1
00:00:02,400 --> 00:00:14,680
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. It is a single Best

2
00:00:14,720 --> 00:00:18,279
Speaker 1: Idea where we take two of our guests across three

3
00:00:18,320 --> 00:00:22,079
Speaker 1: hours at Bloomberg Surveillance and try to give you some

4
00:00:22,320 --> 00:00:28,640
Speaker 1: wisdom on economics, finance, investment, international relations in the inflation

5
00:00:29,080 --> 00:00:31,960
Speaker 1: that we are all living frankly worldwide but also coast

6
00:00:32,000 --> 00:00:35,519
Speaker 1: to coast as well. Three months makes a trend and

7
00:00:35,560 --> 00:00:38,520
Speaker 1: we are well out to a trend. It's a great chart.

8
00:00:38,560 --> 00:00:40,559
Speaker 1: I'll give Jason Furman credit, but it may have been

9
00:00:40,560 --> 00:00:44,159
Speaker 1: somebody else. So a great chart where basically we are

10
00:00:44,240 --> 00:00:49,080
Speaker 1: reinflating out of November of last year. A first shout

11
00:00:49,080 --> 00:00:52,159
Speaker 1: out here on single best idea to Jim Bianco. We

12
00:00:52,200 --> 00:00:55,640
Speaker 1: started early this morning with a gentleman from Chicago, and

13
00:00:55,760 --> 00:00:59,640
Speaker 1: Jim Bianco absolutely nailed this. I don't know if it's

14
00:00:59,680 --> 00:01:02,480
Speaker 1: blind luck, you know, like the Chicago White Sox need

15
00:01:02,480 --> 00:01:05,720
Speaker 1: a pitching staff just to start there. We need Jim

16
00:01:05,720 --> 00:01:09,640
Speaker 1: Bianco on more often because he has absolutely nailed this

17
00:01:09,800 --> 00:01:13,319
Speaker 1: idea of the last mile of disinflation will be hard,

18
00:01:13,360 --> 00:01:17,559
Speaker 1: and that's certainly what we saw in the report today.

19
00:01:17,640 --> 00:01:21,520
Speaker 1: Ira Jersey came on and showed us titanic market moves

20
00:01:21,520 --> 00:01:24,440
Speaker 1: a two year yield on a five percent watch. I

21
00:01:24,480 --> 00:01:28,160
Speaker 1: can't believe I'm saying that. And then Neil Dutta joined us,

22
00:01:28,400 --> 00:01:30,280
Speaker 1: and he was really quite good. At the end of

23
00:01:30,280 --> 00:01:34,360
Speaker 1: his conversation, he talked about the idea that maybe real

24
00:01:34,400 --> 00:01:38,120
Speaker 1: wage growth it's threatened with higher inflation. That was one

25
00:01:38,160 --> 00:01:42,200
Speaker 1: thought from him. But here's Neil Dutta looking at consumption

26
00:01:42,560 --> 00:01:45,559
Speaker 1: and looking at the close you put on your back.

27
00:01:46,120 --> 00:01:47,680
Speaker 2: What I would just say is that you look at

28
00:01:47,680 --> 00:01:50,480
Speaker 2: apparel prices. They rose I think seven tens of one

29
00:01:50,520 --> 00:01:53,680
Speaker 2: percent in March, and that's following a big increase in February.

30
00:01:54,200 --> 00:01:57,640
Speaker 2: But taking a step back, people are already making a

31
00:01:58,600 --> 00:02:00,800
Speaker 2: trade off, right, So if you look at real consumption

32
00:02:00,840 --> 00:02:05,320
Speaker 2: of clothing, it's already declining. So in some respects that

33
00:02:05,480 --> 00:02:07,360
Speaker 2: is not the kind of inflation the feed should be

34
00:02:07,400 --> 00:02:09,880
Speaker 2: worried about. I mean, that's not demand dri of an inflation.

35
00:02:09,919 --> 00:02:11,840
Speaker 2: If people are cutting back in the areas that are

36
00:02:11,880 --> 00:02:14,720
Speaker 2: going up in price, that suggests that people are making

37
00:02:15,000 --> 00:02:17,840
Speaker 2: a trade off already, and there's somewhat resistance to higher prices,

38
00:02:17,880 --> 00:02:20,840
Speaker 2: which then raises the question about how long those price

39
00:02:20,919 --> 00:02:22,080
Speaker 2: increases can stick.

