August 13, 2025 • 44 mins
- Scott Bessent, US Treasury Secretary
- Liz Ann Sonders, Chief Investment Strategist at Charles Schwab
- Jeannette Lowe, Director: Policy Research at Strategas Securities
- Tom Porcelli, Chief US Economist at PGIM Fixed Income
Scott Bessent, US Treasury Secretary, joins to discuss tariffs, US economic data, the Fed, and the economic priorities of the second Trump administration. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, talks about the sustainability of the equity rally as tariffs take hold. Jeannette Lowe, Director: Policy Research at Strategas Securities, talks about the latest developments in President Trump's economic and political priorities. Tom Porcelli, Chief US Economist at PGIM Fixed Income, talks about recent eco data and the outlook for the US economy.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and am Marie Hordern. Join us each
day for insight from the best in markets, economics, and
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or anywhere else you listen, and as always on the
(00:33):
Bloomberg Terminal and the Bloomberg Business App. We've got a
lot to discuss President Trump extending trade talks with China
for another sixty days as both countries continue to win
out key differences. Joining us now to discuss that and
a whole lot more. The seventy Night Secretary of the Treasury,
Scott Besson, mister Secretary, good morning, good to see it.
Speaker 3 (00:50):
Warren John.
Speaker 2 (00:51):
You're a cover model. Now you're famous. Can we get
that front cover up for Business Week this month? Mister Secretary?
I remember when you were just Scott Besson and we
could go for breakfast to get the three of us
and no one would bother you. What happened.
Speaker 1 (01:02):
I don't know, but I hope it's not the curse
the cover because it tolf his Historically, the being on
the cover is a curse.
Speaker 2 (01:12):
So well, the secrety market is not curse that keeps
grinding out all time highs. There is some confidence that
we're selling some issues on the trade front. There's one
issue that came up this week that we'd love to
hear from you about, and that's in Vidia. Where did
this agreement come from? You've been quite innovative this administration
on trade issues. Where did this come from? Who came
up with it?
Speaker 3 (01:32):
The President?
Speaker 1 (01:33):
The president, As I tell everyone, the President is one
of the most open minded people I know. He does
everything at first principles. Why do we do things this way?
Why shouldn't we do it the other way? And you know,
I think that this is a very unique solution allows
in Nvidia to expand into China.
Speaker 3 (01:53):
It can make in Vidia chips.
Speaker 1 (01:55):
The bellweather for Chinese technology, and then the US taxpayer
gets a share of that.
Speaker 2 (02:02):
Key was unique? Is it unique to Invidia an empty
or is this a model for other companies?
Speaker 1 (02:08):
I think we could see it in other industries over time.
I think you know right now this is unique, but
now that we have the model and the beta test,
why not expand it.
Speaker 4 (02:20):
What do you say to people who think we're putting
a price on national security concerns by basically selling export licenses.
Speaker 1 (02:27):
There are no national security concerns here. We would not
sell any of the advanced chips. So the H twenties,
I don't know whether you say there are four or
five six levels down the chip stack. What we do
not want here, Anne Marie, is for Huawei to have
a digital Belton road. So we do not want the
(02:48):
standard to become Chinese across the world or even in China.
Speaker 4 (02:53):
Well, we have exclusive reporting that Beijing is now sending
out letters to firms saying, actually, shrug off those H
twenty and use our domestick champions. Is this something you
might discuss with your counterpart.
Speaker 3 (03:04):
Sure, we can discuss that.
Speaker 1 (03:05):
But it also tells me that they are worried about
the Nvidio chips becoming the standard in China. Look In
video is an incredible product. A lot of the technology
in China is they're piggybacking, And I'll use piggybacking as
a kind word for acquiring our technology do you mean
(03:28):
stealing your words? And yes, that's what I mean.
Speaker 3 (03:32):
And the.
Speaker 1 (03:34):
In video Jensen Wang just stays years ahead of them.
Speaker 4 (03:38):
Criticism came from the Wall Street Ternal Editorial Board though
about this new unique policy. They say it's a step
toward government control of private business. Are you concerned some
of these polies are starting to look like the country
you're actually trying to de risk from central planning basically
out of the old No.
Speaker 1 (03:55):
No, no, no, not at all, because where we got
was with this unfettered trade. We did not have secure
trade or fair trade, and so now we are trying
to make it secure. So you don't want to We're
not sending out the highest level chips, and we don't
(04:16):
want to sell everything to everybody. So there is a
need for intervention. And you know, the Wall Street Journal
just let her rip with kind of a bunch of grumpy
old men over there.
Speaker 3 (04:29):
I was with them yesterday.
Speaker 2 (04:31):
This is going to raise some revenue. What do you
plan to do with it?
Speaker 3 (04:34):
Paid on the debt.
Speaker 2 (04:36):
It's all going to go to play down the debt.
Because we have heard some stories about the money going
back to consumers, going back to citizens of the United States, taxpayers.
Speaker 1 (04:43):
Well, President President Trump's talked about that, and look at
these the bottom fifty percent of wag journers in the
One Big Beautiful Bill are getting a lot of money back.
No tax and tips, no tax on over time, no
tax on Social Security loans are going to be tax deductible.
So I think if we could make a substantial dent
(05:06):
in the debt repayment, then we could talk about a
program like that.
Speaker 2 (05:10):
Could you share with us the kind of numbers you're
thinking about at the moment, just in terms of revenue raising,
and not just the Nvidia deal. I'm talking about the
terraffs on top of that. What are we raising at
the moment month on months.
Speaker 1 (05:18):
Well, Johnson, I've been saying that we could hit three
hundred billion this year, and I think that number is
going to be low. I think I'm going to I
always like to come in low and then surprise on
the upside. But I think in the next days or
weeks I may have to move that number up substantially.
Speaker 2 (05:37):
You've heard the debate playing out on Wall Street now
for a number of months. Who's going to pay the teriffs?
By definition, the importer will pay the tariff. The more
important question here is who absorbs the costs, whether it's
the foreign supplier, whether it's the domestic company here in
the United States, or the end consumer. We've got some
data yesterday, You've seen it. We've all looked at it.
Limited tariff pass through relative to what was expected. Because
(05:57):
of that, a lot of people are suggesting that maybe
companies are absorbing costs in a way we didn't anticipate.
Perhaps the past through will be more muted in the future.
Are you comfortable with where things are now or do
you think things might rebalance in the months to count.
Speaker 1 (06:10):
Jonathan, I think your framing there is exactly right, exactly right,
because that obviously that the tariff itself is paid at
the port, but what if the producer in the other
country has lowered their price the ten fifteen to twenty percent,
so that there is no price change with the tariff.
(06:30):
And obviously our largest trade deficit is with China, and
China does not have the same profit objective that other
Western democracies do, so that is an employment agency, and
my view has been that they would continue to eat
the tariffs. They are doing that, so I think what
(06:51):
we've seen is likely to continue happening. I also think
there are probably a lot of corporate margins that got
very fat during COVID. We're seeing a return to normal
pre COVID margins.
Speaker 2 (07:04):
You see this as some kind of redistribution between corporate
America and maybe the consumer Main Street and Wall Street.
Speaker 1 (07:10):
I think this administration is all about Main Street, but
Wall Street's at a new high. So it's this fault equivalency.
It's not either or I tell everyone, I call it
parallel prosperity. Wall Street's done great, Main Street can now
do great.
Speaker 2 (07:27):
Wall Street might do even better if the Federal Serve
cuts interest rates. The President was pretty clear yesterday put
out this comment, Jerome too late, pal must now lower
the interest rate. Is it reasonable to give them a
bit more time to draw conclusions about what's happening here?
Speaker 1 (07:41):
Well, I think what we could see is that, let's
first of all, what if the BLS data had been
the higher quality and we'd had those numbers, Jonathan. So
if we'd seen those numbers in May in June, I
suspect we could have had rate cuts in June and July.
(08:01):
So that tells me that there's a very good chance
of a fifty basis point rate cut, and I think
President Trump is very good at giving these nicknames. And
I think the reason that the Jay Powell gets a
nickname too late is because he wants to go into
a series of rate hikes. He's not willing. He's not
(08:23):
Alan Greenspan, who is very forward thinking. They try to
be more data driven, which I think is a mistake
because I think we are going back into an economy
like we had in the nineties, So you know, it's
just very old fashioned thinking. But I do think we
could go into a series of rate cuts here, starting
(08:43):
with a fifty basis point rate cut in September.
Speaker 4 (08:46):
Fifty basis rate cut in September. Does that signal that
the economy, though, is not doing well.
Speaker 1 (08:52):
That signals that there's an adjustment and the rates are
too constrictive if you look at it any model that
the if you we should probably be one hundred and
fifty one hundred and seventy five bases points lower. So
I think the committee needs to step back. I think
(09:15):
probably one of the most politicized governors just went off
the board and that she was very very political, I believe,
and I think that.
Speaker 2 (09:29):
Does she do that gave you that impression I'd love
to know. Sorry I mentioned you're referring to Governor Kugler.
What does she do that game?
Speaker 1 (09:35):
I think there's a lot of inside baseball. And look,
Governor Kugler, you read what she was saying when Kamala
Harris was running, that we needed rake cuts, we needed this,
We got to phone the runway and then all of
a sudden it was hard to know whether we know TDS.
Speaker 3 (09:53):
Was it Trump that.
Speaker 1 (09:55):
Dimension syndrome or Trump derangement syndrome or tariff arrangement syndrome.
Speaker 2 (10:00):
You get the opportunity to remake the Federal Reserve. The
president gets the opportunity to remodel reshape the Federal Reserve.
And I'm not talking about the remodeling that maybe the
current chairman's going through. We'll talk about that another time.
I want to talk about the complexion and character of
the committee, the changes that you're making at the moment.
Stephen Maron, let's start with Stephen. How quickly can you
get more and confirmed?
Speaker 1 (10:19):
We'll see. The President has great sway with Leader Thom.
Leader Thom has been a great partner during the tax deal,
and I think that he would like to see Stephen,
who I've known for a long time, get on there
as soon as possible. So I'm hopeful about the September meeting.
And Jonathan, the President's concerned about the building and those
(10:43):
massive costs overrun, which just tell you that there is
no accountability at that organization.
Speaker 3 (10:49):
There's no oversight in terms of the spending.
Speaker 1 (10:52):
But the President and I are both concerned about the
foundations of the FED, the foundations of the FED and
how did this happen and why did it happen? And
you know, how did the leadership let it happen.
Speaker 4 (11:04):
When it comes to Director Myron, do you expect him
to stay on past the January term that expires from
Coogler seat?
Speaker 3 (11:11):
I wouldn't expect that.
Speaker 4 (11:12):
So who are some names you're thinking of the Cooglar seat?
Because everyone has been focused on who is going to
fill the chairmanship role? Who are you thinking to fill
that extra seat?
