Surveillance: Eisman Ends Bet Against Tesla

Should we do this? It's clean and it's good. So I'm gonna let Steve Weisman do his joke. Heisman Group Newberger Berman Sr. Portfolio Manager, Good morning to Steve. Morning. I didn't know you're a comedian as well, So let's talk about it. Give us the joke off the top. What is it? All right? So the joke is guy who comes the CEO of a company reports to work on the first day, has lunked with the old CEO, and the old CEO says, I got a gift for you.

Is him a box? And then the box he opens it, there's three envelopes and then numbered one, two, and three. He says, don't open them until you have your first crisis. Then open up the first envelope. So he said, okay, he puts the box in a drawer. Three years go by, he's got his first crisis, doesn't know what to do. He remembers the envelope, so he opens up the first envelope. He reads it and it says, blame your predecessor, and he says genius. So he does it, and crisis averted.

Believe me, we've all seen this. And then two more years go by there's another crisis. He was from the envelope. So he opens up the second envelope and it says, take a huge restructuring charge, and it goes genius, and he takes a huge restructuring charge and crisis averted. And another three years go by. It doesn't know what to do because it's another crisis. He opens up the third envelope and that says, prepare three envelopes. That is fantastic, all right? So who your trust to? The which of

your lungs? Right? You know, Steve, because it really strikes close to home. How many times have you seen that We're all wondering at LEASA points now you're talking about which company that I'm not going to say, but you are. I will say that I saw New Burger, I saw a CEO of a company that I'm sure and I

will mention it because it's not fair. And as I was and I was thinking, and as you see it was presenting it, it it wasn't a great presentation, thinking this guy could just really use the three ovel are we talking? Let's talk about Elon Musk. Shall we test high profile short for many people? Steve, it's a short that you had and no longer have. How are you thinking about the company at the moment? What made you cover the short? Other than just getting your face ripped off? Imagine if

you're getting a couple of at night. Everybody has a threshold of pain. Mine's pretty high. But when you look at when the stock started to go crazy on look, it started to go crazy because the deliveries were better than expected. It's probably better to expected than I expected. But you know, you started to read things about how you know in two thousand thirty two the company will make you know three thousand dollars per share or whatever.

You know that there's no way to argue against that because it's ten years from now or twenty years from now, So you know when when when the narrative of stock starts to become like that, the best thing to do is at least to walk away stave. Anyone that's familiar with your work nice. How much homework you do, how well thought out every single position is. This isn't just done on a whim. But are the lessons to be learned when there is a popular short like the Testlas

short for someone like yourself. Is that a red flag? Is that something you want to get involved in? Is that something you walk away from at the moment and thinks I'm not I'm not. I'm not afraid of getting involved with shorts that are heavily shorted. I don't like the constructed entire short portfolio of heavily shorted stocks. But if if I really believe in something i'll get, I'll get involved with it. But you have to be careful.

So you you're made famous by the big short, right, But as the era of short shorting kind of ended, and I'm wondering because another of your shorts, Zillo back in October, has searched, you know, more than six since then, and a lot of people are saying, perhaps the fundamentals are getting disconnected from the market action, or it's very it's just funny, my zillok. I'm still short, zilo um.

It was. What's very strange about that short is that when they report third quarter numbers, you know, if you looked at it carefully, the fundamentals actually deteriorated, and yet the narrative was positive. So that does sometimes make a stock difficult. At least it race is a good point his state just how much the price action has become divorced from the fundamentals. As you point out, you look at the numbers coming out of Zelo and it justifies

in your mind as shut. But then the price actually is just doing something completely. I'm willing to stick with something if I think the fundamentals are actually deteriorating or fundamentally deteriorating the problem with with the Tesla short was the fundamental start to improve and and you know then

then all you are left with is evaluation short. And one rule I have is I'm never sure of stock just because of evaluation, because in an age of both of disruption and free money, it's a recipe for just That's where I want to go. I mean the card rule is short says you short alausy company in a lausy group and allowsy market. That's pretty easy to do. Right now, you've got a central bank strategy massively pushing against a short belief? Does does long short just walk

away from short until Chairman Powell changes his tune. I still think you can be long short. I think you have to have a very long bias right now, which I do. I think you can be selectively short individual names like you know. For example, I'm short of stock called ad Talum, which is a ad Talum. It's a

for profit education company. It used to be called Davy, but they sold the actual part of the company called Davray for a dollar plus assumption of debt, which tells you how much on what's left is a nursing school and a medical school. I have no ethical issues about what dev is doing, and the biggest part of the company is nursing And the short these is very simply is that over the last couple of years has been new entrance of nonprofit schools that are doing exactly the

same thing as devirived for half the price. Two other names that come to mind regarding your positioning HSBC standard charted? Yes, what are things looking like right now for you? I'm still short though, and we connected those shorts more to China than we are to Brexit. How do you think this has got nothing to do with Brexit? Nothing? It's it's it's that HSBC is about, off the top of my head, Hong Kong UH standard charters like Hong Kong UM and Hong Kong's in a recession and so they'll

have credit issues. Period. Have you ever been less short stocks though? I mean you're talking about specific names, but you said you know you are. You've got a very long bias, and so I'm wondering, you know, the sort of longs to short ratios sort of over that's about as long as I get. Okay, I'm about six at long right now, and that's as long as you get, as long as I can go. Okay, And how long have you been the longest you can go? Late last year?

What's the biggest mistake rookies make? Shorting? There's a lot of people out there. They don't believe in the FED strategy. They believe the Fed's gonna make John. Are we modeling one or two ray cuts? Right? Now wonder two. Okay, Fine, someday that's gonna end, and everybody's gonna want to go, Okay, I'm gonna get back on the short band record. What's

the rookie mistake in shorting? I think the mistake people make is that because they think that it's wrong for the FED to have a free money policy, therefore they should shortstocks. Is because you think the Feds wrong. So what they have the FED? That's something you could you could think, but so many people have struggled with this. One struggled this smart. You know, don't fight the FED? Well, but does that does that sort of change the equation

for specific names too? Well? They would you would need if you were going to fight the FED. And look, I did fight the FED in two thousand and seven and eight, um, but what you what What you had then was deteriorating credit. So if you're going to fight the FED, you need deteriorating credit quality. The problem is that credit quality United States is perfect. There's no problems anywhere, which is why you like the US banks one reason.

But I only like the large banks. I think investing in anything outside of the large banks with very few exceptions, as a waste of time because they can't spend the money on acknowledging. Steve Icean, thank you so much from his appearances with Bloomberg saveillas today. I'm sure we'll write a whole bunch of we should cut that joke in theme. I was about to say, I play it a few times. I mean it was good. I did, like we should. We should play it when we talk about certain companies

and what they're doing. You could play that joke for years. We will, I think happened. When are you going to tell us about which company you were talking about? Come on, no, I won't do it. Steve Issis at the Interview of the Day on these odd times in the markets will look short term, will look long term as well. In Paul Sweeney, we can do this to the gentleman, the only one we could speak to who actually knew fluidly

how to use a bunker remo. Douglas Cast joined some series a few years ago, licking House at Putnam other venues looking at individual security selection. Doug Cast good morning, um, just to get to the perspective of a bunker remo from a few years ago. This, folks is pre Bloomberg is well have you ever seen a parabolic move of a company of the substance of Tesla. We've seen him, but have we really ever seen it with something is tangible as Tesla. Well, Tesla is almost a metaphor for

the market um. The market caps a hundred forty five billion dollars. It's bigger than Costco. It's twice as big as Cat's, three times the size of GM, six times the size of Kellogg. When it is trading over eight hundred bucks. I think on Tuesday, fifty million shares of Tesla traded an average price of seven fifty. That equates to a nominal value of thirty five billion dollars, or

one third it's market cap. Let's think about that. Tesla maybe the future and the company has obviously established first mover advantage in orders and batteries. But the share the dramatically overpriced and um, as you said, it's recent ascent radically eclipse his previous speculative urges of past cycles. Paul wants to jump in, but dutcasts quickly here, how are

you a position this morning? And your trading accounts? You know, we talk a lot about price targets and whether we're bearish of bullish, and we don't spend enough time generally talking about conviction levels, and this is a period of time in which my conviction level is low. On the least few weeks, we've gotten the taste of a new regime of volatility, not only in Tesla but in the market as a whole. So all markets are not created equal. So Doug, and just on the Tesla, we're down about

