WEBVTT - Iran Endgame in Question as Geopolitical Stress Deepens 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.240 us live on YouTube. 0:00:27.640 --> 0:00:30.480 Joining us now, someone who is a foundation of Bloomberg 0:00:30.880 --> 0:00:34.640 Surveillance and all we've done for decades. Ghen writing definitive 0:00:34.720 --> 0:00:39.760 at bear Stearns years ago preing capital Right now, let 0:00:39.880 --> 0:00:42.280 John thank you so much for coming in. The clear 0:00:42.600 --> 0:00:46.800 message I received on the trip to Phoenix among people 0:00:47.400 --> 0:00:52.160 that are optimistic about American GDP are innovation or manufacturing, 0:00:52.560 --> 0:00:55.160 is why in God's name are we talking about cutting 0:00:55.280 --> 0:00:58.800 interest rates? What's the case now for cutting rates? 0:00:59.320 --> 0:01:01.280 I don't think there is one. I think there's a 0:01:01.320 --> 0:01:04.400 case for racing rates. If you look at the ism 0:01:04.440 --> 0:01:07.160 reports that we had on Monday for manufacturing and yesterday 0:01:07.160 --> 0:01:09.959 for services, and you put them together, you have a clear, 0:01:10.360 --> 0:01:15.160 very strong uptrend. You've an economy growing above potential. The 0:01:15.200 --> 0:01:19.679 administration itself says the economy is doing well so and 0:01:19.800 --> 0:01:22.840 inflation's above the fetch target, and we still have the 0:01:22.920 --> 0:01:26.640 tariff feedthrough to fully work through and the oil price 0:01:26.680 --> 0:01:30.560 shot of an unknown magnitude. I think there is no 0:01:30.800 --> 0:01:34.160 economic case non whatsoever for cutting rates. 0:01:34.200 --> 0:01:38.040 Your definitive take is it your service to the Bank 0:01:38.120 --> 0:01:42.560 of England, your England, your United Kingdom, and also your 0:01:42.600 --> 0:01:46.200 service to the Federal Reserve. Are the bankers listening to 0:01:46.280 --> 0:01:49.320 the PhDs, the analysts that you know, the kids that 0:01:49.360 --> 0:01:50.120 you used to be. 0:01:51.040 --> 0:01:53.600 Well, I think we all know that there's a voice 0:01:53.840 --> 0:01:56.840 just outside the room that's louder than all those voices, 0:01:57.200 --> 0:02:02.320 and that makes monetary policy difficult to carry out. 0:02:02.360 --> 0:02:04.840 In fact, makes fundamental economics. 0:02:04.320 --> 0:02:09.680 Difficult to carry out in policy circles, I think, but 0:02:11.160 --> 0:02:14.040 there are very good people at the FED. There are 0:02:14.160 --> 0:02:17.600 very good researchers at the FED. I think Raphael Bostik, 0:02:17.600 --> 0:02:21.440 for example, will be greatly missed because he listened to 0:02:21.560 --> 0:02:25.760 his researchers and then made his policy decisions and thoughts 0:02:25.800 --> 0:02:28.839 based on what his researchers were telling him. That's why 0:02:28.840 --> 0:02:31.760 he was the first person to call out transitory. He 0:02:31.840 --> 0:02:33.240 came up with a swear jar. 0:02:33.160 --> 0:02:36.359 In twenty twenty two. So I think there are those 0:02:36.360 --> 0:02:36.760 people there. 0:02:36.760 --> 0:02:42.360 The Cleveland FED has an excellent inflation center, and I 0:02:42.440 --> 0:02:47.200 think that that information is getting worked through. But I 0:02:47.240 --> 0:02:50.120 think under this palle fed we don't know how long 0:02:50.160 --> 0:02:52.000 this powerfited's gonna last. It depends how long it takes 0:02:52.080 --> 0:02:58.040 Kevin to get through hearings. I don't think as much 0:02:58.120 --> 0:03:01.640 chance for great unless something real significantly changes. And the 0:03:01.680 --> 0:03:06.200 one wildcard that can do that would be a many 0:03:06.320 --> 0:03:08.919 nineteen seventies rerun with a short moved higher and oil 0:03:09.000 --> 0:03:10.120 not the kind of move we've had. 0:03:10.160 --> 0:03:11.760 This is, this is contained. 