1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 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 --> 00:00:36,879 Speaker 2: Terminal and the Bloomberg Business App. Let's talk about one 10 00:00:36,880 --> 00:00:38,760 Speaker 2: of the issues that's band to come up next week, 11 00:00:38,800 --> 00:00:41,200 Speaker 2: two key data points ahead of the Fed September decision, 12 00:00:41,280 --> 00:00:44,880 Speaker 2: kicking off with payrolls tomorrow and CPI next Wednesday. Housing 13 00:00:44,960 --> 00:00:47,720 Speaker 2: costs remaining a top concern for many, including the former 14 00:00:47,760 --> 00:00:50,960 Speaker 2: Secretary of Housing and Urban Development, Sewan Donovan. Shawn is 15 00:00:50,960 --> 00:00:53,760 Speaker 2: the current president and CEO of Enterprise Community Partners and 16 00:00:53,880 --> 00:00:56,200 Speaker 2: joins us now. Shann co Montor Joe agreed to be 17 00:00:56,280 --> 00:00:58,120 Speaker 2: with you. Thank you very much for coming on the program. 18 00:00:58,200 --> 00:01:00,640 Speaker 2: Let's just talk about the scale of the affordability crisis 19 00:01:00,640 --> 00:01:02,280 Speaker 2: that you've been talking about for Want and we've been 20 00:01:02,360 --> 00:01:06,080 Speaker 2: living through. We finally coming out the other side of this, I. 21 00:01:06,040 --> 00:01:08,960 Speaker 3: Don't think so, And in fact, it's getting worse in places. 22 00:01:09,720 --> 00:01:12,240 Speaker 3: I've been doing this work a long time, about thirty years, 23 00:01:12,720 --> 00:01:16,679 Speaker 3: and I think what is different is really two big things. First, 24 00:01:16,920 --> 00:01:19,560 Speaker 3: it is a problem that is deeper than it's ever been. 25 00:01:19,840 --> 00:01:23,200 Speaker 3: We have the biggest rent increases we've ever seen. We 26 00:01:23,319 --> 00:01:25,920 Speaker 3: have a doubling in what it costs to buy a 27 00:01:25,920 --> 00:01:28,000 Speaker 3: home in the country in the last few years. But 28 00:01:28,040 --> 00:01:30,600 Speaker 3: the problem is also everywhere now. It used to be 29 00:01:30,640 --> 00:01:32,720 Speaker 3: on the coasts, it used to be in our bigger cities. 30 00:01:32,880 --> 00:01:35,399 Speaker 3: I was in Boise, Idaho last week, and they have 31 00:01:35,400 --> 00:01:38,480 Speaker 3: a housing crisis there, and so it really is everywhere. 32 00:01:38,520 --> 00:01:42,399 Speaker 3: It's also driving our economic challenges in a way that 33 00:01:42,440 --> 00:01:46,320 Speaker 3: I've never seen nationally. Our inflation problem is a housing problem. 34 00:01:46,400 --> 00:01:49,680 Speaker 3: Now you have companies who can't attract workers, and it's 35 00:01:49,720 --> 00:01:52,840 Speaker 3: driving down economic growth. Half of all our renters in 36 00:01:52,840 --> 00:01:56,640 Speaker 3: the country are paying more than thirty percent of their income, 37 00:01:56,680 --> 00:01:59,840 Speaker 3: which is unaffordable. That's eight thousand dollars a year they 38 00:01:59,840 --> 00:02:03,400 Speaker 3: can be putting toward groceries, consumer demand, and so it 39 00:02:03,480 --> 00:02:06,800 Speaker 3: really is at a different scale and it's in our 40 00:02:06,880 --> 00:02:10,760 Speaker 3: presidential campaign right now. Thirty three governors across the country 41 00:02:11,080 --> 00:02:13,760 Speaker 3: talked about housing affordability in their State of the State address. 42 00:02:13,880 --> 00:02:16,600 Speaker 3: So it really is a different crisis than I've ever seen, 43 00:02:16,919 --> 00:02:21,280 Speaker 3: and it is moderating from COVID, but at a level 44 00:02:21,400 --> 00:02:23,720 Speaker 3: that is unlike anything we've ever seen. 45 00:02:23,760 --> 00:02:25,320 Speaker 2: I'll ask a dumb question. You can give me a 46 00:02:25,360 --> 00:02:28,000 Speaker 2: complex oce we two hundred banks. This points away from 47 00:02:28,160 --> 00:02:30,320 Speaker 2: solving this crisis a few rant cuts. 48 00:02:30,840 --> 00:02:35,360 Speaker 3: Absolutely not, because we are seven million housing units short 49 00:02:35,480 --> 00:02:38,680 Speaker 3: of what we need. This is a supply problem, not 50 00:02:39,120 --> 00:02:42,799 Speaker 3: just a rapes problem, and that means we've got to 51 00:02:42,840 --> 00:02:45,880 Speaker 3: take action in many, many different ways, both on demand 52 00:02:45,960 --> 00:02:46,680 Speaker 3: and on supply. 53 00:02:46,880 --> 00:02:49,200 Speaker 4: When you listen to the campaign trails, both of these 54 00:02:49,240 --> 00:02:52,160 Speaker 4: individuals sound populist in nature when they talk about the 55 00:02:52,160 --> 00:02:54,760 Speaker 4: housing market. Kamala Harris saying first time buyers can get 56 00:02:54,760 --> 00:02:58,560 Speaker 4: twenty five thousand dollars a benefit to help them. Don't 57 00:02:58,600 --> 00:03:01,560 Speaker 4: you think that would exacerbate the problem we're seeing right now? 58 00:03:02,520 --> 00:03:07,440 Speaker 3: Let's be clear, Harris's plan does both. It focuses on supply, 59 00:03:08,000 --> 00:03:10,919 Speaker 3: it looks at over regulation, it looks at the need 60 00:03:11,040 --> 00:03:15,480 Speaker 3: to encourage states and locals even require them to build more. 61 00:03:16,440 --> 00:03:19,560 Speaker 3: But we also have to recognize that for a family, 62 00:03:20,200 --> 00:03:24,200 Speaker 3: the real struggles are for families who can't even put 63 00:03:24,240 --> 00:03:26,560 Speaker 3: food on the tab. We have a record homelessness crisis, 64 00:03:26,600 --> 00:03:29,200 Speaker 3: and so we do need to figure out how to 65 00:03:29,240 --> 00:03:32,200 Speaker 3: help people afford housing more. We're never going to bring 66 00:03:32,240 --> 00:03:34,639 Speaker 3: that cost of housing down enough that most people can 67 00:03:34,680 --> 00:03:37,520 Speaker 3: afford a decent place to live, right So, and that's 68 00:03:37,600 --> 00:03:40,000 Speaker 3: really you have to have a balanced program. 69 00:03:40,080 --> 00:03:42,520 Speaker 4: It also doesn't matter what Trump or Harris say, because 70 00:03:42,520 --> 00:03:44,680 Speaker 4: this will be done in Congress. How could you see 71 00:03:44,720 --> 00:03:48,360 Speaker 4: potentially a divided Congress get to any resolution on something 72 00:03:48,480 --> 00:03:48,960 Speaker 4: like housing. 73 00:03:49,320 --> 00:03:52,000 Speaker 3: Well, this is what's so interesting about the way the 74 00:03:52,040 --> 00:03:55,000 Speaker 3: politics have changed on housing. I said earlier thirty three 75 00:03:55,040 --> 00:03:58,720 Speaker 3: different governors. I've been in Boise, Idaho, and Montana the 76 00:03:58,800 --> 00:04:04,000 Speaker 3: last few months. Red states, Blue states. Give you another example. 77 00:04:04,360 --> 00:04:06,040 Speaker 3: We had a tax bill that made it through the 78 00:04:06,080 --> 00:04:10,920 Speaker 3: House of Representatives overwhelmingly the most bipartisan thing I think seen. 79 00:04:11,400 --> 00:04:14,080 Speaker 3: There was a significant increase in the Low income housing 80 00:04:14,120 --> 00:04:17,840 Speaker 3: tax credit, the best public private investment vehicle. We have 81 00:04:18,360 --> 00:04:21,279 Speaker 3: to build more affordable housing in the country. And so 82 00:04:22,000 --> 00:04:24,320 Speaker 3: I think this really is a moment different from what 83 00:04:24,320 --> 00:04:27,039 Speaker 3: we've seen in the past where there is bipartisan support 84 00:04:27,320 --> 00:04:29,960 Speaker 3: around housing, and I think in the tax negotiations next year, 85 00:04:29,960 --> 00:04:32,560 Speaker 3: you're going to see a big increase in the loan 86 00:04:32,560 --> 00:04:33,880 Speaker 3: income housing tax credits. 87 00:04:33,920 --> 00:04:37,560 Speaker 1: As policy discussions continue, and presumably we'll take some time 88 00:04:38,120 --> 00:04:40,480 Speaker 1: join back to John's point, if the Fetter reserve cuts 89 00:04:40,480 --> 00:04:42,720 Speaker 1: by two hundred basis points in the next twelve months, 90 00:04:43,040 --> 00:04:46,680 Speaker 1: will that make the home affordability crisis worse or better? 91 00:04:47,720 --> 00:04:51,800 Speaker 3: It will definitely help. It will make Obviously, rates are 92 00:04:51,839 --> 00:04:54,320 Speaker 3: a critical thing, not just for home buyers but for 93 00:04:54,400 --> 00:04:58,839 Speaker 3: builders out there, and so that will be important. But 94 00:04:58,920 --> 00:05:00,880 Speaker 3: I want to go back to the fund mental problem. 95 00:05:01,360 --> 00:05:04,679 Speaker 3: For many, many years, we've been lagging on building housing, 96 00:05:05,200 --> 00:05:09,120 Speaker 3: and the supply problem has got to be focused on 97 00:05:09,240 --> 00:05:10,040 Speaker 3: if we're really going. 98 00:05:09,960 --> 00:05:10,760 Speaker 5: To get to the solution. 99 00:05:10,880 --> 00:05:12,880 Speaker 1: You talked about how this is a problem that's widespread, 100 00:05:12,880 --> 00:05:15,600 Speaker 1: and you talked about US cities, but it's widespread globally, 101 00:05:15,920 --> 00:05:18,760 Speaker 1: and actually cities across the world are dealing with this 102 00:05:18,800 --> 00:05:21,240 Speaker 1: affordability crisis. And a lot of people are saying it's 103 00:05:21,279 --> 00:05:24,039 Speaker 1: because of how low rates got and because a lot 104 00:05:24,080 --> 00:05:27,680 Speaker 1: of people could leverage up their home home purchases and 105 00:05:27,760 --> 00:05:30,360 Speaker 1: thus lead to higher prices. 106 00:05:30,680 --> 00:05:32,680 Speaker 5: Why won't lower rates just do that? 107 00:05:32,760 --> 00:05:36,360 Speaker 1: Again, we've already seen home builders building as fast as 108 00:05:36,360 --> 00:05:38,280 Speaker 1: they have in a very long time, during the pandemic, 109 00:05:38,360 --> 00:05:41,640 Speaker 1: during high rate time, So what's to say that they're 110 00:05:41,680 --> 00:05:42,520 Speaker 1: going to keep. 111 00:05:42,400 --> 00:05:47,320 Speaker 3: Up Because we have to recognize that housing is a 112 00:05:47,360 --> 00:05:51,680 Speaker 3: financial instrument, but you can't build it if you don't 113 00:05:51,680 --> 00:05:56,359 Speaker 3: allow zoning to build that. So in a neighborhood where 114 00:05:56,520 --> 00:06:00,160 Speaker 3: a community is saying, not in my backyard, I don't 115 00:06:00,000 --> 00:06:04,040 Speaker 3: want any more housing, there are different measures of it. 116 00:06:04,080 --> 00:06:06,920 Speaker 3: Harris's plan says she would add three million units. Our 117 00:06:07,040 --> 00:06:11,680 Speaker 3: numbers are for real affordability. We have seven million units shortage. 118 00:06:11,839 --> 00:06:16,000 Speaker 3: So rates are just a piece of the issue. But fundamentally, 119 00:06:16,360 --> 00:06:19,320 Speaker 3: what we allow to be built and how we for 120 00:06:19,440 --> 00:06:21,880 Speaker 3: the lowest income people, how we support them to do 121 00:06:21,920 --> 00:06:23,279 Speaker 3: that is critically important. 122 00:06:23,360 --> 00:06:25,719 Speaker 2: You're an expert in this with a lot of experience, 123 00:06:25,720 --> 00:06:27,600 Speaker 2: a lot more than anyone around this type of that's 124 00:06:27,680 --> 00:06:30,839 Speaker 2: for sure. Harris is offering two things. Wants to incentivize 125 00:06:30,880 --> 00:06:33,560 Speaker 2: building but also support buying. And I think we all 126 00:06:33,640 --> 00:06:35,880 Speaker 2: understand there is a mismatch in the time arizon for 127 00:06:35,880 --> 00:06:38,560 Speaker 2: those two policies to bear fruit. You can support buying 128 00:06:38,560 --> 00:06:41,560 Speaker 2: that works immediately. The supply issue is going to take 129 00:06:41,640 --> 00:06:43,560 Speaker 2: years to play out in the near term. Don't you 130 00:06:43,680 --> 00:06:45,880 Speaker 2: risk higher prices with these kind of policies. 