Interest Rates And Inflation In 2022

thanks so much for joining us. Um, what do you expect to hear? Well, what do you expect not to hear from the Federal Reserve chairman today? Thanks for having me on, guys. So what I expect not to hear is enough. UM. I don't think the Fed will hike today. I wouldn't be surprised if they did. I don't think they will, but they really are behind the curve, and I think that all you really need there is two numbers. Unemployment three point in December CPO inflation seven point one

in December. UM, so both policy conditions and fly conditions are inflationary, and I think that what they really need to do is hike and hike quickly. What do you think about the kind of inflation that we're seeing. I was just looking through your CV and saw that you studied economics as well as German history, so you have the um right Hooper inflatation perspective, M from the Weimar Republic.

Are we are we looking at anything that even compares to the eighties, let alone the eighties in America, let alone the twenties in Germany. That's a very interesting question. No, I don't think so necessarily. German inflation in the nine twenties was obviously driven out of a World war. Germany was cut off from capital markets. Germany printed its own money. We know that story and we know how it ended. But what we are doing now is finally undoing the

post two thousand seven makes financial crisis policy response. Um. That's massive, right. I mean the question is how quickly can you and should you shrink a nine trillion dollar balance sheet? Um? So they're going to be on intended consequences. I don't think we're going to see hyper inflation. But the you know, the debate about whether inflation is persistent or transitory is very much finished. It's persistent, So Ed you've mentioned in others have as well that the FED

is behind the curve, behind the market. What makes you say that number one and number two? Is that a bad thing? I think it's a bad thing. Um. I think it's a bad thing because if the FED is behind the curve and it has to start hiking, um, it will probably have to hike higher and faster than it's previously indicated. So you know, we have Jamie Diamond talking about six even seven, and we have at the other end, um some market commentators and policymakers talking about

three UM. And I think what we're really seeing here is that the monetary policy needs of markets are essentially now at odds with the monetary policy needs of the real economy. UM. So, if I may, I would describe what the FED is doing as a trickle mandate. Okay, so stable prices that's not going very well, full employment that is. But this kind of third amorphous concern, which is financial stability, that really needs low rates and that needs quie to continue. Of course we can't do that.

So I think they're behind the curve, not just on this inflationary cycle, but I think that they're behind the curve of pulling out of the post two thousand seven eight policy response. Before we get before we're out of time, I want to ask you about the Ukraine Russia situation, because you've advised governments and parliaments in Europe and in the UK, and I just was wondering to myself this morning, how much money does Western Europe pay Vladimir Putin every month?

You know, like, what, what's what's their gas bill? They can't really um, sanction him if they need to buy his stuff and give them their money, right, I mean, honestly, I'm a bit more concerned about gas prices at home, um than I am. Right. Well, well, and that's another reason, um, and that they can't really do much about it. Who knows, right, I mean, money is obviously a part of the international system.

Monetary relations are a part of the international system. I think for me, Ukraine is is a distant issue right now. I'm looking at home. I'm thinking about what the stud is doing and, as you said in your introduction, not doing so. If we get a house in order at home, I think the dollar standard and the US will be in a better position to act abroad in any number of areas. So, ed, what what is your economic outlook? For two, I mean, it seems like things are generally

in pretty good stead right here. And you know, the statistics we see on on the pandemic are also trending in the right direction. How optimistic are you for So I think I do. It's weird, right because if you look at the numbers, um, it does seem like this is a good economy right um. At the same time, if you look at sentiments and if you look at you know, responding to polls about how their life is going, how their wallets going, people seem a bit more gloomy.

So my take on all of this is we're actually okay, we're coming out of the out of the pandemic um. But again back to the FED, back to inflation. If we don't get this right, if we don't get pulling out of accommodation right, we could disrupt the real economy. And we could actually disrupt the real economy through market events. So I think, you know, we're in sort of possible

cruption territory already. Obviously we saw a rally on the backup stocks, but I can see that happening again and again as the FED pulls out of this of this low rate environment, so you know, that could lead back into the real economy and it could disrupt what has otherwise been a pretty good recovery. And thanks so much for joining us AID Price there, nonresident Senior Fellow at the n y U Center for Global Affairs. All Right,

we have rates rising. UM. Coming into this year, a lot of strategist fund managers said get ready for volatility, and boy were they right. Robert Teater, head of Investment Policy and Strategy Group of silver Press Asset Management, joins is Robert the first two days of this week. What do you make of the volatility we saw in trading in the last couple of days in these equity markets. It certainly has been a very volatile time. I think you're right. A lot of us have been looking for

that to happen. It's been somewhat overdue. In my view. It's that we're going through a number of different transitions. So I think we're transitioning out of a unidimensional market, meaning everything was all about COVID for a long while.

We've moved beyond that. It's now a much more multifaceted story. UM. I think we're in an era of transition in some of the data as well, also partly related to O macron and a real focus on second derivative in terms of growth rate of the economy and what's going on with inflation. And then lastly, of course we have a big transition from the Fed in terms of their policy, going from very easy to perhaps gliding into neutral here today or soon, and then perhaps tightening a bit and

being more restrictive with rates. So all of that I think has gotten investors sort of back to basics in terms of exiting this sort of easy, one dimensional economy and market and back to focusing on things like earnings and a lot of the more complicated stories that are going on in the market today. Ben Blueberg Intelligence UH is bullish the earnings picture. Gina Martin Adams. Yesterday, um Our chief equity strategist said she sees fifteen percent earnings

growth this year. Did you hear that? Yeah, that's a lot harder than I think the consensus which is high eight. Yeah, exactly. Um, what do you see in terms of earnings growth this year? And are you concerned that the Fed, you know, over tightens um I talked to another economists um Raphael Atten Coney this morning from A d A Economics, She said she expects the FED tightening cycle to push us into a recession next year. Yeah. Well, I I don't share

that fear. I can see why why folks have that expectation. I mean, I think the FED is focused on a couple of things here, and the market has been and laser focused on the inflation part of the of the FED mandate and what's going through the Fed's mind. But I think they're also, of course focused on the economy and jobs. Been very clear in emphasizing wanting to get people back to work and having a support of economy.

Uh And the FED, you know, has has also been very very much emphasizing the need to restore some policy flexibility. So I think it's not all about inflation for the Fed. It certainly seems like it in the heat of the moment here. But I think they will be accommodative enough to keep the economy growing so that people get back to work. And I think that feeds into that earnings picture that you referenced. I'm also optimistic on earnings, perhaps not quite as much as the as the double digit

numbers that you were just talking about. Part of that concern coming from how margins are managed. But I am optimistic on the earnings front. Uh and for stocks as well. Okay, one thing we haven't had to do with it just most recently in the last several years of geopolitical risk, and we think about the Ukraine and Russia that really came front and center. It seems like on Monday morning, Boy, what our investors to do there? You just have to put that on back burner and just ignore it or

is that real? Well? I think the typical playbook is to say to put it on the backburner. Usually when you look back historically at these types of conflicts, there is a short term negative reaction but tends to not be too disruptive over the longer haul. As you mentioned, it came at a at a very tenuous time for markets, when there's a lot going on in this transition that we're going through, and so I think it was more

of a shock than usual. So I do think that played a role here as well in terms of the down draft that we've seen earlier this year. All Right, Robert, thanks so much for joining us. Robert Teeter there is a head of Investment Policy and Strategy group. Great to get your voice your insight on this as we wait for the FED meeting. I hope we get you back

on UM soon as well. From the Silver Crest Asset Management, Robert Teeter, head of Investment Policy and Strategy Group, No, we've been talking about in for the past twenty minutes. Thanks so much for joining us. What do you expect from own pal today? Well, I'll say the soccer football thing. It's good that that's been resolved, so I was happy to hear that, UM. And I'm sorry I missed breakfast. I certainly could have used it on the on the

PAL thing. I think it's a really unusual environment we find ourselves, and I think that they'll come out and uh be moderately hawkish looking at possibly four hikes this year. Is that going to be enough? I don't know. I mean, if we throw away all that, all this modern fan stuff we've learned in the last thirty years about forward rates, etcetera. If you buy the two year today, UM, and you look at where inflation really is, you're locking in what

would seem to be a pretty poor real return. I don't think we've seen in real time this type of

poor real real returns um in a long time. UM. And so I just wonder if we're being a little blase and thinking that, um, we're going to raise rates and we're gonna get to the point where inflation is really gonna roll over, and the types of implied inflation rates you're seeing in tips, you know, getting down to two point two percent once we get past two or three years, is really going to be a realistic sort

of outlook. So we have concerns, Matt. You know, Laird's got his NBA from the unterse of Chicago, and they're pretty good with a number of freshwater economists. I mean, they are into the numbers, Laird, what numbers do you

think this Federal Reserve is really focusing on here? Well, I wish I knew that if I was, I would be focusing on sort of the impulse in inflation, UM, and the fact that, uh, probably statistically you could prove out that the amount of conversations that people are having about real raises being negative even though you're seeing you know, four or five percent raises out there in the economy

and people still negotiating for more. Once you get that embedded in the process, inflation becomes a little bit harder of a phenomenon to beat down. And I think that we're used to thirty years of the FED quote having the style and being reasonably in control of this uh. And I think we're in a new environment. I think that the frog has been in the pot of water for thirty years. Uh. And there's a chance that water is boiling as it relates to inflation, and we don't

realize that at this point. What do you expect in terms of um, you know, corporate earnings in terms of the corporate economy and are we still looking at decent growth? We hear high digit singles single UM numbers in terms of the consensus, but Bloomberg Intelligence says even this year in terms of earnings growth, yeah, yeah, I mean I think we were relatively sanguine UM on the on the corporate side, UM, we are underweight just on a duration basis.

We believe the strategy for bought investors here is go with solid liquid companies that are gonna have good earnings, stay five years and end, except maybe in the banks where you can you can you can creep out to ten years. Because they've had a pretty substantial widening here in terms of the amount you're getting compensated for that risk. Um, we don't expect that there's going to be any massive disruption on the corporate credit side UH this year, but

obviously there's a lot of wild cards out there. You guys mentioned Ukraine, You've got China, You've got the semiconductor supply. You've got a lot of things that could disrupt this economy. All right, Lard, thank you so much for joining us. Really appreciated. Laird Landman, Generalist, portfolio manager, TCWS Fixed Income Group. Well, during the pandemic, I think we've all done a lot more and I mean a lot more of e commerce

buying stuff we never thought we would buy on line. Um. And so that you know, the contact center calling up or emailing or texting to get some new information on a product of service you're buying. That's kind of become the new storefront here. So there's a lot of technology behind that. Louis Sume joins us. He's a CEO and founder of live Vox. It's a publicly traded company NASDAC traded. Lv o X is your symbol. Louis, thanks so much

for joining us here. Tell us about live box. What do you guys do how do you make the e commerce how do you participate in the e commerce UH platform? Yeah, great, thanks,

I appreciate that. Yeah, as you As you said, a lot of customers are more commerce onlines or just just the new way of life here and uh and as a byproduct, some of the conversations of previously would have happened in the store now more or less are going to happen over the phone, or happened via chat, or happened via SMS, and and so that makes the uh contexts and operators have to change the way that they that they do business because they're giving more volume and

they're getting more customers wanting kind of easy routine matters to be handled quickly via chat or via email, via SMS, but also with a seamless ability to get to an agent when when it's a little bit more complex and a little bit more difficult. And that's what we're all about, is really giving them the technology for the simple, easy matters so that they can have a good experience, but also making it easy to get to the agent and have the agent really well positioned to help the customer uh,

you know, wants to get there. There is nothing worse than calling up a business or um or or a store and getting an automated service, right am I? Right, Paul? I mean when you get absolutely for your bank account, please enter you know. UM. But I do love the new chat functions if they work well, and I love the ability to you know, call me back instead of waiting. UM. You must need a lot of actual humans for that though, right,

like flesh and blood people. Well, it's a combination. I mean, you know you've got to um, you know you've got to address both. You know, you've got to be able to do the quick and easy stuff UM online and by SMS and via chat. I mean when you go in a lot of our clients from the banking industry, and when you go in and check a balance, check your your checking account, look at payment status. I mean you you you want that to be quick and easy.

And then of course if you're thinking about refinancing your mortgage, you probably have more questions. And so at that point you want to talk to an asient and you want that agent to be knowledge well, and you want that agents know you. And so you think about that's pretty wide array of technology, right. You got the chat thoughts and the virtual assistance helping me out with the quick

and easy. But then that agent has to be empowered with a rich set of tools to help them be able to quickly and easily answer your questions when you get to the agent. Now you were running tell were you were you running a telehealth service before this? I mean, is this how you got um you're starting this line of service. Yeah, Actually we started off over twenty years ago in the in the health care sector and we were helping doctors and helping physicians help the patients with

more administrative clinical matters and things like that. But yeah, that's exactly what we started. But I mean, I imagine the last two years have been just phenomenal growth for you. Absolutely. I mean it's just driving a lot of the land for context center services. And at the same time, the contact centers are really struggling to hire people. I mean, there's everybody knows there's a labor shortage out there, and

that applies to contact centers as well. So you know, they've got this this pressure to add new technologies because that's what the consumers expect, right, I mean, consumers expect a easy digital experience when it's a small routine matter and they expect to seamlessly get to an agent when it's more complex matter, and if you don't give them that, it doesn't really reflect well on your brand, and so it can it can hurt you. Louis, what's kind of

the next iteration of customer service? Um? You know, it used to be you dial up a phone and get a live human being, and then obviously we went to a lot more of the digital interfaces. What's the next level do you think? Well? I think I think we're really scratching this purface on on a lot of the technology that's been deployed. I mean, we all know as consumers that what I'm describing in terms of, you know, quick and easy and then seamlessly get to an agent

when you want it and that agent knows you. I mean that exists sometimes, but more often than not, it does happen that way. So it's just tremendous opportunity to make these tools, the digital the AI, the chat boughts of virtual agents and all those things just work better. And that's really where we're focused on and in our our our focus here is really to leverage the cloud to make it work better. Because it's complex technology and and deployment from the cloud can make it a lot simpler.

And that's really the challenge is making this stuff kind of just fulfill its promise. How far away are we from a digital AI chatbot that works, because I could say, as somebody, i just moved here from Berlin, so I'm shutting down all my financial services in Germany and opening up financial services here. And you know that the main reason to get a private banker is because none of these you know, Capital One or Chase or Bank America. The chatbots have no idea what I'm saying, whether it's

an English, Spanish or German. I've tried everything. Yeah, look, I think people have to be um practical about how they adopt technology. You can't expect the virtual ages and the chatbots to do too much. You know, you've got to use them well. But then you also got to quickly needsually get to an agent when it's beyond their capability. And I think there's is a little bit of a tendency for people to like say, oh wow ai AI, I just like fall them over the technology and then

ask you to do more than I can do. And that's really not the best approach and Louis, thanks so much for joining us. Really appreciate it. Louisa May CEO and founder of Live vox again at nastactorated Company l v o x on go on your Bloomberg terminal there. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three and on Fall Sweeney I'm on

Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio