WEBVTT - Bloomberg Surveillance TV: September 25th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.360 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:37.000 --> 0:00:38.240 Let's turn to the Federal Reserve. 0:00:38.320 --> 0:00:41.320 The newest Federal Reserve Governor, Stephen Myron, making the case 0:00:41.360 --> 0:00:44.880 for aggressively luring interest rates to avoid damaging the economy. 0:00:45.240 --> 0:00:48.879 Diverging from some other FMC members, I'm pleased to say 0:00:48.880 --> 0:00:51.320 that joining us this morning live from the Federal Reserve 0:00:51.560 --> 0:00:54.520 is Governor Myron himself. Governor, Welcome to the program, sir. 0:00:54.600 --> 0:00:57.040 We've got tons of time to talk about what's going 0:00:57.120 --> 0:00:59.520 to happen next. Your thoughts on the labor market, the 0:00:59.560 --> 0:01:02.000 balance of risk, the broader economy. I actually wanted to 0:01:02.040 --> 0:01:05.320 lead the conversation with this one Governor. What was your experience, 0:01:05.520 --> 0:01:08.360 like I'm sure this was unexpected twelve months ago. What 0:01:08.400 --> 0:01:10.440 was it like walking into the room and was it 0:01:10.440 --> 0:01:11.720 different to what you expected? 0:01:12.920 --> 0:01:14.760 Good morning, and thanks for having me. It's great to 0:01:14.760 --> 0:01:17.600 see you again. Look, you know, walking into the room, 0:01:18.240 --> 0:01:20.920 you know, I had had a good briefing ahead of 0:01:20.959 --> 0:01:23.199 time about what the meeting would what the meeting would 0:01:23.240 --> 0:01:25.319 be like, and so that was very helpful. But I 0:01:25.360 --> 0:01:29.000 will say that everyone was extremely friendly and welcoming and 0:01:29.120 --> 0:01:32.520 kind and collegial, and I really appreciated that. And you know, 0:01:32.600 --> 0:01:35.560 it's important to understand that the FMC is a body, 0:01:35.560 --> 0:01:37.600 the Federal Open Market Committee is a body that makes 0:01:37.640 --> 0:01:41.959 decisions by arguing on the merits of the economics and 0:01:42.000 --> 0:01:44.440 the economics and the merits of policy. 0:01:44.959 --> 0:01:46.400 And that's how it was. 0:01:46.440 --> 0:01:49.560 And everyone was very collegial and airing their views, and 0:01:50.840 --> 0:01:53.320 I the same, and that's what it will continue to be. 0:01:53.400 --> 0:01:55.280 You know, we make policy, as the chairman said last week, 0:01:55.320 --> 0:01:57.960 by persuasion, and so I will continue to try to 0:01:58.080 --> 0:02:00.360 lay up my views and make the cases best I can. 0:02:00.480 --> 0:02:03.600 The governor, I essentially got the opportunity to articulate your argument. 0:02:03.720 --> 0:02:06.080 Just how much daylight did you sense? Was there was 0:02:06.120 --> 0:02:08.440 between you and everyone else on the committee. 0:02:09.600 --> 0:02:10.960 Well, I mean, you know, it's sort of funny. 0:02:10.960 --> 0:02:12.840 If you look at the dots in the summary of 0:02:12.919 --> 0:02:16.079 economic projections, you know, obviously there's a divergence between my 0:02:17.280 --> 0:02:21.160 projection for appropriate policy for twenty twenty five versus where 0:02:21.280 --> 0:02:24.079 the weight of everyone else's is. But if you look 0:02:24.080 --> 0:02:26.320 at next year in the year after, you know, I'm 0:02:26.320 --> 0:02:29.080 sure I'm still on the low end. But you know, 0:02:29.120 --> 0:02:31.880 there's not really that much daylight between all the rest 0:02:31.919 --> 0:02:33.960 of the dots and myself in the following years. So 0:02:33.960 --> 0:02:36.560 it's really just about the speed with which we come 0:02:36.639 --> 0:02:38.320 down to what's closer to neutral. 0:02:38.400 --> 0:02:40.400 Well, let's get into the neutral argument. I think that's 0:02:40.400 --> 0:02:42.280 what separates you from a lot of people. So you've 0:02:42.320 --> 0:02:44.400 got it in the mid two's, Governor, and you think 0:02:44.400 --> 0:02:46.799 we should get there quickly. Can you just build out 0:02:47.000 --> 0:02:48.800 why you believe that's the case and why we should 0:02:48.800 --> 0:02:49.960 get there so fast? 0:02:51.360 --> 0:02:51.680 Sure? 0:02:51.919 --> 0:02:54.120 So, look, you know I discussed a number of forces 0:02:54.120 --> 0:02:56.440 which have kicked in over the course of this year 0:02:56.600 --> 0:02:59.280 and which are I think can start contrast to where 0:02:59.280 --> 0:03:02.079 they were last year year. So I've argued that neutral 0:03:02.240 --> 0:03:04.440 was higher in the past than it is now and 0:03:04.480 --> 0:03:07.400 that neutral was higher for a variety of reasons. But 0:03:07.400 --> 0:03:11.440 I've highlighted recently fiscal policy, you know, sort of driving 0:03:11.520 --> 0:03:15.600 up net national borrowing, decreasing national savings, as well as 0:03:15.639 --> 0:03:20.000 immigration policy driving what was the biggest positive population growth 0:03:20.000 --> 0:03:21.880 shock in my lifetime and has now turned into the 0:03:21.880 --> 0:03:25.400 biggest negative population growth shock in my lifetime in very 0:03:25.480 --> 0:03:29.799 rapid succession relative to how changes in population growth you 0:03:30.120 --> 0:03:33.400 normally normally occur in the data. And so to me, 0:03:33.720 --> 0:03:36.880 when you have huge swings in net national savings driven 0:03:36.880 --> 0:03:40.440 by fiscal policy and you have huge swings in population 0:03:40.520 --> 0:03:43.200 growth driven by changes to border policy, it would be 0:03:43.240 --> 0:03:46.080 bizarre for me to think that that wouldn't have implications 0:03:46.520 --> 0:03:49.320 for the fundamental structure of the economy that gets reflected 0:03:49.600 --> 0:03:51.200 for Montaria policy. 0:03:51.080 --> 0:03:51.880 In the neutral rate. 0:03:52.160 --> 0:03:54.560 So my view is that neutral was higher last year 0:03:54.560 --> 0:03:56.960 because of these reasons. And so last year policy was 0:03:57.000 --> 0:03:59.480 not as tight as a lot of people believed. And 0:03:59.560 --> 0:04:02.280 now neutral has come down or is in the process 0:04:02.320 --> 0:04:05.080 of coming down, and now neutral and now policy is 0:04:05.160 --> 0:04:06.520 more tight than people believe. 0:04:06.880 --> 0:04:08.800 And this has happened recently. 0:04:08.880 --> 0:04:11.160 You know, these policies didn't change, you know, sort of 0:04:11.160 --> 0:04:13.200 overnight they've been kicking in over the course of the year, 0:04:13.800 --> 0:04:17.920 and that means that policy is becoming tighter every day 0:04:18.279 --> 0:04:19.760 as these policies continue. 0:04:19.440 --> 0:04:19.960 To kick in. 0:04:20.279 --> 0:04:23.760 And my view is not one of enormous economic pessimism. 0:04:23.880 --> 0:04:25.640 You know, I don't think the economy is about to creator. 0:04:25.680 --> 0:04:27.160 I don't think the labor market's about to fall off 0:04:27.200 --> 0:04:30.599 a cliff. However, the neutral rate is drifting down, and 0:04:30.760 --> 0:04:32.840 as a result of that, it's in comment upon policy 0:04:32.880 --> 0:04:36.000 to adjust in response. And the longer that policy stays 0:04:36.040 --> 0:04:40.120 excessively excessively restrictive, the greater the risks to the downside 0:04:40.120 --> 0:04:43.479 for the economy. If policy stays excessively restrictive for too long, 0:04:43.680 --> 0:04:45.440 then you do get to in a situation in which 0:04:45.480 --> 0:04:47.880 you have a meaningful, meaningful increase in an employment rate 0:04:47.880 --> 0:04:50.960 and a failure of the employment mandata. 0:04:51.040 --> 0:04:53.320 So, Governor, that's the tension. I think in your view, 0:04:53.320 --> 0:04:56.000 that's worth exploring just a little bit more. On the 0:04:56.040 --> 0:04:58.080 one hand, you don't think the economies at risks have 0:04:58.160 --> 0:05:00.760 breaking down, but you also think we are sessively tight 0:05:00.800 --> 0:05:03.239 at the moment and getting tighter. There are some people 0:05:03.240 --> 0:05:05.280 who would say, and we've had this conversation around the 0:05:05.279 --> 0:05:08.080 table this morning, if we were as tight as you suggesting, 0:05:08.440 --> 0:05:10.800 why is the market within one percent of record highs? 0:05:10.839 --> 0:05:13.479 Why credit spreads super tight, and why is this economy 0:05:13.520 --> 0:05:16.320 still doing Okay, Yeah. 0:05:16.120 --> 0:05:18.360 So that's a perfectly natural thing to ask. Sorry, and 0:05:18.560 --> 0:05:21.240 let me say, let me say two things. One, I 0:05:21.320 --> 0:05:24.919 don't think that all financial conditions are universally loose like that. 0:05:24.960 --> 0:05:26.760 In particular, if you look at the housing market, I 0:05:26.760 --> 0:05:29.400 think it's in quite a different state than you know, 0:05:29.440 --> 0:05:32.159 sort of some financial markets and you know, sort of 0:05:32.320 --> 0:05:35.640 security markets. So I don't think that that's necessarily a 0:05:35.680 --> 0:05:39.000 holistic look at the world of financial conditions in the economy. 0:05:39.200 --> 0:05:42.680 But even that aside, I think that, you know, people 0:05:42.720 --> 0:05:45.039 in financial markets tend to focus a lot on monetary 0:05:45.040 --> 0:05:48.560 policy because interest rates are you know, sort of huge 0:05:48.560 --> 0:05:51.520 tradable instruments, right, But there's so much more that goes 0:05:51.560 --> 0:05:54.400 into determining economic growth and the state of economy and 0:05:54.400 --> 0:05:58.240 inflation and employment than monetary policy. And I think that 0:05:58.360 --> 0:06:02.360 attributing all changes in financial assets to monetary policy can 0:06:02.400 --> 0:06:04.599 be a mistake. And in particular, that's what I tried 0:06:04.640 --> 0:06:07.920 to do in my speech, you know, was to draw 0:06:08.000 --> 0:06:10.520 out some of these some of these effects from non 0:06:10.560 --> 0:06:13.320 monetary policies that are affecting the economy, and of course 0:06:13.400 --> 0:06:17.240 therefore also financial markets. And so if you have changes 0:06:17.240 --> 0:06:20.479 in tax policy, right like significant incentives for investing that 0:06:20.600 --> 0:06:22.920 lower the effective tax rate on capital, of course that's 0:06:22.960 --> 0:06:25.720 going to get reflected into capital assets. If you have 0:06:25.800 --> 0:06:29.719 significant changes to the regulatory environment where you're removing barriers 0:06:29.760 --> 0:06:34.080 to operations that companies can make more more cheaply, which 0:06:34.120 --> 0:06:36.880 by the way, is disinflationary and pushes at the applicap, 0:06:37.279 --> 0:06:39.839 then of course that's also going to be reflected in 0:06:39.960 --> 0:06:43.200 asset markets. So I think it's a mistake to conflate 0:06:44.040 --> 0:06:46.880 the state of financial conditions with monitary policy. They're connected, 0:06:47.040 --> 0:06:49.760 they're related, they affect each other, but they're not exactly 0:06:49.800 --> 0:06:52.040 the same thing. And in the speech I go line 0:06:52.080 --> 0:06:54.599 by line through these different items. And the reason why 0:06:54.680 --> 0:06:57.200 monetary policy doesn't have to react to the hawkish side 0:06:57.320 --> 0:07:00.479 in response to these back to these policy changes is 0:07:00.480 --> 0:07:02.480 because they push out the supply side of the economy 0:07:02.520 --> 0:07:04.880 at the same time that they push out demand. And 0:07:04.920 --> 0:07:07.359 so if you're increasing supply and demand at the same time, 0:07:07.480 --> 0:07:09.520 there's no change to the apput gap. And of course 0:07:09.560 --> 0:07:11.840 it's monetary's policy job at the end of the day 0:07:11.920 --> 0:07:14.560 to be balancing the apput gap, to be balancing aggregate 0:07:14.600 --> 0:07:18.320 supply and aggregthm indity economy so it doesn't overheat or underheat. 