This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom O Business Finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Got a great segment coming up to continue the macro talk. We've got our colleague, Rich Miller, who's on my team you know when I'm doing the rest of my job, which is covering the economy. So Rich, good colleague of mind based out of DC. He's with us on zoom and Ira Jersey, our chief US interest rate strategies with us here in the Bloomberg Interactive Burger studio. How do you guys doing.
I'm doing great, Molly, thanks very much for having us and having me in the studio.
And it looks like the investors I think we're saying in something of a holding pattern. Hand of the inflation data tomorrow and of course the FED decision on Wednesday, so let's get a preview of all that. Ira, who's in studio. By the way, do you know the difference between suspenders and braces? Because Ira can tell you.
Please tell me Ira.
One has buttons, one has clips.
Keep that in mind. So the guy with the braces, he's the most important one. I suspect he's also in studio. So Ira, what is the market expecting at this point and what do you suppose the Fed's going to do? And why is there such a disconnector if there is one?
Well, I think the rate market is thinking the Fed's not going to do anything this week, right, But the question is will they start to get more dubvish?
Right?
And certainly the market has completely shifted tone the last six weeks, where at the beginning of October we were basically pricing for the Fed to do almost nothing in twenty twenty four, maybe a cut at the end of the year. Now we're pricing for one hundred bases points of interest rate cuts starting in March, right, So we're going to be definitely listening for any tone shift from the Fed.
That's a big one.
And if they were a little bit more hawkish than they were, say last month or what you heard in the minute, then you can probably start to price out that March. That March cut that's already priced about.
That is really dramatic to move up from basically no cuts to now starting as early as March. Rich, let's bring you in here because you had a great story over the weekend. As to the question isn't so much about the when, but the why. So tell us about the reasons why the Fed could cut and why that matters.
Well, two basic reasons. One, you know, the economy's falling apart, and then they've got to come to the rescue. So in that case, probably the cuts will be rapid or big.
But the other one, which Chris Waller Governor Chris Waller floated, would be if inflation keeps falling, they bring down rates in tandem with their fall in inflation, so they effectively keep the real rate interest rate after adjusting for inflation, steady, And so that would be sort of good news, probably certainly good news for the economy, because it would be suggesting that the economy is cruising along or in this
soft landing. You know, inflation is coming down, a maculous disinflation, et cetera.
Hey, I, when things turn, they usually turn pretty quickly and pretty severely. How dramatic of a turn have we seen when it comes to parsing the data?
Well, not that dramatic, right, We've seen a mix of data right, where some data is certainly weaker and the data is certainly you know, not falling off a cliff yet. But to your point, John and I, you know, it's possible that you get this, you know, a massive downshift in the economy, and that would be one of the reasons why the Federal Reserve, as to what Rich was just saying, that would be one of the reasons why the Fed would start to cut early.
Now that's a minority view to put that out.
There, though, probably, But at the same time, if that does occur, then certainly the Fed might cut much faster.
Right.
Typically I call it escalator up elevator down.
Right, when the Federal Reserve hikes interest rates, it increases them relatively, you know, slowly, although you know in.
This site four seventy five faces point hypes incessions.
A little bit different.
Right.
But when they cut, they cut, you know, one hundred basis points at a time, maybe for three times, right, so you can wind up with with very significant declines in it. Now, that's not my call, and I actually think that the market's probably getting ahead of itself because I do think that you know that Governor Waller and some of the other members of the FED. They would love to be able to kind of calibrate the federal funds rate with inflation and with the growth level, but
it's very hard to do, right. So I agree with with the idea that we need to know why they're going to be cutting early, and I'm not convinced that they're that they need to or they're going to.
Yeah, and Richie, you know, let's get into a little bit more in the story. Because when I pointed out that that reset why they'd be cutting because of a recession and being a minority view, it looked like in the survey that Bloomberg did earlier this month was what was it about twenty eight percent of people who thought that would be the reason why the Fed would be cutting, but closer to three quarters thinking it'd be more along the soft landing narrative that inflation is cooling and that
would warrant a lower policy rate. So tell us for those people who are in more of the recession camp, I mean, not many of them left, Why do they think that's still the case?
Well, I mean some of them include our own Anawong who's the chief of cons So it basically I think the people are arguing that there's still a recession likely, I guess have a couple of reasons. One, you know, if you go back in history, people always talking about soft landing just before recession.
So that's one.
