Surveillance: Capitalism Works, Langone Says

looking for? The estimate and our survey a hundred and ninety thousand for the month of April they call at Deutsche Bank one sixty thousand strong basically for this point in the cycle. Really, I don't want to emphasize that it's you know, weaken in the prime month or anything like that. This is strong data all around. Women into the show. I've gotta get the juvenile question out the way. It's good data good news today, or it's good data

bad news good question always. Really, I think, you know, we don't want too good a data, right, So we don't really want strong enough data that it tests the FEDS patients. Yeah, so a number, say, for example, like to seventy five k like the a DP number. I think would be in the realms where people start to have to think, wait a minute, we're pricing in rate cuts when we maybe should be thinking about rate hikes.

I thought I was in charge of driven questions. Well, I just thought to get it out of the way, Okay, please continue. Federal Reserve speakers through the day really really busy, including Vice Chairman Richard Clarada. What do we need to

hear from Mr Clarada today? Clarification? I had hesitated to say, really, I think clarification of the comments that chair and Powell put out really in a way, so you know, he took a very non doctrinaire approach to things, with a little fuzzy in terms of what would provoke a rate cut. Didn't want to get pushed into the terrain of saying, look here, if coinflation is below target for X number

of my etcetera, we'll have to respond. I think you're going to get the same message from Richard Clarida, but I think it would be useful for the market. You see, they're on the same John Neils yesterday frankly as well, folks. I can't say enough, folks, how important this cycle of speeches is eleanor we one step away from the Vice chairman or anybody else is gonna say, you know what, this is all wrong. We're going to lift rate when we go next and we get a tantrum. I mean,

that's the arch fear of institutional Wall Street. No, so I think we're not going to get there very quickly, not certainly, not today. I thought that if you got anything from Chairman Powell's comments, it was very sharply neutral. I mean he really said that not there's not a strong case for rate hike or rate cut. You know, that is very different of course from what's been priced in the marketplace, but it's also a long way from

a rate hike. Well, what I'm looking for from the very long list of Federal Reserve speakers through today, there is a conference happening, the Hoover Institute Policy Conference, so look out for it all through the damp leaf that

Mr Clarada will be speaking at eleven thirty Eastern time. Personally, what I'm looking for Alan is to whether there is any daylight between the chairman and the people closest to him, because there are some people out there listening that think there might be do you and there might be some daylight to the extent that I think both Clarada and Williams, I think, take perhaps as somewhat more theoretical approach to things in terms of and and and sort of lay

things out in theoretical terms in a way which the chair the chairman doesn't. So I think there's sometimes differences that come through there. They're largely nuanced. I don't think right now there would have a different view on what policy should be. But as for signals going on in the future, yes, there's there's a there's a hint to daylight. Ellan, you are so diplomatic. I thought that was incredibly diplomatical. The State Department with Mr let me translate what Sir

Alan Ruskin just said. Powell's not a PhD economists. These guys have underlying theories and piles basically saying, yeah, right, okay, what is the theory of the pH d economists right now? Is a traditional Phillips curve? Is it completely data depending? I mean at a graduate level, what is their theory right now? I think the problem, Tom is that the theory in terms of creation of inflation has nowhere better to really turn than some sort of output gap framework.

But as we know, the Phillips curve looks extraordinary flat. We may be at the point where there's a little kink where it gets a little you know, steeper, but we don't know. And that's all we have to hang our hats on in a sense. And that that's a big, big, extremely well said. But the issue I there, Ferrell is better at this, I am is the output gap has plugins. Some of them are accountable and tangible. In what German Pilcher, Yelling and the rest are dealing with is so many

of those plugins are almost intangible, aren't they? Maybe even worse than that time, I think we'll do a better job using inflation to forecast the output gap where we are in the output gap, that we use the output gap to forecast inflation. Thank you, Well, let's talk about the reaction function after FED you've pointed out yourself, we spent months looking at this evolving policy reaction function. The

place is greater emphasis on a symmetric inflation target. That's why so many people were expecting a rate cut, because they thought the Federal Reserve was setting us up for slowly adjusting the reaction function of policy do you think that is still the effort, the underlying effort of the effortm C to take us somewhere in that directional it. I think there's some genuine attempt to emphasize the idea

of a symmetry. I think the symmetric argument made an awful lot of sense at the turn of the year, insomuch as I think the FED looked over the abbess and they saw, wait a minute, you know, we've got inflation that is barely a target really, and now we have we could be into the downswing and that's the peak, and you know, therefore we're definitely going down to zero rates again. Inflation is really peaked, and I think that's that's a problem. The zero bounding rates is really you know,

creating a lot of the problems. So underpending the big ralliant risk assets was undoubtedly the Federal Reserve pivot back three or four months ago. There was a belief that maybe the Federal Reserve was making a policy mistake by hiking interest rates FED back away. I'm going to test the extreme end of this narrative right now. Alan, So I forgive me. Do you think there are some pockets of this market groups of investors substantial enough to have an impact that believe that if the FED does not

cut interest rates, that is equally a policy mistake. Have we gone that far? Now? Put it this way, I think there's enough uncertainty out there just talking to clients, and there are enough people who think that the FED is signal that the next move would be a rate cut, obviously premised on inflation remaining low. But I think they'd be quite disappointed if you didn't get that. So that changes if in the coming days months the market has to readjust the reality that the next move may well

be an increase. What happens to this market? How does price adjust? How do risk assets with risk respond to that? Well, I think we're first going to adjust to the idea of neutrality. Really, so FED is on hold for a long period of time. If we jumped from rate cut expectations to rate hike expectations, I think I'd be usually disruptive. But I think if we slowly take back the fifteen beaps of rate cuts that we have for two thousand and nineteen, then I think it's gonna be too disruptive.

Let's go to Sonoda synodal dampening functions. If dragging has a dampening function where he does nothing out to whenever, if you're suggesting Powell and whoever after him has a dampening function of rate out to forever. Is that French for lethargy? I mean, are we really talking here about

lethargic policy and a lethargic American economy? Look, I think actually one of the big mistakes of the dot was the idea that you hiked interest rates and then the dots sort of you know, peaked elements and stayed at equilibrium. We know that the Fed Funds doesn't behave like that. There's a cycle out there. We go up and we overshoot, and then we go down and undershoot, and I don't think the cycle is going to be any different really, So there's a cycle out there. Great to catch you

up with you one that was a little sophisticated. Your bank chief International on this payrolls Friday get rights. In the Wall Street Journal today, Narrianna coach O Dakota of Rochester and Minneapolis writes of Steven Moore today, why don't

we listen to our conversation yesterday? To Mr Moore, this is gonna be probably a three month process, so a lot, you know what, what the situation today, I think it's gonna be a lot of different three months from now when I go before the Senate and the Banking Committee and the full Senate. So I'm not too concerned about

this UM. I actually think if we can steer the UH the discussion away from things I wrote five years ago and more towards what I believe in terms of the economy and FED policy and how to create growth and stable prices, I think I'm going to win a big majority. Stephen Moore, if we fill the punch bowl to the peak, if we get half or all of the rate cut that the President demands, what will that do to dollars stability? And what will that do to

price stability? Now that's a good question. I think I could make a case for having UH, you know, repealed the rate hike in that took place in December. I remember I was the one who one of the first people although there are many who called that a tragic mistake, and of course now everyone acknowledges that it was a big mistake. You know, I would probably be in favor of repealing that rate hike, which was what I think,

twenty five basis points. I'm not so sure I I agree with the White House that we should cut race by an entire percentage point. I mean I don't. I just don't see the case for that right now. Stephen Moore yesterday, and of course events afterwards, John I, I don't know two hours later, an hour and a half later, if he was either he stepped aside or whatever. We'll go away from that soap proper. We're advantaged to do

it now with Jeffrey Sachs. He's university professor. Columbia University has any number of topics we could talk on for the next three hours, So we're gonna squeeze it in here in three minutes. What would happen if the President got his hundred basis point rate cut. Take us into the classroom freshman year, you know you're there. You've got a young turk up at Harvard, Alberta, Elasina or Michael Berta or whatever. How do you teach a hundred basis

point rate cut. Well, you don't put the FED in the hands of politicians and expect to come out with the stable economy. So that's the basic point. We need a professional FED, we need an independent central bank, and we need a monetary policy that is not at the whim of any politician. Frankly, do you think we're putting something that is what do you believe to be quite precious?

Do you think we're putting that under risk at the moment. Well, the disdain for this institution the President Trump has shown in his direct attacks, in his flagrant violation of the norms of how monetary policy is considered and should be discussed, and in his proposals for FED governors has been really dismaying, but not unlike what we're seeing across the board in our federal institutions were they're falling apart in a lot of ways because they're treated with disdain, because the people

that are filling them are not qualified to fill them, because everything has become hyper political rather than professional. Before Kine and More, we actually had some quite conventional nominations from this administration. In fact, it was what I considered by most of our guests that they had nominated really good candidates for the Federal Reserve. Two of them didn't even get a hearing. Has something changed within the administration where we've gone from the likes of good Friend and

others to the likes of Canaan More. I am not an insider to this administration to say the least, but it does seem that the president is more more in in control. He's not listening to advisers. I presume that this is what this is, but definitely we're seeing a deterioration in policy making in general. I don't this is not a secret. There is no policy because there's whims, there's tweets, and Jeff this is important. What John brings

up is really really important. Take us into the American Economic Association meetings, and the fact is Jeffrey Sachs is on the same page with John Taylor Stanford or Marvin good Friend of Carnegie Mellon much more than people think. The media loves to show the liberal and conservative polarity, but Marvin good Friend is one example. Would be some

form of a centrist a candidate, wouldn't. I think the key actually is professionalism, because when you have trained professionals that are not hacks, they sit around, they talk, they analyze the data. They may not agree on everything, but it really is the way that a complex twenty trillion dollar economy should be addressed, not by these wild swings of whim and it's a little bit frightening what's happening to our institutions across the board. Again, I think the

FED is just one dramatic case. It's a stark case because the world depends on FED stability, because we have seen already what goes wrong when monetary policy goes wrong. The whole world goes into crisis. We're out of time. What we'd love to do a professor secs John, and I would love to get you back for an entire hour to talk about five, six or seven themes. I will be absolutely you know that I will be happy to be here anytime, Jess, Thank you so much. University Professor,

Columbia University. We all know this, Ellen Zentner, Morgan Stanley joining us right now. Ellen, like all of us, has an email incoming box that has junk emails. John Farroh just got the mother of all junk emails. John, This is brilliant and it really points to a Farrell like future. This is beautiful. This is from LinkedIn, and every now and then they send me my top jump picks. These are sometimes Morgan Stanley comes up picks for you this week,

Private Equity Associate, Strategy associate McKenzie, etcetera, etcetera. And then Governor of the Bank of England. Come comes up on my top job picks because I've got three company alumni at work there. I mean, come on, what's the alt go behind there? Ye all go behind that? I don't know. It's Ellen Zentner's fall. Let's bring in the chief economists of Morgan Stanley. Ellen enter doing a wonderful job on framing the path of the American economy and once again

dead on about the sustained low rates and inflation as well. Ellen, you got an opportunity for John Farrell this morning at Morgan Stanley. Yeah, you know what, John, comes see me. You can work for me. I'll do the summer internship with you, guy. You can you can work for me, my coffee boy, coffee boy for the rest of the show today. Coffee boy, Ellen, let me get this out of the way, because there's so much important to talk about your You're one of the great market economists out there.

How do you synthesize the struggle we are in? Filling slot for Governor of the Federal Reserve System how do you in the trenches, UM process what we observed yesterday? Uh well, you know, I look at it from the thirty thousand foot levels, So I try not to get dragged down into uh you know, discussions of whether someone is qualified or not to be a board governor. Um.

You know. And sometimes you can sit back and look at this with amusement, and sometimes you can look at back at it in horror and watch as it as it plays out. But UM, certainly some relief that the nomination um was pulled. Uh you know, I'd like to see more qualified people uh nominated to the board governors. I think it's not necessary. We've been working too shy to positions, shy of a full uh deck for you know, a decade now. UM, So it's not necessary to get

two more board governors appointed. UM. So we don't have to rush it. UM. But I would like to see actual, viable nominations of people that could actually do the job. Um. You know, because the questions I get from clients that I feel most often is how would this person shape monetary policy? Uh? You know, would they get on the board and just immediately the stance on rates would change? And and we're sort of missing the forest for the

for the trees. You know, there's a reason why monetary policy is made by committee so that no one person has outsized influence. And so you know, if we if we do get someone that maybe not as so qualified to be a board governor, at least we can take comfort and the fact that they'll be in discussions with a with a broad committee. Uh, and it's not just solely up to them. Well, and then I think you've touched on something really important. The process in the system

in place at the moment works. It stops people from the while unqualified, getting gone to the federal reserve, and even if they do get there, it's gonna be very difficult for them to have influence, isn't it. Yeah? Yeah, And so I think that's what we've seen play out um with both the Cane nomination um and the more nomination um. You nominate and give a period of time for people to react to that, and you're able to gauge whether they actually have a chance of passing a

uh Senate getting to Senate confirmation. And if it looks like it's just a no go, then either the president or the the nominee themselves pull that nomination. Uh, And so you know, sometimes that's for good reasons, in the case of Cain and Moore. Sometimes it's for not so good reasons, like the case of Nellie Ling, who would have been a phenomenal Board governor but would not have been able to pass Uh you know the gut word

that she was not able to pass Senate confirmation. So you certainly don't want to continue going down that road. So if your clients have confusion about the prospect of a main of a cane more FED, how do they feel about the Fed? We have gone, what have we learned this week? And what you tell them about what Chairman pounded just a couple of days ago. Yeah, So

I think it's a mixed bag for clients. I mean I have uh, you know, clients that I talked to that are frustrated, um at mixed messages that they feel like they're getting out of the FED. You know that, Uh, that Evans and Caplan sending a message that inflation is low and they could be considering insurance cuts. You could throw Cleared into that mix. And then you get chair Pal that sounds like they are so far from consensus

on it now. Uh. You know if you're a Fed watcher, we knew that there was there were nowhere near consensus on an insurance cut. And if you if you step back and just read or listen to what all four of those men have said, Um, they're all saying the same thing. Inflation is low. We're frustrated by it. If it persists at at these very low levels or moves lower, we would certainly be concerned and would need to adjust

policy around that. All four sent to consent a consistent message. UM. I think what I've noticed is missing from Pal's uh, from the conversations that Pal has with us and with the markets, is that and this goes back to when he was communicating around the balance sheet as well. He's missing that standard boilerplate language that monetary policy makers historically have used those if then scenarios. Here's our baseline, here's what we expect to do. If the data comes in

worse than we expect, we would we would cut. If the data comes in better than expect, we could hike. And it's it's a simple, it's a fact. It's boilerplate language. But just saying that would give people more comfort on this job today. Ellen sent here with Morgan Stanley is where us Ellen. There's a point with every frontline economist where they become oh, who's that? And with you long ago and far away. It was productivity analysis the efficiency

of the American economy. So if I look at capital dynamics, labor dynamics, and everything else piled into this new and proved productivity that we see, of my audience doesn't buy it. They don't buy the new improved productivity. Are we more efficient now? Are we more productive? Or is it just smoking mirrors? Well, the way I would put it, Thomas, that we're more productive, but in a way that it's not counted in the in the data like the old productive days of your Where is it a gilded age

and we're being more productive? For Jeff Bezos and Warren Buffett, Well, yes, frankly. So what we're seeing is a lot of the capex that's going on, a lot of the capital capital deepening is all in software. It's an AI, it's an improving warehouse processes, UH and the like, And we just don't produce as high of a rate of productivity when we're investing in services or it's coming from the service sector as it is when we're coming when it's coming from

the manufacturing sector. And so what I would call a new day for productivity by the fact that productivity is picked up, it's picked up to what is a very low underlying trend. And it's just the truth of it. Um. We are a service sector led economy, and the service side of the economy is not associated with very high rates of productivity. Now, on the one hand, that's how

we can get so many people employed. Uh that we we have such a low unemployment rate and we're creating two hundred thousand jobs a month on a pretty steady basis. You know, we're doing that because productivity is not you know, to three like it was when we were manufacturing led economy. Productivity to the run rate for productivity we believe is more one. And before we let you go, we need the Morgan Stanley Guide to pay Rolls in about thirty

four minutes time. Please what should we be looking for? So we're going to be focused on private payrolls. That's where everyone should focus their attention. We're looking for one ninety four, that's a bit above consensus headline. There's no telling where headline comes in. There's going to be a census impact um. It could be twenty thousand, like Jim O'Sullivan, who's a fantastic forecaster, is expecting. It could be closer

as we're expecting. But you've got to strip out any sense of effects over the next several months and just look at private payrolls and you see there's some of the granularity that the pros are looking at as we look at simple statistics like the unemployment. Do you like milk with your coffee on? Almond milk? Almond milk? You drink almond milk, almond milk? Try any sugar? Absolutely, no sugar. It's evil shook his evil finding out a lot about my boss. An know they're really bad news. Here coffee

boy is Mrs Keen is listening to this. There's a fifty five gallon oil drum of almond milk in the refrigerator. We find that so much about this is like Google. I can see the I p O. James Gorman is going to do a secondary offering for Morgan's. It's going to demand the top. Sugar is evil and lovely. To Chief US economist Jeff Rosenberg, City of Port filure manager on black Rock, systematic fixed income t great to catch up with you, Jeff you first read on the payrolls report, please,

great to see you as well. Guys. The first read is, you know, it's a it's a strong report. It continues to tell the story of strong growth in the labor market without pressuring inflation. That's a little bit of a weaker number UH point two versus point three expectations in terms of hourly earnings UH year over year three point two percent. So you have these strong numbers in terms

of payroll growth without really pushing up the acceleration. I think this just continues a sequence of strong reports in the labor market and not really pressuring on the inflation. Tom you mentioned in a minute ago about you know, the inflation narrative. I think Powell put a pin in that earlier this week, and certainly nothing out of this report is gonna is going to raise concerns on that.

Why is there an insatiable desire? You know, we always look at yielding price and that, but Jeffrey Rosenberg, the fact is people are issuing paper and the demand for it, I'm going to use a nonpro word is insatiable That keeps yields down. Let's begin with square one. Why is there an insatiable demand for fixed income paper? Well, there's a lot of reasons behind that time. I mean, you you have a you have a supply demand issue, and it's it's not new, It's been going on for a

long time. And it's not just about the US. This is about global savings, is about a global demand for fixed income. That's a secular trend. Part of that is driven by demographics, part of it is driven by the lack of yield in the rest of the world. Pursuing zero and negative interest rate policies. It makes our yield level is very attractive. Do you have a yield call?

And I mean that's seriously and that you're not in the forecasting business working at buyside black Rock, but two point five six And it feels like an economy that says three point zero zero to me, And yet we're not there, are we? What's your what's your call? Twelve months out on tenure yield? So I think that what we are in in this environment, and I think the more important data around today's report is on the inflation

side rather than the headline. Where is the debate. The debate is centered around the inflation outlook, so today is a little bit helpful. It doesn't accelerate the inflation outlook, uh and it and it certainly helps to stem some of the concerns about too little inflation. But that's the environment that we've been in and we've been talking about and we'll talk about later today in the Hoover Institute.

And we get the headlines from policymakers discussion about changing the framework to how do you deal with very low inflation in that kind of environment? The reason for such low levels of interest rate says, there's an expectation that central bank policymakers are gonna be much more willing to cut interest rates than they are to raise interest rates because of the fear of inflation going downward. And that's

what's pushing downward interest rates. I think that as we get through you as twelve months outlook, as we get through this low level, one and a half percent is where inflation is running. Our forecast see that not in the near term, not in the next three months, but by the end of the year we're gonna be around one eight one nine on that favored measure by the Fed core PC. And in that kind of environment, you could pick up modestly higher in terms of interest rates.

Jeffrey Rosenberg with concern. Jeffrey Rosenberg with a black rock, and we continue. I can't say enough, folks, if you don't have a Bloomberg terminal, you will get one only for t live go. It is outstanding in the esteem Scott Landman right now, right in there, jeff Rosenberg, This puts the historic perspective on the moment. The jabist rate falls to a fresh year low of three point six percent. That wasn't in your textbooks at Carnegie Mellon. What is

the three point six unemployment rate mean to President Trump? Well, it's it's obviously very good news. Now the details around that unemployment rate, he had a big drop in terms of the workforce, and you know some people will will certainly highlight you know that maybe technically driven, but the fact is is we are at historic low levels of unemployment, as low as they've been since the nineteen sixties. And

it's indicative of where this economy is. A very strong labor markets, very extended cycle in terms of the economic expansion, but without the inflationary consequences that we saw in that last period of very low unemployment rate's mid nineteen sixties, inflation d anchored, and you had, you know, the origin story of the FED, uh, you know, popping the bubble of inflation expectations. A very different story for very different reasons this time around. But that's what the utlow unimportant,

you know. And then within tie life, go Jeff Rosenberg, and I know you've been on TI life go written up with your comments many times. The gentleman Torsten Slack of Deutsche Bank. He's got a three a three words sentence here of analysis. Powell was right. If Powell was right, why is he getting so much grief from the President of the United States. Well, he was wrong before he was right, Okay, thank you. Will said expected that the December move was a policy mistake, so he was right

to pivot. I think it's what Torsen is talking about, and that's that's what has occurred here, and that is correct.

And you certainly see the market and the economy responding to the easing in financial conditions from the pivot from Powell back on January fourth, after recognition recognizing belatedly with the market's help, that the the increase in descent was was misplaced and Alan Setner, our team putting out that Census Bureau blip here that we see this month, and private payrolls is ma Zentner at Morgan Stanley mentioned is important was still a buoyant two thirty six thousand. We

are thrilled. Jeffrey Rosenberg's with us with Black Rock. This is a joy and this is a celebration. As you know, at Bloomberg Surveillance, we get informed in seventy two books a day and another one comes in. Yeah yeah, another guy that's made in another book, Yeah, yeah, yeah. And the brilliant that we saw a year and a half ago. I Love Capitalism an American story of Kenneth Land Gone with the image on the cover of a young t shirted holes ripped in his blue jeans land gown with

his home depot shovel ready to dig a ditch. A few years ago we celebrate ken Land going I Love Capitalism out for Beach reading with a paperback out on I Love Capitalism. I can't say enough Ken. The book was such a joy. It's almost James Clavill like, it's all dialogue in all what you said to people. I want to start with something and this goes to chapter one of your book, which is right now, and this is classic land going. You've just said your n y

U Medical school. These doctors need the way to finance off their backs. Tell us what you're doing to help the kids that are smart enough to get into n y U Medical how you're helping them with tuition. Well, it's very simple. We made a decision. It took us eleven years to raise the money to get there, but we made a decision that every kid we accept comes tuition free, every single one of them, including the ones

that haven't finished their study. So if you've got two years or three years left, that's free to and we we really felt like it was the right thing to do. More importantly, on Nation has confronted with a shortage of roughly a hundred and twenty thousand doctors in the year two thousand and thirty. That's only eleven years from now.

Uh fifty sixty thousand primary care physicians, thousand pediatritions and twenty five thousand O B g U I N. These are fields that don't pay as well as some of your more commanding neurosurgery and dermatology and so and it's eighties seven thousand all in it anyway, you medical living costs at all that subway fees of our it's a it's a lot of my tuitions about seventy thousand. So you got to add on top of that you wandered into Bucknell hundred dollars a year. And and you know,

for your parents this was a huge stress. You know, within the time that we've got today, give us a window into what it was like the first day at Bucknell where you were not one of the fancy kids. I remember on a Friday night, my first Friday night, they are being in front of the library and looking out over the Buffalo Valley and I couldn't believe I was there, and I just I was. It was something

I never imagined would happen. What did you learn at buck now that helped you when you built home depot? How to get along with people, how to respect people. Uh. Yeah, the studies, the academic studies are important, no doubt about that. But it was an environment where we were thrown in with each other, and it was one where you knew you would do better. The better you did in dealing with friends and professors and so forth. And I can never ever adequately express my gratitude to buck Now for

what it did for me. So Ken, one of the themes in your book is that free enterprise and capitalism is kind of the key to giving everyone a leg up at an opportunity. Do you think that still holds today to that? Maybe to the same degree, more so, more so more so. We today we celebrate ownership home depot for example, and the number I love to brag about,

we have police. We have three thousand kids that came with us eighteen years old, fresh out of high school, no college, started entry level in the parking lot, pushing carts in three thousand on multiminion. Yes, today capitalism works. Look what you guys all right here today? Look at Mike Bloomberg. I mean, look at this. Damn it. The system works. Is it? Is it unfair at times? Yes? Is it brutal at times? Yes? Every time I've had it's brutal. Okay, I'll go with that. Michael Bloomberg folks

unfair and brutal. He is a principal owner of Bloomberg ELP and one of the most philanthropic men on this Well, okay, I want to talk about the business environment. We see three M blowing up right now. I want to talk about complexity. First, Nestley had to do a reorg. Uni Lever had to do a reorder. Three E M has rolled over. It's really under performing. Is there a point where a business becomes too complex? It's just becomes too cute for its own good No, look, styles and taste change.

A thriving business is dynamic. It changes with its market. Home depot today is not the home depot of forty two years or forty one years ago. For example, we have a much greater emphasis on security products. There are there are changes in construction styles, there are changes in in fashion. We if we don't change with the market, we be rendered were rented obsolete. So the key I mean, I'll give you a good. For instance, Eastern Kodak no

longer exists for one reason and one reason alone. Digital photography showed up and they decided they wanted no part of it because they wanted to protect those little yellow boxes. Well, now they've got nothing to protect. Kodak was one of the fifty most admired and invested companies in them It was in the fifty fifty fifty Great Companies. Kodak's gone why management didn't change with the times. Management didn't change with its market. You go where your customer wants to go,

you don't go. You don't tell your customers this is where you're coming. Are we seeing some of that now? And just the US retail landscape, you know, the Amazon effect, everything e commerce and or it seems like some great names, whether it's the Macy's of the world or whatever, really struggling. Look, convenience is becoming a much more important factor of life. And the other thing is all this noise about content and television and streaming. People are spending more time at home.

They don't want to go out and shop for bread or milk or Hamburgers or whatever. Home Depot is spending eleven billion dollars in the next three years on being relevant in online sales. How we do it, how we reach the customer, the convenience to the customer. So there's an example. The world has changed. Amazon was a pioneer. I want you to do an NBA right now. Paul Sweeney was at Fukuo down to Duke, and there's many

others listening all the different you know NBA's guys. Right now, what does Kim Lan going think of the words scale. It's so in right now. This word it's like synergy. A couple of years ago. We're scaling up. We need scale. You I see the landgoing face over there but ready to get hit between the eyes. One number. Name your book. I love scale. The title I wanted was capitalism and me a love affair because you know what it really

was and it is. They thought it was a better top. Yeah, I love capitalism means it sounds like Avengers scale scale ten years ago. N Why you had sixty seven neurologists on staff today we have two hundred and thirteen neurologists on staff. Why our market has grown and we're growing with our market. You've got to the key to business is to make sure you're relevant to the market you're

trying to reach. If you do that, you'll get scale home deep over this past year had a hundred and eight billion dollars in revenues that scale and look at what we're able to do. We're able to spend eleven billion dollars in the next three years on technology. We couldn't do that if we didn't have scale. We're waiting for Lawrence Cudlow at the White house with John Ferrell. But right now we are thrilled and honored to have

with us. It's an American story. I love capitalism. Kenneth ln going the hardcover did extremely well, and he dashes out for beach, reading the water sealed paperback that Hampton's will be covered with. One of the things we've seen this year twenty nineteen has been built by a lot of people. As g the year of the I p O. We've had so many big tech I p o s, but they're not all working. It seems like you take a look at some of these new technologies that the

right sharing company lifts, we're gonna have Uber coming. Some of those are struggling in the marketplace. Is this the market saying we need to see some path of profitability. You can't just give us some great pipe dream about a big market. Now. The market's discreet, The market's gonna look. I have a company that I invested in a short four or five years ago called shock Wave with the technology for the heart uh and and it came public and around sixteen bucks two months ago, and it's at

forty one a share. To they why it's it's identified a market, it's it's got the technology, and the belief is it will have significant growth because of what it does. One of the things we all need to have in life is the discipline of profits. For how long can you keep going back to the marketplace for capital to take care of the capital you've lost and eroded by virtue of losing money? You know? Look home Deep today pays five dollars and forty four cents to share and dividends.

And by the way, as a reference point, if you board our stock in nineteen, the adjusted cost is four cents to share. So do the math yield on your court. We can only do that because we make money. You make profit. Lord to say it, LS say it's about profit. You've gotta make profits. What does kid Land going to think about all the new Silicon Valley rage, which is an extrapolation of huge revenue growth, zero profit, zero cash flow, and out there somewhere will be profit one day. What

do you think of those guys? Well, I think number one, the market is agreeing with them, that the market they're addressed. Well, look at Fair, look at look at Amazon. Take a look at Amazon's numbers. They're staggering. Look at Google, look at Mike. Look at Microsoft, look at Facebook. They hit on something. At some point the market is going to demand. Hey, guys, we've given you enough lead time, we've given you enough runway. Now when are we gonna start getting some money back?

I don't know when that happened. Right do you agree with Mr Buffet that you can load the boat on Amazon right now? I did a chart today two decade regression of Amazon and extrapolated it out to troop twenty to two thousand thirty nine when Ken Lang going, We'll join us two thousand thirty nine, with the follow up, I love planned to be there, but if it's gonna be seventy eight thousand dollars to share is a log extrapolation. I'll be hud and four years old. That's good. I

like it. But but within that and out that far? Can you extrapolate out Amazon and feel good about the profit potential? Let me tell you what I know about Amazon. I had the good fortune to be invited to have lunch with Jeff Bezos. Frank Blake and I either tied sham and a depot and I went out and had lunch with him about a year and a half ago at home you've got two critical ingredients of success. He's smart and he's humble. Okay, and he hit on something

that is exciting. Tell us about that well, online selling the cloud. Look at the things he's a Look at his numbers. I mean, this thing makes money, it coins money. But guess what it's always about the people. I want to fold this back into your book. I love capitalism, which is Amazon started in America. When I go to Paris, they desperately want the entrepreneurship of landgown and bezos in Paris everywhere else. What is it in the pixie dust of America that allows us to find a bezos in

a station wagon moving books? The incentive of succeeding that if we work our asses off, if we address an issue, if we have a human want that we've satisfied, or a human need that we've addressed, and we do it out of course conscious basis will make money. Now, let me tell you a very exciting thing about home Depot and Apple Apple Grade Gun. Apple went public in December of nineteen eighty and the aggregate return on Apple is

about forty two thousand percent. Home Depot went public in September of nineteen one nine months later and the aggregate return is six hundred and thirty two thousand percent. Hamazon Saws versus exotic devices find a need address. The biggest thing that we did was to recognize the importance of the people that work with us, not for us, but with us. These kids in the stores, these are this is a secret weapon of home. Do you go to a home Depot store, you expect an attentive kid. You

expect the polite kid. I say, kid, if you're under Rady three, you're a kid one. Okay, you expect the kid that knows what he's talking about. That's what it's all about. To depot ten PM, a couple of nights ago, desperate for one little thing to keep afterthoughts, you know, things going there. It was there, it was they had had and the person you go up to randomly, it's just amazing. It's got to be time when I got to somebody at home Depot, where is such and such?

I'le seven in the back on the or Okay, so I will walk down to if they and then they did walk me back there. I want to We're waiting for Cudlow at the White House with John Farrell, Kerolyn going. How do you respond to President Trump who says immigrants are bad for his home? Depot was built and people that wanted to get up early from other nations and where that where that bib. I'm gonna get a little excitement in this interview. He didn't say it's bad for us.

He said, if they want to come here, let him come here through an orderly, lawful process. That's what he said. My grandparents were immigrants. I can tell you right now. This country was built on the back of immigrants, including my grandparents. We're in nation of immigrants. Every one of us came from someplace else except for the American Indian. Guess what we have. I'm glad you brought it up. We have a national crisis in America, big time national crisis.

Let's fix all laws that we could have an orderly way for all these people who want to come here to come. How does the president then, someone you know, well, how does Donald I know him well, I know he knows. How does he change his rhetoric and discourse so he can meet the other side in the middle. Maybe he won't, and maybe he can. But guess what, maybe it's his rhetoric that's driving these results. Look at these numbers this morning, three point six percent unemployment. It is amazing. Now all

better than that, I can tell you. It was a businessman. The hobble of regulation in this country was staggering, and it was crazy, and it did nobody any good. Were you in the minimum ways? We're up to fifteen dollars an hour? Does Kenlyn going want to go to twenty two so they can spend it all at home depot? Well, I have one simple rule that I live with. Pay people what they're worth. Pay them what they are worth, because if you don't, somebody else will. Here's gonna Ken's

gonna take a pause. We're gonna continue, Ester Lango, We've got lots to talk about. You're in radio. He'll join us on Bloomberg Television as well. Look for a special podcast we're gonna do as well. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio