron is wrong. I think he's

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<v Speaker 3>abusing and misinterpreting the Tailor rule and the estimates and

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<v Speaker 3>the importance of our star within the Taylor rule. Our

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<v Speaker 3>star certainly has come down, but potential GDP has also

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<v Speaker 3>come down, potential GDP growth. So when you put the

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<v Speaker 3>two together, there's no recommendation from the Tailor rule or

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<v Speaker 3>anything that I know about economics for the Fed to

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<v Speaker 3>continue to cut rate with the economy at full employment.

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<v Speaker 1>This is Kurt Weinberg and Michael Faroli at JP Morgan

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<v Speaker 1>this phrase potential GDP. None of these people within the

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<v Speaker 1>Trump administration talk about. It's like they're blank to it.

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<v Speaker 2>Carl. The focus obviously today will be on the labor market.

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<v Speaker 2>But the other side of the Fed mandate is inflation.

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<v Speaker 2>What's your inflation view, are you concerned that we may

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<v Speaker 2>see stick your inflation that maybe the market's discounting.

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<v Speaker 3>I'm concerned about more inflation as twenty twenty six progresses,

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<v Speaker 3>because if the economy continues to grow but it can't

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<v Speaker 3>find the workers to make it grow, then we'll have

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<v Speaker 3>too much income chasing too few goods, and that will

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<v Speaker 3>put upward pressure on prices once again. To me, that's

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<v Speaker 3>what the FED should be thinking about. To my clients,

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<v Speaker 3>that's not what the FED is thinking about. But in

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<v Speaker 3>my view, that's what the FED should be thinking about.

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<v Speaker 2>So given that backdrop, how do you expect the FED

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<v Speaker 2>to behave this year? Is it one cut too cuts?

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<v Speaker 2>Do they need to be more aggressive or less aggressive?

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<v Speaker 3>I don't know. I mean, that's really a big question

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<v Speaker 3>we have. First of all, we have four new voters

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<v Speaker 3>on the FOMC. We've lost both of the voters who

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<v Speaker 3>dissented from previous rate cuts, and at least two of

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<v Speaker 3>the new people coming on board may be more inclined

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<v Speaker 3>to ease rather than to hold steady. Even as soon

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<v Speaker 3>as the next meeting against that, FED Chair Powell still

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<v Speaker 3>commands probably three votes on the FOMC out of the twelve.

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<v Speaker 3>And that's the swing, if you will, between those who

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<v Speaker 3>will ease and those who will settle. So I don't

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<v Speaker 3>really know where they're going to go on this, but

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<v Speaker 3>what I'm hoping to see as we move through the

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<v Speaker 3>year is a change in the perception that payrolls are

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<v Speaker 3>slowing because the economy is weak. That's where the FED

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<v Speaker 3>is right now to payrolls are slowing because the labor

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<v Speaker 3>market is tight and there just aren't enough workers to

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<v Speaker 3>hire to keep payrolls growing quickly.

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<v Speaker 1>Some time left here, and I want to get you

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<v Speaker 1>on much more in twenty twenty six. You should see

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<v Speaker 1>where he lives. I mean I took the Nash Rambler once. Yeah,

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<v Speaker 1>I had to put you know, the chains on it

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<v Speaker 1>in I'll enter to get up. Okay, it's up the toconomy.

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<v Speaker 1>You know it's it's like God's country. Yes, sure it's beautiful,

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<v Speaker 1>Carl in your note, And I got any ways to

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<v Speaker 1>go your Carl, but I got to go to your

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<v Speaker 1>legendary reputation on the Pacific rim and on crisis. Do

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<v Speaker 1>you are your radar up in twenty twenty six for

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<v Speaker 1>China or other currency or debt upsets.

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<v Speaker 3>I'm upset for I'm on the alert for a lot

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<v Speaker 3>of things coming from China this year that we've never

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<v Speaker 3>seen before. Right, if you read the IEA's Critical Critical

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<v Speaker 3>Critical Minerals Outlook, I believe is the proper name of it. Okay,

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<v Speaker 3>China sits at the root of every supply chain for

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<v Speaker 3>every critical material for every Western economy, no exceptions to that.

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<v Speaker 3>So all right, this is a weapon that G tested

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<v Speaker 3>with rare earths last year that he's testing right now

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<v Speaker 3>again with Japan. And G has things that he wants

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<v Speaker 3>and I think he's going to asking for them with

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<v Speaker 3>Lee Bridge. I think that's the risk for China in

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<v Speaker 3>the new year.

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<v Speaker 1>Carl, not enough time, Thank you so much, Carl Weinberger.

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<v Speaker 1>With this high Frequency Economics, just definitive research report,