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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business App. Jeffrey Curry joins US, Professor of price theory at the University of Chicago, Acts a small firm downtown. Great interview yesterday, John Farrell, mister Solomon. It was like, you know, it was like piercing is like you know, I mean, I mean, you know Curry Lip Versailles with his energy Now. Yes, Jeff Curry joins US now Energy Pathways, the Carlisle groupie roots for the Baltimore Orioles. Jeff Copper, I got to rip
up the script here. We're not doing oil, We're doing Copper twenty eleven twenty two, and now another surge way out over three standard deviations. What's different this time with a surging copper.
One the investors have finally bought into the view that China is not the only game in town for copper. That's the main thing is people finally wrapped their heads around yes, the property market in China can sync and you can still be long copper, and positioning is full force right now. And I think that if you look at what's different now, it's the willingness of the investor to embrace this market despite the fact that there's a
weak property market. And that's what happened in twenty one in those other time periods that you were talking about, as people started buying into it, then all of a sudden, the property market weakened, They got too scared and you know, pulled out of the position. I think there's a couple things that make this different. It's one they've now seen that copper demand can rise in the face of a declining property market. It's up six percent right now in
a very weak property market. But also they've seen that the government's willing to spend infrastructure on green gapbacks, so there's a lot different.
Is there a utility overlay? As we see utility surge because of electricity buildout, does copper go up with the AI enthusiasm.
One hundred percent? You know? And you know, I'd like to say, you know, AIS, you know, chips and copper. You need the chips, but then you need the electrical wiring to be able to power those chips. In one of those chips, the video chips, the GPUs consume as much power as the average American household. So you're gonna need a lot of grid connection to be able to accommodate that type of growth. And you know what is
the bottleneck for that? It's copper. So all roads lead to copper, whether if it's military, spin, AI, data centers, Green Capex, they all point to copper.
I mean, you couldn't have copper in a million years.
I would have guessed it. So what do I know?
But so there's the demand side of the equation. Jeff, you just highlighted a number of sources of demand. Can you explain to us kind of the supply side of copper. I don't know anything about this. Where does copper come from?
And how's the supply?
It's one of the last of the good old fashioned commodities. You got to dig out of the ground. You know, think about oil, with shale manufacturing, aluminum manufacturing. You know, you got to go out to very remotely located, geographically restricted places like Chile, Peru, the DRC, Mongolia. It's only located in a few places around the world, throwing Zombia in that and a lot of those places are incredibly difficult to get into. Then you got to dig and
dig deep. Your or grades have come down. It can be anywhere from twelve you know, you take you know, ivan Ho's big mine in the DRC. It took twenty six years to bring online, so you know, there is a big commitment to be able to get the supply online, and you have strong demand. And everybody's been sleep walking into this, even though they've been told about it. You know, we started calling copper the new oil back in twenty
twenty one and it rang on daf ears. You know, now it's finally people are perking up to the story. But it's going to take years to bring this up.
I've been medicated. Paul, ask one more question, and then I got to do microeconomics with Professor Kurr.
All right, So while we have you, Jeff here, it talked to us about oil here. I mean, I'm looking at I like to quote WTI crew to oil.
I'm an American.
I love the guys down in Texas and Oklahoma and all those crazy people seventy nine dollars a barrel here. What's driving oil these days? Is it supply? Is a demand?
What are you focusing on?
You know, all the commodities are being driven by the same demand for uces. It's late cycle business cycle in the sense that you can think of twenty twenty two and twenty twenty three as being your classic mid cycle pause where your raise rates, higher energy prices, the system slowed down, a regathered scheme consolidated around the higher rates, and now we're chugging back off into the second half of the business cycle. That's when you want to own
oil and commodities. And it's about the level of demand stressing the inability to supply. That's why all of these markets are going up. You know, the vast majority of them are in backwardation. You know, it's all your typical, you know, into cycle type of bullish structure that's playing out here. And I don't see this oil being any different than copper or some of.
The base medals. And now folks Drivetime America early in the morning, your microeconomics segment, Jeff Curry, we just were honored to have Richard portis a giant of English economics in London Business School in our and you know, he was kind enough to give us a story about studying
under John Hicks a few years ago. I want to talk about going back to copper into China and all the emotion, Jeff Curry, is this a shift in demand along the curve or an outright shift of the curve that has a permanence.
The outright shift in the curves permanence, and think about how much of that's occurred since twenty twenty one? Military the military spin, you know, whether if it is munitions in the US to the two to ninety five billion dollars one hundred billion dollars in places like Germany, and then you throw in the AI data centers on top of that. That's on all an outward shift in the demand curve. So you know that's going to lead to
structurally higher prices. And I think the question is why will it lead to structurally higher prices because somebody's going to have to be crowded out here. There's not enough supply to go around to everyone, and so we're going to find out where demand destruction actually occurs.
Jeff Curry, thank you so much. That segment of microeconomics with Bloomberg Surveillance, brought to you by the George Stiegler Foundation, Chicago. Jeff Curry, thank you so much. With Carlisle there squeeze a three hour conversation into eight minutes with Adam Posen the Peterson Institute. Adam, thank you wonderful to catch up
with you. And I've got to go to an essay off of one of my heroes, Maurice Obsfeld, writing about Trump's plan for the FED would revive nineteen seventies style inflation. Are we close to returning to the ugly inflation of our ute?
We may be only a year away from our ute? Tom joking aside. I think Mariy has it right that if they talk about driving down the dollar for reasons of a trade episode which doesn't matter, or putting on import surcharges, all this Nixon economic policy channeling from the early seventies and making the US undependable in global markets and in global institutions, that's inflationary. Maria is right, and we're going to be following that up for Peterson with other studies.
I want to get this in because Paul's got a bunch of questions. I can't say enough about what Fred Bergston invented and what Adam Posen has driven forward. Obviously Olivier Blanchard there with all of his good work, But there's a guy that wrote a paper that was hugely influential for me decades ago. His name is William Klein, and his basic message, folks, was stop worrying about China, US, Japan, US, Australia, US, in that it's a diffuse system of currency movements off
of William Klein Adam Posen. As we ax about Japan and their depreciation or devaluation, how does it diffuse in a William Klein way across a Pacific.
Rim Well, I think what Bill Klin was saying years ago is even more true now. The dollar is dominant in reserves, the dollar is dominant for so many things, but in terms of the effect of any bilateral exchange weight on real outcomes, it's very small. For anyone who's not the US. I mean putting it this day. Sorry I phrase that badly. But if Japan depreciates by a huge amount, which there's no particular reason it should, then
it actually doesn't matter that much to the US. What starts causing concern is in a situation like now, where the FED is tipped to keep hiking potentially, where US growth is tipped to outperform potentially, and Europe, Japan, China, others are all go lower, then you've got an overall appreciation of the And that's a different story.
I bring this up, Paul. It's so crucial because the media is so fixated on US this, US that, and it's a much more complex economics than what's portrayed in the modern media.
Paul, Adam.
We had this PPI data today, Adam came in, you know, hotter than expected, which is kind of goes to that narrative that inflation is not whipped.
Inflation is still out there.
How do you think about inflation in this US economy these days?
Well, Paul, I've been and you've heard had me on before. I've been in the camp suggesting that the inflation was going to be moving sideways on a multi month average this year, once you got down into the low threes, and that's what's happening. One month's PPI one way or the other doesn't really tell you anything. More importantly, the Fed needs to talk about what its forecast is and
what its goals are. And but for people trying to assess inflation, yeah, we're stuck it around three percent inflation. I would expect headline CPI to go down a bit more in the next few months and then come back up a bit.
So given that backdrop, Adam, what do you think our Federal Reserve should do over the.
Coming months here as we head into an election.
I think they should hold off on any rate cuts until at least November, barring something strange happening like a financial problem or a cratering of the really Connie, which I find extremely unlikely. I think they should be prepared and laying the groundwork for raising rates in twenty twenty five.
And I think they should be looking at and arguably talking about the fact that either they're going to change the inflation target and move it up, or if they don't want to do that, they need to explain why they're comfortable with inflation staying around where it is for a while. They can't just keep hoping that someday they'll get to change the target. But they don't have to talk about.
It now, So all right, Adam. So one of the key drivers, obviously for the Federal Reserve is just.
The US consumer.
Here. We had some home depot results today that were a little bit weaker than expected. Of course, we'll hear from Walmart tomorrow Thursday after the Thursday with their earnings.
How do you view the US consumer here?
I mean, the US consumer is continuing to be quite strong. The idea that it's tapering off some versus a year ago is not a surprise, given the real income growth hasn't been that high, and that people are saving less now.
So we're coming to a point at which US households are probably on average, not going to keep decreasing their savings, right and so fine, But the Fed isn't supposed to be trying to fine tune the economy, to use an old phrase, to we'll recognize and so a little bit of slow down in consumption is okay.
You know, I look at them posing at the real yield here, and I think we need to frame it with a nominal GDP. The great miscall of the last twenty four months. Maybe posts and Bluntchard wrote about this are brilliantly calling the third stimulus the Biden stimulus. We've all misjudged real GDP, and certainly we've all misjudged nominal
GDP with a sustained inflation that we've had. You have in your head where the real yield needs to migrate to to assist business, to assist a belieged housing market. Where does a real yield need get to head?
I think the real yield needs to head where it has to hit irrespective of business, and then we'll get to and that is flat to up. I think our star, the neutral interest rate is going up because we've got productivity rising, we've got risk aversion down, we've got division in the world with China so less capital inflowing here, we've got growth prospects up, we've got fiscal discipline.
Okay, I got to rip up the scripture because we just got time. This is so because we just had Vice chair McClaren in here as well, and he agrees with that. Imposing that there's a new hour start. How do you presume the messaging of the FED teaches us that two percent is history.
So the way they're doing it for now is Paul and a couple others are starting to sort of float the idea that maybe our star is up for good and bad reason. It's mostly good, they claim, And they start redoing the dots every couple months, every few months, and time, moving up bit by bet that ten year projection in your raid projection. But I think it would be helpful for them to talk more bluntly about why our star might be up, and if our star is up,
how far that would be. And then additionally they then have to confront the fact that if our star is up, then their policy isn't as tight as they think it is.
Have we ever done this before? Have we ever job boned.
Two point as it was flight of hand in the late nineties, didn't really admit it right, So no, there hasn't been a public situation because once Bernanki comes in and starts talking transparent exactly our stars on the week.
It Adam, is it Old Testament or New Testament? I mean, what's a gospel here? And I don't know, We've never done this before, have we? Doctor Posen?
Probably not doctor Keane, but the fact for means that it has to be done. If the Fed just keeps telling people that policy is close to write or or tight, when financial conditions are loose and our star is rising, we're gonna end up with a mistake or a huge surprise, one or the other.
Adam, thank you, Adam posing a Peterson Institute. I can't say enough about the importance of their website. Why are you one far away? He was at a bank in little Rocket, He was daytrich The means the mean stocks just we don't have time for this. Joining us in studio Congressman Hill of Arkansas, who is one of the same voices. Whatever your politics in Washington, the arch matter here is Gensler do something. Is it healthy in America
to have day trading of these stocks? Like Reminiscence of a stock Operator in nineteen twenty three.
You know, Tom's good to be with you and Paul when we had this first come up and we had Roaring Kitty at his height, I asked, the question, is the bulletin bar when you subscribe to a bulletin bar on Reddit and people put information out there, is that stock research? Is that a recommendation is that is that evidence of front running? And I never got an answer from the SEC on that.
Okay, I've got to turn We got got a long agenda to talk. It's a two hour interview. Margaret Brennan would make it three hours. French Hill in Arkansas. There is the idea of terraff of China saying we don't want your chicken, or China doesn't want Brazilian chicken. They have teriffs that discourage the import of Tyson's Food chicken, Arkansas chicken into China. So we're going to turn around into one hundred percent tariff on an ev that we
won't let into the country as well. You're not in a swing state.
Explain this, boy, that's such a good question. This is so concerning to me that when we get into this across the board tariff approach by either the Biden or Trump administration, we recognize that we have an economy that we're deeply integrated with China, and the United States have deeply integrated economy, so as to use tariff policy really
backfires ultimately on both countries. I think you're much better identifying the technologies you have concerns about in foreign direct investment in China and then handle it that way.
Paul, I remember years ago a lunch where senior officer of Tyson's Food explained to me that they figured out where they could send the dark meat, and they would send the dark meat to China. It's old news. But the answer is is the congresstance says, we have relationships across many commodities.
Beaks and claws, beaks and claus go to China.
Is that right?
Yes?
How big is tyson Foods in Arkansas?
Well, it's one of our biggest corporate partners because Walmart, Ties and food Ja behind are three big Northwest Arkansas anchor enterprises and their global reach.
Yeah, it's just extreme. So it is an election year. What does that mean for the day to day workings of Congress?
Do you guys have it? I assume you have a to do list? How does that impact it?
By the fact that a lot of it's an election year and there's a lot of noise in Washington.
Well, a couple of weeks ago, Mike Johnson got to celebrate his first day as speaker because after passing the Ukraine, Israel and Taiwan package, the Foreign Intelligence Surveillance Act, reform and reauthorization, and twenty four spending. Those were all things we were supposed to do in twenty twenty three. So having cleared the decks of those, Paul, I think you'll see us move into a campaign mode, which is really messaging bills to show the sharp contrast between the Biden
administration and how Republicans would govern. But there are things we have to do. A Farm Bill every five years, we authorize the agriculture programs.
That's up.
I expect to see that be marked up in the House Ad Committee this month, National Defense Authorization Committee, and then of course the most important is debating fiscal twenty five spending. So those are all on the plate even during an election year.
And of course we have geopolitical issues all over the world that has everyone's attention. What's your current thinking or what's the current thinking within your house as to what's going on in the Middle East and our policy towards Israel, policy towards that whole situation.
Well, our policy towards the Middle East, I think has been off track as the Biden administration has really taken a page out of the Obama administration, which was to coddle Iran. And when you look at this, Iran is a partner and everything bad going on in the world today, including the invasion of Hamas from Gaza into Israel, and they're at the heart of it. And we freed up money, we freed them up from sanctions all under the Biden administration.
House Republicans and a large portion of House Democrats opposed that policy. And I think it's at the heart of rearming Russia in Ukraine, partnering with China because China buys eighty or ninety percent of energy from Iran and therefore sending them money, and then they're arming the Houthis that have disrupted rid sea trade. So at the heart of this axis new access of evil, I think you find iron at every step.
Is there a politeness in Congress right now? Things improved from the madness of twelve months ago.
Well, we have people who are performance artists in Congress, and then we have people who are there to help govern and drive the agenda and counter the Biden agenda if you're rou now.
But the performance artist just had a boofest. It sounded like the British, sounded like Parliament for a way, So is there a sea change here. Maybe I think people.
Look, I think Republicans in Congress want Mike Johnson to continue in the speakership. He's doing a good job. And let's get through the as you say, Paul, the national election in November, let's focus on that. Let's have a contrast between what Republicans would do if we expanded our majority of the House, took the Senate with or without a Biden presidency. I think that's what we should be focused on.
Okay, and we got a problem here. First of all, we got Purdue October twenty eighth, and you know, we got the Red White Showcase October fourth. But this year Arkansas basketball has a different character to it as well. They're popping seven million dollars to the guy from Kentucky. I mean, Arkansas's playing large year. What's the impact of John Calapari coming down and changing Arkansas athletics.
Well, we're fired up to have him, and we're glad he's going to keep his shirt on. Our previous coach would always rip his shirt off when we had a victory, didn't have enough victories. But we're glad to have him, looking forward to him rebuilding our program. But you know, my concern about NCAA Sports is where's it going? Yeah, with name, image and lightness and paying players and they can enter the portal at any time. How do you have a relationship if you don't have a contract with people.
Do you have any understanding that the money that Caliperry brings in pays for history professors or banking professors?
Well? I think I think we know NCAA Sports that football does cover a lot of operating expenses at big universities, There's no doubt, and sports plays an important role there. But I think we're on the cusp of a really turning point in college sports when we tried to figure out we have these huge contracts with coaches, right, yep, but do we have how do we get them the players they need to play to deliver on that contract?
Yep?
Arkansas Duke November twenty Ninsol. I mean there's a road trip that will go down Congress and Hill could join us there for our play by play. Yep.
Yeah, that'll be a play by play, will be the ticket to admission exactly.
Congresstan talked us about the economy in Arkansas. How are the people in Arkansas doing?
You know, the numbering number one thing I hear when I'm at home every week is inflation and the impact on inflation on small business and families. The second thing, which you've picked up on a national basis on your show is people are still looking for the talent they need in their workplace. So this is one of those economies like we don't see very often. And so inflation's number one though, there's no doubt about that.
One minute you have new legislation that you're initiating. Do you have a Democrat who's lined up with that? Tell us quickly about that new legislation.
So FIT twenty one. This is creating a regulatory framework for digital assets. This would tell the CFTC and the SEC how to manage, regulate, and exchange digital assets out there in the marketplace. We want America to be top in innovation there and right here in New York. Richie Torres is a great leader on designing that legislation. Jim Hymes and Connecticut has been very helpful. So those are both Democrats that have worked hard on it.
Do you support ETF for bitcoin?
You know I do, because I think the SEC did the story and I think the cash market in alignment with the bitcoin market's been demonstrated, so we'll see what happens there.
Congressman Hill, thank you so much. He's a Republican from Arkansas.
There, ninth generation Arkins visit.
That is amazing. I can go back.
Davy Crockett used to come over for dinner, I mean Ireland with you to Frendchhill. Thank you so much. Always looking for the next challenge here in the Dow up thirty six. Julian Emmanuel joined some evercoorp Isi this morning. Readjust the bull call right now. Two October's ago death bullmarket, the Yardinny move, the Incorpora move October five, six, seven, eight months ago, another bull market. Are we still in a bull market? We are still in a bull market.
So if you go back to October twenty two, the entire down draft in twenty twenty two, and really the other side in twenty twenty three, it was very valuation driven. Okay, we understand that the earnings have migrated towards for the most part, that's select seven, But at the index level the earnings have stayed roughly the same. The thing about twenty twenty four, which convinces us that even though we think you have a correction in front of you, is
that the bullmarket has further legs. Is you're actually going to see earnings growth for the first time in two years.
So what did you see in this earning cycle that we're just kind of finishing up.
Now we'll get some retailers this week. It seemed pretty good to me.
There's good earness growth out there.
It was a bit odd.
So basically what happened was is that the surprises were much larger than expected because revisions went down prior to the start of the quarter. There isn't really an explanation other than perhaps the message of what was a subpar our GDP first quarter. But you're basically on track five and a half maybe six percent earnings growth, and from our view, that's good. We expect roughly that rate of
growth throughout the year. But the problem for the markets is the market expects that number to be upwards of ten percent.
Has the wall of money moved into support stocks or with a five percent money market fun is yet to happen.
So for us, it has yet to happen. However, the key factor here is you've had a revision of behavior. Okay, if you can just sit there and get upwards of five percent risk free.
That's not bad.
And particularly as the debate goes on and the FED seems more and more hamstring.
Can we rip up the script please?
Rich, thanks so much for this plug. Power. That's a Dow JONN stock up seventy percent, game Stop up one hundred and thirteen percent, AMC Entertainment up one hundred and twenty nine percent. This is not anathema, but the opposite of the Edheimen culture. Are you telling me all this meme stuff is healthy for our confidence in our financial system? Now it's not healthy?
And frankly, what it is is something the FED looks at this and this disturbs them because what it's saying is that unbalanced financial conditions are probably still too loose to get inflation.
Respect so far he remembers when they were fruit on the buttonwood tree. I mean, he goes back that far. Who's a police officer here, Julian Emmanuel.
As it probably is for the most part, you're you're broker, and frankly, there's no stop, there's no problems anymore.
Good morning, Commonwealth. We thank Commonwealth for their support. Show come on list some Mateo's kids are day trading game. Stop up? What one hundred and come on, Paul.
Help, here's tough out there if you're not nimble out there on some of these names. All right, let's just brought it out a little bit there at Julian small Caps standouts. What's a small cap standout on? Why do you like them? So?
What's very interesting, and we were kidding about this before the camera turned red, is the concept of quantum analysis. And what we found very much is that you have a shift around the concept of momentum. Okay, two things are going on. Number One, we all know because of the mag seven that basically small caps have been for the most part of the last two years a funding
short for active managers. And you know the the is it different this time given the fact that the entirety of the Russell two thousand market cap is below the highest market cap in the S and P five hundred, and what we would say is it really isn't different this time. And frankly, what you have is a case where momentum is starting to shine. So the Rustle two thousand is an index peaked believe it or not in
twenty twenty one. But there's a lot of stocks that have made new highs since then, whose earnings are moving in the right way. Those in the names we want to own, putting a toe hold into our view that long term small cap is likely to have a sustained multi year period about performance ahead of it.
What's a momentum miser? Page forty of your decks.
There we go. So the essentially the opposite of what I do.
I see you laughing at me. Sweeney actually reads the decks. I don't.
There we go, There we go. We'll see eighty pages the client's tire by like page sixty or so.
What's a momentumizer?
They are stocks that have not made new highs since this latest bull market cycle and have downward earnings revisions, and it's all a matter of expectations, and if expectations are coming down, those are the kind of stocks you want to under own, sell short that type of thing.
Well, I mean, what does Edheimen say about materials? Copper? I mean, you know Edheimen remembers an anacon of copper was in video of the day? Are we back? Are we back to materials?
I think that's a more mixed view. Right, So the question is the question is Is this a result of, you know, a supply drag over the course of years. There's certainly an element to that. Is it a result of the fact that the rest of the world seems to be stabilizing economically, perhaps more than we thought. There's an element to that. We don't see this sort of woosh type
reacceleration that justifies this in increase in prices. But then there's also the idea that assets are moving to hedge and inflation that appears to be more persistent than perhaps we thought six months ago.
So what do we do here?
How do we think about valuation here? Because we've had such a move off those October levels, you know, twenty five percent of the sp and more and some other indexes. Earnings are good, but I'm not sure they're that good. Are we pushing the envelope on evaluation here?
We are pushing the velope on valuation, which is why for us we think the indexes move a little lower in the near term.
Julian, thank you. Let's do it again. This is too short a visit. Julian Emmanuel with evercore Isi. This is the Bloomberg Surveillance Podcast, bringing you the best in economics finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am
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