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JP Morgan, the Fed, and UAW (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moven news.
• 0:14
  Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:22
  Speaker 3: So, Matt, we've got some news crossing the tape here.
• 0:24
  Speaker 1: Jason JP Morgan settles with Staley US Virgin Islands to
• 0:28
  Speaker 1: end Epstein legal woes. JP Morgan Chase reached settlements with
• 0:32
  Speaker 1: former executive Jess Stally and the US Virgin Islands over
• 0:35
  Speaker 1: ties to Jeffrey Epstein as it seeks to end its
• 0:38
  Speaker 1: legal woes over its banking relationship to the deceased pedophile.
• 0:42
  Speaker 1: The biggest US bank tentatively agreed to pay seventy five
• 0:45
  Speaker 1: million dollars to the US Virgin Island. That's, according to
• 0:47
  Speaker 1: the statement Tuesday, less than half of one hundred and
• 0:49
  Speaker 1: ninety million dollars of the territory it sought. So let's
• 0:52
  Speaker 1: kind of break this down a little bit, and we
• 0:53
  Speaker 1: can do that with Elliott Stein. He's the senior analyst
• 0:55
  Speaker 1: of Bloomberg Intelligence. Following all the legal issues for bi Ellie,
• 1:00
  Speaker 1: I guess this, if nothing else, does put an end
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  Speaker 1: to kind of what JP Morgan sees is a very
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  Speaker 1: bad part of its history.
• 1:08
  Speaker 4: Yeah.
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  Speaker 5: I mean this, This has been assorted saga ever since
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  Speaker 5: Epstein was arrested, and then late last year you had
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  Speaker 5: both Deutsche Bank and JP Morgan sued both by the
• 1:17
  Speaker 5: victims Epstein's victims, and then JP Morgan was also sued
• 1:20
  Speaker 5: by the US Virgin Islands. Both banks settled with the
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  Speaker 5: victims previously, and now we have this settlement which should
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  Speaker 5: put an end to at least, you know, the litigation
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  Speaker 5: against the banks.
• 1:30
  Speaker 2: It's sorry, it's unclear what the settlement with Staley looks like.
• 1:36
  Speaker 2: So we know that in the in terms of the
• 1:39
  Speaker 2: US Virgin Islands, the bank has at least tentatively agree
• 1:44
  Speaker 2: to pay seventy five million dollars. They're not admitting any wrongdoing,
• 1:50
  Speaker 2: I imagine, but when you fork over seventy five million dollars,
• 1:55
  Speaker 2: you know that says something in itself. In terms of Staley,
• 2:00
  Speaker 2: I don't get whether this means that he is going
• 2:04
  Speaker 2: to pay them, and certainly they haven't released any terms.
• 2:08
  Speaker 5: Yeah, I mean, presumably there's some sort of monetary component
• 2:12
  Speaker 5: to the settlement between JP Morgan and Jess Staley.
• 2:15
  Speaker 2: They were coming from Staley to JP Morgan.
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  Speaker 5: Right, JP Morgan was you know, they were saying that
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  Speaker 5: they were really only on the hook because of Jess
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  Speaker 5: Staley's involvement with bringing in Epstein into the bank as
• 2:27
  Speaker 5: a client, and that as a result, the bank was
• 2:31
  Speaker 5: you know, vicariously liable because of his actions, and so
• 2:33
  Speaker 5: they went after him for a few things, you know,
• 2:36
  Speaker 5: reaching his duty to the bank by not telling the
• 2:38
  Speaker 5: bank earlier about what was going on, and then seeking
• 2:41
  Speaker 5: any contribution for any payout that JP Morgan was going
• 2:44
  Speaker 5: to make.
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  Speaker 2: Well for convincing them to keep Epstein's client. Everyone knew
• 2:47
  Speaker 2: what was going on. I mean, his the prosecution and
• 2:50
  Speaker 2: his conviction in what two thousand and eight was public knowledge.
• 2:55
  Speaker 2: So everyone knew.
• 2:57
  Speaker 5: Right, and you know, and that was the problem for
• 3:00
  Speaker 5: the banks that there were red flags. I mean there
• 3:02
  Speaker 5: was no you know, concrete evidence that he was you know,
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  Speaker 5: doing sex trafficking with children, but there were enough red flags,
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  Speaker 5: part of which was because he had a prior conviction.
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  Speaker 4: All right.
• 3:13
  Speaker 3: Deutsche Bank also paid, didn't the actually remember them being involved.
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  Speaker 5: Yeah, So Deutsche earlier this year paid about seventy five
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  Speaker 5: million dollars to the class of victims that had sued Deutsche.
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  Speaker 5: JP Morgan also settled with that class of victims for
• 3:24
  Speaker 5: about two hundred and ninety million dollars. And you know
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  Speaker 5: that was earlier in the year, in the spring and
• 3:30
  Speaker 5: in the summer. And in this case, the US Origin
• 3:32
  Speaker 5: Islands case against J. P. Morgan was going to go
• 3:34
  Speaker 5: to trial in October. So actually I wrote just a
• 3:37
  Speaker 5: couple weeks ago that it looked like this case was
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  Speaker 5: on the path the settlement because neither side wants to
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  Speaker 5: go to trial in the case this sillacious.
• 3:43
  Speaker 1: Yeah, that's the last thing if you're JP Morgan you
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  Speaker 1: want to have and then have you know, Jamie Diamond
• 3:48
  Speaker 1: dragged into this.
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  Speaker 5: Exactly right there. These are not facts anyone wants to
• 3:52
  Speaker 5: come out in court.
• 3:53
  Speaker 1: And so I guess, can we from JP Morgan's perspective,
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  Speaker 1: is this issue behind it now?
• 3:58
  Speaker 5: I think so?
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  Speaker 1: Because you settled with the vic or the class of victims,
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  Speaker 1: I guess right, yep. And if you'd enjoined that class,
• 4:03
  Speaker 1: do you have any standing to come back and try
• 4:05
  Speaker 1: to do something again?
• 4:06
  Speaker 5: No, no, you know, the settlement is like you either
• 4:09
  Speaker 5: opt into the settlement or you don't.
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  Speaker 2: Okay, Well, they were sued by this class of victims,
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  Speaker 2: and they were sued by the US Virgin Islands. Right,
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  Speaker 2: who knows if some other group will come and sue
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  Speaker 2: them as well.
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  Speaker 5: Yeah, it's hard to envision what group that would be.
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  Speaker 5: And there's always statutes limitations too, which sort of put
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  Speaker 5: a cap on when lawsuits can be brought. So at
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  Speaker 5: this point, given you know, this is definitely this resolves
• 4:34
  Speaker 5: everything that's out there right now for JP Morgan related
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  Speaker 5: to Epstein.
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  Speaker 1: All right, all right, that's interesting news, just crossing the
• 4:41
  Speaker 1: tape here, So we want to dive into it and
• 4:42
  Speaker 1: see what the impact will be for JP Morgan. But
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  Speaker 1: I guess if nothing else, it's like it puts that
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  Speaker 1: legal issue behind them. Elliot Stein, thanks so much for
• 4:49
  Speaker 1: joining us. Elliot Stein is the senior analyst with Bloomberg Intelligence.
• 4:52
  Speaker 3: He went to Stanford.
• 4:53
  Speaker 1: So that's PAC twelve, right, you're Stanford cow all that
• 4:56
  Speaker 1: kind of stuff. Yeah, guess what, it's Stale and the
• 4:59
  Speaker 1: Stanford cardell Now have to come to the East coast
• 5:01
  Speaker 1: because you're playing in the ACC Going forward, how stupid is.
• 5:04
  Speaker 5: That they're coming closer to me? So I appreciate it.
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  Speaker 2: It's good for you, I guess for me, I can
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  Speaker 2: see more games, but it doesn't make any sense history.
• 5:12
  Speaker 1: I'm going to ask the volleyball team, some of these
• 5:14
  Speaker 1: young ladies to travel two days to get here, a
• 5:17
  Speaker 1: couple of days, two days to get back for a
• 5:19
  Speaker 1: volleyball game against NC State.
• 5:21
  Speaker 2: And want to go to the West coast.
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  Speaker 1: You know, yeah, I always see these kids, you know,
• 5:27
  Speaker 1: in the airports, these teams from all these schools, and
• 5:30
  Speaker 1: they're you know, it's not like the football.
• 5:32
  Speaker 3: Team where they get their own charter or anything. Of
• 5:34
  Speaker 3: the basketball team.
• 5:35
  Speaker 1: It's the volleyball team, it's the soccer team, it's the
• 5:37
  Speaker 1: golf team or whatever. And they're always like sitting in airports,
• 5:40
  Speaker 1: huddle up, trying to study and everything. I just imagine
• 5:43
  Speaker 1: a cross country stuff. Of course, USC and UCLA they get.
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  Speaker 3: To come to Piscataway, New Jersey they play. How good
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  Speaker 3: is that? All right? Ellie, thanks so much for it.
• 5:51
  Speaker 3: He joining us here.
• 5:54
  Speaker 4: You're listening to the team.
• 5:55
  Speaker 6: Can's a line program Bloomberg Markets weekdays at ten am,
• 5:59
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• 6:03
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• 6:09
  Speaker 1: Definitely a risk off feel to the market here today again,
• 6:12
  Speaker 1: as the high interest rate environment seems to be here
• 6:16
  Speaker 1: for longer.
• 6:17
  Speaker 3: Is what the market's pricing in.
• 6:18
  Speaker 1: Let's check in with somebody who has an informed opinion
• 6:21
  Speaker 1: on this. Brent Shooty, chief investment strategist for Northwestern Mutual. Brent,
• 6:28
  Speaker 1: what's your call here on what our federal Reserve is
• 6:32
  Speaker 1: going to do kind of over the next six to
• 6:34
  Speaker 1: twelve months.
• 6:36
  Speaker 7: Yeah, I think the Federal Reserve is worried about wage growth.
• 6:39
  Speaker 7: So you have seen the disinflation that we thought would happen.
