1 00:00:02,520 --> 00:00:07,040 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 00:00:18,000 --> 00:00:18,480 Speaker 2: the world. 5 00:00:19,120 --> 00:00:22,440 Speaker 3: The FED decision seconds away unchanged the expectation with. 6 00:00:22,440 --> 00:00:23,840 Speaker 2: The cold is my the cake. 7 00:00:25,360 --> 00:00:29,040 Speaker 4: Well pretty much as expected, no change in rates, and 8 00:00:29,120 --> 00:00:31,480 Speaker 4: the FED leaves open the option of cutting rates in 9 00:00:31,520 --> 00:00:35,240 Speaker 4: the future. Stephen Myron and Chris Waller descent in favor 10 00:00:35,280 --> 00:00:39,360 Speaker 4: of a rake cut. Michelle Bowman does not. Waller's descent, 11 00:00:39,400 --> 00:00:41,240 Speaker 4: of course, could be read as an effort to retain 12 00:00:41,360 --> 00:00:44,880 Speaker 4: his place as a finalist to replace j. Powell later 13 00:00:45,000 --> 00:00:48,320 Speaker 4: this year. The statement keeps the line about considering the 14 00:00:48,360 --> 00:00:51,680 Speaker 4: extent and timing of additional adjustments to the target range, 15 00:00:52,040 --> 00:00:55,880 Speaker 4: suggesting more rake cuts are possible. There's no hint, however, 16 00:00:56,280 --> 00:00:59,680 Speaker 4: of what that would lead them to do that or when. 17 00:01:00,280 --> 00:01:04,959 Speaker 4: The economic assessment is very short and relative to recent stations, 18 00:01:05,440 --> 00:01:09,760 Speaker 4: slightly positive available indicators suggests that economic activity has been 19 00:01:09,840 --> 00:01:13,200 Speaker 4: expanding at a solid pace. It says job gains have 20 00:01:13,240 --> 00:01:16,880 Speaker 4: remained low, and the unemployment rate has shown some signs 21 00:01:16,880 --> 00:01:22,880 Speaker 4: of stabilization. Inflation remains somewhat elevated. The officials say uncertainty 22 00:01:22,880 --> 00:01:26,880 Speaker 4: about the economic outlook remains elevated, but they don't emphasize 23 00:01:27,000 --> 00:01:30,600 Speaker 4: jobs as they have the last three statements or inflation 24 00:01:31,040 --> 00:01:34,120 Speaker 4: as the major concern. The Committee is attentive to the 25 00:01:34,200 --> 00:01:37,240 Speaker 4: risks to both sides of its dual mandate. The statement says, 26 00:01:37,760 --> 00:01:39,560 Speaker 4: the open market desk at the New York Fan is 27 00:01:39,600 --> 00:01:42,520 Speaker 4: again told to maintain an ample level of reserves by 28 00:01:42,520 --> 00:01:46,760 Speaker 4: buying treasury bills or, if necessary, maturities of up to 29 00:01:46,840 --> 00:01:49,920 Speaker 4: three years or less. It's all about as plain vanilla 30 00:01:49,960 --> 00:01:52,720 Speaker 4: as you can get, which shifts the focus, of course 31 00:01:52,800 --> 00:01:55,760 Speaker 4: to Chairman Powell's news conference at the bottom of the hour. 32 00:01:56,200 --> 00:01:58,720 Speaker 4: What does he say about the future of interest rates 33 00:01:59,120 --> 00:02:01,720 Speaker 4: and what does he say about his future as a 34 00:02:01,720 --> 00:02:03,040 Speaker 4: member of the Fed? 35 00:02:03,480 --> 00:02:04,560 Speaker 2: Stay tuned, Mi m. 36 00:02:04,640 --> 00:02:07,000 Speaker 3: Keeeth, we will stay tuned. The news conference about twenty 37 00:02:07,000 --> 00:02:09,000 Speaker 3: eight minutes away. You run into that Mi McKee. Their 38 00:02:09,000 --> 00:02:12,760 Speaker 3: world class. As always a FED decision unchanged the vote 39 00:02:12,800 --> 00:02:15,480 Speaker 3: interesting ten to two to hold Ray steady the two 40 00:02:15,880 --> 00:02:19,959 Speaker 3: Governor Myra and Governor Waller. It' tk is it unfair 41 00:02:20,639 --> 00:02:23,680 Speaker 3: to describe the Governor Waller descent as an audition to 42 00:02:23,760 --> 00:02:26,119 Speaker 3: take the top job at the Federal Reserve. 43 00:02:25,960 --> 00:02:28,720 Speaker 5: Nineteen ninety one is classic paper and game theory. I 44 00:02:28,800 --> 00:02:32,080 Speaker 5: just think we saw a little Waller game theory going 45 00:02:32,120 --> 00:02:34,680 Speaker 5: on to say the least. I don't have a strong 46 00:02:34,720 --> 00:02:37,440 Speaker 5: opinion on it, but definitely that's a setup for the 47 00:02:37,480 --> 00:02:39,560 Speaker 5: President to make a Waller decision. 48 00:02:39,720 --> 00:02:42,560 Speaker 3: This has been an individual, Torsten who has provided thought 49 00:02:42,639 --> 00:02:45,519 Speaker 3: leadership on this committee, effective thought leadership now for a 50 00:02:45,600 --> 00:02:48,839 Speaker 3: number of years. That descent will be described by many 51 00:02:48,880 --> 00:02:50,720 Speaker 3: in this market as an audition for the top job 52 00:02:50,720 --> 00:02:51,480 Speaker 3: at the Federal Reserve. 53 00:02:51,840 --> 00:02:52,520 Speaker 2: Is that unfair? 54 00:02:52,880 --> 00:02:54,080 Speaker 1: I think it is a bit unfair. 55 00:02:54,160 --> 00:02:56,760 Speaker 6: I mean, Chris is very very steady and stable and 56 00:02:56,840 --> 00:02:59,440 Speaker 6: has had his whole career as a PSD economy is 57 00:02:59,480 --> 00:03:01,840 Speaker 6: doing research that's going after the data, being data dependent. 58 00:03:02,080 --> 00:03:04,080 Speaker 6: So I do view this mainly as a sign that 59 00:03:04,120 --> 00:03:06,960 Speaker 6: he actually is worried, and his speeches have also given 60 00:03:07,080 --> 00:03:09,520 Speaker 6: very clear indication of this. He is actually truly worried 61 00:03:09,520 --> 00:03:12,040 Speaker 6: about that the label market might be signaling the things 62 00:03:12,080 --> 00:03:13,800 Speaker 6: about to get worse. So I think it's a little 63 00:03:13,800 --> 00:03:16,440 Speaker 6: bit unfair to put him into that category because I 64 00:03:16,440 --> 00:03:18,680 Speaker 6: do think that it's very important that he is telling 65 00:03:18,720 --> 00:03:21,120 Speaker 6: us that he does believe that rates should have been 66 00:03:21,120 --> 00:03:21,600 Speaker 6: cut today. 67 00:03:21,680 --> 00:03:24,079 Speaker 3: Is that worry about a jobs market justified by the 68 00:03:24,160 --> 00:03:24,919 Speaker 3: data you looking at? 69 00:03:24,960 --> 00:03:26,000 Speaker 1: Well, that's the discussion. 70 00:03:26,160 --> 00:03:28,160 Speaker 6: I happen to have the view that this is all 71 00:03:28,200 --> 00:03:30,800 Speaker 6: because of live supply being much lower. Immigration used to 72 00:03:30,800 --> 00:03:32,720 Speaker 6: be three million a year now it's about four hundred 73 00:03:32,760 --> 00:03:35,400 Speaker 6: thousand from the CBO. So with labor supply is lower, 74 00:03:35,440 --> 00:03:36,760 Speaker 6: you should also expect job. 75 00:03:36,560 --> 00:03:37,480 Speaker 1: Growth to be lower. 76 00:03:37,640 --> 00:03:40,440 Speaker 6: Other people, including Chris put more Roller put more weight 77 00:03:40,480 --> 00:03:41,720 Speaker 6: on labor demand. 78 00:03:42,000 --> 00:03:43,320 Speaker 1: So that's the debate at the moment. 79 00:03:43,400 --> 00:03:46,080 Speaker 6: Yes, there has been very little hiring, little bit very firing, 80 00:03:46,280 --> 00:03:48,680 Speaker 6: suggesting that labor demand is indeed also weak. So this 81 00:03:48,760 --> 00:03:50,840 Speaker 6: is the very important debate, and of course only the 82 00:03:50,920 --> 00:03:53,120 Speaker 6: data over the next seven months would tell whether this 83 00:03:53,280 --> 00:03:54,800 Speaker 6: dissent was actually a good idea or not. 84 00:03:54,960 --> 00:03:57,800 Speaker 5: Jan for the first conference of Vice Chairman Clarita fed 85 00:03:57,920 --> 00:04:02,160 Speaker 5: amidst language on downside risks to employment having risen. Let's 86 00:04:02,160 --> 00:04:04,680 Speaker 5: have a chat with some Amazon people this morning. Let's 87 00:04:04,720 --> 00:04:07,040 Speaker 5: talk to ubs this morning. The mail I get the 88 00:04:07,040 --> 00:04:10,480 Speaker 5: mail you get. People think fancy guys like Torst and 89 00:04:10,600 --> 00:04:14,120 Speaker 5: Slack are nuts when they talk about a fully employed America. 90 00:04:14,120 --> 00:04:14,560 Speaker 2: I don't want to. 91 00:04:14,560 --> 00:04:16,480 Speaker 3: Whyever, do the data that comes from the conference board, 92 00:04:16,680 --> 00:04:18,760 Speaker 3: because consume there's confidence all over the place. Right now 93 00:04:18,839 --> 00:04:20,919 Speaker 3: is skewed by a whole bunch of things, including politics. 94 00:04:21,160 --> 00:04:23,440 Speaker 3: But at a chute to the labor market. When people 95 00:04:23,480 --> 00:04:25,120 Speaker 3: turn around to your tors and they say, right now 96 00:04:25,240 --> 00:04:27,480 Speaker 3: is getting harder to get a job? Jobs are not plentiful, 97 00:04:27,680 --> 00:04:28,560 Speaker 3: you have to take notice. 98 00:04:28,560 --> 00:04:31,320 Speaker 6: Done you absolutely it is absolutely the case that the 99 00:04:31,400 --> 00:04:34,440 Speaker 6: labor market data has become slower in terms of job growth. 100 00:04:34,560 --> 00:04:36,400 Speaker 6: But what is very critical here to remember is that 101 00:04:36,440 --> 00:04:38,920 Speaker 6: if you have much fewer immigrants, going from three million 102 00:04:38,960 --> 00:04:41,200 Speaker 6: to four hundred thousand a year, of course, that's also 103 00:04:41,279 --> 00:04:43,919 Speaker 6: going to create the break even rate for unfound prayrolls 104 00:04:44,000 --> 00:04:46,080 Speaker 6: that's a lot lower. That used to be two hundred 105 00:04:46,080 --> 00:04:47,760 Speaker 6: thousand a year, and now the Fed says there's about 106 00:04:47,800 --> 00:04:48,520 Speaker 6: thirty thousand. 107 00:04:48,680 --> 00:04:51,120 Speaker 1: So the closer you get to Sirum, of course, the mall. 108 00:04:51,240 --> 00:04:54,200 Speaker 6: This will also begin to have more worries among people 109 00:04:54,240 --> 00:04:56,120 Speaker 6: whether can I find a job? Cannot find a job, 110 00:04:56,279 --> 00:04:58,880 Speaker 6: and those worries, of course, your sentiment are exactly showing 111 00:04:58,920 --> 00:05:00,920 Speaker 6: up that in particular, the lower leg of the key 112 00:05:01,240 --> 00:05:03,400 Speaker 6: continues to be on the significant distress. 113 00:05:03,480 --> 00:05:05,800 Speaker 3: The Federal Reserve keeping rates unchanged if you want, just 114 00:05:05,839 --> 00:05:09,039 Speaker 3: tuneing in as expected, equities on the sm P five 115 00:05:09,120 --> 00:05:11,120 Speaker 3: hundred just a little bit lower, just off all time 116 00:05:11,200 --> 00:05:14,520 Speaker 3: highs on the SMP five hundred. Two descents looking for 117 00:05:14,560 --> 00:05:17,320 Speaker 3: a twenty five basis point reduction, one from Governor Myron, 118 00:05:17,520 --> 00:05:19,880 Speaker 3: another from Governor Waller. Joining us now a man who 119 00:05:19,960 --> 00:05:22,360 Speaker 3: knows a little something about how this committee makes decisions, 120 00:05:22,400 --> 00:05:25,480 Speaker 3: the former Fed Vice chair Richard Clarida. Rich Welcome to 121 00:05:25,520 --> 00:05:27,400 Speaker 3: the program, sir. What do you make of this decision 122 00:05:27,440 --> 00:05:29,280 Speaker 3: and what are you looking for from the news conference 123 00:05:29,279 --> 00:05:30,360 Speaker 3: in twenty five minutes time? 124 00:05:31,400 --> 00:05:34,359 Speaker 7: You know, it's as expected, pretty minimal changes to the 125 00:05:34,560 --> 00:05:37,240 Speaker 7: statement if anything. As you mentioned though, changing and the 126 00:05:37,240 --> 00:05:40,839 Speaker 7: wording about the labor market. I thought it was a 127 00:05:40,880 --> 00:05:43,240 Speaker 7: close call going in whether or not we would see 128 00:05:43,279 --> 00:05:46,279 Speaker 7: Governor Waller or vice Chair of Bowman descent, and in 129 00:05:46,320 --> 00:05:48,880 Speaker 7: the end we did get the descent from Chris Waller. 130 00:05:48,920 --> 00:05:51,719 Speaker 7: I agree with Torsten who was on earlier. You know, 131 00:05:51,800 --> 00:05:54,200 Speaker 7: Chris is a good economist. He's been consistent and had 132 00:05:54,240 --> 00:05:57,080 Speaker 7: a good call on the labor market and inflation, and 133 00:05:57,600 --> 00:06:00,920 Speaker 7: he's made the case in many speeches that there is 134 00:06:00,960 --> 00:06:03,480 Speaker 7: a case to get rates down to neutral. So I 135 00:06:03,480 --> 00:06:06,480 Speaker 7: take him at his word on that. In terms of 136 00:06:06,480 --> 00:06:11,800 Speaker 7: the press conference, obviously no SEP projections or the like. 137 00:06:12,680 --> 00:06:15,720 Speaker 7: And I think the reporters will be pressing the chair 138 00:06:15,760 --> 00:06:18,600 Speaker 7: on what message they should take away from this in 139 00:06:18,680 --> 00:06:20,359 Speaker 7: terms of the remainder of the year. 140 00:06:20,360 --> 00:06:23,359 Speaker 5: When you look at the politics here, I hesitant to say, Chairman, Clarita, 141 00:06:23,440 --> 00:06:25,880 Speaker 5: but is this a moment where the president goes outside 142 00:06:26,320 --> 00:06:27,880 Speaker 5: the chosen four candidates? 143 00:06:29,560 --> 00:06:31,760 Speaker 7: You know, there has been a speculation, there is the 144 00:06:31,800 --> 00:06:35,560 Speaker 7: reporting this morning. You know, I know each of the candidates. 145 00:06:35,640 --> 00:06:37,680 Speaker 7: I think any of them would be a good choice. 146 00:06:37,720 --> 00:06:40,680 Speaker 7: They bring strengths to the job. But there are a 147 00:06:40,680 --> 00:06:43,520 Speaker 7: lot of moving parts when you're FED chair, and so 148 00:06:43,600 --> 00:06:46,600 Speaker 7: it'll be interesting to see who they finally select. 149 00:06:47,000 --> 00:06:47,520 Speaker 1: You And I. 150 00:06:47,440 --> 00:06:50,040 Speaker 5: Remember the day where Phil Graham went after Alan Green 151 00:06:50,120 --> 00:06:53,839 Speaker 5: span on foreign exchange, Richard Claret, is it appropriate that 152 00:06:53,880 --> 00:06:57,719 Speaker 5: a FED chairman speak of dollar dynamics, particularly the whip 153 00:06:57,760 --> 00:07:02,479 Speaker 5: saw of President week dollars and Secretary of Treasury strong dollar? 154 00:07:03,800 --> 00:07:06,560 Speaker 7: Great question, as usual, Tom, You know, never say never, 155 00:07:06,800 --> 00:07:09,279 Speaker 7: But both as a policy maker and as a student 156 00:07:09,320 --> 00:07:12,640 Speaker 7: of policy making, the FED tries to stay out of 157 00:07:12,680 --> 00:07:15,560 Speaker 7: any and all discussions about exchange rates, and I would 158 00:07:15,600 --> 00:07:19,960 Speaker 7: expect J. Powell today, if he's asked that question the 159 00:07:19,960 --> 00:07:20,960 Speaker 7: the to do the same. 160 00:07:22,040 --> 00:07:24,920 Speaker 6: So, Rich, when you think about yield curve dynamics, I mean, 161 00:07:24,960 --> 00:07:26,480 Speaker 6: what is your view on what the yel. 162 00:07:26,360 --> 00:07:26,880 Speaker 1: Cub will do? 163 00:07:27,160 --> 00:07:28,920 Speaker 6: The consensus has to view that it will steepen. 164 00:07:29,400 --> 00:07:30,120 Speaker 1: Is that also your you? 165 00:07:30,360 --> 00:07:32,360 Speaker 6: Or do you think front end rates will stay stable 166 00:07:32,400 --> 00:07:33,360 Speaker 6: and long rates. 167 00:07:33,200 --> 00:07:34,080 Speaker 1: Will also stay stable? 168 00:07:34,120 --> 00:07:34,240 Speaker 8: All? 169 00:07:34,280 --> 00:07:35,800 Speaker 1: How do you think about the curve at the moment? 170 00:07:35,960 --> 00:07:36,200 Speaker 9: Yeah? 171 00:07:36,240 --> 00:07:37,000 Speaker 1: Now, High Torston. 172 00:07:37,280 --> 00:07:40,720 Speaker 7: You know what's been remarkable is really since either going 173 00:07:40,760 --> 00:07:42,640 Speaker 7: back to the last hike which is all the way 174 00:07:42,680 --> 00:07:46,160 Speaker 7: back in twenty three or the first cut in twenty 175 00:07:46,200 --> 00:07:48,280 Speaker 7: twenty four, the ten year treasury has been in a 176 00:07:48,440 --> 00:07:51,400 Speaker 7: range from roughly four and three quarters to three and 177 00:07:51,480 --> 00:07:55,960 Speaker 7: three quarters. A lot's happen in that intervening period. That 178 00:07:56,080 --> 00:08:01,480 Speaker 7: importantly reflects much higher real rates than we had pre pandemic. 179 00:08:01,600 --> 00:08:03,559 Speaker 7: So you have seen a shift up in the curve 180 00:08:03,640 --> 00:08:07,280 Speaker 7: relative to pre pandemic. And yes, would expect the curve 181 00:08:07,360 --> 00:08:11,119 Speaker 7: to continue to steepen over time as ten years stay 182 00:08:11,120 --> 00:08:14,000 Speaker 7: in that range and as front end rates come down 183 00:08:14,120 --> 00:08:15,000 Speaker 7: under the new chair. 184 00:08:15,280 --> 00:08:19,040 Speaker 3: Rich, as you identify a range impressively stable so far 185 00:08:19,120 --> 00:08:21,440 Speaker 3: for you and the team at Pinco Ridge. What's behind 186 00:08:21,480 --> 00:08:23,800 Speaker 3: what's the biggest pillar of that stability that we're seeing 187 00:08:23,800 --> 00:08:25,520 Speaker 3: over the past few months at the long end of 188 00:08:25,560 --> 00:08:25,880 Speaker 3: the curve. 189 00:08:27,600 --> 00:08:31,560 Speaker 7: Well, I think it reflects the new dynamics, both because 190 00:08:31,600 --> 00:08:36,920 Speaker 7: potentially a faster productivity growth and fiscal concerns. It's appropriate 191 00:08:36,960 --> 00:08:41,040 Speaker 7: that longer dated real yields are higher than they were before. 192 00:08:41,160 --> 00:08:43,880 Speaker 7: I think that's an important fact of life. I mean, 193 00:08:43,920 --> 00:08:46,120 Speaker 7: the real debate and the real issue is, you know, 194 00:08:46,679 --> 00:08:48,640 Speaker 7: within the FAED and in the market says, you know, 195 00:08:48,679 --> 00:08:49,760 Speaker 7: where's the neutral rate? 196 00:08:50,040 --> 00:08:52,120 Speaker 1: Where do front end rates end up? 197 00:08:52,160 --> 00:08:54,719 Speaker 7: And we still think that neutral for the fund rate 198 00:08:54,800 --> 00:08:59,600 Speaker 7: is somewhere down around three percent, But obviously that's going 199 00:08:59,640 --> 00:09:04,040 Speaker 7: to depend on where we are in the cycle as well. 200 00:09:04,200 --> 00:09:05,560 Speaker 1: And this may be an unfair question. 201 00:09:05,760 --> 00:09:07,800 Speaker 6: Do you think an incoming FITCHA is going to make 202 00:09:08,120 --> 00:09:11,480 Speaker 6: dramatic changes to the fit staff in terms of who's 203 00:09:11,520 --> 00:09:13,839 Speaker 6: head of which departments? How do you think the incoming 204 00:09:13,920 --> 00:09:17,040 Speaker 6: chair might think about things if he or she doesn't 205 00:09:17,240 --> 00:09:19,120 Speaker 6: think that it's likely that interest rates are going to 206 00:09:19,160 --> 00:09:21,520 Speaker 6: be coming down because of persuading the committee. 207 00:09:23,120 --> 00:09:25,520 Speaker 1: You know, I'm not sure about that. 208 00:09:25,720 --> 00:09:27,760 Speaker 7: It is important just for the public to know that 209 00:09:28,160 --> 00:09:31,360 Speaker 7: the board staff does report to the chair. You know, 210 00:09:31,440 --> 00:09:33,839 Speaker 7: during my time there, Chair Palell asked me to get 211 00:09:33,960 --> 00:09:35,880 Speaker 7: very much involved with the staff, and I learned a 212 00:09:35,920 --> 00:09:41,440 Speaker 7: lot from them. But it's I think there typically have 213 00:09:41,600 --> 00:09:45,280 Speaker 7: been and always will be changes in staff. People get promoted, 214 00:09:45,320 --> 00:09:48,600 Speaker 7: people moved on, and I should stay. During my time 215 00:09:48,640 --> 00:09:51,160 Speaker 7: at the FED, the senior staff I worked with was 216 00:09:51,200 --> 00:09:56,520 Speaker 7: incredibly capable, so I don't think there'll be any issues there. 217 00:09:56,880 --> 00:09:58,680 Speaker 5: Turst and Sucker, I think it's so important that we 218 00:09:58,720 --> 00:10:01,520 Speaker 5: described the academics Richard Claire to all that he did 219 00:10:01,559 --> 00:10:04,880 Speaker 5: with this fancy thing dynamics still cast a general equilibrium 220 00:10:04,960 --> 00:10:08,720 Speaker 5: theory and monetary policy John mentioned earlier, do we know 221 00:10:08,800 --> 00:10:12,120 Speaker 5: the reaction functions? Do you have an operative theory from 222 00:10:12,160 --> 00:10:15,560 Speaker 5: the world of Richard Clara, Now that's operational well. 223 00:10:15,640 --> 00:10:17,920 Speaker 6: Rich is well famous for their credit multiply and they 224 00:10:17,920 --> 00:10:20,520 Speaker 6: work with Binenke. And of course what credit markets have 225 00:10:20,600 --> 00:10:23,080 Speaker 6: been doing and what credit markets are doing is often 226 00:10:23,160 --> 00:10:25,120 Speaker 6: very critical, of course for the economy, because if credit 227 00:10:25,160 --> 00:10:27,679 Speaker 6: conditions begin to tighten, the economy has a problem. If 228 00:10:27,679 --> 00:10:30,600 Speaker 6: credit conditions begin to losen, of course, the economy could 229 00:10:30,600 --> 00:10:32,880 Speaker 6: also have a problem, namely that it just becomes too 230 00:10:32,920 --> 00:10:34,839 Speaker 6: easy money, including in creditib. 231 00:10:34,760 --> 00:10:38,240 Speaker 5: Gen conversation after conversation, the assumption is credit markets are 232 00:10:38,280 --> 00:10:41,439 Speaker 5: going to loosen because we have maybe it's Biden like stimulus. 233 00:10:41,520 --> 00:10:43,959 Speaker 5: I believe the next six months we're full bore ahead. 234 00:10:43,960 --> 00:10:46,160 Speaker 3: The credit spriends are very tight, and now the dollars weakening. 235 00:10:46,320 --> 00:10:48,120 Speaker 3: And when you think about the dollars influence on final 236 00:10:48,600 --> 00:10:51,240 Speaker 3: conditions more broadly tossed and what is the contribution that 237 00:10:51,240 --> 00:10:52,760 Speaker 3: comes for the fects channel, Well, what. 238 00:10:52,760 --> 00:10:55,079 Speaker 6: I think is very important to remember is that foreigners 239 00:10:55,120 --> 00:10:57,080 Speaker 6: come to the US for two reasons. They come to 240 00:10:57,160 --> 00:11:00,000 Speaker 6: cut coupons in fixed income because levels are higher here, 241 00:11:00,360 --> 00:11:02,600 Speaker 6: and they come to get exposure to AI. So for 242 00:11:02,640 --> 00:11:05,120 Speaker 6: any discussion, for talks about well with it, all of 243 00:11:05,160 --> 00:11:07,240 Speaker 6: ag intergo down, you need to come with a view 244 00:11:07,240 --> 00:11:09,560 Speaker 6: that either AI is going to roll lower, all interest 245 00:11:09,640 --> 00:11:11,600 Speaker 6: rates are going to be a lot lower. So as 246 00:11:11,600 --> 00:11:13,560 Speaker 6: long as you can cut coupons and get much higher 247 00:11:13,600 --> 00:11:16,640 Speaker 6: returns in US assets, you will still have foreigners abroad 248 00:11:16,760 --> 00:11:19,800 Speaker 6: in Europe, Japan, Canada, Australia who come to the US 249 00:11:19,800 --> 00:11:22,679 Speaker 6: to buy US financial assets because they simply do offer 250 00:11:22,880 --> 00:11:25,120 Speaker 6: higher returns than what you get in most other countries. 251 00:11:25,160 --> 00:11:26,959 Speaker 3: Foreign holdings of treasuries at the end of last year, 252 00:11:27,000 --> 00:11:29,319 Speaker 3: close to the end of last year record heighs. People 253 00:11:29,320 --> 00:11:30,480 Speaker 3: hardly talk about that today. 254 00:11:30,640 --> 00:11:31,719 Speaker 6: Well, and if you go back and look at the 255 00:11:31,760 --> 00:11:34,480 Speaker 6: TICK data for netfoink purchases of US assets, you saw 256 00:11:34,520 --> 00:11:37,040 Speaker 6: that in April of last year, during Liberation Day, things 257 00:11:37,080 --> 00:11:39,560 Speaker 6: were absolutely chaotic. It was indeed the case that the 258 00:11:39,600 --> 00:11:42,360 Speaker 6: rest of the world was sell America. But since April, 259 00:11:42,400 --> 00:11:44,520 Speaker 6: for the data we now have from May up onto November, 260 00:11:44,800 --> 00:11:47,280 Speaker 6: it was very very strong inflow of data and to 261 00:11:47,440 --> 00:11:50,640 Speaker 6: rates in particular credit and also of course in two equities. 262 00:11:50,679 --> 00:11:52,240 Speaker 3: If you are just chaining again, welcome to the program. 263 00:11:52,280 --> 00:11:54,120 Speaker 3: About ten minutes ago the Federal Reserve leaving it to 264 00:11:54,160 --> 00:11:57,440 Speaker 3: strains unchanged two votes straight twenty five bases point reduction 265 00:11:57,520 --> 00:11:59,719 Speaker 3: from Governor Waller and from Governor Myra, and the news 266 00:11:59,720 --> 00:12:00,760 Speaker 3: come with Chairman Pale. 267 00:12:00,840 --> 00:12:01,920 Speaker 2: In about twenty minutes time. 268 00:12:02,080 --> 00:12:03,720 Speaker 3: We've got the form of FED Vice chair of Richard 269 00:12:03,720 --> 00:12:05,800 Speaker 3: Clouder standing by just one more question, rich I want 270 00:12:05,800 --> 00:12:08,080 Speaker 3: to come to you on this an important topic because 271 00:12:08,120 --> 00:12:10,600 Speaker 3: the Chairman will be asked about this in the news conference. 272 00:12:10,600 --> 00:12:14,880 Speaker 3: I have no doubt that a more confrontational approach, a 273 00:12:14,880 --> 00:12:17,440 Speaker 3: more assertive approach from the chairman a few weekends ago 274 00:12:17,840 --> 00:12:20,559 Speaker 3: towards the White House, Rich, what do you think prompted that? 275 00:12:20,600 --> 00:12:22,959 Speaker 2: How much internal debate was there about it? 276 00:12:24,640 --> 00:12:26,520 Speaker 7: You know, I'm not sure. I guess we'll have to 277 00:12:26,520 --> 00:12:30,080 Speaker 7: wait for J. Powell's memoir to find out. I just 278 00:12:30,160 --> 00:12:35,160 Speaker 7: infer that the Chair made the decision he'd been you know, 279 00:12:35,200 --> 00:12:38,880 Speaker 7: he had been quiet and had really not weighed in 280 00:12:38,880 --> 00:12:40,440 Speaker 7: in the past, and I think he just made a 281 00:12:40,440 --> 00:12:43,400 Speaker 7: decision that he wanted it to be known that he 282 00:12:43,480 --> 00:12:47,240 Speaker 7: felt that the FED needed to focus on independence and 283 00:12:47,280 --> 00:12:51,960 Speaker 7: focus on making the judgments on monetary policy. Any color 284 00:12:52,000 --> 00:12:54,439 Speaker 7: beyond that, we'll have to wait for the memoir. 285 00:12:54,559 --> 00:12:56,240 Speaker 3: Rich, Do you think it's made it harder to focus 286 00:12:56,240 --> 00:12:57,120 Speaker 3: on monetary policy? 287 00:12:57,120 --> 00:12:57,320 Speaker 9: Though? 288 00:12:59,080 --> 00:12:59,880 Speaker 2: I really don't think. 289 00:13:00,000 --> 00:13:02,920 Speaker 7: I don't think so, in light of all the things 290 00:13:02,920 --> 00:13:05,360 Speaker 7: that are that are going on. I think it was 291 00:13:05,400 --> 00:13:08,760 Speaker 7: a very clear, very clear indication that for the remainder 292 00:13:08,800 --> 00:13:11,240 Speaker 7: of his term as chair, you know, that will be 293 00:13:11,840 --> 00:13:12,760 Speaker 7: will be the focus. 294 00:13:12,920 --> 00:13:15,640 Speaker 3: Richid Cloud, Thank you, sir, as always, thanks for FED 295 00:13:15,720 --> 00:13:18,559 Speaker 3: Vice Chair, Rich CLOUDA. We have no doubt the Chaman 296 00:13:18,640 --> 00:13:21,200 Speaker 3: will be asked about that issue in about twenty minutes time. 297 00:13:21,280 --> 00:13:23,960 Speaker 3: Joining us now to extend the conversation, Bob Michael of 298 00:13:24,040 --> 00:13:27,400 Speaker 3: JP Mulgan Asset Management. Bobby, You've always got your own questions, buddy. 299 00:13:27,559 --> 00:13:29,080 Speaker 3: What do you want to hear from the chairman in 300 00:13:29,120 --> 00:13:29,720 Speaker 3: the next hour. 301 00:13:30,679 --> 00:13:34,520 Speaker 8: Well, the question he's not going to answer is does 302 00:13:34,559 --> 00:13:39,000 Speaker 8: he intend to stay on if after his chair expires? 303 00:13:39,320 --> 00:13:41,480 Speaker 8: But I think the one to ask is what does 304 00:13:41,520 --> 00:13:45,320 Speaker 8: he see in the labor market that's particularly wearing to him? 305 00:13:45,480 --> 00:13:49,400 Speaker 8: And is the FED undergoing studies about what the broader 306 00:13:49,440 --> 00:13:52,079 Speaker 8: impact of AI will be across the economy. 307 00:13:52,960 --> 00:13:55,480 Speaker 5: Bob Michael, you look at the key question that you 308 00:13:55,559 --> 00:13:59,319 Speaker 5: mentioned is labor. We mentioned this earlier off Orzag and Posen. 309 00:14:00,760 --> 00:14:04,320 Speaker 5: Does your team at JP Morgan see any form of 310 00:14:04,400 --> 00:14:06,960 Speaker 5: wage dynamic that indicates inflation? 311 00:14:09,400 --> 00:14:12,960 Speaker 8: Not so much right now. I think this low, higher 312 00:14:13,080 --> 00:14:17,560 Speaker 8: low fire has really dampened wage gains quite a bit. 313 00:14:18,000 --> 00:14:20,400 Speaker 8: We'll see what happens in the first half of the year. 314 00:14:20,760 --> 00:14:24,480 Speaker 8: Certainly expectations are pretty good for the economy and corporate spending. 315 00:14:24,800 --> 00:14:27,120 Speaker 8: Maybe that will lead to higher wages, but right now 316 00:14:27,160 --> 00:14:28,480 Speaker 8: you're not seeing evidence of that. 317 00:14:28,600 --> 00:14:31,000 Speaker 5: I really can't emphasize on the folks that Fraser it'll 318 00:14:31,040 --> 00:14:33,800 Speaker 5: see into the middle of the year than Bob Michael 319 00:14:33,880 --> 00:14:36,480 Speaker 5: with that with an interest rate strategy. And given all 320 00:14:36,520 --> 00:14:39,440 Speaker 5: the upset at the FED, how far out is the 321 00:14:39,440 --> 00:14:42,600 Speaker 5: Bob Michael vision at JP Morgan? Can you get out 322 00:14:42,640 --> 00:14:45,240 Speaker 5: to Q three or dare I say, model out of 323 00:14:45,320 --> 00:14:48,920 Speaker 5: fixed income portfolio to twenty twenty seven? 324 00:14:50,640 --> 00:14:53,480 Speaker 8: You can, and you have to. You can't invest a 325 00:14:53,520 --> 00:14:57,440 Speaker 8: lot of assets without having some view on the short term, 326 00:14:57,480 --> 00:15:01,040 Speaker 8: the medium term, and the longer term. Right now, things 327 00:15:01,040 --> 00:15:04,760 Speaker 8: look pretty good. On Monday, I said that the Yell 328 00:15:04,840 --> 00:15:08,080 Speaker 8: curve looked about as perfectly priced as you could have it. 329 00:15:08,160 --> 00:15:12,440 Speaker 8: So does the bond market. It seems to incorporate reasonably 330 00:15:12,480 --> 00:15:16,560 Speaker 8: good economic activity this year. It seems to incorporate what 331 00:15:16,600 --> 00:15:21,040 Speaker 8: we think could be disinflationary forces coming from both the 332 00:15:21,080 --> 00:15:25,320 Speaker 8: headwinds of tariffs on spending and also the impact of AI. 333 00:15:25,840 --> 00:15:29,840 Speaker 8: It's sort of an ideal market for bonds, including credit. 334 00:15:30,800 --> 00:15:33,000 Speaker 6: Well under the issue about AI, given AI is so 335 00:15:33,080 --> 00:15:35,560 Speaker 6: prominent in the equity market, and now AI is also 336 00:15:35,600 --> 00:15:38,160 Speaker 6: becoming a bigger weight in the public IG index. And 337 00:15:38,200 --> 00:15:40,760 Speaker 6: by the way, AI is also hugely in venture capitil 338 00:15:40,840 --> 00:15:43,280 Speaker 6: two thirds of venture capitul is AI. How do you 339 00:15:43,480 --> 00:15:45,960 Speaker 6: think about the construction of portfolios at the moment when 340 00:15:45,960 --> 00:15:48,720 Speaker 6: you certainly have when you look holistically at asset occasion 341 00:15:48,920 --> 00:15:51,640 Speaker 6: one fact on named the AI that is everywhere. 342 00:15:53,040 --> 00:15:57,000 Speaker 8: Well, we've seen a lot of sectors in the past 343 00:15:57,800 --> 00:16:00,560 Speaker 8: access the markets for a lot of funding, and the 344 00:16:00,640 --> 00:16:04,400 Speaker 8: lesson from that is to wait until the supply starts 345 00:16:04,440 --> 00:16:07,760 Speaker 8: to weigh on prices and that's your opportunity to go in. 346 00:16:08,560 --> 00:16:11,760 Speaker 8: I think what we do understand is there's an enormous 347 00:16:11,800 --> 00:16:15,640 Speaker 8: need of capital because there's an enormous productive use for 348 00:16:15,720 --> 00:16:19,200 Speaker 8: it to build the infrastructure that's going to power everything. 349 00:16:19,640 --> 00:16:22,560 Speaker 8: What we do see at JP Morgan Chase is every 350 00:16:22,640 --> 00:16:26,080 Speaker 8: line of business is using AI and how it operates, 351 00:16:26,440 --> 00:16:30,160 Speaker 8: and it is creating a lot of efficiencies. It allows 352 00:16:30,240 --> 00:16:34,240 Speaker 8: us to scale very very efficiently. So it's not going away. 353 00:16:35,040 --> 00:16:36,520 Speaker 8: It only seems to be accelerating. 354 00:16:36,600 --> 00:16:37,880 Speaker 2: Yeah, Papa, I want to build on this. I think 355 00:16:37,960 --> 00:16:38,600 Speaker 2: is really important. 356 00:16:38,640 --> 00:16:40,280 Speaker 3: And I say this a little tongue in cheek, but 357 00:16:40,360 --> 00:16:43,000 Speaker 3: ultimately a big factor behind the GDP growth for the 358 00:16:43,080 --> 00:16:45,400 Speaker 3: last twelve months is the capex spend of a handful 359 00:16:45,400 --> 00:16:48,280 Speaker 3: of companies. Is that becoming the more important macro indicator, 360 00:16:48,320 --> 00:16:50,920 Speaker 3: never mind payrolls. Is what happens after the close today 361 00:16:50,920 --> 00:16:52,840 Speaker 3: from METSA, Microsoft and what we hear from the big 362 00:16:52,840 --> 00:16:54,520 Speaker 3: tech players over the next week. 363 00:16:56,240 --> 00:17:00,160 Speaker 8: I think so, because they're not only telling us how 364 00:17:00,200 --> 00:17:04,480 Speaker 8: their businesses look, they're telling us how every other business looks, 365 00:17:04,800 --> 00:17:08,399 Speaker 8: and how every other business is thinking about AI and 366 00:17:08,480 --> 00:17:11,400 Speaker 8: are they willing to invest more there. I think we're 367 00:17:11,440 --> 00:17:14,800 Speaker 8: going to find the answer is yes, that everyone's over 368 00:17:14,840 --> 00:17:17,800 Speaker 8: the hump. They see this as real. They've lagged a 369 00:17:17,840 --> 00:17:20,840 Speaker 8: little bit. Why shouldn't they. They were unsure about the 370 00:17:20,880 --> 00:17:24,440 Speaker 8: impact of Taris. They were unsure how AI would play out. 371 00:17:24,720 --> 00:17:26,959 Speaker 8: Now that seems to be in the rear view mirror. 372 00:17:27,440 --> 00:17:29,680 Speaker 8: I think you are going to see pretty good earnings 373 00:17:29,960 --> 00:17:33,040 Speaker 8: and pretty good downrage forecasts Alston. 374 00:17:33,080 --> 00:17:34,639 Speaker 3: This is one of the great dilemmas I think for 375 00:17:34,720 --> 00:17:39,320 Speaker 3: manegy policymakers officials worldwide right now the divide between GDP 376 00:17:40,040 --> 00:17:43,760 Speaker 3: and payrolls growth. GDP's fantastic payroll growth super subdued. And 377 00:17:43,760 --> 00:17:46,360 Speaker 3: you can point to supply side factors like immigration. That's 378 00:17:46,359 --> 00:17:49,119 Speaker 3: a factor, sure, but the character of GDP is becoming 379 00:17:49,160 --> 00:17:51,280 Speaker 3: less and less labor intensive based on what we've seen 380 00:17:51,520 --> 00:17:52,440 Speaker 3: over the last twelve months. 381 00:17:52,520 --> 00:17:54,520 Speaker 6: Absolutely, and a very important point when we talk about 382 00:17:54,520 --> 00:17:56,760 Speaker 6: the FIT is that that also is because we simply 383 00:17:56,760 --> 00:17:59,560 Speaker 6: have that the forces that are driving GDP are actually 384 00:17:59,640 --> 00:18:01,120 Speaker 6: not very interest rate sensitive. 385 00:18:01,359 --> 00:18:03,119 Speaker 1: Because most of the false insessive. 386 00:18:02,880 --> 00:18:05,280 Speaker 6: Driving the boom in AI and the energy built out 387 00:18:05,400 --> 00:18:07,840 Speaker 6: had been coming because of equity valuations. 388 00:18:07,320 --> 00:18:08,000 Speaker 1: Being so high. 389 00:18:08,160 --> 00:18:10,560 Speaker 6: Now there's mall in the change in the capitalist structure 390 00:18:10,640 --> 00:18:13,720 Speaker 6: to watch also motet issuance. But for the last several years, 391 00:18:13,800 --> 00:18:15,919 Speaker 6: no matter what their fitfund straight did, we had a 392 00:18:15,920 --> 00:18:18,439 Speaker 6: really strong boom in AI and that was driving the 393 00:18:18,480 --> 00:18:21,520 Speaker 6: economy forward and continues to drive the economy forward because 394 00:18:21,560 --> 00:18:24,320 Speaker 6: this strength is coming from sources that are much less 395 00:18:24,320 --> 00:18:27,080 Speaker 6: interest rate sensitive than traditional components of GDP. 396 00:18:27,320 --> 00:18:29,800 Speaker 5: Let's get a source on this. Turston slock this morning. 397 00:18:29,880 --> 00:18:31,879 Speaker 5: It was good to see up before nine am. Turston. 398 00:18:32,640 --> 00:18:35,399 Speaker 5: This is his daily note, the daily Spark. Bob Michael, 399 00:18:35,520 --> 00:18:40,200 Speaker 5: quantifying the productivity gains from AI, I would say, it's 400 00:18:40,280 --> 00:18:42,879 Speaker 5: JP Morgan with what is it? It's like Walmart two million 401 00:18:42,920 --> 00:18:46,520 Speaker 5: employees in the US. You people have more knowledge, Bob 402 00:18:46,560 --> 00:18:51,080 Speaker 5: Michael about the new use of AI help doctor slock out. 403 00:18:51,359 --> 00:18:54,040 Speaker 5: How are our productivity gains from AI. 404 00:18:55,760 --> 00:19:00,440 Speaker 8: Well, the aspiration is that you're growing and you can 405 00:19:00,520 --> 00:19:04,320 Speaker 8: do a lot more with the same amount of resource. 406 00:19:04,680 --> 00:19:08,479 Speaker 8: So that's the ambition and the aspiration. We're still early 407 00:19:08,520 --> 00:19:11,400 Speaker 8: into it. We'll see what the payback is down the road. 408 00:19:11,760 --> 00:19:13,840 Speaker 5: I mean, look at this tour, so please expand on 409 00:19:14,200 --> 00:19:16,200 Speaker 5: and there's productivity, and I guess it comes down to 410 00:19:16,280 --> 00:19:20,199 Speaker 5: solo and this strange thing total factor productivity, which is 411 00:19:20,240 --> 00:19:23,639 Speaker 5: basically a made up pixie dust of that John you 412 00:19:23,680 --> 00:19:27,879 Speaker 5: mentioned earlier that American spirit. What does our total factor 413 00:19:28,080 --> 00:19:29,879 Speaker 5: American spirit look like right now? 414 00:19:29,880 --> 00:19:30,600 Speaker 1: Absolutely GDP. 415 00:19:30,720 --> 00:19:33,600 Speaker 6: Growth can come from three sources capital, labor, and productivity. 416 00:19:33,640 --> 00:19:36,119 Speaker 6: And the key issue is if productivity is strong, that 417 00:19:36,119 --> 00:19:38,600 Speaker 6: can more than dominate the other forces of growth, especially 418 00:19:38,680 --> 00:19:42,720 Speaker 6: when labor is now contributing less because immigration is being restricted. 419 00:19:42,880 --> 00:19:45,520 Speaker 6: So that means that the requirements coming from total facts 420 00:19:45,520 --> 00:19:49,119 Speaker 6: of productivity or productivity really significant because that needs to 421 00:19:49,160 --> 00:19:51,080 Speaker 6: deliver a lot of growth now that we have less 422 00:19:51,080 --> 00:19:52,720 Speaker 6: growth coming from the labor side. 423 00:19:52,880 --> 00:19:54,560 Speaker 2: This is why it's hard to sell America. 424 00:19:55,040 --> 00:19:56,800 Speaker 3: So many of these reasons are just a long list 425 00:19:56,840 --> 00:19:58,960 Speaker 3: of things as to why it's hard to sell America, Bob, 426 00:19:59,200 --> 00:20:01,520 Speaker 3: the headlines of the last week or so, not just 427 00:20:01,560 --> 00:20:03,439 Speaker 3: the last week, but the last twelve months. Do you 428 00:20:03,440 --> 00:20:05,040 Speaker 3: push back against them as well, Bob. 429 00:20:05,840 --> 00:20:10,760 Speaker 8: Yeah, they're total hogwash. We invest money for loads of 430 00:20:10,800 --> 00:20:14,840 Speaker 8: different plans around the world. This time last year, into 431 00:20:14,920 --> 00:20:17,880 Speaker 8: March April of last year, maybe through the summer. There 432 00:20:17,960 --> 00:20:21,920 Speaker 8: was some concern there were plans that we're looking at diversifying. 433 00:20:22,280 --> 00:20:24,760 Speaker 8: We saw very little of it. We're not seeing any 434 00:20:24,800 --> 00:20:28,439 Speaker 8: of that now. I think there's a realization that the breath, 435 00:20:28,480 --> 00:20:31,679 Speaker 8: the depth, the size of the markets in the US 436 00:20:32,119 --> 00:20:35,600 Speaker 8: make it the best place to exercise your fiduciary duty. 437 00:20:36,000 --> 00:20:38,760 Speaker 8: And that's what they're seeing. Yeah, is there some currency 438 00:20:38,800 --> 00:20:41,760 Speaker 8: hedging going on on the side, a little bit, But 439 00:20:41,880 --> 00:20:45,480 Speaker 8: is there a wholesale sell America assets? Absolutely not. If 440 00:20:45,480 --> 00:20:48,560 Speaker 8: it's happening, we're not seeing it. We pretty much see everything. 441 00:20:48,720 --> 00:20:52,159 Speaker 5: You know, Bob, I'm thinking of University of Pennsylvania, and 442 00:20:52,200 --> 00:20:54,720 Speaker 5: you know you're in Latin class at Pennsylvania where you 443 00:20:54,840 --> 00:20:57,679 Speaker 5: got straight a's, and you know you look at hogwash 444 00:20:57,720 --> 00:21:01,080 Speaker 5: as newgay or fritilla or in epsha and butcher in 445 00:21:01,119 --> 00:21:03,879 Speaker 5: the pronunciation here. But stay with me on this Bob, 446 00:21:04,280 --> 00:21:08,240 Speaker 5: is there a hotwash among the administration. Bob Michael, you're 447 00:21:08,240 --> 00:21:10,000 Speaker 5: a bond guy. I want you to help me with 448 00:21:10,040 --> 00:21:13,360 Speaker 5: foreign exchange. In Bruce Casman's world, I got one day 449 00:21:13,359 --> 00:21:16,080 Speaker 5: it's a week dollar policy. I got the next day 450 00:21:16,080 --> 00:21:18,800 Speaker 5: a strong dollar policy. It sounds like it's time for 451 00:21:18,920 --> 00:21:20,040 Speaker 5: Secretary Diamond. 452 00:21:22,800 --> 00:21:25,720 Speaker 8: I think he's doing a great areas and I hope. 453 00:21:25,480 --> 00:21:26,400 Speaker 1: He stays there. 454 00:21:26,920 --> 00:21:29,680 Speaker 3: By the way to end an interview, Bob, thank you, sir, 455 00:21:29,800 --> 00:21:33,440 Speaker 3: Bob Michael of JP Morgan Asset Management, stand out of trouble. 456 00:21:33,480 --> 00:21:35,880 Speaker 2: Hugwash, hugwash. That's what he thinks that I said. 457 00:21:36,400 --> 00:21:39,560 Speaker 5: That's brilliant, and you hear it in your wonderful Morning 458 00:21:39,640 --> 00:21:44,240 Speaker 5: note as well. People are so frustrated by this spin 459 00:21:44,359 --> 00:21:48,040 Speaker 5: that they're getting, given the cacophony of our American politics 460 00:21:48,040 --> 00:21:48,480 Speaker 5: and all in. 461 00:21:48,400 --> 00:21:49,000 Speaker 2: A long time ago. 462 00:21:49,080 --> 00:21:52,199 Speaker 3: Tell me the president's first term marked out right of 463 00:21:52,240 --> 00:21:56,480 Speaker 3: great pace on divorcing your political boss from your market analysis. 464 00:21:56,800 --> 00:21:58,679 Speaker 3: And I think there are reasons to be worried about 465 00:21:59,000 --> 00:22:01,440 Speaker 3: diversifying away from the dollar. And I'm not going to 466 00:22:01,520 --> 00:22:04,680 Speaker 3: color everyone who has that opinion with the same brush, 467 00:22:04,720 --> 00:22:06,199 Speaker 3: but I will say this, I think some of this 468 00:22:06,320 --> 00:22:08,040 Speaker 3: has been driven by people who just don't like the 469 00:22:08,040 --> 00:22:10,879 Speaker 3: policy out of the White House. Torsten and dare I 470 00:22:10,920 --> 00:22:12,760 Speaker 3: say they have a bit of TDS. I do think 471 00:22:12,800 --> 00:22:14,680 Speaker 3: some of that is coloring some of the analysis that's 472 00:22:14,720 --> 00:22:17,680 Speaker 3: coming from not just Wall Street, but from research desks 473 00:22:17,720 --> 00:22:18,280 Speaker 3: around the world. 474 00:22:18,320 --> 00:22:20,439 Speaker 6: Absolutely, And you go around Europe and you talk to 475 00:22:20,480 --> 00:22:22,280 Speaker 6: a lot of people who are of course saying, oh 476 00:22:22,320 --> 00:22:25,200 Speaker 6: my god, what's going on? This is confusing, this is chaotic? 477 00:22:25,480 --> 00:22:26,280 Speaker 1: Is its? 478 00:22:26,400 --> 00:22:28,199 Speaker 6: All these discussions, and then you ask at the end 479 00:22:28,240 --> 00:22:30,320 Speaker 6: of the beer, well, how are you even investing your money? 480 00:22:30,359 --> 00:22:32,960 Speaker 6: Or we're still buying dollar assets because dollar asses still 481 00:22:32,960 --> 00:22:36,240 Speaker 6: offer great returns again higher levels of vials. Also, in 482 00:22:36,320 --> 00:22:38,720 Speaker 6: AI exposure, you don't get much AI exposure if you 483 00:22:38,760 --> 00:22:41,280 Speaker 6: invest only in European stocks, don't get much AI exposure 484 00:22:41,280 --> 00:22:43,919 Speaker 6: in Japan, Cana, in Australia. So the US offers things 485 00:22:44,119 --> 00:22:45,879 Speaker 6: that are simply not being offered by the rest of 486 00:22:45,920 --> 00:22:46,200 Speaker 6: the world. 487 00:22:46,200 --> 00:22:48,159 Speaker 5: I mean, quickly, John, you spent twelve hours on the 488 00:22:48,200 --> 00:22:50,439 Speaker 5: SAT in London the day of Brexit. Here we're popping 489 00:22:50,480 --> 00:22:53,240 Speaker 5: one thirty eight on sterling. Does your life change with 490 00:22:53,320 --> 00:22:55,120 Speaker 5: the one forty three sterling? 491 00:22:55,160 --> 00:22:57,040 Speaker 3: You're still convinced that I get paid in sterling, but 492 00:22:57,119 --> 00:22:57,600 Speaker 3: I hope so. 493 00:22:57,720 --> 00:22:59,560 Speaker 5: I mean, I'm looking at the chart here and we're 494 00:22:59,640 --> 00:23:01,320 Speaker 5: right up against the Rangers. 495 00:23:00,960 --> 00:23:02,439 Speaker 2: Gives an recent price section. 496 00:23:02,600 --> 00:23:05,040 Speaker 3: I wish I was funded and stealing, but given this 497 00:23:05,119 --> 00:23:06,560 Speaker 3: is my tantier over here, I'm still. 498 00:23:06,440 --> 00:23:08,920 Speaker 2: Funded at Dallas. Your reviews over Okay. 499 00:23:08,760 --> 00:23:10,960 Speaker 3: Thank you sir, Thank you boss. Let's get to dine 500 00:23:11,000 --> 00:23:13,320 Speaker 3: swamk of KPMG, she joins us. Now this news conference 501 00:23:13,320 --> 00:23:15,680 Speaker 3: stance in about seven or eight minutes time time. Welcome 502 00:23:15,680 --> 00:23:17,760 Speaker 3: to the program. What are your questions for Sham and 503 00:23:17,800 --> 00:23:19,560 Speaker 3: pal when this news conference stants. 504 00:23:21,840 --> 00:23:23,960 Speaker 9: I think one of the questions that hasn't been asked 505 00:23:24,000 --> 00:23:26,199 Speaker 9: of the FED is we've heard the FED talk about 506 00:23:26,280 --> 00:23:29,560 Speaker 9: curbs and immigration and its effect on the break evens, 507 00:23:29,600 --> 00:23:33,040 Speaker 9: on unemployment and the labor market. More broadly, we have 508 00:23:33,200 --> 00:23:36,679 Speaker 9: not heard anything about the pockets of labor shortages that 509 00:23:36,720 --> 00:23:39,560 Speaker 9: are beginning to creep up. The quick rate in leisure 510 00:23:39,560 --> 00:23:43,440 Speaker 9: and hospitality absolutely soared in November and over the summer, 511 00:23:43,920 --> 00:23:46,480 Speaker 9: and that is because of curbs and immigration. We know 512 00:23:46,600 --> 00:23:50,000 Speaker 9: that forum born and native born workers in some professions, 513 00:23:50,280 --> 00:23:54,280 Speaker 9: most notably in the service sector, are compliments, not substitutes 514 00:23:54,320 --> 00:23:57,280 Speaker 9: for each other, and that's something that we're watching closely 515 00:23:57,359 --> 00:24:00,680 Speaker 9: as well. And even with the productivity growth we've seen, 516 00:24:01,240 --> 00:24:04,880 Speaker 9: the AI boom that's going on, is currently with that 517 00:24:04,920 --> 00:24:09,760 Speaker 9: productivity growth not derailed inflation, and in fact it is 518 00:24:09,840 --> 00:24:13,440 Speaker 9: adding to inflation on the margin for in salient prices 519 00:24:13,480 --> 00:24:16,840 Speaker 9: for many consumers, notably electricity costs. And then you have 520 00:24:16,920 --> 00:24:20,199 Speaker 9: this cold spell on top of it that added to 521 00:24:20,280 --> 00:24:23,240 Speaker 9: natural gas costs. But all of that is still pushing 522 00:24:23,320 --> 00:24:25,840 Speaker 9: up prices rather than down when we're going to get 523 00:24:25,840 --> 00:24:28,159 Speaker 9: a lot of fiscal stimulus in the beginning of the 524 00:24:28,240 --> 00:24:29,119 Speaker 9: year as well. 525 00:24:29,400 --> 00:24:33,040 Speaker 5: Dan, your work recently has been absolutely brilliant about the 526 00:24:33,080 --> 00:24:37,399 Speaker 5: fabric of employed America. What is the one thing Wall 527 00:24:37,400 --> 00:24:41,520 Speaker 5: Street Consensus, the three zip codes in Manhattan, what's the 528 00:24:41,560 --> 00:24:46,480 Speaker 5: one thing they get wrong about labor America. 529 00:24:47,200 --> 00:24:49,720 Speaker 9: Well, first of all, the overall and employment rate is 530 00:24:50,359 --> 00:24:52,480 Speaker 9: not really a good summary statistic. 531 00:24:52,600 --> 00:24:53,000 Speaker 1: Right now. 532 00:24:53,040 --> 00:24:55,119 Speaker 9: We know at the end of the year those having 533 00:24:55,119 --> 00:24:57,800 Speaker 9: to accept part time instead of full time hidden all 534 00:24:57,840 --> 00:25:00,720 Speaker 9: time high. We're now at the place where in the 535 00:25:01,080 --> 00:25:04,240 Speaker 9: new millennium, for the last twenty five years, we've seen 536 00:25:04,320 --> 00:25:09,720 Speaker 9: instead of multiple job holders falling as an expansion goes longer, 537 00:25:09,840 --> 00:25:13,399 Speaker 9: they're now rising. This is part of that labor share 538 00:25:13,520 --> 00:25:17,040 Speaker 9: of income being eroded. The inequalities we're seeing out there, 539 00:25:17,359 --> 00:25:20,160 Speaker 9: and the frozen state of the labor market where those 540 00:25:20,160 --> 00:25:23,080 Speaker 9: who have a job are cleaning on and those who 541 00:25:23,359 --> 00:25:25,920 Speaker 9: do not have a job are left wanting. I think 542 00:25:26,040 --> 00:25:29,000 Speaker 9: is very important to understand when you think about things 543 00:25:29,040 --> 00:25:31,760 Speaker 9: like the U six measure of unemployment, which gets into 544 00:25:31,800 --> 00:25:34,480 Speaker 9: that sort of under the hood that's running around eight 545 00:25:34,480 --> 00:25:38,080 Speaker 9: point four percent, two point two percent above where it 546 00:25:38,240 --> 00:25:41,639 Speaker 9: was in twenty nineteen, and I think those are important issues. 547 00:25:41,760 --> 00:25:45,200 Speaker 5: Sank quickly here. The model is that the tech bro 548 00:25:45,320 --> 00:25:49,159 Speaker 5: are taking over America. We've talked about American exceptionalism, but 549 00:25:49,280 --> 00:25:52,560 Speaker 5: so many people just want to turn around that ugly 550 00:25:52,720 --> 00:25:54,040 Speaker 5: labor share vector. 551 00:25:54,520 --> 00:25:59,480 Speaker 1: How would you do that? Well, what's a difficult thing 552 00:25:59,520 --> 00:25:59,840 Speaker 1: to do. 553 00:26:00,200 --> 00:26:02,800 Speaker 9: And certainly with the way that the C suite and 554 00:26:02,840 --> 00:26:05,800 Speaker 9: the gap between employees and the C suite c AI 555 00:26:06,240 --> 00:26:09,800 Speaker 9: and how it's affecting productivity growth is another issue. We 556 00:26:09,840 --> 00:26:14,720 Speaker 9: could literally see a payroll recession as the economy booms 557 00:26:14,720 --> 00:26:18,520 Speaker 9: in twenty twenty six, and that is something that I 558 00:26:18,600 --> 00:26:21,359 Speaker 9: never expected to see out there. I think it's really 559 00:26:21,359 --> 00:26:25,680 Speaker 9: important to remember though, that we still have not ameliorated inflation. 560 00:26:25,840 --> 00:26:29,919 Speaker 9: We still have inflation, and it's much like compounding stock 561 00:26:29,960 --> 00:26:34,480 Speaker 9: returns that has driven that wedge of wealth higher. Compounding 562 00:26:34,600 --> 00:26:38,840 Speaker 9: inflation over the last five years has left prices out 563 00:26:38,840 --> 00:26:41,159 Speaker 9: of reach for too many. At the same time, the 564 00:26:41,240 --> 00:26:44,639 Speaker 9: labor market is frozen, and that is why you're seeing 565 00:26:44,640 --> 00:26:46,200 Speaker 9: the consumer attitude surveys. 566 00:26:46,240 --> 00:26:47,560 Speaker 1: We are and what are. 567 00:26:47,520 --> 00:26:50,560 Speaker 6: The consequences of the K shaped situation for the consumer? 568 00:26:51,520 --> 00:26:55,040 Speaker 6: From a broad macro perspective, the weekly, the monthly retail 569 00:26:55,080 --> 00:26:58,240 Speaker 6: sales data is still recentably okay, does this. 570 00:26:58,200 --> 00:26:59,040 Speaker 1: Matter later this year? 571 00:26:59,200 --> 00:27:01,040 Speaker 6: How do you think about the case shaped situation? Is 572 00:27:01,080 --> 00:27:03,200 Speaker 6: it something that the fits are they take into account? 573 00:27:04,080 --> 00:27:05,840 Speaker 6: Why does this matter from a macro perspective. 574 00:27:07,840 --> 00:27:10,560 Speaker 9: It's really important from a macro perspective because I think 575 00:27:10,600 --> 00:27:15,239 Speaker 9: it's providing an underlying floor under inflation, and that's what 576 00:27:15,280 --> 00:27:18,679 Speaker 9: I worry about. Could happen that with fiscal stimulus on 577 00:27:18,720 --> 00:27:22,960 Speaker 9: top of it, to temporarily disperse economic gains at the 578 00:27:23,000 --> 00:27:25,919 Speaker 9: beginning of the year as we see those tax refunds 579 00:27:25,920 --> 00:27:29,879 Speaker 9: come in. That is important because you sort of the 580 00:27:29,920 --> 00:27:32,760 Speaker 9: sugar high could be very short lived if it only 581 00:27:32,800 --> 00:27:36,080 Speaker 9: makes inflation stick and as I said, inflation is already 582 00:27:36,080 --> 00:27:40,520 Speaker 9: compounded to the place where most Americans feel that things 583 00:27:40,520 --> 00:27:44,960 Speaker 9: are out of reach, and that underscores and undercuts the 584 00:27:45,040 --> 00:27:47,040 Speaker 9: Fed's inflation fighting credibility. 585 00:27:47,280 --> 00:27:48,600 Speaker 3: Don I think we have to sign and I'm sure 586 00:27:48,640 --> 00:27:50,600 Speaker 3: you share this sentiment. If any of us gets a 587 00:27:50,640 --> 00:27:53,160 Speaker 3: tax refund, it's pan the energy bill over the last month. 588 00:27:53,520 --> 00:27:56,320 Speaker 3: Thank you, Dan swamk wank in on the federal Reserve 589 00:27:56,640 --> 00:27:58,439 Speaker 3: and a banks for the economy, I think we just 590 00:27:58,480 --> 00:28:00,400 Speaker 3: take a beat with the two and a half minutes 591 00:28:00,440 --> 00:28:03,119 Speaker 3: we have left. Well, Dan Swamp just sat there that 592 00:28:03,200 --> 00:28:06,800 Speaker 3: we could have an economic boom yep, and the payrolls recession. 593 00:28:06,840 --> 00:28:09,040 Speaker 3: Now I know this sounds a little bit philosophical, but 594 00:28:09,080 --> 00:28:11,159 Speaker 3: what on earth is a boom if we have a 595 00:28:11,200 --> 00:28:12,120 Speaker 3: payrolls recession? 596 00:28:12,720 --> 00:28:15,120 Speaker 5: I'm going to go to I think your question, John 597 00:28:15,160 --> 00:28:17,680 Speaker 5: is brilliant. What she said was remarkable. I don't think 598 00:28:17,720 --> 00:28:19,480 Speaker 5: I've ever heard that ever. 599 00:28:19,560 --> 00:28:19,760 Speaker 1: Ever. 600 00:28:20,000 --> 00:28:23,040 Speaker 5: The bottom line is, we have a president who's prosecuting 601 00:28:23,080 --> 00:28:26,920 Speaker 5: a neo MRK until his strategy. You were weaned on 602 00:28:26,960 --> 00:28:30,880 Speaker 5: this ages and ages great Grandpa Slock a million years 603 00:28:30,920 --> 00:28:34,439 Speaker 5: ago as well. How do we extract ourselves from a 604 00:28:34,520 --> 00:28:38,360 Speaker 5: neo MRK until his strategy to get growth back in 605 00:28:38,920 --> 00:28:41,640 Speaker 5: for the rest of the public not benefiting from this 606 00:28:41,760 --> 00:28:42,360 Speaker 5: tech boom. 607 00:28:42,400 --> 00:28:44,640 Speaker 6: Well, the challenge, of course is that the AI boom 608 00:28:44,680 --> 00:28:47,320 Speaker 6: has to main been demain driver for so long. But 609 00:28:47,440 --> 00:28:50,440 Speaker 6: if you implement policies, of course that ultimately says that 610 00:28:50,520 --> 00:28:52,600 Speaker 6: we want fewer goods and fewer peoples to come into 611 00:28:52,640 --> 00:28:54,760 Speaker 6: the country. The risk is that of course does come 612 00:28:54,800 --> 00:28:57,920 Speaker 6: deglobalization with a risk of high inflation, risk of high 613 00:28:57,920 --> 00:28:59,680 Speaker 6: inflation in prices, risk of high. 614 00:28:59,520 --> 00:29:01,680 Speaker 1: Inflation in wages. So that's why if we are and 615 00:29:01,680 --> 00:29:02,920 Speaker 1: this is not only in the US, this is. 616 00:29:02,840 --> 00:29:06,040 Speaker 6: Also Europe, this is also across the wisidy area. You're 617 00:29:06,080 --> 00:29:09,320 Speaker 6: seeing more and more segmentation of the global economy. Of 618 00:29:09,360 --> 00:29:14,040 Speaker 6: course results in now everything needs to be produced domestically, homeshing, unshoring, reshoring. 619 00:29:14,200 --> 00:29:16,840 Speaker 6: All that, of course results for FIC income investors in 620 00:29:16,920 --> 00:29:18,240 Speaker 6: more upside Regstoin. 621 00:29:17,920 --> 00:29:21,000 Speaker 5: Feace, you just described the nineteen thirties in the United Kingdom. 622 00:29:21,080 --> 00:29:23,120 Speaker 3: It's on the biggest rest of the GDP growth we've 623 00:29:23,160 --> 00:29:26,520 Speaker 3: discussed over the last twelve months. The populist remedies the 624 00:29:26,560 --> 00:29:28,840 Speaker 3: White House might introduce to try and correct the key 625 00:29:29,360 --> 00:29:30,840 Speaker 3: One of those issues we've talked. 626 00:29:30,600 --> 00:29:31,680 Speaker 2: About for the last few months. 627 00:29:31,680 --> 00:29:34,200 Speaker 3: The last month or so has been the introduction of 628 00:29:34,240 --> 00:29:36,960 Speaker 3: a cap on interest rates on credit cards that could 629 00:29:36,960 --> 00:29:41,560 Speaker 3: have the complete opposite intended effect of chilling financial conditions, 630 00:29:41,600 --> 00:29:44,480 Speaker 3: of tightening credit availability. And they're the kind of things 631 00:29:44,480 --> 00:29:46,680 Speaker 3: at the moment this administration TK that are the kind 632 00:29:46,680 --> 00:29:47,560 Speaker 3: of things they're thinking about. 633 00:29:47,640 --> 00:29:49,960 Speaker 5: I think the phrase is grasping it straw us. I 634 00:29:50,040 --> 00:29:54,520 Speaker 5: don't hear much policy or science find it. Maybe we'll 635 00:29:54,560 --> 00:29:56,440 Speaker 5: hear that in these comments. 636 00:29:56,080 --> 00:29:58,800 Speaker 3: To this, just in from Peugh van steinas of Oliver Wyman. 637 00:29:59,040 --> 00:30:00,960 Speaker 3: Sure you know him. He wants us to start a podcast. 638 00:30:01,080 --> 00:30:03,000 Speaker 3: I want to know of Mark Rowan. We'll give up 639 00:30:03,000 --> 00:30:04,360 Speaker 3: torst them once a week so we can do a 640 00:30:04,360 --> 00:30:06,920 Speaker 3: little podcast together. He liked the last hour so much. 641 00:30:07,000 --> 00:30:08,120 Speaker 5: First Gust could be human. 642 00:30:08,520 --> 00:30:09,960 Speaker 3: Do you think Mark and Jim will get on board 643 00:30:09,960 --> 00:30:12,320 Speaker 3: with that? Can we have you once a week? Can 644 00:30:12,360 --> 00:30:13,640 Speaker 3: you write the check if we've got a budget in 645 00:30:13,640 --> 00:30:16,160 Speaker 3: this avalance, we'll try and make that happen. Twlston, this 646 00:30:16,240 --> 00:30:18,320 Speaker 3: was a pleasure. Thank you, sir Towson. Slock There of 647 00:30:18,400 --> 00:30:18,760 Speaker 3: Apollo