0:07:18.480 --> 0:07:19.920 I think there are a lot of people, Governor Myron, 0:07:19.920 --> 0:07:22.800 who'd agree with you that probably the neutral rate is 0:07:22.880 --> 0:07:23.920 quite a bit below. 0:07:23.640 --> 0:07:24.280 Where we are now. 0:07:24.280 --> 0:07:26.200 You said, even the other Fed governors did seem to 0:07:26.240 --> 0:07:26.920 agree with that. 0:07:27.320 --> 0:07:28.840 But not necessarily the speed. 0:07:29.080 --> 0:07:30.040 And I'm still unclear. 0:07:30.240 --> 0:07:32.880 Why do you think it is so important to get 0:07:33.000 --> 0:07:35.480 rates down by one hundred and twenty five or one 0:07:35.560 --> 0:07:38.680 hundred and fifty one hundred and fifty basis points more 0:07:39.040 --> 0:07:42.040 this year if inflation is still running hot and you're 0:07:42.040 --> 0:07:44.840 not seeing anything alarming in the underlying economy. 0:07:45.960 --> 0:07:48.000 Yeah, so this year is merely a function of where 0:07:48.000 --> 0:07:51.320 the calendar is. So my view is that policy is 0:07:51.360 --> 0:07:54.040 quite restrictive, and so I'd like to adjust quickly to 0:07:54.080 --> 0:07:55.680 get back to a more neutral area. 0:07:55.960 --> 0:07:56.200 Right. 0:07:56.280 --> 0:07:58.600 That just means a series of fifties get until you 0:07:58.600 --> 0:08:00.640 get much closer to zero. The fact that it's this 0:08:00.760 --> 0:08:02.600 year is just just a function, just to function of 0:08:02.640 --> 0:08:05.080 the calendar. But again it comes back to the longer 0:08:05.120 --> 0:08:07.960 that you stay restrictive, the greater the risks. And let 0:08:07.960 --> 0:08:09.720 me put it this way, like it was just a 0:08:09.760 --> 0:08:13.200 few years ago that we were having endless conversations about 0:08:13.280 --> 0:08:16.360 declining population growth rates in the whole world's becoming Japan 0:08:16.600 --> 0:08:19.720 in terms of interest rate profiles. Right, those forces are 0:08:19.760 --> 0:08:21.720 still real, those dynamics are still real. 0:08:21.960 --> 0:08:22.840 They didn't go away. 0:08:22.920 --> 0:08:26.520 Those channels, you know, those channels by which population growth effects, 0:08:26.560 --> 0:08:27.840 neutral rates didn't disappear. 0:08:28.280 --> 0:08:29.560 I would rather react. 0:08:29.840 --> 0:08:33.360 I would rather act proactively, right and sort of we 0:08:33.480 --> 0:08:36.360 know that we just had the biggest population growth shocks 0:08:36.400 --> 0:08:40.040 in many people's lifetimes, mine included, Right, I would we 0:08:40.080 --> 0:08:41.640 know what the consequences. 0:08:41.040 --> 0:08:42.199 Of those are economically. 0:08:42.400 --> 0:08:44.920 I would rather act proactively and lower rates as a 0:08:44.960 --> 0:08:47.680 result ahead of time, rather than wait for some you know, 0:08:47.880 --> 0:08:50.839 giant catastrophe to occur, because you suddenly wake up and 0:08:51.120 --> 0:08:53.880 find out that you are sort of resuming those dynamics. 0:08:54.160 --> 0:08:56.120 In my mind, if you wait to sort of to 0:08:56.160 --> 0:08:58.480 see the result of that, you have waited too long, 0:08:58.520 --> 0:09:01.040 and there will be there will have been a potentially 0:09:01.120 --> 0:09:02.320 quite material. 0:09:03.360 --> 0:09:04.840 Downside miss to the employment mandate. 0:09:05.160 --> 0:09:07.560 A lot of people on this show have been wondering 0:09:07.600 --> 0:09:09.840 what the reaction mechanism is going to be for a 0:09:09.840 --> 0:09:13.640 federal reserve. This does start to see inflation as transitory. 0:09:13.720 --> 0:09:16.600 Once again, the idea that we have been above two percent, 0:09:16.640 --> 0:09:19.400 the two percent target for the federal reserve for fifty 0:09:19.440 --> 0:09:22.920 three consecutive months, for more than four years. If there 0:09:23.000 --> 0:09:26.320 is an upsurgeon inflation, how long are you willing to 0:09:26.320 --> 0:09:29.360 look through that if you are cutting rates before you say, 0:09:29.360 --> 0:09:31.520 hold on a second, maybe we need to stop. 0:09:33.040 --> 0:09:36.480 Yeah, So I would want to understand why there was 0:09:36.480 --> 0:09:39.360 an obsurgent inflation and what was driving it, and then 0:09:39.400 --> 0:09:41.640 sort of think about whether that shock is likely to 0:09:41.679 --> 0:09:44.480 be persistent or whether the shock is likely to be transitory. 0:09:44.920 --> 0:09:47.160 And it's the nature. It's the nature of the shock. 0:09:47.200 --> 0:09:49.440 It's not just as inflation higher for a certain number 0:09:49.440 --> 0:09:51.800 of months. It's why is it higher or why is 0:09:51.800 --> 0:09:54.080 it lower? And how long are those and how long 0:09:54.120 --> 0:09:56.760 are those shocks likely to persist? And if you have 0:09:56.760 --> 0:09:59.480 a situation in which inflation is much higher because there's 0:09:59.559 --> 0:10:03.320 you know, let's say a very significant expansion in national 0:10:03.360 --> 0:10:06.000 borrowing that drives up demand could be driven by fiscal 0:10:06.000 --> 0:10:07.800 it could be driven by something else. That might be 0:10:07.840 --> 0:10:09.240 the type of thing that you would expect to be 0:10:09.360 --> 0:10:12.000 to be more persistent. In my mind, if you have 0:10:12.200 --> 0:10:15.000 the type of shock that's driven by a you know, 0:10:15.200 --> 0:10:18.240 basically one off change to tax rates, right, whether that's 0:10:18.240 --> 0:10:22.319 a VAT tax or tariffs or anything else, you know, that, 0:10:22.360 --> 0:10:24.160 in my mind is not the type of chalk that 0:10:24.200 --> 0:10:26.040 would lead you to think that inflation is going to 0:10:26.640 --> 0:10:28.640 be sticky for a long period of time. And in fact, 0:10:28.720 --> 0:10:30.599 there's you know, most central banks around the world, I 0:10:30.600 --> 0:10:32.960 think actually all of them would sort of you know, 0:10:33.080 --> 0:10:35.400 encounter this in a much more direct manner through changes 0:10:35.400 --> 0:10:38.199 in value added taxes, and they always look through them, 0:10:38.280 --> 0:10:40.040 you know, they always say, okay, look the VAT went 0:10:40.120 --> 0:10:42.240 up or the BAT went down, and that's going to 0:10:42.280 --> 0:10:44.200 affect the inflation stistics for a period of time. But 0:10:44.240 --> 0:10:46.160 then we all know that this was basically a fiscally 0:10:46.200 --> 0:10:49.640 mandated price change, and monetary policy shouldn't respond necessarily to 0:10:49.640 --> 0:10:53.240 fiscally mandated price changes because that's not indicative of changes 0:10:53.280 --> 0:10:56.000 to the underlying supplied demand balance in the economy, which 0:10:56.120 --> 0:10:59.240 ultimately drives the type of persistent inflation that the central 0:10:59.240 --> 0:10:59.880 bank cares about. 0:11:00.120 --> 0:11:01.679 Governor mar and I love to get your thoughts a 0:11:01.720 --> 0:11:04.080 little bit more deeper on housing this thing. Matt Misk 0:11:04.120 --> 0:11:06.079 and Neil Gotta have talked a lot on this program 0:11:06.120 --> 0:11:09.280 about going into next year. Do you think the housing 0:11:09.360 --> 0:11:13.200 market will weigh on a deceleration of inflation? Is that 0:11:13.240 --> 0:11:15.240 part of your thesis on inflation coming down? 0:11:16.480 --> 0:11:18.720 Yeah, I mean it explicitly is I mean, Look, you know, 0:11:18.920 --> 0:11:22.480 supply and demand dominates all things economically, right, and if 0:11:22.480 --> 0:11:26.440 you're increasing the demand for housing by dramatically increasing population 0:11:26.559 --> 0:11:29.640 growth without a material increase in the supply of housing 0:11:29.679 --> 0:11:32.120 at the same time, of course, you are going to 0:11:32.160 --> 0:11:34.000 get upward pressure on shelter inflation. 0:11:34.559 --> 0:11:35.800 And then vice versa. 0:11:35.920 --> 0:11:39.080 If you start decreasing population growth because of a change 0:11:39.080 --> 0:11:43.240 in border policies without destroying shelter supply, or or shelter 0:11:43.280 --> 0:11:45.200 supply keeps and expanding at a rate that it has 0:11:45.240 --> 0:11:48.400 been in the previous years, then you get a relative 0:11:48.480 --> 0:11:53.040 change in shelter inflation once again. So it's just it's simple, 0:11:53.160 --> 0:11:55.080 you know, it's simple supply and demand. If we have 0:11:55.640 --> 0:11:59.880 a material downward population shock because we have negative migration, 0:12:00.760 --> 0:12:03.320 that's an increase in the supply of shelter. And I 0:12:03.320 --> 0:12:05.360 think that the study that I cited in the speech 0:12:05.360 --> 0:12:09.400 on Monday Work where Albert says found that Needless city 0:12:09.440 --> 0:12:11.839 of one basically that a one percent increase in the 0:12:13.080 --> 0:12:15.640 in the number of immigrant renters leads to a one 0:12:15.679 --> 0:12:17.440 percentage point change in the rents. 0:12:17.559 --> 0:12:19.920 Right, but immigration is short term? Right, this is a 0:12:19.920 --> 0:12:22.320 short term story. Would you be willing to revise up 0:12:22.400 --> 0:12:24.079 neutral if immigration is. 0:12:24.040 --> 0:12:25.000 Not much of a drag? 0:12:26.960 --> 0:12:30.120 Well, I mean, you know, I have good reason for 0:12:30.160 --> 0:12:32.320 expecting that the immigration story is going to persist at 0:12:32.400 --> 0:12:35.880 least for another three and a half years, and I 0:12:35.960 --> 0:12:38.840 think quite likely potentially after that. Also, So I'm not 0:12:38.920 --> 0:12:40.880 convinced that immigration is really a short term story. 0:12:41.040 --> 0:12:42.880 He Governor, just before you go, because I know you've 0:12:42.920 --> 0:12:44.520 got a run. Have you got a taste for this? 0:12:45.040 --> 0:12:47.560 Is this a position you'd like to keep beyond the 0:12:47.600 --> 0:12:48.200 end of this year? 0:12:49.320 --> 0:12:51.680 Look, you know, I love this country and I'm happy 0:12:51.720 --> 0:12:53.240 to serve this country in any way that I'm asked 0:12:53.240 --> 0:12:55.840 to do so. But personal decisions are not decisions that 0:12:55.880 --> 0:12:56.160 I make. 0:12:57.840 --> 0:13:01.320 Stay with us more Bloomberg Surveilance can coming up after this. 0:13:10.360 --> 0:13:11.480 I's turn to the Federal Reserve. 0:13:11.559 --> 0:13:14.080 Chris Heisi of ME and Bank of America Private Bank 0:13:14.120 --> 0:13:17.920 writing loosening conditions including further FED rate cuts support risk 0:13:17.960 --> 0:13:19.040 assets further. 0:13:19.320 --> 0:13:21.600 Chris joins us now for more Chris and Mornic, Good morning. 0:13:22.120 --> 0:13:24.480 Top decent numbers like that labor market dates. So what 0:13:24.559 --> 0:13:25.600 you make of that claims data? 0:13:26.440 --> 0:13:29.040 I make of it what I always do, which is 0:13:29.120 --> 0:13:32.360 week to week is data points are pretty noisy. It 0:13:32.360 --> 0:13:35.079 doesn't necessarily mean it's a trend, but it is something 0:13:35.200 --> 0:13:38.040 that I think will likely see which is right around 0:13:38.040 --> 0:13:41.080 those numbers for the foreseeable future. There's a little bit 0:13:41.120 --> 0:13:45.520 of a supply and demand balance in the job market overall. 0:13:45.679 --> 0:13:48.240 Some many companies are still in the weight and see 0:13:48.240 --> 0:13:51.600 mode as it relates to how you democratize artificial intelligence. 0:13:51.640 --> 0:13:54.040 So claims numbers are pretty much in line. 0:13:53.840 --> 0:13:57.040 With what our belief is, which is a reacceleration coming 0:13:57.360 --> 0:14:00.160 not just in real growth but nominal growth and ultimately 0:14:00.200 --> 0:14:00.800 profit growth. 0:14:00.920 --> 0:14:03.520 Are you seeing any signs event already beyond that job 0:14:03.559 --> 0:14:05.800 as claims number? Why are you seeing signs of a reacceleration? 0:14:05.840 --> 0:14:06.880 Where are things firm enough? 0:14:07.440 --> 0:14:08.920 You know it comes down at the beginning of the year, 0:14:08.960 --> 0:14:12.200 before the tariffs were put in place, there was this 0:14:12.559 --> 0:14:14.800 notion that you'd have double digit profit growth for this 0:14:14.920 --> 0:14:17.120 year and then next year. Then it was ratcheted back 0:14:17.160 --> 0:14:19.960 by pretty much everybody across Wall Street. Now we're back 0:14:19.960 --> 0:14:22.040 to the numbers again where they were at the beginning 0:14:22.040 --> 0:14:24.080 of the year. So it's a reacceleration. We're seeing it 0:14:24.160 --> 0:14:27.920 already in profit revisions, not just for third and fourth quarter, 0:14:27.960 --> 0:14:29.320 but already for twenty six. 0:14:29.560 --> 0:14:32.000 Do CEOs and CFOs believe it? Do they believe it 0:14:32.080 --> 0:14:34.760 enough to actually take big steps and engage in some 0:14:34.840 --> 0:14:36.840 of the m and a engage in some of the 0:14:36.920 --> 0:14:39.960 hiring plans that they were talking about maybe late last 0:14:40.000 --> 0:14:40.640 year early. 0:14:40.440 --> 0:14:44.400 This really depends on the actual sector obviously, but in 0:14:44.480 --> 0:14:47.280 terms of the general broader community, you're starting to see 0:14:47.280 --> 0:14:50.080 sentiment the soft data start to change for the better. 0:14:50.240 --> 0:14:52.440 Remember when we were all talking about soft data being 0:14:52.480 --> 0:14:54.120 weak and then it was going to filter into the 0:14:54.120 --> 0:14:54.520 hard data. 0:14:54.640 --> 0:14:55.000 Never did. 0:14:55.080 --> 0:14:57.480 Now soft data is coming back. You're seeing in the 0:14:57.480 --> 0:14:59.920 small business segment a little bit because of the rates 0:15:00.000 --> 0:15:03.560 coming down, but a little bit better economy, perhaps an 0:15:03.560 --> 0:15:05.760 adjustment to the neutral rate coming down a little bit. 0:15:05.800 --> 0:15:09.600 As Governor Myron just said, all of that coalesces around 0:15:10.120 --> 0:15:14.000 better optimism. From the corporate side, I would say this though, 0:15:14.280 --> 0:15:17.240 margins are held in there, and that's the key. The 0:15:17.280 --> 0:15:20.200 bottom line is being used on an efficient basis. Some 0:15:20.240 --> 0:15:22.800 productivity is increasing, but when you get a little bit 0:15:22.840 --> 0:15:26.080 above average inflation, that feeds directly to the revenue line 0:15:26.120 --> 0:15:28.040 and you don't have to produce as much to get 0:15:28.040 --> 0:15:30.840 that higher revenue number. So that's why margins have actually 0:15:30.880 --> 0:15:32.840 stayed in there in some cases actually widened out. 0:15:32.960 --> 0:15:35.240 This sounds like a perfect scenario. It sounds like just 0:15:35.360 --> 0:15:39.120 Nirvana investing Nirvana. It's priced as though it's investing Nirvana too. 0:15:39.200 --> 0:15:40.880 Though at what point if we priced all of that 0:15:40.920 --> 0:15:42.840 in a then sum, that leaves it kind of vulnerable 0:15:43.120 --> 0:15:44.920 to anything that doesn't look like what we just got 0:15:44.920 --> 0:15:45.760 from Jovis claims. 0:15:45.840 --> 0:15:47.040 Yeah, at least that's a great point. 0:15:47.080 --> 0:15:49.480 And I think a lot of that is priced in 0:15:49.480 --> 0:15:51.920 in the here too now, but much of it it's 0:15:51.920 --> 0:15:54.640 still not priced in for next year. There's a little 0:15:54.640 --> 0:15:56.840 bit of discounting of what the story I just laid 0:15:56.840 --> 0:16:00.360 out already. Given where the SMP is twenty two twenty 0:16:00.360 --> 0:16:04.320 three times forward, I would say that in this asset 0:16:04.400 --> 0:16:08.240 light world that is driven the index, higher multiples are 0:16:08.320 --> 0:16:11.400 higher because they're still driving higher revenue growth, And if 0:16:11.400 --> 0:16:13.320 you look at the contribution of the tech sector, it's 0:16:13.320 --> 0:16:16.280 about forty four percent or so of the market cap 0:16:16.280 --> 0:16:19.080 of the SMP, but its earnings contribution is in the thirties. 0:16:19.160 --> 0:16:20.800 It's very different than ninety. 0:16:20.640 --> 0:16:22.920 Nine and two thousand, when the earnings contribution was almost 0:16:22.960 --> 0:16:24.360 one half of that peak. 0:16:24.520 --> 0:16:26.800 The investors you speak with, are they more worried about 0:16:26.800 --> 0:16:29.120 some sort of downturn in the economy or are they 0:16:29.160 --> 0:16:31.440 more worried about missing out in the next leg higher. 0:16:31.880 --> 0:16:36.160 You know, they're still worried about the downside scenario. There 0:16:36.200 --> 0:16:38.600 still have that frame of mind of the credit crisis, 0:16:38.600 --> 0:16:41.520 little frame of mind of what happened in August through 0:16:41.560 --> 0:16:44.400 December of twenty eighteen when the Federal Reserve is raising 0:16:44.440 --> 0:16:47.560 rates when inflation was below their target. 0:16:47.280 --> 0:16:49.160 At that point, and then fast forward. 0:16:48.960 --> 0:16:51.240 Into twenty two with the inverted yield curve, and then 0:16:51.280 --> 0:16:54.240 the tariff situation in April. So they still have all 0:16:54.280 --> 0:16:57.400 of this in their mind and they're comfortable still getting 0:16:57.520 --> 0:16:59.400 a decent yield on their cash. 0:17:00.480 --> 0:17:01.800 On the flip side. 0:17:01.480 --> 0:17:04.320 There are some that are very worried about missing the 0:17:04.480 --> 0:17:07.120 next move, particularly as it relates to the infrastructure build 0:17:07.119 --> 0:17:08.480 out of artificial intelligence. 0:17:09.240 --> 0:17:11.240 We believe there's some room to go there. 0:17:11.400 --> 0:17:15.240 We would caution, though, the signs of artificial intelligence and 0:17:15.359 --> 0:17:18.679 infrastructure build out peaking are all about the margin, all 0:17:18.720 --> 0:17:20.679 about the price side of the equation. 0:17:20.720 --> 0:17:22.400 We're not seeing that yet, but we. 0:17:22.359 --> 0:17:25.800 Need to watch that closely to understand what the demand 0:17:25.840 --> 0:17:28.000 for that will be once all of this is built. 0:17:28.119 --> 0:17:30.280 Clients that are concerned about the downside is it because 0:17:30.280 --> 0:17:31.159 they think we're in a bubble. 0:17:32.520 --> 0:17:33.560 They always talk about bubble. 0:17:33.680 --> 0:17:35.600 Number one question I get right now is are we 0:17:35.640 --> 0:17:38.440 in a bubble? Are we four different meetings yesterday? 0:17:38.800 --> 0:17:39.680 Number one question? 0:17:40.240 --> 0:17:43.359 In some cases, in areas that are low quality, that 0:17:43.440 --> 0:17:46.320 don't have any revenues, that are built to sky high valuations, 0:17:46.359 --> 0:17:47.359 you can argue yes. 0:17:47.920 --> 0:17:48.960 In other areas where. 0:17:48.800 --> 0:17:51.440 They're still kicking off very good free cash flow. The 0:17:51.480 --> 0:17:55.720 answers now, so what's your advice. The advice is diversified portfolio. 0:17:55.800 --> 0:17:59.040