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Jobs, Markets, and Higher Ed · Bloomberg Intelligence

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0:55
Speaker 3: Looking at the jobs data headline on the terminal. One
0:58
Speaker 3: of the stories that reads by US labor market defive
1:00
Speaker 3: slow down forecasts in broadening strength right now, want to
1:03
Speaker 3: bring in Tom Gibble. He is the CEO at Lassal Network,
1:07
Speaker 3: joining us on Zoom Tom. When you look at the
1:11
Speaker 3: jobs report that we saw too hot to handle, what
1:14
Speaker 3: really stands out to you from this report?
1:17
Speaker 4: I think number one is the unemployment number dropping, which
1:20
Speaker 4: happens to be somewhat seasonal, but it's still a really
1:23
Speaker 4: good sign based on where things were trending over the
1:25
Speaker 4: past couple months. And then secondarily, the fact that we
1:30
Speaker 4: added one hundred and ninety nine thousand jobs is fantastic.
1:32
Speaker 4: But of the one ninety nine, I believe one point
1:35
Speaker 4: fifty were non government, which is a really good number
1:38
Speaker 4: to see that over seventy five percent of the jobs
1:41
Speaker 4: added or non government. So it's a really good sign.
1:44
Speaker 4: And now, you know, here's just hoping that that not
1:47
Speaker 4: only do they not raise rates, that that they don't
1:51
Speaker 4: not lower rates, that they don't raise them as well.
1:53
Speaker 4: So I think we're gonna be okay.
1:54
Speaker 3: Yeah.
1:55
Speaker 5: And in terms of the Ali and his good morning,
1:57
Speaker 5: it's manas here alongside average early earnings coming in quite
2:01
Speaker 5: nicely plus point four percent month a month year andyar
2:03
Speaker 5: it takes you to four percent, So there's no sign
2:06
Speaker 5: of the steam coming out of that engine at the moment.
2:10
Speaker 5: And this is what markets are going to focus on,
2:12
Speaker 5: isn't it, which is, there's no collapse, this is a
2:15
Speaker 5: nice soft landing and earnings are strong.
2:20
Speaker 4: Well, I think that what people are scared about is
2:22
Speaker 4: it's not a landing at all. And I think that
2:26
Speaker 4: that is it's the craziest market I've ever seen, craziest
2:29
Speaker 4: economy I've ever seen. The stock market continues to go up,
2:32
Speaker 4: earnings are positive, unemployments low.
2:34
Speaker 5: It's certainly not laying the work for hard landing.
2:36
Speaker 6: I mean, that's the whole point. And that's what the bond.
2:39
Speaker 5: Market rallied furiously on, which was, you know, some kind
2:41
Speaker 5: of a crack in the dams. So what is no
2:45
Speaker 5: landing Because no landing doesn't get me two hundred bases
2:47
Speaker 5: points of cuts from the FED next year, does it? No?
2:50
Speaker 4: But but if they don't think it's landing at all,
2:52
Speaker 4: it might get you another another twenty five or fifty
2:55
Speaker 4: bases point increase. So you don't want that either. And
2:58
Speaker 4: I think hopefully we're at a point now where we
3:01
Speaker 4: say let's let this thing ride a little bit. And
3:05
Speaker 4: I don't think we'll get the cuts, and I don't
3:07
Speaker 4: think we'll get the increase, and so we'll just be
3:10
Speaker 4: flat and see what happens.
3:12
Speaker 6: What people don't realize.
3:14
Speaker 4: Sometimes the economist that's definitely main street is that the
3:18
Speaker 4: economy is so much different than we've ever had it
3:22
Speaker 4: in the history of this country. And what I mean
3:24
Speaker 4: by that is Number one, there's more startups than ever before.
3:28
Speaker 6: So Google lays off people.
3:30
Speaker 4: Small companies are gobbling these people up that didn't exist.
3:33
Speaker 4: There wasn't this startup culture that people could go find
3:36
Speaker 4: other jobs. So there's just more companies that exist for
3:38
Speaker 4: people to go work at. Number two, because of technology,
3:41
Speaker 4: the skills are more transferable. Fifty years ago, if I
3:45
Speaker 4: was a General Motors or a Ford or a Chrysler
3:48
Speaker 4: car person, that was all I could do. Today, because
3:51
Speaker 4: of technology and transferable skills, you're not stuck in one
3:55
Speaker 4: industry vertical for your whole career. You can move into
3:57
Speaker 4: other areas. And so those are the type of things
4:00
Speaker 4: that have made this job's recovery in this job's economy
4:03
Speaker 4: so much different than any other time in American history.
4:06
Speaker 3: And tom to see some of these rate cuts play out, though,
4:10
Speaker 3: does something need to break? I'm just looking at the
4:12
Speaker 3: unemployment rate extremely low at three point seven percent, I
4:14
Speaker 3: had seen expectations maybe for that to cross the four
4:17
Speaker 3: percent threshold.
4:19
Speaker 4: Yeah, I think what we're seeing is it's not it's
4:21
Speaker 4: not gonna you know, the only way if the if
4:24
Speaker 4: the FED really believes that the only way to curb
4:28
Speaker 4: inflation and get it down to two percent is to
4:31
Speaker 4: have massive layoffs.
4:33
Speaker 6: So I think which.
4:33
Speaker 4: Would be destructive to the overall economy. Not helpful, but destructive,
4:39
Speaker 4: would be to raise rates, you know, one hundred and
4:42
Speaker 4: fifty basis points over the next three, four, five, six quarters.
4:46
Speaker 4: And I don't think that's gonna happen because right now,
4:49
Speaker 4: what we're seeing is companies can survive and operate with
4:55
Speaker 4: relatively normal interest rates. And what we had it was
5:00
Speaker 4: just too long of an explosion of growth due to
5:04
Speaker 4: zero percent interest rates and no repercussions. And that's the challenge.
5:09
Speaker 4: Is when you can open up a business as a
5:11
Speaker 4: venture capital firm, or you can finance one as a
5:14
Speaker 4: private equity firm and have almost no risk of loss,
5:18
Speaker 4: that creates a net for everybody. That's just not fair,
5:23
Speaker 4: it's not safe, it's not normal. Now what we're seeing
5:25
Speaker 4: is with normalized interest rates as we had throughout the
5:28
Speaker 4: history of this country, the economy can still survive, and
5:32
Speaker 4: that's a positive thing for society.
