1 00:00:02,520 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,200 --> 00:00:13,840 Speaker 2: This is a breaking news update from Bloomberg instant reaction 3 00:00:14,120 --> 00:00:17,959 Speaker 2: and analysis from our three thousand journalists and analysts around 4 00:00:17,960 --> 00:00:18,439 Speaker 2: the world. 5 00:00:19,440 --> 00:00:21,320 Speaker 3: The beginning of a walk into the sunset for the 6 00:00:21,400 --> 00:00:23,960 Speaker 3: Chairman of the Federal Reserve. J. Powell only has two 7 00:00:24,040 --> 00:00:26,640 Speaker 3: more of these meetings on the calendar as the chairman 8 00:00:27,000 --> 00:00:29,440 Speaker 3: of the world's most important central bank. For the equity 9 00:00:29,440 --> 00:00:31,080 Speaker 3: market on the S and P five hundred is still 10 00:00:31,080 --> 00:00:32,760 Speaker 3: close to all time highs on the SMP, on the 11 00:00:32,840 --> 00:00:34,839 Speaker 3: NASDA one hundred up by zero point five. In the 12 00:00:34,840 --> 00:00:38,320 Speaker 3: bond market on twos, tens, and thirties, we look like this. 13 00:00:38,680 --> 00:00:41,240 Speaker 3: It's just about unchanged your ten year four to twenty five, 14 00:00:41,440 --> 00:00:43,760 Speaker 3: your two year three point fifty eight. Journalists did their 15 00:00:43,800 --> 00:00:46,360 Speaker 3: best to make this one interesting. Chairman power was determined 16 00:00:46,479 --> 00:00:48,120 Speaker 3: to make it boring. Take a listen to what the 17 00:00:48,200 --> 00:00:49,320 Speaker 3: chairman had to say. 18 00:00:50,680 --> 00:00:55,240 Speaker 4: Some people didn't want to cut and dissented by committee 19 00:00:55,680 --> 00:00:59,560 Speaker 4: pretty broadly for holding today that we still have some 20 00:00:59,680 --> 00:01:03,680 Speaker 4: tension between employment and inflation, but it's less than it was. 21 00:01:03,720 --> 00:01:06,640 Speaker 4: I think that the upside risks to inflation in the 22 00:01:06,680 --> 00:01:09,560 Speaker 4: downside risk of I have probably both diminished a bit, 23 00:01:10,240 --> 00:01:12,640 Speaker 4: so you know, we'll be looking at the other different 24 00:01:12,680 --> 00:01:14,760 Speaker 4: views on the committee and you know we'll find our 25 00:01:14,800 --> 00:01:16,759 Speaker 4: way forward as the data involve TK. 26 00:01:17,040 --> 00:01:20,000 Speaker 3: Just my takeaway, just my observation towards the end, it 27 00:01:20,040 --> 00:01:22,080 Speaker 3: felt like a man who was looking forward to retiring 28 00:01:22,440 --> 00:01:23,200 Speaker 3: and stepping down. 29 00:01:23,520 --> 00:01:25,360 Speaker 1: You know, there was a gold question. It's great he 30 00:01:25,360 --> 00:01:27,160 Speaker 1: doesn't have Kruger ends in the drawer. He's got the 31 00:01:27,240 --> 00:01:31,440 Speaker 1: Jerry Garciam commemorative gold coins in the drawer, so way looser, 32 00:01:31,560 --> 00:01:36,000 Speaker 1: there's no question about that. But it was really interesting 33 00:01:36,000 --> 00:01:37,920 Speaker 1: to see the nuances of the market away from the 34 00:01:37,920 --> 00:01:41,120 Speaker 1: things we usually quote folks to look at what seriously 35 00:01:41,160 --> 00:01:45,120 Speaker 1: what Sterling was doing, the way euro was vibrating that 36 00:01:45,480 --> 00:01:47,560 Speaker 1: and I would suggest they could go back and say, 37 00:01:47,600 --> 00:01:49,000 Speaker 1: you know, we got through that in one piece. 38 00:01:49,120 --> 00:01:51,160 Speaker 3: He's got some advice for the next fort share stat 39 00:01:51,160 --> 00:01:54,560 Speaker 3: of politics Stephanie Ralph Wolf Research joins us now for more, Stephanie, 40 00:01:54,640 --> 00:01:57,520 Speaker 3: the questions loaded with politics. He was not engaging, he 41 00:01:57,640 --> 00:01:59,280 Speaker 3: was not playing. What was the takeaway for you? 42 00:02:00,240 --> 00:02:02,560 Speaker 5: I think it's a FED that is comfortable with the 43 00:02:03,080 --> 00:02:04,840 Speaker 5: backdrop of data, which I think is the right call. 44 00:02:05,080 --> 00:02:07,640 Speaker 5: The data seem to be improving from here. We actually 45 00:02:07,680 --> 00:02:09,680 Speaker 5: think that it will continue to get better, in which 46 00:02:09,680 --> 00:02:13,399 Speaker 5: case this will certainly be the last cut Underchair Powell. 47 00:02:13,760 --> 00:02:16,320 Speaker 5: There's no more cut under Schair Powell. He's done, and 48 00:02:16,520 --> 00:02:18,800 Speaker 5: he's I think that's right. He's fading into the sunset 49 00:02:18,840 --> 00:02:21,119 Speaker 5: and just wants to avoid all of the questions that 50 00:02:21,200 --> 00:02:22,080 Speaker 5: he didn't really want to answer. 51 00:02:22,200 --> 00:02:24,360 Speaker 1: Unfair question, but I can save it for your morning. 52 00:02:24,400 --> 00:02:27,160 Speaker 1: Note it Wilf research. Maybe it'll help you think Mark 53 00:02:27,200 --> 00:02:32,120 Speaker 1: Kearney at Davos talking about the new geometry of Middle countries. 54 00:02:32,200 --> 00:02:35,720 Speaker 1: You look at the president neo mercantilism, the president week dollar. 55 00:02:36,200 --> 00:02:39,480 Speaker 1: Did the Secretary Treasuries save this press conference by coming 56 00:02:39,520 --> 00:02:43,040 Speaker 1: out hours before and sounding like James Baker from another 57 00:02:43,120 --> 00:02:45,160 Speaker 1: time in place on strong dollar? 58 00:02:46,400 --> 00:02:48,400 Speaker 5: Yeah, I mean last night it was getting to be 59 00:02:48,400 --> 00:02:51,560 Speaker 5: a little bit concerning when Trump made the comments regarding 60 00:02:51,639 --> 00:02:54,440 Speaker 5: his comfort around the sharp drop in the. 61 00:02:54,400 --> 00:02:56,560 Speaker 6: Dollar that we've seen. That could also have. 62 00:02:56,639 --> 00:02:58,600 Speaker 5: Reverberations throughout the rest of the morning. So I think 63 00:02:58,600 --> 00:03:01,400 Speaker 5: that is fair to some extent. Powell clearly don't want 64 00:03:01,400 --> 00:03:04,359 Speaker 5: to comment on the dollar regardless, but there was the 65 00:03:04,720 --> 00:03:07,400 Speaker 5: legitimate risk and there still is that there could become 66 00:03:07,400 --> 00:03:10,280 Speaker 5: reverberations as the carry trade on wines. But it seems 67 00:03:10,800 --> 00:03:12,720 Speaker 5: best and very well aware of the. 68 00:03:12,680 --> 00:03:13,320 Speaker 6: Aftermath of that. 69 00:03:13,400 --> 00:03:18,200 Speaker 1: Can I ask economic question please? Analog has been great 70 00:03:18,240 --> 00:03:20,560 Speaker 1: on this, as you have, as well as Stephanie roth 71 00:03:20,760 --> 00:03:22,600 Speaker 1: Or the idea of the vector and goods we take 72 00:03:22,639 --> 00:03:25,919 Speaker 1: for granted is disinflation that's turned around. Now we've got 73 00:03:25,960 --> 00:03:28,799 Speaker 1: goods moving up. We've got gold, command copper and all 74 00:03:28,800 --> 00:03:31,600 Speaker 1: the other stuff John's talking about. Do you just assume 75 00:03:32,200 --> 00:03:35,800 Speaker 1: out there somewhere after stimulus that goods roll over again 76 00:03:35,920 --> 00:03:40,600 Speaker 1: into some form of disinflation, even if service sector stays 77 00:03:40,640 --> 00:03:42,080 Speaker 1: with an inflationary tone. 78 00:03:42,240 --> 00:03:44,560 Speaker 5: Yeah, we're probably going to see a backdrop where we 79 00:03:44,560 --> 00:03:47,360 Speaker 5: were likely to have some firm goods prices in the 80 00:03:47,360 --> 00:03:49,920 Speaker 5: next couple of months, in the sense that one you 81 00:03:49,960 --> 00:03:51,720 Speaker 5: tend to have there's some seasonal issues in some of 82 00:03:51,760 --> 00:03:52,120 Speaker 5: the data. 83 00:03:52,200 --> 00:03:53,680 Speaker 6: You have consumer stimulus that's. 84 00:03:53,560 --> 00:03:55,880 Speaker 5: Going to hit goods prices for the next quarter or so, 85 00:03:56,280 --> 00:03:57,600 Speaker 5: and then beyond that you're going to move to an 86 00:03:57,640 --> 00:04:00,520 Speaker 5: environment where goods are running it roughly zero percent, and 87 00:04:00,560 --> 00:04:03,520 Speaker 5: then it's back to an environment where it's all about 88 00:04:03,520 --> 00:04:04,200 Speaker 5: the service sext. 89 00:04:04,120 --> 00:04:06,720 Speaker 3: Away from the politics of Washington. One of the takeaways 90 00:04:06,720 --> 00:04:08,880 Speaker 3: from that particular news conference that I have is something 91 00:04:08,920 --> 00:04:11,720 Speaker 3: I've heard repeatedly from a lot of Wall Street participants 92 00:04:11,760 --> 00:04:13,920 Speaker 3: market participants, is that the data is going to be better. 93 00:04:14,240 --> 00:04:16,839 Speaker 3: It will improve, the chairman saying overall, it's a stronger 94 00:04:16,880 --> 00:04:19,559 Speaker 3: forecast than in December. The data since the last meetings 95 00:04:19,560 --> 00:04:22,640 Speaker 3: show clear growth improvement, and a lot of people think 96 00:04:22,680 --> 00:04:25,000 Speaker 3: that's going to continue because of the tax refunds. How 97 00:04:25,040 --> 00:04:27,880 Speaker 3: important these tax refunds going to be? Do you think 98 00:04:27,920 --> 00:04:30,400 Speaker 3: people are overly optimistic about the impact this might have. 99 00:04:31,560 --> 00:04:33,919 Speaker 5: I think they will be positive for the consumer, but 100 00:04:33,960 --> 00:04:36,600 Speaker 5: this is a consumer that is already doing fairly well. 101 00:04:36,600 --> 00:04:38,600 Speaker 6: Spending has been fairly solid in. 102 00:04:38,560 --> 00:04:41,640 Speaker 5: The fourth quarter, and everyone's rise up their GDP numbers 103 00:04:41,920 --> 00:04:45,320 Speaker 5: in the fourth quarter Q one should be equally pretty solid. 104 00:04:45,720 --> 00:04:48,240 Speaker 5: I think the main takeaway is that, yeah, maybe even 105 00:04:48,279 --> 00:04:50,160 Speaker 5: you get a bit of a bump in consumer spending, 106 00:04:50,279 --> 00:04:53,040 Speaker 5: people will spend the stimulus checks that come to them, 107 00:04:53,000 --> 00:04:55,400 Speaker 5: and that is the American consumer. Well, then beyond that, 108 00:04:55,560 --> 00:04:58,680 Speaker 5: this is an environment where you have positive momentum in 109 00:04:58,720 --> 00:05:00,400 Speaker 5: the economy. 110 00:05:00,560 --> 00:05:01,680 Speaker 6: I think it will be important. 111 00:05:01,960 --> 00:05:05,200 Speaker 5: That's entirely fair, but it's also an economy that's performing 112 00:05:05,200 --> 00:05:07,440 Speaker 5: a lot better than many expected towards the back part 113 00:05:07,440 --> 00:05:09,760 Speaker 5: of the year last year when everyone was concerned about 114 00:05:09,960 --> 00:05:11,120 Speaker 5: the health of the consumer. 115 00:05:10,760 --> 00:05:13,760 Speaker 3: Which was sin these conference asked the question, why wouldn't 116 00:05:13,760 --> 00:05:16,560 Speaker 3: that lead to higher inflation, given how in some parts 117 00:05:16,600 --> 00:05:18,279 Speaker 3: of this economy we are supply constraints. 118 00:05:18,320 --> 00:05:19,120 Speaker 7: What's the answer to that. 119 00:05:19,520 --> 00:05:21,360 Speaker 5: The answer is that you'll see some sticky inflations of 120 00:05:21,440 --> 00:05:23,080 Speaker 5: the first part of the year, in which case the 121 00:05:23,120 --> 00:05:24,559 Speaker 5: next bet chair is going to be in an environment 122 00:05:24,560 --> 00:05:27,440 Speaker 5: where inflation is running roughly three percent, the economy is 123 00:05:27,600 --> 00:05:29,760 Speaker 5: fairly firm, and they're going to be trying to cut 124 00:05:29,760 --> 00:05:31,839 Speaker 5: interest rates, and they're probably going to have trouble at first. 125 00:05:32,520 --> 00:05:34,000 Speaker 6: It's going to be later in the year. 126 00:05:33,880 --> 00:05:36,719 Speaker 5: When inflation starts to cool again you lose a little 127 00:05:36,720 --> 00:05:38,760 Speaker 5: bit of that momentum where becomes a little bit easier 128 00:05:38,800 --> 00:05:39,560 Speaker 5: of a conversation. 129 00:05:39,720 --> 00:05:42,360 Speaker 1: I haven't answered anyone this question. I think it's fair 130 00:05:42,400 --> 00:05:45,440 Speaker 1: to ask now after this press conference we talked about 131 00:05:45,480 --> 00:05:48,640 Speaker 1: and the President with great negativity would talk about the 132 00:05:48,680 --> 00:05:53,279 Speaker 1: Bidens stimulus, what does the Trump stimulus actually look like 133 00:05:53,720 --> 00:05:55,360 Speaker 1: into the mid term elections. 134 00:05:56,640 --> 00:06:00,719 Speaker 5: Well, you'll certainly you'll see that better or consumer for 135 00:06:00,760 --> 00:06:02,720 Speaker 5: the first part of the year. It will fade into 136 00:06:02,760 --> 00:06:05,279 Speaker 5: the election period of time, in which case then the 137 00:06:05,279 --> 00:06:07,880 Speaker 5: focus is going to continue to be on affordability. So 138 00:06:08,000 --> 00:06:12,800 Speaker 5: that's that's that's the opposite of stimulus from a sentiment perspective. 139 00:06:12,839 --> 00:06:15,200 Speaker 5: And this is going to be the biggest challenge for 140 00:06:15,240 --> 00:06:16,840 Speaker 5: the administration. They're gonna be dealing with all year and 141 00:06:16,839 --> 00:06:18,560 Speaker 5: they're gonna have a lot of trouble. They've been throwing 142 00:06:18,600 --> 00:06:21,120 Speaker 5: a lot of different things at the wall to see 143 00:06:21,120 --> 00:06:23,760 Speaker 5: what will stick, and there is not that much they can. 144 00:06:23,960 --> 00:06:25,159 Speaker 6: Change sticking right now. 145 00:06:25,240 --> 00:06:29,359 Speaker 1: But any given central bank, whether it's it's Chairman Waller, 146 00:06:29,440 --> 00:06:33,920 Speaker 1: Chairman Mirror and whoever, Chairman Pharaoh, whatever, whatever we see 147 00:06:34,000 --> 00:06:36,240 Speaker 1: with the Central Bank, they've got to figure out what 148 00:06:36,360 --> 00:06:39,280 Speaker 1: will stick with half of America flat in their back. 149 00:06:39,760 --> 00:06:43,200 Speaker 1: What's the wolf research plan for that? Besides a check 150 00:06:43,200 --> 00:06:43,919 Speaker 1: in the mail. 151 00:06:44,400 --> 00:06:46,360 Speaker 6: There is not that much can be done. 152 00:06:46,600 --> 00:06:50,440 Speaker 5: The one positive is not about anything the administration can do. 153 00:06:50,480 --> 00:06:52,479 Speaker 5: It is a just a cyclical pickup in the economy 154 00:06:52,640 --> 00:06:54,840 Speaker 5: that will help at the margin for a lot of 155 00:06:54,839 --> 00:06:56,920 Speaker 5: the bottom end of the k who has been left out. 156 00:06:57,000 --> 00:06:57,760 Speaker 6: They've been left out. 157 00:06:57,680 --> 00:07:02,080 Speaker 1: For a wholes and Postner's saying is you know, you 158 00:07:02,120 --> 00:07:04,400 Speaker 1: get a pick up in the economy, you get productivity, 159 00:07:04,880 --> 00:07:08,360 Speaker 1: and it pulls up people. I mean, that's the reigning 160 00:07:08,440 --> 00:07:10,880 Speaker 1: theory here John, into labor Day and into the end 161 00:07:10,880 --> 00:07:11,240 Speaker 1: of the year. 162 00:07:11,480 --> 00:07:13,120 Speaker 3: Just on the next FED share this from the Treasury 163 00:07:13,120 --> 00:07:15,520 Speaker 3: Secretary in the last hour or so speaking to Yahoo, 164 00:07:15,560 --> 00:07:17,560 Speaker 3: saying the pick may come in a week or so. 165 00:07:17,680 --> 00:07:19,280 Speaker 3: It just feels like a rolling week. At the moment, 166 00:07:19,280 --> 00:07:21,560 Speaker 3: we're waiting another week to get that FED chair pick. 167 00:07:21,760 --> 00:07:23,600 Speaker 3: If you're just joining us, we're live on Bloomberg TV 168 00:07:23,720 --> 00:07:26,120 Speaker 3: and on Bloomberg Radio. A FED rate decision behind us, 169 00:07:26,160 --> 00:07:29,240 Speaker 3: a decision to keep rates unchanged after cunning at three 170 00:07:29,320 --> 00:07:32,640 Speaker 3: consecutive meetings. We did get some dissent from two FED governors, 171 00:07:32,720 --> 00:07:35,000 Speaker 3: one being Governor Walla, the other being Governor Myron looking 172 00:07:35,040 --> 00:07:38,000 Speaker 3: for a twenty five basis point reduction. Let's get to 173 00:07:38,040 --> 00:07:40,640 Speaker 3: Michael McKee, who was in that news conference with Chairman Powell. Mike, 174 00:07:40,680 --> 00:07:42,800 Speaker 3: welcome back. I give you an A for Tryank, a 175 00:07:42,800 --> 00:07:44,880 Speaker 3: big A for trying. What would you take away from 176 00:07:44,880 --> 00:07:45,760 Speaker 3: the chairman moments ago? 177 00:07:47,400 --> 00:07:49,240 Speaker 8: Well, I think we got the answer to whether Ja 178 00:07:49,320 --> 00:07:52,400 Speaker 8: Powell would talk politics or policy He focused on policy, 179 00:07:52,520 --> 00:07:56,160 Speaker 8: tried to stay away as much as possible from politics. 180 00:07:56,160 --> 00:07:58,120 Speaker 8: When I asked him, and Nick tim Rose from the 181 00:07:58,120 --> 00:07:59,600 Speaker 8: Wall Street Journal last him, and then he was asked 182 00:07:59,640 --> 00:08:01,680 Speaker 8: about the all three of us got sort of the 183 00:08:01,680 --> 00:08:04,800 Speaker 8: Seinfeld answer, No soup for you, He's not going to 184 00:08:04,800 --> 00:08:09,040 Speaker 8: talk about that issue right now. In terms of policy, however, 185 00:08:09,360 --> 00:08:13,080 Speaker 8: he seemed to be a little stronger on the outlook 186 00:08:13,200 --> 00:08:18,640 Speaker 8: for the economy than his feelings about what rates would 187 00:08:18,640 --> 00:08:20,680 Speaker 8: be doing. He didn't give us any indication that rates 188 00:08:20,720 --> 00:08:23,800 Speaker 8: would be going down, but he didn't give us any 189 00:08:23,800 --> 00:08:27,080 Speaker 8: indication that they think they're at neutral. He suggested we're 190 00:08:27,120 --> 00:08:29,320 Speaker 8: at the high end of it, which would leave you 191 00:08:29,360 --> 00:08:32,120 Speaker 8: open to a rate cut if you were able to, 192 00:08:32,200 --> 00:08:36,360 Speaker 8: in other words, if inflation's going down and unemployment calls 193 00:08:36,400 --> 00:08:39,800 Speaker 8: for it. But as Stephanie was saying, inflation's going to 194 00:08:39,800 --> 00:08:41,800 Speaker 8: stay elevated for a while. So it's going to be 195 00:08:41,840 --> 00:08:45,120 Speaker 8: hard in the remainder of Powell's term to have any 196 00:08:45,200 --> 00:08:47,600 Speaker 8: rate cuts, and it'd be hard for somebody new coming 197 00:08:47,600 --> 00:08:50,320 Speaker 8: in to get rate cuts right in the beginning, even if, 198 00:08:50,800 --> 00:08:55,920 Speaker 8: as Powell says, they think that inflation x tariffs is 199 00:08:56,000 --> 00:08:58,319 Speaker 8: running just about two percent or a little. 200 00:08:58,160 --> 00:08:59,240 Speaker 7: Above on the committee. 201 00:08:59,280 --> 00:09:00,920 Speaker 3: Might there is still a p U for an interest 202 00:09:01,000 --> 00:09:03,760 Speaker 3: right reduction from both Governor Myron and a Governor Waller 203 00:09:03,840 --> 00:09:05,640 Speaker 3: Mike for the paper of the Mischill counverage a little 204 00:09:05,640 --> 00:09:08,720 Speaker 3: bit earlier immediately following the decision. What's the russal for 205 00:09:08,760 --> 00:09:10,840 Speaker 3: that post from those two confidents on this FYMC. 206 00:09:12,520 --> 00:09:15,200 Speaker 8: Well, we know Myron has sort of been ordered to dissent. 207 00:09:15,440 --> 00:09:17,920 Speaker 8: It's interesting that he only dissented for twenty five basis 208 00:09:17,960 --> 00:09:21,280 Speaker 8: points this time instead of for fifty. Either he thinks 209 00:09:21,320 --> 00:09:24,480 Speaker 8: they've gone far enough or he didn't need to do 210 00:09:24,920 --> 00:09:29,439 Speaker 8: fifty to keep the president's favor. For Chris Waller, the 211 00:09:29,480 --> 00:09:32,640 Speaker 8: initial reaction I've seen from just about everybody who has 212 00:09:32,679 --> 00:09:35,280 Speaker 8: written about it is that he's trying to keep his 213 00:09:35,440 --> 00:09:39,040 Speaker 8: place in line for a possible promotion to FED chair 214 00:09:39,160 --> 00:09:43,520 Speaker 8: replacing Powell. But I would imagine also that Waller, knowing 215 00:09:43,559 --> 00:09:47,080 Speaker 8: him and knowing his reputation, will probably come out on 216 00:09:47,160 --> 00:09:51,040 Speaker 8: Friday when the blackoutlifts, and give us some sort of 217 00:09:51,040 --> 00:09:55,040 Speaker 8: statement on the economic reasons why he thinks a cut 218 00:09:55,080 --> 00:09:57,360 Speaker 8: is important at this time. It's a little bit different 219 00:09:57,360 --> 00:10:01,400 Speaker 8: situation now because the unemployment rate has go down. Inflation 220 00:10:01,720 --> 00:10:05,480 Speaker 8: is according to the FEDS calculations which Paul talked about 221 00:10:05,679 --> 00:10:08,920 Speaker 8: going to for the core PCEE hit three percent. So 222 00:10:09,080 --> 00:10:10,680 Speaker 8: it's harder to make the case for a cut at 223 00:10:10,720 --> 00:10:12,680 Speaker 8: the moment. So it'll be interesting to see what Waller 224 00:10:12,720 --> 00:10:13,280 Speaker 8: has to say. 225 00:10:13,440 --> 00:10:15,840 Speaker 3: My McKay, thank you, sir, stay close. Will come back 226 00:10:15,840 --> 00:10:17,600 Speaker 3: to you a little bit later in the program. We 227 00:10:17,679 --> 00:10:19,840 Speaker 3: talked about this. In the immediate aftermath of the decision 228 00:10:19,880 --> 00:10:22,240 Speaker 3: that descend from Governor Waller for a twenty five basis 229 00:10:22,240 --> 00:10:25,520 Speaker 3: point reduction, we heard from Vice Chair former Vice Chair 230 00:10:25,600 --> 00:10:28,920 Speaker 3: Richard Clarder from Torson's Slock of Apollo, essentially calling it 231 00:10:29,080 --> 00:10:31,880 Speaker 3: unfair to characterize this as a man purely voting for 232 00:10:31,880 --> 00:10:33,520 Speaker 3: a reduction to keep his name in the running to 233 00:10:33,559 --> 00:10:34,320 Speaker 3: become the Fed chair. 234 00:10:34,480 --> 00:10:34,720 Speaker 1: Yeah. 235 00:10:34,800 --> 00:10:36,319 Speaker 7: That has been a man who's delivered. 236 00:10:36,000 --> 00:10:39,160 Speaker 3: Effective leadership, thought leadership at the Federal Reserve and call 237 00:10:39,280 --> 00:10:42,080 Speaker 3: every single turn of the economy over the last several years. 238 00:10:42,160 --> 00:10:44,920 Speaker 1: Yeah. I think Tourston summed it up nicely. This is 239 00:10:44,960 --> 00:10:49,560 Speaker 1: a legit academic folks with major crowd out at Washington State. 240 00:10:49,600 --> 00:10:53,560 Speaker 1: He wrote a very important, small, tiny, perfect paper in 241 00:10:53,679 --> 00:10:55,760 Speaker 1: nineteen ninety one I believe it was. It made his 242 00:10:55,880 --> 00:11:00,680 Speaker 1: reputation and it's on game theory, but accessible game theory, 243 00:11:01,200 --> 00:11:03,520 Speaker 1: you know. Besides, he's like you, he's cutting chisels, he's 244 00:11:03,520 --> 00:11:04,520 Speaker 1: lifting weights every day. 245 00:11:04,600 --> 00:11:06,240 Speaker 7: I wish I lifted like he did. Have you seen 246 00:11:06,320 --> 00:11:06,880 Speaker 7: him deadlift? 247 00:11:07,000 --> 00:11:11,120 Speaker 3: Oh yeah, have you seen this? It's ridiculous. It's ridiculous 248 00:11:11,120 --> 00:11:12,760 Speaker 3: how much weight he lifts. But yes, please can take 249 00:11:12,800 --> 00:11:13,760 Speaker 3: a legitimate guy. 250 00:11:13,840 --> 00:11:16,640 Speaker 1: I mean, Ken Rogo is a huge fan of what 251 00:11:16,720 --> 00:11:19,560 Speaker 1: this academic has done. And he's delivered it. And here's 252 00:11:19,600 --> 00:11:21,680 Speaker 1: the key thing, and I think attractive to the president. 253 00:11:21,960 --> 00:11:25,080 Speaker 1: He's done it in a plain spoken way, and that 254 00:11:25,200 --> 00:11:26,959 Speaker 1: may be to the benefit of President. 255 00:11:27,200 --> 00:11:28,880 Speaker 3: I want to avoid the politics of this, Tom, but 256 00:11:29,120 --> 00:11:31,680 Speaker 3: we've complained so much about group think of the Federal Reserve. 257 00:11:32,040 --> 00:11:34,319 Speaker 3: We can't complain when someone sticks their necc count and 258 00:11:34,320 --> 00:11:35,959 Speaker 3: says we need to do something different. And this is 259 00:11:35,960 --> 00:11:38,360 Speaker 3: why I think we need to do this differently. Risk 260 00:11:38,400 --> 00:11:40,640 Speaker 3: cut both ways. And we've seen that coming out in 261 00:11:40,679 --> 00:11:43,040 Speaker 3: the pandemic. How wrong the consensus has been. Oh yeah, 262 00:11:43,200 --> 00:11:45,360 Speaker 3: risk cuts both ways. 263 00:11:45,440 --> 00:11:48,640 Speaker 1: It's the humility is in order, and I frankly I 264 00:11:48,679 --> 00:11:49,800 Speaker 1: heard that from Chairman. 265 00:11:49,559 --> 00:11:52,320 Speaker 3: Poulton Jeffrey Rosenberg of Black Rock joins us now to 266 00:11:52,400 --> 00:11:54,600 Speaker 3: weigh in on all of this. Jeff, Welcome to the show, sir. 267 00:11:54,880 --> 00:11:58,319 Speaker 3: The big takeaway for you, unchanged and a chairman who's 268 00:11:58,360 --> 00:12:00,480 Speaker 3: not looking to change things for the next several months, 269 00:12:00,520 --> 00:12:03,240 Speaker 3: would you agree, Yeah. 270 00:12:03,280 --> 00:12:06,400 Speaker 2: I think the big takeaway on the policy side was 271 00:12:06,520 --> 00:12:09,160 Speaker 2: the removal of the balance of risks from the labor 272 00:12:09,200 --> 00:12:12,040 Speaker 2: market assessment. He got asked that question. I think the 273 00:12:12,040 --> 00:12:15,160 Speaker 2: most interesting interchange was in the very first question, where 274 00:12:15,640 --> 00:12:18,280 Speaker 2: he very clearly laid out he wasn't going to address 275 00:12:18,320 --> 00:12:20,760 Speaker 2: the politics side, and then and got into the substance 276 00:12:20,920 --> 00:12:23,000 Speaker 2: on the change and the balance of risks, and I 277 00:12:23,040 --> 00:12:25,720 Speaker 2: think from the economic perspective, that was the most interesting 278 00:12:25,800 --> 00:12:30,559 Speaker 2: thing in acknowledging that they moved away from both sides 279 00:12:30,600 --> 00:12:35,080 Speaker 2: of the inflation and the labor market tension that was 280 00:12:35,120 --> 00:12:38,160 Speaker 2: there previously, and that's an upgrade to the assessment. I 281 00:12:38,160 --> 00:12:41,360 Speaker 2: think the near term implication is the bond market has 282 00:12:41,800 --> 00:12:43,800 Speaker 2: the pricing right that you know, and then in the 283 00:12:43,840 --> 00:12:47,600 Speaker 2: next six months there's really no real movement towards a 284 00:12:47,679 --> 00:12:50,760 Speaker 2: cut now. Obviously it depends on the data and everything 285 00:12:50,840 --> 00:12:54,120 Speaker 2: in terms of the expectations for the FMC is going 286 00:12:54,120 --> 00:12:56,360 Speaker 2: to be in the back half of the year, Jeff Rozenberg. 287 00:12:56,480 --> 00:12:59,120 Speaker 1: Maybe more important than the press conference is the American 288 00:12:59,160 --> 00:13:03,000 Speaker 1: exceptional is at four oh two, Microsoft four oh three, 289 00:13:03,480 --> 00:13:07,680 Speaker 1: Tesla four oh five, Meta four oh eight. IBM, honey, 290 00:13:07,720 --> 00:13:10,920 Speaker 1: thank you so much for those times. I mean, what's 291 00:13:11,000 --> 00:13:15,560 Speaker 1: keeping this fed going? Is this exceptional America? How do 292 00:13:15,640 --> 00:13:20,359 Speaker 1: they keep that experiment going with their policy given politics. 293 00:13:21,840 --> 00:13:24,640 Speaker 2: Yeah, that's a really important point, Tom, and it came 294 00:13:24,720 --> 00:13:26,640 Speaker 2: up a little bit in the press conference. You just 295 00:13:26,679 --> 00:13:29,360 Speaker 2: had to like listen for it. It's a point I 296 00:13:29,440 --> 00:13:33,280 Speaker 2: made often, you know in these discussions that you know, 297 00:13:33,440 --> 00:13:37,520 Speaker 2: where is the surprise coming from. It's coming from the 298 00:13:37,559 --> 00:13:41,200 Speaker 2: consumption side. It's being supported by the wealth effect, and 299 00:13:41,240 --> 00:13:44,600 Speaker 2: the wealth effect is being supported by all of those 300 00:13:44,640 --> 00:13:47,600 Speaker 2: earnings and that AI story. So you know, we talk 301 00:13:47,640 --> 00:13:51,600 Speaker 2: a lot about the macro economic perspective here, but it's 302 00:13:51,640 --> 00:13:54,240 Speaker 2: really about the micro and the micro is the AI 303 00:13:54,400 --> 00:13:58,079 Speaker 2: and the technology story, the concentration, and it's flowing through 304 00:13:58,240 --> 00:14:01,400 Speaker 2: from the micro to the macro through the wealth effect. 305 00:14:01,440 --> 00:14:05,280 Speaker 2: And that was why most economists are underclubbing GWth in 306 00:14:05,320 --> 00:14:08,280 Speaker 2: twenty twenty five. It may be again the story in 307 00:14:08,320 --> 00:14:10,079 Speaker 2: twenty twenty six. It's a little bit of the CA 308 00:14:10,280 --> 00:14:13,400 Speaker 2: shaped economy story as well, because it's only a small 309 00:14:13,440 --> 00:14:18,320 Speaker 2: portion that are benefiting, but that small portion overwhelmingly is 310 00:14:18,520 --> 00:14:20,520 Speaker 2: influencing that consumption sething wrong. 311 00:14:20,600 --> 00:14:23,200 Speaker 1: I look at that. I love how mister Rosenberg goes 312 00:14:23,200 --> 00:14:25,080 Speaker 1: to the wealth effect as well. I want to frame 313 00:14:25,120 --> 00:14:28,520 Speaker 1: out what we talked to Turston Slock about real GDP, 314 00:14:28,920 --> 00:14:31,800 Speaker 1: which is being buoyant by the wealth effect, maybe with 315 00:14:31,880 --> 00:14:34,280 Speaker 1: a little bit of add out inflation. Where do you 316 00:14:34,320 --> 00:14:37,680 Speaker 1: see nominal GDP for the next chairman, John, We go 317 00:14:37,800 --> 00:14:40,200 Speaker 1: out two meetings, then there's like one or two or 318 00:14:40,200 --> 00:14:43,240 Speaker 1: three meetings. October twenty nine is a dead meeting because 319 00:14:43,280 --> 00:14:47,800 Speaker 1: of the election. Where's nominal labor dayish in America? 320 00:14:48,320 --> 00:14:51,840 Speaker 5: Yeah, you're going to be sitting five percent a little 321 00:14:51,880 --> 00:14:52,360 Speaker 5: bit higher. 322 00:14:52,400 --> 00:14:54,480 Speaker 1: Wealth effect, John, that's what we call this. 323 00:14:54,600 --> 00:14:56,320 Speaker 6: Rosenberg's right, Yeah, I mean. 324 00:14:56,160 --> 00:14:59,440 Speaker 5: And the wealth effect has been really important for the 325 00:14:59,480 --> 00:15:02,800 Speaker 5: past couple years, partially just because it has broadened out 326 00:15:02,840 --> 00:15:07,120 Speaker 5: beyond just the very wealthy. This is a consumer where 327 00:15:07,280 --> 00:15:10,360 Speaker 5: younger people are involved in equities. More people, even though 328 00:15:10,360 --> 00:15:12,600 Speaker 5: they don't have the lion's share of the equities, they 329 00:15:12,640 --> 00:15:16,640 Speaker 5: are still more invested than many years past. So it's 330 00:15:16,720 --> 00:15:18,720 Speaker 5: helping a big part of America, of course, not that 331 00:15:18,760 --> 00:15:20,240 Speaker 5: bottom of the k which just continues. 332 00:15:20,280 --> 00:15:23,440 Speaker 3: And yet by some measures, by some measures, Conference Board 333 00:15:23,840 --> 00:15:26,239 Speaker 3: consumer confidence hasn't been lower in the last decade. 334 00:15:26,560 --> 00:15:30,240 Speaker 5: Explained, Yeah, conference Board was weaker, you mish was stronger. 335 00:15:30,520 --> 00:15:32,560 Speaker 5: I think the net of the two is a consumer 336 00:15:32,560 --> 00:15:37,400 Speaker 5: that feels bad about the price level in the economy, 337 00:15:37,400 --> 00:15:40,200 Speaker 5: which is something that cannot be changed easily by any means. 338 00:15:41,000 --> 00:15:45,280 Speaker 5: But they're largely employed and they don't like the policy uncertainty, 339 00:15:45,280 --> 00:15:48,040 Speaker 5: so they continue to spend because most of them are 340 00:15:48,040 --> 00:15:50,760 Speaker 5: employed and continue to make decent wage gains. They also 341 00:15:50,800 --> 00:15:52,960 Speaker 5: have they benefit from that wealth effect. But when you 342 00:15:53,000 --> 00:15:55,400 Speaker 5: ask them, how do you feel about the economy, it's 343 00:15:55,440 --> 00:15:56,760 Speaker 5: perhaps not great or. 344 00:15:56,760 --> 00:15:59,080 Speaker 3: Maybe four five percent. Nominal GDP is not what it 345 00:15:59,160 --> 00:16:02,320 Speaker 3: used to be, That is not as labor intensive. That 346 00:16:02,360 --> 00:16:04,880 Speaker 3: this growth is coming from tech capex spent, that don't 347 00:16:04,920 --> 00:16:08,240 Speaker 3: change in the lives of everyday Americans, at least not now. 348 00:16:08,320 --> 00:16:10,320 Speaker 3: Isn't that a good explanation as to what's going on? 349 00:16:10,600 --> 00:16:11,480 Speaker 6: Yeah, I think that's part of it. 350 00:16:11,480 --> 00:16:13,880 Speaker 5: And also concerned about the future prospects because we all 351 00:16:13,920 --> 00:16:15,600 Speaker 5: know AI is going to have important impacts on the 352 00:16:15,640 --> 00:16:18,880 Speaker 5: labor market. You continue to see headlines about job cuts. 353 00:16:18,880 --> 00:16:20,920 Speaker 5: The thing is that this part of the year there 354 00:16:21,000 --> 00:16:23,440 Speaker 5: is often headlines about job cuts, and everybody gets scared 355 00:16:23,440 --> 00:16:25,280 Speaker 5: in January about the labor market because they see all 356 00:16:25,280 --> 00:16:27,520 Speaker 5: these headlines, and then it proved to be not such 357 00:16:27,520 --> 00:16:28,200 Speaker 5: a big problem. 358 00:16:28,400 --> 00:16:31,640 Speaker 1: Jeff Rosenberger, I'm sure you're aware of posen and ors 359 00:16:31,680 --> 00:16:36,600 Speaker 1: eggs mapping out of a higher inflation, a more resilient inflation. 360 00:16:37,200 --> 00:16:41,880 Speaker 1: What does your bond world do if we get inflation resilience. 361 00:16:43,760 --> 00:16:46,400 Speaker 2: So a big part of that, Tom is in the 362 00:16:46,520 --> 00:16:49,040 Speaker 2: term premium. Right, the FED, and what we saw in 363 00:16:49,080 --> 00:16:51,680 Speaker 2: twenty twenty five was that the short end of the 364 00:16:51,760 --> 00:16:56,600 Speaker 2: yield curve, shorter maturities, were very responsive to policy rates. 365 00:16:56,720 --> 00:16:58,600 Speaker 2: It came up in the press conference today and the 366 00:16:58,680 --> 00:17:02,720 Speaker 2: question about long term interest rates, and Powell basically admitted 367 00:17:02,760 --> 00:17:05,199 Speaker 2: that longer term interest rates are going to be a function. 368 00:17:05,480 --> 00:17:08,120 Speaker 2: He focused on the fiscal policy uncertainty, but there's more 369 00:17:08,160 --> 00:17:11,200 Speaker 2: than that. There's real interest rates. The whole other picture 370 00:17:11,280 --> 00:17:15,320 Speaker 2: to AI is an incredible shift in investment demand that 371 00:17:15,400 --> 00:17:18,320 Speaker 2: raises real interest rates and the inflation piece to her question, 372 00:17:18,400 --> 00:17:22,120 Speaker 2: Tom is about inflation risk premia, and as you move 373 00:17:22,200 --> 00:17:25,320 Speaker 2: further out in time, there's more time for that uncertainty 374 00:17:25,560 --> 00:17:29,840 Speaker 2: for all those reasons to affect inflation and the bond 375 00:17:29,880 --> 00:17:34,280 Speaker 2: market impact is a steeper yield curve, reflective innominal space 376 00:17:34,320 --> 00:17:36,439 Speaker 2: of greater inflation risk pre I. 377 00:17:36,480 --> 00:17:39,320 Speaker 1: Look at this, Jeff. The question of where we are, 378 00:17:39,359 --> 00:17:41,760 Speaker 1: and this goes back to dollar analysis of the last 379 00:17:41,800 --> 00:17:45,640 Speaker 1: couple of days, is it's very nonlinear at some point. 380 00:17:45,920 --> 00:17:48,000 Speaker 1: If I look, you know, to look at the benchmark 381 00:17:48,040 --> 00:17:50,960 Speaker 1: ten year yield, how close are we to a point 382 00:17:51,000 --> 00:17:55,040 Speaker 1: where you get accelerated tendencies if we unwind, that would 383 00:17:55,080 --> 00:17:58,680 Speaker 1: be lower bond prices, higher yield. Is it ten beeps away? 384 00:17:58,840 --> 00:18:01,480 Speaker 1: Is it thirty beeps away? Is it a fiction? It's 385 00:18:01,520 --> 00:18:04,520 Speaker 1: just out there somewhere. Yeah. 386 00:18:04,640 --> 00:18:07,080 Speaker 2: Again, it kind of came up in the context of 387 00:18:07,119 --> 00:18:09,440 Speaker 2: the recent volatility in jgbs. 388 00:18:09,640 --> 00:18:10,480 Speaker 7: You know, is there a. 389 00:18:10,480 --> 00:18:14,840 Speaker 2: Nonlinear event for the US bond market. You know, it's 390 00:18:14,840 --> 00:18:18,240 Speaker 2: a different market, It's much bigger, it's much deeper. There's 391 00:18:18,320 --> 00:18:22,200 Speaker 2: a lot more impact in terms of price and substitution 392 00:18:22,320 --> 00:18:24,960 Speaker 2: effects that can happen. He talked about it in terms 393 00:18:25,000 --> 00:18:28,080 Speaker 2: of the fiscal side. It you know, the debt level 394 00:18:28,160 --> 00:18:32,080 Speaker 2: is sustainable, but the path is unsustainable at some point. 395 00:18:32,200 --> 00:18:34,679 Speaker 2: You know, no one really knows where that point is. 396 00:18:35,359 --> 00:18:37,600 Speaker 2: We used to talk about it in the context of small, 397 00:18:37,600 --> 00:18:40,560 Speaker 2: open market economies around one hundred percent eighty percent debt 398 00:18:40,600 --> 00:18:43,760 Speaker 2: to GDP. That's a very different setup than for the 399 00:18:43,880 --> 00:18:45,120 Speaker 2: US economy, and. 400 00:18:45,080 --> 00:18:46,119 Speaker 6: We don't really know. 401 00:18:46,880 --> 00:18:50,040 Speaker 2: I would I think it's a much longer term process 402 00:18:50,080 --> 00:18:53,520 Speaker 2: in terms of building a risk premia slowly and less 403 00:18:53,560 --> 00:18:55,960 Speaker 2: of this kind of tipping point argument. But we don't 404 00:18:55,960 --> 00:18:58,960 Speaker 2: really know for the US bond market what that will uh, 405 00:18:59,000 --> 00:18:59,720 Speaker 2: what that will look like. 406 00:19:00,080 --> 00:19:01,200 Speaker 7: Last your direct question. 407 00:19:01,280 --> 00:19:03,159 Speaker 3: I asked this to Toss and Slock for Apollo in the 408 00:19:03,240 --> 00:19:05,320 Speaker 3: last hour, and he said, no, do you have a 409 00:19:05,359 --> 00:19:07,879 Speaker 3: decent understanding now this FEDS reaction function. 410 00:19:10,960 --> 00:19:14,040 Speaker 2: I mean, I don't know if it's as clear as no. 411 00:19:14,240 --> 00:19:17,479 Speaker 2: I mean, I think that they shifted in the summer, 412 00:19:17,720 --> 00:19:20,080 Speaker 2: and Waller was ahead of it with regards to the 413 00:19:20,119 --> 00:19:24,800 Speaker 2: payroll side, the labor market side. They were validated in 414 00:19:24,840 --> 00:19:27,000 Speaker 2: that shift by the slowdown in the labor market, and 415 00:19:27,040 --> 00:19:29,800 Speaker 2: they told us today that slow down market in the 416 00:19:29,840 --> 00:19:32,200 Speaker 2: labor market is kind of stabilized. So if you look 417 00:19:32,240 --> 00:19:36,480 Speaker 2: at the response function, at least for consistency, they paused 418 00:19:36,560 --> 00:19:40,000 Speaker 2: the cutting, and they appears to be justified by the 419 00:19:40,040 --> 00:19:42,800 Speaker 2: reduction in the downside risk to the labor market. So 420 00:19:43,119 --> 00:19:45,119 Speaker 2: to me, that kind of validates a little bit of 421 00:19:45,119 --> 00:19:48,320 Speaker 2: what we understand about their response function of this current 422 00:19:48,359 --> 00:19:51,520 Speaker 2: fed that they are more keyed in on the labor 423 00:19:51,560 --> 00:19:54,280 Speaker 2: market risks then they are on the growth side, and 424 00:19:54,320 --> 00:19:56,600 Speaker 2: the growth side is being upgraded at the same time 425 00:19:56,640 --> 00:19:58,280 Speaker 2: he talked a little bit about that, So I think 426 00:19:58,280 --> 00:20:00,879 Speaker 2: we're still getting, you know, some view into that response. 427 00:20:00,880 --> 00:20:01,800 Speaker 7: Well, let me put it another way. 428 00:20:01,840 --> 00:20:04,200 Speaker 3: Let's say growth picks up in the way that Stephanie 429 00:20:04,200 --> 00:20:06,920 Speaker 3: and Tolson are looking for, and let's say inflation picks 430 00:20:07,000 --> 00:20:07,800 Speaker 3: up alongside that. 431 00:20:07,840 --> 00:20:09,440 Speaker 7: Do you have an understanding of what they will or 432 00:20:09,480 --> 00:20:11,000 Speaker 7: won't do like this year? 433 00:20:12,320 --> 00:20:15,119 Speaker 2: Well he kind of answered that one as well, at 434 00:20:15,160 --> 00:20:18,440 Speaker 2: least from Powell's perspective, is that no one has trying 435 00:20:18,480 --> 00:20:20,400 Speaker 2: to find my notes on this one, no one has 436 00:20:20,520 --> 00:20:25,880 Speaker 2: rate hikes in the expectation the economics of an uptick 437 00:20:26,000 --> 00:20:28,480 Speaker 2: in growth and an uptick in inflation, you know, might 438 00:20:28,520 --> 00:20:31,240 Speaker 2: otherwise say that, but yes, in terms of the response function, 439 00:20:31,480 --> 00:20:34,520 Speaker 2: it's still asymmetric here where they're looking, you know, to 440 00:20:34,600 --> 00:20:38,159 Speaker 2: be stable, or maybe looking for economic reasons to cut, 441 00:20:38,160 --> 00:20:42,120 Speaker 2: but not looking for an economic scenario where they're raising 442 00:20:42,119 --> 00:20:42,880 Speaker 2: interest in firlks. 443 00:20:42,880 --> 00:20:44,879 Speaker 1: I really want to say, if Jeffrey Rosenberg here with 444 00:20:44,880 --> 00:20:48,520 Speaker 1: Stephanie Roth is important because they both carry their day 445 00:20:48,520 --> 00:20:50,680 Speaker 1: to day work with a lot of humility. Where in 446 00:20:50,760 --> 00:20:56,080 Speaker 1: your head is the unemployment rate where everyone involved goes, oops, 447 00:20:56,280 --> 00:20:58,880 Speaker 1: it's not four point sixty four point seven or that 448 00:20:59,320 --> 00:21:01,920 Speaker 1: is there a stuff you were off unemployment rate where 449 00:21:01,960 --> 00:21:04,040 Speaker 1: the dialogue radically changes If. 450 00:21:03,960 --> 00:21:07,480 Speaker 5: We get that, Yeah, if you start to shift towards 451 00:21:07,800 --> 00:21:09,360 Speaker 5: five percent, then. 452 00:21:09,400 --> 00:21:11,800 Speaker 1: The dyna round number five percent. 453 00:21:11,480 --> 00:21:14,160 Speaker 6: Good round number, five percent, five percent. 454 00:21:13,880 --> 00:21:16,040 Speaker 1: Now the same as it was a five percent ten 455 00:21:16,160 --> 00:21:18,000 Speaker 1: or thirty years ago. I don't think it. 456 00:21:18,200 --> 00:21:19,080 Speaker 6: No, I don't think so. 457 00:21:19,359 --> 00:21:24,480 Speaker 1: In what ways described our audiences here worldwide? Why five 458 00:21:24,480 --> 00:21:28,639 Speaker 1: percent all American unemployment right now was you know, seven 459 00:21:28,680 --> 00:21:30,320 Speaker 1: percent unemployment right back when? 460 00:21:30,720 --> 00:21:34,359 Speaker 5: Yeah, it structurally shifted down over time, in which case, 461 00:21:35,720 --> 00:21:40,520 Speaker 5: because the labor market dynamics have have have have changed materially, 462 00:21:41,840 --> 00:21:45,440 Speaker 5: what keeps us in full employment today is not the same. 463 00:21:45,320 --> 00:21:46,879 Speaker 6: As what we were. 464 00:21:46,960 --> 00:21:51,600 Speaker 5: So therefore, if we're sitting at five percent that's a 465 00:21:51,720 --> 00:21:55,440 Speaker 5: that's a much riskier environment than than what it would 466 00:21:55,480 --> 00:21:56,000 Speaker 5: have been done. 467 00:21:56,000 --> 00:21:58,480 Speaker 1: You live this in Coventry with the auto business in 468 00:21:58,520 --> 00:22:01,560 Speaker 1: the United Kingdom. I just watched of the destruction of 469 00:22:01,600 --> 00:22:04,720 Speaker 1: Eastman Kodak yesterday, a great YouTube video. It was like 470 00:22:04,760 --> 00:22:08,200 Speaker 1: walking through my childhood. But that world is gone when 471 00:22:08,240 --> 00:22:10,879 Speaker 1: it was a seven percent unemployment and now we're walking 472 00:22:10,880 --> 00:22:13,560 Speaker 1: around happy with a five percent numbers. 473 00:22:13,600 --> 00:22:14,719 Speaker 3: Well, the thing to build on that, Tim, I think 474 00:22:14,760 --> 00:22:16,639 Speaker 3: we have to confront a new risk. You bring up 475 00:22:16,680 --> 00:22:19,720 Speaker 3: the old manufacturing hubs the basis of say the United 476 00:22:19,840 --> 00:22:21,240 Speaker 3: Kingdom and for that matter of Detroit he in the 477 00:22:21,359 --> 00:22:24,480 Speaker 3: United States. That's what globalization did to manufacturing. And the 478 00:22:24,560 --> 00:22:25,960 Speaker 3: risk now that we have to confront in the West 479 00:22:26,000 --> 00:22:27,879 Speaker 3: at least is whether AI is going to do that 480 00:22:27,920 --> 00:22:31,399 Speaker 3: to services what globalization did to manufacturing. You said it 481 00:22:31,400 --> 00:22:33,520 Speaker 3: was a brief acknowledgement there from the chairman in that 482 00:22:33,560 --> 00:22:35,240 Speaker 3: news conference, just to give a little nod to the 483 00:22:35,280 --> 00:22:37,080 Speaker 3: prospect of a reduction in jobs at least in a 484 00:22:37,119 --> 00:22:39,320 Speaker 3: short term because of this new technology. 485 00:22:39,800 --> 00:22:40,040 Speaker 7: Yeah. 486 00:22:40,080 --> 00:22:41,840 Speaker 5: I think that's fair and I guess that is the 487 00:22:41,920 --> 00:22:43,439 Speaker 5: risk in the future that we end up with a 488 00:22:43,480 --> 00:22:48,040 Speaker 5: structural shift higher because before it was, you know, a 489 00:22:48,080 --> 00:22:49,120 Speaker 5: backdrop where. 490 00:22:50,840 --> 00:22:53,040 Speaker 6: Globalization and manufacturing. 491 00:22:52,400 --> 00:22:56,200 Speaker 5: Helped to sort of bring the economy into today. We're 492 00:22:56,200 --> 00:22:59,840 Speaker 5: a much more developed economy than we were. 493 00:23:00,080 --> 00:23:02,880 Speaker 6: You know. Of course, that's the risk. 494 00:23:02,720 --> 00:23:04,520 Speaker 5: That we see into the future, that we end up 495 00:23:04,520 --> 00:23:08,040 Speaker 5: with a structurally slightly higher unemployment rate. But I'm not 496 00:23:08,240 --> 00:23:11,359 Speaker 5: convinced that it will end up being quite that. I 497 00:23:11,359 --> 00:23:13,320 Speaker 5: think there's an environment where you end up with job 498 00:23:13,359 --> 00:23:14,119 Speaker 5: gains as a result. 499 00:23:14,160 --> 00:23:16,320 Speaker 3: I think that's the problem being a policy maker right now. 500 00:23:16,400 --> 00:23:18,800 Speaker 3: I'm not convinced of anything, and I'm not sure they 501 00:23:18,800 --> 00:23:21,920 Speaker 3: are either. Things have changed. We asked Bob Michael a 502 00:23:21,960 --> 00:23:24,280 Speaker 3: JP Morgan, your former colleague, the question a little bit earlier. 503 00:23:24,320 --> 00:23:26,880 Speaker 3: What's more important for the outlook for the economy now 504 00:23:27,400 --> 00:23:29,760 Speaker 3: the spending numbers from these big names that report in 505 00:23:29,800 --> 00:23:32,080 Speaker 3: about twenty minutes time in the next hour, or the 506 00:23:32,119 --> 00:23:34,600 Speaker 3: payrolls report that we get every first Friday of the month. 507 00:23:34,920 --> 00:23:37,960 Speaker 3: And he's pointing to tech capex from the major tech 508 00:23:37,960 --> 00:23:40,879 Speaker 3: players in the United States. That has completely changed the conversation. 509 00:23:41,280 --> 00:23:45,440 Speaker 3: How do you set policy with traditional macro indicators when 510 00:23:45,480 --> 00:23:48,080 Speaker 3: what's driving the economy right now is something else. 511 00:23:48,800 --> 00:23:52,560 Speaker 5: So I think what's driving market is of course AI, 512 00:23:52,600 --> 00:23:55,800 Speaker 5: and that kind of is required to continue moving ahead 513 00:23:55,800 --> 00:23:58,560 Speaker 5: in order for the US economy to be okay. If 514 00:23:58,560 --> 00:24:01,080 Speaker 5: tech catpacs started to slow down materially as a result 515 00:24:01,160 --> 00:24:04,159 Speaker 5: of AID, there was a whatever reason they decided to 516 00:24:04,200 --> 00:24:06,600 Speaker 5: return on that investment wasn't quite as high. Usse econdy 517 00:24:06,600 --> 00:24:08,840 Speaker 5: would still be okay. We're not at a place where 518 00:24:08,880 --> 00:24:11,560 Speaker 5: AI is so ingrained and important into the economy that 519 00:24:11,600 --> 00:24:13,560 Speaker 5: if it were to if those dynamics were to change, 520 00:24:13,600 --> 00:24:16,240 Speaker 5: the economy would be in big trouble. We estimate that 521 00:24:16,480 --> 00:24:21,000 Speaker 5: the domestic share of capex AI related capex is that 522 00:24:21,080 --> 00:24:24,840 Speaker 5: one a half percent of GDP housing is a little 523 00:24:24,880 --> 00:24:27,760 Speaker 5: over three, so it's not that ingrained yet. In a 524 00:24:27,760 --> 00:24:30,000 Speaker 5: couple of years, if this continues at the pace, then 525 00:24:30,040 --> 00:24:31,159 Speaker 5: the conversation is different. 526 00:24:31,280 --> 00:24:34,320 Speaker 1: Jeff Rosenberg, let me ask you, Stephanie Roth question. I 527 00:24:34,320 --> 00:24:37,440 Speaker 1: think it fits in your fine and that is if 528 00:24:37,480 --> 00:24:40,000 Speaker 1: you look at the labor upset that's out there. John 529 00:24:40,000 --> 00:24:43,760 Speaker 1: and I are overwhelmed every day with emails talking about 530 00:24:43,800 --> 00:24:47,280 Speaker 1: fancy people at black Rock and Wolf Research talking about 531 00:24:47,320 --> 00:24:52,880 Speaker 1: AI AI that when does the Central Bank just have 532 00:24:53,080 --> 00:24:56,399 Speaker 1: to address with these two Americas? When do they address 533 00:24:56,840 --> 00:25:00,119 Speaker 1: to Americas. 534 00:25:00,200 --> 00:25:02,320 Speaker 2: It's a great conversation and came up again in the 535 00:25:02,640 --> 00:25:04,840 Speaker 2: press conference, and I think Powell did a really nice 536 00:25:04,920 --> 00:25:08,119 Speaker 2: job in addressing what we don't really know and we 537 00:25:08,200 --> 00:25:11,359 Speaker 2: don't know what that impact is going to be. But 538 00:25:11,400 --> 00:25:16,439 Speaker 2: he also critically added this comment on this is not 539 00:25:16,600 --> 00:25:19,600 Speaker 2: something that FED policy is well suited to, right, So 540 00:25:19,680 --> 00:25:23,879 Speaker 2: if we want to address labor market frictions and disruptions, 541 00:25:23,920 --> 00:25:27,000 Speaker 2: that's much better suited to other government policies than the 542 00:25:27,040 --> 00:25:31,080 Speaker 2: broad cudgel of monetary policy. I want to just come 543 00:25:31,119 --> 00:25:33,400 Speaker 2: back to your earlier conversation and just make one other 544 00:25:33,440 --> 00:25:36,720 Speaker 2: point that the wealth effect that we were discussing, it's 545 00:25:36,760 --> 00:25:40,480 Speaker 2: a double edged sword. So while the cap X impact 546 00:25:40,480 --> 00:25:44,919 Speaker 2: that Stephanie was talking about point well taken, the wealth effect, 547 00:25:45,000 --> 00:25:47,320 Speaker 2: if you were to have you know, a challenge to 548 00:25:47,440 --> 00:25:52,440 Speaker 2: the valuations or concerns or repricing the benefits that we've 549 00:25:52,480 --> 00:25:56,040 Speaker 2: seen can also you know, turn into headwinds. And so 550 00:25:56,080 --> 00:25:58,560 Speaker 2: we should just be kind of aware of that fact 551 00:25:58,600 --> 00:26:01,640 Speaker 2: of the AI micro impact to the macro economy. 552 00:26:01,680 --> 00:26:03,520 Speaker 3: And Jeff, I just want to avoid the rent. But 553 00:26:03,600 --> 00:26:06,080 Speaker 3: we have got a few more minutes. I get frustraatesed 554 00:26:06,119 --> 00:26:08,680 Speaker 3: when we say things like the FED can't do things 555 00:26:08,720 --> 00:26:12,840 Speaker 3: about certain situations when they've contributed to them themselves. And 556 00:26:12,880 --> 00:26:17,160 Speaker 3: I'm talking specifically about site inequality and the k shaped economy. 557 00:26:17,240 --> 00:26:21,240 Speaker 3: Jeff haven't made contributed to that problem. 558 00:26:21,640 --> 00:26:26,280 Speaker 2: Uh yeah, It's one of my favorite discussions. And you know, 559 00:26:26,320 --> 00:26:29,280 Speaker 2: it goes back, you know, Jonathan, even the comment that 560 00:26:29,320 --> 00:26:31,320 Speaker 2: I just made. You know, how does the FED address 561 00:26:31,400 --> 00:26:35,320 Speaker 2: these things in their policy framework. It's financial conditions, and 562 00:26:36,119 --> 00:26:39,280 Speaker 2: the FED does affect financial conditions, and they are affected 563 00:26:39,320 --> 00:26:42,400 Speaker 2: by financial conditions, and so you know, when the FED 564 00:26:42,440 --> 00:26:45,560 Speaker 2: made a policy choice back in the GFC through the 565 00:26:45,680 --> 00:26:48,800 Speaker 2: portfolio channel to try to address the challenges of the 566 00:26:48,840 --> 00:26:52,080 Speaker 2: collapse in the housing market, they kind of pushed up 567 00:26:52,200 --> 00:26:57,520 Speaker 2: into their transmission mechanism toolkit transmission through financial conditions. And 568 00:26:57,560 --> 00:27:00,800 Speaker 2: so that's really the problem that we've been inheriting for 569 00:27:00,840 --> 00:27:04,679 Speaker 2: the last two decades. And so, yes, it is something 570 00:27:04,720 --> 00:27:07,480 Speaker 2: that they're part of. It's it's part of Besson's you know, 571 00:27:07,560 --> 00:27:10,320 Speaker 2: criticism in the gain of function, and it's part of 572 00:27:10,359 --> 00:27:13,400 Speaker 2: the kind of you know, future potential for FED policy 573 00:27:13,480 --> 00:27:15,560 Speaker 2: review of you know, how do we how do we 574 00:27:15,720 --> 00:27:19,240 Speaker 2: extract or how does the institution extract itself from those things? 575 00:27:19,240 --> 00:27:21,639 Speaker 2: At a at a simple level, it's it's what should 576 00:27:21,680 --> 00:27:24,080 Speaker 2: the portfolio look like, what should the holdings look like? 577 00:27:24,119 --> 00:27:27,040 Speaker 2: Should we still have mortgages? And that's one example of 578 00:27:27,080 --> 00:27:29,720 Speaker 2: how you could, you know, change some of those functions 579 00:27:29,760 --> 00:27:31,000 Speaker 2: in a new policy. 580 00:27:31,040 --> 00:27:33,160 Speaker 3: Is getting rent. That's the challenge for the next guy. 581 00:27:33,240 --> 00:27:35,879 Speaker 3: Jeff is going to see Jeffrey Rosenbuck there of black crook,