• 6:42
  Speaker 7: That was largely because the inflation that we had over
• 6:45
  Speaker 7: the prior couple years was largely tied to COVID. As
• 6:47
  Speaker 7: we pushed further past that and the economy moved back
• 6:50
  Speaker 7: somewhere towards equilibrium, we thought that inflation would come down,
• 6:53
  Speaker 7: and it has. That's the good news. The bad news
• 6:56
  Speaker 7: is the US economy looks late in an economic cycle.
• 7:00
  Speaker 7: Typically happens late in the economic cycle is that the
• 7:02
  Speaker 7: labor market is tight, which causes wages to grow and
• 7:06
  Speaker 7: that can lead to inflation being pulled back higher, which
• 7:08
  Speaker 7: I think is the prime warror right now, and so
• 7:11
  Speaker 7: so until the FED sees wages move lower, they are
• 7:15
  Speaker 7: not going to take that liquidity tourniquet off. Unfortunately, the
• 7:18
  Speaker 7: only way that labor or that wages have moved lower
• 7:20
  Speaker 7: in the past when the labor markets is tied us
• 7:23
  Speaker 7: through job losses, which we think is a likely outcome
• 7:25
  Speaker 7: in the coming months, which will lead to that recession
• 7:28
  Speaker 7: that we still think is on the horizon.
• 7:31
  Speaker 2: What do you think about the UAW strike and you know,
• 7:35
  Speaker 2: if they come back with wage increases, they're going to
• 7:39
  Speaker 2: be at least twenty percent, right, maybe closer to thirty.
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  Speaker 2: That's I guess you could say only one hundred and
• 7:45
  Speaker 2: fifty thousand workers, but people at other shops are going
• 7:48
  Speaker 2: to look over there and say, I want that too.
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  Speaker 2: Is that going to be a real factor or is
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  Speaker 2: or or are you not expected to have kind of
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  Speaker 2: a nationwide effect?
• 7:59
  Speaker 7: No, I mean, I think it's more indicative of where
• 8:01
  Speaker 7: we are in the economic cycle, which is late where
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  Speaker 7: wages rise because there's a lack of workers to fill
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  Speaker 7: open positions, which causes that wage growth. Of the FED
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  Speaker 7: fears about, I think people forget that the inflationary period
• 8:13
  Speaker 7: that the FED worries about that was so bad in
• 8:16
  Speaker 7: this US economy was called the wage price spiral, and
• 8:19
  Speaker 7: that's where I think we're at right now, and that's
• 8:21
  Speaker 7: why I think the Federal Reserve isn't going to stop.
• 8:23
  Speaker 7: They're not going to loosen policy until they see wages
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  Speaker 7: pull back. Right now, wages are running at four point
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  Speaker 7: three to four point five percent, pick your measure. I
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  Speaker 7: think in an interview a few weeks ago, John Williams,
• 8:34
  Speaker 7: VP of the FMC said that three point two to
• 8:37
  Speaker 7: three point five was more consistent with two percent inflation.
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  Speaker 7: And as I mentioned before, the only way that's happened
• 8:41
  Speaker 7: in the past is through recession, and so maybe this
• 8:44
  Speaker 7: time is different. But I think there are enough things
• 8:46
  Speaker 7: that are flashing red that you can continue to think
• 8:50
  Speaker 7: about that recession coming in the not too distant future.
• 8:53
  Speaker 1: Well, if that's the background there, Brent, are you advising
• 8:56
  Speaker 1: folks to just go into two year treasuries at five
• 8:59
  Speaker 1: point one three percent? That doesn't seem like a bad
• 9:01
  Speaker 1: place to be.
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  Speaker 7: Well, we have been repositioning towards fixed income for the
• 9:05
  Speaker 7: better half the last six to nine months, and so
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  Speaker 7: we are overweight fixed income and underweight equities. As far
• 9:09
  Speaker 7: as hiding out in the front end of the curve,
• 9:12
  Speaker 7: I would advise people not to do that. I think
• 9:15
  Speaker 7: intermediate term bonds offer value here, and they offer a
• 9:18
  Speaker 7: hedge against equity downside risk, which I think will be
• 9:21
  Speaker 7: caused by too little economic growth, which will cause inflation
• 9:26
  Speaker 7: to fall. And so if you think about your Bloomberg
• 9:29
  Speaker 7: aggregate index at five point three five percent and a
• 9:31
  Speaker 7: six duration, if inflation does fall, think about the difference
• 9:36
  Speaker 7: between five point three and two percent. That's where I
• 9:39
  Speaker 7: think there's value right now, especially if you believe like
• 9:41
  Speaker 7: I do, inflation is set to falter, which I do.
• 9:44
  Speaker 7: I think the good news on the opposite side of
• 9:46
  Speaker 7: that is the FED will be able to cut rates,
• 9:48
  Speaker 7: but not until they actually see, you know, that actual
• 9:50
  Speaker 7: recession happen, which I think is still on the horizon.
• 9:55
  Speaker 2: How far out the curve do you go to you say,
• 9:58
  Speaker 2: six year? I mean, I know nothing about bonds like Paul,
• 10:05
  Speaker 2: but I look at four point eight five percent on
• 10:08
  Speaker 2: the twenty year and I think, when's the next time
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  Speaker 2: I'm going to see that?
• 10:13
  Speaker 7: Yeah, this is where so maybe just a little bit
• 10:16
  Speaker 7: more common sensical. So if you invest in a two
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  Speaker 7: year right now. So let's take you back to six
• 10:20
  Speaker 7: and give you a real life example. In O six,
• 10:22
  Speaker 7: the yield care was inverted. I believe the two year
• 10:24
  Speaker 7: was somewhere around five twenty eight to ten year was
• 10:26
  Speaker 7: at five twenty four or something. So it wasn't as
• 10:28
  Speaker 7: big as an inversion of the day. But think about
• 10:31
  Speaker 7: that person in the two year, think about something called
• 10:33
  Speaker 7: reinvestment rate risk. They would have had to have had
• 10:37
  Speaker 7: to reinvest that tenuere or that two year four more times.
• 10:41
  Speaker 7: The first reinvestment I believe would have occurred sub two percent,
• 10:44
  Speaker 7: the last three sub one percent. And so that's where
• 10:47
  Speaker 7: I think just having bonds across the spectrum for an individual,
• 10:51
  Speaker 7: I think is the most appropriate thing. I just worry
• 10:53
  Speaker 7: right now that people are hiding in cash, and you're right,
• 10:57
  Speaker 7: who knows where rates will be two, three, five years
• 10:59
  Speaker 7: from now. You know, perhaps rates are hired now. I
• 11:02
  Speaker 7: don't think we're going back to where we were before,
• 11:04
  Speaker 7: but that's still a kind of an uncertain call, and
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  Speaker 7: I think that's reflective of if you think about uncertainty,
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  Speaker 7: you probably want to spread your bond across the curve
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  Speaker 7: just a bit and not hide in any one part
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  Speaker 7: of the market.
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  Speaker 1: So on the fixed income space, go out a little bit,
• 11:20
  Speaker 1: and is it really are you staying with investment grade?
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  Speaker 3: Are you considering certain parts of the high yield.
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  Speaker 7: No, not high yield yet, I mean investment grade right now,
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  Speaker 7: given that we're headed into an economic contraction, I think
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  Speaker 7: you want to stay high quality, especially when those investment
• 11:33
  Speaker 7: grade bonds offer quite a bit of yield, in many
• 11:36
  Speaker 7: cases yields you haven't seen in sixteen to twenty years,
• 11:38
  Speaker 7: which I think you know four years ago, if I
• 11:40
  Speaker 7: came on your show and told you that, you would
• 11:42
  Speaker 7: have told me I'm crazy. So that maybe has a
• 11:44
  Speaker 7: little bit of a commentary about how uncertain the world
• 11:47
  Speaker 7: can be. And that's where I think, you know, I
• 11:49
  Speaker 7: think people need to reflect that, and I think you
• 11:50
  Speaker 7: need to invest across the curve, but focus more so
• 11:53
  Speaker 7: on intermediate term bonds. Just given the fact that you
• 11:55
  Speaker 7: do lock in those yields for a few more years.
• 11:58
  Speaker 2: When is the right time to buy high yield debt?
• 12:01
  Speaker 2: I mean, if you see a recession coming next year,
• 12:06
  Speaker 2: do you buy in the middle of it, at the
• 12:08
  Speaker 2: beginning of it, at the end of it?
• 12:09
  Speaker 7: When, yeah, I think somewhere on the middle of it.
• 12:12
  Speaker 7: I mean, that's where I think, and that's not where
• 12:14
  Speaker 7: it's kind of uncertain about timing. You know, there are
• 12:16
  Speaker 7: many indications to me that the US economy is headed
• 12:19
  Speaker 7: to a recession. I think people ignoring them because they
• 12:21
  Speaker 7: believe this time is different. There are so many things
• 12:23
  Speaker 7: flashing red right now that you know, I think a
• 12:26
  Speaker 7: recession is is probably you know, it could happen in
• 12:29
  Speaker 7: the next three to six months. That's where timing is
• 12:31
  Speaker 7: a bit uncertain. But that's where you just behave better
• 12:34
  Speaker 7: at the end of an economic cycle, and that's where
• 12:36
  Speaker 7: I think you want to be in high quality bonds now.
• 12:38
  Speaker 7: I think the time for owning things that are less
• 12:41
  Speaker 7: than high quality is after they reprice quite a bit,
• 12:44
  Speaker 7: which they haven't done enough right so yet.
• 12:47
  Speaker 2: By the way, I got another credit trader writing in
• 12:50
  Speaker 2: with a question, since by rates is sort of consensus
• 12:54
  Speaker 2: decade high yields, how do you outperform your peers if
• 12:57
  Speaker 2: everyone's doing the same trade.
• 12:59
  Speaker 7: I'm not for sure sure that that is consensus any
• 13:01
  Speaker 7: longer or is consensed. So I think that you know,
• 13:03
  Speaker 7: the soft landing trade was on the higher forever and
• 13:05
  Speaker 7: interest rates when I talk to individual investors, they are
• 13:08
  Speaker 7: scared to buy bonds, and I don't think you're seeing
• 13:11
  Speaker 7: a huge rush into the bond market. I hear enough
• 13:14
  Speaker 7: other voices of people like myself who are telling people
• 13:17
  Speaker 7: the opposite, which I think is the wrong answer.
• 13:19
  Speaker 1: Inequities, I mean, the big cap growth stocks have been
• 13:22
  Speaker 1: the winners.
• 13:23
  Speaker 3: Here this year.
• 13:23
  Speaker 1: Do you stick with them or do you try to
• 13:25
  Speaker 1: find some value elsewhere.
• 13:27
  Speaker 7: I think you try to find value elsewhere. And this
• 13:29
  Speaker 7: is where my probably my commentary about liking small and
• 13:31
  Speaker 7: mid is a bit odd because they are more economically sensitive.
• 13:34
  Speaker 7: And this is where I do think there is some
• 13:36
  Speaker 7: good news for equity investors. I think parts of the
• 13:38
  Speaker 7: market have discounted some sort of a recession. And so
• 13:41
  Speaker 7: if you think about most of us on Wall Street,
• 13:43
  Speaker 7: we do have to put money to work every day,
• 13:45
  Speaker 7: and so I think most people have hidden out in
• 13:47
  Speaker 7: those large cap names that they think are economically insensitive,
• 13:50
  Speaker 7: that they're going to grow forever. And that's been the
• 13:52
  Speaker 7: part of the market that has done well. Other parts
• 13:56
  Speaker 7: of the market haven't. Those are small and mid cap stocks.
• 14:00
  Speaker 7: S and P six hundred trades at twelve point five
• 14:03
  Speaker 7: times four twelve earnings that are down twelve to thirteen percent,
• 14:07
  Speaker 7: and so I suspect that you will see those earnings
• 14:09
  Speaker 7: estimates fall a bit. But I do think there is
• 14:11
  Speaker 7: some cushion there, and that's where I think the opposite
• 14:13
  Speaker 7: side of this can be really good for individual investors
• 14:15
  Speaker 7: in those areas.
• 14:16
  Speaker 1: All Right, Brent, thanks so much for giving us some
• 14:18
  Speaker 1: of your time. Really appreciated brand shooting. He's a chief
• 14:21
  Speaker 1: investment strategist at Northwestern Mutual. I appreciate getting his thoughts
• 14:26
  Speaker 1: here on the equity side, a little bit underweight and
• 14:29
  Speaker 1: overweight on fixting companies.
• 14:31
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• 14:52
  Speaker 3: Matt.
• 14:52
  Speaker 1: We've been talking about this strike against the auto workers
• 14:55
  Speaker 1: that doesn't appear like they're making much headway. One of
• 14:59
  Speaker 1: the questions I have is how long can these auto
• 15:01
  Speaker 1: companies go with this strike? From a financial perspective. Joe
• 15:06
  Speaker 1: Levington Joints As. He's the director of credit research for
• 15:09
  Speaker 1: Bloomberg Intelligence. He covers the auto companies from the credit perspective.
• 15:13
  Speaker 1: He joins us live here in a Bloomberg Interactive broker studio.
• 15:15
  Speaker 3: So, Joel, how are their balance sheets?
• 15:17
  Speaker 1: How strong are these auto companies from a financial perspective,
• 15:19
  Speaker 1: because at some point the strike's really going to hurt
• 15:22
  Speaker 1: them financially potentially, oh one.
• 15:24
  Speaker 8: Hundred percent, Paul.
• 15:25
  Speaker 9: You know, eventually they all have to get to a
• 15:26
  Speaker 9: table and have to come to agreement because everybody needs
• 15:29
  Speaker 9: to make money, right.
• 15:30
  Speaker 2: Well, they only have to have more money than the UAW.
• 15:32
  Speaker 2: So how is their balance sheet look compared to that
• 15:35
  Speaker 2: of the United Autoworkers Union.
• 15:37
  Speaker 9: It's they're significantly significantly stronger than the AW. Okay, it's
• 15:43
  Speaker 9: combined Ford and GF have about ninety billion dollars of liquidity. Stillantes,
• 15:48
  Speaker 9: I think has about seventy billion dollars of liquidity.
• 15:50
  Speaker 1: So liquidity for you is like cash on the balance
• 15:52
  Speaker 1: sheet plus some bank lines that they control down on.
• 15:56
  Speaker 3: So if I need cash, how much do I really have?
• 15:58
  Speaker 9: And they've got like ninety billion years That's what I'm saying.
• 16:01
  Speaker 9: STILLANTIS has like another seventy. So you're talking about one
• 16:03
  Speaker 9: hundred and sixty billion dollars of firepower and the UAW
• 16:06
  Speaker 9: has eight hundred and twenty five million dollars in cash. Oops,
• 16:09
  Speaker 9: that's what I'm trying to say. Yeah, I mean, if
• 16:11
  Speaker 9: you were on the DraftKings app, you'd probably heavily that
• 16:14
  Speaker 9: the Lottos can you like, last a lot longer than
• 16:17
  Speaker 9: the uawken.
• 16:18
  Speaker 2: And they haven't even really struck where it hurts, right.
• 16:22
  Speaker 2: They hit them at a Bronco plant. That's bad, you know,
• 16:25
  Speaker 2: because there's already a long line of waiting for a Bronco.
• 16:28
  Speaker 2: They're awesome. They hit the Colorado and I know, you know,
• 16:32
  Speaker 2: Mark Royce loves those mid sized pickup trucks.
• 16:35
  Speaker 3: Actually I drove.
• 16:35
  Speaker 2: One, and I was really impressed with the turbo charged
• 16:39
  Speaker 2: inline four engine because you're an in like six guy,
• 16:42
  Speaker 2: I like an inline six, I like, you know, but
• 16:45
  Speaker 2: this small engine I thought was super punchy, had a
• 16:49
  Speaker 2: lot of torque. Anyway, they hit him the Wranglers, you know,
• 16:52
  Speaker 2: high margin vehicle, but they haven't hit them on the
• 16:56
  Speaker 2: truck lines, which is where it hurts, right. They haven't
• 16:59
  Speaker 2: struck where they make the f one fifty. They haven't
• 17:01
  Speaker 2: struck where they make the Tahoe and the suburban, and
• 17:06
  Speaker 2: that would be pretty hardcore if they did that, it
• 17:09
  Speaker 2: would be.
• 17:09
  Speaker 9: But it goes both ways because the more people you
• 17:11
  Speaker 9: put out of the plants, that also means the more
• 17:14
  Speaker 9: they're draining down that eight hundred and twenty five million
• 17:16
  Speaker 9: dollars right, because they're paying them while they're the UAW
• 17:19
  Speaker 9: is paying their employee that their clients while they're you know,
• 17:22
  Speaker 9: like while they're on strike. But I agree with you
• 17:25
  Speaker 9: if you look back to times like the pandemic, right,
• 17:29
  Speaker 9: the pandemic, really what you saw was about a ten
• 17:32
  Speaker 9: billion dollars swing in cash flow over a couple of
• 17:34
  Speaker 9: quarters if you're talking about a FORD or GM. So
• 17:37
  Speaker 9: you could kind of get into that range like if
• 17:39
  Speaker 9: this protracts into you know, like a five six, seven
• 17:43
  Speaker 9: week kind of event. But we're not there yet, and
• 17:46
  Speaker 9: I think, you know, while you have this time, both
• 17:48
  Speaker 9: sides are going to hackle out for each percentage increase
• 17:51
  Speaker 9: in salary that they can get.
• 17:53
  Speaker 3: How are the bonds? How have they been trading?
• 17:55
  Speaker 9: Bonds really haven't moved all that much because the raiders
• 17:57
  Speaker 9: have been done Actually a very nice job of being
• 18:00
  Speaker 9: republic about how they don't expect this to be impactful,
• 18:03
  Speaker 9: and how they've built in somewhere between five and eight
• 18:05
  Speaker 9: weeks of flexibility. So now that we're, you know, like
• 18:08
  Speaker 9: just getting towards the low end of that range, there's
• 18:12
  Speaker 9: still plenty of room in terms of how they're thinking
• 18:14
  Speaker 9: about ratings.
• 18:16
  Speaker 3: So we came out of so GM and Stillantis.
• 18:19
  Speaker 2: They did go bankrupt during the crepy Well, I mean,
• 18:23
  Speaker 2: Chrysler is really what you're talking about, right Stilantis is
• 18:28
  Speaker 2: essentially a French company that bought the Italian company that
• 18:32
  Speaker 2: bought Chrysler for like a dollar.
• 18:35
  Speaker 9: It's a mix of Pugio Fiat At Chrislis okay coming together.
• 18:39
  Speaker 2: But I mean, I'm gonna guess where you were going
• 18:42
  Speaker 2: with this. So we talk a lot about the fact
• 18:44
  Speaker 2: that the unions took a crappy deal in order to
• 18:48
  Speaker 2: help support the automaker's post financial crisis. What we don't
• 18:52
  Speaker 2: talk too much about is that the unions had a
• 18:55
  Speaker 2: much greedier deal that kind of pushed these automakers into
• 18:58
  Speaker 2: bankruptcy during the financial crisis.
• 19:00
  Speaker 9: Right, Yeah, I mean we're still talking about I guess
• 19:04
  Speaker 9: Mary Varrow's out there saying that we made an offer
• 19:07
  Speaker 9: worth one hundred and fifteen thousand dollars uaw worker that
• 19:11
  Speaker 9: was rejected.
• 19:11
  Speaker 2: So whether you' that's their final pay, one hundred and
• 19:15
  Speaker 2: fifteen thousand dollars.
• 19:17
  Speaker 9: Right, that's your take home pay. So whether you are,
• 19:19
  Speaker 9: depending on what side of the corner you're on, whether
• 19:21
  Speaker 9: you think that's good or bad. It doesn't sound particularly
• 19:24
  Speaker 9: horrible to me in any way for a unionized manufacturing facility.
• 19:29
  Speaker 2: But you know, well, I'm just hang on, I'm just dividing.
• 19:31
  Speaker 2: So Mary gets about twenty five million dollars, so divided
• 19:35
  Speaker 2: by one hundred fifteen, so she still gets two hundred
• 19:39
  Speaker 2: and seventeen times more than that. Yeah, and she works hard,
• 19:43
  Speaker 2: I'm sure, and she's steered the company through some tough times,
• 19:48
  Speaker 2: but she's had their help.
• 19:49
  Speaker 9: Yes, And that's what I say. They eventually have to
• 19:52
  Speaker 9: come together because they both need each other.
• 19:54
  Speaker 3: Right, if you're going to.
• 19:55
  Speaker 2: Make money, you have to have workers.
• 19:57
  Speaker 9: And if workers want to have a salary, that they
• 19:59
  Speaker 9: have to have a proper parable company behind them.
• 20:01
  Speaker 2: Now, they don't just want a salary, right, Mary has
• 20:03
  Speaker 2: a defined benefits pension plan. Yes, are the workers going
• 20:06
  Speaker 2: to get that too?
• 20:07
  Speaker 9: Well, Ford seems to have caved a little bit on
• 20:10
  Speaker 9: that front.
• 20:10
  Speaker 4: Matt.
• 20:11
  Speaker 9: That's a really difficult front for others to go into,
• 20:14
  Speaker 9: because if you think about GM, I mean, their opebs
• 20:17
  Speaker 9: blew up to like seventy billion before they.
• 20:18
  Speaker 3: Went to bankrupt I'm sorry that, Paul.
• 20:21
  Speaker 9: There are other pension liabilities that are on their balance sheet.
• 20:25
  Speaker 9: That's really what drove them into bankruptcy to begin with
• 20:28
  Speaker 9: was to get rid of those liabilities. So to start
• 20:31
  Speaker 9: bringing them back in I think would be a really
• 20:33
  Speaker 9: difficult thing and probably one of the bigger challenges on
• 20:35
  Speaker 9: the GM side. Whereas Ford woulds didn't go into bankruptcy,
• 20:39
  Speaker 9: seems more open to working with the union in that aspect.
• 20:45
  Speaker 1: So if I'm a creditor too, if I'm a bond
• 20:48
  Speaker 1: holder of the big three auto companies, do I have
• 20:51
  Speaker 1: a threshold where I don't want to see them have
• 20:55
  Speaker 1: an increase more than twenty five thirty percent?
• 20:57
  Speaker 3: Or do I just not really care? I just want
• 20:58
  Speaker 3: to get a deal done the paper.
• 21:00
  Speaker 2: It probably doesn't matter, right you care about the pension.
• 21:03
  Speaker 9: I think you care about the pension first when it
• 21:06
  Speaker 9: comes to pay. You know, when you're talking about these
• 21:08
  Speaker 9: increases between twenty and forty percent are kind of you know,
• 21:11
  Speaker 9: like where people are targeting. Even if you think about
• 21:14
  Speaker 9: forty percent, it's forty percent of four percent of your
• 21:17
  Speaker 9: total cost of your total bill, and that's before there's
• 21:19
  Speaker 9: any cost benefits that the company may get, and that's
• 21:22
  Speaker 9: before you think about price.
• 21:24
  Speaker 3: So labor's only four percent of their cost. Diructor, it's
• 21:26
  Speaker 3: only four percent.
• 21:27
  Speaker 9: It's really deal, just well, that's that's what two guys
• 21:30
  Speaker 9: from some it might say, yes, but why does it
• 21:34
  Speaker 9: call it thirty or thirty five percent? Have a drink
• 21:36
  Speaker 9: and revel with life, and then you'd be fine, because
• 21:39
  Speaker 9: really you're talking about a percentage point or two on
• 21:42
  Speaker 9: your price side, or figuring out some cost benefits on
• 21:45
  Speaker 9: the way, and then you can move on with life.
• 21:47
  Speaker 2: Pensions are much more expensive. They also want a four
• 21:50
  Speaker 2: day work week, which means you got to hire a
• 21:52
  Speaker 2: whole bunch of other people and pay more health care
• 21:55
  Speaker 2: benefits to those men and women. Plus they want to
• 22:00
  Speaker 2: know which products are coming. So, for example, you know,
• 22:03
  Speaker 2: Dodge doesn't have anything coming next year and they're going
• 22:06
  Speaker 2: to cancel a couple of their offerings. Chrysler only has
• 22:09
  Speaker 2: the Pacific, a minivan and nothing else.
• 22:12
  Speaker 9: It's a good thing that the UAW is not at
• 22:13
  Speaker 9: Bloomberg because we love a seven day work week right here,
• 22:16
  Speaker 9: I don't know what a four day work week would
• 22:18
  Speaker 9: actually look like. It makes no sense to me.
• 22:20
  Speaker 2: I'm a fan of a four hour work frankly, but
• 22:24
  Speaker 2: clearly that's not going to happen with the autoworkers.
• 22:26
  Speaker 9: That's just thrown out as a starting point.
• 22:30
  Speaker 2: But yeah, you're totally right.
• 22:31
  Speaker 3: It's the full.
• 22:31
  Speaker 9: Package, and it's really the benefits side that I think
• 22:34
  Speaker 9: is more of the sticking point for a GM or
• 22:36
  Speaker 9: a stillant this.
• 22:37
  Speaker 1: So how do you think this place out, having you know,
• 22:39
  Speaker 1: listened to both sides and all three companies.
• 22:42
  Speaker 9: Yeah, I mean I think Paul Well probably wind up
• 22:44
  Speaker 9: somewhere that to some guys could figure it out over cocktail,
• 22:46
  Speaker 9: is that it'll probably be somewhere in the thirty percent
• 22:48
  Speaker 9: range of a salary increase. You're going to have your
• 22:50
  Speaker 9: forty hour work week. Maybe there's some marginal benefit that
• 22:53
  Speaker 9: they give back on pensions, and that's.
• 22:55
  Speaker 2: About where it'll wind up.
• 22:57
  Speaker 9: And the reason that it's not that relevant to it
• 23:00
  Speaker 9: to a credit person is because when you think about
• 23:02
  Speaker 9: that increase, you're talking about thirty or forty basis points
• 23:05
  Speaker 9: of margin. It's really not that big a deal for
• 23:08
  Speaker 9: the autos and their outlooks for the long term.
• 23:11
  Speaker 4: All right, we'll.
• 23:12
  Speaker 3: See what kind of deal they can get done.
• 23:15
  Speaker 6: You're listening to the Team ken'shar Live program Bloomberg Markets
• 23:19
  Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the
• 23:22
  Speaker 6: iHeartRadio app and the Bloomberg Business App, or listen on
• 23:25
  Speaker 6: demand wherever you get your podcasts.
• 23:30
  Speaker 1: Deftly, some concerns out there in the credit markets, but
• 23:32
  Speaker 1: one area of a positive sign so Standard and Poors
• 23:36
  Speaker 1: Global Ratings on Wednesday upgraded the Government of Jamaica's long
• 23:39
  Speaker 1: term foreign and local currency issue a default rating from
• 23:44
  Speaker 1: B plus to double B minus with a stable outlook.
• 23:47
  Speaker 1: It is the best credit rating that Jamaica has received
• 23:49
  Speaker 1: from S and P since it started rating the country
• 23:52
  Speaker 1: sovereign dead in nineteen ninety nine.
• 23:53
  Speaker 3: Some good news there. We're gonna break that.
• 23:55
  Speaker 1: Down with Senator Auburn Hill, Minister of Industry, Investment and Commerce,
• 24:01
  Speaker 1: Member of the Senate of the Government of Jamaica, joining
• 24:03
  Speaker 1: us live here in our Bloomberg Interactive Broker studio. Minister,
• 24:07
  Speaker 1: Welcome to Bloomberg what drove the increase in the rating
• 24:11
  Speaker 1: outlook from your ratings issuer for Jamaica, if.
• 24:16
  Speaker 8: I could put towards this discipline management we took over
• 24:21
  Speaker 8: in twenty sixteen, the Andrew Holness administration took over. We
• 24:24
  Speaker 8: made a commitment to the IMF at the time that
• 24:28
  Speaker 8: we would continue to make sure we've become fiscally disciplined.
• 24:32
  Speaker 8: Right through that period of time. We moved our debts
• 24:35
  Speaker 8: down from the high as we might recall at one
• 24:37
  Speaker 8: fur to seven when we took over must have been
• 24:40
  Speaker 8: in the one thirty five or thereabouts, and move it
• 24:42
  Speaker 8: down to where we are today at seventy seven and
• 24:45
  Speaker 8: going in the direction of sixty. We had planned to
• 24:48
  Speaker 8: get there by twenty sixteen, the pandemic interrupted. We moved
• 24:53
  Speaker 8: it to twenty eighteen, but we might get there before
• 24:55
  Speaker 8: twenty eighteen. And all through that we've gone through the
• 24:59
  Speaker 8: plane them spend one hundred billion Jamaican dollars we didn't
• 25:02
  Speaker 8: plan to spend, haven't borrowed any money, and we haven't
• 25:06
  Speaker 8: raised taxes in seven years, so that kind of fiscal discipline.
• 25:10
  Speaker 8: The rating agencies have been watching it, and the best
• 25:14
  Speaker 8: rating we've ever had in twenty four years of S
• 25:17
  Speaker 8: and P. We've just had the rating upgrade, and of
• 25:20
  Speaker 8: course we're in not happy with that. We want to
• 25:22
  Speaker 8: continue to make sure that gets to investment grade as
• 25:26
  Speaker 8: quickly as we can.
• 25:27
  Speaker 2: So what are the industries that are driving this? Are
• 25:32
  Speaker 2: supporting this growth? I have been going to Jamaica my
• 25:37
  Speaker 2: whole life. We go to Silver Sands and Trelawney and
• 25:40
  Speaker 2: if I get a good bonus, then I'll spend a
• 25:42
  Speaker 2: couple of days over at Rose Hall. It's a little pricey,
• 25:47
  Speaker 2: but so tourism obviously is I guess one of the
• 25:50
  Speaker 2: main industries. What else is pushing this because Jamaica is
• 25:52
  Speaker 2: not an offshore economy. This isn't somewhere where people go
• 25:55
  Speaker 2: to hide money, you know, or to start crypto businesses.
• 25:58
  Speaker 8: No, that's not what we do. What happened is when
• 26:03
  Speaker 8: tourism took a dip or and somebody who you've had
• 26:07
  Speaker 8: here at Bloomberg, Grandite, tims Ed Bartlett, found all kinds
• 26:11
  Speaker 8: of innovative ways to help us open back tourism as
• 26:15
  Speaker 8: quickly as we can so that didn't stay down too
• 26:18
  Speaker 8: long and we're now back this summer, well past what
• 26:22
  Speaker 8: we were in twenty nineteen before the pandemic. But through
• 26:26
  Speaker 8: the pandemic we had the BPO, the business processing outsourcing business,
• 26:31
  Speaker 8: the knowledge outsourcing business, and that grew by twenty percent
• 26:36
  Speaker 8: per year in the last four years. So we quickly
• 26:39
  Speaker 8: moved to work from home media adjustments because under the
• 26:43
  Speaker 8: BPO arrangement and OECD watching, you have to make sure
• 26:47
  Speaker 8: you follow certain basic rules. We got those fixed with
• 26:49
  Speaker 8: the Ministry of Finance and through myself, I was then
• 26:53
  Speaker 8: in the Ministry of Economic Growth, which is a Prime
• 26:55
  Speaker 8: minister's ministry, worked it out, got it to work, and
• 26:59
  Speaker 8: it kept on growing and it keeps on growing. But
• 27:01
  Speaker 8: we also are looking at growing or exports because we
• 27:07
  Speaker 8: have had looks like we had a long period of
• 27:10
  Speaker 8: bad debt situation. We've had a longer period of negative
• 27:15
  Speaker 8: trade balances and we're now grapping our hands around that
• 27:19
  Speaker 8: as we've done with debt. To me, and that's one
• 27:21
  Speaker 8: of my main focus why I'm here with twenty odd
• 27:26
  Speaker 8: thirty businesses to look at new markets and develop new
• 27:30
  Speaker 8: market markets, because you cannot be an exporting business and
• 27:34
  Speaker 8: stay in your office, right, So I take them with me.
• 27:37
  Speaker 8: I took them here, took them to a land I'm
• 27:39
  Speaker 8: going to London from here to make sure we developed
• 27:42
  Speaker 8: the markets that we have, and then wider field.
• 27:44
  Speaker 1: What are some of those markets that you'd like to
• 27:46
  Speaker 1: develop or some of those products or services that you'd
• 27:48
  Speaker 1: like to develop.
• 27:49
  Speaker 8: For instance, you know Goya very well. We have something called.
• 27:54
  Speaker 10: Aki.
• 27:55
  Speaker 8: Matty would have had Aki courter breakfast in Jamaica. My
• 27:57
  Speaker 8: eggs okay with your egg it looks like eggs, So
• 28:00
  Speaker 8: we we know. Goya said to one of our importants
• 28:05
  Speaker 8: in Florida recently, we want twenty fourty foot containers. They
• 28:10
  Speaker 8: could only give them one. They want something we have color,
• 28:13
  Speaker 8: which is like spinach. They want breadfruit, which is we
• 28:16
  Speaker 8: make into flour and it's gluten free, which people want.
• 28:20
  Speaker 8: We want containers of that. So we have markets I am.
• 28:24
  Speaker 8: While I'm looking for new markets, we really what I'm
• 28:27
  Speaker 8: looking for as well. The Ministry of Industry. Investment is
• 28:31
  Speaker 8: the second part in commerce. I'm looking for investment to
• 28:34
  Speaker 8: fit those markets. Come in, help us grow agriculture, agro
• 28:40
  Speaker 8: process it and make sure we have the markets for you.
• 28:43
  Speaker 8: Come invest. So that's part of the message I bring
• 28:46
  Speaker 8: as well.
• 28:46
  Speaker 2: What about cannabis, We talk about the canabis business here
• 28:48
  Speaker 2: a lot Obviously, the legalization across well for recreational use
• 28:53
  Speaker 2: twenty three states in the US has grown the market,
• 28:56
  Speaker 2: the legal market considerably. Here can that be an export
• 29:00
  Speaker 2: from a country that's in a way famous for Bob
• 29:04
  Speaker 2: Marley and and that sort of product we have, We have.
• 29:07
  Speaker 8: Exported to places like Australia and Germany, But you probably
• 29:17
  Speaker 8: need to get to thirty eight states, at which point
• 29:21
  Speaker 8: you can change a constitution because it's a Schedule one drug,
• 29:25
  Speaker 8: and until the FEDS change it, you can't do interstate banking.
• 29:29
  Speaker 8: So you can do all you want in Colorado, but
• 29:31
  Speaker 8: you can't ship it to California. So until that changes.
• 29:36
  Speaker 8: As a Schedule one drug, we have to abide by
• 29:39
  Speaker 8: certain international rules that we've signed in treaties, So we
• 29:43
  Speaker 8: can't just export it will in illly and we can't
• 29:45
  Speaker 8: export the United States or even use your airspace to
• 29:48
  Speaker 8: export it.
• 29:48
  Speaker 2: What is the political climate like in Kingston? I mean,
• 29:52
  Speaker 2: you know, we have here a very partisan, very divided
• 29:59
  Speaker 2: political system, which is driving Moody is to threaten a downgrade.
• 30:05
  Speaker 2: So we've already had downgrades at Fitch and s and P.
• 30:08
  Speaker 2: So what advice can you give to the US government?
• 30:11
  Speaker 2: You know, post upgrade to try and get along and
• 30:16
  Speaker 2: govern correctly.
• 30:19
  Speaker 8: Why don't I tell you what we've done. We have
• 30:22
  Speaker 8: made sure that we focus on the fiscal part. Because
• 30:28
  Speaker 8: I noticed why Moody is threatening to downgrade the same
• 30:32
  Speaker 8: reason SMP did in twenty eleven. It's from what I've read,
• 30:36
  Speaker 8: it's the fractiousness over the government closing down. Well, we
• 30:41
  Speaker 8: can't say anything about that nor And you have the
• 30:44
  Speaker 8: privilege of having the reserve currents in the world, so
• 30:48
  Speaker 8: you're in a very particularly privileged position. But what we
• 30:51
  Speaker 8: have done in Jamaica is if we didn't get I
• 30:54
  Speaker 8: remember when the IMF came in twenty thirteen, I was
• 30:58
  Speaker 8: in that meeting called the University of Western is by
• 31:01
  Speaker 8: Oliver Clark, who I know, you know from from Silverton,
• 31:04
  Speaker 8: from Silverstand. Oliver called that meeting. I remember the Governor
• 31:08
  Speaker 8: brand went at the time saying, we cannot get our
• 31:12
  Speaker 8: currency and our inflation under check unless the government gets
• 31:17
  Speaker 8: its fiscal house in order. You will never hear or
• 31:20
  Speaker 8: know we've made since then. We've made the Bank of
• 31:23
  Speaker 8: Jamaica independent. You never hear the government talk. The governor
• 31:27
  Speaker 8: of the central Bank talks about the talking about the
• 31:30
  Speaker 8: fiscal position of the government because we've put it under control.
• 31:34
  Speaker 8: And if until you get that done, then their the
• 31:40
  Speaker 8: rating agents will have that discussion. But frankly, your discussion
• 31:43
  Speaker 8: is quite different because you're the reserve We hold the
• 31:45
  Speaker 8: reserve currency and the biggest military in the world.
• 31:49
  Speaker 1: Minister talks us about the economy today in Jamaica. What's
• 31:52
  Speaker 1: it like for the average in Jamaican today.
• 31:54
  Speaker 8: The average Jamaican. First of all, we're just recently the
• 31:58
  Speaker 8: most recent figure we had for unemployment is four point
• 32:01
  Speaker 8: five percent. It's the lowest in the history of taking
• 32:05
  Speaker 8: numbers in Jamaica, so we have a historical law in
• 32:09
  Speaker 8: unemployment in the emerging market. Four point five percent is
• 32:12
  Speaker 8: near the full employment. So what's happening people in the
• 32:15
  Speaker 8: knowledge of outsourcing business, the hospitality business, the tourism business, saying,
• 32:20
  Speaker 8: and the construction business.
• 32:21
  Speaker 4: We want people.
• 32:24
  Speaker 8: Seventy to eighty percent of our university graduates are women.
• 32:29
  Speaker 8: We have three hundred or four hundred thousand young people
• 32:32
  Speaker 8: on the street who tend to get into gangs their men,
• 32:35
  Speaker 8: primarily men, because they're the ones who weren't graduating. So
• 32:38
  Speaker 8: now we're saying we have heard trust and t we're
• 32:41
  Speaker 8: investing money to take them off the street, put them
• 32:45
  Speaker 8: in a training center for months, pay them a stipend.
• 32:50
  Speaker 8: A part of the stipend we used to open a
• 32:52
  Speaker 8: bank account. We give them a national idea. We give
• 32:55
  Speaker 8: them a passport, driver's license so they become part of
• 32:57
  Speaker 8: the citizenship. We give them the has been certify them
• 33:01
  Speaker 8: so they could work in Jamaica, the United States or
• 33:03
  Speaker 8: Saudia Arabia, and put them back in the workforce. So
• 33:06
  Speaker 8: we're expanding the workforce in this vicinaty, but with apprenticeship
• 33:11
  Speaker 8: with skills.
• 33:12
  Speaker 3: All right, that's good news. That's a good story.
• 33:14
  Speaker 1: The Standard and poorst certainly thinks it's a good story.
• 33:17
  Speaker 3: Jamaica upgraded its credit rating.
• 33:19
  Speaker 1: Senator Aubin Hill, he's a Minister of Industry, Investment in Commerce.
• 33:23
  Speaker 1: He's also a member of the Senate in the government
• 33:26
  Speaker 1: of Jamaica. We appreciate getting a few minuts.
• 33:27
  Speaker 3: You're time.
• 33:27
  Speaker 2: Great to have you here. Thanks so much for joining us.
• 33:30
  Speaker 4: You're listening to the tape.
• 33:31
  Speaker 6: Cat's are live program Bloomberg Markets weekdays at ten am
• 33:34
  Speaker 6: Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com,
• 33:38
  Speaker 6: and the.
• 33:39
  Speaker 4: Bloomberg Business app.
• 33:40
  Speaker 6: You can also listen live on Amazon Alexa from our
• 33:43
  Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 33:48
  Speaker 2: Gary Shilling from a Gary Shilling in company has darkened
• 33:53
  Speaker 2: our door and Gary, we've seen an incredible rise in
• 33:58
  Speaker 2: rates over the last few weeks. What is going on here?
• 34:03
  Speaker 11: Well, I think there's a conviction that the Fed is
• 34:07
  Speaker 11: not through tightening, and I don't think they are. They
• 34:11
  Speaker 11: really are determined to get inflation back to two percent
• 34:15
  Speaker 11: and to keep it there. And of course they were
• 34:17
  Speaker 11: very much behind the curve when they started early last year.
• 34:21
  Speaker 11: They thought that the inflation spurt was simply reopening the
• 34:26
  Speaker 11: economy after the pandemic and and the problems with the
• 34:31
  Speaker 11: supply change.
• 34:32
  Speaker 2: Now, hang on a second, what have you got there?
• 34:34
  Speaker 2: Is it like a candy bar wrapper or.
• 34:36
  Speaker 10: It's a sweetish fish? All right?
• 34:37
  Speaker 2: Now put the Swedish fish down, because we hear that
• 34:39
  Speaker 2: crackling on the So what do you think about Jamie
• 34:42
  Speaker 2: Diamond's warning? I mean, seven percent maybe just a number
• 34:46
  Speaker 2: that he picked out of the air when he was
• 34:47
  Speaker 2: talking in an interview of the Times of India. Who
• 34:49
  Speaker 2: knows where he got that number, but we all thought
• 34:53
  Speaker 2: that at the most the Fed is going to like
• 34:56
  Speaker 2: five and three quarters, And now all of a sudden,
• 34:59
  Speaker 2: ever talking about seven.
• 35:01
  Speaker 11: Well, interestingly enough, we've done a lot of work over
• 35:04
  Speaker 11: the years. We just updated on what we call a
• 35:06
  Speaker 11: debt bomb, and that is the question of what is
• 35:09
  Speaker 11: the rate at which the interest on the debt, which
• 35:13
  Speaker 11: of course is part of the deficit, becomes so great
• 35:16
  Speaker 11: that the whole thing grows geometrically and blows up. Now,
• 35:20
  Speaker 11: the interest rate on the federal debt now is under
• 35:24
  Speaker 11: three percent because a lot of a short term but
• 35:26
  Speaker 11: of course it rolls over in time at higher rates.
• 35:30
  Speaker 11: So if we stay here, it could be a problem.
• 35:32
  Speaker 11: Although our numbers show that unless you got eight percent
• 35:36
  Speaker 11: on the federal debt.
• 35:38
  Speaker 2: The average eight and we've never been there, right, because
• 35:40
  Speaker 2: I remember reading.
• 35:41
  Speaker 11: Average maternity is only six years, so until you got
• 35:44
  Speaker 11: to eight percent, you probably didn't have a problem.
• 35:47
  Speaker 10: But we've never had that problem. We've never had a
• 35:49
  Speaker 10: debt bomb.
• 35:50
  Speaker 11: The closest we had was nineteen ninety two when interest
• 35:53
  Speaker 11: in relation to GDP was three point one percent. It's
• 35:57
  Speaker 11: now three percent. It's basically the same. We haven't been there.
• 36:00
  Speaker 11: We're not Argentina, but but uh, you know this, this
• 36:05
  Speaker 11: is a this is obviously a concern because if interest
• 36:10
  Speaker 11: rates are up and stay up, of course, there's a
• 36:13
  Speaker 11: lot of other things you worry about.
• 36:14
  Speaker 10: I mean, you know, the economy.
• 36:16
  Speaker 11: I don't think could stand anything like eight percent interest
• 36:19
  Speaker 11: on the federal debt because you'd be you'd be talking
• 36:22
  Speaker 11: about double digits for everything else. And we haven't seen
• 36:25
  Speaker 11: that since, uh, since the Boker era and and the
• 36:30
  Speaker 11: ensuing collapsed.
• 36:31
  Speaker 2: Well, now, there's a lot of things you've done in
• 36:33
  Speaker 2: your career, uh to to become such a famous economist.
• 36:38
  Speaker 2: I probably the biggest is you're a bond bowl and
• 36:41
  Speaker 2: we're for throughout the bond bowl market, and you know,
• 36:45
  Speaker 2: really made your name with with those calls. How painful.
• 36:49
  Speaker 2: Then has this drop in price, run up and yields
• 36:52
  Speaker 2: been for you? And at what point do you say, Okay,
• 36:57
  Speaker 2: now it's time to buy again.
• 37:00
  Speaker 11: Well, obviously when you've had a long term forecast, and
• 37:04
  Speaker 11: you might recall Matt when I said in nineteen eighty
• 37:08
  Speaker 11: one that we're entering the bond rally of a lifetime
• 37:10
  Speaker 11: to yield on the thirty year bond was fourteen point
• 37:13
  Speaker 11: six percent. It was a long time ago. Obviously it
• 37:17
  Speaker 11: came way down. Now it's rebounded with all other rays.
• 37:21
  Speaker 11: I think we're getting I think we're getting close because
• 37:24
  Speaker 11: the economy simply cannot stand these kind of rates. We're
• 37:28
  Speaker 11: close to or maybe already in a recession. It's always
• 37:32
  Speaker 11: up to the National Burea of Economic Research to make
• 37:34
  Speaker 11: that call. But I think that will do it. And
• 37:37
  Speaker 11: of course you get a recession. What happens. You get
• 37:41
  Speaker 11: less demand for high quality credit, you get the safe
• 37:45
  Speaker 11: haven of the treasuries, you get the FED easing. But
• 37:49
  Speaker 11: I think the Fed is going to be slow to
• 37:51
  Speaker 11: ease because they want to make sure that inflation.
• 37:54
  Speaker 10: Is killed and killed dead.
• 37:56
  Speaker 11: They really were so far behind the curve on this,
• 37:59
  Speaker 11: so I think this whole thing is going to get
• 38:02
  Speaker 11: stretched out. But I don't think we're there quite there
• 38:04
  Speaker 11: yet where I won't go out. We in our portfolio,
• 38:07
  Speaker 11: as we manage, we do have some long gone positions,
• 38:10
  Speaker 11: but relatively small. We're not adding to them right yet.
• 38:13
  Speaker 1: Is there an irrational investor exuberance back in this market?
• 38:21
  Speaker 10: Well, he sure is.
• 38:22
  Speaker 11: I mean if you look at you look a look
• 38:24
  Speaker 11: at example at the FANG index gross stocks. Now to
• 38:30
  Speaker 11: the extent that their prices today are the discounted value
• 38:34
  Speaker 11: of future earnings out five or ten years. Those things
• 38:38
  Speaker 11: ought to be in the tank. Now they've sold off
• 38:41
  Speaker 11: a little bit lately, but I mean they've rallied for
• 38:43
  Speaker 11: most of most of the year. And of course this
• 38:46
  Speaker 11: is a big thorn in the side of the FED
• 38:49
  Speaker 11: because they see investors really not believing them. They don't
• 38:52
  Speaker 11: really they just don't really believe that they're serious, because
• 38:56
  Speaker 11: if they did, you'd see a lot of things like this.
• 38:58
  Speaker 11: You see stocks in general and says the interest rates
• 39:01
  Speaker 11: sensor is housing already affected by interest rates, but investors
• 39:06
  Speaker 11: in terms of securities not yet convinced.
• 39:09
  Speaker 1: So so you think, I guess, do you think that
• 39:12
  Speaker 1: there's a there's really risk to the stock market in general?
• 39:15
  Speaker 4: Oh?
• 39:15
  Speaker 10: Yeah.
• 39:17
  Speaker 11: Early last year I said, I thought we have a
• 39:19
  Speaker 11: thirty percent decline. Peaked the trough, we were down twenty
• 39:22
  Speaker 11: five percent.
• 39:23
  Speaker 10: You got a rally.
• 39:25
  Speaker 11: That means from here you need about a thirty percent decline.
• 39:28
  Speaker 11: And yeah, I think I think there is is big risk.
• 39:32
  Speaker 11: I mean, you look at all the indicators, you look
• 39:35
  Speaker 11: at the leading indicators, you look at the yield curve,
• 39:39
  Speaker 11: you look at small business hiring intentions. It's just a
• 39:41
  Speaker 11: whole host of factors. And boy, if this isn't if
• 39:45
  Speaker 11: this doesn't tell your recession and all it goes with it,
• 39:48
  Speaker 11: including fedies a lot easier, a lot lower rates, you've
• 39:52
  Speaker 11: got to throw out all the history.
• 39:54
  Speaker 2: I would think so too. And you know, I have
• 39:56
  Speaker 2: a laundry list of all of the headwinds and all
• 39:59
  Speaker 2: the problems that consumers are facing. And you've got along
• 40:02
  Speaker 2: with that, this strike which could be bad for the economy,
• 40:06
  Speaker 2: and also inflation, government shutdown which doesn't augur well, debts,
• 40:11
  Speaker 2: student debt, coming back, delinquencies on credit card debt, and autolans.
• 40:17
  Speaker 2: Every time I run this list by a bull, he'll say, hey,
• 40:22
  Speaker 2: unemployment is at three point eight percent. You know, as
• 40:24
  Speaker 2: long as we have jobs, it's no big deal.
• 40:27
  Speaker 11: Well, one of the real issues here, Matt, is that
• 40:31
  Speaker 11: employers spend so much time and energy hiring people that
• 40:35
  Speaker 11: they're very reluctant to lay them off. It takes time
• 40:39
  Speaker 11: to shift gears one hundred and eighty degrees. But of
• 40:42
  Speaker 11: course as profits and sales weaken, that's what happens. They
• 40:47
  Speaker 11: get layoffs. But this is one of the reasons I
• 40:50
  Speaker 11: think this whole exercise is going to be stretched out.
• 40:52
  Speaker 11: The other one is the FED taking their good sweet
• 40:54
  Speaker 11: time to shift the east because they want to make
• 40:56
  Speaker 11: sure that inflation is really.
• 40:58
  Speaker 2: But that could mean a deeper set right if we
• 41:00
  Speaker 2: have that could mean a very deep recession. If we
• 41:03
  Speaker 2: have the kind of UH slow down where you know,
• 41:07
  Speaker 2: companies have been not wanting to fire people, but are
• 41:11
  Speaker 2: all of a sudden then pushed to do it, and
• 41:14
  Speaker 2: then the FED doesn't want to come in cut rates
• 41:17
  Speaker 2: until until the economy is really in trouble, that could
• 41:20
  Speaker 2: mean a big deep drop.
• 41:22
  Speaker 11: I think it means a long recession, but not necessarily deep.
• 41:26
  Speaker 11: To get a really deep recession, you've got to have
• 41:28
  Speaker 11: a major financial crisis. That That's what happened with the UH,
• 41:34
  Speaker 11: with the dot coms in the in the late nineteen nineties,
• 41:38
  Speaker 11: and of course that's what happened with the subprime mortgages, the.
• 41:40
  Speaker 2: Great Financial Crisis. I mean, looks like there could be
• 41:43
  Speaker 2: the beginning of that happening in China right now.
• 41:46
  Speaker 11: Does that deep as opposed along you've got to get
• 41:49
  Speaker 11: a huge inventory correctionion well.
• 41:51
  Speaker 2: Does the Chinese property problem? Were you or are we
• 41:55
  Speaker 2: too insulated? The economy, not not that much.
• 41:58
  Speaker 11: I mean, our ourd with China has has atrophied. It does, no,
• 42:05
  Speaker 11: it does. It does mean that China's internal growth is going.
• 42:08
  Speaker 4: To be weak.
• 42:09
  Speaker 11: But you look at Si who basically is a present
• 42:13
  Speaker 11: for life. He doesn't really care about the well being
• 42:16
  Speaker 11: of the average Chinese, only that it's good enough that
• 42:19
  Speaker 11: they don't the regime doesn't get tossed out. But but
• 42:23
  Speaker 11: they're in a different world. I mean we look at
• 42:25
  Speaker 11: it through Western eyes where growth is is is good,
• 42:30
  Speaker 11: but they don't look at it. Stay in power is
• 42:32
  Speaker 11: good for as far as their concerned. So I don't
• 42:35
  Speaker 11: think that China really really cares. And of course they
• 42:38
  Speaker 11: got the property problem, they got overbuilt infrastructure, they got
• 42:42
  Speaker 11: huge deaths. The result of this, particularly at the provincial level. Well,
• 42:47
  Speaker 11: I think China is basically going to be in its
• 42:49
  Speaker 11: own its own sphere.
• 42:50
  Speaker 4: Now.
• 42:50
  Speaker 11: One thing that is is does come out of this
• 42:53
  Speaker 11: if it's China's growing more slowly. Uh, it's the second
• 42:56
  Speaker 11: largest economy in the world, and it's a stage of
• 42:58
  Speaker 11: growth where it's it's more emphasis on goods than services.
• 43:03
  Speaker 11: It's economies mature, they shift their services and when you're
• 43:06
  Speaker 11: in goods you need commodities, So I think that I
• 43:10
  Speaker 11: think that that's we can. Commodities obviously is very differentiated
• 43:14
  Speaker 11: the stuff that goes into electric cars, and it's kind
• 43:16
  Speaker 11: of its own world.
• 43:17
  Speaker 10: But you look at copper. Copper is my favorite.
• 43:20
  Speaker 11: I like copper because there's no car tell on either
• 43:22
  Speaker 11: the supplier demand side, and it goes into almost any
• 43:25
  Speaker 11: manufactured I mean, again, full disclosure. We're short and short
• 43:30
  Speaker 11: copper and portfolio as we manage.
• 43:32
  Speaker 2: Your short copper. Yes, that's no bueno. Why why are
• 43:35
  Speaker 2: you short copper?
• 43:36
  Speaker 11: Well because it because that's a that's a bet on
• 43:40
  Speaker 11: global manufacturing weakness.
• 43:43
  Speaker 4: Yeah.
• 43:43
  Speaker 10: Plus the fact say is a bear. I mean, I
• 43:46
  Speaker 10: mean you look at opek.
• 43:47
  Speaker 11: You can have a great forecast on the oil and
• 43:50
  Speaker 11: yet Opac plus comes out tomorrow and make some announcement
• 43:54
  Speaker 11: and you're.
• 43:55
  Speaker 2: Really all as that were looking ninety dollars hundred dollar barrels. Gary,
• 43:58
  Speaker 2: great having you in the studio. Thank you so much
• 44:00
  Speaker 2: for coming in. A Gary shilling.
• 44:04
  Speaker 3: Yeah, just you know, we just turn them on and
• 44:07
  Speaker 3: we can just sit here and listen all day.
• 44:08
  Speaker 2: Yeah, well I do that sometimes on the weekends.
• 44:10
  Speaker 3: On the weekends. Okay, very good, All right, Gerry, Thanks
• 44:12
  Speaker 3: so much for joining us.
• 44:14
  Speaker 6: You're listening to the tape Cat's are live program Bloomberg
• 44:17
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 44:21
  Speaker 6: tune in app, Bloomberg dot Com, and.
• 44:22
  Speaker 4: The Bloomberg Business App.
• 44:24
  Speaker 6: You can also listen live on Amazon Alexa from our
• 44:27
  Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 44:33
  Speaker 3: Let's check out our next guest right here.
• 44:35
  Speaker 1: Tim Dewey, Chief US Economists for sg H Macro Advisors. Tim,
• 44:40
  Speaker 1: I'm not sure if you heard our last discussion. It
• 44:42
  Speaker 1: was with Gary Shilling, and he was bearsh right Man.
• 44:47
  Speaker 2: Well, he is, obviously, you know, one of the most
• 44:49
  Speaker 2: famous bears on Wall Street exactly. A lot of what
• 44:52
  Speaker 2: he was saying reminded me a little bit of what
• 44:54
  Speaker 2: I've heard from Jeremy Grantham as well, who is you know,
• 44:58
  Speaker 2: obviously uber. But I have to admit that I have
• 45:04
  Speaker 2: that that that appeals to me because I see so
• 45:07
  Speaker 2: many headwinds in this economy, Tim, and you know, the
• 45:11
  Speaker 2: the exuberance that pushed us up to forty five hundred
• 45:15
  Speaker 2: on the S and P just doesn't make sense to
• 45:17
  Speaker 2: me as the Fed's raising rates five hundred and six
• 45:19
  Speaker 2: hundred basis points. How do you see it?
• 45:23
  Speaker 12: I am I'm a little bit more optimistic than Gary Schilling.
• 45:27
  Speaker 12: I'm not I'm not not quite as bearish of the economy,
• 45:31
  Speaker 12: and I tend to be much more optimistic that the
• 45:35
  Speaker 12: economy remains more resilient than than people give it credit for.
• 45:38
  Speaker 12: And that's a big reason here why stocks that have
• 45:44
  Speaker 12: performed better than I think anybody would have anticipated in
• 45:48
  Speaker 12: this cycle, you know, given because you said the Fed
• 45:51
  Speaker 12: raised rates, you know, over five hundred basis points and
• 45:54
  Speaker 12: is threatening you know, the even possibility even more. But
• 45:58
  Speaker 12: I think that's just really real that the the economy
• 46:01
  Speaker 12: is is is at a fundamental level different and stronger
• 46:05
  Speaker 12: than than than than people have really I think been
• 46:09
  Speaker 12: willing to contemplate.
• 46:11
  Speaker 2: Than ever before in history. Right, I mean, when's the
• 46:13
  Speaker 2: last time the FED was able to raise rates five
• 46:15
  Speaker 2: or six percent without causing a recession.
• 46:18
  Speaker 12: It's a it's a it's a it's a big it's
• 46:20
  Speaker 12: a big shift, right.
• 46:22
  Speaker 11: Uh.
• 46:22
  Speaker 12: And so you know that plenty of people pointed out
• 46:24
  Speaker 12: to you know, uh, you know, indicators over the past year,
• 46:29
  Speaker 12: year and a half that would all point to a
• 46:32
  Speaker 12: recession and in so far you know that that recession
• 46:35
  Speaker 12: just hasn't materialized. And again it's just I think speaks
• 46:38
  Speaker 12: to a very different economic environment than than we've been
• 46:42
  Speaker 12: familiar with.
• 46:43
  Speaker 1: So I mean, for better or worse him, you know,
• 46:46
  Speaker 1: on my personal agenda, I've taken recession off the table
• 46:49
  Speaker 1: several months ago.
• 46:50
  Speaker 3: But was I a little premature? There is that still
• 46:53
  Speaker 3: really potentially in the cards here?
• 46:55
  Speaker 12: Well, so eventually, right, I mean, this is this is
• 46:58
  Speaker 12: the stop clock argument, is there's always going to be
• 47:01
  Speaker 12: a recession sooner or later. But you know, I think
• 47:05
  Speaker 12: you were wise to take it off the table several
• 47:07
  Speaker 12: months ago because you know, clearly, you know, I think
• 47:11
  Speaker 12: that the predictions that we would have a recession by
• 47:15
  Speaker 12: this time, you know, just having materialized, and uh, you know,
• 47:19
  Speaker 12: I don't really see one coming, you know, anytime soon.
• 47:22
  Speaker 12: I think there's still some momentum under this economy. Uh
• 47:25
  Speaker 12: and and that momentum is not going to fade very quickly.
• 47:30
  Speaker 12: So I really, you know, I don't have a recession
• 47:33
  Speaker 12: in the forecast because you know, it's it's such an
• 47:36
  Speaker 12: idiosyncratic event. And that's what keeps tripping people up, is
• 47:39
  Speaker 12: that every recession is a little bit different. The indicators
• 47:43
  Speaker 12: that that lead you into that recession are a little
• 47:45
  Speaker 12: bit different every time. So you know, we really, I think,
• 47:48
  Speaker 12: don't have a lot of visibility on on when another
• 47:52
  Speaker 12: recession is going to occur.
• 47:53
  Speaker 2: And it's a big and diverse economy, who is it?
• 47:57
  Speaker 2: Ed Yard Denny has said that he thinks we're in
• 48:00
  Speaker 2: kind of a rolling recession where different pockets of the
• 48:02
  Speaker 2: economy are hit at different times. You're not just the
• 48:05
  Speaker 2: chief economist at SGH Macro Advisors. You are an actual
• 48:09
  Speaker 2: doctor in economics. I mean you have a PhD and
• 48:13
  Speaker 2: teach courses on this and uh, you know, help to
• 48:16
  Speaker 2: guide the economy of the state of organ as far
• 48:18
  Speaker 2: as I understand it. What do you think of that
• 48:22
  Speaker 2: idea rolling recession? You know, some states are going to
• 48:25
  Speaker 2: have problems, some industries are going to have recessions, whereas
• 48:29
  Speaker 2: you know, we don't see everyone having a uniform recession.
• 48:32
  Speaker 2: Doesn't that make sense?
• 48:34
  Speaker 7: Oh?
• 48:34
  Speaker 12: It makes it makes a lot of sense. I mean
• 48:36
  Speaker 12: we get we sort of forgot it. I mean during
• 48:39
  Speaker 12: the the immediate aftermath of the pandemic, when everything was booming, right,
• 48:44
  Speaker 12: everybody was doing well, That's that's really not the norm, right,
• 48:48
  Speaker 12: if you have, you know, a slower economy. You know
• 48:51
  Speaker 12: it's still someone but even but slower economy.
• 48:54
  Speaker 11: Uh.
• 48:54
  Speaker 12: You you have sectors that that that that are op
• 48:57
  Speaker 12: versus down, and that's just you know, that's just part
• 49:00
  Speaker 12: of the national give and take. I think of the economy.
• 49:03
  Speaker 12: You can't expect everything's going to be cruising along at
• 49:06
  Speaker 12: a high speed. And of course that makes you know,
• 49:09
  Speaker 12: it more difficult to assess, you know, if you're going
• 49:12
  Speaker 12: to fall into a recession or not. Because again, one
• 49:14
  Speaker 12: industry sliding. I say this, this industry always slid during
• 49:18
  Speaker 12: a prior to a recession. Then you turn around and
• 49:21
  Speaker 12: you find another industry that had always slid prior to recession,
• 49:24
  Speaker 12: but now is gaining traction, right, And so you kind
• 49:27
  Speaker 12: of say, well, wait a second, what's going on here?
• 49:30
  Speaker 12: And what's going on here is that you don't have
• 49:33
  Speaker 12: an economy wide shock that is really driving firms to
• 49:39
  Speaker 12: cut investment and cut employment in a very syn synchronized way.
• 49:45
  Speaker 12: And until you can get that kind of shock, that
• 49:47
  Speaker 12: kind of momentum, you really I think it's really hard
• 49:50
  Speaker 12: to create a recession in the economy.
• 49:53
  Speaker 1: That's kind of where I want to go. I'm this
• 49:55
  Speaker 1: labor market. Tim just kind of fascinates me.
• 49:58
  Speaker 3: You know, I've heard the term hoarding of employees and
• 50:01
  Speaker 3: I've never heard that before.
• 50:04
  Speaker 1: What do you make of a three point seven percent
• 50:06
  Speaker 1: unemployment right here in this economy?
• 50:08
  Speaker 4: You know?
• 50:09
  Speaker 12: So yeah, we we. I mean, certainly it was during
• 50:13
  Speaker 12: the case of the pandemic that labor was so hard
• 50:15
  Speaker 12: to get. You didn't want to you didn't want to
• 50:17
  Speaker 12: let it go. I think that, you know, firms, if
• 50:21
  Speaker 12: they had the sort of economic conditions that that drove
• 50:25
  Speaker 12: the need for layoffs, they would react quickly. So the
• 50:27
  Speaker 12: labor hoarding story only takes you so far. And remember
• 50:31
  Speaker 12: last fall, last winter, you know, around the turn of
• 50:34
  Speaker 12: the year, we saw uh, you know, lots and lots
• 50:38
  Speaker 12: and lots of layoffs in the tech industry.
• 50:41
  Speaker 13: So even though that had been an industry that had
• 50:43
  Speaker 13: struggled immensely to hold onto labor during the pandemic, once
• 50:47
  Speaker 13: it was ready to shed labor, it shed labor. Now
• 50:50
  Speaker 13: that that that story I think has asked us already.
• 50:53
  Speaker 12: So for me again, you know, when I look at
• 50:57
  Speaker 12: you know, what happens the unemployment right tip Leena cycle,
• 51:01
  Speaker 12: It falls to some level like this, a three and
• 51:04
  Speaker 12: a half to four percent, somewhere in that range, and
• 51:07
  Speaker 12: it just sort of hangs out there until you can
• 51:10
  Speaker 12: get again that massive negative shock that really slips you,
• 51:14
  Speaker 12: pushes you into another direction.
• 51:15
  Speaker 2: Hey, So, Tim, I just want to jump in because
• 51:18
  Speaker 2: we are looking at pictures of President Biden on the
• 51:21
  Speaker 2: tarmac with UAW President Sean Fain and some other union members,
• 51:27
  Speaker 2: you know, and while we're speaking about labor, I might
• 51:29
  Speaker 2: as well bring up this because I think we've seen
• 51:32
  Speaker 2: a really fascinating shift in the power dynamic between labor
• 51:38
  Speaker 2: and the corporate bosses. This may be coming to a
• 51:42
  Speaker 2: head now as the UAW is asking first thirty six
• 51:45
  Speaker 2: percent wage increases, bringing back pensions. They want a four
• 51:49
  Speaker 2: day work week, They want to know what the production
• 51:51
  Speaker 2: schedules are at these companies. And I wonder what you
• 51:53
  Speaker 2: think what kind of effect this is going to have,
• 51:55
  Speaker 2: because on the one hand, if they stay on strike,
• 51:59
  Speaker 2: I would think that they're going to drive up the
• 52:02
  Speaker 2: cost of cars even more, and they have barely recovered
• 52:05
  Speaker 2: from the pandemic and in those in those terms. On
• 52:08
  Speaker 2: the other hand, they're going to boost wages for at
• 52:10
  Speaker 2: least one hundred and fifty thousand workers and probably more
• 52:13
  Speaker 2: who look over and say I want that deal too.
• 52:17
  Speaker 5: Yeah.
• 52:18
  Speaker 12: No, So on the one hand, you know, at least
• 52:19
  Speaker 12: the nearest issues you're you're you're, you're correct. I mean,
• 52:23
  Speaker 12: we were counting on lower car prices too, and lower
• 52:27
  Speaker 12: use car prices certainly to help on some of the
• 52:29
  Speaker 12: inflation front. And we kind of supply now again that's
• 52:34
  Speaker 12: gonna that's going to delay that. There's really large, i
• 52:38
  Speaker 12: think strong pent up demand for automobiles already and that's
• 52:41
  Speaker 12: one reason auto sales is in fact hold relatively high
• 52:44
  Speaker 12: despite rising interest rates. So that's clearly a near term
• 52:48
  Speaker 12: hit for the economy. The interesting thing, and I really
• 52:51
  Speaker 12: like what you just said on the UH on the wages,
• 52:56
  Speaker 12: is that you know, to one extent, does does this
• 52:59
  Speaker 12: because a signal for the rest of the economy, right,
• 53:02
  Speaker 12: is that if auto workers are getting you know, huge raises,
• 53:06
  Speaker 12: and we've seen huge, huge raises in other industries to
• 53:10
  Speaker 12: an extent, does that make other workers expecting a higher wave?
• 53:15
  Speaker 12: So you know, instead of expecting three percent a year,
• 53:18
  Speaker 12: now they're expecting five percent a year. And then how
• 53:20
  Speaker 12: does that work play into inflation expectations? And you can
• 53:24
  Speaker 12: tell a story where a series of negative shocks or
• 53:27
  Speaker 12: those kinds of shocks really, do you know, create a
• 53:30
  Speaker 12: different inflation environment than we had in the pre pandemic period.
• 53:36
  Speaker 3: All right, Tim, thanks so much for joining us.
• 53:37
  Speaker 1: Really appreciate that Tim doing chief EOS Economists, s g H,
• 53:42
  Speaker 1: Macro Advisors, getting his thoughts there a little bit, little
• 53:45
  Speaker 1: bit of a different spin than when we've heard from
• 53:48
  Speaker 1: market Fred Gary Shad.
• 53:51
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 53:54
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 53:58
  Speaker 2: podcast platform you I'm Matt Miller. I'm on Twitter at
• 54:02
  Speaker 2: Matt Miller nineteen seventy three.
• 54:04
  Speaker 3: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 54:07
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 54:10
  Speaker 1: Bloomberg Radio.