Speaker 1 (11:21):
Well, e Marie, we're working on the big list right now.
I think they're going to be a couple more names
revealed today. They're going to be private sector names. So
we had a series or a list of current FED members.
We're going to have some private sector very well respected,
(11:41):
very well respected people and then we will get to
the second seat.
Speaker 4 (11:48):
Can you give us some names, a little bit of
a tease, maybe people that have been on this program.
Speaker 1 (11:52):
Well, I just did tease telling you there'll be some
private sector names.
Speaker 4 (11:56):
Okay, when it comes to the FED chair, though, can
you give us a sense of how many names you're
actually thinking about.
Speaker 3 (12:01):
Well, I'm going to interview.
Speaker 1 (12:03):
I'm going to cast a wide net ten to eleven people,
and then there'll be a group of us who are
meeting with them, and we want to talk about monetary policy.
We want to talk about regulatory policy, which is very,
very important because the FED step I think bigfoot of
the other regulators. The Fed's one of three regulators, Federal Reserve,
(12:25):
OCC and FDIC, and I think that they need to
understand that they are one of three.
Speaker 3 (12:34):
And then the.
Speaker 1 (12:35):
Third is the institution itself, which I think is what
President Trump has been focused on quite a bit too.
Speaker 4 (12:41):
After you do this process, how many names are going
to give to the President and when does he start
those in person interviews?
Speaker 3 (12:47):
We don't have a timeline.
Speaker 1 (12:48):
By putting Stephen Myron in that gives us more time,
and again, I want to cast a wide net. The
President's very open minded before he chose A Powell. Janet
Yellen was interviewed, John Taylor was interviewed. Two of them
couldn't have been more different, so they were under consideration.
Speaker 2 (13:11):
I give you credit for coming up with a really
credible list to replace the frontal Reserve chair, Jake pab
without a doubt. I think most people that come on
this program agree with that. What I want to talk
about is the BLS now because there's some controversy around
this pick. I'm sure you've heard some of the concerns.
Speaker 3 (13:22):
E J.
Speaker 2 (13:23):
Anthony had said the following earlier this week before getting
the pick from the President. Until this issue with Payrose
is corrected, he said, quote, the BLS should suspend issuing
the monthly jobs report, but keep publishing the more accurate,
though less timely, quarterly data. We'd love your thoughts on this.
Is that something you'd support, not at all?
Speaker 3 (13:40):
And look what somebody says when.
Speaker 1 (13:43):
There are are private citizens is very very different.
Speaker 3 (13:47):
You know. I called for a shadow fed chair.
Speaker 1 (13:50):
And now that I'm in the seat, I don't think
we need to do that. And I was there when
EJ was interviewed, and he is incredibly qualified, and I
think The most important thing here is that we get
back to the integrity of the numbers, because it just
became okay, just like so many things in our government,
(14:12):
to get sloppy. And ej is precise. He has a
doctorate in economics. I think President Trump put a lot
of thought into this. He was very thorough in his
questioning of him. So what we want is good data,
because you can't make good decisions without good data.
Speaker 3 (14:33):
As I just said, is very likely.
Speaker 1 (14:35):
That the FED would have been doing something else in
June in July if they had had this data.
Speaker 2 (14:43):
Well, let's talk about the data we've got and the
process we have, and how we might improve that process.
As you know that data is prone to big revisions
in your career on More Street, we've all been dealing
with this for a long long time because of the
process and the lack of time. And the response is
it is constantly reviewed month on month as you get
more responses from America. How can we improve that process
(15:03):
so this data is less prone to these big revisions.
Speaker 1 (15:06):
Well, I've been in government now for seven months and
I can tell you that if we take the irs,
which I'm now ahead of, they've been working on a
tech upgrade.
Speaker 3 (15:17):
Since nineteen ninety. Nineteen ninety, we.
Speaker 1 (15:19):
Brought in a young person to fix that. The tech
upgrade has been underway for longer than he is old,
so he wasn't born when the tech upgrade started. So,
you know, I just think like this idea that we're
accepting this mediocrity in government. Why don't we bring things
into the twenty first century? Why don't we bring it
(15:42):
into the digital age? Because I don't know about political
bias one way or the other, but what I can
tell you is that the sample response size kept getting
smaller and smaller, and then they they filled in the cells.
Anytime you get judgment versus data, then things become qualitative
(16:04):
and not quantitative. And I think EJ is going to
do a great job of bringing back quantitative standards. I
think he like these attacks in the press. I think
they're all wrong.
Speaker 4 (16:16):
It's not in the press, it's even within conservative economic
circles that don't think that he is credible to run
the commission. Is the Trump administration open to putting more
resources then to bls, maybe lifting a hiring freez Well
and Marie.
Speaker 1 (16:29):
That's more of a democratic idea that you know, we
need more. It's always money. It's always money. It's New
York City schools, Chicago schools, DC schools. You get terrible outcomes.
I think that he's going to sit back, look at
the process, and how can we use technology to do
this better. I got the Treasury and it was shocking.
(16:50):
We process one point five billion payments a year, and
five hundred million of them, one third of them did
not have what's known as a task Treasury accounting symbol
on them, and people are just hitting sin sin Sin.
And it wasn't a gigantic leap just to try to
get people to do their jobs.
Speaker 2 (17:11):
This has big implications for how people view credible economic data,
but also the markets as well. So let's talk about
financial markets. In the bond market, you've always been a
ten year man. The spread between the two year and
the ten year, I think has been really stable over
the last several months, where we've start to see some
leakages between tens out of thirties. That thirty year bond.
As a tracery secretary, I remember you referring to yourself
(17:32):
as the nation's top bond salesman. What's the usefulness of
issuing a thirty year bond when it feels like at
the moment we're outsourcing borrowing cost to what happens in Japan,
what might happen in the UK, what happens in Europe.
What's the value of issuing that.
Speaker 1 (17:47):
That's a great question, Jonathan, And look, we are committed
to keeping inflation expectations glow and this is a global phenomenon,
whether it's the ten or the thirty. The US tenure
is one of the few ten years where the yield
is down on the year, So that tells me that
there's credibility from Treasury, credibility from FED, that the inflation
(18:12):
expectations are well anchored. But there's definitely leakage from the
Japanese have an inflation problem. I've spoken to Governor u Wada,
my opinion not his. They're behind the curve, so they're
going to be hiking and they need to get their
inflation problem under control. In Germany, we saw a substantial
(18:33):
spike in German rates in the past week also, so
you know, our thirty year is getting dragged along with that.
We've been refilling the Treasury General account, which during the
debt ceiling standoff got run down, and we're doing that
with short term bills.
Speaker 2 (18:52):
Do you see more reason then to pare back on
thirty year issuants? With all this in mind, and this
is a change again for you now and to see
as you look at these developments and rethink, how are
your thoughts on that matter evolving?
Speaker 1 (19:02):
Yeah, they are evolving, and we'll see where things go.
I do think as we bring down this big deficit
that we inherited, I think that the US, that the
entire US curve, can have a parallel shift down relative
to the rest of the world.
Speaker 2 (19:21):
Do you think you can work with the Federal Reserve
on this matter? So if we take the weighted average
maturity of FED holdings at the moment, believe that's running
it about nine years, the issuance of the average maturity
about standing bills notes bawns, that's closer to six. Do
you need to narrow that gap a little bit?
Speaker 3 (19:37):
Yeah.
Speaker 1 (19:38):
Look, I don't think the FED needs to get back
into the large scale asset purchase business, and we've had
very good demand, especially in the belly of the curve,
which is where asset managers seem most interested.
Speaker 4 (19:54):
Now, when it comes to other things you're working on
in Washington, D C. There's still this stock band legislation
that has been circulating around Congress. Is a president prepared
to sign that bill.
Speaker 1 (20:05):
I don't think we have the perfect bill yet, but
I am going to start pushing for its single stock
trading band because it is the credibility of the House
and the Senate that you look at some of these
eye popping returns, whether it's a Representative Pelosi, Senator Widen,
(20:28):
every hedge fund would be jealous of them, and the
American people deserve better than this. People don't shouldn't come
to Washington to get rich, They should come to serve
the American people. And it brings down trust in the
system because I can tell you that if any private
citizen traded this way, the sec would be knocking on
(20:48):
their door.
Speaker 4 (20:49):
Do you think it needs to extend? They'll beyond single stocks?
These individuals can still have ets and other products.
Speaker 1 (20:55):
Well, what I used to do my old firm was
you could buy ETFs had to be widely held ETF
so they couldn't be of a small size, and there
was a long holding period. The House and the Senate,
they're supposed to be working for the American people, their constituents.
They're supposed to be making law and they shouldn't be
(21:18):
trading every day. I'm not going to name names, but
there was one person in Congress who had twelve or
thirteen hundred trades two years ago, and my hedge fund
didn't have that many trades.
Speaker 4 (21:29):
Do you think it needs to also extend to the
executive branch and include the president and the vice president?
Speaker 1 (21:34):
I think that they would be fine on the single
stock and the holding period.
Speaker 2 (21:41):
Maybe they're just great tritus. As the secretary. Do you
not think they're just great tritus.
Speaker 3 (21:46):
It is a statistical anomaly.
Speaker 1 (21:48):
You know. Warren Buffett wrote an essay once and he
talked about the zoo and Graham and Dodville, and if
all the orangutangs.
Speaker 3 (21:55):
In that zoo kept typing the Bible, then there's something
going on in that zoo.
Speaker 1 (22:00):
There is something going on on Capitol Hill in terms
of information.
Speaker 3 (22:04):
Leakage that is statistically they are not sound.
Speaker 2 (22:10):
Do you think those restrictions should extend to the executive branch?
Speaker 3 (22:13):
Sorry?
Speaker 2 (22:13):
Do you think those restrictions should extend to the White House?
Speaker 1 (22:15):
Well, I mean they already extend the Treasury.
Speaker 2 (22:19):
Is the president about this? Is he comfortable?
Speaker 1 (22:23):
Well, the presidents come out and favor this, and King
Jefferies is in favor of this too. And I can
tell you if if I were Congress and I were
looking at my ratings with the American people, I would
be pushing this because again, it's an extractive class. You
should not come to d C expecting to line your pocket.
(22:44):
You should come to d C to do the people's business.
Speaker 2 (22:47):
We couldn't agree more. And it's been greatly disappointing to
see that there's tight restrictions on how journalists trade than
over some members of Congress in Washington.
Speaker 3 (22:54):
Yeah.
Speaker 1 (22:55):
I mean again, it is one of the things that
I think we can do to get trust back into
the system.
Speaker 2 (23:03):
Just wanted to finish on the President's visits to Alaska
going into weekend. Emory's going to be that what do
you think we can accomplish this weekend.
Speaker 1 (23:09):
I think the President has been thinking about this a
long time. He believes, as do I, that this war
never would have started if he had been president, and
he is committed to ending the bloodshed, but not in
any calls, not in any costs. I think everyone has
(23:31):
been frustrated with President Putin. We expected that he would
come to the table in a more fulsome way. It
looks like he may be ready to negotiate. And we've
put secondary terriffs on an Indian on the Indians for
buying Russian oil, and I could see if things don't
(23:51):
go well, then sanctions or secondary terriffs could go up.
Speaker 4 (23:56):
What about China, They're the main purchasers of Russian crude.
Speaker 1 (24:00):
Again, I'm not going to get ahead of the President,
but the President is the best at creating leverage for
himself and he will make it clear to President Putin
that all options are on the table.
Speaker 4 (24:13):
So sanctions can go up, or they can also be loosened.
Speaker 1 (24:17):
Sanctions can go up, they can be loosened, they can
have a definitive life, they can go on indefinitely. There's
this Russian shadow fleet of ships around the world that
I think we could crack down in them. But a
Marie and Jonathan, the one message I would leave you
(24:38):
with the President Trump is meeting with President Putin, and
the Europeans are in the wings, carping about how he
should do it, what he should do it. But the
Europeans need to join us in these sanctions. They need
to The Europeans need to be willing to put on
these secondary sanctions. I was at the G seven meeting
(24:58):
in Canada with President Trump, and the Europeans kept talking
about Senator Graham's bill to do the secondary tariffs. And
I looked at all the leaders around the table and
I said, is everyone at this table willing to put
a two secondary tariff on China? And you know what,
(25:20):
everybody wanted to see what kind of shoes they were wearing.
Speaker 2 (25:22):
I imagine the Germans went very quiet, and that's been
a problem for a long time.
Speaker 1 (25:26):
Yeah, it's put up her, shut up time. The president
is creating his own leverage. We need the Europeans to
come in and help create more leverage.
Speaker 2 (25:35):
Mister secretary. I'm appreciate your time. Good to see if
you're enjoying this. I get the fill that you're enjoying this.
All right, it's good to see it. You seem happy.
Speaker 3 (25:42):
I think things are going well.
Speaker 2 (25:54):
Janette Love, I should take us at bad Company. The
team I've had rights in the following to bank. Now
it's not about whether it's a count rights in September,
but by how much. Jeannette joined us now from more Jenet,
welcome to the program. Also a big question about who's
going to be on the committee by the time we
get to the middle of September, and whether step and
Myron can be confirmed by then. What are you telling
clients about the prospects of that happening.
Speaker 5 (26:12):
Yeah, I mean, so.
Speaker 6 (26:13):
This is something that's kind of interesting because we think
that the Trump administration would definitely like him to be
on the FED Board before the September meeting. And the
question also is do they want him on the board
before September twelfth, when the dot plots and the forecast
have to be submitted. So if the Senate's not coming
back until September second, We've looked at prior cabinet appointees
(26:34):
early on in this Trump administration, as well as Murn's
appointment earlier this year to the Council of Economic Advisors,
and in general it takes about thirteen.
Speaker 5 (26:44):
Days for a cabinet member to be appointed.
Speaker 6 (26:47):
So if the Senate comes back on September second, that
does give enough time for him to be on the
FED Board by the September sixteen, seventeenth meeting, but it
may not give him enough time to be in time
for September twelfth, might mean that the Senate Banking Committee
has to come in earlier to get this confirmation process moving,
to at least hold the hearing in advance, so then
they can start moving to a committee vote when they
(27:09):
come back officially from recess, and then move to the
Senate floor.
Speaker 4 (27:12):
Jendan, how likely is that they're going to move this quickly?
Speaker 3 (27:15):
You know?
Speaker 6 (27:16):
I think it's might depend on whether or not there's
pressure coming from the Trump administration if he asks them
to treat this like a early cabinet member early on
in the administration. Obviously, Marco Rubio was confirmed quite quickly
with only I think five days. So if it's going
to depend if there's some pressure there to actually get
this moving, since obviously that's not usual for members to
(27:36):
be called back into recess called back from recess early.
But I think that's where there's going to have to
be that pressure point is whether or not that occurs
to get the Senate to actually move and try to
advance this a little bit more quickly.
Speaker 4 (27:47):
And when it comes to Steve Meyron, he has the
benefit of already going through this process. What's the likelihood
of EJ and TONI getting confirmed to run BLS?
Speaker 6 (27:56):
Yeah, I mean, I think that there's probably going to
be deference to the administration about getting his appointees in place.
We haven't really seen any major pushback significantly from.
Speaker 5 (28:08):
A few Trump nominees overall.
Speaker 6 (28:10):
And I think the other thing to kind of watch
too with the Fed appointment is watch a Senator like
Tim Tillis, Tom Tillis and see if he might actually
start to raise some questions. Does he also have a
no vote in committee that could slow down the process.
Speaker 5 (28:26):
I think that's something else to kind of watch out for.
Speaker 6 (28:28):
But I think if in terms of the BLS appointee,
there's going to be an effort to try to get
his appointees to the positions. That's obviously been a fight
within the Republicans and the Democrats in the Senate and
whether or not they should have abandoned recess in the
first place, because there's been such a lag in getting
some of these nominees confirmed.
Speaker 4 (28:47):
When it comes to Antony, though, there's been a lot
of pushback in conservative economic circles about his nomination, and
when you look at who's on the Senate Committee on Health, Education, Labor,
and Pensions, it's some Republicans where he cannot lose a
single vote that hasn't had a problem with voicing their
concerns with the Trump administration. They gave Bill Cassidy, Ron
Paul Susan Collins, Lisa Murkowski. Do you think he really
(29:09):
can get out of committee?
Speaker 6 (29:11):
Well, I think, obviously, as we've seen in the past,
what happens in the hearing is most important.
Speaker 5 (29:16):
So if there's information.
Speaker 6 (29:18):
That comes up with the hearing, that could change how
those senators view the nominee and their ultimate vote.
Speaker 5 (29:23):
On the decision.
Speaker 6 (29:24):
But as we've seen in the past, some of these
same senators have had to issues with prior Trump nominees,
but then when push comes to shove, they actually do
vote them through committee, and they do vote them through
on the floor. So I think the hearing will be
quite instructive, but it's always something to kind of keep in.
Speaker 4 (29:38):
Mind, given even conservative economists think this individual's highly bias
and politicized. Our clients telling you that they're concerned about
the accuracy of the data going forward.
Speaker 6 (29:52):
I think this is starting to become a conversation. We're
starting to hear some questions about whether or not there
could be some politicization coming now with a number and
whether or not people can feel like they can trust
the numbers as much.
Speaker 5 (30:03):
It's not an overt.
Speaker 6 (30:04):
Concern at this point, but I think that that's obviously
going to be something that's going to be in the
back of investors' minds just thinking about whether or not
there is some option going down the road, and now
that we've had this argument come up with the past
BLS commissioner and with a past jobs data, whether or
not there could be some sort of either manipulation or
(30:25):
the ability to put someone in there who could have
a sway on the data.
Speaker 5 (30:29):
Janie, I would think that that's what you.
Speaker 2 (30:30):
Ask if I got to jump in forgive me when
you engage with clients, are they worried about this? Is
there something that comes up repeatedly or something the comfortable
with at the moment.
Speaker 6 (30:39):
At the moment, I think it's not a significant concern.
I think obviously how things play out over the next
couple of months will make will have a bigger impact.
But of course you are hearing questions just about whether
the process might have a change now that we're seeing
some movement, we're seeing a shake up at the BLS,
things of that nature. Obviously, there are also some client
(31:00):
who think that, you know, some reform is necessary. So
I think that there's also kind of like let's do
a little bit of a wait and see approach to
this and see what might happen as this new individual
comes in.
Speaker 2 (31:09):
Jennet, thank you, appreciate your time as always, Jennet Low there,
Ohstatiga is a bad company. Braz An Selder is a
child swap right of the following, slightly harder services inflation
suggests the possibility the core PC prints will be a
(31:31):
little higher, though September is still clearly on the table
for a federal reserve. Ray Cup Lizenne joins us right
now for more. Lizane, welcome to the program. Some confidence
maybe that we're seeing limited tariff pass through, but maybe
I think recently some nerves emerging that perhaps we're starting
to see evidence of demand destruction. How concerned list are
you about that?
Speaker 7 (31:51):
Well, you know, one thing that I think needs to
be pointed out when you look at what was perceived
to be fairly benign core goods inflation up only about
on and a quarter percent on a year of year basis,
is what the direction has been. So many people forget
that we were actually with core goods. We were in
deflation territory as recently as the second half of last year,
(32:12):
So that's a full three percentage point more than increase
from where we were at the latter part of last year,
where you had core goods in deflation to the tune
of negative two percent. So you've gone from negative two
percent to one and change, and now you've got this
hook higher on the services side. So I think this
kind of data, inflation data, labor market data, you really
(32:33):
need to dig under the surface to get a true
sense of what the impact is as to whether the
FED will cut it depends on the next set of reports.
I think the mapping to PCE suggests you could see
a little bit of a hotter move that doesn't tend
to be as market moving as CPI and PPI, But
(32:54):
that's what I'd be keeping an eye on.
Speaker 2 (32:55):
As Honess. You know, the range of outcomes is still
really really wide. The way things out right now now,
they might change in several months time. We talked a
lot Michael mckeby's on the program earlier, and we were
talking about how much companies were absorbing at the moment
and whether they pass it on in the months to
come or whether they cut costs. Do you think September
is still too early to draw any firm conclusions.
Speaker 7 (33:16):
I think it is too early. But what I will say,
and this has already been under way, and I think
it will continue in the September and thereafter as it
relates to the FED, I think you're likely to continue
to see a wider dispersion of perspectives from members of
the FED, certainly when they're in the federal open mouth
committee mode out there speaking, but even in things like
the Summary of Economic projections and particularly the dots plot,
(33:39):
you're seeing a wider array. We had two descents with
the most recent meeting of the July meeting. I think
that that sort of dissent probability stays relatively high, with
a wider range depending on who the individual is on
that committee expressing their views going forward. So I think
that's kind of the name of the game, at least
in the near term.
Speaker 4 (34:00):
Well, if the tariff impact is mixed under the surface,
when do you think we'll actually see it fully priced in?
Speaker 7 (34:07):
Well, the problem is that this was not you know
a lot of people talked about the inflation impact being
one time in nature, one time price level reset. The
problem is there's no one time as it relates to
the implementation of tariffs. It has been such rifle shot
on off delays terraffs being used as a tool beyond
(34:28):
just raising revenues or improving the trade deficit. So I
think we've got the rolling nature of this. You know,
several years ago we talked a lot about rolling recessions,
so we didn't think you were going to see an
actual economic recession, but pockets of weakness at different times.
I think that's manifesting itself in the inflation data too,
meaning the rolling nature of it, where you see pockets
(34:50):
of impact on the upside, you maybe get some pockets
of offset on the downside, as opposed to anything that
is one time in nature. And I think that will
also continue to be the name of the game because
there isn't anything one time about how we're getting information
on tariffs, and that increasingly makes it more difficult for
companies to map out a longer term pricing strategy.
Speaker 4 (35:13):
Well when it comes to the FED, do they even
have the luxury of waiting to see the full impact.
If the labor market Lausanne is weakening.
Speaker 7 (35:20):
That would be the primary reason why September is on
the table. The FED is essentially inferred, not that they're
ignoring the inflation side of their mandate, but the trigger
to move back to easier policy, per what they did
last fall, is probably more on the labor market side
versus the inflation side, unless you have a major, major
spike in inflation from here. That's precisely what happened last
fall when the Fed did launch what became only three
(35:43):
rate cuts, but they launched it with a fifty and
that was because of pretty significant concerns turned out to
be somewhat unfounded, but significant concerns about the labor market.
So the inflation data is going to be parsed like
it always is, but I think it's the labor market
side of their mandate that will ultimately be the trigger
for what they do.
Speaker 2 (36:02):
And by how much. Listen, let's push some of this
conversation into the equity market record, Hon, the SMP record. Hon.
Then that's that one hundred as we kick off Wednesday morning.
Beneath the index. How much adjustment are you seeing in
individual equities to the prospect of so called demand destruction?
When you hear about companies like Kava, like Sweet Green
facing a bit of a consumer slowed down.
Speaker 7 (36:21):
Yeah, there's a lot of consolidation happening under the surface,
which if you're only looking at at what the indexers
are doing, I think you don't pick up on that.
I've talked to a lot of people who say, oh,
TeX's the best performing sector. It's actually the second best
performing sector on a year to day basis, comm services
being the other. But they're often lumped together. But each
of those sectors only has about a rounding sixty percent
(36:44):
of their stocks in the same kind of breadth pattern
as the index overall. In the case of the Nasdaq
one hundred all time highs, but less than fifty percent
of the stocks are at all time highs. You've got
only actually, I think it's less than thirty percent of
stocks within the S and P five hundred have outperformed
the index itself over the past month, and you don't
(37:06):
get much above a third of the index over any
trailing period one year, one month, three months, six months.
So there's a bit more weakness and rotation and churn
happening under the surface. It's somewhat similar to what we
have seen in periods in the past, both in twenty
twenty three and twenty twenty four, and I think the
fuller story, not the real story, but the fuller story
(37:29):
maybe getting told under the surface of these cap weighted indexes.
Speaker 2 (37:33):
Do you think that narrow breadth and high current centration
is necessarily something to be concerned about? Zan Then that's
the ultimate question for a lot of people. I hear
people point it out all the time, and then we
just keep grinding out new old time highs. Is it
necessarily problematic?
Speaker 7 (37:47):
Note if the market continues to do well, But if
you look at the early part of this year, the
period between February nineteenth, which at that time was an
all time high and the intra day low on April ninth,
those areas of the market, the megacap, tech, tech related
mag seven, whatever categorization you wanted to use, those were
the areas that had the bigger draw downs relative to
(38:09):
the index. So that that period between mid February and
early April was one where the indexes were dragged down
even more. But you did have some ballasts within the
market in areas that had not done well. So yeah,
you're absolutely right. If the market continues to do well
and momentum is on the market side. I think the
pain trade is still probably higher, but that could be
(38:33):
a situation that unfolds fairly quickly and akin to what
we saw in that mid February to mid April period.
Speaker 2 (38:38):
That sound I appreciate it. Time As always, this sounds
some us that a child swamp. I think what joined
around the time boat by another Yankees fan? Is that right?
Speaker 8 (38:56):
As soon as I saw the mug, I said, why
aren't you disc.
Speaker 3 (38:58):
I was trying HIDEX.
Speaker 4 (38:59):
I'm pretty sure it's our best at treasure secretaries are
red SOX fans, so.
Speaker 2 (39:02):
I don't want to.
Speaker 4 (39:03):
I don't want to antagonize him, you know.
Speaker 2 (39:05):
On during this entire interview, Tom force Selli of PGM
Joints is around the table with Tomking.
Speaker 3 (39:09):
Morning, get good to see you.
Speaker 2 (39:10):
It's going to see it. Let's talk about the state
of this economy. Let's start with the labor market first.
Where are we?
Speaker 8 (39:15):
I mean, you know, I've been on this program many
times for many months saying there are all these cracks forming,
and that is as true today as it was, you know,
sort of six months ago when we were driving that
point home.
Speaker 3 (39:25):
So nothing has changed for us in that regard.
Speaker 8 (39:27):
In fact, what I would say, is the payroll report,
the much maligned recent pay roll report. To me, that
was just a manifestation of all the other things that
had been going on prior. So I don't, I wouldn't.
We weren't all shocked and bothered by it. I think
it was just sort of revealing what was already in place.
Speaker 2 (39:42):
So let's stay on payrolls. Yeah, step down, clearly, very obvious.
We've gone from a decent clip of gains to something
closer to stall speed. I want to understand from your
perspective whether you think that cements this idea that we've
seen a technical turn, whether it's more evidence for a
structural shift, something developing on the supply side.
Speaker 8 (39:56):
Yeah, so we think that things are slowing down, right,
I mean I think that's an important idea. Like, we
don't think we're like cyclically, we're about to slip into
a recession. Instead, what we've been saying is we're in
the sort of muddle through backdrops, and we would define
that as sort of, like you a one percent ish
kind of growth, one to one and a half percent growth,
And so that report is actually very consistent with our
view in that regard. So when I think about FED
response function. We actually think the Fed they are supposed
(40:18):
to cut. I mean, I don't think that's for us.
That's been our long standing call that they would start
cutting again in September, and so we feel good about
that overall. So well, sorry, we feel good about the
call overall. I mean, being slowing down is never obviously
agree to state you feel.
Speaker 4 (40:32):
Good about the call of the FED cutting in September.
The Trager secretary is calling for fifty basis point.
Speaker 2 (40:37):
Yeah, So look, do I have sympathy for that idea?
Speaker 3 (40:40):
The answer to that is, tell me.
Speaker 8 (40:42):
What the payroll report is going to look like, you know,
in a month from now or whatever it is, a
couple of weeks from now, because I think you're gonna
need evidence for that. If it's just a sort of
another another really soft report like we saw, I don't
know if that's the evidence enough to go fifty. But
you know, to me, it's it's sort of semantics in
some way, because whether they go fifty or twenty five,
I think they're pulling forward a lot of the cuts
that they sort of were prt that the FED was
(41:03):
pricing in over the balance of the next year and
a half.
Speaker 4 (41:05):
If they go fifty though, what signal does that mean
for how the Fed thinks of the economy right now?
Speaker 8 (41:10):
Yeah, I think it really drives home that, look, the
Fed already and I feel like a lot of us,
me included, I feel like a lot of us forget this.
The Fed already had cuts teed up, right, They already
were expecting two cuts this year, so they were expecting
a softer economic backdrop. And so I think in that context,
it's just very in keeping with what they're viewing. Show
me another really poor payroll report it I'll give you
(41:31):
the evidence for Hey, maybe they need to do more,
but I think for right now it's pretty consistent.
Speaker 2 (41:35):
We get one more papers report. I've got no idea
what Senate. We'll get that on September fifth. A week later,
they don't tell you, absolutely cluarless to be a less
it share nothing with me. A week later we'll get
the CPI report. I want to finish on inflation, and
turns to that side of the dual mandate. Limited tariff
passed through relative to what was expected? Do you think
it remains that when the months to count?
Speaker 8 (41:53):
No, Actually, I think you're seeing limited passed through now
because companies did a really smart thing. They built inventories
in a really meaningful So that's sort of buffering the
sort of the flow of the tariff inflationary impulse into inflation.
But I'll give you one really interesting thing to think about.
You know, it's funny we're having this conversation about our
payrolls calculator, right, Obviously we can have the same conversation
(42:14):
about inflation inflation. There are so many flaws in the
calculation of inflation. So if I look at if I
swap out something as simple it's not that it's so
simple because it's a big component.
Speaker 3 (42:24):
But if I swap out.
Speaker 8 (42:25):
Oeer for you know, sort of a market measure of
rents like apartment list.
Speaker 3 (42:32):
Inflation is running at a one percent pace right now.
Speaker 8 (42:35):
I mean, I think all of this sort I think
that to me is the right way of thinking about
what the starting point for.
Speaker 2 (42:41):
It Isn't that giving you a lead on what you
think ultimately is going to happen with service inflation down
the road?
Speaker 3 (42:46):
Yeah?
Speaker 8 (42:46):
So I think from our perspective, what it means is
that you are going to get this lift higher in inflation.
But you know you so what so you lift sort
toward the target as opposed to being above target now
and going even further above target. I mean, I think
if you look at inflation with just making some very
modest and I think very reasonable adjustments, you probably want
to getting back to target.
Speaker 2 (43:04):
This situation that is not something that you think will
constrain the fensibility to reduce right and respect to softness
in the light.
Speaker 8 (43:10):
Yeah, I don't. I mean, I think the FED has
the right line on this. I think it is going
to be a temporary sort of one time shift time
you say.
Speaker 2 (43:15):
The fedesi right line, some fedid vigils at the FED, Yes,
have the right line. Yes, I don't know where the
whole committee is. Where's the whole comittee on this?
Speaker 8 (43:21):
Yeah, I mean, and as you would expect, there's just
a divergence of views, I think, seemingly at this point.
But it does seem that the sort of the momentum
is drifting toward people having the right line, which is
to say, cutting in September.
Speaker 4 (43:32):
If we're not going to see the full tariff impact,
say till twenty twenty six. Can you see a scenario
with a FED is cutting at the end of this year,
maybe starting in September and then having to think about
hikes next year.
Speaker 8 (43:42):
Yeah, so this is a really important idea in the
context of this is not COVID, right. I mean, I
think people are looking at this sort of this this
drift that we're going to see higher in inflation, and
I think that, you know, they're scarred. I think including
FED officials is specifically pell I think right called the
transitory So I think they're scarred because of the whole
you know, let's call it transitory mistique. But it's this
(44:04):
is not that you know, we imply people with mountains
of cash through a helicopter drop of money. We didn't
create a pent up demand scenario by shutting down an
otherwise really healthy economy and then turning back on.
Speaker 2 (44:13):
So I think the setup is so different, right to
see it's going to see you, sir, good same time.
Thank you for being here. Tom por Sei of PGM
Fixed Income. This is the Bloomberg Sevenants podcast, bringing you
the best in markets, economics, antient politics. You can watch
the show live on bloomblog TV weekday mornings from six
am to nine am Eastern. Subscribe to the podcast on Apple, Spotify,
(44:36):
or anywhere else you listen, and, as always on the
bloom blog, terminal and the Bloomberg Business app.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and am Marie Hordern. Join us each
day for insight from the best in markets, economics, and
geopolitics from our global headquarters in New York City. We
are live on Bloomberg Television weekday mornings from six to
nine am Eastern. Subscribe to the podcast on Apple, Spotify
or anywhere else you listen, and as always on the
(00:33):
Bloomberg Terminal and the Bloomberg Business App. We've got a
lot to discuss President Trump extending trade talks with China
for another sixty days as both countries continue to win
out key differences. Joining us now to discuss that and
a whole lot more. The seventy Night Secretary of the Treasury,
Scott Besson, mister Secretary, good morning, good to see it.
Speaker 3 (00:50):
Warren John.
Speaker 2 (00:51):
You're a cover model. Now you're famous. Can we get
that front cover up for Business Week this month? Mister Secretary?
I remember when you were just Scott Besson and we
could go for breakfast to get the three of us
and no one would bother you. What happened.
Speaker 1 (01:02):
I don't know, but I hope it's not the curse
the cover because it tolf his Historically, the being on
the cover is a curse.
Speaker 2 (01:12):
So well, the secrety market is not curse that keeps
grinding out all time highs. There is some confidence that
we're selling some issues on the trade front. There's one
issue that came up this week that we'd love to
hear from you about, and that's in Vidia. Where did
this agreement come from? You've been quite innovative this administration
on trade issues. Where did this come from? Who came
up with it?
Speaker 3 (01:32):
The President?
Speaker 1 (01:33):
The president, As I tell everyone, the President is one
of the most open minded people I know. He does
everything at first principles. Why do we do things this way?
Why shouldn't we do it the other way? And you know,
I think that this is a very unique solution allows
in Nvidia to expand into China.
Speaker 3 (01:53):
It can make in Vidia chips.
Speaker 1 (01:55):
The bellweather for Chinese technology, and then the US taxpayer
gets a share of that.
Speaker 2 (02:02):
Key was unique? Is it unique to Invidia an empty
or is this a model for other companies?
Speaker 1 (02:08):
I think we could see it in other industries over time.
I think you know right now this is unique, but
now that we have the model and the beta test,
why not expand it.
Speaker 4 (02:20):
What do you say to people who think we're putting
a price on national security concerns by basically selling export licenses.
Speaker 1 (02:27):
There are no national security concerns here. We would not
sell any of the advanced chips. So the H twenties,
I don't know whether you say there are four or
five six levels down the chip stack. What we do
not want here, Anne Marie, is for Huawei to have
a digital Belton road. So we do not want the
(02:48):
standard to become Chinese across the world or even in China.
Speaker 4 (02:53):
Well, we have exclusive reporting that Beijing is now sending
out letters to firms saying, actually, shrug off those H
twenty and use our domestick champions. Is this something you
might discuss with your counterpart.
Speaker 3 (03:04):
Sure, we can discuss that.
Speaker 1 (03:05):
But it also tells me that they are worried about
the Nvidio chips becoming the standard in China. Look In
video is an incredible product. A lot of the technology
in China is they're piggybacking, And I'll use piggybacking as
a kind word for acquiring our technology do you mean
(03:28):
stealing your words? And yes, that's what I mean.
Speaker 3 (03:32):
And the.
Speaker 1 (03:34):
In video Jensen Wang just stays years ahead of them.
Speaker 4 (03:38):
Criticism came from the Wall Street Ternal Editorial Board though
about this new unique policy. They say it's a step
toward government control of private business. Are you concerned some
of these polies are starting to look like the country
you're actually trying to de risk from central planning basically
out of the old No.
Speaker 1 (03:55):
No, no, no, not at all, because where we got
was with this unfettered trade. We did not have secure
trade or fair trade, and so now we are trying
to make it secure. So you don't want to We're
not sending out the highest level chips, and we don't
(04:16):
want to sell everything to everybody. So there is a
need for intervention. And you know, the Wall Street Journal
just let her rip with kind of a bunch of grumpy
old men over there.
Speaker 3 (04:29):
I was with them yesterday.
Speaker 2 (04:31):
This is going to raise some revenue. What do you
plan to do with it?
Speaker 3 (04:34):
Paid on the debt.
Speaker 2 (04:36):
It's all going to go to play down the debt.
Because we have heard some stories about the money going
back to consumers, going back to citizens of the United States, taxpayers.
Speaker 1 (04:43):
Well, President President Trump's talked about that, and look at
these the bottom fifty percent of wag journers in the
One Big Beautiful Bill are getting a lot of money back.
No tax and tips, no tax on over time, no
tax on Social Security loans are going to be tax deductible.
So I think if we could make a substantial dent
(05:06):
in the debt repayment, then we could talk about a
program like that.
Speaker 2 (05:10):
Could you share with us the kind of numbers you're
thinking about at the moment, just in terms of revenue raising,
and not just the Nvidia deal. I'm talking about the
terraffs on top of that. What are we raising at
the moment month on months.
Speaker 1 (05:18):
Well, Johnson, I've been saying that we could hit three
hundred billion this year, and I think that number is
going to be low. I think I'm going to I
always like to come in low and then surprise on
the upside. But I think in the next days or
weeks I may have to move that number up substantially.
Speaker 2 (05:37):
You've heard the debate playing out on Wall Street now
for a number of months. Who's going to pay the teriffs?
By definition, the importer will pay the tariff. The more
important question here is who absorbs the costs, whether it's
the foreign supplier, whether it's the domestic company here in
the United States, or the end consumer. We've got some
data yesterday, You've seen it. We've all looked at it.
Limited tariff pass through relative to what was expected. Because
(05:57):
of that, a lot of people are suggesting that maybe
companies are absorbing costs in a way we didn't anticipate.
Perhaps the past through will be more muted in the future.
Are you comfortable with where things are now or do
you think things might rebalance in the months to count.
Speaker 1 (06:10):
Jonathan, I think your framing there is exactly right, exactly right,
because that obviously that the tariff itself is paid at
the port, but what if the producer in the other
country has lowered their price the ten fifteen to twenty percent,
so that there is no price change with the tariff.
(06:30):
And obviously our largest trade deficit is with China, and
China does not have the same profit objective that other
Western democracies do, so that is an employment agency, and
my view has been that they would continue to eat
the tariffs. They are doing that, so I think what
(06:51):
we've seen is likely to continue happening. I also think
there are probably a lot of corporate margins that got
very fat during COVID. We're seeing a return to normal
pre COVID margins.
Speaker 2 (07:04):
You see this as some kind of redistribution between corporate
America and maybe the consumer Main Street and Wall Street.
Speaker 1 (07:10):
I think this administration is all about Main Street, but
Wall Street's at a new high. So it's this fault equivalency.
It's not either or I tell everyone, I call it
parallel prosperity. Wall Street's done great, Main Street can now
do great.
Speaker 2 (07:27):
Wall Street might do even better if the Federal Serve
cuts interest rates. The President was pretty clear yesterday put
out this comment, Jerome too late, pal must now lower
the interest rate. Is it reasonable to give them a
bit more time to draw conclusions about what's happening here?
Speaker 1 (07:41):
Well, I think what we could see is that, let's
first of all, what if the BLS data had been
the higher quality and we'd had those numbers, Jonathan. So
if we'd seen those numbers in May in June, I
suspect we could have had rate cuts in June and July.
(08:01):
So that tells me that there's a very good chance
of a fifty basis point rate cut, and I think
President Trump is very good at giving these nicknames. And
I think the reason that the Jay Powell gets a
nickname too late is because he wants to go into
a series of rate hikes. He's not willing. He's not
(08:23):
Alan Greenspan, who is very forward thinking. They try to
be more data driven, which I think is a mistake
because I think we are going back into an economy
like we had in the nineties, So you know, it's
just very old fashioned thinking. But I do think we
could go into a series of rate cuts here, starting
(08:43):
with a fifty basis point rate cut in September.
Speaker 4 (08:46):
Fifty basis rate cut in September. Does that signal that
the economy, though, is not doing well.
Speaker 1 (08:52):
That signals that there's an adjustment and the rates are
too constrictive if you look at it any model that
the if you we should probably be one hundred and
fifty one hundred and seventy five bases points lower. So
I think the committee needs to step back. I think
(09:15):
probably one of the most politicized governors just went off
the board and that she was very very political, I believe,
and I think that.
Speaker 2 (09:29):
Does she do that gave you that impression I'd love
to know. Sorry I mentioned you're referring to Governor Kugler.
What does she do that game?
Speaker 1 (09:35):
I think there's a lot of inside baseball. And look,
Governor Kugler, you read what she was saying when Kamala
Harris was running, that we needed rake cuts, we needed this,
We got to phone the runway and then all of
a sudden it was hard to know whether we know TDS.
Speaker 3 (09:53):
Was it Trump that.
Speaker 1 (09:55):
Dimension syndrome or Trump derangement syndrome or tariff arrangement syndrome.
Speaker 2 (10:00):
You get the opportunity to remake the Federal Reserve. The
president gets the opportunity to remodel reshape the Federal Reserve.
And I'm not talking about the remodeling that maybe the
current chairman's going through. We'll talk about that another time.
I want to talk about the complexion and character of
the committee, the changes that you're making at the moment.
Stephen Maron, let's start with Stephen. How quickly can you
get more and confirmed?
Speaker 1 (10:19):
We'll see. The President has great sway with Leader Thom.
Leader Thom has been a great partner during the tax deal,
and I think that he would like to see Stephen,
who I've known for a long time, get on there
as soon as possible. So I'm hopeful about the September meeting.
And Jonathan, the President's concerned about the building and those
(10:43):
massive costs overrun, which just tell you that there is
no accountability at that organization.
Speaker 3 (10:49):
There's no oversight in terms of the spending.
Speaker 1 (10:52):
But the President and I are both concerned about the
foundations of the FED, the foundations of the FED and
how did this happen and why did it happen? And
you know, how did the leadership let it happen.
Speaker 4 (11:04):
When it comes to Director Myron, do you expect him
to stay on past the January term that expires from
Coogler seat?
Speaker 3 (11:11):
I wouldn't expect that.
Speaker 4 (11:12):
So who are some names you're thinking of the Cooglar seat?
Because everyone has been focused on who is going to
fill the chairmanship role? Who are you thinking to fill
that extra seat?
Speaker 1 (11:21):
Well, e Marie, we're working on the big list right now.
I think they're going to be a couple more names
revealed today. They're going to be private sector names. So
we had a series or a list of current FED members.
We're going to have some private sector very well respected,
(11:41):
very well respected people and then we will get to
the second seat.
Speaker 4 (11:48):
Can you give us some names, a little bit of
a tease, maybe people that have been on this program.
Speaker 1 (11:52):
Well, I just did tease telling you there'll be some
private sector names.
Speaker 4 (11:56):
Okay, when it comes to the FED chair, though, can
you give us a sense of how many names you're
actually thinking about.
Speaker 3 (12:01):
Well, I'm going to interview.
Speaker 1 (12:03):
I'm going to cast a wide net ten to eleven people,
and then there'll be a group of us who are
meeting with them, and we want to talk about monetary policy.
We want to talk about regulatory policy, which is very,
very important because the FED step I think bigfoot of
the other regulators. The Fed's one of three regulators, Federal Reserve,
(12:25):
OCC and FDIC, and I think that they need to
understand that they are one of three.
Speaker 3 (12:34):
And then the.
Speaker 1 (12:35):
Third is the institution itself, which I think is what
President Trump has been focused on quite a bit too.
Speaker 4 (12:41):
After you do this process, how many names are going
to give to the President and when does he start
those in person interviews?
Speaker 3 (12:47):
We don't have a timeline.
Speaker 1 (12:48):
By putting Stephen Myron in that gives us more time,
and again, I want to cast a wide net. The
President's very open minded before he chose A Powell. Janet
Yellen was interviewed, John Taylor was interviewed. Two of them
couldn't have been more different, so they were under consideration.
Speaker 2 (13:11):
I give you credit for coming up with a really
credible list to replace the frontal Reserve chair, Jake pab
without a doubt. I think most people that come on
this program agree with that. What I want to talk
about is the BLS now because there's some controversy around
this pick. I'm sure you've heard some of the concerns.
Speaker 3 (13:22):
E J.
Speaker 2 (13:23):
Anthony had said the following earlier this week before getting
the pick from the President. Until this issue with Payrose
is corrected, he said, quote, the BLS should suspend issuing
the monthly jobs report, but keep publishing the more accurate,
though less timely, quarterly data. We'd love your thoughts on this.
Is that something you'd support, not at all?
Speaker 3 (13:40):
And look what somebody says when.
Speaker 1 (13:43):
There are are private citizens is very very different.
Speaker 3 (13:47):
You know. I called for a shadow fed chair.
Speaker 1 (13:50):
And now that I'm in the seat, I don't think
we need to do that. And I was there when
EJ was interviewed, and he is incredibly qualified, and I
think The most important thing here is that we get
back to the integrity of the numbers, because it just
became okay, just like so many things in our government,
(14:12):
to get sloppy. And ej is precise. He has a
doctorate in economics. I think President Trump put a lot
of thought into this. He was very thorough in his
questioning of him. So what we want is good data,
because you can't make good decisions without good data.
Speaker 3 (14:33):
As I just said, is very likely.
Speaker 1 (14:35):
That the FED would have been doing something else in
June in July if they had had this data.
Speaker 2 (14:43):
Well, let's talk about the data we've got and the
process we have, and how we might improve that process.
As you know that data is prone to big revisions
in your career on More Street, we've all been dealing
with this for a long long time because of the
process and the lack of time. And the response is
it is constantly reviewed month on month as you get
more responses from America. How can we improve that process
(15:03):
so this data is less prone to these big revisions.
Speaker 1 (15:06):
Well, I've been in government now for seven months and
I can tell you that if we take the irs,
which I'm now ahead of, they've been working on a
tech upgrade.
Speaker 3 (15:17):
Since nineteen ninety. Nineteen ninety, we.
Speaker 1 (15:19):
Brought in a young person to fix that. The tech
upgrade has been underway for longer than he is old,
so he wasn't born when the tech upgrade started. So,
you know, I just think like this idea that we're
accepting this mediocrity in government. Why don't we bring things
into the twenty first century? Why don't we bring it
(15:42):
into the digital age? Because I don't know about political
bias one way or the other, but what I can
tell you is that the sample response size kept getting
smaller and smaller, and then they they filled in the cells.
Anytime you get judgment versus data, then things become qualitative
(16:04):
and not quantitative. And I think EJ is going to
do a great job of bringing back quantitative standards. I
think he like these attacks in the press. I think
they're all wrong.
Speaker 4 (16:16):
It's not in the press, it's even within conservative economic
circles that don't think that he is credible to run
the commission. Is the Trump administration open to putting more
resources then to bls, maybe lifting a hiring freez Well
and Marie.
Speaker 1 (16:29):
That's more of a democratic idea that you know, we
need more. It's always money. It's always money. It's New
York City schools, Chicago schools, DC schools. You get terrible outcomes.
I think that he's going to sit back, look at
the process, and how can we use technology to do
this better. I got the Treasury and it was shocking.
(16:50):
We process one point five billion payments a year, and
five hundred million of them, one third of them did
not have what's known as a task Treasury accounting symbol
on them, and people are just hitting sin sin Sin.
And it wasn't a gigantic leap just to try to
get people to do their jobs.
Speaker 2 (17:11):
This has big implications for how people view credible economic data,
but also the markets as well. So let's talk about
financial markets. In the bond market, you've always been a
ten year man. The spread between the two year and
the ten year, I think has been really stable over
the last several months, where we've start to see some
leakages between tens out of thirties. That thirty year bond.
As a tracery secretary, I remember you referring to yourself
(17:32):
as the nation's top bond salesman. What's the usefulness of
issuing a thirty year bond when it feels like at
the moment we're outsourcing borrowing cost to what happens in Japan,
what might happen in the UK, what happens in Europe.
What's the value of issuing that.
Speaker 1 (17:47):
That's a great question, Jonathan, And look, we are committed
to keeping inflation expectations glow and this is a global phenomenon,
whether it's the ten or the thirty. The US tenure
is one of the few ten years where the yield
is down on the year, So that tells me that
there's credibility from Treasury, credibility from FED, that the inflation
(18:12):
expectations are well anchored. But there's definitely leakage from the
Japanese have an inflation problem. I've spoken to Governor u Wada,
my opinion not his. They're behind the curve, so they're
going to be hiking and they need to get their
inflation problem under control. In Germany, we saw a substantial
(18:33):
spike in German rates in the past week also, so
you know, our thirty year is getting dragged along with that.
We've been refilling the Treasury General account, which during the
debt ceiling standoff got run down, and we're doing that
with short term bills.
Speaker 2 (18:52):
Do you see more reason then to pare back on
thirty year issuants? With all this in mind, and this
is a change again for you now and to see
as you look at these developments and rethink, how are
your thoughts on that matter evolving?
Speaker 1 (19:02):
Yeah, they are evolving, and we'll see where things go.
I do think as we bring down this big deficit
that we inherited, I think that the US, that the
entire US curve, can have a parallel shift down relative
to the rest of the world.
Speaker 2 (19:21):
Do you think you can work with the Federal Reserve
on this matter? So if we take the weighted average
maturity of FED holdings at the moment, believe that's running
it about nine years, the issuance of the average maturity
about standing bills notes bawns, that's closer to six. Do
you need to narrow that gap a little bit?
Speaker 3 (19:37):
Yeah.
Speaker 1 (19:38):
Look, I don't think the FED needs to get back
into the large scale asset purchase business, and we've had
very good demand, especially in the belly of the curve,
which is where asset managers seem most interested.
Speaker 4 (19:54):
Now, when it comes to other things you're working on
in Washington, D C. There's still this stock band legislation
that has been circulating around Congress. Is a president prepared
to sign that bill.
Speaker 1 (20:05):
I don't think we have the perfect bill yet, but
I am going to start pushing for its single stock
trading band because it is the credibility of the House
and the Senate that you look at some of these
eye popping returns, whether it's a Representative Pelosi, Senator Widen,
(20:28):
every hedge fund would be jealous of them, and the
American people deserve better than this. People don't shouldn't come
to Washington to get rich, They should come to serve
the American people. And it brings down trust in the
system because I can tell you that if any private
citizen traded this way, the sec would be knocking on
(20:48):
their door.
Speaker 4 (20:49):
Do you think it needs to extend? They'll beyond single stocks?
These individuals can still have ets and other products.
Speaker 1 (20:55):
Well, what I used to do my old firm was
you could buy ETFs had to be widely held ETF
so they couldn't be of a small size, and there
was a long holding period. The House and the Senate,
they're supposed to be working for the American people, their constituents.
They're supposed to be making law and they shouldn't be
(21:18):
trading every day. I'm not going to name names, but
there was one person in Congress who had twelve or
thirteen hundred trades two years ago, and my hedge fund
didn't have that many trades.
Speaker 4 (21:29):
Do you think it needs to also extend to the
executive branch and include the president and the vice president?
Speaker 1 (21:34):
I think that they would be fine on the single
stock and the holding period.
Speaker 2 (21:41):
Maybe they're just great tritus. As the secretary. Do you
not think they're just great tritus.
Speaker 3 (21:46):
It is a statistical anomaly.
Speaker 1 (21:48):
You know. Warren Buffett wrote an essay once and he
talked about the zoo and Graham and Dodville, and if
all the orangutangs.
Speaker 3 (21:55):
In that zoo kept typing the Bible, then there's something
going on in that zoo.
Speaker 1 (22:00):
There is something going on on Capitol Hill in terms
of information.
Speaker 3 (22:04):
Leakage that is statistically they are not sound.
Speaker 2 (22:10):
Do you think those restrictions should extend to the executive branch?
Speaker 3 (22:13):
Sorry?
Speaker 2 (22:13):
Do you think those restrictions should extend to the White House?
Speaker 1 (22:15):
Well, I mean they already extend the Treasury.
Speaker 2 (22:19):
Is the president about this? Is he comfortable?
Speaker 1 (22:23):
Well, the presidents come out and favor this, and King
Jefferies is in favor of this too. And I can
tell you if if I were Congress and I were
looking at my ratings with the American people, I would
be pushing this because again, it's an extractive class. You
should not come to d C expecting to line your pocket.
(22:44):
You should come to d C to do the people's business.
Speaker 2 (22:47):
We couldn't agree more. And it's been greatly disappointing to
see that there's tight restrictions on how journalists trade than
over some members of Congress in Washington.
Speaker 3 (22:54):
Yeah.
Speaker 1 (22:55):
I mean again, it is one of the things that
I think we can do to get trust back into
the system.
Speaker 2 (23:03):
Just wanted to finish on the President's visits to Alaska
going into weekend. Emory's going to be that what do
you think we can accomplish this weekend.
Speaker 1 (23:09):
I think the President has been thinking about this a
long time. He believes, as do I, that this war
never would have started if he had been president, and
he is committed to ending the bloodshed, but not in
any calls, not in any costs. I think everyone has
(23:31):
been frustrated with President Putin. We expected that he would
come to the table in a more fulsome way. It
looks like he may be ready to negotiate. And we've
put secondary terriffs on an Indian on the Indians for
buying Russian oil, and I could see if things don't
(23:51):
go well, then sanctions or secondary terriffs could go up.
Speaker 4 (23:56):
What about China, They're the main purchasers of Russian crude.
Speaker 1 (24:00):
Again, I'm not going to get ahead of the President,
but the President is the best at creating leverage for
himself and he will make it clear to President Putin
that all options are on the table.
Speaker 4 (24:13):
So sanctions can go up, or they can also be loosened.
Speaker 1 (24:17):
Sanctions can go up, they can be loosened, they can
have a definitive life, they can go on indefinitely. There's
this Russian shadow fleet of ships around the world that
I think we could crack down in them. But a
Marie and Jonathan, the one message I would leave you
(24:38):
with the President Trump is meeting with President Putin, and
the Europeans are in the wings, carping about how he
should do it, what he should do it. But the
Europeans need to join us in these sanctions. They need
to The Europeans need to be willing to put on
these secondary sanctions. I was at the G seven meeting
(24:58):
in Canada with President Trump, and the Europeans kept talking
about Senator Graham's bill to do the secondary tariffs. And
I looked at all the leaders around the table and
I said, is everyone at this table willing to put
a two secondary tariff on China? And you know what,
(25:20):
everybody wanted to see what kind of shoes they were wearing.
Speaker 2 (25:22):
I imagine the Germans went very quiet, and that's been
a problem for a long time.
Speaker 1 (25:26):
Yeah, it's put up her, shut up time. The president
is creating his own leverage. We need the Europeans to
come in and help create more leverage.
Speaker 2 (25:35):
Mister secretary. I'm appreciate your time. Good to see if
you're enjoying this. I get the fill that you're enjoying this.
All right, it's good to see it. You seem happy.
Speaker 3 (25:42):
I think things are going well.
Speaker 2 (25:54):
Janette Love, I should take us at bad Company. The
team I've had rights in the following to bank. Now
it's not about whether it's a count rights in September,
but by how much. Jeannette joined us now from more Jenet,
welcome to the program. Also a big question about who's
going to be on the committee by the time we
get to the middle of September, and whether step and
Myron can be confirmed by then. What are you telling
clients about the prospects of that happening.
Speaker 5 (26:12):
Yeah, I mean, so.
Speaker 6 (26:13):
This is something that's kind of interesting because we think
that the Trump administration would definitely like him to be
on the FED Board before the September meeting. And the
question also is do they want him on the board
before September twelfth, when the dot plots and the forecast
have to be submitted. So if the Senate's not coming
back until September second, We've looked at prior cabinet appointees
(26:34):
early on in this Trump administration, as well as Murn's
appointment earlier this year to the Council of Economic Advisors,
and in general it takes about thirteen.
Speaker 5 (26:44):
Days for a cabinet member to be appointed.
Speaker 6 (26:47):
So if the Senate comes back on September second, that
does give enough time for him to be on the
FED Board by the September sixteen, seventeenth meeting, but it
may not give him enough time to be in time
for September twelfth, might mean that the Senate Banking Committee
has to come in earlier to get this confirmation process moving,
to at least hold the hearing in advance, so then
they can start moving to a committee vote when they
(27:09):
come back officially from recess, and then move to the
Senate floor.
Speaker 4 (27:12):
Jendan, how likely is that they're going to move this quickly?
Speaker 3 (27:15):
You know?
Speaker 6 (27:16):
I think it's might depend on whether or not there's
pressure coming from the Trump administration if he asks them
to treat this like a early cabinet member early on
in the administration. Obviously, Marco Rubio was confirmed quite quickly
with only I think five days. So if it's going
to depend if there's some pressure there to actually get
this moving, since obviously that's not usual for members to
(27:36):
be called back into recess called back from recess early.
But I think that's where there's going to have to
be that pressure point is whether or not that occurs
to get the Senate to actually move and try to
advance this a little bit more quickly.
Speaker 4 (27:47):
And when it comes to Steve Meyron, he has the
benefit of already going through this process. What's the likelihood
of EJ and TONI getting confirmed to run BLS?
Speaker 6 (27:56):
Yeah, I mean, I think that there's probably going to
be deference to the administration about getting his appointees in place.
We haven't really seen any major pushback significantly from.
Speaker 5 (28:08):
A few Trump nominees overall.
Speaker 6 (28:10):
And I think the other thing to kind of watch
too with the Fed appointment is watch a Senator like
Tim Tillis, Tom Tillis and see if he might actually
start to raise some questions. Does he also have a
no vote in committee that could slow down the process.
Speaker 5 (28:26):
I think that's something else to kind of watch out for.
Speaker 6 (28:28):
But I think if in terms of the BLS appointee,
there's going to be an effort to try to get
his appointees to the positions. That's obviously been a fight
within the Republicans and the Democrats in the Senate and
whether or not they should have abandoned recess in the
first place, because there's been such a lag in getting
some of these nominees confirmed.
Speaker 4 (28:47):
When it comes to Antony, though, there's been a lot
of pushback in conservative economic circles about his nomination, and
when you look at who's on the Senate Committee on Health, Education, Labor,
and Pensions, it's some Republicans where he cannot lose a
single vote that hasn't had a problem with voicing their
concerns with the Trump administration. They gave Bill Cassidy, Ron
Paul Susan Collins, Lisa Murkowski. Do you think he really
(29:09):
can get out of committee?
Speaker 6 (29:11):
Well, I think, obviously, as we've seen in the past,
what happens in the hearing is most important.
Speaker 5 (29:16):
So if there's information.
Speaker 6 (29:18):
That comes up with the hearing, that could change how
those senators view the nominee and their ultimate vote.
Speaker 5 (29:23):
On the decision.
Speaker 6 (29:24):
But as we've seen in the past, some of these
same senators have had to issues with prior Trump nominees,
but then when push comes to shove, they actually do
vote them through committee, and they do vote them through
on the floor. So I think the hearing will be
quite instructive, but it's always something to kind of keep in.
Speaker 4 (29:38):
Mind, given even conservative economists think this individual's highly bias
and politicized. Our clients telling you that they're concerned about
the accuracy of the data going forward.
Speaker 6 (29:52):
I think this is starting to become a conversation. We're
starting to hear some questions about whether or not there
could be some politicization coming now with a number and
whether or not people can feel like they can trust
the numbers as much.
Speaker 5 (30:03):
It's not an overt.
Speaker 6 (30:04):
Concern at this point, but I think that that's obviously
going to be something that's going to be in the
back of investors' minds just thinking about whether or not
there is some option going down the road, and now
that we've had this argument come up with the past
BLS commissioner and with a past jobs data, whether or
not there could be some sort of either manipulation or
(30:25):
the ability to put someone in there who could have
a sway on the data.
Speaker 5 (30:29):
Janie, I would think that that's what you.
Speaker 2 (30:30):
Ask if I got to jump in forgive me when
you engage with clients, are they worried about this? Is
there something that comes up repeatedly or something the comfortable
with at the moment.
Speaker 6 (30:39):
At the moment, I think it's not a significant concern.
I think obviously how things play out over the next
couple of months will make will have a bigger impact.
But of course you are hearing questions just about whether
the process might have a change now that we're seeing
some movement, we're seeing a shake up at the BLS,
things of that nature. Obviously, there are also some client
(31:00):
who think that, you know, some reform is necessary. So
I think that there's also kind of like let's do
a little bit of a wait and see approach to
this and see what might happen as this new individual
comes in.
Speaker 2 (31:09):
Jennet, thank you, appreciate your time as always, Jennet Low there,
Ohstatiga is a bad company. Braz An Selder is a
child swap right of the following, slightly harder services inflation
suggests the possibility the core PC prints will be a
(31:31):
little higher, though September is still clearly on the table
for a federal reserve. Ray Cup Lizenne joins us right
now for more. Lizane, welcome to the program. Some confidence
maybe that we're seeing limited tariff pass through, but maybe
I think recently some nerves emerging that perhaps we're starting
to see evidence of demand destruction. How concerned list are
you about that?
Speaker 7 (31:51):
Well, you know, one thing that I think needs to
be pointed out when you look at what was perceived
to be fairly benign core goods inflation up only about
on and a quarter percent on a year of year basis,
is what the direction has been. So many people forget
that we were actually with core goods. We were in
deflation territory as recently as the second half of last year,
(32:12):
So that's a full three percentage point more than increase
from where we were at the latter part of last year,
where you had core goods in deflation to the tune
of negative two percent. So you've gone from negative two
percent to one and change, and now you've got this
hook higher on the services side. So I think this
kind of data, inflation data, labor market data, you really
(32:33):
need to dig under the surface to get a true
sense of what the impact is as to whether the
FED will cut it depends on the next set of reports.
I think the mapping to PCE suggests you could see
a little bit of a hotter move that doesn't tend
to be as market moving as CPI and PPI, But
(32:54):
that's what I'd be keeping an eye on.
Speaker 2 (32:55):
As Honess. You know, the range of outcomes is still
really really wide. The way things out right now now,
they might change in several months time. We talked a
lot Michael mckeby's on the program earlier, and we were
talking about how much companies were absorbing at the moment
and whether they pass it on in the months to
come or whether they cut costs. Do you think September
is still too early to draw any firm conclusions.
Speaker 7 (33:16):
I think it is too early. But what I will say,
and this has already been under way, and I think
it will continue in the September and thereafter as it
relates to the FED, I think you're likely to continue
to see a wider dispersion of perspectives from members of
the FED, certainly when they're in the federal open mouth
committee mode out there speaking, but even in things like
the Summary of Economic projections and particularly the dots plot,
(33:39):
you're seeing a wider array. We had two descents with
the most recent meeting of the July meeting. I think
that that sort of dissent probability stays relatively high, with
a wider range depending on who the individual is on
that committee expressing their views going forward. So I think
that's kind of the name of the game, at least
in the near term.
Speaker 4 (34:00):
Well, if the tariff impact is mixed under the surface,
when do you think we'll actually see it fully priced in?
Speaker 7 (34:07):
Well, the problem is that this was not you know
a lot of people talked about the inflation impact being
one time in nature, one time price level reset. The
problem is there's no one time as it relates to
the implementation of tariffs. It has been such rifle shot
on off delays terraffs being used as a tool beyond
(34:28):
just raising revenues or improving the trade deficit. So I
think we've got the rolling nature of this. You know,
several years ago we talked a lot about rolling recessions,
so we didn't think you were going to see an
actual economic recession, but pockets of weakness at different times.
I think that's manifesting itself in the inflation data too,
meaning the rolling nature of it, where you see pockets
(34:50):
of impact on the upside, you maybe get some pockets
of offset on the downside, as opposed to anything that
is one time in nature. And I think that will
also continue to be the name of the game because
there isn't anything one time about how we're getting information
on tariffs, and that increasingly makes it more difficult for
companies to map out a longer term pricing strategy.
Speaker 4 (35:13):
Well when it comes to the FED, do they even
have the luxury of waiting to see the full impact.
If the labor market Lausanne is weakening.
Speaker 7 (35:20):
That would be the primary reason why September is on
the table. The FED is essentially inferred, not that they're
ignoring the inflation side of their mandate, but the trigger
to move back to easier policy, per what they did
last fall, is probably more on the labor market side
versus the inflation side, unless you have a major, major
spike in inflation from here. That's precisely what happened last
fall when the Fed did launch what became only three
(35:43):
rate cuts, but they launched it with a fifty and
that was because of pretty significant concerns turned out to
be somewhat unfounded, but significant concerns about the labor market.
So the inflation data is going to be parsed like
it always is, but I think it's the labor market
side of their mandate that will ultimately be the trigger
for what they do.
Speaker 2 (36:02):
And by how much. Listen, let's push some of this
conversation into the equity market record, Hon, the SMP record. Hon.
Then that's that one hundred as we kick off Wednesday morning.
Beneath the index. How much adjustment are you seeing in
individual equities to the prospect of so called demand destruction?
When you hear about companies like Kava, like Sweet Green
facing a bit of a consumer slowed down.
Speaker 7 (36:21):
Yeah, there's a lot of consolidation happening under the surface,
which if you're only looking at at what the indexers
are doing, I think you don't pick up on that.
I've talked to a lot of people who say, oh,
TeX's the best performing sector. It's actually the second best
performing sector on a year to day basis, comm services
being the other. But they're often lumped together. But each
of those sectors only has about a rounding sixty percent
(36:44):
of their stocks in the same kind of breadth pattern
as the index overall. In the case of the Nasdaq
one hundred all time highs, but less than fifty percent
of the stocks are at all time highs. You've got
only actually, I think it's less than thirty percent of
stocks within the S and P five hundred have outperformed
the index itself over the past month, and you don't
(37:06):
get much above a third of the index over any
trailing period one year, one month, three months, six months.
So there's a bit more weakness and rotation and churn
happening under the surface. It's somewhat similar to what we
have seen in periods in the past, both in twenty
twenty three and twenty twenty four, and I think the
fuller story, not the real story, but the fuller story
(37:29):
maybe getting told under the surface of these cap weighted indexes.
Speaker 2 (37:33):
Do you think that narrow breadth and high current centration
is necessarily something to be concerned about? Zan Then that's
the ultimate question for a lot of people. I hear
people point it out all the time, and then we
just keep grinding out new old time highs. Is it
necessarily problematic?
Speaker 7 (37:47):
Note if the market continues to do well, But if
you look at the early part of this year, the
period between February nineteenth, which at that time was an
all time high and the intra day low on April ninth,
those areas of the market, the megacap, tech, tech related
mag seven, whatever categorization you wanted to use, those were
the areas that had the bigger draw downs relative to
(38:09):
the index. So that that period between mid February and
early April was one where the indexes were dragged down
even more. But you did have some ballasts within the
market in areas that had not done well. So yeah,
you're absolutely right. If the market continues to do well
and momentum is on the market side. I think the
pain trade is still probably higher, but that could be
(38:33):
a situation that unfolds fairly quickly and akin to what
we saw in that mid February to mid April period.
Speaker 2 (38:38):
That sound I appreciate it. Time As always, this sounds
some us that a child swamp. I think what joined
around the time boat by another Yankees fan? Is that right?
Speaker 8 (38:56):
As soon as I saw the mug, I said, why
aren't you disc.
Speaker 3 (38:58):
I was trying HIDEX.
Speaker 4 (38:59):
I'm pretty sure it's our best at treasure secretaries are
red SOX fans, so.
Speaker 2 (39:02):
I don't want to.
Speaker 4 (39:03):
I don't want to antagonize him, you know.
Speaker 2 (39:05):
On during this entire interview, Tom force Selli of PGM
Joints is around the table with Tomking.
Speaker 3 (39:09):
Morning, get good to see you.
Speaker 2 (39:10):
It's going to see it. Let's talk about the state
of this economy. Let's start with the labor market first.
Where are we?
Speaker 8 (39:15):
I mean, you know, I've been on this program many
times for many months saying there are all these cracks forming,
and that is as true today as it was, you know,
sort of six months ago when we were driving that
point home.
Speaker 3 (39:25):
So nothing has changed for us in that regard.
Speaker 8 (39:27):
In fact, what I would say, is the payroll report,
the much maligned recent pay roll report. To me, that
was just a manifestation of all the other things that
had been going on prior. So I don't, I wouldn't.
We weren't all shocked and bothered by it. I think
it was just sort of revealing what was already in place.
Speaker 2 (39:42):
So let's stay on payrolls. Yeah, step down, clearly, very obvious.
We've gone from a decent clip of gains to something
closer to stall speed. I want to understand from your
perspective whether you think that cements this idea that we've
seen a technical turn, whether it's more evidence for a
structural shift, something developing on the supply side.
Speaker 8 (39:56):
Yeah, so we think that things are slowing down, right,
I mean I think that's an important idea. Like, we
don't think we're like cyclically, we're about to slip into
a recession. Instead, what we've been saying is we're in
the sort of muddle through backdrops, and we would define
that as sort of, like you a one percent ish
kind of growth, one to one and a half percent growth,
And so that report is actually very consistent with our
view in that regard. So when I think about FED
response function. We actually think the Fed they are supposed
(40:18):
to cut. I mean, I don't think that's for us.
That's been our long standing call that they would start
cutting again in September, and so we feel good about
that overall. So well, sorry, we feel good about the
call overall. I mean, being slowing down is never obviously
agree to state you feel.
Speaker 4 (40:32):
Good about the call of the FED cutting in September.
The Trager secretary is calling for fifty basis point.
Speaker 2 (40:37):
Yeah, So look, do I have sympathy for that idea?
Speaker 3 (40:40):
The answer to that is, tell me.
Speaker 8 (40:42):
What the payroll report is going to look like, you know,
in a month from now or whatever it is, a
couple of weeks from now, because I think you're gonna
need evidence for that. If it's just a sort of
another another really soft report like we saw, I don't
know if that's the evidence enough to go fifty. But
you know, to me, it's it's sort of semantics in
some way, because whether they go fifty or twenty five,
I think they're pulling forward a lot of the cuts
that they sort of were prt that the FED was
(41:03):
pricing in over the balance of the next year and
a half.
Speaker 4 (41:05):
If they go fifty though, what signal does that mean
for how the Fed thinks of the economy right now?
Speaker 8 (41:10):
Yeah, I think it really drives home that, look, the
Fed already and I feel like a lot of us,
me included, I feel like a lot of us forget this.
The Fed already had cuts teed up, right, They already
were expecting two cuts this year, so they were expecting
a softer economic backdrop. And so I think in that context,
it's just very in keeping with what they're viewing. Show
me another really poor payroll report it I'll give you
(41:31):
the evidence for Hey, maybe they need to do more,
but I think for right now it's pretty consistent.
Speaker 2 (41:35):
We get one more papers report. I've got no idea
what Senate. We'll get that on September fifth. A week later,
they don't tell you, absolutely cluarless to be a less
it share nothing with me. A week later we'll get
the CPI report. I want to finish on inflation, and
turns to that side of the dual mandate. Limited tariff
passed through relative to what was expected? Do you think
it remains that when the months to count?
Speaker 8 (41:53):
No, Actually, I think you're seeing limited passed through now
because companies did a really smart thing. They built inventories
in a really meaningful So that's sort of buffering the
sort of the flow of the tariff inflationary impulse into inflation.
But I'll give you one really interesting thing to think about.
You know, it's funny we're having this conversation about our
payrolls calculator, right, Obviously we can have the same conversation
(42:14):
about inflation inflation. There are so many flaws in the
calculation of inflation. So if I look at if I
swap out something as simple it's not that it's so
simple because it's a big component.
Speaker 3 (42:24):
But if I swap out.
Speaker 8 (42:25):
Oeer for you know, sort of a market measure of
rents like apartment list.
Speaker 3 (42:32):
Inflation is running at a one percent pace right now.
Speaker 8 (42:35):
I mean, I think all of this sort I think
that to me is the right way of thinking about
what the starting point for.
Speaker 2 (42:41):
It Isn't that giving you a lead on what you
think ultimately is going to happen with service inflation down
the road?
Speaker 3 (42:46):
Yeah?
Speaker 8 (42:46):
So I think from our perspective, what it means is
that you are going to get this lift higher in inflation.
But you know you so what so you lift sort
toward the target as opposed to being above target now
and going even further above target. I mean, I think
if you look at inflation with just making some very
modest and I think very reasonable adjustments, you probably want
to getting back to target.
Speaker 2 (43:04):
This situation that is not something that you think will
constrain the fensibility to reduce right and respect to softness
in the light.
Speaker 8 (43:10):
Yeah, I don't. I mean, I think the FED has
the right line on this. I think it is going
to be a temporary sort of one time shift time
you say.
Speaker 2 (43:15):
The fedesi right line, some fedid vigils at the FED, Yes,
have the right line. Yes, I don't know where the
whole committee is. Where's the whole comittee on this?
Speaker 8 (43:21):
Yeah, I mean, and as you would expect, there's just
a divergence of views, I think, seemingly at this point.
But it does seem that the sort of the momentum
is drifting toward people having the right line, which is
to say, cutting in September.
Speaker 4 (43:32):
If we're not going to see the full tariff impact,
say till twenty twenty six. Can you see a scenario
with a FED is cutting at the end of this year,
maybe starting in September and then having to think about
hikes next year.
Speaker 8 (43:42):
Yeah, so this is a really important idea in the
context of this is not COVID, right. I mean, I
think people are looking at this sort of this this
drift that we're going to see higher in inflation, and
I think that, you know, they're scarred. I think including
FED officials is specifically pell I think right called the
transitory So I think they're scarred because of the whole
you know, let's call it transitory mistique. But it's this
(44:04):
is not that you know, we imply people with mountains
of cash through a helicopter drop of money. We didn't
create a pent up demand scenario by shutting down an
otherwise really healthy economy and then turning back on.
Speaker 2 (44:13):
So I think the setup is so different, right to
see it's going to see you, sir, good same time.
Thank you for being here. Tom por Sei of PGM
Fixed Income. This is the Bloomberg Sevenants podcast, bringing you
the best in markets, economics, antient politics. You can watch
the show live on bloomblog TV weekday mornings from six
am to nine am Eastern. Subscribe to the podcast on Apple, Spotify,
(44:36):
or anywhere else you listen, and, as always on the
bloom blog, terminal and the Bloomberg Business app.
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