131 00:06:46,839 --> 00:06:50,800 Speaker 3: You have some risk, but understand, for a family that 132 00:06:51,279 --> 00:06:55,799 Speaker 3: is right now spending half of their income towards rent 133 00:06:55,920 --> 00:07:00,200 Speaker 3: or to own something, that increased support might mean they 134 00:07:00,200 --> 00:07:02,640 Speaker 3: put more food on the table, it might mean that 135 00:07:02,720 --> 00:07:06,240 Speaker 3: they do other things to support their family. So it 136 00:07:06,279 --> 00:07:08,680 Speaker 3: has some effect, and there is some risk to what 137 00:07:08,680 --> 00:07:11,280 Speaker 3: you're talking about. But at the end of the day, 138 00:07:11,560 --> 00:07:13,400 Speaker 3: we know we have to do both. We have to 139 00:07:13,440 --> 00:07:16,080 Speaker 3: support supply and demand. And I do think what's exciting 140 00:07:16,160 --> 00:07:19,160 Speaker 3: right now is you have a consensus around the country 141 00:07:20,000 --> 00:07:22,840 Speaker 3: on Democrat for Democrats and Republicans that we have to 142 00:07:22,880 --> 00:07:24,920 Speaker 3: build more. Here in New York, we have a city 143 00:07:24,920 --> 00:07:28,360 Speaker 3: of Yes proposal. In Montana, they just passed the legislation 144 00:07:28,480 --> 00:07:33,200 Speaker 3: that says cities can't restrict housing development in certain ways. 145 00:07:33,240 --> 00:07:36,640 Speaker 3: So that is a growing moment, and you're right, it 146 00:07:36,680 --> 00:07:39,000 Speaker 3: will take time, so we better get started. 147 00:07:39,280 --> 00:07:41,280 Speaker 2: How long has this problem been building for? Maybe we 148 00:07:41,360 --> 00:07:44,200 Speaker 2: can finish here and just give you a big picture opportunity. 149 00:07:44,760 --> 00:07:46,520 Speaker 2: You were part of the government coming down at the 150 00:07:46,720 --> 00:07:51,720 Speaker 2: financial crisis the housing crisis A nine were the problems 151 00:07:51,760 --> 00:07:54,800 Speaker 2: now where the states plants it back then? The lack 152 00:07:54,800 --> 00:07:56,920 Speaker 2: of supply how connected to these two issues. 153 00:07:57,040 --> 00:07:57,400 Speaker 5: So what I. 154 00:07:57,360 --> 00:08:01,720 Speaker 3: Would say is this has been a chronic problem over decades. 155 00:08:01,760 --> 00:08:04,720 Speaker 3: Housing affordability has been getting worse for probably fifty years 156 00:08:04,760 --> 00:08:09,080 Speaker 3: in this country, but it's really become an acute crisis 157 00:08:09,120 --> 00:08:12,440 Speaker 3: through COVID. COVID gave it a jolt of adrenaline in 158 00:08:12,480 --> 00:08:15,560 Speaker 3: terms of making the problem worse. I want to go 159 00:08:15,600 --> 00:08:18,840 Speaker 3: back even before the Obama administration, given that we're on 160 00:08:18,880 --> 00:08:21,840 Speaker 3: Bloomberg TV. I was Mike Bloomberg's Housing commissioner here in 161 00:08:21,840 --> 00:08:24,320 Speaker 3: New York City and this was a huge focus for us. 162 00:08:24,360 --> 00:08:27,760 Speaker 3: It's taking old industrial areas rezoning them. Right now, we 163 00:08:27,840 --> 00:08:30,800 Speaker 3: have a billion square feet of empty office space around 164 00:08:30,840 --> 00:08:35,240 Speaker 3: the country. That's an opportunity to really think about. So absolutely, 165 00:08:35,280 --> 00:08:37,600 Speaker 3: this is a problem that's been building, but it is 166 00:08:37,840 --> 00:08:40,880 Speaker 3: different now in terms of what we saw during COVID. 167 00:08:41,120 --> 00:08:44,240 Speaker 3: People are demanding those people who used to work in 168 00:08:44,240 --> 00:08:47,000 Speaker 3: an office, they're now working at home. They're demanding more 169 00:08:47,000 --> 00:08:49,800 Speaker 3: space at home, and so we have a demand that's 170 00:08:49,840 --> 00:08:53,640 Speaker 3: grown enormously during COVID that we have to meet. 171 00:08:53,920 --> 00:08:55,680 Speaker 2: This was SAFSMA and we look forward to doing again 172 00:08:55,720 --> 00:08:58,319 Speaker 2: with you. Thank you, place are appreciate it. Shown town 173 00:08:58,360 --> 00:09:11,640 Speaker 2: of in the eventiprise community. Kate Alhillo of Russell Investments 174 00:09:11,679 --> 00:09:14,880 Speaker 2: saying the inflation problem is largely solved at this stage. 175 00:09:14,960 --> 00:09:17,560 Speaker 2: Expect we'll hit the two percent inflation target in early 176 00:09:17,559 --> 00:09:20,280 Speaker 2: twenty five. The Fed has the space to be aggressive 177 00:09:20,320 --> 00:09:23,200 Speaker 2: if needed on rates. We still expect a self landing, 178 00:09:23,200 --> 00:09:25,960 Speaker 2: but we can't rule out the possibility of a recession. 179 00:09:26,160 --> 00:09:28,640 Speaker 2: Kate joins surround the table. Kate, good monitor. You great 180 00:09:28,640 --> 00:09:30,280 Speaker 2: to be here, Thanks for joining us. Let's start with 181 00:09:30,320 --> 00:09:32,360 Speaker 2: payrolls tomorrow morning and the data through the next hour 182 00:09:32,440 --> 00:09:34,439 Speaker 2: or so. What even the team looking for. 183 00:09:34,800 --> 00:09:38,320 Speaker 6: Well, we're looking for a beat on what we saw 184 00:09:38,440 --> 00:09:42,040 Speaker 6: certainly in July, and something close to the one sixty 185 00:09:42,400 --> 00:09:45,240 Speaker 6: five range. And if we get something, you're close out. 186 00:09:45,280 --> 00:09:48,240 Speaker 6: We think the market is pretty powersitive. Continue to see 187 00:09:48,240 --> 00:09:51,719 Speaker 6: some of this brightening out. Any chance that we are 188 00:09:51,840 --> 00:09:54,520 Speaker 6: below one twenty, below one hundred, that's where you start 189 00:09:54,559 --> 00:09:56,120 Speaker 6: to see some material volatility. 190 00:09:56,200 --> 00:09:57,760 Speaker 2: So good news is good news, and band news is 191 00:09:57,760 --> 00:10:00,160 Speaker 2: definitely really bad. Band news. Talk to me about that 192 00:10:00,160 --> 00:10:01,120 Speaker 2: would leaves the bone market. 193 00:10:01,320 --> 00:10:03,360 Speaker 6: So yeah, so I think again, I don't think the 194 00:10:03,360 --> 00:10:06,880 Speaker 6: bond market's moving tremendously unless you see the labor market 195 00:10:06,920 --> 00:10:10,040 Speaker 6: really start to show more signals of a weakening versus 196 00:10:10,080 --> 00:10:13,040 Speaker 6: a normalization, and then you know, potentially you start the 197 00:10:13,120 --> 00:10:16,080 Speaker 6: recession discussion to be more prominent. We're not there yet, 198 00:10:16,280 --> 00:10:18,319 Speaker 6: but if you start to see some challenging prints in 199 00:10:18,400 --> 00:10:20,600 Speaker 6: terms of labor, that's where you start to see some movement. 