0:03:11.840 --> 0:03:13.600 But if we use. 0:03:13.480 --> 0:03:15.440 Fundamental economics, I know you love that time we go 0:03:15.480 --> 0:03:17.960 back to Alfred Marshall invented the concept of the price 0:03:18.000 --> 0:03:21.240 elasticity at demand. The price elasticity a demand for oil 0:03:21.320 --> 0:03:24.280 is very low. Estimates are about minus point one, which means. 0:03:24.200 --> 0:03:26.240 Okay, I dear Paul wants to jump in here, but 0:03:26.280 --> 0:03:30.160 this is incredible. We're not reliving the nineteen seventies oil show. 0:03:30.280 --> 0:03:31.560 No, no, no, no, we're not. 0:03:31.639 --> 0:03:34.840 I mean if we What that elis system means is 0:03:34.840 --> 0:03:37.640 that if you had a one percent reduction in global 0:03:37.720 --> 0:03:41.600 oil supplies on a semi permanent base for the new term, 0:03:41.680 --> 0:03:43.480 you'd expect to see about a ten percent. 0:03:43.400 --> 0:03:44.320 Increase in prices. 0:03:44.360 --> 0:03:48.640 So if we really have a disruption, and you mentioned 0:03:48.680 --> 0:03:51.720 the strength of the Strait of Home moves. Twenty percent 0:03:51.760 --> 0:03:53.400 of the world's oil goes through there, So if you 0:03:53.520 --> 0:03:58.160 have a serious interruption there, then you're looking at a 0:03:58.720 --> 0:04:02.360 potentially very big move in the price soil. I'm not 0:04:02.360 --> 0:04:05.520 forecasting it. I just think we need economics to frame 0:04:06.280 --> 0:04:09.680 the magnitude of what we're seeing and history to frame 0:04:09.720 --> 0:04:11.920 the magnitude of what we're seeing. And what we're seeing 0:04:12.040 --> 0:04:13.960 is very contained right now. 0:04:15.600 --> 0:04:17.240 Reporting that just in the last week the price of 0:04:17.279 --> 0:04:20.520 gasoline at the pumps up a little over twenty cents 0:04:20.720 --> 0:04:23.960 per barrel. When does that start becoming an inflation risk 0:04:24.080 --> 0:04:26.279 for this economy or does it become a risk just 0:04:26.279 --> 0:04:28.400 to the consumer out there, who probably doesn't need another 0:04:28.760 --> 0:04:30.000 bat of inflation to deal with. 0:04:30.279 --> 0:04:32.520 Well, there's a number of elements. 0:04:32.520 --> 0:04:34.839 First, let me say one of the reasons this isn't 0:04:34.880 --> 0:04:37.600 the nineteen seventies because the US is now self sufficient 0:04:37.640 --> 0:04:40.640 in oil. So in the nineteen seventies, the oil price 0:04:40.640 --> 0:04:43.960 shot transferred income from the US to OPEC countries. Now 0:04:44.000 --> 0:04:46.880 it reshuffles income within the US, but it does shuffle 0:04:46.920 --> 0:04:51.000 income away from the consumer and to producers and owners 0:04:51.040 --> 0:04:56.000 of oil companies. And I think we have to see 0:04:56.040 --> 0:04:58.200 a bigger move. But what it does do for the consumer, 0:04:59.279 --> 0:05:02.120 I believe long time and research has begin to support 0:05:02.120 --> 0:05:07.200 that view that it's the frequent purchases that consumers make that. 0:05:07.400 --> 0:05:08.880 Impact their expectations. 0:05:08.920 --> 0:05:11.919 It is going to the shop during the pandemic, things 0:05:11.960 --> 0:05:14.120 like toilet paper and something that weren't having prize that 0:05:14.200 --> 0:05:19.120 I didn't understand why that influencerer expectations. So groceries gasoline 0:05:19.160 --> 0:05:23.240 that has a big impact. Twenty thirty cents a gallon 0:05:24.040 --> 0:05:28.599 isn't a game changer for the consumer. But you know, 0:05:28.640 --> 0:05:31.440 another favorite letter of people want to talk about in 0:05:31.520 --> 0:05:36.080 the economy, the K shape, that it will hurt those 0:05:36.640 --> 0:05:37.520 at the bottom of the K. 0:05:38.240 --> 0:05:41.600 Economic growth, as you mentioned, continues to be solid, I 0:05:41.680 --> 0:05:43.520 mean kind of across the board. 0:05:43.520 --> 0:05:46.000 Here we had some good ism data points here. 0:05:47.160 --> 0:05:50.440 What is the risk to this US economy to the 0:05:50.560 --> 0:05:51.720 GDP call out there? 0:05:51.800 --> 0:05:57.680 Do you think, well, I think it's one a potential 0:05:58.200 --> 0:06:00.880 and just say a potential, not forecasting for a real 0:06:00.960 --> 0:06:05.719 big oil price shop that would definitely have an impact 0:06:05.800 --> 0:06:08.400 in terms of the costs of non oil companies, who 0:06:08.440 --> 0:06:12.560 are the non oil producing companies are the primary employers 0:06:12.600 --> 0:06:15.560 in the economy. Old companies are much small and more 0:06:15.600 --> 0:06:18.920 contained in size. So I think that's one. And I 0:06:19.040 --> 0:06:22.159 just think the general uncertainty and we've had if you 0:06:22.200 --> 0:06:25.839 think of what this economy is absorbed increases and interest rates, 0:06:27.200 --> 0:06:29.719 you know, all the way up to five and a 0:06:29.800 --> 0:06:32.599 quarter to five and a half percent from effectively zero. 0:06:33.279 --> 0:06:35.800 We didn't the US didn't go into recession. That surprised me. 0:06:35.880 --> 0:06:37.400 I was wrong on that call. 0:06:38.920 --> 0:06:41.159 The tariff shock, which. 0:06:41.000 --> 0:06:44.560 I thought would have pushed the economy potentially over the edge, 0:06:45.000 --> 0:06:46.720 that has been absorbed. And the thing that has done 0:06:46.760 --> 0:06:49.159 that is productivity growth. Now we get productivity in numbers 0:06:49.160 --> 0:06:52.680 at eight thirty this morning. That is the We are 0:06:52.800 --> 0:06:56.040 fortunate in the US in having the potential for this big, 0:06:56.440 --> 0:07:00.560 secular and long running story on productivity at the game. 0:07:00.960 --> 0:07:03.600 It's disruptive on people when they look at history, look 0:07:03.640 --> 0:07:07.320 at statistics, don't look at the people who were disrupted. 0:07:07.440 --> 0:07:10.920 And my hat's off to Governor Barr, who gave a 0:07:11.040 --> 0:07:15.040 terrific speech a couple of weeks ago on AI on 0:07:15.080 --> 0:07:17.480 what monitor policy can do, and cont. 0:07:17.520 --> 0:07:20.800 John writings, who starts wrong? Today? We continue from bringing capital. 0:07:20.840 --> 0:07:23.720 We say good morning to all of you worldwide on YouTube. 0:07:24.120 --> 0:07:27.320 A big message I learned in Phoenix Serious XM yep, 0:07:27.600 --> 0:07:30.960 huge good morning on Serious XM channel one twenty one, 0:07:31.400 --> 0:07:34.040 and this thing building on YouTube every day. Paul and 0:07:34.080 --> 0:07:35.880 I are really unsure of what to do with that. 0:07:35.880 --> 0:07:40.360 The February numbers were gratifying, to say the least. Lots 0:07:40.400 --> 0:07:42.840 of good talk here again we're focused on oil. Eighty 0:07:42.920 --> 0:07:45.960 three sixty nine of two dollars twenty nine really buck 0:07:46.120 --> 0:07:50.080 used up against at eighty four level. John, I really 0:07:50.080 --> 0:07:52.720 want to talk about this productivity issue. Is the better 0:07:52.800 --> 0:07:57.400 productivity now from AI? I don't think so? Or is 0:07:57.400 --> 0:08:01.560 it from something different? Where's this two thous twenty five 0:08:01.680 --> 0:08:04.160 twenty six productivity coming from. 0:08:04.520 --> 0:08:08.160 It's coming from capital spending. I think AI is beginning 0:08:08.240 --> 0:08:11.760 to have an impact. But again, give another shout out 0:08:11.760 --> 0:08:15.240 to a form of fact governor Governor Larry Meyer, he 0:08:15.440 --> 0:08:18.240 cave one of the best speeches I've ever heard from 0:08:18.240 --> 0:08:21.360 a Fed governor back in two thousand and one. I 0:08:21.360 --> 0:08:23.800 think it was whatever happened to the new economy, and 0:08:23.840 --> 0:08:27.640 he documented these historical periods of productivity growth going back 0:08:27.680 --> 0:08:32.200 to eighteen eighty and you had twenty five year phases 0:08:33.200 --> 0:08:36.440 on average in productivity growth, high productivity growth and low 0:08:36.480 --> 0:08:39.080 productivity growth. Now we were in a very low productivity 0:08:39.080 --> 0:08:41.360 growth in the middle of the last decade and we 0:08:41.400 --> 0:08:44.400 started to come out of it. I think that COVID 0:08:44.800 --> 0:08:49.600 was a huge shakeup, and to be honest, I actually 0:08:49.640 --> 0:08:51.880 think that the work from home has enabled people to 0:08:51.880 --> 0:08:54.000 tap more effectively into the workforce. 0:08:54.080 --> 0:08:55.320 That those people who don't need. 0:08:55.240 --> 0:08:57.360 To go into the office are tired by an hour 0:08:57.520 --> 0:09:01.480 as commute. An hour's commute home, there are inevitable destructs 0:09:01.480 --> 0:09:04.000 in the house, but I think that may have been 0:09:04.040 --> 0:09:04.440 a factor. 0:09:04.559 --> 0:09:07.559 But the thing is, whatever. 0:09:07.200 --> 0:09:11.440 The cause is, these swings in productivity tend to last 0:09:11.480 --> 0:09:14.480 for at least ten years and on average for twenty 0:09:14.559 --> 0:09:17.560 five years, and so we could be looking at a 0:09:17.640 --> 0:09:21.880 three percent productivity growth number or higher for the next decade. 0:09:22.160 --> 0:09:26.079 And that kind of productivity has enabled companies to absorb 0:09:27.240 --> 0:09:28.240 the tarreft shop. 0:09:28.360 --> 0:09:30.400 I mean, Paul, you're in cyclopedic gun as you've been 0:09:30.440 --> 0:09:35.160 to Arizona forty seven times. North Phoenix is something we 0:09:35.240 --> 0:09:39.600 don't understand on the East coast. Taiwan's semiconductors coming in 0:09:40.000 --> 0:09:45.160 with manufacturing sites and the real secret is tens or 0:09:45.400 --> 0:09:49.280 hundreds of small suppliers to supply that, and that's that 0:09:50.120 --> 0:09:55.120 capital investment and productivity that we're just missing on a 0:09:55.200 --> 0:09:56.719 landstarved East coast. Yeah. 0:09:56.720 --> 0:09:59.880 Absolutely, and there's lots of places where that money is going. 0:10:00.600 --> 0:10:03.319 John talked to us about just the labor market in general. Obviously, 0:10:03.360 --> 0:10:06.600 that's the other part of the Fed's remit here seems 0:10:06.640 --> 0:10:09.280 to be hanging in there more than hanging in there. 0:10:09.679 --> 0:10:12.319 But are there some concerns underneath the surface for. 0:10:12.280 --> 0:10:17.600 You, Well, there's definitely concerns. We had very very slow, barely. 0:10:17.280 --> 0:10:22.360 Noticeable job growth last year, but it happened, and I 0:10:22.360 --> 0:10:24.080 don't want to get too political, at a time when 0:10:25.480 --> 0:10:28.160 the US was contracting its labor force due to its 0:10:28.200 --> 0:10:33.760 policies on immigration, and so we didn't really see it 0:10:33.800 --> 0:10:38.760 show up in the numbers. Apart from the November you know, 0:10:38.880 --> 0:10:41.600 during the shutdown, household released within a plumb rate pup 0:10:41.720 --> 0:10:43.520 to four point six percent. We're now at four point 0:10:43.520 --> 0:10:46.080 three percent, but within the labor market, and this is 0:10:46.120 --> 0:10:49.160 a bit worrying to me for the US. The US 0:10:49.240 --> 0:10:53.120 labor market has been very dynamic historically. We've got a 0:10:53.240 --> 0:10:57.560 very sclerotic internals to this labor market. We have very 0:10:57.679 --> 0:11:02.520 low hiring and very low firing. And I think the 0:11:02.800 --> 0:11:07.360 uncertainty about tariff's now maybe obviously too certain of impact 0:11:07.440 --> 0:11:10.720 any of the numbers, certainly about oil. That thing sas 0:11:10.720 --> 0:11:15.360 companies like sitting on the sidelines and trying to work 0:11:15.440 --> 0:11:17.880 through and tapping into productivity growth. 0:11:18.040 --> 0:11:18.840 But here's the thing. 