ten and a half percent here below eight hundreds. Of the volatility around Tesla shares continues. So, Doug, are you surprised at the resiliency in the equity markets in the face of I would say that you know the latest exogenous shock, which is the coronavirus and the impact that might have on global GDP. Are you surprising the resiliency the equity markets? I am not really. I'm certainly not

surprised about the volatility, which I've been expecting. And I just think as we look at I think that the contour of the stock market is going to be importantly influenced in shape by both profits and politics, and I think we'll probably a lot of surprises in both ends. So do with with your loads of experience, how do you typically position yourself in an election year, particularly one which could be particularly contentious. Well, as I said, not

all markets are creative equal. We shouldn't have conviction levels the same at all levels of the market, and the same applies to the election. Um, there's a great deal of uncertainty. Um. I think what I have learned is to expect the unexpected. Um. Just look at two thousand nineteen. No one looked for a rise in the SMP. No one. It was a universal view that interest rates, let's say the ten year was going to a three and a

half percent yield, into the opposite occurred. So I think this year could be and out of the vix thinking and a mean reversion invaluation, stocks and profits. Doug cast for Partners will be with us a generous amount of time in this half hour. Doug, I've gotta go to what sticks out like a sore thumb and everybody you know, you're out on Twitter and you're the pin launch. Oh quiet, I don't want to go there, Doug. I mean I've

been medicating that you've just given us a division title. Yes, Doug, I mean did Sandy call you up and just say this is the greatest things? Slice bread, Palmer said it was the stupidest deal he's ever heard. You give a franchise player unproven just because of a luxury tax. Okay, we're gonna rip up the scripture, folks. We gotta, we gotta, we gotta let the Red or the Knicks. Doug Cast Folks, Wisconsin, Florida, next to a guy named Palmer. He used to throw

the orb for the Baltimore Orioles as well. We're honored to speak with Mr Palmer one day. One of my true heroes as a kid. Doug Cast. Jim Palmer says, this was a bad trade, awful trade. I'll get him on the phone next time I'm on you kill him. You just know, you know it was you Just to face reality. One of the mark say, good morning one or six one FM Boston. I got my black arm, but trust me, Doug Kiss, I want to go to What's so different for you? Which is a five year,

six year, ten year conviction on Amazon. Let's start with the idea. How rare is it for you to have a big company long term conviction like that? I think that Amazon will trade of five thousand a share by three um in the last ten years has only been two companies that have exceeded organic growth, Google and Amazon and their modest tom are just getting deeper and deeper.

The concerned about regulatory reform and how would impact the p N l UH is no longer a factor, and their mode is getting deeper and deeper and more impenetrable.

UM I said to you about six or nine months ago that I expected a hockey stick in earnings growth foreign excess ten greater in two thousand, twenty to twenty two than the consensus forecast for on the south side of with regard to earnings, and I suspect that they're about nine months ahead ahead of my timetable based upon the last quarter, which is two dollars to share better than expectations, and indeed estimates rose by the reason cast comes on. He says he knows I'm doing logarithms on

the Bloomberg on what he's saying. These are outlandish phrases by Mr Cass, No, they're not. If you take the long term regression of Amazon, folks back to the horrific bottom of oh one, you get out to a Cassian four thousand eight, five thousand three at the end of twenty three. So Doug, this is important. Doug's outrageous called Paul Sweeney is the linear log regression of the stock.

He's stating the obvious employees either loan in doing that. Interesting, Doug, I mean you brought the regulatory overhang for not just Amazon, but some of these other big technology companies like Facebook and and Google. This is an alphabet free studio, so we call it Google. So, but for Amazon in particular, Doug, why do you think the regulatory risk is not that material? Um? I think that the more regulation placed on Amazon, the more it will increase their mode and their market share. Um.

They're such first mover advantage. Now no one's, no one's even in the same league as they are, so it would actually be self defeating. Interesting to see the stock. It's amazing that Jeff Baso so another two billion dollars worth the stock and the stock is up fifty dollars in the last in the last two days. Interesting. So the and by the way, Thomas Thomas, Yes, speaking of

linear lag regression. I teachum Robert Schiller's course at the Yale School of Management that I actually spent three hours on that last year. This is important, folks, This is going to logs, Doug All of US, Paul Sweeney, Douglas Cass, and I remember when the Securities Exchange Commission was afraid to use logs publicly because they thought it would confuse the public. And yet this is what adults do in the market, because the core equation is an exponential function.

F E equals PV one plus out of the t Doug Cass, what's the biggest mistake in extrapolation people make? I mean, you're extrapolating out three weeks or three months or even up may I suggest five years with Amazon. What's the biggest extrapolation mistake investors make? I think, um, oddly, Um, the extrapolation of parabolic moves is a major trading an investment mistake. And I'm thinking obviously of Tesla. Um. You know, Tesla was has Tesla started the year at four under

in eighteen dollars a share and traded to nine dollars. Now, Tesla is not going to automatically brush our teeth, and that it's not gonna walk our dog. That's not gonna heal the sick, it's not gonna cure the blind, it's not going to solve global warning warming it's not going

to deliver world peace. Um. When you have parabolic moves and you extend that and traders by the relative strength, we have to remember that parabolic moves almost always returned to the point of breakout, and we're seeing that this morning. There's also another important lesson. It's not your question specifically, I see Tesla down another sixty dollars. It's an important

lesson about short selling. UM. I, as a matter of practice, as you know, have as a basic tenant of my short selling, to avoid any stock with a large short interest relative to the average daily trading volume and or the float. For example, Tesla has twenty eight million shares short, a hundred and forty million share a float, which is really overstated because probably thirty million of that is in Ron Barron's hands and other law committed long term investor

investors and cult members. So um that's a dangerous thing. And look I lived through Robert Wilson short Squeezeer Resorts International. I have the scars on my back shorting stocks at the dot cop dot com era a bit early. It worked out fine, but they show we're painful for a period of time. Doug Cass for the reason, of course in Florida, and uh is better than good. We protect the copyright of all of our guests. If you want Mr Casss literature, you know where to go for him.

John Hudack with us, and this is important. There's a lot of punditry on politics and that. But who Deck is with Brookings. He's with their governance study group, and he takes very seriously the accesses of all this punditry and politics. He joins us. Now, John, you know we knew we were going to have you. That was before the Iowa blow up. I mean talk about a failed process. John Farrell mentioned it earlier. Is modern technology and voting,

is it officially dead? Well, I don't think it's officially dead. You know, there's a lot of contractors out there who are looking to get party money, so I wouldn't declare it dead yet. But I think this is a lesson that a lot of Americans look at and they say, if our systems can get hacked by Russia, if our systems can sail. I think they look back to a paper ballot system or the old metal voting boots with

the curtain and see that the good old thing. I mean John, I don't know what they do in England here the coolest thing You should go voting day and your father mother would pick you up and you could hit the little tabby things in the metal booth and the curtain closed. And did they have it? And when I used to vote in the UK, I just go and sign a piece of paper, just a little tick with a quill to the name. How did you do at least? Did you think you've got the wrong person here?

I think it's Tom that used to turn up with a quill. Are you guys who really wound up to that? I will say if there were a little um levers that you pulled and then that big thing and we have a guest, John, are you John? Are we going back to that? You know, we're probably not going back to that. But I think the nostalgia around that and the security that people felt around that is going to

make them furiously questioned. These new technological advances that people are promising will be flawless and secure, and I think it's going to be a serious conversation within the party about what what the future holds and what kind of backup systems in particular, will have to avoid chaos, Johns, at the end of the caucus. I would hope it's the end of the Iowa caucuses. I mean, these are outdated. They force a system in play where not everyone can participate.

To see them on TV or to see them in person. Uh that they're foolish looking, and I think the party needs to recognize that this is not the direction of American politics right now, and it certainly shouldn't be its future.

But a lot of criticism of the party in the last couple of days, for that matter, the last few months about how they order the states and who goes to vote first, whether you should do priorities and have no caucus anymore, Johnny, is there going to be a serious rethink at the very top of the party about how to achieve the best outcome, come up with the best candidate on a national level, and stop playing around

in New Hampshire and Iowa. You know, it's not just the past few months that that criticism has been happening, and it's happened for both parties. I think if you asked me five or six years ago if that serious conversation was going to happen, I would say no. But what we saw after six is the Democratic Party responding by saying, we need to make some reforms And there were some serious reforms that were made at the state level and at the national level of how to select

a president. And I think after this election, you're going to see that same conversation broadened to be more encompassing about more issues. John, there's also a question about the narrative emerging from the Iowa caucus. First of all, it's one of dysfunction. But second of all, it's the lack of a response to President Trump, who has basically going to herald the economy in his re election campaign, which we saw last night the State of the Union address.

What should Democrats do in order to counter that or how important is it for them to get that narrative together. It's critically important for them to get that narrative together. What we have as a president who has a lot of economic data to brag about, and that is the president's prerogative. If the economy is doing well, um talk

about it. And you know, part of the reason Republicans did so poorly in was that the President talked about immigration and not a booming economy, but the economic recovery and the continued economic success has not to everyone equally, and there are a lot of people who are struggling out there. And that's the message for Democrats, and they haven't crafted it properly yet. John. Let's take the punditry and bring it over to your serious political science. Mr Carville,

who I adore, I've worked with them another time. James Carville of Louisiana says, I'm scared to death for the Democratic Party. That's a moderate voice. Is anyone listening to the Carvilles of the Democratic Party? Well, I will say there are a lot of moderate voices who are saying that who are scared to death of progressives who are scared to death of what that might mean for the

future of the party. I'm not ready to pronounce the Democratic Party dead, but what I do think is that there are these moments in a party's history in which they face real challenges, a real question marks, and uh, we don't know what the future of the Democratic Party

will hold. It could be the progressive is nominated and that progressive wins, and then we reset everything and say progressive politics is the wave of the future, or that progressive loses to Donald Trump and we say progressivism is dead, you know, long live uh Centrism. Depending on the outcome of this election will determine quite a bit about what the future of both the Democratic and Republican Party will be. But John, we've seen the outcome of things like this

again and again and again. This comes back to a question that I've seen being asked in the United Kingdom constantly, a question of the left. Does it just have to come down to a purity test? Is it just about maintaining holding on to the moral high ground? Is that the hill you want to die on? If you really want to make change, you've got to govern, and to

govern you've got to win. And John, from what I see right now, it's not a party that putting themselves in a position to really make the massive effort needed to win. You know, I think you're absolutely right about that. The purity tests that exists are ones the alienate voters and in purposefully alienate voters. And I think you're right. In order to govern you have to win. But also

in order to govern, you have to govern. And what we have right now are candidates in this race both you know, some centrists and certainly some on the left who are putting plans out there that will never pass the United States Congress. And what worries me is someone who studies governance is the conversation is never extended to say this is the ideal, but here's the path we're going to go through to get there. Elizabeth Warren has tried this a little bit to say, if we can't

have the perfect, here's our alternative done. And she's been slammed for this. John, It's it chases a really important point and exactly where I wanted to go, which is what proposals have you heard, either out of President Trump or the Democrats that you think are feasible, doable that

markets should be taking more into account. You know, I think for Elizabeth Warren and for some of the other centrist candidates, they've talked about how difficult um health care is in the United States and how they need to work across the aisle that they're not going to get the Republic and send it to sign on to medicare

for all, and that's something that is realistic. It's something that you know, markets don't have to think about medicare for all because Medicare for all is not going to happen. After the election, no matter whose president, but there's a lot of variation in what the alternatives are. John Hudeck, thank you so much. With Brookings, why don't you bring in Francisco Blondest Lisa. I mean, this guy is just like this is that gift for Lisa? That's nice for me.

It's a very exciting time in oil. You're looking right now at oil prices rebounding up three per cent after absolutely being clawbered, with a lot of people saying that there was a secular shift in the entire crude market. Francisco Blanche of Bank of American Marrilage, head of Global Commodities, thank you so much for being with us. This would love to get your sense right now of where we are. The biggest one day rally since December. Is this the

beginning of some sort of revival of oil prices? Hi? Thanks for having me. Look. I mean, I think a lot of it depends on how China balls from here. We've we've played out three scenarios at base case, major China slowdown scenario and a coal contingent scenario for for the coronavirus. But the base case we haven't really changed. Our numbers were still was still look for sixty twos in average for rent and fifty seven for w t

I for the year. Uh I said, I haven't had all of the forecasts, um, partly because our economists think that the that the China s lowlan is gonna be a one quarter issue. So as long as that remains the case, this is a good buying opportunity for commodity markets. Obviously, the risk is that that UM the situation in China's and stabilize, in which in which case you may have a major slowdown or worse, a pandemic, in which case obviously, uh, you know, you would get hit pretty hard on in

terms of all market would get hit harder. Yeah, but that's really the story here. I mean, the nand could really swing by a million barrel's day or about one percent of global of global demand. So that's that's the issue here, a buying opportunity. I'm wondering how the dollar factors into this. Jane Follio of Rubble Bank just telling us she expects the dollar to continue to strengthen. How much does that pressure commodities and does that factor into

your call at all? Um? It is it is a factor, no question and remember that all are actually weakened a little bit against some of the European currencies. Um as rates came down, but not rates are going up obviously again as as the U. S. Economy, to your point earlier, is really really humming. Um So it's a factor. But I do think that I do think that ultimately we

were in the early stages of a global recovery. I'm open a half ago, driven by the U. S. China trade deal and and also importantly by the massive he seeing that the Federal Reserve has given us as well as many centil facts we've had. We have three cuts last year by the FED, and we also had a big balance heat reversal. I think we talked about this in the past that the balancy of contraction was a

massive tail, a massive headwind for the economy. Now with the FED, expanmies bouncy and and cutting reads, we have a huge style wind a couple with whatever else the central bines are doing. So so that's why risk assets are so excited um and and ultimately this will come down to commodities as well. But we do need China, we do need emerging markets to to us his strong consumption Francisco. As you point out, we've been in the

early stages of a recovery. That recovery was not secured, not in Europe, not in Asia for that matter either. If it's really a one quarter event, what gives you, guys, the confidence that we come out the other side in this V shaped recovery when the situation was not secure to begin with. Well, I mean again, I'm not I'm not saying it will be. I'm not a virologist, so

I can't I can't really make that call. I mean, I've just laid other three Francis are just based on the disruptions that you see to supply chains right now, the sudden stop to launch chunks of the Chinese economy right now. I agree with you, we shouldn't get into the medical issues, will leave that to the doctors. But

as things stand right now, what gives you that confidence? Well, look, I mean one of the one of the big issues that that we had passed eighteen months is that inventories around the world came down a long and they came down a lot, because once you start playing around with Harris,

people slow down their purchases. If you look at if you look at where global trade growth was running in in UH seventeen and eighteens, running around five percent year and year, following years of growth of two or three percent. Then basically last year global trade shut down completely. We had essentially a contraction because of the large increase in

your STARTUS. And and now this year we just need we just need to see a inventory restocking cycle, um because consumption is strong, because labor growth is strong, because the the service economy is still doing so. So I think we need to bring those goods, those goods to the economy now longer term for sure. To your point, you're gonna have this disruptions and supply chains, and this

is gonna change the Catholic cycle. So and we argue that in some of our pieces we will see a restocking cycle, but not a Catholic cycle under until there is claddity as to where this thing is going, Francis, we've gotta leave it there. Thank you so much. I appreciate this morning with the Bank of America. Right now Lindsay piegsa whether she writes brilliantly for step phil and

what I love about her latest work. Dr Piazza says moderate growth as expected Lindsay, congratulations on a middle road here. How have you adjusted your moderate growth view given this morning's data and given serious Chinese issues of the last two weeks. Well, I think moderate is sort of the new normal for but we do have to put it in perspective that moderate is not great. The bar of expectations has been lowered so dramatically that it seems the

market is celebrating even mediocrity at this point. Keep in mind that two percent is really the bare minimum that we should expect from the economy, assuming one percent gains population, one percent gains from productivity, and we're also just achieving that bare minimum with bloated government balance sheets an extremely low rate. So my concern is that moderate growth is here,

but is it here to stay? Or does the economy lose momentum as we move further into Lindsay, I'm just not sure how many people are interested in the January data right now. It's just a rush to show me February. Just show me what February looks like for the global economy. Lindsay, how much can we read into the Jenuary economic data worldwide?

You're being You're being cruel and unusual to lindsay, because it's February five, how are we supposed to look into February to read through in terms of the coronavirus is impact and down absolutely pretty much everyone, I think Lindsay thoughts right, so so so the market is looking for some cleaned and saying how much of this is just a temporary bliff because of this coronavirus and the fear of the spread as opposed to fundamental weakness. And I

do think it's very difficult to pass this out. But what we can see is this declining trend that was well established before the first coronavirus. We saw momentum in the U. S economy slowing. We saw the consumer, yes, still out in the marketplace spending, but spending it a

noticeably slower clip. And so I do expect those trends once we get clean data excluding the impact of the coronavirus, we do expect that trend to continue into and I think we we've seen that with some breaking news around maybe these closing stores, slower manufacturing data producers being very concerned that outside of the coronavirus, again, global growth, global demand is not an extremely steady footing as we look out to February and more importantly beyond MADI an estimate

year end from the economist that we track on more straight lines as real GDP for the U S economy. Lindsey, what are you modeling at the moment? What are you looking for? Well? I think one point day for an annual GDP growth is reasonable. It's continuing with that loss of momentum. I would say a longer term trend for the domestic economy is closer to one point five. The

fact a little more optimistic at one point nine. Again, what we're what we're seeing is that there is a lack of fundamental growth in the domestic economy, and in fact, what we're doing is increasingly relying on non traditional supports from the FED and the federal government. Are you modeling sub four current nominal GDP? I think that's very reasonable? Is okay, lindsay you're great at this? Is this politically acceptable in this nation? Republican or Democrat? Can Can any

politician move forward assuming sub four animal spirit? I think so. I think the expectation of the average market participant or orn that the average American has come down so dramatically that two percent real GDP um even one and a half, let's round up to two percent real GDP? Is good enough? Good enough? That's the new metric for the economy. Is it good enough to get by? We're not looking for great we're not looking for a stellar boomer economy. Now

the expectation is is it just good enough? Lindsay, what's the line between stall speed and goldilocks. Well, that's a very fine line. And my bigger concern when we talk about the economy losing momentum is not that we fall into recession, but as you point out, we go into that stall motor what I like to call a non accelerating economy, and that would be less than one percent. And we're not that far away from that very clear

danger zone. Because if we do get to less than one percent, there's going to be an even larger reliance on non traditional, non organic metrics to continue to perpetuate growth, Meaning we're going to rely more and more on government spending more and more on lower rates, and it's going to be increasingly difficult. It's not impossible for then organic momentum to get us back into a stage of longer

term prosperity. And so what we could see is perpetual growth below one for five ten Lindsay is going to sit there and accept that exactly, that's right. We wanted to go what's fed policy off of your call? Looks the feed has been forecasting perpetual two percent GDP and they double down down their commitment to getting prices back to not near but back to two. And so I do think that as the data continues to underperform, they have backed themselves into a corner and they're going to

need to take action sooner than later. I don't think it's it's unreasonable to expect two additional basis point moves within the coming months. Did they have the fiscal space to attach to that? I mean, if you're running a trillion dollar deficity, you goose it out to one point three one point four trillion dollars to assist in your double rate cut? Why not? The FET is not concerned about Come, Lindsay, it's a free lunch. I mean, I mean, what's the price of your really important analysis of sub

two forward? There's got to be a there's gotta be a price to it. There there is a price, but it's a longer term consequence that the FET is not going to concern themselves with near term. Their near term mandate is getting inflation back on track. And so whether that means growing the balance sheet back to four and a half, five and a half, what's six trillion among friends, that's how they're going to sell it. They're going to say, look, we need to get the economy back on track. This

is how we do it. We can continue to hold these securities. We don't have to mark to market. We can hold these securities to maturity and let the cards lay where they will longer term. This has been fabulous. We'll have us out on podcast folks. Dr Piexo with Steeple just really really important there on a on a view of how you get to a sub two percent called Lindsay, thank you so much this morning. 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 Keene before the podcast, you can always catch us worldwide. I'm Bloomberg Radio