200 00:10:20,800 --> 00:10:22,080 Speaker 5: This is really interesting to me. 201 00:10:22,440 --> 00:10:25,520 Speaker 1: You think it's an asymmetric response that essentially people are 202 00:10:25,520 --> 00:10:27,880 Speaker 1: not going to unwind what we've seen in terms of 203 00:10:27,880 --> 00:10:29,160 Speaker 1: the rally and the bond market. 204 00:10:29,600 --> 00:10:31,839 Speaker 5: What gives you that conviction? Yeah, well, I'd say a 205 00:10:31,880 --> 00:10:32,280 Speaker 5: couple things. 206 00:10:32,320 --> 00:10:34,240 Speaker 6: First, I think the first hundred basis points of cuts, 207 00:10:34,240 --> 00:10:36,079 Speaker 6: whether it happens this year it kind of drips into 208 00:10:36,160 --> 00:10:39,360 Speaker 6: next year, is kind of easy to get to the 209 00:10:39,400 --> 00:10:41,320 Speaker 6: two hundred or so that's being priced in through the 210 00:10:41,400 --> 00:10:44,040 Speaker 6: end of next year. That's where you might see some 211 00:10:44,160 --> 00:10:47,640 Speaker 6: movement still, but you still end up having the terminal rate. 212 00:10:47,679 --> 00:10:50,120 Speaker 6: You still a while to go to get there. So again, 213 00:10:50,160 --> 00:10:52,680 Speaker 6: I think if you get some good news the labor 214 00:10:52,679 --> 00:10:55,200 Speaker 6: market is more normalizing July was maybe a little bit 215 00:10:55,240 --> 00:10:57,560 Speaker 6: of a misshoot, but the FED is still moving to 216 00:10:57,600 --> 00:11:00,000 Speaker 6: focus on the labor market and not inflation that you 217 00:11:00,120 --> 00:11:03,080 Speaker 6: don't end up seeing a big shift back up in 218 00:11:03,160 --> 00:11:06,439 Speaker 6: rates because we know that the direction is pretty clear. 219 00:11:06,720 --> 00:11:09,320 Speaker 1: We were talking about the incredible volatility of markets at 220 00:11:09,320 --> 00:11:12,000 Speaker 1: a time where there are so many unknowns and they're 221 00:11:12,040 --> 00:11:14,960 Speaker 1: just as this feeling that one data point could really 222 00:11:15,040 --> 00:11:18,080 Speaker 1: tip the scales in a pretty significant way. Do you 223 00:11:18,120 --> 00:11:21,960 Speaker 1: basically view bad news as being a buying opportunity? I mean, 224 00:11:22,000 --> 00:11:25,440 Speaker 1: if you end up seeing a negative, some really problematic print, 225 00:11:25,840 --> 00:11:27,920 Speaker 1: can you say, look, you look at the fundamentals, you 226 00:11:28,000 --> 00:11:30,040 Speaker 1: look at these companies that are performing pretty well. 227 00:11:30,559 --> 00:11:32,880 Speaker 5: Oh, right, time to buy. Yeah. I mean, I'd say 228 00:11:33,000 --> 00:11:33,600 Speaker 5: a couple of things. 229 00:11:33,600 --> 00:11:35,680 Speaker 6: It's great to actually see volatility back in the market 230 00:11:35,720 --> 00:11:37,640 Speaker 6: and the market reacting. I think the challenge is it's 231 00:11:37,640 --> 00:11:42,000 Speaker 6: overreacting to single points or news, and so we're staying 232 00:11:42,000 --> 00:11:44,760 Speaker 6: pretty close to home in terms of our strategic allocations. 233 00:11:44,800 --> 00:11:47,600 Speaker 6: If we see those overreactions, we are leaning into them. 234 00:11:47,840 --> 00:11:50,480 Speaker 6: It tends to be more as trimming our winners. Even 235 00:11:50,559 --> 00:11:53,559 Speaker 6: when rates have moved up over the moved down over 236 00:11:53,559 --> 00:11:56,120 Speaker 6: the past period, we've been trimming. If we see a 237 00:11:56,160 --> 00:11:58,600 Speaker 6: big self, we'll be leaning in. But I think it's 238 00:11:58,640 --> 00:12:01,480 Speaker 6: more because the over reaction that we're seeing from the markets, 239 00:12:01,520 --> 00:12:04,000 Speaker 6: because of the volatility and the uncertainty. The market is 240 00:12:04,000 --> 00:12:05,600 Speaker 6: still trying to find kind of the narrative. 241 00:12:05,760 --> 00:12:07,920 Speaker 1: Would you say, trimming in the bond space and then 242 00:12:07,920 --> 00:12:08,880 Speaker 1: we'll go to the sock space. 243 00:12:08,960 --> 00:12:09,120 Speaker 5: Yeah. 244 00:12:09,160 --> 00:12:11,400 Speaker 1: Are you basically saying that the market is posted in 245 00:12:11,480 --> 00:12:12,319 Speaker 1: too many rate cuts? 246 00:12:12,720 --> 00:12:16,520 Speaker 6: Yeah, So we think that the magnitude right now is 247 00:12:16,720 --> 00:12:18,880 Speaker 6: at the point where it's probably as much as it's 248 00:12:18,880 --> 00:12:20,800 Speaker 6: going to go unless we start to see a recession 249 00:12:21,160 --> 00:12:23,160 Speaker 6: theme start to pick up. So we have started to 250 00:12:23,160 --> 00:12:25,160 Speaker 6: trim some of our duration positioning. 251 00:12:24,920 --> 00:12:25,079 Speaker 5: You know. 252 00:12:25,160 --> 00:12:27,640 Speaker 2: Connoscent Bloomberg Opinion. Love Connoscent. 253 00:12:27,679 --> 00:12:28,000 Speaker 5: It's great. 254 00:12:28,080 --> 00:12:30,319 Speaker 2: Check out this tweet. If the FED was unburdened by 255 00:12:30,320 --> 00:12:33,440 Speaker 2: what has been get it fantastic, And if the FED 256 00:12:33,480 --> 00:12:35,360 Speaker 2: had a blank sheet of paper to begin with, they'd 257 00:12:35,360 --> 00:12:37,680 Speaker 2: probably set FED funds around four percent instead of where 258 00:12:37,679 --> 00:12:40,360 Speaker 2: we are right now. Instead of this performative channel from 259 00:12:40,440 --> 00:12:42,360 Speaker 2: various people about the signal that AT's send if they 260 00:12:42,360 --> 00:12:44,720 Speaker 2: cut by twenty five or fifty in the anchoring to 261 00:12:44,800 --> 00:12:47,320 Speaker 2: five twenty five to five fifty. Can we play that game? 262 00:12:47,360 --> 00:12:49,520 Speaker 2: Just some scenario analysis. If we were to have a 263 00:12:49,559 --> 00:12:51,800 Speaker 2: blank sheet of paper the Federal Reserve, what would the 264 00:12:51,880 --> 00:12:52,520 Speaker 2: rate be today? 265 00:12:54,840 --> 00:12:56,079 Speaker 5: Four twenty five four fifty. 266 00:12:56,240 --> 00:12:58,560 Speaker 2: Yeah, so we're about one hundred basis points off side 267 00:12:58,559 --> 00:12:58,800 Speaker 2: of the. 268 00:12:58,720 --> 00:13:00,640 Speaker 6: Fat, Yeah, which is why I say the first hundred 269 00:13:00,640 --> 00:13:02,720 Speaker 6: basis points is easy to get to, so you don't 270 00:13:02,720 --> 00:13:04,880 Speaker 6: see as much movement. It's the stuff further out that 271 00:13:04,880 --> 00:13:06,439 Speaker 6: we're still trying to figure out in the magnitude of 272 00:13:06,440 --> 00:13:07,000 Speaker 6: how far they get. 273 00:13:07,040 --> 00:13:08,800 Speaker 2: We've heard that number a few times, haven't we That 274 00:13:08,880 --> 00:13:10,920 Speaker 2: maybe there are one hundred basis points off side. So 275 00:13:10,960 --> 00:13:13,280 Speaker 2: it's to Conn's point, what is this performative chatter about 276 00:13:13,400 --> 00:13:16,800 Speaker 2: the signaling from twenty five versus fifty? If you're off side, 277 00:13:17,000 --> 00:13:18,920 Speaker 2: get a move on and just say you're off side. 278 00:13:19,280 --> 00:13:22,120 Speaker 1: Isn't the FED and this isn't meant as a pejorative, 279 00:13:22,320 --> 00:13:24,800 Speaker 1: but isn't the FED essentially a performative instrument. Isn't it 280 00:13:24,840 --> 00:13:26,880 Speaker 1: sort of the signal that that they give. 281 00:13:26,760 --> 00:13:28,080 Speaker 2: To markets they behave that way? 282 00:13:28,160 --> 00:13:28,360 Speaker 6: Yeah? 283 00:13:28,400 --> 00:13:30,560 Speaker 1: Well, and so at a certain point, and that really 284 00:13:30,600 --> 00:13:33,400 Speaker 1: goes to this question of how do you trim positioning? 285 00:13:34,160 --> 00:13:37,000 Speaker 1: How do you understand whether they're on a trajectory that's 286 00:13:37,080 --> 00:13:39,720 Speaker 1: much steeper kin to what Adol Husaini was talking about, 287 00:13:39,720 --> 00:13:43,080 Speaker 1: where they could go back to zero versus between three 288 00:13:43,160 --> 00:13:43,800 Speaker 1: and four percent. 289 00:13:45,160 --> 00:13:47,280 Speaker 6: Yeah, and I think that that's where you don't make 290 00:13:47,320 --> 00:13:49,719 Speaker 6: any kind of severe moves because there is a lot 291 00:13:49,720 --> 00:13:53,080 Speaker 6: of uncertainty and try to take advantage of the volatility. 292 00:13:53,440 --> 00:13:55,560 Speaker 2: Okay, this is awesome, busy twenty four eyes I had 293 00:13:55,600 --> 00:13:57,280 Speaker 2: for you in the thing. Thanks for dropping by, Thank you, 294 00:13:57,400 --> 00:14:01,640 Speaker 2: thank you, Katy Ahila there of Russell invests at al Husaini. 295 00:14:01,679 --> 00:14:04,360 Speaker 2: If Columbia thread needle writing, the FED put is back. 296 00:14:04,600 --> 00:14:06,800 Speaker 2: One of the key unknowns is how the economy will 297 00:14:06,840 --> 00:14:09,839 Speaker 2: respond to the FED executing rate cuts. If the past 298 00:14:09,840 --> 00:14:12,400 Speaker 2: through of cuts into the rear economy is slow, the 299 00:14:12,480 --> 00:14:15,160 Speaker 2: FED may find it south behind the curve once again, 300 00:14:15,240 --> 00:14:16,880 Speaker 2: as with the surround the table for more ED. Good 301 00:14:16,920 --> 00:14:17,760 Speaker 2: morning and welcome back. 302 00:14:17,800 --> 00:14:18,520 Speaker 5: Hey fantastic. 303 00:14:18,640 --> 00:14:20,720 Speaker 2: You said in your recent note the market pricing masks 304 00:14:20,720 --> 00:14:24,320 Speaker 2: a broad distribution of outcomes. How wide are the range 305 00:14:24,360 --> 00:14:25,560 Speaker 2: of outcomes right now? 306 00:14:25,680 --> 00:14:28,960 Speaker 7: Yeah, I mean it's striking if you look ahead, you know, 307 00:14:29,000 --> 00:14:31,320 Speaker 7: we're starting to praise well in access of one hundred 308 00:14:31,320 --> 00:14:33,800 Speaker 7: basis points this year, and if you look into the 309 00:14:33,920 --> 00:14:37,400 Speaker 7: end of next year, the probability that that funds managers 310 00:14:37,400 --> 00:14:40,240 Speaker 7: to stay around four percent is closed to zero. So 311 00:14:40,280 --> 00:14:43,880 Speaker 7: it's a fantastically broad distribution at the moment and getting 312 00:14:43,920 --> 00:14:44,640 Speaker 7: brighter every week. 313 00:14:44,720 --> 00:14:46,760 Speaker 2: And as a feeling, it wouldn't take much weak economic 314 00:14:46,840 --> 00:14:49,360 Speaker 2: data to really amplify some of those bets that if 315 00:14:49,400 --> 00:14:52,200 Speaker 2: we drop to one hundred k tomorrow morning, at unemployment 316 00:14:52,240 --> 00:14:54,720 Speaker 2: stays at four point three percent, we start pricing in 317 00:14:54,760 --> 00:14:57,400 Speaker 2: a series of fifty pases point cuts. So if you're 318 00:14:57,400 --> 00:14:59,720 Speaker 2: facing these kind of outcomes and the range is like 319 00:15:00,200 --> 00:15:01,920 Speaker 2: one you can drive a truck through it, do you 320 00:15:02,040 --> 00:15:04,520 Speaker 2: chase this bull market rabby, what do you do with this? 321 00:15:06,680 --> 00:15:08,360 Speaker 7: Or I think we've had a really strong valuy so 322 00:15:08,400 --> 00:15:11,800 Speaker 7: far this year. I think what we want to do 323 00:15:12,040 --> 00:15:14,360 Speaker 7: is take stock that the starting level of yields is 324 00:15:14,360 --> 00:15:19,200 Speaker 7: still quite attractive, that the curve is likely to continue 325 00:15:19,240 --> 00:15:23,160 Speaker 7: to steep in versus wood markets expect and so that 326 00:15:23,160 --> 00:15:25,240 Speaker 7: gives us a little bit of juice. At the same time, 327 00:15:25,240 --> 00:15:26,560 Speaker 7: I don't think you want to be maxed out. I 328 00:15:26,600 --> 00:15:27,880 Speaker 7: think you want to leave a little bit of dry 329 00:15:27,880 --> 00:15:30,680 Speaker 7: powder for an environment where the data manages to surprise 330 00:15:30,720 --> 00:15:31,560 Speaker 7: us to the upside. 331 00:15:31,640 --> 00:15:33,520 Speaker 1: I was struck by the fact that you hear the 332 00:15:33,600 --> 00:15:36,440 Speaker 1: likes of Howard Mark saying that the neutral rate in 333 00:15:36,480 --> 00:15:38,960 Speaker 1: this new environment is something like three to four percent. 334 00:15:39,000 --> 00:15:42,760 Speaker 1: But if you look at this wide spectrum of potential outcomes, 335 00:15:42,800 --> 00:15:46,080 Speaker 1: you actually see an average rate below three percent by 336 00:15:46,160 --> 00:15:50,280 Speaker 1: twenty twenty six. Do you think that that's maybe overestimating 337 00:15:50,280 --> 00:15:52,880 Speaker 1: the chance the FED really does get down to close 338 00:15:52,920 --> 00:15:53,920 Speaker 1: to zero again. 339 00:15:55,520 --> 00:15:58,760 Speaker 7: Well, I think there's a there's really strong probability that 340 00:15:58,760 --> 00:16:01,920 Speaker 7: that happens in the coming years. Right that the data 341 00:16:02,120 --> 00:16:05,720 Speaker 7: deteriorates to the point where unemployment starts to feed on itself, 342 00:16:05,720 --> 00:16:09,200 Speaker 7: you get those recessionary dynamics in that environment. The odds 343 00:16:09,240 --> 00:16:11,200 Speaker 7: that the FED funds rate goes to zero, I think 344 00:16:11,280 --> 00:16:14,560 Speaker 7: is exceptionally high, and FED research does continue to point 345 00:16:14,600 --> 00:16:18,560 Speaker 7: to that probability being high in the coming decades. Will 346 00:16:18,560 --> 00:16:20,320 Speaker 7: it happen in the course of the next twelve to 347 00:16:20,320 --> 00:16:23,400 Speaker 7: twenty four months? Is anybody you's bet we have a 348 00:16:23,640 --> 00:16:25,920 Speaker 7: significant amount of fiscal uncertainty on the flip side of 349 00:16:25,920 --> 00:16:30,360 Speaker 7: the selection that that may forestall a recession. But if 350 00:16:30,400 --> 00:16:33,440 Speaker 7: the dynamics are there, FED funds going back to zero, 351 00:16:33,600 --> 00:16:35,640 Speaker 7: I think is very a very reasonable assumption. 352 00:16:35,760 --> 00:16:39,160 Speaker 1: There's a pretty profound sort of extrapolation that I'm feeling 353 00:16:39,160 --> 00:16:42,360 Speaker 1: from you, which is said, essentially, this is not a 354 00:16:42,400 --> 00:16:45,520 Speaker 1: different environment than pre pandemic. That essentially, this is not 355 00:16:45,680 --> 00:16:49,000 Speaker 1: a more inflationary time than we were in twenty nineteen 356 00:16:49,000 --> 00:16:51,040 Speaker 1: in twenty eighteen. And this flies in the face of 357 00:16:51,040 --> 00:16:53,680 Speaker 1: what a lot of investors are saying, including some pretty 358 00:16:53,680 --> 00:16:55,720 Speaker 1: big ones. Can you explain why you think so? 359 00:16:56,640 --> 00:16:56,880 Speaker 5: Yeah. 360 00:16:56,880 --> 00:17:01,440 Speaker 7: Look, I think the large part of the inflation story 361 00:17:01,840 --> 00:17:04,640 Speaker 7: again just goes back all the way to the mid nineties, 362 00:17:05,119 --> 00:17:09,679 Speaker 7: is driven by anchored inflation expectations. We've run this massive 363 00:17:09,720 --> 00:17:11,439 Speaker 7: experiment on the course of the past three years, the 364 00:17:11,440 --> 00:17:14,560 Speaker 7: extent to which those inflation expectations form a center of 365 00:17:14,560 --> 00:17:18,479 Speaker 7: gravity that pulls inflation towards two percent, and I think 366 00:17:18,520 --> 00:17:22,360 Speaker 7: it's played out really well. It's underscored the Fed's credibility 367 00:17:22,359 --> 00:17:25,840 Speaker 7: in maintaining that level. I don't see any reason why 368 00:17:26,040 --> 00:17:30,960 Speaker 7: inflation should be different going forward unless the FED strategy changes. Inflation, 369 00:17:31,040 --> 00:17:33,360 Speaker 7: at the end of the day, is a financial variable 370 00:17:33,400 --> 00:17:34,240 Speaker 7: determined by the FED. 371 00:17:34,880 --> 00:17:36,959 Speaker 1: If the FED cuts by fifty basis points, and then 372 00:17:37,040 --> 00:17:39,240 Speaker 1: fifty basis points again at a time where the economy 373 00:17:39,280 --> 00:17:41,840 Speaker 1: is not falling off a cliff, isn't that the variable 374 00:17:41,840 --> 00:17:44,080 Speaker 1: that could cause a higher inflationary environment. 375 00:17:44,600 --> 00:17:47,160 Speaker 7: We're going to find out, right, if in fact that 376 00:17:47,280 --> 00:17:50,240 Speaker 7: neutral rate is closer to four percent, that means the 377 00:17:50,280 --> 00:17:52,280 Speaker 7: economy is going to be very sensitive to rate cuts 378 00:17:52,720 --> 00:17:55,080 Speaker 7: straight out of the gate. Right, one hundred basic points 379 00:17:55,119 --> 00:17:58,919 Speaker 7: of cuts could significantly accelerate growth, could put upside pressure 380 00:17:59,000 --> 00:18:01,399 Speaker 7: on inflation, and then we're not going to get you know, 381 00:18:01,480 --> 00:18:03,919 Speaker 7: FED funds below three three and a half percent in 382 00:18:03,920 --> 00:18:05,240 Speaker 7: the coming twenty four months. 383 00:18:05,960 --> 00:18:06,879 Speaker 5: This is a key unknown. 384 00:18:07,080 --> 00:18:09,359 Speaker 7: We just don't know at the stage, given how much 385 00:18:09,520 --> 00:18:11,520 Speaker 7: flux we've had in the course of the past through three years. 386 00:18:11,520 --> 00:18:13,679 Speaker 2: And please to add a settle this because you have 387 00:18:13,720 --> 00:18:16,399 Speaker 2: to realize how finely balanced things aren't going against tomorrow morning. 388 00:18:16,920 --> 00:18:19,639 Speaker 2: We're one bad jobs print away from pricing at a 389 00:18:19,680 --> 00:18:21,920 Speaker 2: series of fifty basis point cuts and one good one 390 00:18:21,960 --> 00:18:23,879 Speaker 2: away from reversing a lot of what we've priced in 391 00:18:23,880 --> 00:18:24,840 Speaker 2: over the last few weeks. 