RenMac's Head of Economics Neil Dutta on Recession Indicators

Barry speaks with Neil Dutta, head of economics at Renaissance Macro Research. Neil leads their macroeconomic research efforts, with an emphasis on analyzing the US economy, Federal Reserve, global trends, and cross-market investment themes. Prior to RenMac, Neil spent seven years at Bank of America-Merrill Lynch. There, he was a Senior Economist covering both the United States and Canada. They discuss in initial interest in economic studies and whether we'll see a recession in 2025. 

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.

Speaker 2 (00:17):
This week on the podcast, another extra special guest Neil
Dudda with a tour to fource explanation on what a
market economist is, how it's their job to take all
of the academic and somewhat esoteric economic research and take
it from the five yard line into the end zone.

(00:41):
Why it's so important to put stuff into context that
investors can use or focus on, not just merely the
economic data, but what it means for different sectors of
the economy, what means for different companies. I always find
Neil fascinating to listen to. He has a really great
track record forecasting things in a way that is occasionally

(01:04):
out of consensus. So when he's talking about inflation in
twenty twenty one, or FED hikes in twenty twenty two,
or why we weren't going to see a recession in
that same year, it's always fascinating to see somebody whose
thought processes detailed and interesting and out of consensus, but

(01:25):
also right. I thought this conversation was fascinating, and I
think you will also with no further ado my conversation
with head of an economic research at Renmack Neil Datta.
So last time we were here, we talked about a
bunch of things that you got right. I know your
views have evolved. Will get to some of those, but

(01:47):
let's just go over your background a little bit. Bachelor's
and economics and political science from New York University. From
NYU was the original career plan to go into finance.

Speaker 3 (01:59):
Uh No, I mean, you know, when you go to college,
you have no you don't know that jobs like the
one I'm in currently even exist. It's like, you mean
to tell me, I get to write about economics and
talk all day long and someone will pay me for it,
no manual labor. Yeah, And so you know I had

(02:19):
no idea. I mean, I knew that I had an
interest in economics, I had an interest in political science.
The original plan was actually, you know, maybe to go
to law school. But I ended up, you know, just
not doing as well as I thought I was going
to on the l SAT. So my senior year of college,
I was kind of scrambling because I didn't want to

(02:42):
go to school for another three years, but I wanted
to stay in the city, and I was just like,
let me just try to get into Merrill Lynch, or
it's not at Merrill Lynch. I mean I got into
Mary Lynch. But any of the bulge bracket banks in
the city, right.

Speaker 2 (02:56):
All had good back in the day, they all had
good training program.

Speaker 3 (02:59):
Yes, So that was that was the goals to get
into one of the analyst programs at the bult Record Bank.
So I got into to Merrow Lynch. I actually started
off there as a compensation analyst.

Speaker 2 (03:10):
And meaning studying studying labor, studying salaries and things all.

Speaker 3 (03:15):
Right, Yeah, I mean a lot of what the job was,
in the amount of time that I had done, it was,
I mean a lot of it is just benchmarking the
employees of the firm to the market to make sure
that you're paying people to market.

Speaker 2 (03:29):
Meaning internally Lynch.

Speaker 3 (03:32):
Yeah, and managing the year end bonus pools. So that
was the whole process in and of itself. But one
of the good things about working in HR is that
you kind of so I got my foot in the door.
I mean I was just happy to have something at
that point. I remember I showed my mother my offer letter.
I still have it saved from Meryl Lynch where they
were paying me fifty thousand dollars with a ten thousand

(03:54):
dollars signing bonus. And I showed that to my mom
and she was like, why would they be paying you
this much money? And I was like, well, oh, we'll
find out. Yeah, we'll find out what I'm going to
be doing. But the benefit of working in HR in
particular is that you kind of know where all the
jobs are and where the opening open positions are in
the firm. And there was an open position on David

(04:15):
Rosenberg's team at you know, at Merrill Lynch, and so
then I joined his firm, sorry, his team. That was
in early lado six or early two thousand and seven,
So you know, right when Rosie was really killing it.
I mean, you know, he was like a marketing machine.
He was like the guy like number one in II.

(04:35):
All these things are happening, you know, I mean, and
so it was really exciting to be on his team.
So it was really it was like it was like
a very quick education. I mean, there was a real
education being on his team during that time.

Speaker 2 (04:48):
To say nothing of what happened over the next few
years eight oh nine in the Great Financial crisis was
right around the corner.

Speaker 3 (04:56):
Yeah, I mean I definitely think that, you know, one
of the things that I've always has come to believe,
now they haven't been in the business for a long time,
is that as you know, like our like the financial
industry is very cyclical, right, Like everyone knows someone who's
been laid off, let go, you know, has gone through
spells of just not having a job, right. And I

(05:18):
do think it says something about you if you've been
able to survive these crises.

Speaker 2 (05:21):
Yea, the very least. Where was Barons in your career history?
You were an analyst at the weekly Dow Jones publication.

Speaker 3 (05:29):
Yes, that was that was That was more of a
When I was in college, I worked for Gene Epstein.
Oh really, yes, noted libertarian. You know, kind of gave
me my first taste of like a lot of the
tools that we use now in in sort of the
business economic space, like Haver analytics. I actually got my

(05:52):
first taste of that working with Gene at Barons and
you know, getting my you know, sort of first sense
of you know, trying to analyze data looking at you know,
I mean he had he had sort of a weekly
column on the economy, but a lot of the interesting
pieces that he wrote would happen on you know, days
of like the employment report or you know, summarizing the
ism data and like what it might mean for the

(06:14):
economy and the outlook. So it kind of gave me
my first taste of what a business economist, uh would
do on a basis.

Speaker 2 (06:23):
I've noticed you used the phrase market economists, ye, business
economists all the time. How does that differ from the
traditional economists for lack of the better.

Speaker 3 (06:34):
Word, Well, I don't have like formal PhD training, So
I think you know what, that to me is like
an important distinction. You know, you have business economists on
the street that have PhDs, but I don't think a
PhD is required to be a business economist. And to me,
it's like also just a way to respect the academic profession, right,

(06:57):
I mean you have people here that are really studying
a specific Nietzsche area their entire careers, right, I mean
you think about like behavioral economics and like financial economics.
I mean they are economists that are just looking at
that and they're doing it for decades, right, because that's

(07:18):
what they do.

Speaker 2 (07:18):
And I think a Hyman Minsky looking at the narrow
subtopic of stability and instability and economic systems and toiling
away for decades until eventually the market hits a tipping
point and suddenly all of this research that seems like
a quiet backwater, yeah, it becomes front page news.

Speaker 3 (07:41):
I mean we're like, you know, strategic trade theory. I mean,
these are these are all sorts of things that have
I think, and you could say maybe in you know,
like the academics take you basically to the five yard
five yard line, and as a business economists, your job
is to kind of run it in for a touchdown
and tell, you know, the investor community, like, why is

(08:02):
this important to what you're doing right now?

Speaker 2 (08:05):
That's very interesting script.

Speaker 3 (08:07):
So so that that's that's sort of the way I
kind of view it. I mean, obviously you lean a
lot of their work throughout your career. I mean, you know,
I mean, this had this had gotten a lot of
play earlier in the cycle. But ed Leemer wrote a
paper once called housing is the Business Cycle? Right? I mean,
and that was you.

