# RenMac's Head of Economics Neil Dutta on Recession Indicators

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 17 Jul 2025, 1 h 06 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/6846bcd5-fd61-4acf-9e8c-b31d01478da3/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

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

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
[0:12] Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
[0:17] Speaker 2: This week on the podcast, another extra special guest Neil
[0:21] Speaker 2: Dudda with a tour to fource explanation on what a
[0:26] Speaker 2: market economist is, how it's their job to take all
[0:30] Speaker 2: of the academic and somewhat esoteric economic research and take
[0:37] Speaker 2: it from the five yard line into the end zone.
[0:41] Speaker 2: Why it's so important to put stuff into context that
[0:44] Speaker 2: investors can use or focus on, not just merely the
[0:48] Speaker 2: economic data, but what it means for different sectors of
[0:51] Speaker 2: the economy, what means for different companies. I always find
[0:55] Speaker 2: Neil fascinating to listen to. He has a really great
[0:59] Speaker 2: track record forecasting things in a way that is occasionally
[1:04] Speaker 2: out of consensus. So when he's talking about inflation in
[1:08] Speaker 2: twenty twenty one, or FED hikes in twenty twenty two,
[1:12] Speaker 2: or why we weren't going to see a recession in
[1:15] Speaker 2: that same year, it's always fascinating to see somebody whose
[1:19] Speaker 2: thought processes detailed and interesting and out of consensus, but
[1:25] Speaker 2: also right. I thought this conversation was fascinating, and I
[1:28] Speaker 2: think you will also with no further ado my conversation
[1:32] Speaker 2: with head of an economic research at Renmack Neil Datta.
[1:37] Speaker 2: So last time we were here, we talked about a
[1:40] Speaker 2: bunch of things that you got right. I know your
[1:43] Speaker 2: views have evolved. Will get to some of those, but
[1:47] Speaker 2: let's just go over your background a little bit. Bachelor's
[1:50] Speaker 2: and economics and political science from New York University. From
[1:53] Speaker 2: NYU was the original career plan to go into finance.
[1:59] Speaker 3: Uh No, I mean, you know, when you go to college,
[2:03] Speaker 3: you have no you don't know that jobs like the
[2:06] Speaker 3: one I'm in currently even exist. It's like, you mean
[2:10] Speaker 3: to tell me, I get to write about economics and
[2:12] Speaker 3: talk all day long and someone will pay me for it,
[2:14] Speaker 3: no manual labor. Yeah, And so you know I had
[2:19] Speaker 3: no idea. I mean, I knew that I had an
[2:21] Speaker 3: interest in economics, I had an interest in political science.
[2:26] Speaker 3: The original plan was actually, you know, maybe to go
[2:29] Speaker 3: to law school. But I ended up, you know, just
[2:33] Speaker 3: not doing as well as I thought I was going
[2:36] Speaker 3: to on the l SAT. So my senior year of college,
[2:39] Speaker 3: I was kind of scrambling because I didn't want to
[2:42] Speaker 3: go to school for another three years, but I wanted
[2:46] Speaker 3: to stay in the city, and I was just like,
[2:49] Speaker 3: let me just try to get into Merrill Lynch, or
[2:51] Speaker 3: it's not at Merrill Lynch. I mean I got into
[2:53] Speaker 3: Mary Lynch. But any of the bulge bracket banks in
[2:55] Speaker 3: the city, right.
[2:56] Speaker 2: All had good back in the day, they all had
[2:58] Speaker 2: good training program.
[2:59] Speaker 3: Yes, So that was that was the goals to get
[3:01] Speaker 3: into one of the analyst programs at the bult Record Bank.
[3:04] Speaker 3: So I got into to Merrow Lynch. I actually started
[3:08] Speaker 3: off there as a compensation analyst.
[3:10] Speaker 2: And meaning studying studying labor, studying salaries and things all.
[3:15] Speaker 3: Right, Yeah, I mean a lot of what the job was,
[3:19] Speaker 3: in the amount of time that I had done, it was,
[3:22] Speaker 3: I mean a lot of it is just benchmarking the
[3:25] Speaker 3: employees of the firm to the market to make sure
[3:28] Speaker 3: that you're paying people to market.
[3:29] Speaker 2: Meaning internally Lynch.
[3:32] Speaker 3: Yeah, and managing the year end bonus pools. So that
[3:37] Speaker 3: was the whole process in and of itself. But one
[3:38] Speaker 3: of the good things about working in HR is that
[3:42] Speaker 3: you kind of so I got my foot in the door.
[3:44] Speaker 3: I mean I was just happy to have something at
[3:45] Speaker 3: that point. I remember I showed my mother my offer letter.
[3:49] Speaker 3: I still have it saved from Meryl Lynch where they
[3:52] Speaker 3: were paying me fifty thousand dollars with a ten thousand
[3:54] Speaker 3: dollars signing bonus. And I showed that to my mom
[3:56] Speaker 3: and she was like, why would they be paying you
[3:58] Speaker 3: this much money? And I was like, well, oh, we'll
[4:01] Speaker 3: find out. Yeah, we'll find out what I'm going to
[4:03] Speaker 3: be doing. But the benefit of working in HR in
[4:06] Speaker 3: particular is that you kind of know where all the
[4:08] Speaker 3: jobs are and where the opening open positions are in
[4:11] Speaker 3: the firm. And there was an open position on David
[4:15] Speaker 3: Rosenberg's team at you know, at Merrill Lynch, and so
[4:20] Speaker 3: then I joined his firm, sorry, his team. That was
[4:24] Speaker 3: in early lado six or early two thousand and seven,
[4:27] Speaker 3: So you know, right when Rosie was really killing it.
[4:30] Speaker 3: I mean, you know, he was like a marketing machine.
[4:32] Speaker 3: He was like the guy like number one in II.
[4:35] Speaker 3: All these things are happening, you know, I mean, and
[4:39] Speaker 3: so it was really exciting to be on his team.
[4:41] Speaker 3: So it was really it was like it was like
[4:42] Speaker 3: a very quick education. I mean, there was a real
[4:45] Speaker 3: education being on his team during that time.
[4:48] Speaker 2: To say nothing of what happened over the next few
[4:51] Speaker 2: years eight oh nine in the Great Financial crisis was
[4:55] Speaker 2: right around the corner.
[4:56] Speaker 3: Yeah, I mean I definitely think that, you know, one
[4:58] Speaker 3: of the things that I've always has come to believe,
[5:01] Speaker 3: now they haven't been in the business for a long time,
[5:03] Speaker 3: is that as you know, like our like the financial
[5:06] Speaker 3: industry is very cyclical, right, Like everyone knows someone who's
[5:09] Speaker 3: been laid off, let go, you know, has gone through
[5:15] Speaker 3: spells of just not having a job, right. And I
[5:18] Speaker 3: do think it says something about you if you've been
[5:20] Speaker 3: able to survive these crises.
[5:21] Speaker 2: Yea, the very least. Where was Barons in your career history?
[5:25] Speaker 2: You were an analyst at the weekly Dow Jones publication.
[5:29] Speaker 3: Yes, that was that was That was more of a
[5:32] Speaker 3: When I was in college, I worked for Gene Epstein.
[5:36] Speaker 3: Oh really, yes, noted libertarian. You know, kind of gave
[5:42] Speaker 3: me my first taste of like a lot of the
[5:44] Speaker 3: tools that we use now in in sort of the
[5:48] Speaker 3: business economic space, like Haver analytics. I actually got my
[5:52] Speaker 3: first taste of that working with Gene at Barons and
[5:57] Speaker 3: you know, getting my you know, sort of first sense
[5:59] Speaker 3: of you know, trying to analyze data looking at you know,
[6:01] Speaker 3: I mean he had he had sort of a weekly
[6:03] Speaker 3: column on the economy, but a lot of the interesting
[6:06] Speaker 3: pieces that he wrote would happen on you know, days
[6:08] Speaker 3: of like the employment report or you know, summarizing the
[6:12] Speaker 3: ism data and like what it might mean for the
[6:14] Speaker 3: economy and the outlook. So it kind of gave me
[6:16] Speaker 3: my first taste of what a business economist, uh would
[6:20] Speaker 3: do on a basis.
[6:23] Speaker 2: I've noticed you used the phrase market economists, ye, business
[6:26] Speaker 2: economists all the time. How does that differ from the
[6:31] Speaker 2: traditional economists for lack of the better.
[6:34] Speaker 3: Word, Well, I don't have like formal PhD training, So
[6:38] Speaker 3: I think you know what, that to me is like
[6:41] Speaker 3: an important distinction. You know, you have business economists on
[6:45] Speaker 3: the street that have PhDs, but I don't think a
[6:48] Speaker 3: PhD is required to be a business economist. And to me,
[6:53] Speaker 3: it's like also just a way to respect the academic profession, right,
[6:57] Speaker 3: I mean you have people here that are really studying
[7:01] Speaker 3: a specific Nietzsche area their entire careers, right, I mean
[7:07] Speaker 3: you think about like behavioral economics and like financial economics.
[7:12] Speaker 3: I mean they are economists that are just looking at
[7:14] Speaker 3: that and they're doing it for decades, right, because that's
[7:18] Speaker 3: what they do.
[7:18] Speaker 2: And I think a Hyman Minsky looking at the narrow
[7:22] Speaker 2: subtopic of stability and instability and economic systems and toiling
[7:28] Speaker 2: away for decades until eventually the market hits a tipping
[7:32] Speaker 2: point and suddenly all of this research that seems like
[7:36] Speaker 2: a quiet backwater, yeah, it becomes front page news.
[7:41] Speaker 3: I mean we're like, you know, strategic trade theory. I mean,
[7:44] Speaker 3: these are these are all sorts of things that have
[7:48] Speaker 3: I think, and you could say maybe in you know,
[7:51] Speaker 3: like the academics take you basically to the five yard
[7:54] Speaker 3: five yard line, and as a business economists, your job
[7:57] Speaker 3: is to kind of run it in for a touchdown
[7:59] Speaker 3: and tell, you know, the investor community, like, why is
[8:02] Speaker 3: this important to what you're doing right now?
[8:05] Speaker 2: That's very interesting script.
[8:07] Speaker 3: So so that that's that's sort of the way I
[8:09] Speaker 3: kind of view it. I mean, obviously you lean a
[8:10] Speaker 3: lot of their work throughout your career. I mean, you know,
[8:15] Speaker 3: I mean, this had this had gotten a lot of
[8:17] Speaker 3: play earlier in the cycle. But ed Leemer wrote a
[8:20] Speaker 3: paper once called housing is the Business Cycle? Right? I mean,
[8:23] Speaker 3: and that was you.
[8:25] Speaker 2: Know, professor at Harvard or George.
[8:28] Speaker 3: I think it was in the University of California if
[8:31] Speaker 3: I'm mistaken, But at any rate, I mean, that was
[8:33] Speaker 3: a that was a piece of research that had gotten
[8:36] Speaker 3: a lot of attention over the years. You know, when
[8:39] Speaker 3: when housing was melting down back in twenty twenty two,
[8:41] Speaker 3: a lot of people were leaning on that paper again,
[8:43] Speaker 3: So it's important. I mean, so to me, it's like,
[8:45] Speaker 3: I make that distinction because a I don't have a PhD.
[8:49] Speaker 3: And I'm not doing the same thing. What I'm basically
[8:52] Speaker 3: trying to do is look at all the different sort
[8:56] Speaker 3: of pieces of economic information that come out and on
[8:58] Speaker 3: the US economy. There's always something going on, right, I mean,
[9:02] Speaker 3: in terms of data, it's some some of its marketing movements,
[9:04] Speaker 3: some of it's not, and try to kind of formulate
[9:07] Speaker 3: an economic outlook that is useful for investors. That is
[9:10] Speaker 3: not what academics tend to do, right.
[9:13] Speaker 2: Sure, for sure. So when you were at Bank America
[9:16] Speaker 2: Merrill Lynch, you were doing a weekly note you authored.
[9:20] Speaker 2: How did that help carve out your own space and
[9:23] Speaker 2: expertise and how did that ultimately lead to your job
[9:27] Speaker 2: at Renmack.
[9:29] Speaker 3: Well, So, I mean, obviously Merril was was an interesting
[9:33] Speaker 3: time because I was sort of coming up the ranks,
[9:38] Speaker 3: and you know, by two thousand and nine, Rosie had left,
[9:43] Speaker 3: and so it was sort of this weird time where
[9:46] Speaker 3: it was like a very important time in the economy
[9:49] Speaker 3: because we were just transitioning from recession to expansion. But
[9:53] Speaker 3: Merrill's economic team was kind of without a leader, right,
[9:56] Speaker 3: so we didn't really have So it was I was
[9:58] Speaker 3: able to do a lot at that time just by
[10:02] Speaker 3: default because there was no one else really doing it.
[10:04] Speaker 3: So I would I would be writing a lot for
[10:07] Speaker 3: the you know, especially for the equity market desk.
[10:09] Speaker 2: You had to be pretty young back in all.
[10:11] Speaker 3: Yeah, I was. I was very young. I might have
[10:13] Speaker 3: been like, oh god, I don't know, like not even thirty,
[10:16] Speaker 3: so at any rate. So I mean, it's one of
[10:22] Speaker 3: these things where you if if it's just you and
[10:25] Speaker 3: like a couple of other people, you don't you're doing
[10:27] Speaker 3: a lot more than you otherwise would be doing had
[10:29] Speaker 3: there been like a chief, a formal chief economist. So
[10:33] Speaker 3: I remember the summer of nine vividly because we had,
[10:36] Speaker 3: you know, like the team had gotten like a big
[10:38] Speaker 3: reputation for being very bearish because obviously because Rosie, because
[10:42] Speaker 3: of Rosie, but still bash Yeah, but bye bye by
[10:45] Speaker 3: March but bye by the time he had left and
[10:48] Speaker 3: by the second quarter of O nine, it was becoming
[10:49] Speaker 3: increasingly clear that things were kind of turning around, right,
[10:52] Speaker 3: I mean, you know, credit markets had turned. It looked like,
[10:56] Speaker 3: you know, housing wasn't getting any worse, right, Inventories had
[11:02] Speaker 3: basically been cut to the bone. They couldn't go any lower.
[11:04] Speaker 3: And and so we had written a piece basically talking
[11:07] Speaker 3: about how, you know, the recession's over like that that's it,
[11:12] Speaker 3: And that had gotten a lot of attention from our
[11:15] Speaker 3: from our sales desk. But you know that's to me, like,
[11:18] Speaker 3: you know, you talk about writing. One of the things
[11:21] Speaker 3: that I've noticed, like recently is just it's just ubiquitous, right,
[11:26] Speaker 3: Like everyone's writing, Like it's just stack. Yes, it's like
[11:31] Speaker 3: come view me on my substack. And like, you know,
[11:33] Speaker 3: there's like all this research. But to me, like what's
[11:37] Speaker 3: important in the research sales business, because that's ultimately what
[11:41] Speaker 3: I'm in, right, It's about knowing when to say something,
[11:45] Speaker 3: you know, you know, and there's just a lot of
[11:48] Speaker 3: like filler research that comes out.
[11:52] Speaker 2: I love the word filler because it's literally all it.
[11:55] Speaker 3: Is and the and and there's some important I mean,
[11:57] Speaker 3: I do think it's important for clients to kind of
[11:59] Speaker 3: see that continuity, but it doesn't have to be some
[12:01] Speaker 3: written products. So to me, one of the things I've
[12:03] Speaker 3: learned is like when you write something, make sure that
[12:07] Speaker 3: it has some depth and it serves a purpose, right,
[12:11] Speaker 3: And so.
[12:12] Speaker 2: As opposed to just cranking something out daily a weekly.
[12:15] Speaker 3: Because it's just it's like that eventually, like you know,
[12:19] Speaker 3: that turns into spam, right, I mean from the perspective
[12:22] Speaker 3: of your client. So there's there's there's many ways to
[12:25] Speaker 3: kind of touch people in terms of accounts like your
[12:30] Speaker 3: client base that are paying for your your research and
[12:32] Speaker 3: your views and your analysis and that could you know,
[12:35] Speaker 3: and some of that's written, some of that could be presentations,
[12:38] Speaker 3: some of that could be podcasts, some of that could
[12:41] Speaker 3: you know, it could be it's it's that to me
[12:43] Speaker 3: is what's important. So you know, writing in the beginning
[12:47] Speaker 3: was important. But I think one of the things I
[12:48] Speaker 3: learned very early on is that it's important to kind
[12:52] Speaker 3: of say something that has meaning. And that's not always
[12:55] Speaker 3: going to be the case, right, Like people don't need
[12:58] Speaker 3: to hear from me every day, they need to hear
[13:00] Speaker 3: for me when my views on something are working out
[13:03] Speaker 3: or not.
[13:04] Speaker 2: I like to say, nobody really cares about ism or
[13:08] Speaker 2: fill in the blank, whatever your least favorite economic data point.
[13:11] Speaker 3: Is, right, I mean, and also these days, right like,
[13:15] Speaker 3: the market reaction to it is immediate, so you can
[13:18] Speaker 3: pretty much tell right away whether the number was good
[13:21] Speaker 3: or bad or whatever else. Right, So what do I
[13:23] Speaker 3: need to read your analysis for? And so it's you know,
[13:25] Speaker 3: you kind of have to pick your spots about when
[13:27] Speaker 3: to you know, try to chime in and provide some
[13:29] Speaker 3: kind of useful context for these data points.
[13:31] Speaker 2: So there's a little bit of a void in two
[13:33] Speaker 2: thousand and nine after the head of the economics coverage
[13:37] Speaker 2: from Merrill Lynch departs and you somewhat fill that void
[13:42] Speaker 2: nine ten eleven. What leads you to join Renmack in
[13:46] Speaker 2: twenty twelve.
[13:47] Speaker 3: Well, so by the fall of nine we had Ethan
[13:53] Speaker 3: Harris Sure from from Lehman joined the you know, he
[14:00] Speaker 3: started was named the chief US Economist UH basically uh.
[14:04] Speaker 3: And and he obviously he was from a like a
[14:08] Speaker 3: like a fixed income shop, I mean, Leman was a
[14:10] Speaker 3: huge fixed incomes you know, Ethan was a fed economist,
[14:14] Speaker 3: so his passion was really more towards the fixed income markets.
[14:18] Speaker 3: And so but obviously Merrill was like a huge, like
[14:21] Speaker 3: a legacy equity shop. Yeah, and so I kind of
[14:26] Speaker 3: got a lot of my like cut my teeth with
[14:28] Speaker 3: the equity salesforce and what I tried to do. And
[14:31] Speaker 3: one of the things you do find out in in
[14:33] Speaker 3: the research business is that fixed income doesn't pay for research.
[14:37] Speaker 3: It's just it's just that's what it is, right. I mean,
[14:39] Speaker 3: you look at.
[14:40] Speaker 2: Well the margins are smaller the basically what verto Yeah, you.
[14:45] Speaker 3: Think about like the biggest names in research sales over
[14:49] Speaker 3: the last number of decades. You think about people like
[14:54] Speaker 3: Ed Hyman, Nancy Lazar, Right, you think they're writing about
[14:59] Speaker 3: like like rates. No, they're writing about like how economics
[15:03] Speaker 3: can be tied into a stock market call. And Rosie,
[15:07] Speaker 3: to his credit, was great at that. And that's kind
[15:09] Speaker 3: of what I tried to do when Ethan was running things,
[15:13] Speaker 3: because he didn't really he didn't really do that, you know,
[15:17] Speaker 3: and so he kind of let me run with it,
[15:20] Speaker 3: and he kind of gave me a lot of latitude
[15:22] Speaker 3: to kind of come up with my own ideas and
[15:26] Speaker 3: try to tell, you know, an equity salesforce like why
[15:31] Speaker 3: is this important for your clients? Like and and because
[15:33] Speaker 3: Merrill had so many equity analysts. There there was like
[15:36] Speaker 3: a like a wealth of opportunity, right, Like, so let's
[15:40] Speaker 3: say we wanted to write a piece on business investment, right, Like,
[15:46] Speaker 3: so why is that important for equities? Well, because a
[15:49] Speaker 3: lot of EPs comes from cabex. And now you can
[15:53] Speaker 3: go talk to your like you can talk to your
[15:54] Speaker 3: industrials analysts, you can talk to the machinery analysts and say, like,
[15:58] Speaker 3: you know, are you guys bullish or bearish on your names? Like,
[16:01] Speaker 3: and if you can come up with a scenario where
[16:03] Speaker 3: a macro view can tie into a specific stock sector view,
[16:08] Speaker 3: for an equity salesperson, that's a home run, right, And
[16:12] Speaker 3: so it just makes their life a lot easier. The
[16:14] Speaker 3: worst thing you could do, especially at a bulge bracket firm,
[16:17] Speaker 3: right is well, your economist is really really negative. But
[16:21] Speaker 3: like you know, this guy is telling me like by caterpillar,
[16:24] Speaker 3: like how does that work? Like and like whenever, as
[16:27] Speaker 3: a salesperson, like having to deal with that question from
[16:29] Speaker 3: a client is annoying, you know what I mean. So
[16:32] Speaker 3: whenever you can come up with ways to tie a
[16:37] Speaker 3: macroeconomic view into and this goes back to the business economics, right,
[16:41] Speaker 3: I mean tie a macro view to a market call.
[16:44] Speaker 3: That's a home run, right, No one cares what your
[16:48] Speaker 3: GDP growth view is, Like, I mean, you have all
[16:50] Speaker 3: these like you go you look at through the Wall
[16:51] Speaker 3: Street research and it's like in the back there's like
[16:53] Speaker 3: my GDP forecast. You have this big forecast table, and
[16:56] Speaker 3: that's kind of what they're talking off of, right, But
[16:57] Speaker 3: that's not really why I think people for research. People pay,
[17:01] Speaker 3: you know, the people pay for having an economics view
[17:05] Speaker 3: that can be aligned with a market's call.
[17:08] Speaker 2: So let's talk about that economic view aligned with a
[17:12] Speaker 2: couple of market calls. At least we'll look at the
[17:15] Speaker 2: twenty twenties, because oh, nine, ten to eleven seems like
[17:19] Speaker 2: it's so long ago. Let's fast forward a couple of decades.
[17:24] Speaker 2: Late in twenty twenty one. I very vividly remember most
[17:29] Speaker 2: economists were fairly sanguine about inflation. FED chair Jerome Palell
[17:35] Speaker 2: had said we're gonna let inflation run hot the previous
[17:40] Speaker 2: Jackson hole, and you made a very out of consensus call.
[17:45] Speaker 2: You had said in late twenty twenty one economists were
[17:48] Speaker 2: too sanguine about inflation that the f OMC would have
[17:52] Speaker 2: to raise rates, and you said at least four times,
[17:56] Speaker 2: and that turned out to be very precient. We started
[17:58] Speaker 2: with four seventy five bit raises before we add two
[18:02] Speaker 2: at fifty and then a sort of after thought at
[18:04] Speaker 2: twenty five. Tell us what you were looking at in
[18:06] Speaker 2: twenty twenty one that so many other economists missed.
[18:12] Speaker 3: Well, thank you for saying that. I mean, in hindsight,
[18:14] Speaker 3: I feel like I wasn't hawkish enough.
[18:16] Speaker 2: You know, you were so much more hawkish than the
[18:19] Speaker 2: more than the Yeah, I mean, hey, you know, everybody,
[18:23] Speaker 2: most people forget sticking the landing. Most people missed the pool.
[18:28] Speaker 2: You you managed to at least put give your clients
[18:32] Speaker 2: a heads up of FED tightening is about to stop.
[18:35] Speaker 3: Yeah, I mean right, I mean I caught the the swing.
[18:38] Speaker 3: I mean, I think and then you know, eventually I
[18:41] Speaker 3: kind of came around to the idea that they'd have
[18:43] Speaker 3: to do a lot more than what was priced. But
[18:45] Speaker 3: I think, yeah, I think, thank you for saying that.
[18:47] Speaker 3: I did kind of catch that. But you know, to me,
[18:51] Speaker 3: it was just like a rapidly accelerating economy. To me,
[18:54] Speaker 3: it was so basically the call. I think that the
[18:59] Speaker 3: main issue there was. It was one call that you
[19:02] Speaker 3: got right that kind of led to everything else. Right,
[19:04] Speaker 3: So basically what I saw at the time was a
[19:06] Speaker 3: V shape recovery. And so since there was a V
[19:08] Speaker 3: shape recovery, that was going to have ramifications for all
[19:12] Speaker 3: the other macro calls that people make, like whether that's
[19:16] Speaker 3: the fed rates stocks, you know. And so basically what
[19:22] Speaker 3: I what I said, was we're gonna have a V
[19:25] Speaker 3: shape recovery. You could see it in the data. They
[19:27] Speaker 3: basically turned the lights off, turned it on, and threw
[19:29] Speaker 3: a bunch of money out the problem.
[19:30] Speaker 2: Two dollars solves a lot of headaches.
[19:33] Speaker 3: Well, it's sort of you know, they they kind of
[19:35] Speaker 3: they fought the last war, right, I mean, they essentially
[19:37] Speaker 3: they they diagnosed the problem as a it was basically
[19:44] Speaker 3: a supply shock. It was a negative It was a
[19:46] Speaker 3: very large negative supply shock that they treated as a
[19:49] Speaker 3: big demand shock. And so when you have a demand
[19:53] Speaker 3: side stimulus with a you know what is basically a
[19:57] Speaker 3: supply shock, be surprised if you.
[20:01] Speaker 2: Get like inflation, trillion dollars in money coursing into the
[20:06] Speaker 2: system and everybody stuck at home. Guess what they're gonna
[20:09] Speaker 2: do with that money?
[20:10] Speaker 3: And it's it's not just uh and it wasn't just
[20:12] Speaker 3: fed pumping, right, it was. It was a fiscal stimulus,
[20:15] Speaker 3: you know. And so so I think it's and and
[20:20] Speaker 3: also just like the behavior of of of people at
[20:24] Speaker 3: the time. I mean, you know, typically in a bad
[20:27] Speaker 3: economic situation, you don't see people going out and like
[20:33] Speaker 3: get like taking out mortgage loans. But that's exactly what
[20:36] Speaker 3: was happening at the time, right. So you know, housing
[20:39] Speaker 3: is like one of these irreversible decisions, so you have
[20:41] Speaker 3: to be really confident in things in order to buy one.
[20:44] Speaker 3: And so when I started to see people like you know,
[20:46] Speaker 3: mortgage purchase apps are like basically v bottoming, like it's
[20:50] Speaker 3: just going straight up, like they're signal there. And at
[20:54] Speaker 3: the time, like everyone was thinking the bottom was going
[20:56] Speaker 3: to fall out, it was the opposite, and it was
[20:59] Speaker 3: and and I remember at the time, I mean in
[21:02] Speaker 3: April of I think in April of twenty twenty, in
[21:04] Speaker 3: the middle of April of twenty twenty, I said, we bottomed,
[21:07] Speaker 3: it's over. There was whatever whatever one two week recession
[21:10] Speaker 3: that we had, it's over. And I remember I got
[21:13] Speaker 3: so much hate. I remember at the time, like you know,
[21:16] Speaker 3: you had prominent economists telling like it's going to get
[21:19] Speaker 3: a lot worse. Like the bottom still not in but
[21:23] Speaker 3: it was just sort of It's one of these things
[21:25] Speaker 3: in business economics where it's like up is up right,
[21:28] Speaker 3: Like markets care about they don't care about whether things
[21:32] Speaker 3: are good or bad. They care about whether things are
[21:34] Speaker 3: getting better or worse. And so you know, you can
[21:39] Speaker 3: say it's not good, but hey, guess what, Like at
[21:43] Speaker 3: the margin, we had more door dash deliveries in the
[21:46] Speaker 3: third week of April than we did in the first
[21:48] Speaker 3: week of a.
[21:48] Speaker 2: Free I don't remember if it was Ned Davis or
[21:51] Speaker 2: it might have even been Ed Hyman who had said,
[21:55] Speaker 2: don't look for when the economy is great or terrible.
[22:01] Speaker 2: Look where when it goes from terrible to bad, Like
[22:05] Speaker 2: that's your first sign that you're making a bottom. Hey,
[22:08] Speaker 2: this is really not a great economic data point, but
[22:11] Speaker 2: it's so much better than it was last month. Maybe
[22:14] Speaker 2: things were turning like that approach is when it goes
[22:17] Speaker 2: from terrible to fair, you're moving in the right direct.
[22:20] Speaker 3: Yeah, and also like the I mean to me, honestly,
[22:22] Speaker 3: like looking back on it, that whole period was probably
[22:28] Speaker 3: was the easiest call I had to I made. Huh,
[22:30] Speaker 3: And it's interesting because it was kind of out of consent.
[22:33] Speaker 3: I was out of consensus at the time, but I
[22:35] Speaker 3: thought that it was so easy. I mean you had
[22:37] Speaker 3: the I mean especially like from a market's perspective, right,
[22:40] Speaker 3: I mean.
[22:42] Speaker 2: Stops was straight up after that.
[22:43] Speaker 3: Well, not only that, are like are we no longer
[22:45] Speaker 3: going to have cruise lines? Are we no longer gonna
[22:47] Speaker 3: have airlines and hotels? Like it was just so obvious, like, Okay,
[22:50] Speaker 3: these are like generational buying opportunities. You better just put
[22:53] Speaker 3: everything you have into these names and just ride it
[22:56] Speaker 3: out because anyway, I just thought. But to me, I
[23:00] Speaker 3: think what I learned there is just you know, it's
[23:03] Speaker 3: it's just important to kind of just pick a bunch
[23:05] Speaker 3: of like indicators and see like is it getting better
[23:09] Speaker 3: or worse? And it was clearly getting better, right, I
[23:13] Speaker 3: mean you can't go down after you know you've gone down.
[23:16] Speaker 3: I mean in some of these indicators, it's like you
[23:18] Speaker 3: can't just keep falling, right, And so there was stability,
[23:20] Speaker 3: and by the second week of April, I think it
[23:22] Speaker 3: was it was pretty obvious that things were turning around.
[23:24] Speaker 3: And also the nature of the policy response, like right,
[23:28] Speaker 3: it was huge, biggest GD well not only that, but
[23:31] Speaker 3: the way they were doing it right, like the phased
[23:33] Speaker 3: in approach. So like, okay, so this week, like ten
[23:35] Speaker 3: percent of the economies open, and then next week we're
[23:39] Speaker 3: gonna we're gonna take it. We're gonna expand it out
[23:41] Speaker 3: to gyms and restaurants, and then we're gonna expand it
[23:44] Speaker 3: out to department stores and things like you know, you
[23:46] Speaker 3: know what I mean. So like every week they were
[23:48] Speaker 3: kind of flipping on a bunch of on switches, right,
[23:52] Speaker 3: and so obviously that was gonna keep the economic momentum going.
[23:58] Speaker 2: So let's talk about another out of census call you
[24:00] Speaker 2: made the following year. Very few economists were calling for
[24:05] Speaker 2: no recession in twenty twenty two. Most were pretty bearish,
[24:10] Speaker 2: and of course they looked at the FED hikes that
[24:12] Speaker 2: they had missed the previous year. You were one of
[24:15] Speaker 2: the few people that were saying no recession in twenty
[24:18] Speaker 2: twenty two. Was it simply that v recovery and just
[24:21] Speaker 2: the robust momentum that was in the economy.
[24:24] Speaker 3: Well, I don't know that, I said, I mean, I
[24:26] Speaker 3: definitely understood where the recession call was coming from. I
[24:29] Speaker 3: think for me, the bigger gap with the consensus was
[24:32] Speaker 3: really going into twenty twenty three, and I said, there
[24:37] Speaker 3: wasn't going to be a recession. And I think first
[24:41] Speaker 3: it's important to understand why people were kind of latching
[24:44] Speaker 3: onto the recession call back then. It was basically because
[24:47] Speaker 3: the FED told you so, right, I mean, the FED
[24:49] Speaker 3: was basically saying, we need a recession to deal with inflation.
[24:54] Speaker 3: That's what they were saying. When power like pain will
[24:57] Speaker 3: be required, that that's what he means, right, And so.
[25:00] Speaker 2: What did Larry Summer come out and say. Summers came
[25:03] Speaker 2: out and said ten percent unemployment to fight inflation turned
[25:08] Speaker 2: out to be a little uh to nineteen seventies.
[25:11] Speaker 3: Ish, Well, well, sure, I mean it was. And what
[25:14] Speaker 3: was the other thirty percent chance of stagflation? Thirty percent
[25:16] Speaker 3: chance of this thirty I don't know whatever, But I
[25:20] Speaker 3: think part of the reason, I mean, this is part
[25:22] Speaker 3: of the way these models work, Right, if you have
[25:24] Speaker 3: a period of inflation, the model's going to assume that
[25:26] Speaker 3: you need recession in order to kind of get it
[25:29] Speaker 3: back to target. Right. So I think it's at some
[25:31] Speaker 3: level like one of the driving one of the reasons
[25:36] Speaker 3: driving the recession views on the street back in twenty
[25:39] Speaker 3: twenty two was because the FED was basically telling you
[25:41] Speaker 3: that's what they thought they needed to get inflation down. Now,
[25:44] Speaker 3: by the end of twenty twenty two, I think it
[25:46] Speaker 3: was becoming increasingly clear to me that we weren't going
[25:49] Speaker 3: to have a recession. And again I kind of put
[25:52] Speaker 3: on my business economics hat, right, Like, So, if you
[25:55] Speaker 3: go back to that period, we had the Russian invasion
[25:58] Speaker 3: of Ukraine that sent energy prices through the roof. By
[26:01] Speaker 3: the end of the year, gas prices had basically round tripped,
[26:05] Speaker 3: and the labor markets were strong. So we were going
[26:07] Speaker 3: into twenty twenty three with upward momentum and real incomes. Okay,
[26:11] Speaker 3: so that's good, that's just support consumer spending. Next, despite
[26:16] Speaker 3: massive FED hikes, like the FED was going seventy five
[26:19] Speaker 3: BIPs a meeting by the end of the year, what
[26:22] Speaker 3: was going on with home building stocks? They were actually
[26:25] Speaker 3: turning around. Right. Homebuilder sentiment was getting better. Right, builders
[26:28] Speaker 3: were in a much better balance sheet position. They were
[26:32] Speaker 3: able to buy their buyers down in terms of mortgage
[26:35] Speaker 3: rate buy downs.
[26:35] Speaker 2: Right, so had massive shortage of single family home exactly.
[26:39] Speaker 3: So, so housing was doing well despite hikes. You had
[26:44] Speaker 3: governments spending a lot of money, Like state and local
[26:46] Speaker 3: governments were flushed with cash, right, they got all this
[26:49] Speaker 3: COVID money, So you had government spending, and then everyone
[26:53] Speaker 3: was prime for recession, right. I mean, if it's what
[26:56] Speaker 3: it's like, this expectations, you know element of it, If
[27:00] Speaker 3: you know, one of the ways I think recession happens
[27:02] Speaker 3: is through surprise. If people think, you know, things are
[27:06] Speaker 3: going to be okay, and then they're not, then that
[27:08] Speaker 3: prompts the clearing out of inventories and investment and so forth.
[27:10] Speaker 3: And then but if if the opposite it's true, then
[27:13] Speaker 3: then that'll happen. Right, So if everyone is prime for
[27:15] Speaker 3: recession and it doesn't happen, then there's going to be
[27:18] Speaker 3: a period where you have to kind of gear up
[27:19] Speaker 3: and invest in inventories and hiring and so forth. And
[27:24] Speaker 3: so based on those four factors, to me, it was like,
[27:27] Speaker 3: by the end of twenty twenty two, it's like, yeah,
[27:29] Speaker 3: we're not going to have a recession. Real incomes are
[27:31] Speaker 3: growing too rapidly in order for that to happen, and
[27:33] Speaker 3: the housing market's doing well. Like if you can get
[27:36] Speaker 3: that right, if housing is working in the US and
[27:39] Speaker 3: labor markets and real incomes are growing you're not getting
[27:42] Speaker 3: a recession, so you know, and so to me it
[27:46] Speaker 3: was like a really easy market call because a lot
[27:48] Speaker 3: of the weakness in the market was just predicated on
[27:50] Speaker 3: recession risk, and so to like this, the more obvious
[27:53] Speaker 3: it became that that wasn't the case. It was, you know,
[27:57] Speaker 3: to me, it was very clear that you know that
[28:00] Speaker 3: equities we're strong by.
[28:03] Speaker 2: So you've talked a little bit about the Street predicting
[28:08] Speaker 2: four to six rate cuts this year. They've been predicting
[28:11] Speaker 2: that pretty much since twenty twenty two and have consistently
[28:14] Speaker 2: been way too dubvish. What do you think the Street
[28:18] Speaker 2: has been missing over the past, you know, two or
[28:21] Speaker 2: three years.
[28:23] Speaker 3: Well, I mean, I think the main story over the
[28:25] Speaker 3: last two years, and you know, I'm a little bit
[28:29] Speaker 3: more cautious now, but I do think the main story
[28:31] Speaker 3: of the last couple of years has just been how
[28:33] Speaker 3: resilient the US economy is. And you know, that's basically
[28:39] Speaker 3: been the main stories that We've had very very strong
[28:41] Speaker 3: income growth. You know, we've had obviously a lot of
[28:46] Speaker 3: state and local government spending, a lot of federal spending,
[28:49] Speaker 3: but the main story I think has been, you know,
[28:52] Speaker 3: very strong growth and real incomes, which has been supporting
[28:54] Speaker 3: household consumption. And if you get the consumer right in
[28:57] Speaker 3: the US, pretty much everything else will fall into place.
[29:00] Speaker 2: So when we look out at the world today, we've
[29:03] Speaker 2: seen a lot of volatility in policy. I hate the
[29:08] Speaker 2: word uncertainty, but at least a lack of clarity, which
[29:12] Speaker 2: seems to be affecting people's long term travel plans, corporate
[29:17] Speaker 2: capex plans. How significant is all of the back and
[29:22] Speaker 2: forth on various policy issues out of the White House
[29:27] Speaker 2: impacting your analysis?
[29:30] Speaker 3: Well, I do think that when uncertainty is high, it
[29:35] Speaker 3: just makes sense to kind of double down and look
[29:37] Speaker 3: at the data as it's coming in, right. I mean,
[29:39] Speaker 3: it's what you shouldn't try to make a big sweeping
[29:42] Speaker 3: forecast if the uncertainty is high, but you should kind
[29:45] Speaker 3: of think about what's just look at what's happening in
[29:47] Speaker 3: front of you. And that's kind of what I've been
[29:50] Speaker 3: trying to do. And you know, when I look at
[29:53] Speaker 3: what's happening right now, I mean I don't get a
[29:56] Speaker 3: lot of optimism. I mean have it looks like the
[30:00] Speaker 3: labor markets are continuing to cool.
[30:01] Speaker 2: Off, still positive, but certainly at much lower levels than
[30:05] Speaker 2: we saw two three years ago.
[30:07] Speaker 3: I mean, I think, to me, momentum matters. Right, we
[30:09] Speaker 3: talk about better or worse, right, I mean, the labor
[30:12] Speaker 3: markets are clearly getting worse. And you know, is it
[30:15] Speaker 3: is it nonlinear? No, it's not. But you know, you know,
[30:18] Speaker 3: one of the points that I've been making this year
[30:20] Speaker 3: is that all recessions begin with a slowdown. Not all
[30:24] Speaker 3: slowdowns and in recession, but we know that all recessions
[30:27] Speaker 3: start with a slowdown. And it's pretty clear that the
[30:29] Speaker 3: labor markets are slowing down. You have a very narrow
[30:33] Speaker 3: kind of breath of industries adding employee jobs. A lot
[30:38] Speaker 3: of it is in kind of acyclical industries like education
[30:41] Speaker 3: and health, so sort of the cyclical areas of labor
[30:43] Speaker 3: market are slowing down. You're seeing weakness in like white
[30:46] Speaker 3: collar professional services, recruiting intensities low. So the labor markets
[30:52] Speaker 3: I think are To me, that's been my big my
[30:55] Speaker 3: big theme for this year is that it's it's far
[30:57] Speaker 3: more concerning. And then the consensus seems to appreciate, and
[31:02] Speaker 3: I think also for the Fed. I mean, they keep
[31:05] Speaker 3: talking about how the labor market is solid and and
[31:10] Speaker 3: what they're I mean, to me, that's basically a very
[31:12] Speaker 3: like surface level analysis, like they're looking at, Okay, the
[31:14] Speaker 3: unemployment rate is four point one percent, and therefore the
[31:17] Speaker 3: labor markets are solid. But I think you can make
[31:19] Speaker 3: a very strong case that the that the unemployment rate
[31:22] Speaker 3: of four point one percent is really overstating the degree
[31:25] Speaker 3: of health in the in the job market. Right, Like,
[31:27] Speaker 3: when the unemployment rate is four point one percent, you
[31:29] Speaker 3: typically don't see like the hiring rate as low as
[31:33] Speaker 3: it is, you don't see the quits rate as low
[31:35] Speaker 3: as it is, you don't see consumer confidence in the
[31:37] Speaker 3: job market as bad as it is. You don't see
[31:41] Speaker 3: you know, even wage growth is slowing down, right, So if.
[31:43] Speaker 2: But it's still it's slowing down from a pretty high level.
[31:46] Speaker 2: Where what is wage growth now about four percent?
[31:48] Speaker 3: Is that? Well, it's actually slownging a bit more than that,
[31:51] Speaker 3: I mean, it's it's running. If you look at over
[31:52] Speaker 3: the last three months or so, it's around you know,
[31:54] Speaker 3: three three and a half percent. But huh, but if
[31:58] Speaker 3: if that, but again, like if the labor markets were
[32:01] Speaker 3: tight or tightening, then you wouldn't expect to see wage
[32:05] Speaker 3: growth continuing to slow down and you have ongoing increases
[32:10] Speaker 3: in like the number of discouraged workers. Right, you have
[32:13] Speaker 3: a lot of people exiting the workforce're going straight from
[32:16] Speaker 3: unemployment out of the labor force. I mean, these are
[32:18] Speaker 3: not things that happen in a healthier, solid job market.
[32:22] Speaker 2: How much of this is driven by the past five
[32:25] Speaker 2: whacky years, including the pandemic and a giant decrease in
[32:31] Speaker 2: people working, the recovery in people returning, plus the entire
[32:35] Speaker 2: fiscal stimulus making its way through the system. It's not
[32:39] Speaker 2: like twenty twenty five is just one in a series
[32:42] Speaker 2: of normal years. It's one in a series of very
[32:46] Speaker 2: unusual situations, including what five hundred and twenty five basis
[32:50] Speaker 2: points of FED hikes in eighteen months or so. So
[32:55] Speaker 2: how do you contextualize this slow down as the pig
[32:59] Speaker 2: works way through the python?
[33:02] Speaker 3: I mean, so this is sort of the argument that,
[33:04] Speaker 3: like the whole thing was just one giant like bull whip,
[33:06] Speaker 3: and we've kind of, you know, now we're just we're
[33:08] Speaker 3: still normalizing from all of it. You know, I think
[33:12] Speaker 3: to me, it's that's possible. But it's just again, like
[33:17] Speaker 3: the sectors that are slowing down are not the ones
[33:20] Speaker 3: you want to see slow down, right, I mean, you
[33:23] Speaker 3: know you're at a point now where it looks like
[33:26] Speaker 3: housing market conditions are continuing to deteriorate, right, Like prices
[33:29] Speaker 3: are slowing. They're slowing in the in the markets where
[33:32] Speaker 3: builders make homes. That's going to probably lead to job
[33:37] Speaker 3: losses in the construction industry.
[33:39] Speaker 2: They're not getting any help from the FED in terms
[33:41] Speaker 2: of rates at least no time sting.
[33:43] Speaker 3: Well, no, right, I mean to the extent that the
[33:45] Speaker 3: housing market is working, it's basically because the sellers are capitulating, right,
[33:51] Speaker 3: I mean, they're they're listing homes for market, they're willing
[33:53] Speaker 3: to take price concessions. That's pushing up transaction volumes to
[33:56] Speaker 3: some extent, right, So that's that's that's been okay. I mean,
[33:59] Speaker 3: you see, you have a little bit more elasticity coming
[34:01] Speaker 3: into the housing market, you know. But the fact that
[34:05] Speaker 3: the labor markets are cooling down, what does that mean?
[34:08] Speaker 3: Primarily that's going to weigh on consumer spending and that
[34:14] Speaker 3: kind of sets in motion like a below trend growth outlook.
[34:17] Speaker 2: So let me ask you what I think is one
[34:20] Speaker 2: of the most perplexing issues. Consumer spending pretty close to
[34:24] Speaker 2: record highs right now, and at the same time, consumer
[34:27] Speaker 2: sentiment pretty much still in the dumper off the lows
[34:30] Speaker 2: but still historically low. How do we reconcile the robust
[34:36] Speaker 2: spending with the terrible sentiment are one of those indicators
[34:40] Speaker 2: one of those measures broken?
[34:43] Speaker 3: Well, I don't know that. So this is like the
[34:46] Speaker 3: vibe session kind of story.
[34:48] Speaker 2: And I definitely are you a vibe session person or no?
[34:54] Speaker 3: No, I mean I think consumer sentiment. To me, what's
[34:58] Speaker 3: really interesting about what's happened with consumer sentiment is how
[35:02] Speaker 3: the link between consumer sentiment and labor market views basically
[35:07] Speaker 3: completely detached following twenty twenty one twenty two, right, I
[35:13] Speaker 3: mean once inflation started going So for most of my career,
[35:19] Speaker 3: if you basically got like the labor market view, right
[35:22] Speaker 3: you pay you more or less, would get the consumer
[35:24] Speaker 3: sentiment number, right, you know what I mean, like no more,
[35:27] Speaker 3: no more, right, I mean. So it's just it's one
[35:29] Speaker 3: of these things where when you ask someone like how
[35:35] Speaker 3: do you rate the economy, It'll be like something like
[35:38] Speaker 3: it will be a very low number. How do you
[35:39] Speaker 3: rate the labor market? It'll be a very strong number.
[35:41] Speaker 3: That's very perplexing, But it's just it just it demonstrates
[35:44] Speaker 3: that people don't look at the economy solely through the
[35:47] Speaker 3: prism of the job market.
[35:48] Speaker 2: What else is kind of fascinating is if you ask
[35:51] Speaker 2: people how do you rate the economy and they're like, mah,
[35:54] Speaker 2: how do you rate your personal economy? Oh, I'm doing fine.
[35:58] Speaker 2: It's like, how do you think of Congress?
[35:59] Speaker 3: Oh?
[35:59] Speaker 2: Congress, this is terrible? What about your congressman? Oh, he's great?
[36:02] Speaker 3: Totally.
[36:03] Speaker 2: So all of this brings me back to the question
[36:07] Speaker 2: is sentiment broken? When we look at the Michigan consumer
[36:10] Speaker 2: sentiment worse than the pandemic, worse than the GFC, worse
[36:15] Speaker 2: than nine to eleven in the dot com implosion, worse
[36:18] Speaker 2: than the eighty seven crash, it kind of makes me
[36:21] Speaker 2: stop and think, are all of us missing how terrible
[36:24] Speaker 2: things are? Or is just this methodology of asking people
[36:29] Speaker 2: in twenty twenty five what they think just doesn't work anymore.
[36:33] Speaker 3: Well, the methodology for the umish number in particular, did change.
[36:35] Speaker 3: I think they moved online. But so I just saw
[36:38] Speaker 3: to me, it's like, consumer sentiment is basically a function
[36:41] Speaker 3: of what stocks are doing, what inflation's doing, and what
[36:45] Speaker 3: jobs are doing. And if you think about it that way,
[36:50] Speaker 3: the drop in consumer sentiment made a lot of sense
[36:53] Speaker 3: because inflation went really through the roof, right, and so
[36:57] Speaker 3: that's why sentiment went down. Since then, you've some stability
[37:00] Speaker 3: and inflation, and you know now that the stock markets
[37:06] Speaker 3: back to all time highs. Essentially you've seen some recovery
[37:10] Speaker 3: and consumer sentiment not surprisingly. But what I'm what I've
[37:15] Speaker 3: been focusing on, it's, you know, there's this big debate about,
[37:19] Speaker 3: you know, how useful survey measures of economic data are,
[37:23] Speaker 3: like consumer sentiment is m versus like hard economic data
[37:29] Speaker 3: like manufacturing production, jobs growth. So to me, I think
[37:33] Speaker 3: the bigger question for people in my field is like
[37:35] Speaker 3: how much do you want to weigh survey measures of
[37:39] Speaker 3: economic data in your process? And to me, there is
[37:43] Speaker 3: still useful information in these surveys, right, Like, so when
[37:45] Speaker 3: you when you look at the conference board data, for example,
[37:48] Speaker 3: it's another consumer confidence number. If you look at like
[37:50] Speaker 3: the labor differential, So what are consumers telling you about
[37:53] Speaker 3: how how plentiful jobs are? How are jobs hard to
[37:56] Speaker 3: get or are they plentiful? That number still does a
[38:00] Speaker 3: reasonably good job telling you or informing you about like
[38:07] Speaker 3: tightness in the job market. Right, So if I mean,
[38:10] Speaker 3: and if consumers are telling you that things are a
[38:11] Speaker 3: little bit more slack. You should probably believe them. So
[38:16] Speaker 3: to me, it's about looking at which pieces of survey
[38:19] Speaker 3: data are important and which ones aren't. Even in you know,
[38:22] Speaker 3: regional manufacturing data. Right, you get asked, they ask the
[38:25] Speaker 3: purchasing managers about their capex intentions. Again, it's another indicator.
[38:29] Speaker 3: It does a reasonably good job like mirroring the broad
[38:32] Speaker 3: ups and downs in business investment like cor durable goods.
[38:35] Speaker 2: So I think the purchasing manager seems to be that
[38:40] Speaker 2: survey seems to be a little less out of sync
[38:43] Speaker 2: with spending than consumer sentiment is with either labor or
[38:48] Speaker 2: consumer spending. Fair statement.
[38:50] Speaker 3: Yeah, I mean the consumer sentiment number doesn't look like
[38:53] Speaker 3: consumer spending. I mean that. But that's that, that is true.
[38:59] Speaker 3: That is true. They're elements within the consumer sentiment stuff.
[39:01] Speaker 3: That kind of makes sense. But you know, broadly speaking,
[39:05] Speaker 3: you're right, consumer sentiment is dramatically understating how much consumers
[39:09] Speaker 3: have been spending. That's true.
[39:12] Speaker 2: So, so we're talking about all these different US data series.
[39:17] Speaker 2: How do you incorporate global macro trends and global economic
[39:20] Speaker 2: data into your models.
[39:24] Speaker 3: I'm gonna be honest with you. I don't spend a
[39:26] Speaker 3: lot of time focusing on the rest of the world.
[39:28] Speaker 3: Really that's probably to my own, to my own, I mean,
[39:32] Speaker 3: especially for.
[39:33] Speaker 2: These days with Europe outperforming the US and emerging markets
[39:36] Speaker 2: doing well after underperforming the US for fifteen years.
[39:40] Speaker 3: Yeah, I mean what's interesting is that you look at
[39:43] Speaker 3: you know, it's right, I mean that that has been notable,
[39:46] Speaker 3: Like they're the outperformance of the euro You don't really
[39:48] Speaker 3: see much outperformance and growth dynamics, so it kind of
[39:53] Speaker 3: tells you, like, you know, like sentiment in these towards
[39:58] Speaker 3: Europe has been so depressed, so like it's been like
[40:00] Speaker 3: some incremental improvements, some incremental narrowing and growth differentials, and
[40:03] Speaker 3: everyone's thinking that, like Europe is off to the races,
[40:06] Speaker 3: But I don't really see that in the data that
[40:07] Speaker 3: we look at. I mean, if you look at purchasing
[40:09] Speaker 3: managers surveys, for example, in Germany, I mean they're still
[40:12] Speaker 3: well below I mean they're still below fifty. I mean
[40:14] Speaker 3: German manufacturing, French manufacturing have been in the kind of
[40:17] Speaker 3: dumps for for a while.
[40:18] Speaker 2: And Germany is in the middle of economic contraction, right.
[40:22] Speaker 3: Yeah, I mean it's you know, there's been a lot
[40:24] Speaker 3: of it seems like a lot of like hopium based
[40:27] Speaker 3: on like defense spending and fiscal reflation and so forth.
[40:31] Speaker 2: Huh, really really interesting. Let's talk a little bit about
[40:36] Speaker 2: the possibility of a recession in twenty five or twenty six.
[40:42] Speaker 2: What do you think is the most significant macroeconomic risk
[40:46] Speaker 2: facing the United States right now?
[40:50] Speaker 3: Well, I mean, obviously the one that's getting the most
[40:53] Speaker 3: attention is a radic trade policy, But I don't think
[40:58] Speaker 3: that by itself is what's going to cause a recession.
[41:01] Speaker 3: I think it's primarily like monetary policies too tight. You
[41:05] Speaker 3: have essentially you have nominal GDP slowing, and the Fed
[41:10] Speaker 3: funds rate is not doing anything. It's basically flat at
[41:13] Speaker 3: four and a half percent. So to me, that represents
[41:16] Speaker 3: a passive tightening of monetary policy, and that will continue
[41:19] Speaker 3: to build pressure on the economy, particularly on the labor market.
[41:22] Speaker 3: So you know, kind of go down the list, right.
[41:26] Speaker 3: I do think that their left tail risk of the
[41:28] Speaker 3: distribution has gone up, you know number one. I mean,
[41:34] Speaker 3: labor markets are cooling and income growth is slowing. That's
[41:37] Speaker 3: probably going to weigh on consumer spending. That was true
[41:41] Speaker 3: even before tariffs came into force. If you look at housing,
[41:48] Speaker 3: residential investment is probably slowing because home prices are now declining,
[41:54] Speaker 3: particularly in the places where the builders are making the
[41:57] Speaker 3: homes right, which is like the South Florida Tech Arizona.
[42:01] Speaker 3: That's weighing on construction activity. If you look at business investment,
[42:10] Speaker 3: it's probably welcome that they just passed this tax law
[42:14] Speaker 3: and that gives some certainty around the tax outlook. But
[42:17] Speaker 3: at the same time, you know, some of that effect
[42:22] Speaker 3: is going to be blunted by what's going on with trades.
[42:26] Speaker 3: So you haven't really seen much in terms of Yeah,
[42:29] Speaker 3: outside of AI, business investment has been quite sluggish. So
[42:35] Speaker 3: I stay in local governments cutting back right, So it's
[42:39] Speaker 3: just sort of it's a very unstable kind of equilibrium
[42:43] Speaker 3: in my opinion. And I do think that, you know,
[42:47] Speaker 3: if as consumer spending is slowing, that creates risks for
[42:52] Speaker 3: the US economy.
[42:54] Speaker 2: So is your base case that recession in second half
[42:58] Speaker 2: of twenty twenty five sometime in twenty six likely probable?
[43:03] Speaker 3: I have it on the board. I mean, I definitely
[43:05] Speaker 3: think that our recession is more likely than not. And specifically,
[43:12] Speaker 3: I think you'll see a period of you know, a
[43:14] Speaker 3: quarter or two where you get a series of negative
[43:17] Speaker 3: employment reports, and and I think that'll push up the
[43:23] Speaker 3: unemployment rate and probably bring in the FED to tart
[43:26] Speaker 3: more aggressively.
[43:27] Speaker 2: So unemployment rate ticks up to four and a half
[43:30] Speaker 2: five percent. Where do you see this going five and
[43:32] Speaker 2: a quarter.
[43:32] Speaker 3: I don't know it goes up that high, but I
[43:34] Speaker 3: can easily see it getting it close to four to
[43:36] Speaker 3: five percent at some point over the next twelve months.
[43:38] Speaker 2: Sure, and that forces the FED to So let's talk
[43:42] Speaker 2: about the FED for a second. You know, once the
[43:46] Speaker 2: first Cares Act, which was what two trillion dollars ten
[43:50] Speaker 2: percent of GDP, the biggest fiscal stimulus since World War Two.
[43:54] Speaker 2: Once that was passed, it seemed like the FED was
[43:57] Speaker 2: increasingly behind the curve. Inflation start to tick up in
[44:01] Speaker 2: twenty but really take off in twenty one, and they
[44:05] Speaker 2: kind of sat on their hands until when did the
[44:08] Speaker 2: cycle start? March or April of twenty twenty two, And
[44:13] Speaker 2: by then by June it was inflation peaked and started
[44:16] Speaker 2: heading down. And so it seems like they were late
[44:19] Speaker 2: to recognize inflation, they were late to tighten. Now it
[44:23] Speaker 2: seems like they're late to start cutting. At least in
[44:27] Speaker 2: your assessment, is the FED just a big, slow, ponderous institution,
[44:32] Speaker 2: and they're always going to be behind the.
[44:34] Speaker 3: Count like Trump too late.
[44:36] Speaker 2: Now, by the way, you're the first person ever accused
[44:39] Speaker 2: me of that. But to be fair, hold aside the
[44:45] Speaker 2: beef between Trump and Powell. For my entire professional career
[44:50] Speaker 2: in finance, it has felt like the FED is always
[44:53] Speaker 2: late to the party. Yeah, I mean, I think they're
[44:59] Speaker 2: just conservative and slow, and they would rather be late
[45:03] Speaker 2: than mistaken.
[45:04] Speaker 3: I think is affect you know, I mean, you know
[45:06] Speaker 3: there are times when they're I mean, even by Powells
[45:11] Speaker 3: on admission, like last year he said that when they
[45:13] Speaker 3: went fifty in September that even that was a little
[45:16] Speaker 3: bit late. So yeah, I mean, you know, it's a
[45:19] Speaker 3: consensus building institution. You have to kind of corral your
[45:23] Speaker 3: your colleagues to your view and so that that to
[45:26] Speaker 3: me might be one reason why it's a little bit slow.
[45:31] Speaker 3: But as I say, I mean.
[45:36] Speaker 2: So we've talked a little bit about, or you brought
[45:40] Speaker 2: up how much uncertainty there seems to be around the
[45:44] Speaker 2: tariff policy, especially on again off again. What are the
[45:51] Speaker 2: risks from the tariff policy? Could this be a factor
[45:55] Speaker 2: in the recession, what other knock on effects do you
[45:58] Speaker 2: see from from this new pop.
[46:00] Speaker 3: I think the main effect is that it freezes business
[46:02] Speaker 3: investment in place, right. I mean that to me is
[46:04] Speaker 3: the big story.
[46:04] Speaker 2: Nobody wants to commit hundreds of millions of billions of
[46:07] Speaker 2: dollars till they know what the polomy.
[46:09] Speaker 3: Trading relationships will be with all these other countries. Sometimes
[46:12] Speaker 3: you're announcing terrorists with countries we may already have trading agreement.
[46:16] Speaker 2: South Korea we have twenty twelve.
[46:18] Speaker 3: Korea is a good example.
[46:20] Speaker 2: Sort of bizarre we don't we have?
[46:22] Speaker 3: So yeah, I mean, and you know, look like this,
[46:25] Speaker 3: this to me is like it's the return of like
[46:27] Speaker 3: the Trump collar strategy, right. I mean one of the
[46:29] Speaker 3: things that we thought very early on was that you know,
[46:35] Speaker 3: essentially he's going to be testing the market, right, I
[46:37] Speaker 3: mean if the market gets you know, it's it's sort
[46:42] Speaker 3: of bounded in a way, right, a strong stock market,
[46:46] Speaker 3: maybe he pushes the trade dial up a little bit.
[46:49] Speaker 3: Then if the market sells off, maybe he'll back off. Right.
[46:52] Speaker 3: So it's it's sort of he's trying to find an
[46:54] Speaker 3: equilibrium for himself that he's comfortable with. And you know
[46:59] Speaker 3: that to me for businesses, right, Like to me, It's
[47:04] Speaker 3: as simple as part of his stick is chaos, and
[47:09] Speaker 3: the business community doesn't like uncertainty. So that's a fundamental tension.
[47:15] Speaker 3: But I think so that's going to weigh on investment spending.
[47:17] Speaker 3: But I think in the background, you still have this
[47:19] Speaker 3: kind of slow bleeding in the job market. You have
[47:21] Speaker 3: this ongoing cooling and consumer spending. You have this slow
[47:26] Speaker 3: sort of bleeding out bleeding out in the housing market
[47:29] Speaker 3: that's weighing on construction. So and you have you know,
[47:33] Speaker 3: state in local governments cutting back, so you just don't
[47:36] Speaker 3: have as many drivers for growth, and ultimately that becomes
[47:40] Speaker 3: a problem.
[47:41] Speaker 2: So what is going to finally push the FED into
[47:45] Speaker 2: beginning cutting rates? What do you think is the most
[47:48] Speaker 2: important data series they're looking at. I really don't imagine
[47:52] Speaker 2: anyone cares whether inflation is two or two in a quarter.
[47:56] Speaker 2: But if we see, as you mentioned, a negative payrolls print,
[48:01] Speaker 2: that has to get their attention, doesn't it. Yeah, I
[48:04] Speaker 2: would think, so what else might get their attention and
[48:07] Speaker 2: start a new rate cycle?
[48:09] Speaker 3: To me, the most important thing is seeing what happens
[48:11] Speaker 3: with you know, essentially labor markets slack, right, I mean,
[48:15] Speaker 3: if if wage growth continues to slow, down, then the
[48:21] Speaker 3: ability for households to essentially absorb tariffs is non existent,
[48:28] Speaker 3: which makes it very difficult to see where you get
[48:30] Speaker 3: inflation from. So right now they've been kind of making
[48:33] Speaker 3: this point that the labor markets are not a source
[48:36] Speaker 3: of inflationary pressure. If you get further slack in the
[48:39] Speaker 3: labor market at this point, like at that point, maybe
[48:41] Speaker 3: inflate the labor markets become a source of disinflationary pressure.
[48:45] Speaker 3: And so I think that's something they have to keep
[48:46] Speaker 3: an eye on.
[48:47] Speaker 2: What else might capture the Fed's attention and say, hey,
[48:51] Speaker 2: we're really behind the curve. How what what do you
[48:54] Speaker 2: look at in the housing market, Is it just new
[48:57] Speaker 2: home starts or what?
[48:59] Speaker 3: Prices are slowing right? I mean not to me, so it's.
[49:01] Speaker 2: But they're still they're not negative and most especially in
[49:04] Speaker 2: the coasts, in in the big cities and in in.
[49:08] Speaker 3: Well, prices aren't negative in the northeast. But if you
[49:10] Speaker 3: look at like California, like Inland County, Florida, also prices
[49:13] Speaker 3: are down. They're they're contracting outright, and in places like Texas, Florida, Inland, California, Arizona.
[49:20] Speaker 2: But they've experienced giant booms over the past five years
[49:23] Speaker 2: they have.
[49:23] Speaker 3: But at the same I mean, I would just that
[49:25] Speaker 3: that's true. But to me, again, it's about what's happening
[49:27] Speaker 3: at the margin. At the margin, prices are contracting and
[49:30] Speaker 3: that matters, and that matters, and inventories arising, and you know,
[49:37] Speaker 3: to me, that's the main asset on the most households
[49:40] Speaker 3: balance sheet. And if you look at home prices, I
[49:42] Speaker 3: mean there is an important link between home prices and
[49:44] Speaker 3: actual price inflation, right, I mean you can just look
[49:47] Speaker 3: at the data. You know, the the cities across the
[49:50] Speaker 3: country that are experiencing the most home price deflation are
[49:54] Speaker 3: also the places where you don't see much consumer price inflation.
[49:57] Speaker 3: So I think that's notable.
[49:59] Speaker 2: So when one of your more recent research pieces you
[50:02] Speaker 2: talked about the importance of the US dollar, Why is
[50:06] Speaker 2: this such a huge factor on a macro level? What
[50:10] Speaker 2: do we down ten percent year to date in the dollar?
[50:13] Speaker 2: How significant is the dollar to the rest of the economy.
[50:19] Speaker 2: And let me know if i'm if I get if
[50:21] Speaker 2: I'm talking, If you didn't say that, I have so
[50:25] Speaker 2: much stuff in my head I can't keep it all straight.
[50:27] Speaker 3: Well, I mean, the dollar is important. You know, typically
[50:32] Speaker 3: when you have a weeker dollar, right, I mean you
[50:36] Speaker 3: should assume that you get some upward pressure on core inflation.
[50:40] Speaker 3: I think what's notable about what's happened with the dollar
[50:42] Speaker 3: is that it kind of went the other way in
[50:44] Speaker 3: terms of what people thought. Right, Remember the big line.
[50:47] Speaker 3: The line was that you know, we're gonna put these
[50:49] Speaker 3: tariffs on a lot of the shock is going to
[50:51] Speaker 3: be neutralized because the dollar is going to get stronger.
[50:54] Speaker 3: Didn't actually happen. Yeah, Well, I mean it did for
[50:57] Speaker 3: a day, mainly against EM but most of the weakness
[51:01] Speaker 3: and the dollar actually was against G ten FX. So
[51:05] Speaker 3: but at any rate, yeah, I mean, so.
[51:08] Speaker 2: It's the significant of the dollar to the economic cycle.
[51:12] Speaker 2: The things like foreigners buying US homes is a big
[51:17] Speaker 2: driver in a lot of cities. How significant is a
[51:21] Speaker 2: dollar to either a recession, coal inflation, or real estate?
[51:27] Speaker 3: Well, so, I mean I think it depends how I mean,
[51:30] Speaker 3: So it's interesting how you how you're framing this question.
[51:32] Speaker 3: I mean, I think in remember, in macro like, everything
[51:36] Speaker 3: is correlated, right, so if if the dollar, to me,
[51:40] Speaker 3: it's really about why the dollar's moving the way it is.
[51:43] Speaker 3: So if we were actually if I let's say I'm right,
[51:45] Speaker 3: and we go into recession, I would assume the dollar
[51:47] Speaker 3: to be strengthening in that environment, right, because it's a
[51:50] Speaker 3: safety play, right, So if the US economy's weakening, then
[51:54] Speaker 3: you know, people are going to seek out safety, and
[51:56] Speaker 3: that should push the dollar value up.
[51:59] Speaker 2: You mentioned in April that it was potentially your worst
[52:02] Speaker 2: case scenario, and in that month, after the big trade
[52:07] Speaker 2: policy TAFF policy announcement on April second, we saw bond's weekend,
[52:13] Speaker 2: we saw stocks weekend, we saw the dollar week in sort.
[52:16] Speaker 3: Of he'll sell America trade. But if you if you
[52:18] Speaker 3: go back to that though, right, Barry, I mean, if
[52:20] Speaker 3: you look at the number of times where that combination
[52:25] Speaker 3: of things happened, I mean you could probably count on
[52:28] Speaker 3: one hand, right how many days that happened. So it
[52:31] Speaker 3: was like it was one of these things where the
[52:34] Speaker 3: narrative kind of got way out in front of what
[52:36] Speaker 3: was actually happening. And now here we sit a couple
[52:40] Speaker 3: of months later, and we're talking about US equities at
[52:43] Speaker 3: all time highs, and you know, so, I mean I
[52:45] Speaker 3: think it, you know, maybe part of it is maybe
[52:48] Speaker 3: there's a little bit more enthusiasm around what's going on
[52:51] Speaker 3: in Europe, right. I mean Europe is taking steps to
[52:53] Speaker 3: reflate their economy. That's good for the euro you know,
[52:57] Speaker 3: you have at the margin, like people are a little
[53:00] Speaker 3: bit more optimistic about emerging markets. Emerging market currencies have
[53:03] Speaker 3: been doing better, so you know, there's this train of
[53:09] Speaker 3: thought that, like the dollars, is purely a function of
[53:12] Speaker 3: like the the Trump more on risk premium. But that,
[53:16] Speaker 3: to me, does I don't think that goes That might
[53:20] Speaker 3: be some of it, but I don't think that's nearly
[53:22] Speaker 3: all of it.
[53:23] Speaker 2: That is, I've heard taco. I can't say I've heard
[53:26] Speaker 2: more on risk premia before. That's a new phrase. Don't
[53:30] Speaker 2: send your hate mail to me. Let me throw a
[53:34] Speaker 2: curveball question at you before we get to our favorite questions.
[53:38] Speaker 2: What do you think investors are not talking about but
[53:41] Speaker 2: perhaps should be And it could be any topic, assets, geography, policy,
[53:46] Speaker 2: What data point is getting overlooked but is important and
[53:51] Speaker 2: people should be paying attention to.
[53:52] Speaker 3: Well. I think what's interesting is this sort of the
[53:55] Speaker 3: Trump Apprentice show with the fed chair. I think that's
[53:58] Speaker 3: becoming I mean Scott right, I mean there's this there's
[54:02] Speaker 3: this whole talk about shadow feed chair. But if you
[54:05] Speaker 3: get into a situation where by Trump doing what he's doing,
[54:13] Speaker 3: do you actually get him naming a chairman in name
[54:18] Speaker 3: only because Kevin yeah or no? But basically, in other words,
[54:22] Speaker 3: what I'm saying is these guys are trying to get
[54:24] Speaker 3: this done early, essentially to kind of create a condition
[54:29] Speaker 3: for some sort of shadow fed shair right with.
[54:31] Speaker 2: No authority, no power, no ability to rates.
[54:34] Speaker 3: Well that but also maybe someone that's But then if
[54:37] Speaker 3: this person ends up becoming the chair, does he actually
[54:40] Speaker 3: become a chair in name only? Because Powell is still
[54:43] Speaker 3: sticking around?
[54:45] Speaker 1: Right?
[54:45] Speaker 3: I mean that that to me is what's interesting.
[54:47] Speaker 2: Is when does Powell's term end?
[54:49] Speaker 3: Well, his term is chair ends next May, but his
[54:51] Speaker 3: term as a governor doesn't end for another two years
[54:54] Speaker 3: after that. Oh really, So that to me is something
[54:57] Speaker 3: that you know, that's a pretty uh, that's a card
[55:02] Speaker 3: he can play, right, And the way they go they're
[55:05] Speaker 3: going about this, you know you talk about you know,
[55:09] Speaker 3: we talk about like Supreme Court justices and like litmus
[55:12] Speaker 3: tests when you name right, like there's they have a
[55:14] Speaker 3: litmus test for judges. Trump is creating a litmus test
[55:18] Speaker 3: in a way for FED, for monetary policy officials, right.
[55:20] Speaker 3: He wants someone that's going to cut.
[55:22] Speaker 2: Rates, someone who's not going to be independent exactly.
[55:25] Speaker 3: And so if so, I do think that this desire
[55:30] Speaker 3: to have this kind of like big show like the
[55:34] Speaker 3: Apprentice Monetary Policy edition and this sort of like you know,
[55:40] Speaker 3: shadow fed chair, you know, trying to kind of undercut
[55:44] Speaker 3: Powell before he's done with this term, that could potentially
[55:49] Speaker 3: backfire in them because it would just mean that it's
[55:52] Speaker 3: possible that if they put in it, if they actually
[55:54] Speaker 3: get whoever they want across the finish line, once they're there,
[55:58] Speaker 3: they're actually quite they're very weak chair because Powell decides
[56:01] Speaker 3: to stick around.
[56:03] Speaker 2: That's really quite fascinating. I haven't heard anybody talk about that.
[56:06] Speaker 2: So that is very much an under the radar answer.
[56:10] Speaker 2: So let's let's in our last few minutes, let's talk
[56:12] Speaker 2: about our five favorite questions. We ask all of our guests,
[56:17] Speaker 2: starting with tell us what you're streaming these days? What
[56:19] Speaker 2: are you listening to? We're watching?
[56:22] Speaker 3: M hmm, what am I watching? I just finished The
[56:24] Speaker 3: Handmaid's Tale? Oh really that they had their last.
[56:29] Speaker 2: Did it hold up through all these seasons?
[56:32] Speaker 3: I thought? I thought the last season was actually pretty good,
[56:35] Speaker 3: So I I like that. I just watched Netflix The
[56:39] Speaker 3: Poop Cruise. That was pretty fun.
[56:40] Speaker 2: Oh really, that's people stuck on the boat in the
[56:43] Speaker 2: beginning of Yeah, it was a good like it's such
[56:45] Speaker 2: a horrible title.
[56:46] Speaker 3: It was a quick it was a quick documentary. But
[56:48] Speaker 3: I but I kind of enjoyed it. And yeah, those
[56:52] Speaker 3: are those are the two things that are tests that
[56:54] Speaker 3: are top of mind for me.
[56:55] Speaker 2: Those are those are very eclectic, little similar. I walked
[57:01] Speaker 2: in on my wife watching The Gilded Age, and somehow
[57:04] Speaker 2: I got sucked into this. And it's really quite fascinating
[57:08] Speaker 2: because all the issues that we argue about today, wealth
[57:12] Speaker 2: inequality and new money versus all money and economic strata
[57:17] Speaker 2: and economic mobility, themes of the Gilded Age one hundred
[57:23] Speaker 2: and fifty years ago. It's amazing that everything's changed and
[57:26] Speaker 2: nothing's changed, right, It's kind of kind of fascinating. Let's
[57:29] Speaker 2: talk about mentors. Who were some of your early mentors
[57:32] Speaker 2: who helped shape your career.
[57:35] Speaker 3: You know, it's interesting. I mean I think about that.
[57:40] Speaker 3: I mean, I remember you asked me this question the
[57:41] Speaker 3: last time I was on and I probably said, you know,
[57:45] Speaker 3: Ethan Harris, right, I think I'd put Drumatis in that
[57:48] Speaker 3: category of mentor. But I'm also at the point now
[57:52] Speaker 3: I feel like in my career where the people that
[57:54] Speaker 3: I idolized early on are now actually like my rivals, right,
[57:57] Speaker 3: they're my competitors in some respects, right, I mean we
[58:00] Speaker 3: talk about Rosie. I mean, he and I are both
[58:01] Speaker 3: in the research business, you know, I mean, so it's
[58:04] Speaker 3: sort of it's interesting.
[58:07] Speaker 2: If you're bearish the same year he's bearish, or at
[58:11] Speaker 2: least the same quarter. That's an unusual alignment because for
[58:16] Speaker 2: as long as that might be true right now, because
[58:18] Speaker 2: for fifteen years you've been fairly yeah, fairly constructive, and
[58:24] Speaker 2: you can't say the same of Rosie. This could be
[58:27] Speaker 2: the first time, second half twenty twenty five.
[58:29] Speaker 3: We're aligned, right, But you know that just means.
[58:32] Speaker 2: You've shifted because he's been sort of.
[58:34] Speaker 3: But so now it's more about like not so much mentors,
[58:37] Speaker 3: but like who am I Who am I talking to
[58:39] Speaker 3: to kind of help me work through my process as
[58:42] Speaker 3: like an analyst and yeah, I mean some names that
[58:46] Speaker 3: come to mind, like connorson your Blueberg Blueberg opinion colleague.
[58:50] Speaker 3: I like talking to him about about the economic outlook.
[58:54] Speaker 3: We sort of think about and come out come at
[58:55] Speaker 3: things the same way. Luke Kawa is another one. I like,
[59:02] Speaker 3: so these are sort of like, you know, I guess
[59:05] Speaker 3: you could call them like geriatric millennials, like myself, like
[59:08] Speaker 3: we sort of another periatric millennials.
[59:12] Speaker 2: Again, another phrase I've never heard before.
[59:14] Speaker 3: Scanda im or not is another one. I mean, he's
[59:16] Speaker 3: sort of in like more of like the public policy space.
[59:19] Speaker 3: But I mean I'm kind of glad he doesn't do it,
[59:22] Speaker 3: but he he'd make a great business economist himself. But
[59:26] Speaker 3: I mean, these are people that I just like talk
[59:28] Speaker 3: to to kind of stress test my own views. And
[59:30] Speaker 3: I think that's at this point in my career, Like
[59:33] Speaker 3: that's what I need more than than mentors, is sort
[59:36] Speaker 3: of smart people that will help me, you know, kind
[59:39] Speaker 3: of think through an outlook and stress test. Yeah, or
[59:44] Speaker 3: just like where are you wrong? Like like why what
[59:47] Speaker 3: are you? What are you missing?
[59:49] Speaker 2: That's interesting.
[59:50] Speaker 3: So that that's sort of how I think about it.
[59:52] Speaker 2: Now, let's let's talk about books. What are some of
[59:54] Speaker 2: your favorites? What are you reading currently?
[59:57] Speaker 3: You know, I don't read books.
[59:59] Speaker 2: I'm a book reads.
[1:00:01] Speaker 3: We did I read the news? I read. I can
[1:00:06] Speaker 3: tell you who are the people that I like reading?
[1:00:11] Speaker 3: You know, in journalism like Nick timros Wall Street love
[1:00:16] Speaker 3: reading his stuff.
[1:00:17] Speaker 2: Fed Whisper these days too.
[1:00:19] Speaker 3: Well. I mean it's not just that, but he has
[1:00:21] Speaker 3: like a very like you know, I mean he's he
[1:00:23] Speaker 3: thinks about things very thoughtfully too, and he and he
[1:00:26] Speaker 3: you know, he does a little data watching himself, so
[1:00:28] Speaker 3: I kind of like reading what he has to say.
[1:00:33] Speaker 3: Jonathan Levin Bloomberg Opinion. So you know those are the
[1:00:39] Speaker 3: your colleague, Josh Brown. I read his stuff, so.
[1:00:42] Speaker 2: He's a very thoughtful writer.
[1:00:46] Speaker 3: So to me, it's really it's really I I you know,
[1:00:49] Speaker 3: I don't have time to read books because I'm too
[1:00:51] Speaker 3: busy like reading, uh you know, read reading the news,
[1:00:56] Speaker 3: reading opinion pieces. The most interesting FED paper that I
[1:00:59] Speaker 3: came across recently is just you know, we talked a
[1:01:03] Speaker 3: little bit about ed Leamer before, but the FED recently
[1:01:05] Speaker 3: published a paper just looking at the housing channel of
[1:01:08] Speaker 3: consumer spending, right like, so they were basically making a
[1:01:10] Speaker 3: fairly obvious point that if housing transactions or new home
[1:01:14] Speaker 3: sales are down, like, that's going to have effects on
[1:01:16] Speaker 3: housing related consumer spending. And that's something that we should
[1:01:19] Speaker 3: be thinking of.
[1:01:19] Speaker 2: Glurable goods Gross Board.
[1:01:21] Speaker 3: Yeah.
[1:01:22] Speaker 2: Absolutely, housing has always been a big driver of the economy.
[1:01:26] Speaker 2: What's been so shocking about this economy is we've seen
[1:01:30] Speaker 2: home transactions drop significantly just because there's no supply, but
[1:01:35] Speaker 2: the economy has been so resilient. It's really been kind
[1:01:38] Speaker 2: of fascinating watching that happen.
[1:01:39] Speaker 3: Yeah, I mean it's interesting. I mean so again, like
[1:01:41] Speaker 3: housing is one of the reasons why I'm cautious on
[1:01:43] Speaker 3: the economic outlook. And you know, I think what's different
[1:01:46] Speaker 3: about this time with respect to housing versus you know,
[1:01:49] Speaker 3: early twenty twenty two, is that now units under construction
[1:01:54] Speaker 3: are coming down. You're in a situation where starts are
[1:01:57] Speaker 3: running below completions, which means that units under I mean
[1:02:01] Speaker 3: essentially units under construction will have to keep falling. And
[1:02:06] Speaker 3: that's not what you had last time. Right back then,
[1:02:13] Speaker 3: units under construction were going up. So to me, that
[1:02:17] Speaker 3: construction piece of it is different this time versus last time.
[1:02:22] Speaker 2: Our final two questions, what sort of advice would you
[1:02:25] Speaker 2: give to a recent grad interested in a career in
[1:02:28] Speaker 2: either economics or investing.
[1:02:32] Speaker 3: I mean, to me, it's just get a foot in
[1:02:34] Speaker 3: the door, you know, figure out the details later. You know,
[1:02:37] Speaker 3: it's sort of it never works out. The way you think,
[1:02:42] Speaker 3: But you just have to put yourself in a position
[1:02:44] Speaker 3: where you have the best chance of succeeding. And that,
[1:02:46] Speaker 3: to me is the most is the best advice I
[1:02:48] Speaker 3: can give someone. So in my case, that manifested itself
[1:02:51] Speaker 3: and get your foot in the door at a bulge
[1:02:53] Speaker 3: record from.
[1:02:54] Speaker 2: I mean you literally were working in HR before you
[1:02:57] Speaker 2: moved into.
[1:02:58] Speaker 3: Yeah, it doesn't like to me, it's about again, it's
[1:03:01] Speaker 3: about putting in yourself in a position where you can succeed.
[1:03:04] Speaker 3: And and I think that that's definitely true. I mean
[1:03:06] Speaker 3: for me, it's a number of ways that happened. Right,
[1:03:08] Speaker 3: I went to n YU. I went to n YU
[1:03:11] Speaker 3: because I knew that if I stayed in New York
[1:03:13] Speaker 3: I'd probably have a better chance at things than if
[1:03:16] Speaker 3: I left. And and it's just you know, I mean NYU.
[1:03:23] Speaker 3: You know, it's not like the best school. It's not
[1:03:24] Speaker 3: like Princeton or Harvard, but.
[1:03:26] Speaker 2: Pretty good school.
[1:03:26] Speaker 3: It's a pretty good school, and it's a business stern.
[1:03:29] Speaker 3: And if you're in New York, you're gonna there recruiters
[1:03:33] Speaker 3: are gonna come after you. If he went to n YU, right, right,
[1:03:35] Speaker 3: It's just that simple.
[1:03:36] Speaker 2: And you just need one hundred k Ye.
[1:03:39] Speaker 3: Well yeah, I mean it wasn't that much when I
[1:03:41] Speaker 3: was going. But but my advice would just be you
[1:03:45] Speaker 3: have to put yourself in a position to succeed and
[1:03:47] Speaker 3: just let the chips fall where they may. I mean
[1:03:49] Speaker 3: that that to me is you know, and if that
[1:03:50] Speaker 3: means taking a job that maybe not the best job,
[1:03:54] Speaker 3: but it's at a firm that you have a lot
[1:03:56] Speaker 3: of you know, respect for, or it's a good firm,
[1:03:58] Speaker 3: good brand name.
[1:03:59] Speaker 2: To make it our final question, what do you know
[1:04:02] Speaker 2: about the world of investing today you wish you knew
[1:04:05] Speaker 2: twenty twenty five years ago when you were first starting out.
[1:04:11] Speaker 3: Ah, that's a tough one. I mean, I think my
[1:04:17] Speaker 3: favorite thing, I mean, to me, what's important is and
[1:04:19] Speaker 3: just trying to relay this back to my seat, is
[1:04:22] Speaker 3: it's important to understand the time horizon of the person
[1:04:25] Speaker 3: that you're talking to and you're providing analysis for because
[1:04:27] Speaker 3: a lot of people live in the short run. But
[1:04:31] Speaker 3: if you're sort of a typical investor, you can you
[1:04:35] Speaker 3: can tune out a lot of the stuff that we're
[1:04:36] Speaker 3: talking about, to be perfectly honest, because to quote my
[1:04:39] Speaker 3: friend Sam row Stock, to usually just go up and
[1:04:42] Speaker 3: so you know, it's sort of you see all this
[1:04:46] Speaker 3: analysis that comes out on the street, like after the
[1:04:48] Speaker 3: ism goes to forty to forty, you know, usually the
[1:04:51] Speaker 3: stock markets higher six months later and twelve months later.
[1:04:54] Speaker 3: We'll yeah, obviously because the.
[1:04:55] Speaker 2: Stuff that's defaults depending on the decade. Looking at it's
[1:05:00] Speaker 2: three out of four or four out of five.
[1:05:02] Speaker 3: Yeah, So to me, it's sort of yeah. I would
[1:05:06] Speaker 3: tell myself back then, like, don't worry so much about
[1:05:09] Speaker 3: making big market calls. Just give people your thought process.
[1:05:14] Speaker 2: Really really interesting. Neil, thank you for being so generous
[1:05:18] Speaker 2: with your time. We have been speaking with Neil Dutta,
[1:05:21] Speaker 2: head of economic research at Renmac. If you enjoy this conversation,
[1:05:26] Speaker 2: well check out any of the five hundred and fifty
[1:05:28] Speaker 2: we've done over the past eleven years. You can find
[1:05:32] Speaker 2: those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your
[1:05:37] Speaker 2: favorite podcast. And be sure and check out my new
[1:05:40] Speaker 2: book How Not to Invest The Bad ideas, numbers and
[1:05:44] Speaker 2: behavior that destroys wealth and how to avoid them How
[1:05:48] Speaker 2: Not to Invest at your favorite bookseller right now. I
[1:05:52] Speaker 2: would be remiss if it I did not thank the
[1:05:54] Speaker 2: crack team who helps me put these conversations together each week.
[1:05:59] Speaker 2: My audio engineer is Peter Nicolino. Anna Luke is my producer.
[1:06:04] Speaker 2: Jean Russo is my researcher. I'm Barry Ruscholtz. You've been
[1:06:08] Speaker 2: listening to Masters in Business on Bloomberg Radio.

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