392 00:18:25,400 --> 00:18:29,320 Speaker 1: And essentially, what we don't know is what the responsive 393 00:18:29,359 --> 00:18:32,440 Speaker 1: markets will do to the underlying economy. We keep talking 394 00:18:32,480 --> 00:18:35,359 Speaker 1: about how this isn't a very interst rate sensitive economy, 395 00:18:35,359 --> 00:18:38,200 Speaker 1: as many people expected on the way up. What's to 396 00:18:38,240 --> 00:18:39,440 Speaker 1: say it will be on the way down? 397 00:18:39,680 --> 00:18:42,720 Speaker 2: Should I fear the disinversion? Can we finish there? When 398 00:18:42,720 --> 00:18:45,280 Speaker 2: the curve starts to normalize and you get this bull statner, 399 00:18:45,440 --> 00:18:47,840 Speaker 2: typically that means bad things are about to or are 400 00:18:47,840 --> 00:18:50,240 Speaker 2: happening in the US economy. The rate cycle is just 401 00:18:50,280 --> 00:18:53,080 Speaker 2: about to start or is happening. What is it this time? 402 00:18:53,240 --> 00:18:54,399 Speaker 2: Could it be different this time? 403 00:18:55,680 --> 00:18:56,280 Speaker 5: Not as much? 404 00:18:56,440 --> 00:18:58,760 Speaker 7: I look at the curve and I see in the 405 00:18:58,760 --> 00:19:01,000 Speaker 7: course of the past, you know, again twelve to twenty 406 00:19:01,000 --> 00:19:03,639 Speaker 7: four months, the curve is deeply inverted, signaling that the 407 00:19:03,680 --> 00:19:07,080 Speaker 7: FED has taken us to a very restrictive place. They're 408 00:19:07,240 --> 00:19:10,440 Speaker 7: taking the foot off that brake pedal right now, and 409 00:19:10,520 --> 00:19:14,400 Speaker 7: the curve is disinverting. The pass through into the real economy, 410 00:19:14,640 --> 00:19:17,439 Speaker 7: I think is an open question. Right You had your 411 00:19:17,480 --> 00:19:21,159 Speaker 7: previous guests talk about the sensitivity of the housing market, 412 00:19:21,240 --> 00:19:24,160 Speaker 7: housing cappacs to those interest rate cuts. It's a key 413 00:19:24,240 --> 00:19:27,679 Speaker 7: unknote to this day. If in fact, we see that 414 00:19:27,720 --> 00:19:30,359 Speaker 7: housing demand come back, housing capecs come back on the 415 00:19:30,400 --> 00:19:35,040 Speaker 7: flip side of the election, potentially corporate capex reaccelerate the 416 00:19:35,080 --> 00:19:37,440 Speaker 7: Fed's going to have a really high floor in terms 417 00:19:37,440 --> 00:19:39,320 Speaker 7: of other cuts relative to what's price today. 418 00:19:39,560 --> 00:19:41,920 Speaker 2: Ed small as always, Thank you, sir. I was signing 419 00:19:41,960 --> 00:19:54,159 Speaker 2: that a Columbia threat nade to jobbas claims came out 420 00:19:54,200 --> 00:19:56,399 Speaker 2: at two twenty seven. The meeting estimate was two thirty. 421 00:19:56,600 --> 00:19:58,800 Speaker 2: I said earlier, if you walked into a room of economists, 422 00:19:58,800 --> 00:20:00,720 Speaker 2: you'd walk back out confused. If you look at the 423 00:20:00,720 --> 00:20:03,520 Speaker 2: States this morning, you're not getting clear direction either. Jay 424 00:20:03,560 --> 00:20:06,520 Speaker 2: Bryceon of Welst Fago is challenged with solving some of 425 00:20:06,560 --> 00:20:08,480 Speaker 2: these issues. Jay, what is going on in the labor 426 00:20:08,520 --> 00:20:11,480 Speaker 2: market in America? 427 00:20:12,600 --> 00:20:15,440 Speaker 8: Well, John, I mean, I think you kind of talked 428 00:20:15,480 --> 00:20:17,800 Speaker 8: about it before. I mean, you know, what we're seeing 429 00:20:18,000 --> 00:20:20,720 Speaker 8: is we're just not getting as much hiring as we 430 00:20:20,840 --> 00:20:23,399 Speaker 8: had before, and I think that's consistent with the ADP 431 00:20:23,600 --> 00:20:26,200 Speaker 8: number we got this morning. But we're also not seeing 432 00:20:26,280 --> 00:20:29,639 Speaker 8: businesses laying people off, and that's we're consistent with the 433 00:20:29,680 --> 00:20:32,280 Speaker 8: initial job less claims number. So you know, the labor 434 00:20:32,359 --> 00:20:35,920 Speaker 8: market is moving has moved back into better balance, which 435 00:20:36,000 --> 00:20:38,119 Speaker 8: is a good thing. Things are slowing down at their 436 00:20:38,400 --> 00:20:41,720 Speaker 8: labor market. But you know, you and I think Lisa 437 00:20:41,800 --> 00:20:44,399 Speaker 8: used this word earlier. You know, you're kind of on 438 00:20:44,440 --> 00:20:46,640 Speaker 8: a knife edge right now, and you know you don't 439 00:20:46,680 --> 00:20:49,360 Speaker 8: want things to deteriorate further from here. 440 00:20:49,320 --> 00:20:51,800 Speaker 2: Jay, What gives you confidence it won't. Is there any 441 00:20:51,800 --> 00:20:54,520 Speaker 2: reason to be confident that things stabilize, that this isn't 442 00:20:54,520 --> 00:20:56,480 Speaker 2: just a moment in time, it's an end state for 443 00:20:56,520 --> 00:20:57,320 Speaker 2: the rest of this year. 444 00:21:00,119 --> 00:21:02,640 Speaker 8: So I think there's two things, John, that I think 445 00:21:02,680 --> 00:21:05,280 Speaker 8: things kind of stabilize here. And you know, recession is 446 00:21:05,320 --> 00:21:07,399 Speaker 8: not the base case call. One would be if you 447 00:21:07,440 --> 00:21:10,600 Speaker 8: look at the financial position of households in general, it's 448 00:21:10,600 --> 00:21:14,040 Speaker 8: pretty good. Yes, we have seen delinquencies go up on 449 00:21:14,119 --> 00:21:17,960 Speaker 8: credit cards, on autos, we've seen you know, we're hearing 450 00:21:18,000 --> 00:21:22,080 Speaker 8: antidotes of low income consumers feeling some stress. But if 451 00:21:22,119 --> 00:21:24,360 Speaker 8: you step back and you look at the debt situation, 452 00:21:24,400 --> 00:21:26,119 Speaker 8: if you look at the debt service ratio of the 453 00:21:26,119 --> 00:21:29,399 Speaker 8: business of consumers, it all remains pretty good. And the 454 00:21:29,440 --> 00:21:32,320 Speaker 8: same thing applies to the business sector in general. Businesses 455 00:21:33,359 --> 00:21:37,600 Speaker 8: large don't really have to lay people off, you know, 456 00:21:37,800 --> 00:21:40,439 Speaker 8: in aggregate right now. And so those I think are 457 00:21:40,480 --> 00:21:43,720 Speaker 8: two good things. To take a deep breath. Things aren't 458 00:21:43,720 --> 00:21:46,680 Speaker 8: falling apart out there. And you know, a continued expansion 459 00:21:46,800 --> 00:21:48,119 Speaker 8: is probably still the base case. 460 00:21:48,480 --> 00:21:51,320 Speaker 1: Jay, Let's say the base rate right now is one 461 00:21:51,359 --> 00:21:55,520 Speaker 1: hundred basis points slower and companies had an easier time 462 00:21:55,880 --> 00:21:59,560 Speaker 1: borrowing at a more reasonable price. I guess would you 463 00:21:59,640 --> 00:22:02,520 Speaker 1: start to see a pickup in hiring based in the 464 00:22:02,560 --> 00:22:06,159 Speaker 1: fact that companies are still hopeful and or frankly, the 465 00:22:06,240 --> 00:22:08,919 Speaker 1: reason why they haven't been more aggressively hiring is in 466 00:22:08,960 --> 00:22:11,520 Speaker 1: part because of uncertainty around the economy as well as 467 00:22:11,840 --> 00:22:12,320 Speaker 1: the election. 468 00:22:15,280 --> 00:22:17,080 Speaker 8: You know, at least I think that's part of it. 469 00:22:17,119 --> 00:22:19,160 Speaker 8: But you know, we're also seeing when you look at 470 00:22:19,000 --> 00:22:21,959 Speaker 8: the overall economy, you are seeing signs of softness. Right 471 00:22:21,960 --> 00:22:24,199 Speaker 8: We all know that, you know, the housing market has 472 00:22:24,200 --> 00:22:25,960 Speaker 8: been kind of soft for a while. We all know 473 00:22:26,080 --> 00:22:30,400 Speaker 8: that manufacturing is also soft right now. The only real 474 00:22:30,440 --> 00:22:33,080 Speaker 8: thing that's really holding up the economy right now is 475 00:22:33,119 --> 00:22:35,400 Speaker 8: the service sector. And so you know, when we get 476 00:22:35,440 --> 00:22:38,040 Speaker 8: the ISM number at ten o'clock, that will be important 477 00:22:38,040 --> 00:22:41,199 Speaker 8: to tell us what's what's going on in there. And 478 00:22:41,280 --> 00:22:45,720 Speaker 8: so you know, as rates come down, you know, the 479 00:22:45,760 --> 00:22:48,640 Speaker 8: point here is that should help to stimulate sort of things. 480 00:22:48,680 --> 00:22:52,080 Speaker 8: I think there's some uncertainty whether whether it's towards the election, 481 00:22:52,400 --> 00:22:56,199 Speaker 8: whether it's towards the economic outlook in general, but you know, 482 00:22:56,240 --> 00:22:59,119 Speaker 8: in general, what we are seeing is monetary policy is 483 00:22:59,160 --> 00:23:01,679 Speaker 8: in a restrictive dance right now. Rates do need to 484 00:23:01,720 --> 00:23:04,200 Speaker 8: come down to help stimulate spending. 485 00:23:04,680 --> 00:23:08,040 Speaker 1: Jay, Is this normal to have this level of uncertainty 486 00:23:08,280 --> 00:23:11,560 Speaker 1: the knife edge? It's almost talking about this idea that 487 00:23:12,000 --> 00:23:14,159 Speaker 1: things could tip the scales one way or another. Is 488 00:23:14,160 --> 00:23:17,000 Speaker 1: this always how it feels at tipping points that seem 489 00:23:17,040 --> 00:23:19,040 Speaker 1: to last forever with such model data. 490 00:23:21,800 --> 00:23:25,239 Speaker 8: Yeah, you know, so there's always uncertainty out there, right 491 00:23:25,240 --> 00:23:27,040 Speaker 8: And if you go back, you look at the pandemic, right, 492 00:23:27,080 --> 00:23:29,439 Speaker 8: that was a very fast moving sort of situation. You 493 00:23:29,440 --> 00:23:32,439 Speaker 8: look at the financial crisis, lots of uncertainty around there, 494 00:23:32,680 --> 00:23:36,280 Speaker 8: absent a major shock. And you know, the last major 495 00:23:36,320 --> 00:23:38,480 Speaker 8: shock was the pandemic a few years ago, and the 496 00:23:38,600 --> 00:23:42,400 Speaker 8: unwinding from that apps in a major shock. I'm kind 497 00:23:42,400 --> 00:23:44,320 Speaker 8: of hard pressed to think of a time in the 498 00:23:44,400 --> 00:23:47,400 Speaker 8: last you know, few business cycles when things have felt 499 00:23:47,400 --> 00:23:49,760 Speaker 8: a little bit uncertain as they do right now. So 500 00:23:50,080 --> 00:23:53,920 Speaker 8: I do think it's it's not normal right now given 501 00:23:53,960 --> 00:23:57,240 Speaker 8: where we are. But you know, unfortunately, just the nature 502 00:23:57,359 --> 00:24:00,040 Speaker 8: of the way the economy works and the way the 503 00:24:00,119 --> 00:24:05,680 Speaker 8: overall geopolitical situation works, there's always a base level of uncertainty. 504 00:24:06,080 --> 00:24:08,680 Speaker 4: You said earlier, not much hiring, not much firing sounds 505 00:24:08,760 --> 00:24:11,280 Speaker 4: very goldilocks, but we've heard from Mike McKee was just 506 00:24:11,320 --> 00:24:14,080 Speaker 4: talking about hours worked will be important. What kind of 507 00:24:14,160 --> 00:24:16,320 Speaker 4: number of hours worked would you need to see to 508 00:24:16,359 --> 00:24:19,760 Speaker 4: then get concern that potentially the next point of call 509 00:24:19,840 --> 00:24:20,800 Speaker 4: is going to be layoffs. 510 00:24:23,320 --> 00:24:25,520 Speaker 8: Yeah, So if we're seeing, you know, if we're seeing 511 00:24:25,560 --> 00:24:28,840 Speaker 8: aggregate our hours work tomorrow going down let's call it 512 00:24:28,960 --> 00:24:31,640 Speaker 8: zero point three percent or something like that, then I'm 513 00:24:31,640 --> 00:24:34,160 Speaker 8: starting to get a little bit concerned, you know, at 514 00:24:34,160 --> 00:24:36,320 Speaker 8: that point. And so I think Mike had a really 515 00:24:36,359 --> 00:24:38,320 Speaker 8: good point there in terms of the hours worked. And 516 00:24:38,359 --> 00:24:40,119 Speaker 8: you know, the first things that you do see is 517 00:24:40,160 --> 00:24:43,960 Speaker 8: you see temporary workers start to go down. You know, 518 00:24:44,640 --> 00:24:47,200 Speaker 8: it's like twenty four out of the last twenty six months, 519 00:24:47,320 --> 00:24:49,560 Speaker 8: we've seen the number of temporary workers going down. So 520 00:24:49,600 --> 00:24:52,000 Speaker 8: we're already seeing that. And if we do start to 521 00:24:52,000 --> 00:24:55,480 Speaker 8: see hours worked going down by that magnitude zero point 522 00:24:55,560 --> 00:24:58,520 Speaker 8: three percent, zero point four percent, then I'm really starting 523 00:24:58,560 --> 00:24:59,560 Speaker 8: to get a little bit concerned. 524 00:25:00,000 --> 00:25:02,639 Speaker 2: Thanks for the updates, sir, JAKEE briceon there of Wells Fargo. 525 00:25:03,359 --> 00:25:06,920 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 526 00:25:06,920 --> 00:25:10,240 Speaker 2: in markets, economics, and geopolitics. You can watch the show 527 00:25:10,320 --> 00:25:13,240 Speaker 2: live on Bloomberg TV weekday mornings from six am to 528 00:25:13,400 --> 00:25:17,119 Speaker 2: nine am Eastern. 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