Speaker 2 (08:25):
Know, professor at Harvard or George.

Speaker 3 (08:28):
I think it was in the University of California if
I'm mistaken, But at any rate, I mean, that was
a that was a piece of research that had gotten
a lot of attention over the years. You know, when
when housing was melting down back in twenty twenty two,
a lot of people were leaning on that paper again,
So it's important. I mean, so to me, it's like,
I make that distinction because a I don't have a PhD.

(08:49):
And I'm not doing the same thing. What I'm basically
trying to do is look at all the different sort
of pieces of economic information that come out and on
the US economy. There's always something going on, right, I mean,
in terms of data, it's some some of its marketing movements,
some of it's not, and try to kind of formulate
an economic outlook that is useful for investors. That is

(09:10):
not what academics tend to do, right.

Speaker 2 (09:13):
Sure, for sure. So when you were at Bank America
Merrill Lynch, you were doing a weekly note you authored.
How did that help carve out your own space and
expertise and how did that ultimately lead to your job
at Renmack.

Speaker 3 (09:29):
Well, So, I mean, obviously Merril was was an interesting
time because I was sort of coming up the ranks,
and you know, by two thousand and nine, Rosie had left,
and so it was sort of this weird time where
it was like a very important time in the economy

(09:49):
because we were just transitioning from recession to expansion. But
Merrill's economic team was kind of without a leader, right,
so we didn't really have So it was I was
able to do a lot at that time just by
default because there was no one else really doing it.
So I would I would be writing a lot for
the you know, especially for the equity market desk.

Speaker 2 (10:09):
You had to be pretty young back in all.

Speaker 3 (10:11):
Yeah, I was. I was very young. I might have
been like, oh god, I don't know, like not even thirty,
so at any rate. So I mean, it's one of
these things where you if if it's just you and
like a couple of other people, you don't you're doing
a lot more than you otherwise would be doing had
there been like a chief, a formal chief economist. So

(10:33):
I remember the summer of nine vividly because we had,
you know, like the team had gotten like a big
reputation for being very bearish because obviously because Rosie, because
of Rosie, but still bash Yeah, but bye bye by
March but bye by the time he had left and
by the second quarter of O nine, it was becoming
increasingly clear that things were kind of turning around, right,
I mean, you know, credit markets had turned. It looked like,

(10:56):
you know, housing wasn't getting any worse, right, Inventories had
basically been cut to the bone. They couldn't go any lower.
And and so we had written a piece basically talking
about how, you know, the recession's over like that that's it,
And that had gotten a lot of attention from our
from our sales desk. But you know that's to me, like,

(11:18):
you know, you talk about writing. One of the things
that I've noticed, like recently is just it's just ubiquitous, right,
Like everyone's writing, Like it's just stack. Yes, it's like
come view me on my substack. And like, you know,
there's like all this research. But to me, like what's
important in the research sales business, because that's ultimately what

(11:41):
I'm in, right, It's about knowing when to say something,
you know, you know, and there's just a lot of
like filler research that comes out.

Speaker 2 (11:52):
I love the word filler because it's literally all it.

Speaker 3 (11:55):
Is and the and and there's some important I mean,
I do think it's important for clients to kind of
see that continuity, but it doesn't have to be some
written products. So to me, one of the things I've
learned is like when you write something, make sure that
it has some depth and it serves a purpose, right,
And so.

Speaker 2 (12:12):
As opposed to just cranking something out daily a weekly.

Speaker 3 (12:15):
Because it's just it's like that eventually, like you know,
that turns into spam, right, I mean from the perspective
of your client. So there's there's there's many ways to
kind of touch people in terms of accounts like your
client base that are paying for your your research and
your views and your analysis and that could you know,

(12:35):
and some of that's written, some of that could be presentations,
some of that could be podcasts, some of that could
you know, it could be it's it's that to me
is what's important. So you know, writing in the beginning
was important. But I think one of the things I
learned very early on is that it's important to kind
of say something that has meaning. And that's not always
going to be the case, right, Like people don't need

(12:58):
to hear from me every day, they need to hear
for me when my views on something are working out
or not.

Speaker 2 (13:04):
I like to say, nobody really cares about ism or
fill in the blank, whatever your least favorite economic data point.

Speaker 3 (13:11):
Is, right, I mean, and also these days, right like,
the market reaction to it is immediate, so you can
pretty much tell right away whether the number was good
or bad or whatever else. Right, So what do I
need to read your analysis for? And so it's you know,
you kind of have to pick your spots about when
to you know, try to chime in and provide some
kind of useful context for these data points.

Speaker 2 (13:31):
So there's a little bit of a void in two
thousand and nine after the head of the economics coverage
from Merrill Lynch departs and you somewhat fill that void
nine ten eleven. What leads you to join Renmack in
twenty twelve.

Speaker 3 (13:47):
Well, so by the fall of nine we had Ethan
Harris Sure from from Lehman joined the you know, he
started was named the chief US Economist UH basically uh.
And and he obviously he was from a like a

(14:08):
like a fixed income shop, I mean, Leman was a
huge fixed incomes you know, Ethan was a fed economist,
so his passion was really more towards the fixed income markets.
And so but obviously Merrill was like a huge, like
a legacy equity shop. Yeah, and so I kind of
got a lot of my like cut my teeth with

(14:28):
the equity salesforce and what I tried to do. And
one of the things you do find out in in
the research business is that fixed income doesn't pay for research.
It's just it's just that's what it is, right. I mean,
you look at.

Speaker 2 (14:40):
Well the margins are smaller the basically what verto Yeah, you.

Speaker 3 (14:45):
Think about like the biggest names in research sales over
the last number of decades. You think about people like
Ed Hyman, Nancy Lazar, Right, you think they're writing about
like like rates. No, they're writing about like how economics
can be tied into a stock market call. And Rosie,

(15:07):
to his credit, was great at that. And that's kind
of what I tried to do when Ethan was running things,
because he didn't really he didn't really do that, you know,
and so he kind of let me run with it,
and he kind of gave me a lot of latitude
to kind of come up with my own ideas and
try to tell, you know, an equity salesforce like why

(15:31):
is this important for your clients? Like and and because
Merrill had so many equity analysts. There there was like
a like a wealth of opportunity, right, Like, so let's
say we wanted to write a piece on business investment, right, Like,
so why is that important for equities? Well, because a
lot of EPs comes from cabex. And now you can

(15:53):
go talk to your like you can talk to your
industrials analysts, you can talk to the machinery analysts and say, like,
you know, are you guys bullish or bearish on your names? Like,
and if you can come up with a scenario where
a macro view can tie into a specific stock sector view,
for an equity salesperson, that's a home run, right, And
so it just makes their life a lot easier. The

(16:14):
worst thing you could do, especially at a bulge bracket firm,
right is well, your economist is really really negative. But
like you know, this guy is telling me like by caterpillar,
like how does that work? Like and like whenever, as
a salesperson, like having to deal with that question from
a client is annoying, you know what I mean. So
whenever you can come up with ways to tie a

(16:37):
macroeconomic view into and this goes back to the business economics, right,
I mean tie a macro view to a market call.
That's a home run, right, No one cares what your
GDP growth view is, Like, I mean, you have all
these like you go you look at through the Wall
Street research and it's like in the back there's like
my GDP forecast. You have this big forecast table, and
that's kind of what they're talking off of, right, But

(16:57):
that's not really why I think people for research. People pay,
you know, the people pay for having an economics view
that can be aligned with a market's call.

Speaker 2 (17:08):
So let's talk about that economic view aligned with a
couple of market calls. At least we'll look at the
twenty twenties, because oh, nine, ten to eleven seems like
it's so long ago. Let's fast forward a couple of decades.
Late in twenty twenty one. I very vividly remember most

(17:29):
economists were fairly sanguine about inflation. FED chair Jerome Palell
had said we're gonna let inflation run hot the previous
Jackson hole, and you made a very out of consensus call.
You had said in late twenty twenty one economists were
too sanguine about inflation that the f OMC would have

(17:52):
to raise rates, and you said at least four times,
and that turned out to be very precient. We started
with four seventy five bit raises before we add two
at fifty and then a sort of after thought at
twenty five. Tell us what you were looking at in
twenty twenty one that so many other economists missed.

Speaker 3 (18:12):
Well, thank you for saying that. I mean, in hindsight,
I feel like I wasn't hawkish enough.

Speaker 2 (18:16):
You know, you were so much more hawkish than the
more than the Yeah, I mean, hey, you know, everybody,
most people forget sticking the landing. Most people missed the pool.
You you managed to at least put give your clients
a heads up of FED tightening is about to stop.

Speaker 3 (18:35):
Yeah, I mean right, I mean I caught the the swing.
I mean, I think and then you know, eventually I
kind of came around to the idea that they'd have
to do a lot more than what was priced. But
I think, yeah, I think, thank you for saying that.
I did kind of catch that. But you know, to me,
it was just like a rapidly accelerating economy. To me,
it was so basically the call. I think that the

(18:59):
main issue there was. It was one call that you
got right that kind of led to everything else. Right,
So basically what I saw at the time was a
V shape recovery. And so since there was a V
shape recovery, that was going to have ramifications for all
the other macro calls that people make, like whether that's
the fed rates stocks, you know. And so basically what

(19:22):
I what I said, was we're gonna have a V
shape recovery. You could see it in the data. They
basically turned the lights off, turned it on, and threw
a bunch of money out the problem.

Speaker 2 (19:30):
Two dollars solves a lot of headaches.

Speaker 3 (19:33):
Well, it's sort of you know, they they kind of
they fought the last war, right, I mean, they essentially
they they diagnosed the problem as a it was basically
a supply shock. It was a negative It was a
very large negative supply shock that they treated as a
big demand shock. And so when you have a demand

(19:53):
side stimulus with a you know what is basically a
supply shock, be surprised if you.

Speaker 2 (20:01):
Get like inflation, trillion dollars in money coursing into the
system and everybody stuck at home. Guess what they're gonna
do with that money?

Speaker 3 (20:10):
And it's it's not just uh and it wasn't just
fed pumping, right, it was. It was a fiscal stimulus,
you know. And so so I think it's and and
also just like the behavior of of of people at
the time. I mean, you know, typically in a bad
economic situation, you don't see people going out and like

(20:33):
get like taking out mortgage loans. But that's exactly what
was happening at the time, right. So you know, housing
is like one of these irreversible decisions, so you have
to be really confident in things in order to buy one.
And so when I started to see people like you know,
mortgage purchase apps are like basically v bottoming, like it's
just going straight up, like they're signal there. And at

(20:54):
the time, like everyone was thinking the bottom was going
to fall out, it was the opposite, and it was
and and I remember at the time, I mean in
April of I think in April of twenty twenty, in
the middle of April of twenty twenty, I said, we bottomed,
it's over. There was whatever whatever one two week recession
that we had, it's over. And I remember I got
so much hate. I remember at the time, like you know,

(21:16):
you had prominent economists telling like it's going to get
a lot worse. Like the bottom still not in but
it was just sort of It's one of these things
in business economics where it's like up is up right,
Like markets care about they don't care about whether things
are good or bad. They care about whether things are
getting better or worse. And so you know, you can

(21:39):
say it's not good, but hey, guess what, Like at
the margin, we had more door dash deliveries in the
third week of April than we did in the first
week of a.

Speaker 2 (21:48):
Free I don't remember if it was Ned Davis or
it might have even been Ed Hyman who had said,
don't look for when the economy is great or terrible.
Look where when it goes from terrible to bad, Like
that's your first sign that you're making a bottom. Hey,
this is really not a great economic data point, but

(22:11):
it's so much better than it was last month. Maybe
things were turning like that approach is when it goes
from terrible to fair, you're moving in the right direct.

Speaker 3 (22:20):
Yeah, and also like the I mean to me, honestly,
like looking back on it, that whole period was probably
was the easiest call I had to I made. Huh,
And it's interesting because it was kind of out of consent.
I was out of consensus at the time, but I
thought that it was so easy. I mean you had
the I mean especially like from a market's perspective, right,

(22:40):
I mean.

Speaker 2 (22:42):
Stops was straight up after that.

Speaker 3 (22:43):
Well, not only that, are like are we no longer
going to have cruise lines? Are we no longer gonna
have airlines and hotels? Like it was just so obvious, like, Okay,
these are like generational buying opportunities. You better just put
everything you have into these names and just ride it
out because anyway, I just thought. But to me, I
think what I learned there is just you know, it's
it's just important to kind of just pick a bunch

(23:05):
of like indicators and see like is it getting better
or worse? And it was clearly getting better, right, I
mean you can't go down after you know you've gone down.
I mean in some of these indicators, it's like you
can't just keep falling, right, And so there was stability,
and by the second week of April, I think it
was it was pretty obvious that things were turning around.
And also the nature of the policy response, like right,

(23:28):
it was huge, biggest GD well not only that, but
the way they were doing it right, like the phased
in approach. So like, okay, so this week, like ten
percent of the economies open, and then next week we're
gonna we're gonna take it. We're gonna expand it out
to gyms and restaurants, and then we're gonna expand it
out to department stores and things like you know, you
know what I mean. So like every week they were

(23:48):
kind of flipping on a bunch of on switches, right,
and so obviously that was gonna keep the economic momentum going.

Speaker 2 (23:58):
So let's talk about another out of census call you
made the following year. Very few economists were calling for
no recession in twenty twenty two. Most were pretty bearish,
and of course they looked at the FED hikes that
they had missed the previous year. You were one of
the few people that were saying no recession in twenty

(24:18):
twenty two. Was it simply that v recovery and just
the robust momentum that was in the economy.

Speaker 3 (24:24):
Well, I don't know that, I said, I mean, I
definitely understood where the recession call was coming from. I
think for me, the bigger gap with the consensus was
really going into twenty twenty three, and I said, there
wasn't going to be a recession. And I think first
it's important to understand why people were kind of latching
onto the recession call back then. It was basically because

(24:47):
the FED told you so, right, I mean, the FED
was basically saying, we need a recession to deal with inflation.
That's what they were saying. When power like pain will
be required, that that's what he means, right, And so.

Speaker 2 (25:00):
What did Larry Summer come out and say. Summers came
out and said ten percent unemployment to fight inflation turned
out to be a little uh to nineteen seventies.

Speaker 3 (25:11):
Ish, Well, well, sure, I mean it was. And what
was the other thirty percent chance of stagflation? Thirty percent
chance of this thirty I don't know whatever, But I
think part of the reason, I mean, this is part
of the way these models work, Right, if you have
a period of inflation, the model's going to assume that
you need recession in order to kind of get it
back to target. Right. So I think it's at some

(25:31):
level like one of the driving one of the reasons
driving the recession views on the street back in twenty
twenty two was because the FED was basically telling you
that's what they thought they needed to get inflation down. Now,
by the end of twenty twenty two, I think it
was becoming increasingly clear to me that we weren't going
to have a recession. And again I kind of put

(25:52):
on my business economics hat, right, Like, So, if you
go back to that period, we had the Russian invasion
of Ukraine that sent energy prices through the roof. By
the end of the year, gas prices had basically round tripped,
and the labor markets were strong. So we were going
into twenty twenty three with upward momentum and real incomes. Okay,
so that's good, that's just support consumer spending. Next, despite

(26:16):
massive FED hikes, like the FED was going seventy five
BIPs a meeting by the end of the year, what
was going on with home building stocks? They were actually
turning around. Right. Homebuilder sentiment was getting better. Right, builders
were in a much better balance sheet position. They were
able to buy their buyers down in terms of mortgage
rate buy downs.

Speaker 2 (26:35):
Right, so had massive shortage of single family home exactly.

Speaker 3 (26:39):
So, so housing was doing well despite hikes. You had
governments spending a lot of money, Like state and local
governments were flushed with cash, right, they got all this
COVID money, So you had government spending, and then everyone
was prime for recession, right. I mean, if it's what
it's like, this expectations, you know element of it, If

(27:00):
you know, one of the ways I think recession happens
is through surprise. If people think, you know, things are
going to be okay, and then they're not, then that
prompts the clearing out of inventories and investment and so forth.
And then but if if the opposite it's true, then
then that'll happen. Right, So if everyone is prime for
recession and it doesn't happen, then there's going to be
a period where you have to kind of gear up
and invest in inventories and hiring and so forth. And

(27:24):
so based on those four factors, to me, it was like,
by the end of twenty twenty two, it's like, yeah,
we're not going to have a recession. Real incomes are
growing too rapidly in order for that to happen, and
the housing market's doing well. Like if you can get
that right, if housing is working in the US and
labor markets and real incomes are growing you're not getting
a recession, so you know, and so to me it

(27:46):
was like a really easy market call because a lot
of the weakness in the market was just predicated on
recession risk, and so to like this, the more obvious
it became that that wasn't the case. It was, you know,
to me, it was very clear that you know that
equities we're strong by.

Speaker 2 (28:03):
So you've talked a little bit about the Street predicting
four to six rate cuts this year. They've been predicting
that pretty much since twenty twenty two and have consistently
been way too dubvish. What do you think the Street
has been missing over the past, you know, two or
three years.

Speaker 3 (28:23):
Well, I mean, I think the main story over the
last two years, and you know, I'm a little bit
more cautious now, but I do think the main story
of the last couple of years has just been how
resilient the US economy is. And you know, that's basically
been the main stories that We've had very very strong
income growth. You know, we've had obviously a lot of

(28:46):
state and local government spending, a lot of federal spending,
but the main story I think has been, you know,
very strong growth and real incomes, which has been supporting
household consumption. And if you get the consumer right in
the US, pretty much everything else will fall into place.

Speaker 2 (29:00):
So when we look out at the world today, we've
seen a lot of volatility in policy. I hate the
word uncertainty, but at least a lack of clarity, which
seems to be affecting people's long term travel plans, corporate
capex plans. How significant is all of the back and

(29:22):
forth on various policy issues out of the White House
impacting your analysis?

Speaker 3 (29:30):
Well, I do think that when uncertainty is high, it
just makes sense to kind of double down and look
at the data as it's coming in, right. I mean,
it's what you shouldn't try to make a big sweeping
forecast if the uncertainty is high, but you should kind
of think about what's just look at what's happening in
front of you. And that's kind of what I've been
trying to do. And you know, when I look at

(29:53):
what's happening right now, I mean I don't get a
lot of optimism. I mean have it looks like the
labor markets are continuing to cool.

Speaker 2 (30:01):
Off, still positive, but certainly at much lower levels than
we saw two three years ago.

Speaker 3 (30:07):
I mean, I think, to me, momentum matters. Right, we
talk about better or worse, right, I mean, the labor
markets are clearly getting worse. And you know, is it
is it nonlinear? No, it's not. But you know, you know,
one of the points that I've been making this year
is that all recessions begin with a slowdown. Not all
slowdowns and in recession, but we know that all recessions
start with a slowdown. And it's pretty clear that the

(30:29):
labor markets are slowing down. You have a very narrow
kind of breath of industries adding employee jobs. A lot
of it is in kind of acyclical industries like education
and health, so sort of the cyclical areas of labor
market are slowing down. You're seeing weakness in like white
collar professional services, recruiting intensities low. So the labor markets

(30:52):
I think are To me, that's been my big my
big theme for this year is that it's it's far
more concerning. And then the consensus seems to appreciate, and
I think also for the Fed. I mean, they keep
talking about how the labor market is solid and and
what they're I mean, to me, that's basically a very

(31:12):
like surface level analysis, like they're looking at, Okay, the
unemployment rate is four point one percent, and therefore the
labor markets are solid. But I think you can make
a very strong case that the that the unemployment rate
of four point one percent is really overstating the degree
of health in the in the job market. Right, Like,
when the unemployment rate is four point one percent, you
typically don't see like the hiring rate as low as

(31:33):
it is, you don't see the quits rate as low
as it is, you don't see consumer confidence in the
job market as bad as it is. You don't see
you know, even wage growth is slowing down, right, So if.

Speaker 2 (31:43):
But it's still it's slowing down from a pretty high level.
Where what is wage growth now about four percent?

Speaker 3 (31:48):
Is that? Well, it's actually slownging a bit more than that,
I mean, it's it's running. If you look at over
the last three months or so, it's around you know,
three three and a half percent. But huh, but if
if that, but again, like if the labor markets were
tight or tightening, then you wouldn't expect to see wage
growth continuing to slow down and you have ongoing increases

(32:10):
in like the number of discouraged workers. Right, you have
a lot of people exiting the workforce're going straight from
unemployment out of the labor force. I mean, these are
not things that happen in a healthier, solid job market.

Speaker 2 (32:22):
How much of this is driven by the past five
whacky years, including the pandemic and a giant decrease in
people working, the recovery in people returning, plus the entire
fiscal stimulus making its way through the system. It's not
like twenty twenty five is just one in a series

(32:42):
of normal years. It's one in a series of very
unusual situations, including what five hundred and twenty five basis
points of FED hikes in eighteen months or so. So
how do you contextualize this slow down as the pig
works way through the python?

Speaker 3 (33:02):
I mean, so this is sort of the argument that,
like the whole thing was just one giant like bull whip,
and we've kind of, you know, now we're just we're
still normalizing from all of it. You know, I think
to me, it's that's possible. But it's just again, like
the sectors that are slowing down are not the ones
you want to see slow down, right, I mean, you

(33:23):
know you're at a point now where it looks like
housing market conditions are continuing to deteriorate, right, Like prices
are slowing. They're slowing in the in the markets where
builders make homes. That's going to probably lead to job
losses in the construction industry.

Speaker 2 (33:39):
They're not getting any help from the FED in terms
of rates at least no time sting.

Speaker 3 (33:43):
Well, no, right, I mean to the extent that the
housing market is working, it's basically because the sellers are capitulating, right,
I mean, they're they're listing homes for market, they're willing
to take price concessions. That's pushing up transaction volumes to
some extent, right, So that's that's that's been okay. I mean,
you see, you have a little bit more elasticity coming
into the housing market, you know. But the fact that

(34:05):
the labor markets are cooling down, what does that mean?
Primarily that's going to weigh on consumer spending and that
kind of sets in motion like a below trend growth outlook.

Speaker 2 (34:17):
So let me ask you what I think is one
of the most perplexing issues. Consumer spending pretty close to
record highs right now, and at the same time, consumer
sentiment pretty much still in the dumper off the lows
but still historically low. How do we reconcile the robust
spending with the terrible sentiment are one of those indicators

(34:40):
one of those measures broken?

Speaker 3 (34:43):
Well, I don't know that. So this is like the
vibe session kind of story.

Speaker 2 (34:48):
And I definitely are you a vibe session person or no?

Speaker 3 (34:54):
No, I mean I think consumer sentiment. To me, what's
really interesting about what's happened with consumer sentiment is how
the link between consumer sentiment and labor market views basically
completely detached following twenty twenty one twenty two, right, I
mean once inflation started going So for most of my career,

(35:19):
if you basically got like the labor market view, right
you pay you more or less, would get the consumer
sentiment number, right, you know what I mean, like no more,
no more, right, I mean. So it's just it's one
of these things where when you ask someone like how
do you rate the economy, It'll be like something like
it will be a very low number. How do you

(35:39):
rate the labor market? It'll be a very strong number.
That's very perplexing, But it's just it just it demonstrates
that people don't look at the economy solely through the
prism of the job market.

Speaker 2 (35:48):
What else is kind of fascinating is if you ask
people how do you rate the economy and they're like, mah,
how do you rate your personal economy? Oh, I'm doing fine.
It's like, how do you think of Congress?

Speaker 3 (35:59):
Oh?

Speaker 2 (35:59):
Congress, this is terrible? What about your congressman? Oh, he's great?

Speaker 3 (36:02):
Totally.

Speaker 2 (36:03):
So all of this brings me back to the question
is sentiment broken? When we look at the Michigan consumer
sentiment worse than the pandemic, worse than the GFC, worse
than nine to eleven in the dot com implosion, worse
than the eighty seven crash, it kind of makes me
stop and think, are all of us missing how terrible

(36:24):
things are? Or is just this methodology of asking people
in twenty twenty five what they think just doesn't work anymore.

Speaker 3 (36:33):
Well, the methodology for the umish number in particular, did change.
I think they moved online. But so I just saw
to me, it's like, consumer sentiment is basically a function
of what stocks are doing, what inflation's doing, and what
jobs are doing. And if you think about it that way,
the drop in consumer sentiment made a lot of sense

(36:53):
because inflation went really through the roof, right, and so
that's why sentiment went down. Since then, you've some stability
and inflation, and you know now that the stock markets
back to all time highs. Essentially you've seen some recovery
and consumer sentiment not surprisingly. But what I'm what I've

(37:15):
been focusing on, it's, you know, there's this big debate about,
you know, how useful survey measures of economic data are,
like consumer sentiment is m versus like hard economic data
like manufacturing production, jobs growth. So to me, I think
the bigger question for people in my field is like

(37:35):
how much do you want to weigh survey measures of
economic data in your process? And to me, there is
still useful information in these surveys, right, Like, so when
you when you look at the conference board data, for example,
it's another consumer confidence number. If you look at like
the labor differential, So what are consumers telling you about
how how plentiful jobs are? How are jobs hard to

(37:56):
get or are they plentiful? That number still does a
reasonably good job telling you or informing you about like
tightness in the job market. Right, So if I mean,
and if consumers are telling you that things are a
little bit more slack. You should probably believe them. So

(38:16):
to me, it's about looking at which pieces of survey
data are important and which ones aren't. Even in you know,
regional manufacturing data. Right, you get asked, they ask the
purchasing managers about their capex intentions. Again, it's another indicator.
It does a reasonably good job like mirroring the broad
ups and downs in business investment like cor durable goods.

Speaker 2 (38:35):
So I think the purchasing manager seems to be that
survey seems to be a little less out of sync
with spending than consumer sentiment is with either labor or
consumer spending. Fair statement.

Speaker 3 (38:50):
Yeah, I mean the consumer sentiment number doesn't look like
consumer spending. I mean that. But that's that, that is true.
That is true. They're elements within the consumer sentiment stuff.
That kind of makes sense. But you know, broadly speaking,
you're right, consumer sentiment is dramatically understating how much consumers
have been spending. That's true.

Speaker 2 (39:12):
So, so we're talking about all these different US data series.
How do you incorporate global macro trends and global economic
data into your models.

Speaker 3 (39:24):
I'm gonna be honest with you. I don't spend a
lot of time focusing on the rest of the world.
Really that's probably to my own, to my own, I mean,
especially for.

Speaker 2 (39:33):
These days with Europe outperforming the US and emerging markets
doing well after underperforming the US for fifteen years.

Speaker 3 (39:40):
Yeah, I mean what's interesting is that you look at
you know, it's right, I mean that that has been notable,
Like they're the outperformance of the euro You don't really
see much outperformance and growth dynamics, so it kind of
tells you, like, you know, like sentiment in these towards
Europe has been so depressed, so like it's been like
some incremental improvements, some incremental narrowing and growth differentials, and

(40:03):
everyone's thinking that, like Europe is off to the races,
But I don't really see that in the data that
we look at. I mean, if you look at purchasing
managers surveys, for example, in Germany, I mean they're still
well below I mean they're still below fifty. I mean
German manufacturing, French manufacturing have been in the kind of
dumps for for a while.

Speaker 2 (40:18):
And Germany is in the middle of economic contraction, right.

Speaker 3 (40:22):
Yeah, I mean it's you know, there's been a lot
of it seems like a lot of like hopium based
on like defense spending and fiscal reflation and so forth.

Speaker 2 (40:31):
Huh, really really interesting. Let's talk a little bit about
the possibility of a recession in twenty five or twenty six.
What do you think is the most significant macroeconomic risk
facing the United States right now?

