THE ANALYSIS WITH BOB FERRO MS. -- YEARS AGO.
DAVID ROSENBERG JOINS US IN TORONTO WITH ROSENBERG RESEARCH.
I WANT YOU TO SPEAK TO JEROME POWELL.
IS THE DEFLATIONARY -- DISPLAY SNARING VECTOR AND FORCED AND
WHAT BE STAYING WITH A DISINFLATION INTO 2024? DAVID:
I THINK WITH THE DISINFLATION TREND, IT WILL BE THE PRIMARY
TREND. WE WILL HAVE A BUMP IN THE NEXT
MONTH OR TWO BECAUSE THE CRV HAS TAKEN AN 8% JUMP SINCE THE
END OF MAY FOR THE REASON YOU FOLKS WERE TALKING ABOUT.
THE QUESTION IS HOW THE FED WILL TREAT THAT, AND WHETHER IT
WILL BE TEMPORARY OR PERMANENT OF THIS RUN-UP WE HAVE HAD
ACROSS FOOD PRICES IN THE COMMODITY MARKETS.
AND ALSO WHAT IS HAPPENING WITH OIL COMING OFF THE BOTTOM.
IF THIS IS HAPPENING WITH AN 4.5% TO 5% UNEMPLOYMENT RATE,
AND WE HAVE ACCESS IN THE ECONOMY, IT IS NOT A PROBLEM.
BUT WITH FULL EMPLOYMENT, THE WEIGHT HAS TO BE ON THE FENCE
MIND. THE PRIMARY TREND IS GOING TO
BE TOWARD DISINFLATION INTO THE NEXT 12 MONTHS.
THE NEXT COUPLE MONTHS WILL CHALLENGE THAT YOU. TOM:
ARMY BEYOND THE PAN-DEM -- ARE WE BEYOND THE PANDEMIC?
DO YOU BELIEVE IN FACTORS? ARE WE BEYOND PANDEMIC ANALYSIS?
DAVID: I DON'T THINK SO.
WE ARE STILL SEEING A LOT OF THE AFTER AFFECTS.
IT IS ONE OF THE REASONS WHY YESTERDAY, NO ONE SEEMED TO
CARE ABOUT THE CONFERENCE INDICATOR DECLINE FOR THE NEXT
-- FOR 15 MONTHS IN A ROW.
THE INVERTED YIELD CURVE HAS BEEN MORE THAN A YEAR.
IT IS DEEP. THE DISPERSION ACROSS ALL YIELD
CURVES WOULD TELL YOU THE RECESSION SHOULD BE STARTING,
BUT WE HAVE DEBATE OVER WHETHER THERE WILL BE A RECESSION.
THIS IS THE ENERGIZER BUNNY, THE GIFT THAT KEPT ON GIVING,
THE STIMULUS CHECKS FROM BIDEN IN MARCH 2021.
AND EXCESS SAVINGS. HISTORICALLY, AMERICANS WOULD
SPEND HALF AND SAVE HALF. BUT WE LIVE IN A MUCH MORE ARE
SUBSISTING SOCIETY. IS THE COVID EFFECT BEHIND US?
THE WORST OF THE COVID HEALTH IS BEHIND US BUT WE ARE LIVING
IN YOLO, YOU ONLY LIVE ONCE, SO SPENDING HAS GONE UP.
THIS MAY BE ENDING RIGHT NOW BUT IT IS ONE OF THE REASONS
WHY THE PEOPLE CALLING FOR RECESSION, YOURS TRULY, HAVE
BEEN FRUSTRATED. BECAUSE OF THE IMPACT OF THE
FISCAL STIMULUS WAS A PRODUCT OF THE PANDEMIC. JONATHAN:
WHAT IS INTERESTING -- TOM: WHAT IS INTERESTING IS YOU ONLY
LIVE ONCE. DAVID ROSENBERG IS GOING TO SEE
BARBIE TWICE THIS WEEK AND. [LAUGHTER]
LENHARD FEELS THAT OVER TIME WE
WILL RETURN TO SOME -- BLANXHARD FEELS THAT OVER TIME
WE WILL RETURN TO SOME.
ARE WE GOING TO BE IN 2%-ISH RANGE OR WILL DAVID ROSENBERG
HAVE TO SET A LEGITIMATE, SOCIETAL INFLATION RATE? DAVID:
I THINK YOU ARE REFERRING TO 2% AS BEING THE BASELINE.
WHAT IS INTERESTING THROUGH THE PANDEMIC AND DISTORTIONS AROUND
THE PANDEMIC, THE FED NEVER ONCE HAS CHANGED ITS LONG-RUN
ESTIMATE OF WHERE THE NOMINAL NEUTRAL FUNDS RATE IS.
IT HAS BEEN STUCK AT 2.5%. THE WORK THAT HAS BEEN DONE
REFERS TO THE REAL NEUTRAL RATE. LET'S ASSUME THAT WE GET TO THE
HOLY GRAIL OF 2% INFLATION.
THEN YOU HAVE JOHN WILLIAMS. OUR WORK HAS CORROBORATED HIS
WORK THAT WE GO NEGATIVE IN YEARS AHEAD.
WHAT DID COVID NOT CHANGE OR THE POLICIES AROUND COVID NOT
CHANGE? AGING DEMOGRAPHICS.
THIS REMAINS AND HAS BEEN A DEADWEIGHT DRAG. TOM:
JONATHAN TELLS ME EVERY DAY. CONTINUE. DAVID:
AND DEBT IS ANOTHER CONSIDERATION.
THIS HAS BEEN WONDERFUL FOR GROWTH STOCKS AND THE TECH
SECTOR. IT SEEMS AS THOUGH NVIDIA BACK
IN MAY WITH THE TRULY BOMBSHELL EARNINGS REPORT, ALMOST FELT
LIKE PFIZER MONDAY IN DECEMBER 2020.
I WILL NOT SAY IT IS BIGGER THAN THE INTERNET BUT IT IS
BIGGER THAN 3D PRINTING AND WILL HAVE MONUMENTAL IMPACTS IN
THE LABOR MARKET.
LABOR TECHNOLOGY, FROM A LABOR MARKET PERSPECTIVE, WILL BE A
SIGNIFICANT DISINFLATIONARY FORCE LIKE THE INTERNET WAS.
NOT ON THE SAME SCALE, BUT I DOES NOT -- BUT IT DOES NOT
HAVE TO BE ON THE SAME SCALE TO BE A DISINFLATIONARY FORCE.
JONATHAN: THIS IS SORT OF OUT THINKING,
10 OR 20 YEARS, BUT WHAT WILL HAPPEN IF WE START TO SEE THIS
JOB REPLACEMENT FROM THIS BOOM? DAVID:
IT WILL BE A PROBLEM BECAUSE WITH AGING DEMOGRAPHICS COMES
DEPENDENCY RATES WHICH PUTS PRESSURE ON FISCAL FINANCES AT
A TIME WHEN GOVERNMENTS AROUND THE WORLD HAVE BEEN ON THE
SPENDING SIDE. SOME PEOPLE SAY THE ONLY WAY
OUT OF THIS IS WE HAVE TO INFLATE OUT OF THE THAT PROBLEM.
THE PROBLEM WITH INFLATION AND THE REASON WHY JEROME POWELL
HAS BEEN FIGHTING INFLATION WITH COVER FROM THE WHITE HOUSE
IS INFLATION IS A TAX ON THE POOR AND ELDERLY.
PEOPLE SAY WE HAVE TO SOLVE THE ADULT PROBLEM -- SOLVING DEBT
PROBLEM WITH INFLATION BUT NO, BECAUSE IT CREATES OTHER SOCIAL
PROBLEMS. WE WILL HAVE TO RE-CREATE THE ENTIRE SCHOOL
SYSTEM. THE BOTTOM LINE IS THIS DIRTY
FIVE LETTER WORD CALLED "TAXES" WILL HAVE TO GO UP.
THAT IS WHY I SAY, WHY HAVE BOND YIELDS NOT SORT?
EVEN WITH WHAT IS HAPPENING WITH FOODSTUFFS AND ENERGY THE
PAST FEW DAYS, THE FED PENNED
THE FUNDS RATE FROM 5.25 TO 5.5. WHY ARE WE AT 3.80 ON THE
10-YEAR YIELD? THE BOND MARKET IS TELLING YOU
SOMETHING WHICH GOES BACK TO TOM'S INITIAL QUESTION.
IT IS TELLING YOU SOMETHING ABOUT THE DISINFLATIONARY
FUTURE. IN TERMS OF HOW GOVERNMENTS
DEAL WITH IT, THIS ERA WE ARE SEEING OF FISCAL RECTITUDE IS
GOING TO HAVE TO GO TOWARD FISCAL TIGHTENING DOWN THE ROAD
BECAUSE IT IS NOT SUSTAINABLE. WE TOLD EVERYBODY WHAT WAS
HAPPENING WITH THE STOCK MARKET AND FISCAL DEFICITS.
EVERYTHING WE ARE TALKING ABOUT