5:34
Speaker 5: One of the biggest debates that we have been having
5:37
Speaker 5: during this massive rally in the bond market and sort
5:40
Speaker 5: of explosion in equity markets higher, was that we were
5:43
Speaker 5: going to face some kind of a debt cliff as
5:47
Speaker 5: sort of a refinancing cliff in theory. Do you believe
5:53
Speaker 5: that that's part of the reason why we're still sustaining ourselves,
5:56
Speaker 5: that that cliff is just not materializing.
6:00
Speaker 4: Yeah, I think it's a matter of time. I think
6:03
Speaker 4: what we've got is is that there's more equity in
6:05
Speaker 4: people's homes than we've ever had before, and at the
6:09
Speaker 4: same time, the rate on borrowing money is increased, and
6:13
Speaker 4: so what we've seen is people have the ability to
6:15
Speaker 4: borrow more, and we're seeing consumer debt increase. We just
6:20
Speaker 4: haven't seen it hit the wall yet. And I think
6:22
Speaker 4: that the biggest change I've seen in consumer spending and
6:26
Speaker 4: debt versus ever before is that people used to borrow
6:30
Speaker 4: and have home equity lines or whatever it was, but
6:34
Speaker 4: they were also saving for rainy day. And now what
6:37
Speaker 4: it seems like is no matter how much money people have,
6:40
Speaker 4: the saving for rainy days gone out the window because
6:43
Speaker 4: there's this sense of the government will step in. I'm
6:45
Speaker 4: not going to get kicked out of my house, and
6:47
Speaker 4: there's an overall cultural shift that's existed, and I do
6:51
Speaker 4: think I don't think it's going to happen in twenty
6:53
Speaker 4: twenty four, but eventually the rubber's going to hit the
6:56
Speaker 4: road there due to the deficit and the large amount
6:59
Speaker 4: of individual debt as well.
7:00
Speaker 3: Yeah, we're talking to CEO. Let's sell on network, Tom Gibble. Tom,
7:03
Speaker 3: you make an interesting point because when we were talking
7:05
Speaker 3: around Black Friday and Cyber Monday sales, it seemed like
7:08
Speaker 3: the consumer was more than happy to use things like
7:10
Speaker 3: buy now, pay later, taking on credit card debt to
7:13
Speaker 3: keep buying goods. You're talking about the rubber hitting the
7:15
Speaker 3: road in twenty twenty five. How does that shake out
7:18
Speaker 3: with a labor market that you've made the point to
7:20
Speaker 3: that's still strong and still has quite a number of
7:23
Speaker 3: transferable skills. If people were to be.
7:25
Speaker 4: Laid off, well, I think that's exactly I think you're
7:28
Speaker 4: going to have a big come up and soid it'll
7:30
Speaker 4: probably make a difference of who wins in the election
7:33
Speaker 4: in twenty four and where Congress sits of what the
7:36
Speaker 4: bailout will be.
7:37
Speaker 6: So now we've.
7:37
Speaker 4: Had, you know, in the past fifteen years, we've had
7:40
Speaker 4: the recession and the corporate bailout, We've had the pandemic
7:44
Speaker 4: and the consumer bailout. So now we're going to look
7:46
Speaker 4: and we're going to see what's going to happen when
7:49
Speaker 4: we get if we get another recession, and how bad
7:54
Speaker 4: it gets on the homeowner side, on the residential, on
7:57
Speaker 4: the commercial real estate side, and what we see with
8:01
Speaker 4: the continuing growth of the national deficits. So I think
8:04
Speaker 4: that because we've had this expansion of companies and to
8:08
Speaker 4: quote Tom Freeman, right, the world really is flat from
8:11
Speaker 4: a standpoint of jobs being able to be done anywhere
8:15
Speaker 4: in the world, that I think people are going to
8:19
Speaker 4: realize that they've got to work, and they're going to
8:23
Speaker 4: take jobs below what they were making. Salaries are inflated
8:26
Speaker 4: right now. I don't care what anybody says. We're up
8:28
Speaker 4: four percent. Wages are and what's gone on in the
8:33
Speaker 4: past thirty months with wage increases on the hourly side,
8:37
Speaker 4: and the salary is crazy to happen that fast, and
8:41
Speaker 4: it's going to come down, whether it's in twenty five
8:44
Speaker 4: or twenty six. It's going to come back down eventually,
8:47
Speaker 4: and I think that as long as people have jobs
8:49
Speaker 4: when that happens, will be okay.
8:51
Speaker 6: But you will see that that recalibration on wages.
8:54
Speaker 3: But that's interesting. So you're saying we see kind of
8:57
Speaker 3: a resetting of wages in twenty five, twenty six, in
9:00
Speaker 3: twenty four, like in terms of when you're looking at
9:02
Speaker 3: the labor market, wage growth, recession risks, that's not a
9:06
Speaker 3: twenty four story at all in your view.
9:08
Speaker 4: I don't think it's going to be a twenty four stor.
9:10
Speaker 4: I think it's going to be a twenty four story
9:11
Speaker 4: for two reasons. I think number one, we've still got
9:13
Speaker 4: the infrastructure bill, and so what that means is the
9:16
Speaker 4: government's hiring people like it hired twenty five percent of
9:19
Speaker 4: the one ninety nine that we're added in the November
9:22
Speaker 4: jobs report, and that leads to trickle down economics to
9:26
Speaker 4: the private sector on the infrastructure package. So we've still
9:31
Speaker 4: got this infrastructure package and all those trillions being spent,
9:34
Speaker 4: so that keeps things afloat. In twenty four plus, you
9:37
Speaker 4: have an election cycle year, which there's obviously incentive for
9:41
Speaker 4: that to keep the economy humming as well. So twenty
9:44
Speaker 4: four I don't see being a problem whatsoever. I think
9:47
Speaker 4: that we're pushing things. We're kicking the can down the
9:50
Speaker 4: road a little bit.
9:51
Speaker 5: I just want to come back as an intern on
9:53
Speaker 5: Wall Street. We're I get one hundred and twenty dollars
9:55
Speaker 5: in our next summer. I'll just leave you with that thought.
9:57
Speaker 5: That's what we're paid in twenty twenty three. Will they
10:00
Speaker 5: be able to command that in twenty twenty four?
10:03
Speaker 3: Interesting conversation though, Thank you so much. Tom Gibble again,
10:06
Speaker 3: CEO at Lasal Network, joining us via zoom from Chicago.
10:11
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10:15
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10:25
Speaker 3: Baby Filton, Manus Granny here filling in for Paul and Matt,
10:29
Speaker 3: Joined now by Nancy Tangler, CEO and CIO at Laffer
10:34
Speaker 3: Tangler Investments. Here in the Bloomberg Interactive Studio. Nancy, we
10:38
Speaker 3: get jobs data, We get University of Michigan sentiment data.
10:42
Speaker 3: Markets are trading higher. Too hot to handle this. It
10:45
Speaker 3: seems like we were not initially kind of gearing up
10:48
Speaker 3: for this kind of a market reaction in the pre
10:50
Speaker 3: market trading.
10:51
Speaker 8: Yeah, well, I think I think the volatility well, first
10:53
Speaker 8: of all, it's friend to the long term investor. So
10:55
Speaker 8: if you were in there buying early this morning or
10:58
Speaker 8: pre market, you're in good shape. But I also think
11:00
Speaker 8: that the Michigan numbers were more important than the jobs numbers.
11:04
Speaker 8: They weren't really the jobs numbers that is as robust
11:07
Speaker 8: as the headlines indicated. So you saw, you know, the
11:10
Speaker 8: return of UAW and screenwriters. You saw a lot of
11:13
Speaker 8: healthcare jobs, but manufacturing jobs were down. So I think
11:17
Speaker 8: that the initial reaction was ill informed. Remember that it's
11:20
Speaker 8: the algorithms that are reading the headlines, you know, driving volatility.
11:24
Speaker 8: But the Michigan numbers were actually, I think, quite encouraging,
11:28
Speaker 8: and I'm loving this rally.
11:31
Speaker 5: Those pesky i'l goes and I have it in good
11:35
Speaker 5: authority that they have financial cloud. The one year inflation
11:38
Speaker 5: expectations come in at three point one percent on the
11:42
Speaker 5: Michigan numbers. Now that is perhaps the more significant piece
11:48
Speaker 5: that the bomb market will look towards, isn't it.
11:50
Speaker 3: Yeah?
11:50
Speaker 8: And hugely better than the market was expected.
11:53
Speaker 5: Full point three was the expectation previously full point five percent.
11:57
Speaker 9: Yeah, so you're right, man.
11:59
Speaker 8: I think one of the things that we've been arguing
12:01
Speaker 8: is that inflation, Yes, it is coming down. I think
12:03
Speaker 8: what the disconnect between most people and us the financial
12:09
Speaker 8: community is that maybe coming down, but there are still
12:11
Speaker 8: embedded very high costs.
12:13
Speaker 5: I think.
12:14
Speaker 9: So that's why I think the Michigan.
12:15
Speaker 8: Numbers are so powerful, because there seems to be some
12:19
Speaker 8: realization that we're at the end by the consumer. Maybe
12:22
Speaker 8: they can you know, sort of absorb some of these
12:24
Speaker 8: higher prices.
12:25
Speaker 5: Can I just say, as a recent transplant to your
12:27
Speaker 5: fine country and your esteemed city, my gosh, it's expensive.
12:32
Speaker 5: And I have come from one hallish expensive city, from Dubai,
12:35
Speaker 5: from the Middle East on food on boost and there
12:37
Speaker 5: was no tax. There was no income tax there. I mean,
12:40
Speaker 5: I'm being taxed within an inch of my life? How strong?
12:42
Speaker 5: Where do you want to? Where do you want to
12:44
Speaker 5: be in this economy? Because this is this the immaculate disinflation?
12:49
Speaker 5: Is this the soft landing of these these these sayings
12:52
Speaker 5: are so awful, But but how do you position for it?
12:55
Speaker 5: Because it doesn't look brootal or hard well man, I.
12:57
Speaker 8: Think we were talking pre show that. My analogy is
13:00
Speaker 8: I was alive in the nineties.
13:02
Speaker 9: And as was I, I was.
13:03
Speaker 8: Managing just for the director show barely and I was
13:08
Speaker 8: managing billions of dollars. And this feels a lot like that.
13:11
Speaker 8: So you have what I would call and some are
13:13
Speaker 8: calling the Fourth Industrial Revolution or a supercycle in technology, digitization, generative,
13:19
Speaker 8: cloud computing. I mean, just look at Broadcoms numbers last night,
13:24
Speaker 8: and that's the poor man's Nvidia. So if you look
13:27
Speaker 8: at that and you say, okay, we had higher inflation,
13:31
Speaker 8: we had interest rates that were five to eight percent
13:34
Speaker 8: in the nineties, we had an inverted yield curve what
13:37
Speaker 8: was called then ASoft landing. I'm not predicting one this time.
13:40
Speaker 8: We had a war, we had a recession at the
13:42
Speaker 8: beginning of the decade, and yet the Nasdaq was up
13:44
Speaker 8: over eight percent, the Dow and the S and P
13:46
Speaker 8: were up over four hundred percent. So I think stocks
13:49
Speaker 8: can continue to do well in hell here the surprise
13:51
Speaker 8: is going to be earnings, I think for most investors,
13:54
Speaker 8: and I think what we're seeing now is that for
13:57
Speaker 8: the most part, the market's not listening to the FED anymore,
14:00
Speaker 8: which I've said, and we don't need to debate.
14:02
Speaker 9: It has a credible ratesgized.
14:06
Speaker 8: Has a credibility problem for sure. So I want to
14:09
Speaker 8: be in overweight technology. I want to be overweight industrials
14:12
Speaker 8: because the pmis are bondbing when.
14:14
Speaker 3: You're looking at technology, though, is that predominantly within the
14:18
Speaker 3: Magnificent seven and friends or you're looking at kind of
14:20
Speaker 3: more of a widespread rally within tech.
14:23
Speaker 5: Yeah.
14:23
Speaker 8: So, so the companies that are so our investing theme
14:26
Speaker 8: is old economy companies Bailey that are pivoting to digitization
14:30
Speaker 8: and embracing it, and then the new the companies that
14:33
Speaker 8: are providing those tools. So so our biggest holdings in
14:36
Speaker 8: technology would be Microsoft, Palleto Network Service, now Broadcom.
14:42
Speaker 9: I'm probably forgetting half a dozen of them.
14:43
Speaker 8: But the names that that are going to drive this
14:47
Speaker 8: next supercycle.
14:49
Speaker 9: I'm not interested in meta.
14:52
Speaker 8: We own a little bit of Google, uh, but we
14:54
Speaker 8: want those are in some ways glorified ad companies. We
14:58
Speaker 8: want the ones the company instead of driving it.
15:01
Speaker 5: It's interesting because when we've had a variety of people
15:03
Speaker 5: in through the morning time talking about the propensity for
15:06
Speaker 5: mag seven to deliver out sized returns in twenty twenty
15:09
Speaker 5: four may well be more challenged, and perhaps you want
15:11
Speaker 5: to go a little bit more for breadth. At the
15:14
Speaker 5: end of every year, I'm waiting for the Goldmen's report
15:16
Speaker 5: to come out on buybacks or whatever. But this is
15:20
Speaker 5: where I want to get your sense. Buybacks are incredibly important.
15:25
Speaker 5: Apple intermittently do it, and we spend the whole day
15:29
Speaker 5: gorging on Apples buy back and bond issue and stuffun
15:32
Speaker 5: and whatever. But where will buy backs put a floor
15:36
Speaker 5: in this mode?
15:36
Speaker 8: Absolutely to what extent took the words right out of
15:39
Speaker 8: my mouth.
15:39
Speaker 5: It's from the script.
15:43
Speaker 9: You secretly did I say?
15:46
Speaker 6: How did I read that?
15:47
Speaker 9: You said it better?
15:49
Speaker 8: Yeah, I think clearly they are going to. And one
15:51
Speaker 8: of the things that drives when we'll continue to drive
15:53
Speaker 8: that is the insatiable appetite that the shadow banking system
15:57
Speaker 8: has for corporate bonds. But if you just look at
15:59
Speaker 8: the mag seven and it's not all of them, I
16:00
Speaker 8: think it's four or five. They're going to issue one
16:03
Speaker 8: hundred billion dollars in share buybacks over the next year
16:06
Speaker 8: or two, or claim a one hundred billion, however you want
16:10
Speaker 8: to say that. I think that's what we saw in
16:13
Speaker 8: twenty twenty and twenty nineteen, and that's what we're going
16:16
Speaker 8: to continue to see in twenty twenty three.
16:18
Speaker 9: It is, and.
16:18
Speaker 8: As Apple's a big chunk of that. So you just
16:23
Speaker 8: need them to do what they say they're going to do.
16:24
Speaker 8: And so I think you buy the dips in technology.
16:27
Speaker 8: And I know there's a lot of people that are
16:29
Speaker 8: saying the tech trade is over.
16:30
Speaker 9: I just don't agree. I think they're ill informed.
16:32
Speaker 3: Well, I'm looking at kind of the catch up trade,
16:35
Speaker 3: if you will. We're seeing the equal weighted SMP catching
16:37
Speaker 3: up really since that November late October bottom. How do
16:41
Speaker 3: you see that playing out in different areas? You mentioned industrials.
16:44
Speaker 3: Is that a place that you're continuing to put cash
16:46
Speaker 3: to work. What names do you like within the industrial space.
16:50
Speaker 8: Yeah, so we like the ones that are automating. And
16:52
Speaker 8: I would say broadening out is great for portfolio managers
16:54
Speaker 8: because we have to be diversified, Bailey, So you can't
16:57
Speaker 8: put all your eggs in the technology basket. But you know,
17:00
Speaker 8: Carriers one of our largest holdings in industrials. You saw
17:03
Speaker 8: it pop today on the sale. We also like Illinois Toolworks.
17:09
Speaker 8: We have exposure to Emerson Electric, and we actually have
17:13
Speaker 8: exposure in a different portfolio to Honeywell, so it has
17:16
Speaker 8: done not nearly as well as those names. But I
17:19
Speaker 8: think you still want to be in the short cycle
17:21
Speaker 8: of industrials and then broaden out in We have a
17:26
Speaker 8: market weight in healthcare, we have a market weight in financials,
17:29
Speaker 8: and an overweight and consumer discretionary, so broadening out is great.
17:34
Speaker 8: We were adding risks back into our portfolios in October
17:36
Speaker 8: of twenty twenty two, so we were adding to technology
17:39
Speaker 8: when the last death no was issued, and we will
17:42
Speaker 8: continue to do that as we have the opportunity.
17:44
Speaker 3: You mentioned consumer discretionary. It's the chatters died down a bit.
17:49
Speaker 3: But what's your thought on kind of this ozempic trend
17:52
Speaker 3: and is that really going to reshape the entire economy
17:55
Speaker 3: and how people spend.
17:56
Speaker 9: I don't think so, Bailey.
17:57
Speaker 8: I mean, you know, I was around when we had
18:00
Speaker 8: fen Fenn and for a while it was great, and
18:02
Speaker 8: then all the side effects showed up, and I just
18:04
Speaker 8: don't think there's enough data. And I was just in
18:07
Speaker 8: the Midwest and they have not gotten the ozembic message
18:12
Speaker 8: or the memo, So I think I think it will
18:14
Speaker 8: have an impact mildly, but I don't think it's going
18:17
Speaker 8: to hurt these companies, like the initial reaction indicated.
18:20
Speaker 5: And then just very quickly you look at we have
18:22
Speaker 5: a big take story this morning talking about Hermes having
18:25
Speaker 5: delivered one thousand percent returns since they batted away LVMH.
18:29
Speaker 5: You know, do you feel confident at all in taking
18:32
Speaker 5: some of the higher, let's say, the premium names relative
18:36
Speaker 5: to Henny's a very European number. I'm learning as I
18:39
Speaker 5: go here in terms of what's big on the high
18:41
Speaker 5: street and anything. Are you so comfortable with taking any
18:43
Speaker 5: of the higher value luxury names.
18:45
Speaker 8: Yeah, I mean we do own Lululemon, and it looks
18:47
Speaker 8: to me like it turned around this morning when I
18:49
Speaker 8: was walking over here, and that's because they are a
18:53
Speaker 8: premium provider and they are delivered, they've delivered, and they're
18:56
Speaker 8: adding two.
18:57
Speaker 5: Already, one sixteen up sixteen bucks.
18:59
Speaker 9: Yeah, I'll take it.
19:00
Speaker 8: And then we own Nike, so that's another name in
19:04
Speaker 8: that space that you know, can be high with.
19:06
Speaker 3: Those, somewhat high end with those though, like again a
19:09
Speaker 3: somewhat high end definitely areas that are targeted to the
19:13
Speaker 3: younger generation, people who want to spend when you look
19:15
Speaker 3: at you, that is me. I know I don't want
19:16
Speaker 3: to for.
19:17
Speaker 9: People we're spending like crazy.
19:20
Speaker 5: I'm technically not a baby boomer yet.
19:22
Speaker 3: Go on, we've got about thirty seconds. But how are
19:24
Speaker 3: you thinking about kind of the strength of the consumer
19:28
Speaker 3: into twenty twenty four, just given how much the younger
19:31
Speaker 3: generations have been putting on credit card debt and things
19:33
Speaker 3: like buy now papers.
19:34
Speaker 8: Yeah, great for American Express, by the way, which we
19:36
Speaker 8: also own. So I would say that people spend when
19:38
Speaker 8: they're working, and they spend out of their net worth.
19:40
Speaker 8: Americans have one hundred and fifty four trillion dollars in
19:43
Speaker 8: net worth, half of which is in with my generational
19:46
Speaker 8: core cohort, which is the baby boomers. They are going
19:48
Speaker 8: to continue to spend. They have no debt for the
19:51
Speaker 8: most part, and they will continue to spend. So I
19:53
Speaker 8: think high end is good. We're looking at LVMH looking
19:56
Speaker 8: for an entry point, and I'm going to run over
19:59
Speaker 8: to a MA now that you reminded me, I.
20:02
Speaker 5: Can't afford to going through this.
20:05
Speaker 3: We got to leave it there though. Thank you so much.
20:07
Speaker 3: Nancy Taylor, she is the CEO and CIO at Laffer
20:11
Speaker 3: Tangler Investments.
20:12
Speaker 7: You're listening to the tape cats are live program Bloomberg
20:16
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
20:19
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
20:23
Speaker 7: You can also listen live on Amazon Alexa from our
20:25
Speaker 7: flagship New York station. Just say Alexa Play Bloomberg eleven thirty, Ley.
20:32
Speaker 3: Lip Schultz and Nathan Hay're hanging out with you here
20:35
Speaker 3: on Bloomberg Markets. Paul and Matt are both off busy
20:39
Speaker 3: jobs Day Friday. Right now, looking at the markets. You've
20:43
Speaker 3: got the SMP relatively flat, as is the Dow and
20:46
Speaker 3: the Nasdaq, but keeping an eye on the two year
20:48
Speaker 3: old at four spot seven to one percent and on
20:51
Speaker 3: the ten year four spot two four percent. Right now,
20:54
Speaker 3: we are joined in the Interactive Broker studio by Ben Emmons.
20:57
Speaker 3: He is the head of fixed income at new A Wealth,
21:00
Speaker 3: talking the market, talking jobs and what stands out to
21:04
Speaker 3: you because headline numbers seemed hot, but there are a
21:06
Speaker 3: lot of things to kind of look at under the
21:08
Speaker 3: hood on this report.
21:10
Speaker 10: Yeah, what I was looking at this morning was the
21:12
Speaker 10: ADP report first, and I noted that the leisure and
21:17
Speaker 10: Hospitality was negative in the ADP report, and ADP is
21:20
Speaker 10: leading in some of the sectors NFP reports, So I
21:23
Speaker 10: was surprised to see a forty k gain in leisure
21:27
Speaker 10: in this report, and it jumps out because there's a
21:30
Speaker 10: lot of job growth out of that sector of the
21:32
Speaker 10: last years now and it's very consistent, so it's still
21:36
Speaker 10: not slowing down. And I take comform them saying like, well,
21:40
Speaker 10: this job market may be quote code loosening if you
21:42
Speaker 10: think of the job openings, or you think of even
21:45
Speaker 10: if you can tell someone in continuing claims or auto measures,
21:49
Speaker 10: but you think of leisure, that's like a growth engine
21:52
Speaker 10: for this job market, and that's I think positive against Look,
21:57
Speaker 10: it was good to see this influx of people back
21:59
Speaker 10: in the labor forces the other guests was talking about
22:02
Speaker 10: and the guest was talking about. But it's important there
22:08
Speaker 10: to notice that the share of foreign immigrants as part
22:15
Speaker 10: of the labor force that's increasing now up to twenty percent.
22:18
Speaker 10: So I think what's going on in the last few
22:19
Speaker 10: years is that as we get more people coming into
22:21
Speaker 10: the country, they get into labor force to find work
22:24
Speaker 10: really quick and I think that's a really important development
22:27
Speaker 10: because if that continues, not only that that keeps the
22:30
Speaker 10: job market like humming and going. It also is for
22:34
Speaker 10: productivity really important. And so the average charity earnings although
22:37
Speaker 10: they were up, but it was like four tenths of
22:40
Speaker 10: percent versus forecast point three. You know that's not like
22:43
Speaker 10: a dramatic increase such that that's really because of the
22:46
Speaker 10: effect on productivity. So it isn't a way a Goldilarcks number,
22:52
Speaker 10: a Goldilocks reports and why the markets are as they are.
22:55
Speaker 10: I mean, you would expect yields to jump by this
22:57
Speaker 10: much and you would think that starts with rally and
22:59
Speaker 10: that's exactly what's going on. So again a job support
23:03
Speaker 10: that says to me, this is an economy that does
23:06
Speaker 10: not warrant the successful amount of ray cuts that we're
23:08
Speaker 10: seeing being priced in the market.
23:10
Speaker 11: Hey, Ben, it's Nathan in DC. Good to speak with
23:13
Speaker 11: you again. Does that mean that you're thinking that this
23:17
Speaker 11: job market is going to continue on this trajectory of
23:20
Speaker 11: the kind of growth that we have seen that's defied
23:23
Speaker 11: so much of what economists have been expecting for literally
23:26
Speaker 11: months now.
23:28
Speaker 10: Yeah, it does look like that, Nathan, because you know
23:30
Speaker 10: that the strikes you see being added into the the headline,
23:35
Speaker 10: but the strikes itself did not have ripple effects in
23:38
Speaker 10: the economy that some people feared like, and meaning you
23:41
Speaker 10: would get wider spread job losses because of all the disruption,
23:45
Speaker 10: and you know, against somewhat the layoff trends that are
23:49
Speaker 10: ongoing and the job opening is declining, that that is
23:53
Speaker 10: really just a marginal loosening of the labor market that
23:56
Speaker 10: allows other people to come back in and find work.
23:59
Speaker 10: So it's it's a better of labor markets. It's a
24:01
Speaker 10: market with the momentum. You know, the cancers fat put
24:04
Speaker 10: out a puts out a labor momentum index, and I
24:09
Speaker 10: noted that that index actually barely changed the last sort
24:11
Speaker 10: of six months, meaning has not really declined in any way,
24:14
Speaker 10: even though you're seeing like for example, job openings declining
24:18
Speaker 10: or other indicator the clinding, which means loosening, that does
24:22
Speaker 10: indicate that people can find work and that there's momentum
24:24
Speaker 10: in the same market.
24:25
Speaker 3: And then I'm looking at the warp function. Right now,
24:27
Speaker 3: we've got about a coin flip odds for a first
24:30
Speaker 3: rate hike in March, and it looks like just over
24:32
Speaker 3: four expected in twenty twenty four. What's the markets read
24:37
Speaker 3: on kind of where the FED sits where we can
24:40
Speaker 3: take some of this data.
24:41
Speaker 10: Yeah, if you take today's report, it does not argue
24:45
Speaker 10: that the FEDS should go ahead and match market expectations,
24:49
Speaker 10: but we got to take note of what happened in June.
24:51
Speaker 10: They actually had pencils in the Hunter basements of cuts
24:53
Speaker 10: at that time and then revises of them in the faifty. Right,
24:56
Speaker 10: and now the market is back to Hana plus. So
24:59
Speaker 10: they could actually go back and say, hey, guess what
25:01
Speaker 10: would just go along with the market. But I think
25:03
Speaker 10: a report like this probably tells them like, we don't
25:06
Speaker 10: actually have to. It's really, you know, highlighting how we
25:10
Speaker 10: think about the economy. It's moderating. It is a software lending,
25:14
Speaker 10: even though it's not an official language, but it's an
25:17
Speaker 10: economy where they've done enough with restrictive policy rates so
25:20
Speaker 10: that it can get to a better stable, you know state,
25:25
Speaker 10: and as a result, you don't have to necessarily forecast
25:28
Speaker 10: all those Ray cuts. I think that's next week, the
25:31
Speaker 10: tension in the markets it will be. I think some
25:33
Speaker 10: are taken back where Powell will be well, it sounds hockeys,
25:37
Speaker 10: but really was saying like, see, we have enough data
25:40
Speaker 10: points to prove to you markets that these raycuts are
25:43
Speaker 10: probably over extended, and as he said in the speech
25:46
Speaker 10: a week ago, you know, he diffused the speculation there.
25:48
Speaker 10: You don't need to speculate on raycuts, and so I
25:50
Speaker 10: think that will be big message next week.
25:54
Speaker 11: Yeah, I wanted to ask whether the narrative shifts when
25:57
Speaker 11: we get that inflation data next week. What do you
25:59
Speaker 11: think we're going to see from CPI.
26:02
Speaker 10: Yeah, there will be pressure on CPI from the energy
26:05
Speaker 10: effect of the last month or so, Nathan, because that
26:08
Speaker 10: that clearly will filter through now and you can tell
26:10
Speaker 10: right from from the now cast of CPI or how
26:14
Speaker 10: the market is pricing CPI. I think that's fairly accurate.
26:18
Speaker 10: On the other hand, the sticky items that we're been
26:22
Speaker 10: following for many months probably stay sticky year, and that
26:25
Speaker 10: this not seems to be too much movement yet to
26:29
Speaker 10: happen there, even though the last CPI report was such
26:32
Speaker 10: a I guess groundbreaking data point of the owner's equivalent
26:36
Speaker 10: rent finally declining is the pandemic pressure gets out of
26:41
Speaker 10: that component. So that will be the big topic for
26:43
Speaker 10: next week too. Will see in continuing decline. If so,
26:48
Speaker 10: probably the market will take it favorably. But for the
26:50
Speaker 10: fat that's all again playing in their hands and their
26:52
Speaker 10: message like this is what they have been forecasting and
26:54
Speaker 10: what they've been expecting. So to them, it's more of
26:58
Speaker 10: a vindication of that they're restrictive.
27:00
Speaker 3: Atto she's working and looking at some of the granular data.
27:04
Speaker 3: I keep coming back to wage growth because it does
27:06
Speaker 3: seem like the FED is very much fixated. Obviously that's
27:09
Speaker 3: a big driver for inflation. When you look at the
27:11
Speaker 3: print from today, when you look at expectations into twenty
27:14
Speaker 3: twenty four for wage growth, how does that play out
27:16
Speaker 3: and how does that factor into inflation and what the
27:18
Speaker 3: FED can and will do.
27:21
Speaker 10: Yeah, the wage trackers from the Atlanta FED have all
27:24
Speaker 10: shown a moderation most sectors, including the leisure sector. I
27:29
Speaker 10: think it's only a two a somewhat of a soft
27:31
Speaker 10: landing type path, just like how inflation has come down
27:35
Speaker 10: in a soft landing mode, and as basically the economy
27:38
Speaker 10: since twenty twenty one has been declining down. So and
27:41
Speaker 10: it's also effect of productivity. Right, we have a significant
27:44
Speaker 10: productivity pickup this year, so wage growth should start to
27:47
Speaker 10: moderate as more people get in the labor force and
27:51
Speaker 10: you're getting somewhat of a. You know, i'd say supply
27:54
Speaker 10: and dement, you know, rebalance and therefore that wage pressure
27:58
Speaker 10: eases off again. That is favorable to the economy because
28:02
Speaker 10: it doesn't mean like it's outright wage deflation first foremost. Second,
28:06
Speaker 10: you know, the real wages are likely going to be
28:10
Speaker 10: improving given that what inflation is doing. So I do
28:13
Speaker 10: think it's a positive development. You know, look the average
28:17
Speaker 10: arlity earns. We're a little bit up this today in
28:19
Speaker 10: this report, you know, but not like alarming. The effect
28:23
Speaker 10: from the UAW negotiations, for example, isn't yet coming really true,
28:27
Speaker 10: So I'm not so sure if it if it's a
28:29
Speaker 10: wage price viiral idea, it's more of a moderation.
28:32
Speaker 11: So is there room ben for rate cuts of any
28:36
Speaker 11: size next year? I mean, I know there's still a
28:39
Speaker 11: debate about, you know, whether we're going to see cuts
28:42
Speaker 11: as aggressive as the market's been pricing. But do you
28:44
Speaker 11: see cuts in any stretch next year?
28:47
Speaker 10: So I find there's a really important question Nathan could
28:50
Speaker 10: think about what we're going to go into next year.
28:52
Speaker 10: It's an election year and attention will be about the
28:56
Speaker 10: economy obviously, and we know that if you keep raged
29:00
Speaker 10: too restrictive that that could affect the economy really negatively
29:03
Speaker 10: against you know, whatever physical stimulus that we're still pumping
29:06
Speaker 10: into the economy does start to fade off. And if
29:09
Speaker 10: you take it against that backdrop and the FAT continues
29:11
Speaker 10: to make ground against inflation, then it has put out
29:15
Speaker 10: this framework to manage this politically, saying, look, we have
29:18
Speaker 10: a high rate. We can bring it somewhere down as
29:21
Speaker 10: inflation is declining because you know the difference between the
29:24
Speaker 10: nominal rate and inflation is getting wider, and therefore leave
29:27
Speaker 10: some room to have the nominal rate go down and
29:30
Speaker 10: that will be your rate cut. But it's literally taking
29:32
Speaker 10: out the most restrictive part from the FAT funds rate
29:35
Speaker 10: a little bit down. It's like insurance raycut, as I say,
29:39
Speaker 10: you know that the protection against the downside of the
29:41
Speaker 10: of the for the economy. It's nothing about like an
29:45
Speaker 10: alarming raycut. Okay, we've got an ease policy really aggressively
29:48
Speaker 10: because we're about to slip in the major downtown.
29:51
Speaker 3: Got to leave it there, Ben Emmons, thank you so much.
29:53
Speaker 3: Had to fixed income at New Edge Wealth, joining us
29:56
Speaker 3: here in the Bloomberg Interactive Broker's studio again all eyes
30:01
Speaker 3: on the job, support and some of the data that
30:02
Speaker 3: we've been seeing.
30:04
Speaker 7: You're listening to the tape. Catch a live program Bloomberg
30:07
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
30:11
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
30:14
Speaker 7: You can also listen live on Amazon Alexa from our
30:17
Speaker 7: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
30:21
Speaker 11: One of the big political stories of the last few days,
30:29
Speaker 11: in the aftermath and the ongoing turmoil that we're seeing
30:33
Speaker 11: in the Middle East, is this reaction that we've seen
30:37
Speaker 11: on college campuses, protests on both sides pro Palestinian pro Israeli,
30:44
Speaker 11: and the rise of anti Semitic incidents at college campuses.
30:49
Speaker 11: And we had that congressional testimony just a few days
30:52
Speaker 11: ago from the presidents of Harvard Mit the University of Pennsylvania,
30:58
Speaker 11: where they were asked, you know, pretty direc dire to
31:00
Speaker 11: say whether calling for the genocide of Jews on campus
31:04
Speaker 11: violates school policy. And we saw these narrow legal answers
31:09
Speaker 11: that were given by those university presidents that really has
31:14
Speaker 11: sparked this ongoing backlash not just from students but from alumni.
31:21
Speaker 11: Major donors. We saw a major rabbi who worked at
31:27
Speaker 11: Harvard University resigning in protest. This controversy just is not
31:32
Speaker 11: going away, and it could really have an impact on
31:36
Speaker 11: university endowments.
31:38
Speaker 3: Yeah, it's something that we've we've been tracking and been
31:40
Speaker 3: paying attention to. As you mentioned, you saw the alumni
31:44
Speaker 3: at Harvard University, among others, really kind of pushing back
31:48
Speaker 3: on how the board and how leadership at the universities
31:50
Speaker 3: are handling this. And it does seem like it's only
31:53
Speaker 3: gotten worse in the wake of Harvard President's clouding Gays
31:57
Speaker 3: that congressional testimony on December fifth, and kind of the
32:01
Speaker 3: questions around how universities and a lot of the biggest
32:05
Speaker 3: and most well known IVY League universities how they're handling
32:08
Speaker 3: it and reacting to it.
32:10
Speaker 7: Yeah. Absolutely.
32:10
Speaker 11: I mean we've seen the university presidents you mentioned Claudiine
32:14
Speaker 11: Gay and also Liz McGill from the University of Pennsylvania
32:18
Speaker 11: sort of issuing statements. We had a video statement in
32:20
Speaker 11: fact from the penn president trying to clarify those comments
32:25
Speaker 11: and sort of walk them.
32:26
Speaker 6: Back a little bit.
32:27
Speaker 11: But this backlash isn't going away. So with that in mind,
32:30
Speaker 11: we want to bring in our Bloomberg News higher education
32:33
Speaker 11: reporter Janet Lauren, who has been following this very closely,
32:37
Speaker 11: breaking a lot of news in the aftermath of these
32:41
Speaker 11: ongoing protests and this backlash that we're seeing for these
32:45
Speaker 11: university presidents. Janet is with us. Now, what's the latest.
32:51
Speaker 11: Are these university presidents living on borrow time?
32:56
Speaker 12: Well, it's not entirely clear. There's obviously a lot of
33:00
Speaker 12: discussions going on right now their boards. They're trying to
33:03
Speaker 12: figure out what to do next. The hearing was somewhat
33:08
Speaker 12: of a disaster. I think that sort of universally understood.
33:12
Speaker 12: Keep in mind that these schools are also under investigation
33:16
Speaker 12: in several ways from the federal government. There are lat
33:19
Speaker 12: that are Education Department is looking into their Title six complaints,
33:24
Speaker 12: which is civil rights issues. So there's that investigation. We
33:30
Speaker 12: also heard yesterday that the House Education Committee is also investigating.
33:37
Speaker 12: So one thing you have to you do have to
33:39
Speaker 12: remember about schools, even though they are private schools, they
33:42
Speaker 12: get a lot of government money. You know, you're you're
33:45
Speaker 12: looking at student loans, you're looking at grants like pel grants,
33:48
Speaker 12: you're looking at tax deductions from donors. But Also, they
33:53
Speaker 12: taken a tremendous amount of federal money for their scientific research,
33:58
Speaker 12: so if that that's threatened, that could be quite a
34:01
Speaker 12: big problem for them. In addition to all we've been
34:03
Speaker 12: hearing about with donors calling back. You know, we had
34:06
Speaker 12: a story earlier this week that everyone small donors, large donors, volunteers.
34:13
Speaker 12: You know, so many people are quite upset about this,
34:16
Speaker 12: and they're trying to step back from places like harverd
34:19
Speaker 12: and Penn where they've had relationships for not just a
34:22
Speaker 12: few years, but we're talking decades, you know, fifty years.
34:25
Speaker 12: We had a story about a pen donor who is
34:29
Speaker 12: clawing back, using an interesting strategy to claw back a
34:32
Speaker 12: donation of one hundred million dollars based on a morality
34:35
Speaker 12: clause that he had included, and you know, in a
34:38
Speaker 12: letter to his staff he said, I never thought I
34:40
Speaker 12: would ever have to use this, but was so horrified
34:44
Speaker 12: by how the presidents responded in the hearing that you know,
34:50
Speaker 12: people are still quite stunned. You know, these are if
34:53
Speaker 12: this was a public company and you had a CEO testifying,
34:56
Speaker 12: you know, you would have our real immediate reaction in
34:59
Speaker 12: a decline in STUF prices. But as these are you know,
35:03
Speaker 12: private universities don't have that same kind of metric.
35:06
Speaker 3: And Jennet, what what happens next in terms of how
35:10
Speaker 3: the university has handled this, what actually happens with some
35:13
Speaker 3: of the leadership members.
35:15
Speaker 12: Well, these are discussions that are happening now about the
35:18
Speaker 12: president's about the board members. You know, there's been a
35:21
Speaker 12: push for the board chair at Penn, Scott Bock, to
35:25
Speaker 12: step down in addition to the president. So these are
35:28
Speaker 12: discussions that are you know, that are happening now. The
35:31
Speaker 12: schools are looking to also limit liability. But I think
35:35
Speaker 12: the overall issue that people still have is why is
35:39
Speaker 12: this pervasive anti semitic? Why is there a pervisive anti
35:44
Speaker 12: Semitic nature on on these campuses? Why is this still allowed?
35:50
Speaker 12: Why is you know, why are there still people allowed
35:52
Speaker 12: to scream the word atafada and have signs up? And
35:57
Speaker 12: it's it's it's an environment where Jewish students find threatening.
36:01
Speaker 12: And I think that the response from the hearing is
36:06
Speaker 12: that's still not really being addressed, and it.
36:09
Speaker 11: Points to the difficulty as well when we see you know,
36:13
Speaker 11: the top rabbi and the advisory board of Harvard University
36:17
Speaker 11: feeling that he has to resign after the comments that
36:21
Speaker 11: we heard from Claudine Gey, the Harvard president. I guess
36:24
Speaker 11: it speaks to the difficulty that comes to, you know,
36:29
Speaker 11: trying to change minds on university campuses when you know
36:33
Speaker 11: a lot of students have, you know, pretty strong views
36:38
Speaker 11: on these issues, such a complicated issue with Middle East relations.
36:44
Speaker 12: Well, but it's not just the students, it's also the faculty.
36:48
Speaker 7: Yeah, right, I think exactly.
36:49
Speaker 12: It's the concern. It's the students and the faculty. And
36:52
Speaker 12: in this pervasive atmosphere continues, and there is sort of
36:57
Speaker 12: a double standard that people have mentioned if you were
37:01
Speaker 12: hearing these types of words for other ethnic groups or
37:05
Speaker 12: you know, trans community would not be tolerated. And uh,
37:10
Speaker 12: you know, and the criticism is coming from all all camps.
37:14
Speaker 12: You know, you heard the Democratic too, congressmen who represent Massachusetts,
37:21
Speaker 12: both Harvard alone, both Democrats, both military veterans, saying they
37:26
Speaker 12: were extremely disappointed in their alma mater. So it's it's
37:30
Speaker 12: really quite quite a widespread dissatisfaction.
37:35
Speaker 3: And Jenny, in terms of universities, obviously we're talking Penn, Harvard,
37:38
Speaker 3: MI t how wide spread geographically in terms of universities
37:42
Speaker 3: and colleges are these issues in these conversations, Well, I think.
37:47
Speaker 12: You're hearing them the loudest, certainly at these campuses on
37:52
Speaker 12: the East Coast, certainly Stanford as well. Uh, you know,
37:57
Speaker 12: you're you're not hearing as much as at other places.
38:01
Speaker 12: And it's a good question. You know, perhaps you've had
38:03
Speaker 12: issues at the City University of New York system, but
38:07
Speaker 12: it's you know, perhaps if you're a smaller liberal arts
38:10
Speaker 12: college not near a big city, you know, it just
38:15
Speaker 12: it just may not be as pervasive because your critical
38:18
Speaker 12: population is much smaller. But you know, several people have
38:23
Speaker 12: made the point, and the rabbi did as well. You know,
38:27
Speaker 12: most kids on college campuses today do not feel this intensely.
38:31
Speaker 9: They're just there to get an education.
38:33
Speaker 12: And you know, when you see the videos of the
38:36
Speaker 12: classes being disrupted with bullhorns and the uneasysiness of the students,
38:41
Speaker 12: you know, they're paying eighty thousand dollars or they're borrowing money,
38:45
Speaker 12: or the school is giving financial aid. They want to
38:48
Speaker 12: do their work, they want to finish their finals, and
38:51
Speaker 12: there's a tremendous amount of disruption. And you know, the
38:55
Speaker 12: lawsuit that was filed by some Penn students. You know,
38:58
Speaker 12: this is the amount of tuition that families are paying,
39:01
Speaker 12: and they're just they're not there to protest, They're there
39:04
Speaker 12: to get an education and learn.
39:06
Speaker 3: We've got to leave it there. Janet Lauren, thank you
39:08
Speaker 3: so much, Bloomberg News Higher Education Report talking about all
39:11
Speaker 3: the backlash around anti semitism on college campuses.
39:15
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39:18
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39:22
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39:28
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39:30
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