0:11:19.280 --> 0:11:22.080 There was the Stanford University paper. There's been other papers 0:11:22.080 --> 0:11:26.600 come out that have said, you know, AI is allowing 0:11:26.640 --> 0:11:29.120 companies not to hire that entry level person in a 0:11:29.280 --> 0:11:35.400 bunch of industries, and that is a problem because you 0:11:35.520 --> 0:11:37.880 need to get those people on board and you need 0:11:37.920 --> 0:11:41.400 to train them. So they moved from being AI competitive 0:11:41.679 --> 0:11:44.400 to AI complementary, if you want to think of it 0:11:44.480 --> 0:11:47.920 that way, and that that is something that monetary policy 0:11:48.280 --> 0:11:49.000 cannot address. 0:11:49.040 --> 0:11:51.199 Okay, so a side caught me up. He says, we 0:11:51.280 --> 0:11:53.440 got to talk to writing about soccer. You forget about 0:11:53.440 --> 0:11:56.280 Preston North End in your commitment there there and off 0:11:56.320 --> 0:11:59.319 your Coventry city maybe or pop up into the Premier 0:11:59.520 --> 0:12:03.560 League over this thing called relegation. Can you imagine the 0:12:03.640 --> 0:12:07.920 Colorado Rockies, the Chicago White Sox and Nathan Hager's Washington 0:12:08.000 --> 0:12:12.240 Nationals out of the Major League Baseball and replaced by 0:12:12.280 --> 0:12:16.839 the Jacksonville Jumbo Shrimp to Scranton Wilkespeare rail Riders and 0:12:16.960 --> 0:12:24.080 the Lehi Valley Iron Pigs. Tottenham relegated, John, That's never 0:12:24.160 --> 0:12:25.880 happened in your lifetime, right, I. 0:12:25.760 --> 0:12:31.400 Think Tottenham has been not in the not in what 0:12:31.400 --> 0:12:35.640 would then called the First Division in my lifetime. But 0:12:36.320 --> 0:12:40.959 you know, it's just tremendously fluid. It's very difficult running 0:12:40.960 --> 0:12:45.319 the economics of a team. I know people who owners 0:12:45.360 --> 0:12:50.000 and managers, and it is it is difficult. But then 0:12:50.120 --> 0:12:52.480 look at Wrexham, right, give a shout out to Ryan 0:12:52.520 --> 0:12:53.160 Reynolds here. 0:12:53.360 --> 0:12:54.559 Look at Wrexham, which. 0:12:57.200 --> 0:13:00.480 In the Championship and will be playing got the email 0:13:00.559 --> 0:13:04.000 yesterday at Yankee Stadium against Liverpool in an exhibition game 0:13:05.000 --> 0:13:06.079 over the summer. 0:13:06.120 --> 0:13:07.679 We should go to that. 0:13:08.360 --> 0:13:12.360 Should be surveillance road trip. See that. I just so 0:13:12.480 --> 0:13:15.400 much wish that American sports had this relegation. 0:13:15.000 --> 0:13:16.319 Though, Oh boy, can you. 0:13:16.240 --> 0:13:23.560 Imagine Colorado Rockies worried about the Jacksonville some Exactly, it's all. 0:13:23.440 --> 0:13:26.800 About protecting the economics. In the US, they're franchises. The 0:13:27.120 --> 0:13:29.599 teams well, I mean they are teams, but the franchises, 0:13:29.679 --> 0:13:32.240 and you know, with the franchise, you get perverse rights 0:13:32.360 --> 0:13:34.240 like the most exciting games at the end of the 0:13:34.240 --> 0:13:37.640 season could be the team between and fourth. 0:13:37.360 --> 0:13:37.960 From the bottom. 0:13:38.400 --> 0:13:39.679 Email me, she says, what are we going to do 0:13:39.720 --> 0:13:42.200 with the tots? John Riding? What does Tottenham have to do? 0:13:42.280 --> 0:13:45.240 They've got that palace of a stadium, They've blown up 0:13:45.240 --> 0:13:47.880 the team over four years. What do they need to do? 0:13:48.679 --> 0:13:50.680 I don't know, I don't I don't pay too much 0:13:50.720 --> 0:13:55.319 attention to the internals of Tottenham. 0:13:55.360 --> 0:13:58.240 But you know, it's all about managing the resources you have. 0:13:58.360 --> 0:14:00.959 And you look at a team like United you're doing 0:14:01.040 --> 0:14:05.360 terribly and to change managers and now they're doing Verry 0:14:05.360 --> 0:14:07.800 Sodleik much better work. 0:14:08.320 --> 0:14:12.040 So it is about managing the resources you have. 0:14:12.280 --> 0:14:14.400 Side says that was a good stager, John writing, thank 0:14:14.440 --> 0:14:15.839 you so much for coming in. We need to get 0:14:15.880 --> 0:14:20.520 you way more offend. Stay with us. More from Bloomberg 0:14:20.640 --> 0:14:22.680 Surveillance coming up after this. 0:14:29.920 --> 0:14:33.480 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:14:33.560 --> 0:14:36.720 weekday afternoons from seven to ten am Eastern Listen on 0:14:36.800 --> 0:14:40.200 Apple Karplay and Android Auto with the Bloomberg Business app, 0:14:40.360 --> 0:14:42.120 or watch us live on YouTube. 0:14:42.360 --> 0:14:45.880 Fiona Greg joins US Global had a policy and research 0:14:46.000 --> 0:14:48.760 at Vanguard, who owns a high ground on this with 0:14:48.800 --> 0:14:53.440 a few other select worthies. We could go two hours here. 0:14:53.560 --> 0:14:55.760 Puss screwed up is our four to oh one K 0:14:56.520 --> 0:15:00.240 experiment coming out of ARISA of nineteen seventy four. 0:15:00.760 --> 0:15:03.040 Well, I would actually beg to differ. I actually think 0:15:03.080 --> 0:15:07.040 we're seeing some strength in terms of the design of 0:15:07.080 --> 0:15:09.680 our four oh and k plans. More and more plans 0:15:09.760 --> 0:15:13.640 are actually auto and rolling people in those plans. We're 0:15:13.680 --> 0:15:17.480 seeing more people get auto and rolled into slightly higher rates. 0:15:18.240 --> 0:15:22.560 And the other big experiment that has been successful is 0:15:22.560 --> 0:15:26.080 getting people auto enrolled into target date funds, which is 0:15:26.080 --> 0:15:29.640 a professionally managed allocation that makes sense for retirement. Now, 0:15:29.840 --> 0:15:32.600 there is a sort of dark side of the cloud, 0:15:32.640 --> 0:15:35.520 which is that if we think about the overall Vanguard 0:15:35.560 --> 0:15:39.360 retirement outlook of our baby boomers on track for retirement, 0:15:39.760 --> 0:15:42.080 well we see about two and five are. That means 0:15:42.080 --> 0:15:43.800 three and five are not, So we still have wood 0:15:43.800 --> 0:15:45.600 to chop on this system. 0:15:45.680 --> 0:15:47.600 Paul and I argue about this, and I'm in the 0:15:47.680 --> 0:15:51.240 camp that we screwed up so bad that our children 0:15:51.880 --> 0:15:56.280 are saving earlier in bigger than we did when we 0:15:56.320 --> 0:15:59.040 are in our twenties and thirties, are you seeing. 0:15:58.760 --> 0:16:04.160 That at Vanguard actually are seeing some strengthening of that savement, 0:16:04.320 --> 0:16:08.680 that saving journey. So younger employees are more likely to 0:16:08.720 --> 0:16:12.000 be on track for retirement, and that is impartly because 0:16:12.040 --> 0:16:15.240 they are benefiting from this stronger plan design and retirement 0:16:15.280 --> 0:16:18.840 plans for more of their careers. Right, So those in 0:16:18.880 --> 0:16:21.840 their fifties and sixties might not have been auto enrolled, 0:16:22.040 --> 0:16:24.440 whereas the typical twenty year old is definitely going to 0:16:24.440 --> 0:16:27.320 be auto enrolled into their plans, so they will be saving. 0:16:27.400 --> 0:16:29.840 Here's some primary research from the Sweeney household. Here were 0:16:30.080 --> 0:16:34.000 my three working folks in late twenties and thirty. They 0:16:34.000 --> 0:16:36.320 are Maxanta, four oh and Ka because I told them to. 0:16:37.160 --> 0:16:38.520 But b they don't. 0:16:38.320 --> 0:16:40.120 Believe they're going to be able to own a home and. 0:16:40.400 --> 0:16:43.800 Have that asset is part of their portfolio like prior generations. 0:16:43.880 --> 0:16:47.360 They think they're foreing ky. That's it, and that. 0:16:47.400 --> 0:16:49.320 Is I can second that my kids. 0:16:50.280 --> 0:16:52.640 I just tell you that the three of us dealing 0:16:52.680 --> 0:16:56.800 with this day to day, the basic blather, not Vanguard, 0:16:56.800 --> 0:16:59.200 but the bladder that we hear, the certitude that we 0:16:59.280 --> 0:17:03.480 hear is way off the mark. The kids, Sweeney's kids 0:17:03.520 --> 0:17:04.320 are petrifig. 0:17:04.640 --> 0:17:07.760 Well, you know, it is definitely the case that the 0:17:07.800 --> 0:17:11.920 younger generation is feeling more of a pinch in certain ways. Right, 0:17:12.000 --> 0:17:15.679 So millennials gen Z they have two x the amount 0:17:15.720 --> 0:17:19.880 of non housing debts that Baby Boomers had at their 0:17:20.000 --> 0:17:24.000 same age. So although there are tailwinds in their favor 0:17:24.240 --> 0:17:27.679 like stronger plan design and retirement savings, et cetera, there 0:17:27.720 --> 0:17:31.800 are also headwinds that they are facing, like student loan debt, 0:17:31.920 --> 0:17:34.199 you know, things of that nature that are putting pressure 0:17:34.280 --> 0:17:35.119 on their pocketbooks. 0:17:35.160 --> 0:17:38.240 My First Wall Street bonus, blew it all. Second Wall 0:17:38.240 --> 0:17:40.119 Street bonus, I paid off all my student loans. 0:17:40.280 --> 0:17:43.040 That's how we rule. But they don't have that opportunity 0:17:43.359 --> 0:17:44.040 for the most part. 0:17:44.280 --> 0:17:47.119 So what are some of the trends here in just 0:17:47.160 --> 0:17:49.439 the four oh one k business? Are people taking more 0:17:49.440 --> 0:17:52.200 of risk with it? Are they changing their allocations or 0:17:52.200 --> 0:17:55.720 are they saying, oh, I need to maybe take put 0:17:55.720 --> 0:17:58.520 more into alternatives investments and things like that, because mine 0:17:58.560 --> 0:18:00.359 is just I just thought it all onto you know, kid, 0:18:00.600 --> 0:18:02.920 just a little onto stock funds. You know that will 0:18:03.000 --> 0:18:06.240 down off a you know, fidelity manager for me. 0:18:06.800 --> 0:18:12.240 Yeah, well, because of qualified default investment alternatives. A person 0:18:12.359 --> 0:18:14.720 enrolling in a four oh one K plan today would 0:18:14.760 --> 0:18:17.879 automatically have that dollar invested in the target date fund. 0:18:18.240 --> 0:18:21.320 So what we're seeing actually among younger generations is that 0:18:21.359 --> 0:18:25.680 they actually have textbook allocations. They have high equity allocations, 0:18:25.720 --> 0:18:29.320 they have very little cash and that is appropriate for 0:18:29.400 --> 0:18:32.480 their age. If you compare them to you know, older 0:18:32.480 --> 0:18:34.680 generations at their same age, they would have had more 0:18:34.760 --> 0:18:39.080 extreme portfolios that might not have been as professionally managed. 0:18:39.080 --> 0:18:41.359 So that is one really positive trend. 0:18:42.560 --> 0:18:45.560 Tomorrow's Jobs Day, we know that Vanguard launched a new 0:18:45.800 --> 0:18:48.280 job market. You have some new data there tell us 0:18:48.280 --> 0:18:49.480 about that and what it's. 0:18:49.440 --> 0:18:54.040 Telling you absolutely, So we're actually using these retirement plan 0:18:54.200 --> 0:18:59.640 data to understand labor market conditions. Why, because we can 0:18:59.680 --> 0:19:03.480 see hiring, we can see separations, we can see income 0:19:03.560 --> 0:19:07.359 growth among people in those retirement plans. You know, seventy 0:19:07.400 --> 0:19:11.200 percent of American workers have access to a defined contribution plan, 0:19:11.240 --> 0:19:13.760 and in Vanguard plans are roughly more than eighty percent 0:19:13.800 --> 0:19:16.399 of them actually participate. So through this we actually have 0:19:16.440 --> 0:19:19.640 a pretty good window into the employment picture. What we're 0:19:19.640 --> 0:19:23.200 seeing is that you know, we're actually seeing a pretty 0:19:23.640 --> 0:19:28.119 quietly resilient labor market. So we are in a low 0:19:28.200 --> 0:19:32.440 higher environment, and normally that would be quite concerning because 0:19:32.800 --> 0:19:36.480 the first thing affirms does in an economic downturn is 0:19:36.520 --> 0:19:39.920 they stop hiring new workers. But at the same time, 0:19:40.000 --> 0:19:43.879 we're also seeing very few separations. So it's a low higher, 0:19:44.040 --> 0:19:47.159 low fire environment, less movement than normal. 0:19:47.760 --> 0:19:52.359 Odd I agree with us. I hear this morning folks 0:19:52.359 --> 0:19:55.679 with Vanguard Investment Strategy Group, and we continue, Good morning 0:19:55.720 --> 0:20:00.480 all of you. Can I go academic nerd time now? Sure, folks, 0:20:00.840 --> 0:20:03.720 darken the door. It's Stanford. This is like the land 0:20:03.760 --> 0:20:07.040 of Michael McFall and of course all of the Hoover Institute. 0:20:07.760 --> 0:20:10.840 Did you have the privilege of the author of the 0:20:10.960 --> 0:20:13.119 End of History? In the last man? Were you in 0:20:13.160 --> 0:20:15.000 the classroom? 0:20:14.600 --> 0:20:20.120 Chase? You're asking me to rewind my life. So I'm 0:20:20.160 --> 0:20:24.040 going to say, I have no idea, no idea. 0:20:24.080 --> 0:20:26.640 But the huge thing you're going back to nineteen ninety 0:20:26.680 --> 0:20:29.800 two in the End of History is the basic idea 0:20:29.880 --> 0:20:33.879 with President Trump is at the end of the democracy 0:20:34.000 --> 0:20:38.080 experiment worldwide as well. What are your thoughts on the 0:20:38.160 --> 0:20:41.960 testing of this After President Trump? Do we revert to 0:20:42.600 --> 0:20:44.560 some form of traditional democracy? 0:20:45.480 --> 0:20:49.040 Look, I mean what we're seeing is our institutions being tested, 0:20:49.040 --> 0:20:51.280 and we're seeing resilience in some of those institutions. So, 0:20:51.880 --> 0:20:54.800 you know, I think we can look to the midterms 0:20:54.800 --> 0:20:56.240 to see what's going to happen exactly. 0:20:56.560 --> 0:21:00.119 These midterms are not normal midterms, are they? 0:21:00.400 --> 0:21:03.760 They're consequential, But every midterm is consequential for any Do. 0:21:03.760 --> 0:21:06.840 You know anyone who's staying in San Jose or Palo Alto, 0:21:06.960 --> 0:21:08.359 or is everyone leaving the state. 0:21:09.440 --> 0:21:12.440 I think some Californians are calling themselves Californians. 0:21:12.480 --> 0:21:15.080 Now, yeah, I tell you the rent I'm paying for 0:21:15.160 --> 0:21:17.640 my number four off spring out there in Santa Clara. 0:21:17.920 --> 0:21:20.199 It's like New York and could get home, you know, 0:21:20.280 --> 0:21:22.639 you could even get home. Yeah, they lost the plane. 0:21:23.520 --> 0:21:26.720 So what are we doing here with this AI? How's 0:21:26.760 --> 0:21:30.480 a AI factoring into your work on the data the 0:21:30.560 --> 0:21:33.240 labor market? Because it seems like the no hire, no 0:21:33.359 --> 0:21:36.320 fire in one of the reasons. Maybe the no hires 0:21:36.359 --> 0:21:39.040 because AI is taking some of those entry level jobs. 0:21:39.240 --> 0:21:40.679 We do we know that for sure. 0:21:40.840 --> 0:21:43.520 Well, you know, in any month we do see you know, 0:21:43.840 --> 0:21:47.240 separations or firing, and in any month there are companies 0:21:47.320 --> 0:21:50.480 laying people off. I think those are actually in February, 0:21:50.560 --> 0:21:53.919 we're seeing a slight downtick in those in terms of 0:21:53.960 --> 0:21:58.119 the overall arching aggregate trends, I wouldn't say there's cause 0:21:58.160 --> 0:22:01.639 for huge alarm, were and to pating maybe more adjustments 0:22:01.640 --> 0:22:04.400 in twenty twenty seven. The other thing I would point to, though, 0:22:04.560 --> 0:22:07.800 is income growth, because the four to win K data 0:22:07.840 --> 0:22:11.360 actually allow us to track what's happening to people's income 0:22:11.560 --> 0:22:15.080 year over year, and there we're seeing considerable growth, actually 0:22:15.119 --> 0:22:20.920 above inflation, and in particular for younger workers who tend 0:22:21.000 --> 0:22:24.160