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the Bloomberg Terminal, and the Bloomberg Business App. William Dudley joining us nowt the former New York Fed president and Bloomberg opinion columnists Phil I got eight ways to go here. I'll stand script on inflation and McKee. I'm sure we'll have smarter things to say. Five percent is flat out not acceptable. Everyone understands that what inflation rate is that moment where Bill Dudley relaxes.
I think when the Fed gets the inflation rate down into the twesday and there's more slack in the labor market and wages are rising more like three to four percent rather than five to six percent, which.
They're doing now.
The Fed is making some progress on the inflation front, but they haven't made much progress yet on the labor market and on the wage trend. So it's hard to see inflation going all the way back to two percent where the labor market's tight and wages as high, and.
Your studies at Berkeley, is it necessary to have unemployment go up to bring inflation down? Why can't we just move the inflation needle the disinflation needle and keep America employed.
Well, that'd be the ideal outcome.
It'd be great if we could operate at a three point four percent unemployment rate with two percent inflation.
But historically that suggests that it's not happened in the past.
The libor market at that level of tightness generates wage gains that are inconsistent with two percent inflation, and the Federal Reserve doesn't think that's going to happen. The fether Reserve, if you look at their last summary of economic projections, expects that they're going to need to push the unemployment rate up above four and a half percent to be successful and bringing inflation down. So they need to push the unemployer rate by more than a full percentage point in.
Their minds to be successful. And I think that's a reasonable forecast.
Bill.
It's Mike switching to that Jobs report data. The calculations people are making to get to that four and a half percent by the end of the year, which the Fed has forecast, we need all of a sudden to start losing tens of thousands, if not hundreds of thousands of jobs a month. Do you see any prospect of that?
Well, I think it just reiterates the tension between what the Fed thinks in terms of how long I have to keep greats high versus what the market thinks.
The FED thinks, this is all going to be a very slow process.
It's going to take many, many months, and I think when we get the next summer of economic projections from the Fed in June, you'll probably see them being less optimistic about how fast they can bring inflation back down to two percent, and probably show a slower rise in.
The unemployer rate. You're absolutely right.
The labor market's still pretty darn strong, and the Fed really hasn't.
Gotten the progress that they've wanted on that score. They need payroll.
Gains of fifty thousand or less to push the unemployment rate up by a meaningful amount, and they haven't gotten anything like that yet.
Is there any way they can accurately forecast what's going to happen to wages. Given this post pandemic, weird kind of labor market that we have, I.
Think that they can see what's happening through a broad set of wage indicators, and what's happening is not really unusual relative to what you would expect, even the tightness of the layer market. If you look at the Jolts report, the job openings, the labor to turnaments report, that suggests that the layer market has eased a little bit, but that ratio of unfilled jobs to unemployed workers is still really high. Pure Pola said that he needs to get
that ratio down to about one to one. Right now, I think we're operating at one point six to one, so we still have quite a bit of ways to go.
Speaking of a ways to go, which is I guess kind of what policymakers are always going to say. Are they there in terms of being restrictive enough or is there anything in this data or the data that you've seen so far since the last meeting that would suggest that maybe they need to do more.
They think they're restrictive enough, And I think one reason why they think they're restrictive enough is we're going to see some credit constraints from the banking sector because of the turmo we've seen in the banking area, So they're thinking that credit conditions are going to be tighter as banks pull back a bit. One area, though, where you have to be a little bit concerned is the housing sector, which is really the most interest rate sense of the
sector of the comic seems to be bottoming out. So if entre policy is a really tight and the housing market is start to recover again, and that does raise a question of whether the FED is sufficiently tight.
Bill Dudley, I want to go to your latest essay, which has a single sentence in it which is not an inflammatory, but I think shocking to a lot of people. And I'm going to suggest that Bill Dudley, like Stephen Roach, who worked at another shop on Wall Street years ago, you people are looking for a new FED mandate around
FED stability. Are you a financial stability Are you advocating a three part FED with the responsibility of inflation dynamics, jobs dynamics, and find financial stability dynamics.
Well, I guess I would put it is financial stability is a necessary condition for.
An effective monitoring policy.
If you don't have financial stability, you lose control of monitary policy. So as part of your monetary policy mandate, you have to have a great close focus on financial stability.
And the fact is the FED missed what was going to happen in the banking sector.
If you look back at the November Financial Stability Report, there was nothing about the potential funding risk of regional banks. There was nothing about the large marked to market losses on their balance sheet. There was nothing about the risk that uninsured depositors might leave. So the FED really, you know, didn't capture that. And I get the FED a lot of credit for the report that they published just recently
on what went wrong with Lacon Valley Bank. I think they do recognize their supervisory failures, but that's not sufficient. Entre policy also contributed to what happened because the FED basically made interest rate very low for a very long time.
They flooded the banking system with deposits. Some banks took those as posits and bought long datad assets that didn't work out for them.
So the FED reserves entre policy did contribute to the problems that we've seen in the banking sector.
Yeah, I looked Mike McKee at this and the dovetail here, and it hearkens back to Stephen wrote screaming about a new FED with a new mandate within a modern economy, and whether it was Roach at Morgan Stanley or Bill Dudley at Goldman Sachs years ago, this was the dovetail of market economics into the academic discussion that Chairman Powell has to face every day, and here we are looking at it again. Yeah.
Bell raises a question of what do you think the Fed's reaction function is now given that the new monetary policy framework doesn't apply at the moment.
I think their reaction function is that they want to They're going to keep rates at this level or maybe a little even a little bit higher until they seekings that they're confident that inflation is going to get back to two percent.
And to be confident that inflation is going to get back to two.
Percent, they need to see more softness in the market reduction and wage inflation, and.
More progress on services sector inflation.
Bill Dudley hotsyus.
Some M.
Calvy are online too, and they just want to gustimate to you, when do we get under three percent inflation? Give us your market economic analysis today? Of the timeline to three percent. When do we see it?
I think I probably see it by before the end of the year because housing inflation is going to come down pretty dramatically. We've seen that the housing inflation in the CPI and in the pc deflator lags a lot behind what's actually happening in housing, So that's going to start to turn down pretty sharply, I think in the second half of the year, and that will help us on headline inflation.
Doctor Doddley, thank you so much for joining us writing for Bloomberg Opinions. Superb assay, thought provoking essay for all commercial banking here from Bill Dudley on the latest banking crisis of financial stability. He is the ultimate bottoms up investor, Mario Gabelly cut his teeth on machinery things, as Gartman says, following your foot and hurt you. He is a cell side analyst who's had a claim with a broader portfolio over the years in entertainment and such. Mario, I've got.
To go to you know.
I couldn't do it as a diehard Red Sox fan. I'm not gonna go along the Atlanta braves. But this is textbook Gibelly. It was twenty something now it's on the edge of forty. Explain why the Atlanta Braves are gonna win the Gabelly World Series this year.
You know, I'm sorry about the Red Sox losing last night. The Braves are doing well. Independent of that. The pitch clock is having an impact on baseball by shortening it. Well, we'll get the results over time. But in addition to that, you have other reasons for attendance, You have other reasons for revenues. There's about sixty two million shares of B A t R A and B A t R at the lower voting stock. Our clients own a significant piece of the voting stock, and so as a result of that,
we are obviously cheerleaders for the Atlanta Braves. And we think between Battery Park, that is the area in which the stadium is in right, the value of the franchise. I think you're going to get it, you know, forty five to fifty five dollars a share somewhere in an extra vos. That's it. It's a And if you don't want to own it because you got emotional dynamics such as life, that's your portfolio. But give it that everybody
listening should get one hundred shares from others day. For someone to that they like Mario.
Gabelli on the Atlanta Braves, putting me in the Gabelli, it'll double time out. Chare is well, there will be reports on Disney, Mario, I think of you and Gordon Crawford and Capitol Guardian Trust as being people that have followed as entertainment idiocy. Were you surprised at the streaming nonprofit in is Disney the mother of all Gabelli values?
Well, you've got to look at the amount of money being spent on content by the companies. As an example, Disney will probably be twenty eight to thirty billion. Netflix is trying hard to get up to thirteen or fourteen or fifteen billion. Paramounts is higher than that. Then you have Apple trying to catch up. But Apple cumulively maybe for the last five years, has spent thirteen billion said they don't have any content. So where and how do you find? You know, I love Lucy, and I love
Tom Keene, and I love Lisa. Those kind of contents are buried in there and they come back. And for example of Full Life with Jimmy Stewart. Because of the bank run, people are going back and looking at that. So how important is the embedded value? What is when you do a theatrical box office. You had a forty two billion dollar business, but the theater operators get forty percent of that or higher. So now you go direct
to streaming. And unfortunately, because of the regulatory organizations, the companies like AT and T and Verizon and T Mobile don't get paid for people using the highways on a super speed. I go over to George Washington Bridge and I pay less than a Class A truck. So Tom, from Disney's point of view, yes, you've got a learning curve, You've got some dynamic short term you want to go global. You know we can't be so the US has only
got three hundred and fifty million people. The rest of the world has seven billion.
More plus Mari, are you still enthusiastic about Paramount? Do you still think that Apple's going to buy them?
My own reaction is that whatever you have, Barb barersk doing a great job running the business. You have good content. They're obviously making the tough decisions to give them financial flexibility. The Federal Trade Commission turned down an ability for them to monetize Simon and Schuster to what they're going to do. They're going to do beet They're going to try to raise some capital there. But you know, from my point of view, a year or two from now, they have
to sell our spin, which they've done before. They're very good. For example, nobody appauded to them when they bought Pluto for as New Yorkers would say, buckets, and they basically have done a great job on that. Now, independent of that, without getting into too much detail, you know, they were spending six hundred million dollars a year on cash dividends. That's going to be down to you know, twenty cents time six fifty do you know a significant amount of less.
So over the next couple of years, put the foundations back in place, accelerate the growth, and execute, and that's
what they're going to do. And then you ask the simple question, Yeah, if you've got a stock selling at thirty which is now nineteen, let's call it thirty, and you basically multiply that by six hundred and fifty million shares, you're talking about a twenty eive billion dollar equity value and then you got debt will probably be down to eight billion if they do these sale of these assets and keep the care flow. So you're talking about a
tiny little morsel. So if Sherry, who owns thirty of the forty million voting shares, decides that you know, hey, you know, Apple wants to pay me you know, X dollars and it's the minimus for them, and they don't have the broadcast stations anymore because they're spin out of the process of spending. You know, I love making takes place in a variety of ways.
So Mario, on a broader level, you did just get back from Omaha where you were at the Berkshire Hathaway Annual Meeting shareholder meeting. Have you ever heard Warren Buffett this negative, this gloomy, this pessimistic, unstocked. Did you take a message from that that you obviously.
I disagree with you complete. Warren Buffett basically pounded away at the idea that if you believe in the virtues of the American system that allowed him for eighty years when he first started investing at the age of thirteen to make a lot of money, that tailwind continues to flourish. So is he practical. Yeah, I mean, you know, he's very patient and so as a result of that, he's
got his cash, he's waiting for it. All of us are going to focus on a thirteen f that's coming out by Monday and see what he bought, what he's selling so wild. You know, he's got smart people working for him and Greg he first announced, Greg Abel now taking over and a jeep Jane continue to run the insurance business. So your management session has been identified.
Everyone wants to know the value trapped. It's a banks and your research note. You say to me that you want to buy a Southern bank for acquisition. My theme for the year is the great zombie roll up? Are the smaller banks one collective zombie? And are we going to see a massive bank roll up led by banks in the South.
You know, look, you got all of the right dynamics. We have a lot of banks. But you know, let's flash back. You and I have been doing this for a few years. You had a crisis in nineteen sixty seven eight nine where the banks lend money to oil tankers or whatever they were. In the seventies, you had the Hirshta Bank had a whole bunch kind of og bus. You had a hold and the eighties you started one
thousand banks. Tom went bust in the savings a loan association crisis because of that, the account's put in a rule called hold to maturity, don't amortize, And then you had no interest rates for an extended period of time. So somebody says, I got a deposit, I'm going to lend it long. It costs me no money. The basic bank problem is you borrow short and lend long. You got a problem independent of that. You still need to have that service for the American public, the American economy.
And I will get over this notion of how bad the office will construct. That's it, Murra.
We got one Yankees fan. He's down in Florida, and this Yankees fan emails it and says, the breadth of the market is important. Broad Based rallies have the potential to continue, while narrowing rallies are prone to a failure. Quoting the great Bob Ferrell and Mari Lynch years ago, if you ever seen anything as narrow as what we see with Apple Computer and four other stocks, and what do we do about it?
Well, you got a lot of dynamics. If I was growing up tom playing World of Warcraft and I'm now playing Diablo for on my machines, a very quick I learned I want instant results. I want to play momentum clearly, you know. And then I get on robin Hood and then you get quants, Momo, Algos and Aiole coming together to do trading the markets of the markets, okay, the
values of the values over the next right now. For example, even if GDP is down two percent real and inflations, you're going to get nominal revenues going in three and that's a large basket for you. What you talked about before in your show. If company is having growth margins SDNA, they're learning how to deal with manufacturing reshoring to the United States. Tizan is out. That is the just in
time inventory. Now you bring it closer and you get more efficient, and you do AI and you start doing a lot of automation, and you pray for immigration because that's where the long term growth of this country is coming from.
Mario, we've talked about how we are seeing an increasing number of people go back to stock picking from just simply indexing. Do you notice that in the day to day, do you notice more people interested in the trade that you've always practiced and you continue doing so now, But.
Go back one giant step. I come from a culture where we had Graham Dodd, Roger Murray, Bruce Greenwall and now Tolla Santo's teaching value investing. How do you do research? What is the value of an enterprise? Who is going to buy it is? What a would private equity pay? What is the capital structure that they can tolerate? What is the tax structure? How good is it? Big? Then you cut through all the crap right, How good is the business? How good is the management? The values after
buying of that? Are they well below what you think the intrinsic value is? And therefore that discount you know we'll go out and that over time you're going to do. Okay. I think that the market tom in forty five years will be one million under Dow. So you know that's seven eight percent returns.
You're showing your cards. You're showing your Morning Side Heights cards. Here in the bottom line is Columbia Business School, and you mentioned grab Dott and Coddle, and a guy named Buffet went there years ago as well. Do the young Turks of Columbia Business School believe in the traditional Warren Buffett securities analysis.
There's a lot of cultures that come in in quotes in the financial area. You want to integrate analytics.
Tom.
If you and I were around two hundred years ago, what we would be talking about today on this was that the Rothschild's got a pigeon to tell them who won the battle at Waterloo, and that they went down and did something on the stock market. We can talk about that at other time. Then you used to go to have Warren Buffer go down in Washington, DC to microfish Data or Graham then you I did it at the New York Stock you saints today. I gave a speech and I said chat GPT. I got my grandson
to do it and it was a brilliant speech. I and it took him five seconds.
Yeah.
So the question is how quickly can we gather data? How quickly can we use it? But then when you get you got to be with some practical judgment has to go in the mix.
Murr. One more question. Speak to the people out there that want to be in the market, but they're scared stiff. How do you play? How do you participate.
Well, first of all, you got to do what Buffett says, which is patients long term, don't worry about the short term dynamics. You for you know, if I own a farm out in Iowa or in the Bronx, so let's by farm into Brox. I'm not going to wake up every day and figure out what the prices are. I'm going to look at it and say what are my cash flows and what are my predictability and what can
I harvest it? Same thing with good businesses. If you buy a good bunch of business and you know whether I have like the Tagna taxtrawn trade and television my te's, you know, we can talk about these things. The stocks will go down, they'll go up, but you know, five years from now we're to make pers This.
Has been brilliant. Mario Gabelli, thank you so much for particalarly there on banks in the South as well, joining us now French Hill of Arkansas. He is a Republican. Give me the morality here at Congressman the Hill. It is a serious, serious issue no one's talking about. Is it immoral to have a debt and deficit in the United States? I think it's well.
First of all, good morning to both of you. I missed Bible study this morning, so that was a great top of the show reminder. And let me say that it is immoral to have a debt and a deficit that are not controlled, and that's what we have now. We're running a forecast of over one and a half trillion dollar deficits a year for the next ten years
in the President's budget. That's the part that's unsustainable. You could argue that's immoral because it's substantially larger than we've run in the past, and it doesn't show the kind of discipline we should have to go back to a balanced budget and not be adding to the debt indiscriminately.
Congressman, there is a photograph of you and Bush the first in your youth, and that was back when we had commissions I think of green Span and Social Security that actually got something done. I'm still in disbelief that Simpson Bulls went down in flames. Why can't we be like any good democracy, get a commission to find an equal ground to do something about our debt and deficit.