But two, I think it's more about that the interest rates will slowly start to weigh on consumers companies, and that you know, consumers have more or less exhausted all their surplus savings and now they're having a bar credit you know, people point to buy now pay later has like ballooned, and the companies, many of the companies, the rates they locked in will be coming doe and they'll
have to refinance. So that's the argument of, as you say, sort of dwindling minority at the moment of people who think of recession. I mean, what was kind of interesting in the survey was that, just looking ahead to the meeting, is that the median economists we surveyed, you know, says the Fed itself is only going to have two interest
rate cuts penciled into their dot plot. And that's like just half, as Ira was saying, that's just half of what the market is expecting the Fed will end up having to do.
Is it instructive? Ira to look at history the interval between pauses, hikes, pauses and cuts. Does that tell you anything?
I mean, it's not a time thing that the FED really worries about, right, it's where are we in the economy.
But there is a cyclicality to the business.
Cycle, for sure, right where you do have troughs and valleys and economic momentum. But sometimes it was manifest themselves in mid cycle slowdowns. I mean, I'll take twenty fifteen as a perfect example where you had some massive sectors of the economy that were in recession.
Right.
You had the oil patch was in recession for sure, but we didn't really fall into the category of making it a recession because it wasn't incredibly broad based.
And it's possible that we could.
Be in a situation like that right where we have a meaningful slow down right now that winds up accelerating sometime in the not too distant future and we don't technically get a recession, but it doesn't matter. The economy is slowing, right. There's you know, I think very few people and objective observers would deny that. The question is will the pace be slow enough that and broad enough that it worries the federal reserve, and does is it slow enough that inflation I'm sound enough for the.
Federal reserve to be And then what's the history of soft landings? Do we have a good track record of that?
You could you could argue we had one in nineteen ninety four. You can argue that, you know, we had one or two. But yeah, they don't normally happen.
Right, It's it's the Fed cuts usually because there's an emergency, and it cuts a lot.
Yeah, I mean what kind of emergency do you think that would be at this point, rich, Like, you know, that Job's report on Friday certainly doesn't look like any emergency in the labor market right now.
Yeah, I mean, and all survey sort of said that one other option would because some sort of financial shock. And for the moment, none of the economists we survey are looking for a financial shock, which gets you a little worried. But you know that would be something you know, as I said, the people who see a recession sort of you know say, okay, you know things are always bright before it turns dark or some thing like that, and that you know that that that that that this
interest rates have have an impact. High interest rates have an impact, and they will. They will basically wear the economy down to recession. I'll be a most people think it's going to be very mild, but still that's I mean. I think will be interesting next week, Will you know be the Fed has kind of in its statement has a bit of a tightening bias. Will they reword that some people, some economists like Michael Gapin of Bank of
America suggesting they may even drop that. And then the other things I mentioned earlier will be you know, the dot plot, and you know how much, how many, how many, how many, how many rate cuts they've got priced in. At the last press conference after the last meeting, Powell said they weren't even thinking about rate cuts, not talking about rate cuts.
It's going to be hot for him.
I think to say that this time.
Rich joys a pleasure thanks a lot rich on Zoom from Washington, D C. Rich Miller, our economics reporter and in studio with us Ira Jersey, the chief US industrate strategists with Bloomberg Intelligence. Of course, the FED meeting Wednesday and the foul Powell press conference will be specifically looking for the summary of economic projections. You're listening to Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
You know New York Molly has been winning listings from London, the Chipman early listings. That is, well stock listings.
Yeah, the kind that our listeners care about.
What'd you think I was talking about?
I don't know. I mean, you know, my mind's been in the real estate space lately.
Oh that's right. Just closed, closed.
We just signed a contract. Big except we're closing.
You become a big girl now, Oh.
My goodness, you better believe it.
Mortgage and everything well, chip Maker arm when you talk about listings, that's the one that immediately comes to mind. Based in Cambridge, listing in New York. With that as a backdrop, let's explore the ties between our two great cities, New York and London. And we're honored to say hi to Chris Hayworth, the Policy Chairman for the City of London. So New York and London are we friends, enemies, frenemies competitors something else.
Well, I would say we are first and foremost friends and also just a little bit of competition between our two great cities as well. But as far as the listings go, I mean, I think both our exchanges have
had challenging years, ours more than yours. We know our listings are down in London, and really that's down to availability of capital and capital flows, and particularly we've seen it with fintech and fintech sector companies who we would have had would have listed on the London Stock Exchange have come across the pond because then get bigger valuations
here there's more capital availability. But our regulators have adjusted some of the restrictions on listing in on the London Stock Exchange, and so we're hoping to continue to win business in a friendly and competitive way with you in New York.