Speaker 3 (40:50):
Well, I mean, obviously the one that's getting the most
attention is a radic trade policy, But I don't think
that by itself is what's going to cause a recession.
I think it's primarily like monetary policies too tight. You
have essentially you have nominal GDP slowing, and the Fed
funds rate is not doing anything. It's basically flat at

(41:13):
four and a half percent. So to me, that represents
a passive tightening of monetary policy, and that will continue
to build pressure on the economy, particularly on the labor market.
So you know, kind of go down the list, right.
I do think that their left tail risk of the
distribution has gone up, you know number one. I mean,

(41:34):
labor markets are cooling and income growth is slowing. That's
probably going to weigh on consumer spending. That was true
even before tariffs came into force. If you look at housing,
residential investment is probably slowing because home prices are now declining,

(41:54):
particularly in the places where the builders are making the
homes right, which is like the South Florida Tech Arizona.
That's weighing on construction activity. If you look at business investment,
it's probably welcome that they just passed this tax law
and that gives some certainty around the tax outlook. But

(42:17):
at the same time, you know, some of that effect
is going to be blunted by what's going on with trades.
So you haven't really seen much in terms of Yeah,
outside of AI, business investment has been quite sluggish. So
I stay in local governments cutting back right, So it's

(42:39):
just sort of it's a very unstable kind of equilibrium
in my opinion. And I do think that, you know,
if as consumer spending is slowing, that creates risks for
the US economy.

Speaker 2 (42:54):
So is your base case that recession in second half
of twenty twenty five sometime in twenty six likely probable?

Speaker 3 (43:03):
I have it on the board. I mean, I definitely
think that our recession is more likely than not. And specifically,
I think you'll see a period of you know, a
quarter or two where you get a series of negative
employment reports, and and I think that'll push up the
unemployment rate and probably bring in the FED to tart

(43:26):
more aggressively.

Speaker 2 (43:27):
So unemployment rate ticks up to four and a half
five percent. Where do you see this going five and
a quarter.

Speaker 3 (43:32):
I don't know it goes up that high, but I
can easily see it getting it close to four to
five percent at some point over the next twelve months.

Speaker 2 (43:38):
Sure, and that forces the FED to So let's talk
about the FED for a second. You know, once the
first Cares Act, which was what two trillion dollars ten
percent of GDP, the biggest fiscal stimulus since World War Two.
Once that was passed, it seemed like the FED was
increasingly behind the curve. Inflation start to tick up in

(44:01):
twenty but really take off in twenty one, and they
kind of sat on their hands until when did the
cycle start? March or April of twenty twenty two, And
by then by June it was inflation peaked and started
heading down. And so it seems like they were late
to recognize inflation, they were late to tighten. Now it

(44:23):
seems like they're late to start cutting. At least in
your assessment, is the FED just a big, slow, ponderous institution,
and they're always going to be behind the.

Speaker 3 (44:34):
Count like Trump too late.

Speaker 2 (44:36):
Now, by the way, you're the first person ever accused
me of that. But to be fair, hold aside the
beef between Trump and Powell. For my entire professional career
in finance, it has felt like the FED is always
late to the party. Yeah, I mean, I think they're

(44:59):
just conservative and slow, and they would rather be late
than mistaken.

Speaker 3 (45:04):
I think is affect you know, I mean, you know
there are times when they're I mean, even by Powells
on admission, like last year he said that when they
went fifty in September that even that was a little
bit late. So yeah, I mean, you know, it's a
consensus building institution. You have to kind of corral your
your colleagues to your view and so that that to

(45:26):
me might be one reason why it's a little bit slow.
But as I say, I mean.

Speaker 2 (45:36):
So we've talked a little bit about, or you brought
up how much uncertainty there seems to be around the
tariff policy, especially on again off again. What are the
risks from the tariff policy? Could this be a factor
in the recession, what other knock on effects do you

(45:58):
see from from this new pop.

Speaker 3 (46:00):
I think the main effect is that it freezes business
investment in place, right. I mean that to me is
the big story.

Speaker 2 (46:04):
Nobody wants to commit hundreds of millions of billions of
dollars till they know what the polomy.

Speaker 3 (46:09):
Trading relationships will be with all these other countries. Sometimes
you're announcing terrorists with countries we may already have trading agreement.

Speaker 2 (46:16):
South Korea we have twenty twelve.

Speaker 3 (46:18):
Korea is a good example.

Speaker 2 (46:20):
Sort of bizarre we don't we have?

Speaker 3 (46:22):
So yeah, I mean, and you know, look like this,
this to me is like it's the return of like
the Trump collar strategy, right. I mean one of the
things that we thought very early on was that you know,
essentially he's going to be testing the market, right, I
mean if the market gets you know, it's it's sort

(46:42):
of bounded in a way, right, a strong stock market,
maybe he pushes the trade dial up a little bit.
Then if the market sells off, maybe he'll back off. Right.
So it's it's sort of he's trying to find an
equilibrium for himself that he's comfortable with. And you know
that to me for businesses, right, Like to me, It's

(47:04):
as simple as part of his stick is chaos, and
the business community doesn't like uncertainty. So that's a fundamental tension.
But I think so that's going to weigh on investment spending.
But I think in the background, you still have this
kind of slow bleeding in the job market. You have
this ongoing cooling and consumer spending. You have this slow

(47:26):
sort of bleeding out bleeding out in the housing market
that's weighing on construction. So and you have you know,
state in local governments cutting back, so you just don't
have as many drivers for growth, and ultimately that becomes
a problem.

Speaker 2 (47:41):
So what is going to finally push the FED into
beginning cutting rates? What do you think is the most
important data series they're looking at. I really don't imagine
anyone cares whether inflation is two or two in a quarter.
But if we see, as you mentioned, a negative payrolls print,

(48:01):
that has to get their attention, doesn't it. Yeah, I
would think, so what else might get their attention and
start a new rate cycle?

Speaker 3 (48:09):
To me, the most important thing is seeing what happens
with you know, essentially labor markets slack, right, I mean,
if if wage growth continues to slow, down, then the
ability for households to essentially absorb tariffs is non existent,
which makes it very difficult to see where you get

(48:30):
inflation from. So right now they've been kind of making
this point that the labor markets are not a source
of inflationary pressure. If you get further slack in the
labor market at this point, like at that point, maybe
inflate the labor markets become a source of disinflationary pressure.
And so I think that's something they have to keep
an eye on.

Speaker 2 (48:47):
What else might capture the Fed's attention and say, hey,
we're really behind the curve. How what what do you
look at in the housing market, Is it just new
home starts or what?

Speaker 3 (48:59):
Prices are slowing right? I mean not to me, so it's.

Speaker 2 (49:01):
But they're still they're not negative and most especially in
the coasts, in in the big cities and in in.

Speaker 3 (49:08):
Well, prices aren't negative in the northeast. But if you
look at like California, like Inland County, Florida, also prices
are down. They're they're contracting outright, and in places like Texas, Florida, Inland, California, Arizona.

Speaker 2 (49:20):
But they've experienced giant booms over the past five years
they have.

Speaker 3 (49:23):
But at the same I mean, I would just that
that's true. But to me, again, it's about what's happening
at the margin. At the margin, prices are contracting and
that matters, and that matters, and inventories arising, and you know,
to me, that's the main asset on the most households
balance sheet. And if you look at home prices, I
mean there is an important link between home prices and

(49:44):
actual price inflation, right, I mean you can just look
at the data. You know, the the cities across the
country that are experiencing the most home price deflation are
also the places where you don't see much consumer price inflation.
So I think that's notable.

Speaker 2 (49:59):
So when one of your more recent research pieces you
talked about the importance of the US dollar, Why is
this such a huge factor on a macro level? What
do we down ten percent year to date in the dollar?
How significant is the dollar to the rest of the economy.
And let me know if i'm if I get if

(50:21):
I'm talking, If you didn't say that, I have so
much stuff in my head I can't keep it all straight.

Speaker 3 (50:27):
Well, I mean, the dollar is important. You know, typically
when you have a weeker dollar, right, I mean you
should assume that you get some upward pressure on core inflation.
I think what's notable about what's happened with the dollar
is that it kind of went the other way in
terms of what people thought. Right, Remember the big line.

(50:47):
The line was that you know, we're gonna put these
tariffs on a lot of the shock is going to
be neutralized because the dollar is going to get stronger.
Didn't actually happen. Yeah, Well, I mean it did for
a day, mainly against EM but most of the weakness
and the dollar actually was against G ten FX. So
but at any rate, yeah, I mean, so.

Speaker 2 (51:08):
It's the significant of the dollar to the economic cycle.
The things like foreigners buying US homes is a big
driver in a lot of cities. How significant is a
dollar to either a recession, coal inflation, or real estate?

Speaker 3 (51:27):
Well, so, I mean I think it depends how I mean,
So it's interesting how you how you're framing this question.
I mean, I think in remember, in macro like, everything
is correlated, right, so if if the dollar, to me,
it's really about why the dollar's moving the way it is.
So if we were actually if I let's say I'm right,
and we go into recession, I would assume the dollar

(51:47):
to be strengthening in that environment, right, because it's a
safety play, right, So if the US economy's weakening, then
you know, people are going to seek out safety, and
that should push the dollar value up.

Speaker 2 (51:59):
You mentioned in April that it was potentially your worst
case scenario, and in that month, after the big trade
policy TAFF policy announcement on April second, we saw bond's weekend,
we saw stocks weekend, we saw the dollar week in sort.

Speaker 3 (52:16):
Of he'll sell America trade. But if you if you
go back to that though, right, Barry, I mean, if
you look at the number of times where that combination
of things happened, I mean you could probably count on
one hand, right how many days that happened. So it
was like it was one of these things where the
narrative kind of got way out in front of what
was actually happening. And now here we sit a couple

(52:40):
of months later, and we're talking about US equities at
all time highs, and you know, so, I mean I
think it, you know, maybe part of it is maybe
there's a little bit more enthusiasm around what's going on
in Europe, right. I mean Europe is taking steps to
reflate their economy. That's good for the euro you know,
you have at the margin, like people are a little
bit more optimistic about emerging markets. Emerging market currencies have

(53:03):
been doing better, so you know, there's this train of
thought that, like the dollars, is purely a function of
like the the Trump more on risk premium. But that,
to me, does I don't think that goes That might
be some of it, but I don't think that's nearly
all of it.

Speaker 2 (53:23):
That is, I've heard taco. I can't say I've heard
more on risk premia before. That's a new phrase. Don't
send your hate mail to me. Let me throw a
curveball question at you before we get to our favorite questions.
What do you think investors are not talking about but
perhaps should be And it could be any topic, assets, geography, policy,

(53:46):
What data point is getting overlooked but is important and
people should be paying attention to.

Speaker 3 (53:52):
Well. I think what's interesting is this sort of the
Trump Apprentice show with the fed chair. I think that's
becoming I mean Scott right, I mean there's this there's
this whole talk about shadow feed chair. But if you
get into a situation where by Trump doing what he's doing,

(54:13):
do you actually get him naming a chairman in name
only because Kevin yeah or no? But basically, in other words,
what I'm saying is these guys are trying to get
this done early, essentially to kind of create a condition
for some sort of shadow fed shair right with.

Speaker 2 (54:31):
No authority, no power, no ability to rates.

Speaker 3 (54:34):
Well that but also maybe someone that's But then if
this person ends up becoming the chair, does he actually
become a chair in name only? Because Powell is still
sticking around?

Speaker 1 (54:45):
Right?

Speaker 3 (54:45):
I mean that that to me is what's interesting.

Speaker 2 (54:47):
Is when does Powell's term end?

Speaker 3 (54:49):
Well, his term is chair ends next May, but his
term as a governor doesn't end for another two years
after that. Oh really, So that to me is something
that you know, that's a pretty uh, that's a card
he can play, right, And the way they go they're
going about this, you know you talk about you know,
we talk about like Supreme Court justices and like litmus

(55:12):
tests when you name right, like there's they have a
litmus test for judges. Trump is creating a litmus test
in a way for FED, for monetary policy officials, right.
He wants someone that's going to cut.

Speaker 2 (55:22):
Rates, someone who's not going to be independent exactly.

Speaker 3 (55:25):
And so if so, I do think that this desire
to have this kind of like big show like the
Apprentice Monetary Policy edition and this sort of like you know,
shadow fed chair, you know, trying to kind of undercut
Powell before he's done with this term, that could potentially

(55:49):
backfire in them because it would just mean that it's
possible that if they put in it, if they actually
get whoever they want across the finish line, once they're there,
they're actually quite they're very weak chair because Powell decides
to stick around.

Speaker 2 (56:03):
That's really quite fascinating. I haven't heard anybody talk about that.
So that is very much an under the radar answer.
So let's let's in our last few minutes, let's talk
about our five favorite questions. We ask all of our guests,
starting with tell us what you're streaming these days? What
are you listening to? We're watching?

Speaker 3 (56:22):
M hmm, what am I watching? I just finished The
Handmaid's Tale? Oh really that they had their last.

Speaker 2 (56:29):
Did it hold up through all these seasons?

Speaker 3 (56:32):
I thought? I thought the last season was actually pretty good,
So I I like that. I just watched Netflix The
Poop Cruise. That was pretty fun.

Speaker 2 (56:40):
Oh really, that's people stuck on the boat in the
beginning of Yeah, it was a good like it's such
a horrible title.

Speaker 3 (56:46):
It was a quick it was a quick documentary. But
I but I kind of enjoyed it. And yeah, those
are those are the two things that are tests that
are top of mind for me.

Speaker 2 (56:55):
Those are those are very eclectic, little similar. I walked
in on my wife watching The Gilded Age, and somehow
I got sucked into this. And it's really quite fascinating
because all the issues that we argue about today, wealth
inequality and new money versus all money and economic strata

(57:17):
and economic mobility, themes of the Gilded Age one hundred
and fifty years ago. It's amazing that everything's changed and
nothing's changed, right, It's kind of kind of fascinating. Let's
talk about mentors. Who were some of your early mentors
who helped shape your career.

Speaker 3 (57:35):
You know, it's interesting. I mean I think about that.
I mean, I remember you asked me this question the
last time I was on and I probably said, you know,
Ethan Harris, right, I think I'd put Drumatis in that
category of mentor. But I'm also at the point now
I feel like in my career where the people that
I idolized early on are now actually like my rivals, right,

(57:57):
they're my competitors in some respects, right, I mean we
talk about Rosie. I mean, he and I are both
in the research business, you know, I mean, so it's
sort of it's interesting.

Speaker 2 (58:07):
If you're bearish the same year he's bearish, or at
least the same quarter. That's an unusual alignment because for
as long as that might be true right now, because
for fifteen years you've been fairly yeah, fairly constructive, and
you can't say the same of Rosie. This could be
the first time, second half twenty twenty five.

Speaker 3 (58:29):
We're aligned, right, But you know that just means.

Speaker 2 (58:32):
You've shifted because he's been sort of.

Speaker 3 (58:34):
But so now it's more about like not so much mentors,
but like who am I Who am I talking to
to kind of help me work through my process as
like an analyst and yeah, I mean some names that
come to mind, like connorson your Blueberg Blueberg opinion colleague.
I like talking to him about about the economic outlook.

(58:54):
We sort of think about and come out come at
things the same way. Luke Kawa is another one. I like,
so these are sort of like, you know, I guess
you could call them like geriatric millennials, like myself, like
we sort of another periatric millennials.

Speaker 2 (59:12):
Again, another phrase I've never heard before.

Speaker 3 (59:14):
Scanda im or not is another one. I mean, he's
sort of in like more of like the public policy space.
But I mean I'm kind of glad he doesn't do it,
but he he'd make a great business economist himself. But
I mean, these are people that I just like talk
to to kind of stress test my own views. And
I think that's at this point in my career, Like
that's what I need more than than mentors, is sort

(59:36):
of smart people that will help me, you know, kind
of think through an outlook and stress test. Yeah, or
just like where are you wrong? Like like why what
are you? What are you missing?

Speaker 2 (59:49):
That's interesting.

Speaker 3 (59:50):
So that that's sort of how I think about it.

Speaker 2 (59:52):
Now, let's let's talk about books. What are some of
your favorites? What are you reading currently?

Speaker 3 (59:57):
You know, I don't read books.

Speaker 2 (59:59):
I'm a book reads.

Speaker 3 (01:00:01):
We did I read the news? I read. I can
tell you who are the people that I like reading?
You know, in journalism like Nick timros Wall Street love
reading his stuff.

Speaker 2 (01:00:17):
Fed Whisper these days too.

Speaker 3 (01:00:19):
Well. I mean it's not just that, but he has
like a very like you know, I mean he's he
thinks about things very thoughtfully too, and he and he
you know, he does a little data watching himself, so
I kind of like reading what he has to say.
Jonathan Levin Bloomberg Opinion. So you know those are the

(01:00:39):
your colleague, Josh Brown. I read his stuff, so.

Speaker 2 (01:00:42):
He's a very thoughtful writer.

Speaker 3 (01:00:46):
So to me, it's really it's really I I you know,
I don't have time to read books because I'm too
busy like reading, uh you know, read reading the news,
reading opinion pieces. The most interesting FED paper that I
came across recently is just you know, we talked a
little bit about ed Leamer before, but the FED recently
published a paper just looking at the housing channel of

(01:01:08):
consumer spending, right like, so they were basically making a
fairly obvious point that if housing transactions or new home
sales are down, like, that's going to have effects on
housing related consumer spending. And that's something that we should
be thinking of.

Speaker 2 (01:01:19):
Glurable goods Gross Board.

Speaker 3 (01:01:21):
Yeah.

Speaker 2 (01:01:22):
Absolutely, housing has always been a big driver of the economy.
What's been so shocking about this economy is we've seen
home transactions drop significantly just because there's no supply, but
the economy has been so resilient. It's really been kind
of fascinating watching that happen.

Speaker 3 (01:01:39):
Yeah, I mean it's interesting. I mean so again, like
housing is one of the reasons why I'm cautious on
the economic outlook. And you know, I think what's different
about this time with respect to housing versus you know,
early twenty twenty two, is that now units under construction
are coming down. You're in a situation where starts are
running below completions, which means that units under I mean

(01:02:01):
essentially units under construction will have to keep falling. And
that's not what you had last time. Right back then,
units under construction were going up. So to me, that
construction piece of it is different this time versus last time.

Speaker 2 (01:02:22):
Our final two questions, what sort of advice would you
give to a recent grad interested in a career in
either economics or investing.

Speaker 3 (01:02:32):
I mean, to me, it's just get a foot in
the door, you know, figure out the details later. You know,
it's sort of it never works out. The way you think,
But you just have to put yourself in a position
where you have the best chance of succeeding. And that,
to me is the most is the best advice I
can give someone. So in my case, that manifested itself
and get your foot in the door at a bulge

(01:02:53):
record from.

Speaker 2 (01:02:54):
I mean you literally were working in HR before you
moved into.

Speaker 3 (01:02:58):
Yeah, it doesn't like to me, it's about again, it's
about putting in yourself in a position where you can succeed.
And and I think that that's definitely true. I mean
for me, it's a number of ways that happened. Right,
I went to n YU. I went to n YU
because I knew that if I stayed in New York
I'd probably have a better chance at things than if
I left. And and it's just you know, I mean NYU.

(01:03:23):
You know, it's not like the best school. It's not
like Princeton or Harvard, but.

Speaker 2 (01:03:26):
Pretty good school.

Speaker 3 (01:03:26):
It's a pretty good school, and it's a business stern.
And if you're in New York, you're gonna there recruiters
are gonna come after you. If he went to n YU, right, right,
It's just that simple.

Speaker 2 (01:03:36):
And you just need one hundred k Ye.

Speaker 3 (01:03:39):
Well yeah, I mean it wasn't that much when I
was going. But but my advice would just be you
have to put yourself in a position to succeed and
just let the chips fall where they may. I mean
that that to me is you know, and if that
means taking a job that maybe not the best job,
but it's at a firm that you have a lot
of you know, respect for, or it's a good firm,
good brand name.

Speaker 2 (01:03:59):
To make it our final question, what do you know
about the world of investing today you wish you knew
twenty twenty five years ago when you were first starting out.

Speaker 3 (01:04:11):
Ah, that's a tough one. I mean, I think my
favorite thing, I mean, to me, what's important is and
just trying to relay this back to my seat, is
it's important to understand the time horizon of the person
that you're talking to and you're providing analysis for because
a lot of people live in the short run. But
if you're sort of a typical investor, you can you

(01:04:35):
can tune out a lot of the stuff that we're
talking about, to be perfectly honest, because to quote my
friend Sam row Stock, to usually just go up and
so you know, it's sort of you see all this
analysis that comes out on the street, like after the
ism goes to forty to forty, you know, usually the
stock markets higher six months later and twelve months later.
We'll yeah, obviously because the.

Speaker 2 (01:04:55):
Stuff that's defaults depending on the decade. Looking at it's
three out of four or four out of five.

Speaker 3 (01:05:02):
Yeah, So to me, it's sort of yeah. I would
tell myself back then, like, don't worry so much about
making big market calls. Just give people your thought process.

Speaker 2 (01:05:14):
Really really interesting. Neil, thank you for being so generous
with your time. We have been speaking with Neil Dutta,
head of economic research at Renmac. If you enjoy this conversation,
well check out any of the five hundred and fifty
we've done over the past eleven years. You can find
those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your

(01:05:37):
favorite podcast. And be sure and check out my new
book How Not to Invest The Bad ideas, numbers and
behavior that destroys wealth and how to avoid them How
Not to Invest at your favorite bookseller right now. I
would be remiss if it I did not thank the
crack team who helps me put these conversations together each week.

(01:05:59):
My audio engineer is Peter Nicolino. Anna Luke is my producer.
Jean Russo is my researcher. I'm Barry Ruscholtz. You've been
listening to Masters in Business on Bloomberg Radio.