Well, Tom, you're right, and I do support that idea. I thought that was one of the more effective things in the first term of President Reagan when he was cutting taxes and rebuilding defense. He also puts social Security on a stable ground by the Greenspan Commission, which had an up or down vote on how to do that. I would support a commission like that to tackle mandatory spending programs like Social Security, Medicare. Make sure they have
the stability and funding for the next generation. Because they're two thirds of our spending every year, they drive the deficit, which in turn obviously drives the debt.
Congressman, there's a really important conversation to be had about what's sustainable and good finance for this nation. There's another question around the manner to have it, whether we should be having it on a brinks edge, holding the US's credit rating hostage. Is this really the appropriate way to be discussing this at a time when both parties have increased the deficit?
Right?
Well, I think that's why on February one, Kevin McCarthy met with the President and said, let's meet and have a sensible and responsible way to raise the debt ceiling
and get spending under control. Following the pandemic. They had a meeting the President promise to follow up, and one hundred days have gone by, and what's happened in the interim is only one branch of government, one portion of a branch of government has taken action, and that's the House, under Kevin McCarthy's leadership, to raise the debt ceiling and propose some spending controls and regulatory policies that would make us have a better economy and a faster growing economy.
With all due respect on their former President Trump's administration, the deficit rose by seven point eight trillion dollars. It brought it to World War two type financing conditions, and yet we didn't have a question over the debt ceiling. There wasn't this sort of pushback. We weren't brought to the brink. Why is it so different now that we can't have a discussion more clearly even though we have the same kind of debt situation.
Well, I don't think that's true. First of all, the bulk of debt spending was due to bipartisan spending to fight the pandemic, over five trillion dollars. Shocking situation, shocking reaction by the Congress. If we knew what we know today, back in March of twenty twenty, we probably wouldn't have
spent that much money. But with that said, we did have a debt ceiling fight in twenty nineteen, and it was President Trump was forced to negotiate with Speaker Pelosi because he was not in control of the situation, the precise same situation that President Biden finds himself now. And that's why Kevin McCarthy went to the President on February first and said, let's do a sensible and responsible deal.
Comrasce Spannet, what would your response be to President Trump if he did invoke the fourteenth Amendment to keep paying interest, to keep paying principle on the US debt, even if we do go over that deadline with respect to this debt ceiling.
Well, Secretary Yellen doesn't believe that's a practical activity. I think it's sort of a gimmick. I understand the fourteenth Amendment. But we've also got legislation in the House that we've passed to continue spending the principal interest payments on the treasury and other mandatory spending programs as well. That was passed by the House Ways and Means Committee several weeks ago.
French Hill, September of twenty fifteen. Mister Baynor fell on a sword and exited stage right, or maybe exited stage left, and that was the problem with the Tea Party at the time. Explain to me the challenges Kevin McCarthy has here not to do another John Bayner.
Well, look, I heard this morning earlier that people were concerned Kevin McCarthy only has a one person can move make a motion to vacate the chair. Well, every speaker of the House except for Nancy Pelosi, has faced the same procedural motion. It's not a new thing, and it can still be a motion that's tabled by two hundred and eighteen Republicans. So I don't view that as something
that Kevin McCarthy's remotely concerned about. What he's concerned about is a responsible and sensible way of raising the dead ceiling and curtailing spend and going back to our pre pandemic priorities.
Congressman Hill, what do you need from Secretary Yellen? What leadership can Janet Yellen provide in the coming days? Excellent question, Tom.
Janet Yellen could step in right now and say that she'll be happy to work with Speaker McCarthy and develop a responsible and sensible deal to raise the debt ceiling and curtail a spending in the right way. And I think it would pass overwhelmingly in the House and Senate, and President Biden could sign it into law well ahead of any deadline that she has set. And I would say, Look,
that's precisely what President Trump did with Speaker Pelosi. He asked Secretary Steve Manuchin, then the Treasury Secretary, to get that deal done, and that's what happened back in twenty nineteen.
Congressman, thank you so much. The Republicans you've met to thank you with us today in a terrific brief. He is in London, where he holds Corn's chief global equity stretch just a Gold and Sacks. Peter Appeneimer has decades of experience of extracting ourselves from the worries of the moment. Peter, thank you so much for joining us, and I love what you're saying your research note about finding neutrality, a neutral view, What do you do in the stock market when you have a neutral view?
Well, Tom, we've had that view really through the last year.
We've been calling the.
Market environment fat and flats, relatively flat returns at the index level, with quite wide trading bands as the market assesses at different points the relative risk between recession and inflation. And I think we're at the top of that band at the moment. And what we've been arguing is that within that so you're going to get quite a lot
of our for opportunities. Generally, we've been pitching it as a balance between some deep value where we think the risks of valuations are very low, and quality growth g and the combination we think is really where investors should be in a relatively flat index environment.
Peter, over the past ten years, everyone was a macro trader, and in the past six months everyone's become a microtrader. And I go to Bank of America saying, for the first time since the two thousand and eight crisis, there is evidence of a stock pickers market, of individuals going into stocks over ETFs. Is this something that you think is going to be persistent, that we are actually shifting away from some of the broad indexes and really meaningfully clients looking at specific stocks.
Yeah, I think that's right.
Look, in the last decade, really equities and all asset classes have been dominated by one thing and one thing only, and that's a zero interest rate world, a very low cost of capital, and that's really driven an environment where valuations of assets have gone up. That's been a major driver of returns which were not likely to see again to the same degree. But it also generated environment was very factor based. Everyone wanted growth because it benefited most from that drop of very low cost of.
Capital, and everyone was neglecting value.
And I think it's much more nuance now you're seeing some really good earnings coming through across different sectors of the markets. We're also seeing different leadership geographically as well. We've been arguing that Europe woul outform the US, and it's been doing rather better in the last year.
I think that will continue.
So I think investors need to be a bit more nuanced, more diversified across regions, across sectors and factors. And it really is I think an environment where stop picking an alpha creates a better opportunity for investors relative to just beta an index investing. Well.
That makes sort of a concern around the fragility of markets when there is a shock that people are not prepared for. And I wonder, for example, today with the CPI report, we end up with something that is much harder than what people expected. If there is that vulnerability even amid all of this sort of malaise around the mac or a trade to suddenly say, oh my goodness, I need to pay attention again.
Yeah, I think, look, the macro is going to be critically important because we're close to inflection points, and it's always an environment where investors become particularly heightened to risks or opportunities around margin or macro data. I think, as you described in the introduction, we're in an environment where inflation is still pretty sticky, well above what the central banks really want in terms of their targets, and there are some risks still on the downside in terms of
the economy. At the moment, I think markets are really pricing the best possible outcome on markets, pricing rate cuts and inflation coming down. The equity markets are pretty much pricing a soft landing. That combination is possible, but it's really what's priced, and I think that the margin. Our view is that interest rate expectations need to adjust to being higher for longer to get inflation down.
Before we get back to inflation, I want to tag team you and Jeff Curry together, and this is on hydrocarbons. And I look at Shell PLC obviously with a higher dividend than what I see with Exceutomobile, Goldman Sex and owning big oil on the continent or big oil in America. How do you choose?
Well, We like energy and commodities generally we think that prices will rise from a fundamental perspective, as Jeff has been arguing. But also these sectors are very very cash generative. They're paying dividends and they got free cash flow yields, you know, in the mid teens, particularly in Europe, so energy and resources were overweight in Europe. We like resources in particular in the US. But these areas of the
market we think have very low valuations. They don't have a lot of downside risk in terms of valuation, and they've still got an opportunity to I think, accrete returns and compound returns for investors over time in a flat market.
Peter, if you and Jeff Curry are over in New York City or were there, or were there in London, whatever, we'd love to get both of you on desk with us at the same time. That would be just a really great moment. Mister Oppenheimer's with Golden Sex.
Joining us now, Henry to Trace, economic policy research director at Veda Partners, really appreciate you joining us, Henrietta, your take on the non action, the non development of yesterday's meeting and whether any of these meetings will really gild any fruit until someone said yesterday the eleventh hour, the fifty ninth minute, and the fifty ninth second.
Yeah, that's exactly right.
I mean, anybody who's been through this movie before knows that they do not get anything done until they have to. In DC, we are functionally four weeks away from June first, which even Treasury has not been hard and fast on the actual deadline. The House has been out of session for about ten days since their vote a few weeks back. So when they had the meeting yesterday, my base case assumption and from speaking with staff, was that nothing was
going to come a bit. There was going to be press availability, they were going to shake hands, get a lot of jobs in which we obviously saw from Speaker McCarthy sometimes a little bit more aggressively than anybody would have anticipated in an ordinary year. But he's really like proving what he wants to be and present as speaker, and so this is much much more about posturing. You'll notice that the biggest takeaway was staff is going to
get involved. Now that's all I want, as a former staffer, is to get staff involved.
They'll start meeting today at the leadership level.
One of the.
Areas to concern I hear most is, Hey, the House and Senate are not going to be in session at the same time for the next consecutive three weeks. Are you concerned? And my answer is no, I don't care what break and file members are doing. I really only care what staff is doing, and they will be meeting tonight. They are free to work through the weekend. They do not need to attend every single fundraiser back in the district the way that members do. So there really are
three full weeks to get a resolution here. And the way that I would phrase it, just briefly, a good rule of thumb here is look at the thursdays for the rest of May. Thursday of this week we start to get action out of staff. Thursday of next week is the earliest I would expect a Senate vote, and then Thursday of the following week is withou would expect a House vote, So that's plenty of time.
This is like waiting for smoke signals, right, wait for Thursday and we can get some sort of sense of what's going on. Yeah, Pastor ket over here this morning, Henrietta. I'm curious about this George Santos development in how it relates to some of the close margins that Kevin McCarthy is working with. The New York Post is reporting the GEO representative GOP representative George Santos is going to surrender after the indictment that we heard about yesterday. He does
plan to turn himself in, according to this report. This highlights that Kevin McCarthy is working with a five Republican margin of error that he has to keep on the rails. Does this change the equation at all in your in your view, I mean it.
Really underscores the current equation.
This is an empty shirt that you're trotting around that has no committee assignments and is only there to vote. The way to Kevin mc he tells him to vote. When we were dealing with the Limit Safe Grow Act, initially I thought it was great when Santos came out and said he didn't know which way he was going to vote. He's going to vote whichever way Kevin McCarthy tells him to vote, and that is the requirement in order for him to stay in Congress.
So I think this just underscores how.
Razor thin as you point out the margins are for Speaker McCarthy, that you would keep someone like towards Santas and then that the rest of the caucus has to explain away and that's the tricky thing for them to do.
Why can't we get to a commission? Simpson Bulls or some flavor of that? Is it, Henrietta, you're expert at this? Is it so fractured? We can't even get to a commission because these clowns are afraid of the outcome of a commission.
I mean, give it time.
Alan Simpson is an all time rock star as far as I'm concerned. Those were great days when we had the Simpson Bulls Commission. We even had the Super Committee and around that time, if you'll remember that group of people. So to get a serious answer, when I started out yesterday, I assumed that there would not be any breakthroughs and
negotiations at the White House. So my immediate next step was to listen for any dog whistles for a fiscal year twenty twenty four appropriations process, discussions of the budget, discover discussions of actual government spending in those twelve approbe spills. That is something that I spent my time with staff collecting thoughts on, Hey, what are the odds we kicked
the can down the road? Just get a short term suspension going from June first to September thirtieth, which is the end of the fifth year, and see what the odds are and whether they're rising for that sort.
Of four month bridge.
Okay, that four months period is when you'd see Simpson bowls or Supercommittee starts it form.
Yeah, you've teed up the can like Lucy with Charlie Brown. I mean, I know the way this goes. What happens the first week of October if we've move us the can to September thirty exactly.
So this is my worst case scenario and has been since January, this situation where we never reach a conclusion. Why because you know, we only have four vote margin in the House and a Democratic Senate. What you start seeing that on the risk is that we only do these short term punts, and this sword is hanging over us for the next two years. That's, in my opinion, a very bad outcome, and that could very easily pass.
It happened in twenty twenty one.
We had always the federal fiscal year ends on the September thirtieth, but at the time we couldn't agree on the appropriations bills either, so we passed a three month extension of those, called a continuing resolution into December third, and then we simultaneously bumped the debt ceiling out that
same exact period. It was a four hundred and eighty billion dollar suspension of specifically designed to get the debt ceiling to coincide with the CR expiration, which of course had been punted from September.
So that's a very real risk.
Henrietta Troce, thank you so much. She is chairman of the Alan Simpson Fan Club in Washington with Ada partners as well. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern Bloomberg Dot, the iHeartRadio app Tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on
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