Is it too much regulation in your city?
We don't think so. We think that high quality regulation. Financial regulation is actually very important. It's important to attract foreign direct investments into our country. But at the same time it mustn't be restrictive. It has to be innovative as well. And the one thing you do much better in New York than we do is you actually take risk in business, and unfortunately regulation has become something that's
seen not innovative, not promoting global competitiveness. We're very keen to see them do that, but not to downgrade the quality of our regulation.
Got it, well, Chris, tell us a little bit more about your title. We were trying to understand as a lot little bit before. You know your distinction is policy chairman. What role that really entails? And I'm also a little bit while you're here this week.
So okay, So the Policy Chairman of the City of London is the political leader of the corporation. Serves for five years. We have one hundred and twenty so.
That deserves explanation on itself. There's there's London and the Corporation, which is in the Guema Square city So where does the where does that get its roots? The corporation?
The Corporation goes back over one thousand years. It is the oldest part the heart of the of London in general. London in general is made up of thirty two different London boroughs and the City of London Corporation. But our job specifically is to promote UK financial and professional services both and to represent them, both to the UK government and internationally. So my job sees me doing sixty five days travel around the world promoting London as a global financial capital.
And to that and you're opening an office.
We are we are know this. This is something I've wanted to do for a number of years now. We have a global representation in other countries, we haven't had it here in the US, and so I've hired a managing director and we're going to work between DC, where we obviously have the regulators, the Hill and the think tanks, and New York, where you obviously have the commercial and
financial center. The idea is really to talk together about regulation and alignment of regulation and policy areas as well, and of course to promote flows off trade and investment between our two great nations.
So tell us, Chris, because admittedly, so like I said, I'm a huge fan of your city. I studied abroad there when I was in college, have been dying to get back when My memory though of the financial center of London is that it's largely Canary Wharf, right or is there a whole lot else going on beyond that area?
Absolutely? I mean what you will find in Canary Wharf are some of the big banks, some of the big investment banks, but you will find huge amounts to financial services companies and some banks in the square mile itself. What happened is, you know, we only have one square mile. That's a tiny area to actually be able to cope with the explosion of growth in the past twenty years in the financial services sector. And so fifteen so years ago,
a number of the moved to Canary Wharfs. Some are now moving back into the city, but we still maintain that the reputation when you're talking globally, what people remember is not Canary Wharf. They remember the city of London.
It's not a one way street. There's US investment going to London. Tell us about that, particularly with venture capital.
With venture capital particularly there is and that's hugely important for us. And what I've been doing today and I will be doing in the next few days here and in DC is. I spoke today with the New York Stock Exchange and we agreed to mutual collaboration. Although there is com competition, there's no reason why we can't equally support each other's aspirations. And there's lots of ways we can align and one of the encouraging things is we do get two way flows, it's not just one way.
We do have US investment into the United Kingdom and that's been growing, and the VC market in particular.
And tell us about investment then from other countries. As much as we sometimes like to think, the US is not the center of the world, So tell us what's happening elsewhere.
Well, look, we've been through a very difficult challenge over the past seven years with the Brexit debate and leaving Europe and leaving the EU, leaving the Single Market. So that's forced us now to look globally, and we've been doing free trade agreements around the world and unfortunately I don't think we're going to get a free trade agreement with the US, but that I don't think will stop US trading as we do very effectively between US and
the UK. I don't think either of your political parties here have our appetite for free trade agreement with US. But nevertheless, there is a tremendous flow of business and trade and investment going both ways across the Atlantic. And we know this transatlantic alliance, this friendship has been around for decades and centuries in fact, and what we want to do is take it to its next level. That's why we're opening an office here.
What excites you the most about this relationship and where it's headed.
Well, I think we have lots of things in common between the United States and the United Kingdom. We both speak the same language. We both have slightly different accent to it, maybe, but we do both speak the same language. We're both financial capitals. Look New York. We have huge respect for New York and the New York Stock Exchange, and I think the city of London is reciprocated. You know,
we see ourselves as a global financial center. So what excites me is how do we bring the tour us together to strengthen the alliance in the Western world between these two great financial capitals.
Yeah, you know, in financial houses in New York and even places like Bloomberg, you sort of cut your teeth in London. At some point in your career, you're sent over there, and that's like a have.
You been with Bloomberg or otherwise you had to ask, didn't for the work, Okay, just for fun? Well have you been to our office over there? Chris, I hear. It's quite the marvel.
It is the most remarkable building, the most sustainable office building in the whole of Europe. It's a fabulous building. I go on the radio Bloomberg in London regularly. I do Bloomberg TV regularly, and I have met your great mister Bloomberg last week at the cop actually out in Dubai, so I went to the Bloomberg dinner.
So I was very lucky, fantastic. Well, we love to hear. Then, thank you.
I haven't been invited to the new building yet.
I haven't either. Maybe that'll be our next week.
You need to get an invitation, you really do, and come and see us in the Guildhall in the City of London.
Office opening in New York.
Well, we're at the moment.
We're working between New York and DC to identify locations in both and we'll we're bottom that ats. We've appointed the MD we'll bottom that out in the next few months.
Keep us updated.
Fantastic, appreciate it and Chris Hayward, the policy Chairman for the City of London, deepening the relationship the ties between New York and London.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons. From three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa, play Bloomberg eleven thirty.
Have you booked a hotel in a big appolitely.
In a city where I live?
I don't know. Oh, come on, it's almost a rhetorical question for the listeners and viewers. Right, So I did because I had to do a quick turnover, and I don't live here. I live in another state. But my eyeballs almost pomped out of their sack.
Scary stuff.
Oh goodness, gracious, I didn't pay for it. I mean I put them on the MX. But anyway, Our next guest follows the hotel and hospitality industry pretty closely. Kevin Davis is CEO of America's Hotels and Hospitality at JLL. So how does the Big Apple stack up? Right now?
The New York City hotel market is performing exceptionally well. In fact, we are having a record year from an average daily rate perspective. We're up almost thirteen percent compared to twenty nineteen and over twenty two percent compared to twenty twenty two, So incredibly strong dynamics in New York City.
So how much of this, Kevin, is like pent up COVID demand versus I'm sure you get this question a lot to see you already roll in your eyes or is this like really smile by this? Okay, we're smiling, but I mean, really is that a valid question?
Look, some of it's pent up demand. There are also some supply dynamics that are taking place in New York City that I think are.
Your typical New Yorker. By the way, you're like, why would anybody want to come here?
I love living here, And we're gonna ask Kevin why my real estate investment is going to appreciate.
He there you go, and I'll tell you why. I'll give you fifty reasons why. But look, the reality is part of it is pent up demand. I think part of it is there's a supply story, there's a demand story. So from a demand perspective, sure people are continuing to travel post COVID. I think COVID unleashed this you only live once mentality, and I think a lot of people are continuing to travel as a result of that and want to get out and experience the world.
We've seen a.
Return of international travel to New York City, which is a significant demand driver in this market. Interestingly, the Chinese, which historically have been the second largest foreign demand group, they recently relaxed their group travel restrictions, which is a big driver of traction of travel to New York City from an international perspective, so we expect to see significant inbound Chinese travel as well as from some of the
other foreign jurisdictions. The other dynamics that we're seeing returned to the office and return of business travelers coming back to New York staying in hotels, group travel meetings taking place, which is also driving demand from a supply perspective. Couple things taking place. We've had a significant influx of new hotels over the past ten or twelve years in New York City, which we expect that influx to decline pretty significantly.
There was a legislative initiative past several years ago which makes it much more difficult to build new hotels in New York City. You effectively need City Planning Commission approval to get a new hotel built, which makes it a lot harder to build new hotels. So Ultimately there will likely be fewer.
New hotels built.
Also, Airbnb, the city passed regulations which make it more difficult for owners for homeowners to essentially put their properties on Airbnb, So we've seen a meaningful decline in Airbnb as a result.
So an investor who wants to capture some of this upside potential, what do they do?
Look, there are properties certainly on the market. We expect that there will be a lot more properties on the market over the next twelve months for sale, which should drive significant volume. And interestingly, in twenty twenty three, we've actually had a meaningful uptick in investment sales activity. Almost three billion dollars of hotels have sold in New York City, which is a record. That's October year to date, which
is a record relative going back to twenty fifteen. So we haven't had this strong of an investment year since twenty fifteen. A lot of the reason ties into a couple of the things that we talked about before. Difficult to build, hard to build, a lot of demand for people wanting to come to New York City and stay in hotels. So that's a trend that we expect will continue well into twenty twenty four.
Yeah, so let's recap on this what you just said here, Kevin, because I heard that all of the demand indicators look like they're going up, a lot of the supply ones are going down. Correct, that sounds like a nice recipe for inflation.
Well for higher hotel rates, higher hotel rates, how's that now? Look the other side of that is, I mean labor costs have gone up, so it's certainly more expensive to operate a hotel in New York City.
Again, we can pass those on through the higher hotel rates.
That is certainly possible in some instances. But yes, there have been higher costs, but obviously rates across the city are at record highs. Look the other dynamic that we're seeing about twelve percent of the hotel rooms in New York City are being leased out to migrants. So that's a fair number of rooms. Call it seventeen one to seven. Seventeen thousand hotel rooms in New York City are actually effectively offline because they're being used used by the migrants.
The metric by which we judge success in the hotel and is revenue per available room, right, that is correct? RevPAR? How does that work? I mean, I wish everybody would just like use the same accounting standard we need.
We need one for each industry.
John, Well, it counterbalances your average daily rate and your occupancy, so it tells you effectively, if your rate is one number and your occupancy is another number, you multiply those two together and you get what is revenue per available room. So it's actually what you're getting.
As a function of the occupancy.
So as John was just saying, I am in this apartment buying journey that I've been taking the listeners through for several months now, and I'm always looking for reasons to as to why my investment is going to do well. So I mean, tell me, it sounds like there's a lot of great factors for like you just said, tourism in New York City. What does that mean if anything,
for like the you know, the residential market here. Is there any reason to think that that strength on the tourism side could be good for the residential market too.
Yeah, absolutely, particularly if we start to see more foreign investment in in residinnacial real estate in New York City, which has historically been a big driver of demand in
this market. So certainly we could see overflow. You know, one of the interesting dynamics at play is a lot of foreign investors, either for their own country as a result of their own country restrictions visa issues, have not been able to visit New York, meaning they haven't been able to look at hotels that they may be interested
in buying and or residential real estate. So I think as some of those barriers have decreased over time, we should expect to see more foreign investment in New York City. Absolutely from a hotel perspective, I would expect that that will continue from in the residential context. You know, Interestingly, we've seen a meaningful uptick from Asian buyers and Middle Eastern buyers in the hotel space in twenty twenty three, and in New.
York the most sauday after spaces seem to be at opposite ends of the spectrum.
Yeah, that's correct, And it's not just a New York City dynamic. It's it's across the industry more broadly, where you've had strong investor interest in luxury assets on one end of the spectrum and then select service and extended stay assets on the other end of the spectrum.
You might ask why that is, both those.
Sectors have performed incredibly well in a in a post COVID environment, and given the strong operating performance, you've seen a meaningful, meaningful interest in those asset classes on the part of investors.
I lobby to do this interview at the Carlisle. They turned me down.
Then, Carlisle, what's your nice place to stay?
Yet? Well, not just I know the downstairs source of the hope that the restaurant.
Oh, I was thinking the Carlisle Hotel on the Upper east Side. Yeah, where Roger stays during the US Open for.
Bobby Short used to play in the in the the Carlisle Cafe. Right, what's what's your That leads me to my next question? What's your favorite spot in New York City? The hotel space? Oh?
Wow, I mean there there are so many amazing hotels.
I tell you.
I'll name one where I had breakfast this morning, which is an absolutely lovely hotel, the Whitby Hotel on fifty sixth.
I don't think I've ever heard fifty sixth.
And fifty sixth between fifth and sixth.
Okay, smack in the middle of midtown. There you go, There you go.
It's a great Hotel. But of course New York City has has a bunch of wonderful hotels, the Carlisle, the Equinox, the.
Music to My Ears, the Equinox Hotel, nice spaces.
They'll never let me in. Kevin, good to see you, Thanks for stopping by the studios. You noticed he didn't do this via zoom because he's you know, we love him the local guy. All of America's hotels and hospitalities for a J L L.
You're listening to the Bloomberg Business Week podcas catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Much more than this, I did it live.
Away all right, Thanks Frank, Frank Sinacha you ever heard of him?
He's not Taylor Swift, but you know.
That's more my cup of tea anyway, John Tucker, Molly Smith with you. Argentina has a new leader. Javier Marley got there promising to fix the economy. Now he seems to be a ditching some of the key pillars of his radical economic platform. Manuela Tobias and Joel Weber put together a story on Argentina's new leader, and they join us. Now, Joel, he's a a practicality, it seems would be giving way to some of the promises that he made.
Well, there were some big promises before the election, and what's happened That election was last month and over the weekend we had an inauguration and basically everything he ran on has become sort of a big question mark because it seems like he is tacking in ways that are totally unexpected. And I think Argentina, which is if you look at recent history in Argentina, has been through the.
Ringer and it looks like more ringer ahead.
So Manuel, bring us up to speed on how Argentinians are feeling about this election and the person that they put in to the presidency.
Yeah.
I think a great way. You summed it up pretty well. We've been through the Ringer here in Argentina. And Lay was this radical candidate who came onto the scene literally with a chainsaw, saying he was going to burn down the central bank and dollarize the economy, ditch the Argentine bisson and he he took office on Sunday, and basically what we saw is a very a much more moderate. President also said he was going to cut ties with
China and Brazil, our biggest trading partners. Uh and then very very amicable you know, greeting with with all of the foreign ministers yesterday.
What.
Yeah.
Basically, these these radical proposals that he said he would do on the campaign trail, he's he's toned them down, and we very much saw that in his choice of cabinet members. All the people who were there at his victory party just a couple of weeks ago, we've seen them leave.
In different forms. And at the same time.
This might be like, oh, he's not the person he said he was, this is actually really really a promising for Wall Street.
We saw.
Sovereign bonds go up thirty percent, really rally, and he's given some really promising signs in these last couple of days, last couple of weeks that you know, it's it's a question mark what that radical fan base thinks about it, but it's given the market some much needed calm in these last months of hectic times in Argentina. Just to give you context, we were at one hundred and forty three percent inflation and already expecting double digits this upcoming month.
Scary numbers, and we think we've got an inflational problem here in the US. So Benuela tell us though a little bit about the rationale for this abrupt pivot, because it really, like you just said, is just so completely different from what Mela was campaign. Was he getting pressure to tone down some of these policies.
Yeah, so maay.
He comes onto the scene in August in this primary where poles show him a distant third place, and he gets first with thirty percentage points.
That's when everyone goes mad.
They say, oh my goodness, this person we he didn't even think, you know, he would get here, promising to burn down the central bank. Suddenly gets first place in a primary, and then we see him plateau in the general election which took place in October, where he still gets thirty percent of the votes, so he doesn't grow, but his one of one of the contenders from the Pro Business Party, Patricia Vuldrich, comes in third with twenty four percent of the points.
So you know, the ideas for a line.
But you've got the opposition divided into against the current left wing Parentis Party and basically they joined forces in the in the November runoff, and so you've got Melais thirty percent of hardcourt voters joined with this more moderate pro business twenty four percent.
And I think that's what we see.
We see him sort of tone down because he needs the votes, but also.
Now he needs to govern.
So in order to even just fill up his cabinet, he had people with no government experience from the private sector, but also just a lot of academics, people who had just never had this kind of responsibility, who are now going to have to have a purse of billions of dollars. And so I think we saw what we were hoping and expecting, which is just now you have to govern and you're not the same person as you were on the campaign trail. You're responsible for forty six million Argentines.
And so he he toned it down and ditched those friends who got him into power in in that.
Yeah, so George, let me ask you, what's the outlook for Argentina.
Now, Well, I think that's the question, right, like they are we going to be using pesos still or is it going to eventually become dollars?
Right?
And what you know, I think Manuel you hinted at this, and I'm curious to like bring it back to you is like, you know, this guy was willing to just basically burn it all down.
That's what he ran on.
And now it seems like he's maybe actually been an establishment candidate all along. So what is how is Wall Street you know, to see the bonds rally like this? Like, what what is Wall Street seeing that? You know, maybe argent times are not seen?
I think you know this is.
Uh, the going back to the speech that he gave yesterday.
Yeah, yesterday was Sunday. It's been a long couple of days.
When he swears into office.
He in some ways he didn't change his speech.
What he says is we've been in you know, one hundred year decline and things need to be you know, changed fast. And this is what Mauriciomakriti President twenty fifteen twenty nineteen, uh breaks with you know, more than a decade of left wing paranis rules, says he's going to change things up falls into gradualism. Isn't actually able to put in the changes that he said. This guy comes along says some really crazy stuff, ends up you know,
moderating himself. Because also something that I didn't say earlier is he has tiny fraction of minorities in both houses of Congress, so you simply cannot dolerize the economy with with such little representation. And so I think what's so promising about what he says is he is telling Argentine straight on, like, this is gonna hurt. We're gonna do a massive fiscal adjustment. He even warned of fifteen thousand percent possible inflation that we're inheriting from the previous government.
Oh my god, He's laying.
It all up front. You know this, this is gonna hurt. We're gonna have to do some some big changes, some big budget cuts. And I think that's a little bit the message and the embrace from the population of yeah, we're ready for that, we want that change, even though you know, he presented it as this chainsaw. But I think what what Wall Street likes is, you know, you've got this population who's finally ready, or at least claims to be ready for radical change. It's not gonna happen
because it's simply not possible to happen in Congress. And so you meet somewhere in the middle, and I think that that change is what we need. So so badly in Argentina to get out of this inflation. Maybe this guy has the.
Answer, So tell me more about this guy who potentially has the answer. He sounded like kind of a nut job.
Well that's when when he first came on the scene, and Manuel you know, you know this extremely well, it's like sort of like who is this guy?
Right? And he would say he's a bachelor, he hasn't been married. He's sort of like calls his dogs his children.
That it is part of a cultures comment.
And and you know, and what's crazy is like in Argentinian politics that's maybe not so crazy, Like this is a country that has seen a lot of flamboyant people in politics. But what's interesting was like the fact that he had that staying power that we kind of talked about, and not only was it and that's I think speaks to the desperate nature of who's voting. It's like, yeah, like you have this inflation for this long, people are willing to, you know, take.
A big risk.
He represents that risk.
But you know, the thing that's that again intrigues me in all of this is those establishment figures that he's been willing.
To lean back into.
Manuela who are some of the people, Like, yes, some people spoke up for him and and we're excited about him, and and yes they are no longer there, but there are so other people that have been sort of central in like the Caputo administration even that or the when Caputo is there, you know, like, so, who are these other people that he has turned to who are sort of establishment candidates.
Yeah, it's funny because first you asked sort of like who is he?
And then who is his team?
And it's it's nine and day because Gabuto, who was actually finance minister under under former President Modicio Muckety, that pro business president we were talking about earlier, who wasn't able to to enact the change Milay, had some really harsh things to say about him when he was in that role. He said he smoked away fifteen billion dollars, really criticized his time at the Central Bank as well.
This is this is out a Wall.
Street trader at heart, who did have, you know, very very prominent role under Makti's government, left with some uh some some problems with the IMF program. Didn't live under the best conditions, I think was twenty eighteen in Magda's government, and now he put him as his ECON minister and as Central Bank president. We've got one of his right
hand men, Sandel. This is the guy who said he wanted a totally this guy meaning Milea, who said he wanted a totally independent central bank, and who was going to give the keys to Emilio Gambol, the author of his dollarization.
Plan to close down the central bank. So you suddenly you went.
From independent, burned down central bank to the right hand man of the ECON minister at the helm. And so that is to give you a little sense of how far we've we've changed pivoted.
And yeah.
So so those are the top ECON ministers, and we've got in defense and security. We were going to have the Vice President, Victoria viol who he spoke at length on the campaign, was going to handle those issues. And now our new security Minister is going to be Patricia Woolrich, who was the pro business candidate who got that twenty
four percent. So his rival on the campaign turned ally who helped him get those votes, is now head of security, which is a big, big issue here because we've bought forty five percent now poverty one hundred and forty three percent inflation. You can imagine the sort of issues we're dealing with more and more insecurity.
On speak A great story and a great read, Manuela, thanks very much for being with us. Appreciated. Manuela Tobias on Zoom There from Argentina and Joel Weber Bloomberg BusinessWeek Editor Argentina with its new leader and apparently a heady number of defections, people sort of disenchanted with the way things are going, at least his most avid supporters on them.
A journal.
Yeah, bet you let me.
Oh no, no, no no, who's going to jug.
Please?
I'll travel.
I want to drive.
It's a good question.
This is the drive to the globes. We'll buy an shut it on.
On Bloomberg Radio. You're listening to Bloomberg Business we come, John Tucker along with Molly Smith.
Yes, another wonderful Monday afternoon together.
Yeah.
Absolutely, usually in the morning for us though, well.
Yeah, but you know, as utility infielders, you got to get used to different shifts as.
Right, we're pinch hitting today. And for our good friends Carol Masser and Tim Stanovic who are elsewhere.
Elsewhere and they should be back soon.
They will be don't worry.
Don't worry. A bit of caution. I'm going to say it kind of seems to be permeating some of the markets today as we wait for the inflation data. We get that tomorrow in the form of the CPI and of course the FED meeting Wednesday. So Molly wants an investor to do. Let's bring in the next guest. Jeff Crumpleman is chief investment strategist and head of Equities at Mariner Wealth Advisors. Joining us from Cleveland.
Cleveland the home of Cincinnati even better Ccinnati, not the rock and roll Hall of Fame. Is that where you're going with that?
No, I was going to say thirty one to fifty nine West eleventh Street, which is the Christmas Story House.
Oh, okay, a little different. Well, anyway, Cincinnati sounds lovely this time of year. Thanks for joining us, Jeff. Yeah, Like John just said, lots going on to parse through this week as far as you know, investible decision making things going on. So what's where's your head at right now going into this week? A lot of things going on.
Well, you know, we just say, had a lot to celebrate, I think.
But the jobs report, well, you know.
There's sure. The jobs report, and I just think the plethora of data through the year, we were positive going into it. I think when the rest of the world or a lot of the world was very negative, things just didn't need to be hunky dory. They just need to be less worse. And so inflation trends and we get the CPI report tomorrow. So inflation trends have pretty consistently since June of twenty twenty two, been trending in a better fashion. And the economy is held up pretty well.
So we're going to get retail sales and we're going to get industrial production. We had a nice employment report, as you cite last Friday, so the consumers employed making pretty good wage. Costs are coming down from painful levels, and things are just better than feared. So I don't know if there's much to focus on and to do.
You don't want to get complacent, but I would say enjoy the fact that we are in a fairly healthy backdrop, and maybe others will start appreciating that more and more as we see other strategies taking up targets, and so twenty twenty four could be shaping up to be I'm sure we'll have wallworry items that crop up, but a fairly decent year.
Jeff, explain to everybody what happens for managers like yourself as you go into your end tax loss harvesting. How do the dynamics change for the next couple of weeks.
Well, it can cause a rally in different types of stocks as the losers. You know you're going in and you're going to try and capture a loss where it makes sense to do that unless you think there could be a snap back recovery. People will harvest losses and then you have to go somewhere with those stocks. So one of the things that we've been thinking about in
your end. You really have seen a very narrow market this year, right, So everyone's talking about megad and Magnificence seven, and we tried to be a little more diversified than that. We do think that it's a little overdone. There are a number of tech names that have done well this year, but there's there's a lot that have not done as well.
So you sell your losers and you move into these these areas that you know have not participated along with the Mega seven or eight, and you can get a pretty hard rally in some nice growth names, and so that's what's going on. And I think you're seeing the market broaden out a little bit as values starting to outperform. You're equal weighted S and P five hundred's outperforming market
cap weighted. Your non mega tech names are moving in a bit direction, and you can see kind of a risk on attitude that's developing as we make some of these these shifts totally.
I mean that growth story, those Magnificent seven, that was obviously the big story of that November rally. What do you think the big theme is going to be for this month and just heading into the new year.
You know, I don't think there is a theme.
I have.
We said all year that this can be a really fertile market if you are a active stock portfolio manager and an active strategy, and you know, we've been saying that for just a long time, and I kind of was getting to the point where I thought, maybe I'm a dinosaur. Maybe everybody's just gonna etf it and go passive.
And certainly this has been a year where our more aggressive strategies we've outperformed very handsomely because there have been a lot of stocks on sale that have great earnings, and once balance sheets matter and rates start rising again, you know, some people are able to invest and obtain capital and drive margins and some folks can't when rates move up like they have. So I don't think there's
a theme. I think if you look at consumer discretionary, you look at technology and healthcare, those traditional growth areas, there's some really active names. There's a capital spending boom that's underway. On the other hand, that makes us very I think attracted two industrials and some of your material stocks like a United Rental, a Jacob's Solutions, a deer an Eton in the industrials area, or a Vulcan Materials
or a Ball Corp within materials. So I think there's a capital spending boom as we re on shore that's out there. That might be one of the underappreciated themes that you're asking.
About the correlation between stocks and bonds. I guess has been a little muddied. Sixty forty Is that still something?
Yeah? I think you know this this is a last year you could have panned sixty forty as we had a down year in stocks, you know, twenty two percent down and then bonds also weren't a great tout of return play this year. You've seen the opposite thing after this November rally where you've made money, and I think stocks and bonds off of very weak levels, and you know, at the end of the day, let's let's sit back and gain perspective as all these mood slings are all
over the map, and this timing sixty forty is bad. No, it's good. No, it's bad. No, it's good. You know, quite frankly, over the last five years in the S and P five hundred, which is part of that big sixty percent, you're up twelve percent a year, which is above the long term average for all the moves and
all the angst. And you know, so yeah, I think that it's still alive and well and feel very good about prospects as race stabilized and the market looks pretty strong in the equity sector at the twenty.
Twenty four Good to see you, Jeff, Jeff Crumpleman from Cincinnati. It's Alicant Carps.
Wendy City. No, that's Chicago. What do I know?
Somewhere in the Midwest, here's fan as I am.
This is Bloomberg, this is the Bloomberg Business Week podcast of a Little Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from three to six Easterning on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal