Surveillance: Americans Should Be Depressed, Rattner Says

of course on the Bloomberg. Joining us now is Peter Hooper. He's the chief economist at which Man Morty. Peter, I won't ask you the question should he stay or should he go? But to maybe we can talk about the ramifications of this decision, the Governor Carney's waging right now. What are there? Well, this is a this is certainly

a difficult critical time for the UK economy. UH were as as breakfit unfolds learning how this is going to affect the economy there and and more globally, um the the economy right now facing the effects of substantial weakening of sterling. UH inflation expectations up sharply at a time when growth has not yet picked up a pace so

difficult decisions, difficult decisions ahead. I think this is an uncertainty about Mr Carney's future that needs to be resolved this week, and global investors are hoping that he stays on. He's he's a known commodity and someone who is generally trusted, but obviously personal reasons of his own for wanting to

go on. I would look through the politics here. Some new statistics at this morning from the Euro Area about growth in in the wake of the Brexit vone gross domestic product for his point three percent in the three months to September, inflation rate picking up to point five percent in October, both of those things in line with with expectations here. What do they tell you about the health of the the euro economy here after that referendum vone, Well, the the the economy is h so far, not taking

any kind of a significant hit. We weren't expecting a major negative for the euro economy, but more in an issue for the UK um UH at this point, it's how how does the how do the negotiations move going forward? The UK obviously more sensitive to this than the Euro Area. ECPs goal here are right close to just below two percent. That with the likelihood we get to that anytime soon. We're a ways off. Uh. And our expectation is ECB

is going to expand its QUI at the December meeting. Um. But certainly globally things beginning to move in a direction that that that could be helpful. I mean, you're you're seeing inflation slowly pick up in the US. News out of China has been Uh. Inflation is that admit more of the watchword these days, um so um labor markets. Labor markets are tightening. Uh. And it's going to be a slow process. But I'm gonna take a while, Peter,

let's do let's do a granular thing. We have two point nine percent and we're assuming it's inventories and exports. Helped me here with if I want to delete inventories from my analysis of g d P, translate that jargon forest okay. Uh. The inventory sales ratio has been has been relatively high. Uh. It plunged. Inventory investment plunged in

the second quarter, a big negative on growth. Third quarter looks like it's subtracted something on the order of a half percentage point from from GDP growth going I mean, added something like half a percent as inventory investment went from a substantial negative to a moderate plus. Uh. That is you know what it does going forward, is it takes a little bit out of the fourth quarter we've we've we were expecting to see more correction in inventories

UM over the near tournaments. Our Deutsche Bank view, UM, we we now expect to see inventories subtract a few tents in Q four UM. So it was a moderate plus to us, a little bit of surprise, but more in line with consensus expectations. UM. We still have some correction to go going forward. Does it get you to a sustained better g d P or as you told us an hour ago, that it gets you to sub two GDP. You can't have both. Okay, you have two

point nine Half of that was exports and inventories. Uh. The underlying feeling growth trend is something in the one and a half to two percent range. That's uh what we're consumer and business investment. Consumer just over two. Business investment has been very week has been a modest negative. That's where we need to really pick up going forward. But let me say that even if we're at just one and a half percent GDP growth, that's enough to

give us ongoing improvement in the US labor market. Because productivity output per hour has not grown over the last five years. For overall GDP, labor productivity pretty flat. So one and a half percent GDP growth means one and a half percent labor demand growth, which gives you pretty good growth in in employment. Uh. That's a tightening labor market. Um. Problem here productivity is growing that slowly. Uh. Not just it means very slow potential growth. It means uh lag

lagging improvement in the US underd of living. Uh. And it means pressure on unit labor cards. Yeah. And David, not that I want editor lies here, but it touches a little bit on Mr Trump's comments in different debates on a quote unquote one percent economy and not particularly one point zero percent. But Dr Hooper's view is Trumpian in the GDP sense. Squinting a correct word, I think it is my sudden Matt Winkler's piece this work. We can ask him about, yes, whether or not that's vaded

to the dictionary. Uh. Squinting through that headline number. Peter looking looking at household spending, looking at the state of the consumer, How does he or she look in light of that two point nine percent figure, I think overall consumer is doing okay, alright, household balance sheets of recovered uh average households net worth income ratio back to previous near previous highs, labor market doing well, hiring going okay,

and wage inflation beginning to rise. You you had a four percent increase nominal income, uh two a little of two percent real income. Uh. That's enough to sport a you know, a moderate growth in consumer spending going forward, and that's that's more than two thirds of the economy, so that that's what's giving you this uh, this underlying growth and domestic demand somewhere in the at least one and a half two percent range in the face of

some drag on the part of business spending. As I mentioned, we get personal income and personal spending figures this morning. What are you looking for there? I think my expectation is we're going to be somewhere in the four percent range nominal. Yeah, but this is important because you get spending an income. I get it, and then you take it down and you guys calculate. Did the government calculate or do you back out what the personal savings rate is? They give it to us, they give it you. It's

all part of it. You don't have to like do incense, you know, do a Harry Potter hell of kind of thing. And the saving saving rate has gone from low of three to five six. Okay, but but Peter, this is really important here. The paradox of savings, the paradox is upon us with with this great distortion of the fixed income market, isn't it. Well? We we've saying, we've been saying that the baby boom generation has not been saving

enough for retirement. Savings has picked up, but it picked up primarily because of all the uncertainty around the Great Financial Crisis. People. People were shocked by the by the drop in home prices, people were shocked by the huge drop in in asset values. Uh. All this uncertainty says we need to save more. Of course, that is that is one of the drags on consumer spending. More you say, the less you spend. Uh, that was a drag. That was a drag coming out of the out of the

out of the recession. Uh. Saving has been wiggling around, but it's been a little more stable. I would say, what are you doing us for Halloween? What am I worry for Halloween? Are you going this? John Maynard? Keys those jewel man, I've got a mask on the front, a mask on the back. On the front, I'm going as Irving Fisher and my mask in the back is the vice chairman, Stanley Fisher. So I'm going as Fisher Fisher for Hello. We think anybody will get it on

the upper east side? What do you think, David? Come on if they get it in Brooklyn? Right? Yeah, you're going as a kil farmer, right of course, of course I'll have my my backpack laden with I'm afraid to ask what the girl offspring? How you're going to embarrass them? Halloween be safe today. Let's let's I just want to rip up the script on Job's Day. This job's day is a big deal. December's job days a bigger deal, right absolutely? I mean this, This Job's Day is not

going to affect what the Fed? Uh, what what the Fed's up to? It will raise raise the issue of December if if there's an unusually weak number um and followed up by another one h uh in early December. But at this point that you know, it's uh. I think we're looking for something in the range on payrolls. We're looking for maybe a little bit further updrift and average early earnings and this is right on track for

for FED moving ahead. David Girl, December two, December two ish. Yes, we've got an ECB meeting on the heels of down of the eighth I believe. But yep, Peter, in a recent note, you said here we see a good chance of substantial further step down in the unemployment rate. What what leads you to think that could be the case. Well, the unemployee rate has leveled off over the last year

because labor force participation has picked up pretty significantly. Uh. The there's a secular downtrend and labor force participation because of demographics, largely the retirement of the Baby Boom generation taking about a quarter percentage point per year, and that adds has a substantial impact on on the unemployer right if it if it backs up, and it has, it's

enough to level of things out. Uh. If if it resumes its downtrend, um the unemploint rate with with something anything in the neighborhood of one fifty on payrolls, unemployment rate is going to fall somewhere between three quarters of a percentage point and one percent over the next year.

That's how powerful that downtrend is. UM. So we think that the labor force particiation participation rate picked up over the last year, not so much because a lot of people are coming back in, but because the rate of people who are unemployed long term unemployed actually leaving the labor force has dropped off. UH. That says that sometime in the next six months you could see a resumption move toward a bit of a downtrend and labor force participation.

That says that unemployment UM begins to trend down. Word again, you and your colleagues did a masterful job. You're going through what was discussed at the Boston FEDS Economic Conference on Octilly the fourteenth, that, of course we're fed share Yellen suggested it might be wise to or there might be a rationale for running the economy in a more

high pressure state. To what degree you think that's going to be discussed tomorrow and Wednesday around that giant conference table in the Equals Building in Washington, And and do you think there's much agreement there among policy makers that it's something that they you know, that they could be heading towards Um, you know, I think when when Jane Yellen raised the Center speech, she was sort of asking the question, and her speech was more to raise issues

that warrant further research by macroeconomists in the years to come. Um, I'm not expecting a theme to the central theme of the discussion be it's time to run the economy at a hotter level. Uh, in a serious way until until you know, next year. If indeed the unemployed rate stage starts declining significantly, this becomes an issue for FED discussion.

So far, however, we're not there. Dr Banky Dean Mackie Barklay is now at point seven two with Steve Cohen has said for quarters the migration here is to four point zero percent unemployment. Can I make some news this morning? Is a major house like Peter Hooper, agree with Dr Mackie. Okay, our house call is for unemployment getting down into the mid fours over the next year. But okay, alright, okay, it's Halloween. You want to risk Uh, they're not my

fishure fisher there. Certainly I will tell you it's pure arithmetic that if okay, if pure arithmetic that if a labor force participation rate resumes its downtrend, secular downtrend. Okay, if the economy continues to grow two percent and productivity hasn't picked up, will be below four percent by the end of next year. Let's leave it there, Peter, Thank you news. This one that's shocking, folks, you heard it. I believe folks that David Gurry. I think that's the

first I would suggest, yes for what we've heard. I want to I wanna. I want to suggest that DARTR. Hooper did not make a point forecast there or estimate he are or both. He suggested those would be the trends given this, that and the other thing. That's not the same because an official, Mr Cry, And don't let's be sure is badge still works? Mr Cry. That's all we ask Peter Hooper, thank you so much. I want to bring in Steve Whiting now. He is the chief

global strategist at City Private Bank. A real pleasure to have him here. And I want to start with with the bond market. Steve. I look at the FED minutes, I look at the Fed statements. I listened to Mario Draggy a week and a half ago, and I wonder hear how much uncertainty remains when it comes to to monta terry policy in light of what we have looking at w I R P here, the probability of a hike at you know, the heels of this FED meeting seventeen,

how much uncertainty remains when it comes to central banks. Well, I think they're coming into a path that sort of makes sense now for two thousand and seventeen. When you think about the period when interest rate hikes really became credible in two thousand and fourteen, the markets and the said were very far apart the idea that they'll do one step now before the end of the year and

two quarter point tightenings next year. And as Janet Yellen said at Jackson Hole, that was the course if there is a shop free outlook, Um, that is now sort of a reasonable course that we could be on, particularly with that qualification that, um, if there are no outside shocks, you know, history is stilled with them, and there have been FED tightenings through those periods and they couldn't control everything.

But now I think that this is a path that we're sort of the hawks and the doves can both take that road together and see if you're not you're not writing off November rate rise completely, are you you know, in my gut, I just can't completely do that. Um. The fact that they didn't even mention the weakness in the pervasive weakness and economic data in the month of August, when you know they followed up in September with a

pause in three decents. You know first said that is not political, just the absence of mentioning any of the weak economic news, perhaps so that it doesn't fall into a political context. It just strikes me that with um so much information arguing for a tightening, that just deciding to wait to December, it's just hard to say that that it's entirely off the table. December obviously seems more likely, and the historical proclivity is to the said not the

tighten right ahead of political events. But um, I just note that one play this play is after me a little bit here, because we've heard time and time again they won't raise rates because of the election. How could you see those two events interacting with with one another. In other words, if they were to raise it's in November, what what measurable effect would that have on the campaign?

On the election? As you see in Well the Strongest argument is maybe not political, it's the sac The Federal Reserve is not, you know, trying to impose a harsh tightening, and markets are unprepared, have not priced in this event,

so they politely uh in. They would likely desire not to have that outcome in the market, whereas in December, where's entirely priced in, they're going to have less impact in many ways that it has tried to tighten without impact over you know, the last two years and said only one chance and then take a look at what happened in last December. In fact, historically the Federal Reserve has tried to avoid. December is the period of liquidity

year and uncertainty. So they're just a little bit they can't win situation here, but they have managed, you know, to take down expectations so much for the course of future tightening that they're they're okay here one way or the other. Does inflation say next year, Steve writing, I think inflation comes back just simply on the oil price rise.

And you know, the depending on how the American economy forms and how willing the fit of Reserve is to go in a different direction from other central banks and will dictate the path of the exchange rate and you know, a meaningful dampening effect from goods prices. You know we were on earlier. I don't think that you're going to see the kind of inflation with a life of its own where demands that year after year year it's going to be a bounce. Yeah, And I like that framework.

Stephen Winding with his folks, and Stephen Winding is an economist and a strategist, links in earnings, revenues and the dynamics of profitability of corporations into our greatest greater economy, Stephen, and it will be a changed world if we get a villain bowder economy and others that have frankly been more optimistic than city group migrating towards the city group level of g d P somewhere in the vicinity of two point zero percent some south, some north. Isn't that

unex acceptable to the animal spirit of the country. Isn't that unacceptable to develop corporate confidence? Look, I think one of the hard questions has to be when we have nearly two hundred thousand jobs created on average per month for seven years, you know what in terms of headcount looks like a you know, very significant tightening of labor markets. But output growth is slow and so much is out

of control of policy makers. You know, we can do things ideally to incentivize labor force participation, to get people looking at the incentives to work and go back, um when it comes to productivity growth. You know the technology surprises uh that we have seen, you know, for one, in the facting sector in oil where we had a couple of years back a dramatic windfall and output uh, you know, a decade earlier in I T You know, these sorts of technology surprises are not something that I

think policymakers can plan for. But wheak you think about this, and I think it's actually a really good argument in favor of potential optimism. Is that when you're down, you know, near early nineteen eighties lows on this, and you see enough things going around in the technology front, we might actually one of these days we're not going to get

just downside surprises and growths. To cut to the chase and what's what's interesting to me and help me here, Stephen Whiting and David Gura jump in here as someone of wisdom as well. I saw an Apple commercial this weekend which is a bunch of you know, millennials. You want to punch there, you know the whole Apple techie gorgeous thing. You want to punch all of them. But the basic idea is that technology of Apple using your iPhone to do qt C pie selfies. That's productivity, robotics,

e commerce. Um. You know the fact that the e commerce sector is sort of displacing you know, standard commerce with a lot less labor input, and people are a little bit happy not having you know, massive amounts of speculum at inventory across you know, millions of square miles across the United States. You know where somebody might just walk in and happen to buy it. There is a technology like that which is in fact disruptive. Uh. You know these sorts of things where you have some resources

again on the sidelines that you can redeploy. That's how you know, real income rogers per person. That reminded me of a very vivid moment from stand fisher speech at the Economic Club of New York in which he's urged by a colleague to take a subway ride to see everybody using you sing there iPods. I thought that was

I thought that was just great. We were talking with Peter Peter a few moments ago about his take on Janet Yellen speech at the FED conference in Boston a little while back, and so much of that conference had to do with productivity. Alan Krueger spoke there as well. When you look at demographics, how much do you just raise up your hands in defeat here? How much can the FED do? How much can anyone do about the

demographic picture we're seeing in this country right now? Well, um, aging is not something we're going to do anything about. It's it's the course of history and where it will go. I think raising labor force participation for older workers is ideal. Um. What striking is in the list seven years, with the exception the last twelve months. Um, you know, we were seeing labor force participation undershoot anything that demographics could explain. People between five and fifty five were not in the

labor force US as they were predicted to be. It's been remarkably weak on that front. And you know, for us to see in the last twelve months three million people come back and search for jobs is pretty striking. That's another big forecast miss. Both the short fall and now the improvement are other size that the forecasting is getting better that we've We've talked a ton on this program just about the deficits of of FED forecasting. Uh sure, the FED and others, but you know, how do we

forecast better? Uh information, being able to take real time digital information on sales production in the economy, These sorts of things that we probably don't fund very well. Improving these sorts of things can help. Um. You know, if people are looking for the answers to like how to make you know financial markets les volatil, that's a different story. You know, we can people will always try harder to get uh some better forecast, and you know, it becomes

a little bit like high frequency trade. Think it's a it's a race for speed, but it won't necessarily improve everything. That's an important point. What is your confidence in your guestiments of C plus I plus G plus n x, particularly after the first look we saw third quarter? Do you have a belief that you can gain the adjustments of third quarter or the reality of this fourth quarter

across consumption, investment, government, and exports. I think we can interpret it reasonably well that the first cance of the year had some shortfalls. We didn't believe growth would be just one, and so what's happened in the third quarter is a bit of a correction for that. UM. Some of the contributions to growth are you know, not looking

so great as of course in the third quarter. But you know, put that in the context of let's look back at the last couple of quarters, and it balances out roughly where we think we are, which is UM, certainly better than one, but probably not as good as do nine. I wanna ask you about energy. We see oil prices here hovering below fifty dollars a barrel. We had another OPEC meeting this weekend that came to no result other than them just accurring they're going to continue

talking about production cuts for production freeze. How much is oil weighing on the markets right now? UM, only a little because sort of the absolute level of distress that we were in around the beginning of the year, whereas a variety of things, petro dollar portfolio holders in a

state of distress, selling assets outside of petroleum. UM solvency becoming more of a broad question beyond ty of the oil price itself being so high, they were contracts to sell oil UH and fifteen dollars that were sold in January, and so I think we can look at the last you know two years were investment spending to seek out new oil, to maintain the capital stock and oil that you know, this is the path forward for oil. It's not going to be a better agreements between different actors,

you know, gentlemen's agreements to do this through that. It's really going to be about high cost producers simply not being there in the future. Thank you so much, Stephen, Winning City Private Bank as well. Who you put your trust in matters. Investors have put their trust in independent registered investment advisors to the tune of four trillion dollars.

