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Bloomberg Surveillance is about conversation. That's the way we do it. Right now, joining us without question or interview of the day. Steven Englander with earn credit, the standard charter at Bank, definitive at City Group for years on cross rates, absolutely known globally for the relationships and currency show. I want to cut to the chase and go back to Yale. Okay, you had Bob Evanson is your faculty advisor at Yale.
Did you ever go to the Yale Harvard tailgate games that were legendary with Evanson?
No, but he did send me the Pesol Fundau in Brazil to look at their agricultural experiment stations and see what they were doing.
His was granular data, which is the way Steve Englander rolls. What take the Yale granular study that Colls commissioned. Shill learn all that and bring it over to how you make a call of fifty basis points in September.
I think the trick is to try and understand everything that's in the market and ask you why does the market think what it's thinking? What is the market logic? And then say do I have a right to disagree with it? Do I think that there's something I know that the market doesn't know? And how comfortable am I with it? Let's start on the dual mandate of inflation.
Let's go back to Evanson, giant of Minnesota and teaching it Yale iconic and that's the American farmer. The images this weekend of farmers in Arkansas flat on their back, how pernicious, Stephen Englander. Is the inflation now in America?
I think the perception is quite strong, and there is a justification. I'd say this that the if you look at some of the adjustments for technological progress, our computers are much better, but we don't use that much of their capacity. So you know, some of the softness that we sometimes see in inflation is sort of added on
by the BLS. It's completely legitimate, but it's not what the price of coffee is, what the you know, farmers or inputs from market saft farmers, Stephen Englander, where there's the standard charter bank, we are commercial trees through the market opening and well into this nine o'clock hour.
David Gerray in for Paul Sweeney.
David, you mentioned that you're sort of looking at all of these market factors as you come up with that forecaster. What was it that led you to make this call? Was it the simple variable of just the jobs numbers that we got, or were there was there some other mechanism or variable that made you feel confident in that.
Well, you also have to try and read the mind of the FED and the incentives in the market and so on, and they think, you know, yes, you know, I actually think it's the right thing to do. And one question I ask myself is say they had known the data for the last four months, non FORIGM pay rolls last four months has averaged twenty seven thousand, and because of the bias that you get from the birth
death adjustment, we think even that's overstated. Would they have cut And you know the answer is yeah, entire mind that they would have cut. And so we think that they they're not going to commit themselves to making a series of cuts, but they're going to say, look, you know, the numbers are softer than we expected. We're reading the numbers and they justify cutting, but also a bit of catch up.
We're in this moment where the integrity of government data is being cast into question more than it has been, certainly by personnel movements, but also as you listen to the president's economic advisor suggesting that they're not capturing the labor economy in a holistic sense, how does that complicate your job as a private sector economist who's looking at the economy. Does it raised doubts in your mind? How how does it sort of change the work that you're doing if that's coming about.
Well, we actually spend a lot of time looking at the data and trying to understand if they're legitimate or not. Like last year, one of our big papers, and I think we were one of the first, was served integrating undocumented immigrants and kind of saying, there's a reason the payrolls are so strong because they're getting work permits and getting picked up by NFP. So I actually spend an inordinate amount of time worrying about the quality of data.
And I say this that the riskiest thing you can do is believe people when they say you'res a gold standard because he's self criticism goes out the door.
Stephen Englander with this here and a fed call of fifty basis points, I want to take a little bit of theory here. The Yale a Budget Lab at Yale has been absolutely brilliant in teaching us about this legislation and about tariffs as well. I personally saw terroriffs this weekend and cannot paint when I'm fifteen percent out of the blue. Steve Englander, I'm in the camp. David Kelly, I want to say it hutting them at JP Morgan David Kelly writing about the income effect as well. We're
all focused on substituting. Lisa's going to go to Costco. She's not gonna buy coffee, She's gonna buy Sanca Blogny. To me right now, what's going on as a major income effect affected by purchasing power? This goes back to a guy named Hicks, Folks, a guy named Slutsky. But the answer is we're being a hit with a new purchasing power that's evaporating.
I think that's correct, and you know a lot of people understand it. You know, in terms of oil prices, right, you know you were paying forty to fill up your tank. Now you pay eighty. It means one less trip with the kids to McDonald's in the week. With tariffs and import prices, it's more spread out and less dramatic, but it's the same kind of impact. All of a sudden, everything you see is a little bit more expensive, and you have to make decisions and prioritize your spending.
Feel the dreams will fifty basis points ease our pain?
I think yes, And let me be clear, because we think that they do fifty and then they pause because GDP numbers aren't bad. Productivity looks like it's actually pretty good.
You sure, Scharmer said that in the Ft today and the.
You know, you look at the labor numbers, as you know, they're really mediocre. Its sluggage softish. But you know, as you know, I was at Lehman's in two thousand and eight. This is not a two thousand and eight type of labor market. That's not a twenty April twenty twenty labor market. It's a mediocre, sluggish, poor labor market where you know you probably should get closer to neutral, but nothing is falling off a cliff.
The Chairman has talked about the oddness of that and the challenge of having a market like you describe. How much closer are we to figuring out why it is that way and why he continues to be Is it's just the simple sense of ambiguity about policies and their effects, is it? As you hear from Scott Bessant or An Hasset, you know, things will take time to equilibrate or work themselves out. What do you make of the labor market the state of which it's in right now?
Well, look, if I want to criticize the fad, I'd say that they spend ninety percent of their time worrying about the man shocks. And here we are talking about productivity shocks, talking about labor market shocks. And there's a lot of ambiguity in terms of how you interpret numbers when they come in because you don't know if they're moving, you know what shock is moving them. So I think that that's the big issue that leaves things uncertain, and
you know, uncertain about how bad things are. So I think that you know in some ways that argues that you know, you kind of know the direction so you make a move, but you'd be very cautious. I mean, what if we're in nineteen ninety seven.
Is stagflation a word that is bandied about in the standard charted offices? Is it something that you were thinking about or worried about at this moment.
It's always a worry.
But you know, with labor markets so soft, you know, and spending going to be soft, I don't think labor is going to be about to push wages up, you know. So I think that you know, he respect in sixties, he's so yale, irrespectful, irrespected of the productivity story. I think that the you know, uh yeah, Darter.
With a brilliant essay this weekend and he goes back to nominal GDP, and I get it. It's a conundrum. Do we have terrible economic growth but still buying inflation? Stagflation is doctor Ger talks about here, Stephen Englander. Is the real risk here that we get this wrong and we have dampen growth and quiescent inflation where nominal GDP dips below five percent, ginormous number dips below Dare I say four percent or worse? Or is that in one of your probabilities.
You know, I think that you know, we all talk about AI all day long, and I think that that's going to be the real decisive for how the economy breaks that if it turns out that we're, you know, partly because of AI or other factors, that productivity growth is strong, right, everything's going to be fun.
But the FED doesn't have that luxury. We can talk about it, we can go yeah, yeah, bring in Simon Johnson up at MIT. Rogueoff was on the other day. It's a bunch of bow type stuff. The FED doesn't have that luxury. Do they to ponder AI and productivity?
Well, a, they should, I know, the more time on.
Stoomberg prescriptive of should. I like, Crewman was on once and I couldn't get him to say the dreaded s word should. Englander's doing it? What should got to do with it?
But I think, you know, in practice, given the absence of knowledge, it just means that you you sort of go slowly in the direction that you think that data are telling you. I mean, there's no straw here with which to make bricks, and you know, you can critique the productivity data very easily as well. So I think that they sort of you know, you take a step, you see what happens. Right, take another step, see what happens. If something bad happens, you stop, or you step back
a little bit. If it looks good, you keep going.
Yeah, I want you to jump in here and finish out the interview. We're having so much funnier folks with the academics of doctor England or I really want to emphasize some of this stuff is incredible dynamics moving parts. David off of that is this dreaded word ambiguity, which is we really don't know where we are or what's going to happen.
Continue will, I will ask you to indulge me and do a little work for us here as we look ahead to this week of data. So we have these revisions, I'm curious how you're thinking about them. But also we had President Cools beyond Friday saying he wants to see the inflation data this week that matters to him. We've got to look at the inflation side too, He says, how important is that to you? So how should be thinking or framing the day releases that we're going to get this week?
Okay, I think the important thing about the benchmark revisions is we think they're going to be significant, maybe seven hundred and fifty to one million down and important things there is there's no reason to think that things have gotten better since the March of twenty twenty five. As far as inflation goes, I think the real issue. You know, yeah, so you know my shirt price went up because there's a tariff on shirts. I mean, you don't know how
to engauge it. If it turns out that, you know, say services inflation is heating up and stuff that you know is not related to tariffs is heating up, then there's a problem.
What happens to the animal spirit? You mentioned seven fifty to one million, Most people are below that, it's say four hundred and five. I mean, Steve Angler's out in a linear folks, with what we're going to see tomorrow. We'll have complete coverage of this. And Steven Angler, what does it mean for people's retirement plans? Slash the stock market? If we get Anglander rate cuts? Is that good or bad for equities?
You know, a little bit of bad news is probably pretty good for equities because it calms the market down and it sort of says, look, if you get your company right, cost the capital isn't going to be an issue for you. I think if things are really falling apart, like you know, twenty twenty or two thousand and eight, then you know, bad news is really bad news. But in many circumstances, a little bit of bad news is actually good news for equities. And I'd say things that
the equity. You know, you sort of say why your equity is so strong when when everybody thinks things are a mush. It sort of makes you look at the productivity element again, kind of saying, well, wages aren't going up, but it looks like GDP is fairly strong.
What's left.
It's not going into taxes, right, there's only profits.
Bill from London emails in he's with a standard Charter bank and says, ask Steven what it means for the rest of the world. How about standards charter question this morning for Bill Winters, what does all this Englander talk mean for Singapore, for London and the rest of the standard charter world?
In some ways it's actually okay. I mean there are two elements. One is that if you look at the AI game, if that's the game, you sort of say, okay, us seems to be on the game. China might be in the game. A bunch of other countries trying to get in Europe, you know.
Right not there having some conferences.
On the other hand, you know, the say US GDP or say the FED cuts by the fifty basis points. That's everybody else's interest rates go down by thirty to fifty basis points. And that's far more important to them than sort of saying, well, oh, you know if England there's right, you know they're forty your jobs that they're not going to buy a Singapore exports. The fact that they can get their cost of capital and the risk premium is down, they think is more important to the rest of us.
Bill Winters know that Standard Charter Bank is up eighty nine point sixty seven percent in the past twelve months because of Steve Englander.
Well, I think he can add like four or five decimal points. I'm not from your mouth to his ears, honored.
We'd love to get a phone call with you tomorrow on your busy day, Steve Englander. When we get this data. Doctor Englander is with a Standard Charter Bank and they're just thrilled to give you extended conversations. There that's what Bloomberg likes to do for Global at Wall Street. Stay with us. More from Bloomberg Surveillance coming up after this.
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The good news from Mark Geller is he's Aisconsin London. He probably avoided the hit of the summer here for Global Wall Street. Mister Geller's global head of Bank Debt capital Markets at Berkley's. And this is a chat for Global at Wall Street. The big song this summer, I know, are you in the Hamptons this summer? Unfortunately not more than Hamptons. Are these trench at lyrics because this is
where we are in September. I'm looking for a man in finance Trust fun six' five blue, Eyes Finance trust fun six' five. Blue eyes that's the deep lyrics of. This song are we in an m and? A frenzy are we Going With? President trump? A deregulation just with the way the? Stars align is your day to day activity? Right now nuts.
It certainly picked up over the course of, this YEAR and i think the first quarter was particularly busy when we think about the post election momentum that we had at. That, time obviously as we've drifted through, the air there have been a few, risk events not least obviously the tariff discussions that we all had during the Course. Of april there's been a lot of geopolitical risk which have brought some headlines, as well whether it's On the, European Side, Middle, East.
India PAKISTAN so i think through the course of the year there have been a few elements where issuers AND also M and a prospective participants have had to think very very carefully about. The year, but overall the risk appetite that we've witnessed has been very. Very STRONG so i think FROM an M and a point, of view we are certainly very constructive as we think about the progress over the.
Coming months are the clients coming to the Banks like barclays or are you going out across the Hinterlands of america Of continental europe and saying now is? The time which Dynamic.
Is it's a little bit.
Of both to.
Be honest if you take a step back and you look at the financing conditions that we've had at, the moment the strength of the equity markets obviously many measures across the globe at all. Time highs that's been very favorable in terms of using that currency for opportunities ON the M and. A SIDE and i think if you look in terms of the cost of capital, right now
we've had rates. Relatively HIGH but i think as we've been discussing since the job Numbers, on friday and we've seen a reaction in terms, of rates the prospect of seeing rate cuts over the coming months should support some of that activity, as well in the same way that we had three or four. Years AGO so i think it's looking very very strong as we prospectively look ahead over the next three to.
Six months you've enumerated a lot of the risks with which you've had. To deal how much of, those have if not, resolved themselves got to a place where they're more satisfactory to those who are looking TO pursue M. And A so i guess is there more of a kind of comprehension or sense of the, regulatory landscape? For, instance now is there a feeling that things have calmed down in effect more than they were a few.
Months, back yes if you look at the, regulatory LANDSCAPE and i think certainly coming out of the global financial crisis for banks over the last, fifteen years it's been about building up capital thinking about where the rest. May be but if you look at the global bank space, right now capital strength is very, very high liquidity is, extremely strong vigilance around asset quality. Very HIGH so i think you could argue that the banks are in the best position been for twenty twenty.
Five years so that's very.
Very strong the opportunity to lend and to support some of the m and a activity that we're likely to witness and have seen over the course of. THIS year i think as you consider some of those, risk events whether, it's taris, geopolitical risk, or otherwise certainly at those moments there's a little bit of, a pause but when you look at the speed with which the markets recovered over, THAT period i think it's.
Very, conducive indeed how.
About the appetite for cross, border transactions so or at a moment here where there is a lot of ambiguity about tariffs and, TRADE policy i think a lot of business executives are kind of wondering what the future looks like in terms of them putting a footprint or a plant here IN.
The us is.
That dampening sentiment?
At all just the kind of confusion, OR again i guess the sense of not knowing the way that this is all likely to.
Play out it's certainly an element in terms of. The, debate ABSOLUTELY and i think that's something that we have to look at over the next. Six MONTHS but i think the confidence around where asset valuations are, right now it's a great opportunity to think about what your business needs and could achieve over the next.
Few years it remains a very very.
GOOD opportunity i want you to define strategic.
FOR banks i don't know if you've, seen it but a bank merger. Just warning maybe you can't come Out because barclays, is INVOLVED but Pnc of pittsburgh is buying Into the denver retail Market With. First, bank okay one small four billion. Dollar transaction to find the word strategic and conversations, right now not finance stuff like six or five guys with, trust funds but the strategic mandate that's.
Out there coming back to my comments around where the banks are globally right now in terms, of, capital liquidity the confidence, looking forward especially outside OF the us where there have been issues in. The past over the last, ten, years yeah most of that seems to, have gone and so a LOT of ceo CFOs the boards can look forward with confidence and think about what where they want to be over the next five to, ten years what
footprint might be missing from. Their BUSINESSES and i think for so many banks looking through the rear view mirror having to manage, your business whether it's because you're building up the strength that you didn't have at, one stage or strategically thinking about what, you need or managing conduct issues that it. MAY be i think a lot of that is out out of the. Way now so the opportunity to look forward with confidence is.
Absolutely There, mark geller where There's, a barclays we continue here global ahead of bank debt capital over. THE weekend i know it's completely inappropriate for you to come in and this individual Bank To, Hong kong Shanghai And. Banking corporation the Headline from bloomberg HSBC's biggest shake up in decade raisest STAKES. For ceo when people are, shaking up are you seeing tweaking at the margin across the entire or are they saying we're going to stay in, This
business we're going to get out of. That business so.
IT depends i won't comment on, individual names, of course, but STRATEGICALLY as, i mentioned it's very important to think about where your business will go looking ahead over the next five to. TEN years, i think, in particular returns for shareholders are absolutely critical. As well think about those returns and the capital that you need to keep. Against them where is it that you've got the best risk adjusted return for your business and where do you want to?
Take IT so i think looking at some of those strategic changes that we've had across the banking, landscape globally it's within.
THAT lens i would describe It.
As mark thank you. So Much mark keller with us Visiting From broccolay's Don't you good to have? You here stay With us More From bloomberg surveillance coming up. After this.
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On YouTube he anriata trays with Us. In Washington david girl is going to drive. This conversation i'm going to get one question, In Here henrietta Treys With vada partners Before mister girl. Holds, court henrietta everybody's electric bill is Up.
To.
Congress people are they aware of the inflation out there or are? They?
REMOVED no i think they're.
Acutely aware And the american public is vary attude to. Energy prices as we, all know this is just, After gas so it's absolutely going to be a topic of conversation. FLOOR speeches I think democrats are tweeting about. It constantly republicans are trying to talk about how there's a BOOM and ai and that's what's going.
To generate a lot of.
Economic growth but the reality is that electricity prices are through.
The roof so anybody made, that trade it's been doing. Really well Henry.
And TOM and i were talking about we've got twenty two days till this, potential SHUTDOWN and i gather there are two routes That the congress could. TAKE here i know The Appropriators susan Collins And. Tom cole they're interested in kind of a short term. Spending bill there's an appetite among, some MEMBERS and i think From the president himself for a longer term bill that would take us to.
Next year what's your sense of the, trajectory here the way this is going to, Play, out yes over the next couple of, weeks here bearing in mind we've got a recess baked in there, as well but also beyond that sort of what we're kind of spending bill we're likely, to get if in fact.
We, get one, you know it's going to take even more money this cycle to keep the. Government open and that's Something that republicans generally don't want to. Talk about After especially doge And the president's.
Efforts to cut the fat on.
Federal spending the reality Is the president has requested more money For the Department of defense than. Ever before we're going to be spending about two trillion dollars just to keep the. Lights on so there is a reaction Function in congress where instead of passing a big two trillion dollar package just to keep the, lights on they end up splicing it into into. Little pieces and so that's probably what we're going to get going into the last
couple months of. This year you'll get a short term STOCK gap cr that lasts as few as like three weeks sometimes, they do or Into, mid december Just. Before christmas and the benefit of that For The minority party is to basically chop up.
The legislative momentum that the majority party.
Might get so you, see this when either side is in you get a short TERM stopgap cr that pushes you Into A veteran's day And, then christmas and you just do that over and. Over again and you could tell that that's the strategy because the far right now is asking for a FULL, year cr which is historically anathema.
To THEM henrietta i Read The ezra kline essay In The New york times over. The weekend he's done a video audio component of that, as well but he talks a lot about the Bargain That chuck schumer made Back in march he convinced members of his caucus to go along with the last. Spending Bill, ezra kline a long time of progressive writer, opinion columnist saying that he supported that at. The time he understood Why the minority leader was doing that at, the time but he said this time,
is DIFFERENT and i wonder if you agree with. That assessment how much of a fisher you See, within democrats and how that's kind of compounding the risk or the odds that were likely to see a shutdown this, time around That that democrats simply didn't get enough out of going along with that spending bill.
Last.
TIME yeah I think klein's argument is.
Really interesting the ONE thing i agree with Is that democrats need to get their. ACT together, i mean they don't have a comprehensive message or, A strategy, AND frankly i don't think shutting it down just To steyvey trump's forward march is necessarily a. Cohesive argument you're going to have to put a lot more meat on. The bones, i'm biased OBVIOUSLY because i cover, macroeconomic policy but talk about fiscal dominance and trying to stress Us the fed
into cutting. Interest rates talk about how you're about to take Over The supreme court and force the ruling that allows the president to Tax the. American people that's literally what we Fought the. British OVER so i think there are really clear arguments and clients saying shut it down and begin you, About.
That andrea and one quick, question Here and i'm sure we'll talk about it as we've staggered to the election over. A beverage, THIS weekend i was pontificating About the virginia. Governor Race, earl Sears the Republican Against, abbie Spanberger the democrat. Out there How's the democrat doing there Is As abigail spanberger A new Democrat Is david gera Talks, ABOUT.
Yeah I think virginia is a perfect example of where the federal spending cuts. Come in whether you get an, engage population whether Or not democrats, turn out that's what they need. To drive so as long as you're having, That conversation democrats should just by being in the minority when one party, has control they should pick Up the house and make a real dent in some Of the senate seats Being Up north carolina and some of, the
others make a real run at It In joony. Earn's seats, you know there's a lot, to do especially in and out year at an interim.
Election, cycle henrietta thank you so much For The, Monday Brief HENRIETTA treys theta partners stay. With us More From bloomberg surveillance coming up. After this.
You're listening To The bloomberg. Surveillance PODCAST Catch us live weekday afternoons from seven to Ten Am eastern Listen on Applecarplay And android otto With The bloomberg, business app OR Watch us live.
On YouTube Stay with bloomberg all through the day for the history being Made. In France mister carroll At Our Paris, NEWS bureau i THINK it's i take, Great, issues stephen and, full, DISCLOSURE folks i have Family. In paris it's All about Paris. For americans marseille is sixteen percent the Size. Of paris paris is thirty percent three zero Of the. French. Economy folks It's like La In new york combined. In, impact stephen how does this political crisis Play, in Marseille, in Leon.
In, bordeaux, well look you're mentioning Places in france where some of the more writing parties have. Greater strongholds so many of the people who voted in those particular cities might also be wondering about why they don't see themselves represented more accurately in the government of. The day we're looking at a government spit in or a parliament rather.
Spit in about three the Far Right nata rally party is the largest single party in parliam although the Way that french, politicans worked as no other party has wanted to go into business with them to form. A government they wouldn't be able to on the current parliamentary, maps anyway but essentially within those three blocks that nobody has enough of a majority, to govern which is why we're heading towards our seventh prime minister since twenty Two Since
emmanuel macron. Became president stephen, Quickly here i'm just curious what the flavor of this speech is going. To be as we talked about a little, While Back michel barney gave one of these speeches about little less than it than a.
Year ago what are we expecting to? Hear you what you'd be watching for in.
That speech.
His message has been really, consistent throughout not only since He Became, prime minister or when he announced the budget Outlines in july or two, weeks ago when he called this, governance voter even if you go back as far as the two thousand and seven presidential campaign when he was a candidate. As well it's about Bringing the french deficit and debt. Under control he's repeated over and, over again this figure Of the french debt going up by FIVE
thousand us. Every second it's actually a really interesting example of how you try to communicate, a massive largely incomprehensible problem with debt to the general public to try to
win support. For them but essentially he's failed in, that mission despite being very consistent over the years of his Position that france needs to bring its public spending, under control needs to bring down its debt levels and bring the cost of borrowing, under control because it's set to take up an even larger part of the front budget debates.
To come i'm looking At from sobayrou now on.
His feet it's launching this debate which will determine his future.
Three Pm in Paris Or stephen kerrer will go into the evening there to give you coverage Of the.
French government this Is The bloomberg, surveillance podcast Available, On, apple spotify and anywhere else you get. Your podcasts listen live each weekday seven to Ten am Eastern on Bloomberg, dot Com the, iHeartRadio App, tune in And The bloomberg. Business app also watch us live every weekday on YouTube and always On the bloomberg terminal