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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 2: my co host Matt Miller.
Speaker 1: Every business day we bring you interviews from CEOs, market pros,
Speaker 1: and Bloomberg experts, along with essential market movin news.
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Speaker 3: Looking at the jobs data headline on the terminal. One
Speaker 3: of the stories that reads by US labor market defive
Speaker 3: slow down forecasts in broadening strength right now, want to
Speaker 3: bring in Tom Gibble. He is the CEO at Lassal Network,
Speaker 3: joining us on Zoom Tom. When you look at the
Speaker 3: jobs report that we saw too hot to handle, what
Speaker 3: really stands out to you from this report?
Speaker 4: I think number one is the unemployment number dropping, which
Speaker 4: happens to be somewhat seasonal, but it's still a really
Speaker 4: good sign based on where things were trending over the
Speaker 4: past couple months. And then secondarily, the fact that we
Speaker 4: added one hundred and ninety nine thousand jobs is fantastic.
Speaker 4: But of the one ninety nine, I believe one point
Speaker 4: fifty were non government, which is a really good number
Speaker 4: to see that over seventy five percent of the jobs
Speaker 4: added or non government. So it's a really good sign.
Speaker 4: And now, you know, here's just hoping that that not
Speaker 4: only do they not raise rates, that that they don't
Speaker 4: not lower rates, that they don't raise them as well.
Speaker 4: So I think we're gonna be okay.
Speaker 3: Yeah.
Speaker 5: And in terms of the Ali and his good morning,
Speaker 5: it's manas here alongside average early earnings coming in quite
Speaker 5: nicely plus point four percent month a month year andyar
Speaker 5: it takes you to four percent, So there's no sign
Speaker 5: of the steam coming out of that engine at the moment.
Speaker 5: And this is what markets are going to focus on,
Speaker 5: isn't it, which is, there's no collapse, this is a
Speaker 5: nice soft landing and earnings are strong.
Speaker 4: Well, I think that what people are scared about is
Speaker 4: it's not a landing at all. And I think that
Speaker 4: that is it's the craziest market I've ever seen, craziest
Speaker 4: economy I've ever seen. The stock market continues to go up,
Speaker 4: earnings are positive, unemployments low.
Speaker 5: It's certainly not laying the work for hard landing.
Speaker 6: I mean, that's the whole point. And that's what the bond.
Speaker 5: Market rallied furiously on, which was, you know, some kind
Speaker 5: of a crack in the dams. So what is no
Speaker 5: landing Because no landing doesn't get me two hundred bases
Speaker 5: points of cuts from the FED next year, does it? No?
Speaker 4: But but if they don't think it's landing at all,
Speaker 4: it might get you another another twenty five or fifty
Speaker 4: bases point increase. So you don't want that either. And
Speaker 4: I think hopefully we're at a point now where we
Speaker 4: say let's let this thing ride a little bit. And
Speaker 4: I don't think we'll get the cuts, and I don't
Speaker 4: think we'll get the increase, and so we'll just be
Speaker 4: flat and see what happens.
Speaker 6: What people don't realize.
Speaker 4: Sometimes the economist that's definitely main street is that the
Speaker 4: economy is so much different than we've ever had it
Speaker 4: in the history of this country. And what I mean
Speaker 4: by that is Number one, there's more startups than ever before.
Speaker 6: So Google lays off people.
Speaker 4: Small companies are gobbling these people up that didn't exist.
Speaker 4: There wasn't this startup culture that people could go find
Speaker 4: other jobs. So there's just more companies that exist for
Speaker 4: people to go work at. Number two, because of technology,
Speaker 4: the skills are more transferable. Fifty years ago, if I
Speaker 4: was a General Motors or a Ford or a Chrysler
Speaker 4: car person, that was all I could do. Today, because
Speaker 4: of technology and transferable skills, you're not stuck in one
Speaker 4: industry vertical for your whole career. You can move into
Speaker 4: other areas. And so those are the type of things
Speaker 4: that have made this job's recovery in this job's economy
Speaker 4: so much different than any other time in American history.
Speaker 3: And tom to see some of these rate cuts play out, though,
Speaker 3: does something need to break? I'm just looking at the
Speaker 3: unemployment rate extremely low at three point seven percent, I
Speaker 3: had seen expectations maybe for that to cross the four
Speaker 3: percent threshold.
Speaker 4: Yeah, I think what we're seeing is it's not it's
Speaker 4: not gonna you know, the only way if the if
Speaker 4: the FED really believes that the only way to curb
Speaker 4: inflation and get it down to two percent is to
Speaker 4: have massive layoffs.
Speaker 6: So I think which.
Speaker 4: Would be destructive to the overall economy. Not helpful, but destructive,
Speaker 4: would be to raise rates, you know, one hundred and
Speaker 4: fifty basis points over the next three, four, five, six quarters.
Speaker 4: And I don't think that's gonna happen because right now,
Speaker 4: what we're seeing is companies can survive and operate with
Speaker 4: relatively normal interest rates. And what we had it was
Speaker 4: just too long of an explosion of growth due to
Speaker 4: zero percent interest rates and no repercussions. And that's the challenge.
Speaker 4: Is when you can open up a business as a
Speaker 4: venture capital firm, or you can finance one as a
Speaker 4: private equity firm and have almost no risk of loss,
Speaker 4: that creates a net for everybody. That's just not fair,
Speaker 4: it's not safe, it's not normal. Now what we're seeing
Speaker 4: is with normalized interest rates as we had throughout the
Speaker 4: history of this country, the economy can still survive, and
Speaker 4: that's a positive thing for society.
Speaker 5: One of the biggest debates that we have been having
Speaker 5: during this massive rally in the bond market and sort
Speaker 5: of explosion in equity markets higher, was that we were
Speaker 5: going to face some kind of a debt cliff as
Speaker 5: sort of a refinancing cliff in theory. Do you believe
Speaker 5: that that's part of the reason why we're still sustaining ourselves,
Speaker 5: that that cliff is just not materializing.
Speaker 4: Yeah, I think it's a matter of time. I think
Speaker 4: what we've got is is that there's more equity in
Speaker 4: people's homes than we've ever had before, and at the
Speaker 4: same time, the rate on borrowing money is increased, and
Speaker 4: so what we've seen is people have the ability to
Speaker 4: borrow more, and we're seeing consumer debt increase. We just
Speaker 4: haven't seen it hit the wall yet. And I think
Speaker 4: that the biggest change I've seen in consumer spending and
Speaker 4: debt versus ever before is that people used to borrow
Speaker 4: and have home equity lines or whatever it was, but
Speaker 4: they were also saving for rainy day. And now what
Speaker 4: it seems like is no matter how much money people have,
Speaker 4: the saving for rainy days gone out the window because
Speaker 4: there's this sense of the government will step in. I'm
Speaker 4: not going to get kicked out of my house, and
Speaker 4: there's an overall cultural shift that's existed, and I do
Speaker 4: think I don't think it's going to happen in twenty
Speaker 4: twenty four, but eventually the rubber's going to hit the
Speaker 4: road there due to the deficit and the large amount
Speaker 4: of individual debt as well.
Speaker 3: Yeah, we're talking to CEO. Let's sell on network, Tom Gibble. Tom,
Speaker 3: you make an interesting point because when we were talking
Speaker 3: around Black Friday and Cyber Monday sales, it seemed like
Speaker 3: the consumer was more than happy to use things like
Speaker 3: buy now, pay later, taking on credit card debt to
Speaker 3: keep buying goods. You're talking about the rubber hitting the
Speaker 3: road in twenty twenty five. How does that shake out
Speaker 3: with a labor market that you've made the point to
Speaker 3: that's still strong and still has quite a number of
Speaker 3: transferable skills. If people were to be.
Speaker 4: Laid off, well, I think that's exactly I think you're
Speaker 4: going to have a big come up and soid it'll
Speaker 4: probably make a difference of who wins in the election
Speaker 4: in twenty four and where Congress sits of what the
Speaker 4: bailout will be.
Speaker 6: So now we've.
Speaker 4: Had, you know, in the past fifteen years, we've had
Speaker 4: the recession and the corporate bailout, We've had the pandemic
Speaker 4: and the consumer bailout. So now we're going to look
Speaker 4: and we're going to see what's going to happen when
Speaker 4: we get if we get another recession, and how bad
Speaker 4: it gets on the homeowner side, on the residential, on
Speaker 4: the commercial real estate side, and what we see with
Speaker 4: the continuing growth of the national deficits. So I think
Speaker 4: that because we've had this expansion of companies and to
Speaker 4: quote Tom Freeman, right, the world really is flat from
Speaker 4: a standpoint of jobs being able to be done anywhere
Speaker 4: in the world, that I think people are going to
Speaker 4: realize that they've got to work, and they're going to
Speaker 4: take jobs below what they were making. Salaries are inflated
Speaker 4: right now. I don't care what anybody says. We're up
Speaker 4: four percent. Wages are and what's gone on in the
Speaker 4: past thirty months with wage increases on the hourly side,
Speaker 4: and the salary is crazy to happen that fast, and
Speaker 4: it's going to come down, whether it's in twenty five
Speaker 4: or twenty six. It's going to come back down eventually,
Speaker 4: and I think that as long as people have jobs
Speaker 4: when that happens, will be okay.
Speaker 6: But you will see that that recalibration on wages.
Speaker 3: But that's interesting. So you're saying we see kind of
Speaker 3: a resetting of wages in twenty five, twenty six, in
Speaker 3: twenty four, like in terms of when you're looking at
Speaker 3: the labor market, wage growth, recession risks, that's not a
Speaker 3: twenty four story at all in your view.
Speaker 4: I don't think it's going to be a twenty four stor.
Speaker 4: I think it's going to be a twenty four story
Speaker 4: for two reasons. I think number one, we've still got
Speaker 4: the infrastructure bill, and so what that means is the
Speaker 4: government's hiring people like it hired twenty five percent of
Speaker 4: the one ninety nine that we're added in the November
Speaker 4: jobs report, and that leads to trickle down economics to
Speaker 4: the private sector on the infrastructure package. So we've still
Speaker 4: got this infrastructure package and all those trillions being spent,
Speaker 4: so that keeps things afloat. In twenty four plus, you
Speaker 4: have an election cycle year, which there's obviously incentive for
Speaker 4: that to keep the economy humming as well. So twenty
Speaker 4: four I don't see being a problem whatsoever. I think
Speaker 4: that we're pushing things. We're kicking the can down the
Speaker 4: road a little bit.
Speaker 5: I just want to come back as an intern on
Speaker 5: Wall Street. We're I get one hundred and twenty dollars
Speaker 5: in our next summer. I'll just leave you with that thought.
Speaker 5: That's what we're paid in twenty twenty three. Will they
Speaker 5: be able to command that in twenty twenty four?
Speaker 3: Interesting conversation though, Thank you so much. Tom Gibble again,
Speaker 3: CEO at Lasal Network, joining us via zoom from Chicago.
Speaker 7: You're listening to the team. Ken's a live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 3: Baby Filton, Manus Granny here filling in for Paul and Matt,
Speaker 3: Joined now by Nancy Tangler, CEO and CIO at Laffer
Speaker 3: Tangler Investments. Here in the Bloomberg Interactive Studio. Nancy, we
Speaker 3: get jobs data, We get University of Michigan sentiment data.
Speaker 3: Markets are trading higher. Too hot to handle this. It
Speaker 3: seems like we were not initially kind of gearing up
Speaker 3: for this kind of a market reaction in the pre
Speaker 3: market trading.
Speaker 8: Yeah, well, I think I think the volatility well, first
Speaker 8: of all, it's friend to the long term investor. So
Speaker 8: if you were in there buying early this morning or
Speaker 8: pre market, you're in good shape. But I also think
Speaker 8: that the Michigan numbers were more important than the jobs numbers.
Speaker 8: They weren't really the jobs numbers that is as robust
Speaker 8: as the headlines indicated. So you saw, you know, the
Speaker 8: return of UAW and screenwriters. You saw a lot of
Speaker 8: healthcare jobs, but manufacturing jobs were down. So I think
Speaker 8: that the initial reaction was ill informed. Remember that it's
Speaker 8: the algorithms that are reading the headlines, you know, driving volatility.
Speaker 8: But the Michigan numbers were actually, I think, quite encouraging,
Speaker 8: and I'm loving this rally.
Speaker 5: Those pesky i'l goes and I have it in good
Speaker 5: authority that they have financial cloud. The one year inflation
Speaker 5: expectations come in at three point one percent on the
Speaker 5: Michigan numbers. Now that is perhaps the more significant piece
Speaker 5: that the bomb market will look towards, isn't it.
Speaker 3: Yeah?
Speaker 8: And hugely better than the market was expected.
Speaker 5: Full point three was the expectation previously full point five percent.
Speaker 9: Yeah, so you're right, man.
Speaker 8: I think one of the things that we've been arguing
Speaker 8: is that inflation, Yes, it is coming down. I think
Speaker 8: what the disconnect between most people and us the financial
Speaker 8: community is that maybe coming down, but there are still
Speaker 8: embedded very high costs.
Speaker 5: I think.
Speaker 9: So that's why I think the Michigan.
Speaker 8: Numbers are so powerful, because there seems to be some
Speaker 8: realization that we're at the end by the consumer. Maybe
Speaker 8: they can you know, sort of absorb some of these
Speaker 8: higher prices.
Speaker 5: Can I just say, as a recent transplant to your
Speaker 5: fine country and your esteemed city, my gosh, it's expensive.
Speaker 5: And I have come from one hallish expensive city, from Dubai,
Speaker 5: from the Middle East on food on boost and there
Speaker 5: was no tax. There was no income tax there. I mean,
Speaker 5: I'm being taxed within an inch of my life? How strong?
Speaker 5: Where do you want to? Where do you want to
Speaker 5: be in this economy? Because this is this the immaculate disinflation?
Speaker 5: Is this the soft landing of these these these sayings
Speaker 5: are so awful, But but how do you position for it?
Speaker 5: Because it doesn't look brootal or hard well man, I.
Speaker 8: Think we were talking pre show that. My analogy is
Speaker 8: I was alive in the nineties.
Speaker 9: And as was I, I was.
Speaker 8: Managing just for the director show barely and I was
Speaker 8: managing billions of dollars. And this feels a lot like that.
Speaker 8: So you have what I would call and some are
Speaker 8: calling the Fourth Industrial Revolution or a supercycle in technology, digitization, generative,
Speaker 8: cloud computing. I mean, just look at Broadcoms numbers last night,
Speaker 8: and that's the poor man's Nvidia. So if you look
Speaker 8: at that and you say, okay, we had higher inflation,
Speaker 8: we had interest rates that were five to eight percent
Speaker 8: in the nineties, we had an inverted yield curve what
Speaker 8: was called then ASoft landing. I'm not predicting one this time.
Speaker 8: We had a war, we had a recession at the
Speaker 8: beginning of the decade, and yet the Nasdaq was up
Speaker 8: over eight percent, the Dow and the S and P
Speaker 8: were up over four hundred percent. So I think stocks
Speaker 8: can continue to do well in hell here the surprise
Speaker 8: is going to be earnings, I think for most investors,
Speaker 8: and I think what we're seeing now is that for
Speaker 8: the most part, the market's not listening to the FED anymore,
Speaker 8: which I've said, and we don't need to debate.
Speaker 9: It has a credible ratesgized.
Speaker 8: Has a credibility problem for sure. So I want to
Speaker 8: be in overweight technology. I want to be overweight industrials
Speaker 8: because the pmis are bondbing when.
Speaker 3: You're looking at technology, though, is that predominantly within the
Speaker 3: Magnificent seven and friends or you're looking at kind of
Speaker 3: more of a widespread rally within tech.
Speaker 5: Yeah.
Speaker 8: So, so the companies that are so our investing theme
Speaker 8: is old economy companies Bailey that are pivoting to digitization
Speaker 8: and embracing it, and then the new the companies that
Speaker 8: are providing those tools. So so our biggest holdings in
Speaker 8: technology would be Microsoft, Palleto Network Service, now Broadcom.
Speaker 9: I'm probably forgetting half a dozen of them.
Speaker 8: But the names that that are going to drive this
Speaker 8: next supercycle.
Speaker 9: I'm not interested in meta.
Speaker 8: We own a little bit of Google, uh, but we
Speaker 8: want those are in some ways glorified ad companies. We
Speaker 8: want the ones the company instead of driving it.
Speaker 5: It's interesting because when we've had a variety of people
Speaker 5: in through the morning time talking about the propensity for
Speaker 5: mag seven to deliver out sized returns in twenty twenty
Speaker 5: four may well be more challenged, and perhaps you want
Speaker 5: to go a little bit more for breadth. At the
Speaker 5: end of every year, I'm waiting for the Goldmen's report
Speaker 5: to come out on buybacks or whatever. But this is
Speaker 5: where I want to get your sense. Buybacks are incredibly important.
Speaker 5: Apple intermittently do it, and we spend the whole day
Speaker 5: gorging on Apples buy back and bond issue and stuffun
Speaker 5: and whatever. But where will buy backs put a floor
Speaker 5: in this mode?
Speaker 8: Absolutely to what extent took the words right out of
Speaker 8: my mouth.
Speaker 5: It's from the script.
Speaker 9: You secretly did I say?
Speaker 6: How did I read that?
Speaker 9: You said it better?
Speaker 8: Yeah, I think clearly they are going to. And one
Speaker 8: of the things that drives when we'll continue to drive
Speaker 8: that is the insatiable appetite that the shadow banking system
Speaker 8: has for corporate bonds. But if you just look at
Speaker 8: the mag seven and it's not all of them, I
Speaker 8: think it's four or five. They're going to issue one
Speaker 8: hundred billion dollars in share buybacks over the next year
Speaker 8: or two, or claim a one hundred billion, however you want
Speaker 8: to say that. I think that's what we saw in
Speaker 8: twenty twenty and twenty nineteen, and that's what we're going
Speaker 8: to continue to see in twenty twenty three.
Speaker 9: It is, and.
Speaker 8: As Apple's a big chunk of that. So you just
Speaker 8: need them to do what they say they're going to do.
Speaker 8: And so I think you buy the dips in technology.
Speaker 8: And I know there's a lot of people that are
Speaker 8: saying the tech trade is over.
Speaker 9: I just don't agree. I think they're ill informed.
Speaker 3: Well, I'm looking at kind of the catch up trade,
Speaker 3: if you will. We're seeing the equal weighted SMP catching
Speaker 3: up really since that November late October bottom. How do
Speaker 3: you see that playing out in different areas? You mentioned industrials.
Speaker 3: Is that a place that you're continuing to put cash
Speaker 3: to work. What names do you like within the industrial space.
Speaker 8: Yeah, so we like the ones that are automating. And
Speaker 8: I would say broadening out is great for portfolio managers
Speaker 8: because we have to be diversified, Bailey, So you can't
Speaker 8: put all your eggs in the technology basket. But you know,
Speaker 8: Carriers one of our largest holdings in industrials. You saw
Speaker 8: it pop today on the sale. We also like Illinois Toolworks.
Speaker 8: We have exposure to Emerson Electric, and we actually have
Speaker 8: exposure in a different portfolio to Honeywell, so it has
Speaker 8: done not nearly as well as those names. But I
Speaker 8: think you still want to be in the short cycle
Speaker 8: of industrials and then broaden out in We have a
Speaker 8: market weight in healthcare, we have a market weight in financials,
Speaker 8: and an overweight and consumer discretionary, so broadening out is great.
Speaker 8: We were adding risks back into our portfolios in October
Speaker 8: of twenty twenty two, so we were adding to technology
Speaker 8: when the last death no was issued, and we will
Speaker 8: continue to do that as we have the opportunity.
Speaker 3: You mentioned consumer discretionary. It's the chatters died down a bit.
Speaker 3: But what's your thought on kind of this ozempic trend
Speaker 3: and is that really going to reshape the entire economy
Speaker 3: and how people spend.
Speaker 9: I don't think so, Bailey.
Speaker 8: I mean, you know, I was around when we had
Speaker 8: fen Fenn and for a while it was great, and
Speaker 8: then all the side effects showed up, and I just
Speaker 8: don't think there's enough data. And I was just in
Speaker 8: the Midwest and they have not gotten the ozembic message
Speaker 8: or the memo, So I think I think it will
Speaker 8: have an impact mildly, but I don't think it's going
Speaker 8: to hurt these companies, like the initial reaction indicated.
Speaker 5: And then just very quickly you look at we have
Speaker 5: a big take story this morning talking about Hermes having
Speaker 5: delivered one thousand percent returns since they batted away LVMH.
Speaker 5: You know, do you feel confident at all in taking
Speaker 5: some of the higher, let's say, the premium names relative
Speaker 5: to Henny's a very European number. I'm learning as I
Speaker 5: go here in terms of what's big on the high
Speaker 5: street and anything. Are you so comfortable with taking any
Speaker 5: of the higher value luxury names.
Speaker 8: Yeah, I mean we do own Lululemon, and it looks
Speaker 8: to me like it turned around this morning when I
Speaker 8: was walking over here, and that's because they are a
Speaker 8: premium provider and they are delivered, they've delivered, and they're
Speaker 8: adding two.
Speaker 5: Already, one sixteen up sixteen bucks.
Speaker 9: Yeah, I'll take it.
Speaker 8: And then we own Nike, so that's another name in
Speaker 8: that space that you know, can be high with.
Speaker 3: Those, somewhat high end with those though, like again a
Speaker 3: somewhat high end definitely areas that are targeted to the
Speaker 3: younger generation, people who want to spend when you look
Speaker 3: at you, that is me. I know I don't want
Speaker 3: to for.
Speaker 9: People we're spending like crazy.
Speaker 5: I'm technically not a baby boomer yet.
Speaker 3: Go on, we've got about thirty seconds. But how are
Speaker 3: you thinking about kind of the strength of the consumer
Speaker 3: into twenty twenty four, just given how much the younger
Speaker 3: generations have been putting on credit card debt and things
Speaker 3: like buy now papers.
Speaker 8: Yeah, great for American Express, by the way, which we
Speaker 8: also own. So I would say that people spend when
Speaker 8: they're working, and they spend out of their net worth.
Speaker 8: Americans have one hundred and fifty four trillion dollars in
Speaker 8: net worth, half of which is in with my generational
Speaker 8: core cohort, which is the baby boomers. They are going
Speaker 8: to continue to spend. They have no debt for the
Speaker 8: most part, and they will continue to spend. So I
Speaker 8: think high end is good. We're looking at LVMH looking
Speaker 8: for an entry point, and I'm going to run over
Speaker 8: to a MA now that you reminded me, I.
Speaker 5: Can't afford to going through this.
Speaker 3: We got to leave it there though. Thank you so much.
Speaker 3: Nancy Taylor, she is the CEO and CIO at Laffer
Speaker 3: Tangler Investments.
Speaker 7: You're listening to the tape cats are live program Bloomberg
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Speaker 3: Lip Schultz and Nathan Hay're hanging out with you here
Speaker 3: on Bloomberg Markets. Paul and Matt are both off busy
Speaker 3: jobs Day Friday. Right now, looking at the markets. You've
Speaker 3: got the SMP relatively flat, as is the Dow and
Speaker 3: the Nasdaq, but keeping an eye on the two year
Speaker 3: old at four spot seven to one percent and on
Speaker 3: the ten year four spot two four percent. Right now,
Speaker 3: we are joined in the Interactive Broker studio by Ben Emmons.
Speaker 3: He is the head of fixed income at new A Wealth,
Speaker 3: talking the market, talking jobs and what stands out to
Speaker 3: you because headline numbers seemed hot, but there are a
Speaker 3: lot of things to kind of look at under the
Speaker 3: hood on this report.
Speaker 10: Yeah, what I was looking at this morning was the
Speaker 10: ADP report first, and I noted that the leisure and
Speaker 10: Hospitality was negative in the ADP report, and ADP is
Speaker 10: leading in some of the sectors NFP reports, So I
Speaker 10: was surprised to see a forty k gain in leisure
Speaker 10: in this report, and it jumps out because there's a
Speaker 10: lot of job growth out of that sector of the
Speaker 10: last years now and it's very consistent, so it's still
Speaker 10: not slowing down. And I take comform them saying like, well,
Speaker 10: this job market may be quote code loosening if you
Speaker 10: think of the job openings, or you think of even
Speaker 10: if you can tell someone in continuing claims or auto measures,
Speaker 10: but you think of leisure, that's like a growth engine
Speaker 10: for this job market, and that's I think positive against Look,
Speaker 10: it was good to see this influx of people back
Speaker 10: in the labor forces the other guests was talking about
Speaker 10: and the guest was talking about. But it's important there
Speaker 10: to notice that the share of foreign immigrants as part
Speaker 10: of the labor force that's increasing now up to twenty percent.
Speaker 10: So I think what's going on in the last few
Speaker 10: years is that as we get more people coming into
Speaker 10: the country, they get into labor force to find work
Speaker 10: really quick and I think that's a really important development
Speaker 10: because if that continues, not only that that keeps the
Speaker 10: job market like humming and going. It also is for
Speaker 10: productivity really important. And so the average charity earnings although
Speaker 10: they were up, but it was like four tenths of
Speaker 10: percent versus forecast point three. You know that's not like
Speaker 10: a dramatic increase such that that's really because of the
Speaker 10: effect on productivity. So it isn't a way a Goldilarcks number,
Speaker 10: a Goldilocks reports and why the markets are as they are.
Speaker 10: I mean, you would expect yields to jump by this
Speaker 10: much and you would think that starts with rally and
Speaker 10: that's exactly what's going on. So again a job support
Speaker 10: that says to me, this is an economy that does
Speaker 10: not warrant the successful amount of ray cuts that we're
Speaker 10: seeing being priced in the market.
Speaker 11: Hey, Ben, it's Nathan in DC. Good to speak with
Speaker 11: you again. Does that mean that you're thinking that this
Speaker 11: job market is going to continue on this trajectory of
Speaker 11: the kind of growth that we have seen that's defied
Speaker 11: so much of what economists have been expecting for literally
Speaker 11: months now.
Speaker 10: Yeah, it does look like that, Nathan, because you know
Speaker 10: that the strikes you see being added into the the headline,
Speaker 10: but the strikes itself did not have ripple effects in
Speaker 10: the economy that some people feared like, and meaning you
Speaker 10: would get wider spread job losses because of all the disruption,
Speaker 10: and you know, against somewhat the layoff trends that are
Speaker 10: ongoing and the job opening is declining, that that is
Speaker 10: really just a marginal loosening of the labor market that
Speaker 10: allows other people to come back in and find work.
Speaker 10: So it's it's a better of labor markets. It's a
Speaker 10: market with the momentum. You know, the cancers fat put
Speaker 10: out a puts out a labor momentum index, and I
Speaker 10: noted that that index actually barely changed the last sort
Speaker 10: of six months, meaning has not really declined in any way,
Speaker 10: even though you're seeing like for example, job openings declining
Speaker 10: or other indicator the clinding, which means loosening, that does
Speaker 10: indicate that people can find work and that there's momentum
Speaker 10: in the same market.
Speaker 3: And then I'm looking at the warp function. Right now,
Speaker 3: we've got about a coin flip odds for a first
Speaker 3: rate hike in March, and it looks like just over
Speaker 3: four expected in twenty twenty four. What's the markets read
Speaker 3: on kind of where the FED sits where we can
Speaker 3: take some of this data.
Speaker 10: Yeah, if you take today's report, it does not argue
Speaker 10: that the FEDS should go ahead and match market expectations,
Speaker 10: but we got to take note of what happened in June.
Speaker 10: They actually had pencils in the Hunter basements of cuts
Speaker 10: at that time and then revises of them in the faifty. Right,
Speaker 10: and now the market is back to Hana plus. So
Speaker 10: they could actually go back and say, hey, guess what
Speaker 10: would just go along with the market. But I think
Speaker 10: a report like this probably tells them like, we don't
Speaker 10: actually have to. It's really, you know, highlighting how we
Speaker 10: think about the economy. It's moderating. It is a software lending,
Speaker 10: even though it's not an official language, but it's an
Speaker 10: economy where they've done enough with restrictive policy rates so
Speaker 10: that it can get to a better stable, you know state,
Speaker 10: and as a result, you don't have to necessarily forecast
Speaker 10: all those Ray cuts. I think that's next week, the
Speaker 10: tension in the markets it will be. I think some
Speaker 10: are taken back where Powell will be well, it sounds hockeys,
Speaker 10: but really was saying like, see, we have enough data
Speaker 10: points to prove to you markets that these raycuts are
Speaker 10: probably over extended, and as he said in the speech
Speaker 10: a week ago, you know, he diffused the speculation there.
Speaker 10: You don't need to speculate on raycuts, and so I
Speaker 10: think that will be big message next week.
Speaker 11: Yeah, I wanted to ask whether the narrative shifts when
Speaker 11: we get that inflation data next week. What do you
Speaker 11: think we're going to see from CPI.
Speaker 10: Yeah, there will be pressure on CPI from the energy
Speaker 10: effect of the last month or so, Nathan, because that
Speaker 10: that clearly will filter through now and you can tell
Speaker 10: right from from the now cast of CPI or how
Speaker 10: the market is pricing CPI. I think that's fairly accurate.
Speaker 10: On the other hand, the sticky items that we're been
Speaker 10: following for many months probably stay sticky year, and that
Speaker 10: this not seems to be too much movement yet to
Speaker 10: happen there, even though the last CPI report was such
Speaker 10: a I guess groundbreaking data point of the owner's equivalent
Speaker 10: rent finally declining is the pandemic pressure gets out of
Speaker 10: that component. So that will be the big topic for
Speaker 10: next week too. Will see in continuing decline. If so,
Speaker 10: probably the market will take it favorably. But for the
Speaker 10: fat that's all again playing in their hands and their
Speaker 10: message like this is what they have been forecasting and
Speaker 10: what they've been expecting. So to them, it's more of
Speaker 10: a vindication of that they're restrictive.
Speaker 3: Atto she's working and looking at some of the granular data.
Speaker 3: I keep coming back to wage growth because it does
Speaker 3: seem like the FED is very much fixated. Obviously that's
Speaker 3: a big driver for inflation. When you look at the
Speaker 3: print from today, when you look at expectations into twenty
Speaker 3: twenty four for wage growth, how does that play out
Speaker 3: and how does that factor into inflation and what the
Speaker 3: FED can and will do.
Speaker 10: Yeah, the wage trackers from the Atlanta FED have all
Speaker 10: shown a moderation most sectors, including the leisure sector. I
Speaker 10: think it's only a two a somewhat of a soft
Speaker 10: landing type path, just like how inflation has come down
Speaker 10: in a soft landing mode, and as basically the economy
Speaker 10: since twenty twenty one has been declining down. So and
Speaker 10: it's also effect of productivity. Right, we have a significant
Speaker 10: productivity pickup this year, so wage growth should start to
Speaker 10: moderate as more people get in the labor force and
Speaker 10: you're getting somewhat of a. You know, i'd say supply
Speaker 10: and dement, you know, rebalance and therefore that wage pressure
Speaker 10: eases off again. That is favorable to the economy because
Speaker 10: it doesn't mean like it's outright wage deflation first foremost. Second,
Speaker 10: you know, the real wages are likely going to be
Speaker 10: improving given that what inflation is doing. So I do
Speaker 10: think it's a positive development. You know, look the average
Speaker 10: arlity earns. We're a little bit up this today in
Speaker 10: this report, you know, but not like alarming. The effect
Speaker 10: from the UAW negotiations, for example, isn't yet coming really true,
Speaker 10: So I'm not so sure if it if it's a
Speaker 10: wage price viiral idea, it's more of a moderation.
Speaker 11: So is there room ben for rate cuts of any
Speaker 11: size next year? I mean, I know there's still a
Speaker 11: debate about, you know, whether we're going to see cuts
Speaker 11: as aggressive as the market's been pricing. But do you
Speaker 11: see cuts in any stretch next year?
Speaker 10: So I find there's a really important question Nathan could
Speaker 10: think about what we're going to go into next year.
Speaker 10: It's an election year and attention will be about the
Speaker 10: economy obviously, and we know that if you keep raged
Speaker 10: too restrictive that that could affect the economy really negatively
Speaker 10: against you know, whatever physical stimulus that we're still pumping
Speaker 10: into the economy does start to fade off. And if
Speaker 10: you take it against that backdrop and the FAT continues
Speaker 10: to make ground against inflation, then it has put out
Speaker 10: this framework to manage this politically, saying, look, we have
Speaker 10: a high rate. We can bring it somewhere down as
Speaker 10: inflation is declining because you know the difference between the
Speaker 10: nominal rate and inflation is getting wider, and therefore leave
Speaker 10: some room to have the nominal rate go down and
Speaker 10: that will be your rate cut. But it's literally taking
Speaker 10: out the most restrictive part from the FAT funds rate
Speaker 10: a little bit down. It's like insurance raycut, as I say,
Speaker 10: you know that the protection against the downside of the
Speaker 10: of the for the economy. It's nothing about like an
Speaker 10: alarming raycut. Okay, we've got an ease policy really aggressively
Speaker 10: because we're about to slip in the major downtown.
Speaker 3: Got to leave it there, Ben Emmons, thank you so much.
Speaker 3: Had to fixed income at New Edge Wealth, joining us
Speaker 3: here in the Bloomberg Interactive Broker's studio again all eyes
Speaker 3: on the job, support and some of the data that
Speaker 3: we've been seeing.
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Speaker 11: One of the big political stories of the last few days,
Speaker 11: in the aftermath and the ongoing turmoil that we're seeing
Speaker 11: in the Middle East, is this reaction that we've seen
Speaker 11: on college campuses, protests on both sides pro Palestinian pro Israeli,
Speaker 11: and the rise of anti Semitic incidents at college campuses.
Speaker 11: And we had that congressional testimony just a few days
Speaker 11: ago from the presidents of Harvard Mit the University of Pennsylvania,
Speaker 11: where they were asked, you know, pretty direc dire to
Speaker 11: say whether calling for the genocide of Jews on campus
Speaker 11: violates school policy. And we saw these narrow legal answers
Speaker 11: that were given by those university presidents that really has
Speaker 11: sparked this ongoing backlash not just from students but from alumni.
Speaker 11: Major donors. We saw a major rabbi who worked at
Speaker 11: Harvard University resigning in protest. This controversy just is not
Speaker 11: going away, and it could really have an impact on
Speaker 11: university endowments.
Speaker 3: Yeah, it's something that we've we've been tracking and been
Speaker 3: paying attention to. As you mentioned, you saw the alumni
Speaker 3: at Harvard University, among others, really kind of pushing back
Speaker 3: on how the board and how leadership at the universities
Speaker 3: are handling this. And it does seem like it's only
Speaker 3: gotten worse in the wake of Harvard President's clouding Gays
Speaker 3: that congressional testimony on December fifth, and kind of the
Speaker 3: questions around how universities and a lot of the biggest
Speaker 3: and most well known IVY League universities how they're handling
Speaker 3: it and reacting to it.
Speaker 7: Yeah. Absolutely.
Speaker 11: I mean we've seen the university presidents you mentioned Claudiine
Speaker 11: Gay and also Liz McGill from the University of Pennsylvania
Speaker 11: sort of issuing statements. We had a video statement in
Speaker 11: fact from the penn president trying to clarify those comments
Speaker 11: and sort of walk them.
Speaker 6: Back a little bit.
Speaker 11: But this backlash isn't going away. So with that in mind,
Speaker 11: we want to bring in our Bloomberg News higher education
Speaker 11: reporter Janet Lauren, who has been following this very closely,
Speaker 11: breaking a lot of news in the aftermath of these
Speaker 11: ongoing protests and this backlash that we're seeing for these
Speaker 11: university presidents. Janet is with us. Now, what's the latest.
Speaker 11: Are these university presidents living on borrow time?
Speaker 12: Well, it's not entirely clear. There's obviously a lot of
Speaker 12: discussions going on right now their boards. They're trying to
Speaker 12: figure out what to do next. The hearing was somewhat
Speaker 12: of a disaster. I think that sort of universally understood.
Speaker 12: Keep in mind that these schools are also under investigation
Speaker 12: in several ways from the federal government. There are lat
Speaker 12: that are Education Department is looking into their Title six complaints,
Speaker 12: which is civil rights issues. So there's that investigation. We
Speaker 12: also heard yesterday that the House Education Committee is also investigating.
Speaker 12: So one thing you have to you do have to
Speaker 12: remember about schools, even though they are private schools, they
Speaker 12: get a lot of government money. You know, you're you're
Speaker 12: looking at student loans, you're looking at grants like pel grants,
Speaker 12: you're looking at tax deductions from donors. But Also, they
Speaker 12: taken a tremendous amount of federal money for their scientific research,
Speaker 12: so if that that's threatened, that could be quite a
Speaker 12: big problem for them. In addition to all we've been
Speaker 12: hearing about with donors calling back. You know, we had
Speaker 12: a story earlier this week that everyone small donors, large donors, volunteers.
Speaker 12: You know, so many people are quite upset about this,
Speaker 12: and they're trying to step back from places like harverd
Speaker 12: and Penn where they've had relationships for not just a
Speaker 12: few years, but we're talking decades, you know, fifty years.
Speaker 12: We had a story about a pen donor who is
Speaker 12: clawing back, using an interesting strategy to claw back a
Speaker 12: donation of one hundred million dollars based on a morality
Speaker 12: clause that he had included, and you know, in a
Speaker 12: letter to his staff he said, I never thought I
Speaker 12: would ever have to use this, but was so horrified
Speaker 12: by how the presidents responded in the hearing that you know,
Speaker 12: people are still quite stunned. You know, these are if
Speaker 12: this was a public company and you had a CEO testifying,
Speaker 12: you know, you would have our real immediate reaction in
Speaker 12: a decline in STUF prices. But as these are you know,
Speaker 12: private universities don't have that same kind of metric.
Speaker 3: And Jennet, what what happens next in terms of how
Speaker 3: the university has handled this, what actually happens with some
Speaker 3: of the leadership members.
Speaker 12: Well, these are discussions that are happening now about the
Speaker 12: president's about the board members. You know, there's been a
Speaker 12: push for the board chair at Penn, Scott Bock, to
Speaker 12: step down in addition to the president. So these are
Speaker 12: discussions that are you know, that are happening now. The
Speaker 12: schools are looking to also limit liability. But I think
Speaker 12: the overall issue that people still have is why is
Speaker 12: this pervasive anti semitic? Why is there a pervisive anti
Speaker 12: Semitic nature on on these campuses? Why is this still allowed?
Speaker 12: Why is you know, why are there still people allowed
Speaker 12: to scream the word atafada and have signs up? And
Speaker 12: it's it's it's an environment where Jewish students find threatening.
Speaker 12: And I think that the response from the hearing is
Speaker 12: that's still not really being addressed, and it.
Speaker 11: Points to the difficulty as well when we see you know,
Speaker 11: the top rabbi and the advisory board of Harvard University
Speaker 11: feeling that he has to resign after the comments that
Speaker 11: we heard from Claudine Gey, the Harvard president. I guess
Speaker 11: it speaks to the difficulty that comes to, you know,
Speaker 11: trying to change minds on university campuses when you know
Speaker 11: a lot of students have, you know, pretty strong views
Speaker 11: on these issues, such a complicated issue with Middle East relations.
Speaker 12: Well, but it's not just the students, it's also the faculty.
Speaker 7: Yeah, right, I think exactly.
Speaker 12: It's the concern. It's the students and the faculty. And
Speaker 12: in this pervasive atmosphere continues, and there is sort of
Speaker 12: a double standard that people have mentioned if you were
Speaker 12: hearing these types of words for other ethnic groups or
Speaker 12: you know, trans community would not be tolerated. And uh,
Speaker 12: you know, and the criticism is coming from all all camps.
Speaker 12: You know, you heard the Democratic too, congressmen who represent Massachusetts,
Speaker 12: both Harvard alone, both Democrats, both military veterans, saying they
Speaker 12: were extremely disappointed in their alma mater. So it's it's
Speaker 12: really quite quite a widespread dissatisfaction.
Speaker 3: And Jenny, in terms of universities, obviously we're talking Penn, Harvard,
Speaker 3: MI t how wide spread geographically in terms of universities
Speaker 3: and colleges are these issues in these conversations, Well, I think.
Speaker 12: You're hearing them the loudest, certainly at these campuses on
Speaker 12: the East Coast, certainly Stanford as well. Uh, you know,
Speaker 12: you're you're not hearing as much as at other places.
Speaker 12: And it's a good question. You know, perhaps you've had
Speaker 12: issues at the City University of New York system, but
Speaker 12: it's you know, perhaps if you're a smaller liberal arts
Speaker 12: college not near a big city, you know, it just
Speaker 12: it just may not be as pervasive because your critical
Speaker 12: population is much smaller. But you know, several people have
Speaker 12: made the point, and the rabbi did as well. You know,
Speaker 12: most kids on college campuses today do not feel this intensely.
Speaker 9: They're just there to get an education.
Speaker 12: And you know, when you see the videos of the
Speaker 12: classes being disrupted with bullhorns and the uneasysiness of the students,
Speaker 12: you know, they're paying eighty thousand dollars or they're borrowing money,
Speaker 12: or the school is giving financial aid. They want to
Speaker 12: do their work, they want to finish their finals, and
Speaker 12: there's a tremendous amount of disruption. And you know, the
Speaker 12: lawsuit that was filed by some Penn students. You know,
Speaker 12: this is the amount of tuition that families are paying,
Speaker 12: and they're just they're not there to protest, They're there
Speaker 12: to get an education and learn.
Speaker 3: We've got to leave it there. Janet Lauren, thank you
Speaker 3: so much, Bloomberg News Higher Education Report talking about all
Speaker 3: the backlash around anti semitism on college campuses.
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