Why they see their roles to serve, not sell. That's why Charles Schwab is committed to the success over seven thousand independent financial advisors who passionately dedicate themselves to helping people achieve their financial goals. Learn more at find your Independent Advisor dot com. It is a perfect time to speak with Stephen Lawrence Ratner. I urge you to peruce his Wikipedia over a most collected career with will of advisors full disclosure. Managing much of the assets of the

former mayor of New York. Michael Bloomberg, of course a majority owner of this UH station. Steve Rattner, I want to go back to original sin. You were the leader of the Presidential Task Force on the auto industry. You had laptops where you had to you know, you had sensitive stuff on it. How in God's name did this happen? How did six hundred and fifty jillion thousand emails were whatever we get getting on get on private computers. I

don't get it off the clarity of a senior cabinet office. Well, first of all, the six emails were heavily Anthony we think assume are heavily Anthony Weens emails rather than he was right. But but look they were they they broke the rules. They were conducting State Department business on private computers. Whether it's Anthony and Donald Trump is not completely wrong. Potentially Anthony Weiner had access to State Department information, whether it was classified or not, that he should not have

had access. In the crush, You're sitting on the tarmac at LaGuardia. You've got to get to Detroit to bail out the auto business. At times you must have done this original sin right, Well, let me say two things. First of all, we had we did have in my case, Treasury Department issued blackberries and so on, so there was

a way to commune kate through the official system. That said, I think anyone who's worked in the government, particularly back then when the technology was not very robust, would tell you that a certain amount of government business does get done on personal devices. That is just the reality, as you say, of sitting on the tarmac at LaGuardia. But in this case, all government business was done off of the government server, and that's I think a different kettle

of fish. In all fairness to everybody, what I wanna say next is by no means trying to excuse anything that happened here. But when I was reporting in Washington, it was not uncommon for me to talk to government officials who complained about the updated nous the quality of

the technology they were using. Stepping aside from the politics of this whole matter, what does it say about our government's ability to control data, or to to have systems in place that works seamlessly so that we can transfer information where it's appropriate, from one person to the other.

It says that our government, not totally surprisingly is behind the curve with respect to technology and implement at the systems at least we had back then, as you suggest, for operating within the total confines of the Treasury, in my case, were incredibly difficult and incredibly ornerary. But all that said, I would also say this is not in any way a reference to Mrs Clinton nor Whoma Aberdeen.

There were some government officials that I'm aware of, who would conduct some government business on personal devices, particularly to keep it from being captured within the government email uh complex and therefore potentially subject to FOY or other disclosure. And so we can argue about that appropriate stuff that did go on. What's the legacy going to be here

of the wiki leaks side of things? I think back to just last week, a new sleu of emails came out and Marie Slaughter Form believe the State Department's Policy Planning Office, you know, saying that she and others did this quite regularly. I can imagine this and still some fear and those who have worked in Washington, who work in Washington about what's going to happen with the emails

that they've sent. Well, I think I think there's comfort and number verse and I think there's so many people who did take some liberties with the system, whether it was for convenience or privacy or whatever, that you're not going to go and prosecute five thousand former government officials.

So I think I think they're pretty safe. I think that I assume that starting whenever you want to date it from when this began, was nobody anymore is now operating off of the government, you know, anyway deviating from the government rules, and so at least we know we've accomplished that out of all this, what's your sense of the politics here with you know, so a few days until the election, the timing of this, obviously, is it still being debated and learned about. Uh, does it smell

of something to you? No? Even in terms of no, no, no, I okay. I I think that Comey is the FBI director. Comy is in a very tough place. I think in question his question, debate his decisions. But I think he's within the fairway in terms of having UH done the best he could under a very difficult set of sin That is a brilliant statement that the smartest thing I've heard on all this in the less seventy two hours. Within the fairway captures the squishiness. It makes foolish the

certitude that we're hearing from both sides. Yeah, I think the certitude from both sides is not correct. I think that I I agreed with Comey's decision back in July to explain why he wasn't prosecuting Mrs Clinton because it was such a political situation. He then went and testified in front of Congress and promised them that if anything else came out, he would tell them. Then they learned about this uh Anthony Weener laptop, and then he says to himself, well do I tell people or do I wait?

If he waits, and after the election, it turns out he knew eleven days before the election there were thousand other emails. He will get crucified by the Republicans. He brings it out. Now he's being crucified by the Democrats. So it is kind of it is a kind of equal opportunity, crucified crucifixion that's going on of him. And I think he kind of did what he had to do on of the circumstances he was faced with. Steve

I tried to do a balanced approach. I had comments from Attorney General holder and from Attorney General Mcasey uh this morning. Mr mckasey representing public Service with George bush Um emphasize the need for grand juries. Does President Clinton move beyond the grand jury if she is president? Let me put it this way. I'm not I'm not an expert on grand juries, but let me put it this way.

I think one thing that none of us should be happy about, regardless of our politics, is that if she is elected, and I think she still will be notwithstanding recent events, she is going to be faced with a continuing onslaught of investigation, some of them honorable in a sense of being by the FBI or whatever, some of them perhaps political from Republicans on Capitol Hill. And that is a very depressing thing to me as an American, that we're going to start a presidency with the president

under investigation. Depressing. How difficult to make it to govern? There are many already so many hurdles to governing, and Washington with the kind of divisions we've seen here being under that suspicion investigation. Call it what you will, How hard will it make it for a President Clinton should she be elected to govern? It is one more? It is one more log on the fire in difficultness of governing. She's already going to be faced almost certainly with divided government.

She's going to be faced with being elected with not the not a great approval rating from the country, and then you add this on top of it and an ongoing series of investigations, and as I said, as an American, you should be depressed. I've got to ask you the news question just to clearly or have you been asked to provide public service to a Clinton administration? No, and I wouldn't. I'm very happy managing all of Mayor Bloomberg's philanthropic assets. But I don't think they've asked. I don't

think they've asked anybody at this point. Just trying to get it out there can get it out, so you can ask the question President vetted to be Secretary State. Is he the energy to be a Secretary of State? He would be a great secretary of State, but he said that he won't take the job. So I think that's now off the tip. That's where your name came up. Yes, exactly, are just like two pieces in a pod from our experience. Thank you so much. Willing advisers with perspective and we're

trying for us, We're killing ourselves trying to be balanced. Honest, what an uproar this weekend? I shout out again, Chuck Todd. I'm Bloomberg Radio Sunday afternoons with his wonderful Meet the

Press David Gura, Meet the Press. Killed it yesterday at the opening yesterday, going back the secretary kissing your announcing the war was over forty two hours or whatever before the election, chucked out to Stephen, you want to come in and then and then the other example of George Bush and the d and the du I coming out four or five days before the election in two thousands and so we have been here before, and we will get through it. And well, I don't know, we got

eight more chase to go. Who knows what could happen in eight days. Steve Redner, thank you so much. This is Bloomberg Surveillance on Bloomberg Radio. David Gurray here with Tom Keane on Halloween. Excuse me, I'm so rattled, like I forgot to hit the red button. The advance of J. K. Rowling was two thousand, five hundred pounds. I've got a working statistic of a Harry Potter thing of fifteen billion

dollars is what it's worth. I just want you to know that for Halloween the Keen household spend about thirteen point three billion of the fifteen billion. Like, I don't get it. I mean, I I gotta get smarter on Harry Potter. It's completely overtaken. You've got your neo Fisherian devil faced masks. I am. I'm going as Irving Fisher and then on the backside and going as vice Chairman Fisher. It was a special custom, you know, like especially late tex late text thing. We a what are you doing? Well?

So my daughter is going to go as a peacock. She's she's got enough that she's you know, there's no no Harry Potter yet on the language. But yeah, we'll be running around park Slope. But that the mayor, the current mayor of the city, a park Slope resident at least part time. He often leads the parade that we'll have down seventh, So keep an out. Doug Cass is going as earning Banks. Yeah, with Sea Breeze partners. Doug, I mean a little bit on baseball here. This is fun,

isn't it. Well, we while we wait for that. I've got an email here from Doug. I opened it up. Here has an image attached as Doug wearing a Cubs baseball hat. Optimism continues here. Unshine fresh air, things behind us, Let's play too. I mean, what give us your takeaway of the excitement at Wrigley Field? I mean Bill Bill Bill uh uh Murray almost I love. I loved his rendition to pick me out to the ball games. One of my closest friends, George Siegel, is in Chicago and

he went to the game. I almost went to Chicago yesterday and I was going to go to Sluggers. But but do you know how much the coverage charges? Yeah, I'm afraid to ask. Yeah, just to get that, don't Sluggers is is outside of Wrigley Field. It's a local bar. It's a well known hamburg a joint. You know that you're gonna at the dinner for fifteen dollars at Yeah. Doug explained to our global audience how Wrigley Field in the Chicago Cub's experience is different from Fenway Park, is

different from Dallas. Cowboy football is different from Manchester United. Oh, it's so, it's so His historic with the ivy with the vines growing on the outfield. UM. I know every time I've gone to Wrigley Field. UM uh the uh of course I'll never by the way, just to digressive a second, I'll never forget. The best uh pitching duel in the history of baseballs, as you remember, was with my mys in Sandy and the Chicago Cubs when Sandy threw a pitch hitter a perfect game. Excuse me in

September ninth. I think it was against Bob Henley, who was a journeyman. Um picture for the Cubs, who just came out of the minor leagues. But it's so beautiful. And every time I've gone to Wrigley Field, they played take me out to the ballgame before the first inning, and they have a parent with a child play catch and said to field, I mean, what is better than that? Doug Cass, you have written often about peak sports viewership and media companies. We have not yet had your comments

on telephone in time Warner. I love what you say about everybody trying to copy the giant. Chris Berman over at ESPN or arguably helped invent the modern enthusiasm. Why are we at peak sports viewership? Yeah, I thought. I thought for some time. I've been writing on the on the Street dot com since June of two thousands fifteen, and one of my largest short positions, which is a secular short investment position, has been Disney. It's done well.

It's gone from hundred and sixteen to about ninety four. UM. You know, if we go back to two thousand five, when I established this peak sports viewership thesis, the n c Double A semi final College Bowls series showed a thirty three percent decline in ratings. Viewership at the UH, I know you enjoyed. Hockey at the NHL's Winter Classic dropped by twenty in two thousand fifteen versus two thousand fourteen.

Ratings for the college Football's National Championships subsequently declined by almost We have a number of factors, I think in terms of explaining this. Firstly, we have oversaturation of products. Secondly, we have what you just described as these sinine commentators who all want to be UM and mimic ESPNS. Chris Berman's only one, Chris Berman. Uh, it's gotten annoying. Thirdly, the quality of play UM has arguably eroded with parody UM. Fourthly,

there's or refereeing and a lack of league discipline. You know a lot of especially in the NFL, where a number of players are socially off the off the reservation. UM, we have unsavory player behavior on and off the field in other words, UM. And there are numerous viewing alternatives, and at this market segmentation, we're in a social media driven world. There's so much time each day for sports TV.

And I just noticed that Nielsen came out on Friday that ESPN lost six five thousand subscribers in the month of October, which is astonishing. David. I would suggest also that Doug doesn't mention as people are exhausted by ads. It's just there's a generational ship David jumping Yeah. PC here. I noticed in Business Week a few weeks back, looking at viewership of NFL primetime games dropping fourteen percent from

a year earlier. You say it's a secular trend here, I know a lot of people have attributed just to the to the news cycle and to the election. You do think it's greater than that. It's much greater because it began in early well actually late thousand fourteen, and coincident with cord cutting among cable TV customers. UM. Yeah, I think this is this is um David. This has been in place for nearly two years now, you know.

I think it's it's a trend. You mentioned Disney, and I got to ask you about the complimentarity there with with Twitter. Is is Twitter something that you think Disney should be taking a look at. It's I don't think it's higher's um nature to buy buy a company like that,

terribly diluted. Disney has its own problems right now, David. Um, It's earnings estimates are falling like a rock, and I don't think they'll even meet the downgraded expectations I noted here In your most recently you've talked about history and talked about the difficulties of looking back. Given the environment we're in right now with central banks and and and quant strategies and whatnot. That'll continue, that will persist. Yeah.

I was talking this morning, UM on my blog about the unusual investing backdrop and that we have these these basically three influences, David. We have this this dirty water central banking liquidity and zero or negative interest rates. We have the dominance of quantz strategies like UM risk parity, and vola tending volatility trending strategies who are agnostic to

private market value, income statements and balance sheets. And then we have this proliferation of passive investing through exchange trade of funds, and they've all up ended the benefits of those like myself and I think Tom who are inclined to look to the past for a picture of the future. Douglas cast with the sea breezes. Doug, you put out a note the other day which had in a lot of different companies, I think the great mysteries Amazon with

with the effort in cloud. They've been on a trajectory. Then they get hit a little bit. Whether Douglas casts on Mr Bezos and Amazon. I took a basic what I described as a trading short rental in the stock the day before earnings were released, and I did so for two basic reasons. Number one, it appeared that just technically the stock was making a double top at eight fifty. So had I had a tight stop in my short position was meant to be a trade, not not the

investment short the way Disney is. The second more important factor from a fundamental standpoint, Retail isn't disarray. I mean the retail stock index just makes new lows day after day after day, and I didn't believe that Amazon would be immune to the retail carnage. As we moved into the holiday season and improved that well, and the stock went down um from the top by seven or five points, at which time I covered the short and it was one of my better shorts of the year. What is

your tone three or five years out? Is it like Dartman where that we're going from the lower left of the upper right, or could you be more nuance and the gentleman? You know? Um? Back in I'm a bit of a student of Warren Buffett, as you know. And back in his Chairman's letter to Berkshire shareholders, he was quoted as saying, to the extent, Charlie and I have been successful. It's because we concentrated on identifying one ft hurdles that we could step over, rather than because we

acquired any ability to clear seven foot hurdles. And I think the market is now a seven ft hurdle. Um. The SMP five index is expensive. Are nearly all valuation metrics. I look at eight of them, Enterprise value to sales, enterprise value to IBADA, PD growth, which is the rate forward PE cash flow yields, cyclically adjusted PE price to book and free cash flow yields, and the aggregate index is at the eighty third percentile. However, Tom, if you

look at the median stock it's at nine percentile. This to me is a seven ft hurdle and so I want to be risk averse in a period of gross uncertainty. You mentioned that uncertainty looking ahead here to the election just a week away. What do you think, what effect is that going to have in volatility to think and how are you covering yourself there? Well, my baseline expectation, Dave, is in looking at predict Wise and election odds dot

com and the Lunding betting parlors um. My baseline expectation is that Clinton will win the White House, that the Democrats will regain the Senate, and the House will be maintained by the Republican Party. And my concern is that my concern actually is either a Trump or a Clinton victory will be market unfriendly. And the reason I say that is because it's very important that we have a

successful policy. Baton pass from monetary policy which has introduced massive amount of liquidity and zero interest rates in this country to a thoughtful economically growth catalyzing physical policy. And I'm afraid that not only are the parties fractured between themselves,

but within the parties they're fractured. What were the honest that you're playing here on on a big fiscal package, on on that fiscal policy that that you mentioned, And I wonder what the implications of visa the senses um you know, my basic expectation I look at my bad case on the market, is I see UH Treasury yield rise and the tenure rising to around two and a half percent next year, and that the yield gap narrows

slightly to about four hundred basis points. That produces an earnings yield of six point five or a PE of about fifteen point five times. And you apply that pe multiple to my estimate of around a hundred twenty three dollars of S and P or and and I come out with an SMP at nine, which is in a roughly twelve percent below where it is today. A few minutes ago, I asked Steve Whiting the degree to which there's there's uncertainty surrounding what central banks are doing right now?

For you for somebody who who looks at technicals, looks at history. When you look at at what the central banks are doing, how sure are you of of the path there on right now? Well, I think they're they're they're trapped. They're trapped um in in what is appearing to be a Larry Summers um secular stagnation scenario. And the problem I have is that the effectiveness David of monetary policy, both domestically and around the world, is losing

its effectiveness. So we're we are really super reliant on on an effective um as I said, baton path to physical policy, and I don't see it happening in this country. Yes, listen one minute. How do we speed up baseball? I mean, you know, it's an important issue. How do we speak up the game of baseball? Are we nuts? Well, it's the question being asked in a number of sports. You know, I played two rounds of golf this weekend. It's the same problem with golf. Um Uh, it's a real problem.

As I said in my in our discussion of sports viewers peaking sports viewership, people have just so much time in the day, and social media is taking a larger proportion of our time. And I don't think. I don't think the grand old game is going to be changed in our lifetime. Tom Okay, Doug Cast, thanks so much, brilliant inspired Doug that you're going as Dennis Gartman for Halloween. I think that's just absolutely well. We all wish he's on the course, like eighty hours a week here whatever

and in the county around it. Doug Cast, thank you so much. With Cebris Partners. Thanks for listening to the Bloomberg Surveying podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.

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