40
00:02:22,400 --> 00:02:25,600
Speaker 1: I'll give you demand driven inflation. After thought said we

41
00:02:25,600 --> 00:02:28,280
Speaker 1: need some steak in the house because we're like everybody else,

42
00:02:28,280 --> 00:02:30,600
Speaker 1: we're chicken. We're eating chicken eight days a week. I mean,

43
00:02:30,600 --> 00:02:33,080
Speaker 1: it's a shift from beef to chicken. So you know,

44
00:02:33,120 --> 00:02:35,160
Speaker 1: I caught up the fancy place and I said, can

45
00:02:35,200 --> 00:02:37,840
Speaker 1: I get a steak? I thought it's in two and said,

46
00:02:37,840 --> 00:02:44,239
Speaker 1: they send this one ginormous steak which costs thirty two dollars,

47
00:02:44,280 --> 00:02:45,840
Speaker 1: and it was, you know, more than a pound. It

48
00:02:45,880 --> 00:02:49,240
Speaker 1: was like a big, genormous piece. But the I can't

49
00:02:49,280 --> 00:02:52,440
Speaker 1: even scope and scale that thirty two dollars and I

50
00:02:52,440 --> 00:02:54,880
Speaker 1: had to cook the beast. And that's the kind of

51
00:02:54,880 --> 00:02:57,320
Speaker 1: examples they're saying. So the answer is we all eat chicken.

52
00:02:57,680 --> 00:03:02,640
Speaker 1: And that's the substitution effect that you see on inflation.

53
00:03:03,400 --> 00:03:08,000
Speaker 1: It's a very very real problem. We also talked to

54
00:03:08,040 --> 00:03:13,480
Speaker 1: Stever Shooto of Mazuo and he was really, really quite good.

55
00:03:13,520 --> 00:03:18,360
Speaker 1: Here here's Stever Shooto in the shock of an inflation report.

56
00:03:18,400 --> 00:03:20,840
Speaker 3: The end of the day, they're trying to maximize social welfare,

57
00:03:20,919 --> 00:03:24,040
Speaker 3: and their concept between kind keeping the labor market as

58
00:03:24,080 --> 00:03:26,399
Speaker 3: tight as it is is to try to drive up wages.

59
00:03:27,000 --> 00:03:29,200
Speaker 3: The problem is by keeping the labor market tight in

60
00:03:29,240 --> 00:03:32,040
Speaker 3: an environment where all the excess capacity has been used

61
00:03:32,080 --> 00:03:34,840
Speaker 3: up in the system is it creates inflation. And that's

62
00:03:34,880 --> 00:03:36,880
Speaker 3: when you get into the situation as you indicated a

63
00:03:36,880 --> 00:03:40,160
Speaker 3: few seconds ago, in terms of negative real wages. So

64
00:03:40,400 --> 00:03:43,600
Speaker 3: your attempt to try to maximize social welfare by keeping

65
00:03:43,600 --> 00:03:46,880
Speaker 3: a labor market tight could go against you if CEOs

66
00:03:46,920 --> 00:03:49,720
Speaker 3: and companies feel they have pricing power, and after seeing

67
00:03:49,760 --> 00:03:52,280
Speaker 3: this kind of improvement in the in the data, you're

68
00:03:52,320 --> 00:03:55,120
Speaker 3: starting to see that that's a broad based improvement in

69
00:03:55,160 --> 00:03:58,000
Speaker 3: the inflation numbers or a rise in the inflation numbers is

70
00:03:58,000 --> 00:03:59,840
Speaker 3: telling you that more and more people feel they do

71
00:04:00,160 --> 00:04:03,240
Speaker 3: some pricing power left, and that's why it's working at

72
00:04:03,240 --> 00:04:07,200
Speaker 3: the detriment of their desire to maximize social welfare.

73
00:04:07,480 --> 00:04:11,000
Speaker 1: Steve Shudo of missou and my question is you look

74
00:04:11,040 --> 00:04:13,160
Speaker 1: at the three components you know you can do it

75
00:04:13,160 --> 00:04:16,960
Speaker 1: in a fix fixed income space. A nominal yield, the

76
00:04:17,040 --> 00:04:19,000
Speaker 1: yield that we all know what's a mortgage ra going

77
00:04:19,000 --> 00:04:21,720
Speaker 1: to be after this inflation report. And then you take

78
00:04:21,760 --> 00:04:25,400
Speaker 1: away inflation and you have a residual, which is the

79
00:04:25,480 --> 00:04:28,040
Speaker 1: real yield, the real five year yield well out overs

80
00:04:28,040 --> 00:04:32,040
Speaker 1: two standard deviation move ten year yield almost is exciting

81
00:04:32,560 --> 00:04:34,240
Speaker 1: to a hire. I believe it was two point zero

82
00:04:34,320 --> 00:04:37,719
Speaker 1: nine percent. Or you can bring it over to the

83
00:04:37,800 --> 00:04:43,359
Speaker 1: economy and look at nominal GDP, the current GDP, which

84
00:04:43,440 --> 00:04:46,080
Speaker 1: is all in with inflation. This goes back to Lawrence

85
00:04:46,120 --> 00:04:49,359
Speaker 1: Cuddler years ago bear Stearns, where he really fought for

86
00:04:49,400 --> 00:04:54,440
Speaker 1: the importance of nominal GDP. Takeout inflation and you get

87
00:04:54,440 --> 00:04:56,640
Speaker 1: the residual, which is the thing we talk about all

88
00:04:56,680 --> 00:04:59,560
Speaker 1: the time, real GDP. So you got three moving parts,

89
00:05:00,040 --> 00:05:03,599
Speaker 1: and I'm not really sure where those moving parts are

90
00:05:03,680 --> 00:05:06,920
Speaker 1: headed right now. I think that's a massive uncertainty that

91
00:05:07,040 --> 00:05:09,440
Speaker 1: the FED faces at a main meeting. They've got a

92
00:05:09,640 --> 00:05:11,599
Speaker 1: They're just gonna do nothing. I mean, is it going

93
00:05:11,640 --> 00:05:13,880
Speaker 1: to be a snooze fest. I'll show up, the FED decides,

94
00:05:14,279 --> 00:05:16,039
Speaker 1: I'll be there with John and Lee soon, you know,

95
00:05:16,080 --> 00:05:19,279
Speaker 1: we'll see what the main meeting is like. But where

96
00:05:19,360 --> 00:05:22,600
Speaker 1: is nominal GDP? And then when you take out this

97
00:05:22,760 --> 00:05:29,120
Speaker 1: new higher inflation set, where is real GDP? That's going

98
00:05:29,200 --> 00:05:31,360
Speaker 1: to be fascinating to see what the growth of the

99
00:05:31,400 --> 00:05:35,919
Speaker 1: American economy is. Major shout out to the gentleman up

100
00:05:35,960 --> 00:05:39,560
Speaker 1: at Harvard Holding Court Jason Furman his public service to

101
00:05:39,600 --> 00:05:43,320
Speaker 1: the nation in the White House. But Jason Furman with

102
00:05:43,480 --> 00:05:46,520
Speaker 1: a beautiful historical perspective. I don't have the numbers in

103
00:05:46,520 --> 00:05:48,960
Speaker 1: front of me. What you need to know that on

104
00:05:49,040 --> 00:05:53,120
Speaker 1: a three month annualized on a twelve month the annualized basis,

105
00:05:53,839 --> 00:05:59,280
Speaker 1: we are back to inflation of the early nineteen nineties.

106
00:06:00,000 --> 00:06:02,560
Speaker 1: On Apple car Play, thank you so much for your

107
00:06:02,560 --> 00:06:06,240
Speaker 1: effort there worldwide. On Apple car Play, download the business

108
00:06:06,320 --> 00:06:10,000
Speaker 1: app and the Bloomberg Business app, I should say, and

109
00:06:10,080 --> 00:06:14,599
Speaker 1: also on YouTube, just extraordinary attention to YouTube. Thank you

110
00:06:14,680 --> 00:06:18,080
Speaker 1: so much. You go to YouTube, you search Bloomberg podcasts,

111
00:06:18,200 --> 00:06:21,599
Speaker 1: look for Lisa Matteo. It's a better look than looking

112
00:06:21,600 --> 00:06:24,039
Speaker 1: for me. Here for looking for Paul. But thank you

113
00:06:24,080 --> 00:06:27,760
Speaker 1: for your interest on YouTube. This is single best idea

114
00:06:27,960 --> 00:06:30,080
Speaker 1: on Apple podcasts.