Bank Of America's Michelle Meyer: Masters in Business (Audio)

for a few years from mutual friends. I think I might have first met her through Dave Rosenberg and a few other folks who are either economists or researchers. Um. She's actually a delightful person and really really knowledgeable about things. I think she brings a very very fundamental approach to economics. She's a bit of a data wank. Really interesting background. Uh double uh degree Masters and bachelors in four years from Boston University, which is really very very impressive to

do that. She is an expert on both the housing market, which she's covered for many years, as well as the labor market, and and those are two UM. Terrific qualifications to have if you're an economist covering the United States UH in the post credit crisis era. Her background is simply, she came out of school and went right to Lehman Brothers. She was there right in the middle of the crisis. I wish we had more time to discuss that with her,

but she described it. It was really quite fascinating what it was like to be in the eye of the hurricane during that that collapse. Um stayed on at Barkley's when they took over Lehman Brothers post bankruptcy, and her former boss, Ethan Harris at Lehman Brothers, ended up taking over the lead economist role at Merrill Lynch and ultimately ended up recruiting her to join him at Maryland. So he's been at that position. She's been at that position

at Merrill Lynch now for about five years. So, without any further ado, here is my conversation with Michelle Myers of Merrill Lynch. This is Master's in Business with Barry Ridholts on Bloomberg Radio. My guest this week is Michelle Meyer. She is the deputy head of economics for Merrill Lynch for the United States let me give you a little background about Michelle UM Undergraduate Boston University. You did a joint B A M A program, Is that right? I

did in four years? Four years so I started taking my graduate coursework my junior year of undergrads. You can imagine how exciting my social life was my junior year and he was a five year program. But that you did it for there you go, So zero social life? Did you? Was it? Twenty four hours a day? Summer is the whole deal? Just now. Luckily I didn't have to have school in the summer because I had a lot of credits heading in, so I would have been

able to graduate underground in three years. So so let me give people a little background about who you are and what you do for a living. You're essentially the chief economists for the United States for Merrill Lynch, one of the biggest, if not the biggest, of American Bank of America Merrill Lynch. That's right. I'm still stuck in the two thousand's. I have a pre crisis mindset. You were named to Forbes list of thirty under thirty and Finance.

That was a couple of years ago. So now you more recently were named to thirty five under thirty five not too long ago. UM, and you have a really interesting background. You were at Lehman Brothers right throughout the crisis, then that became Barclays, and then for the past five years you've been at Meryl. So let's talk a little bit about about your background. So you have a master's and a b a. In economics. What made you think, well, let's go to Wall Street and work for some of

the biggest names, most storied names on the street. Well, who wouldn't want to do that? Um? Lots lots of people think finances a little squishy and they go elsewhere. No, I understand, I understand. You know. Frankly, at the time,

I didn't know what I wanted to do. I graduated from graduate school and I actually intended to go straight through for a PhD. I had a wonderful UM advisor UM at school, professor Kevin Lang, who was actually a micro economist focusing on labor markets, and that was my area focus was labor economics, the micro side, not the macro side. So that's really funny because I think of you as a housing and real estate specialty, not so much labor. That's true, and what I do now is

much more macro focus. It's markets focused. But what I was studying was was was micro UM and UM I spoke to him and he advised, you know, go into the workforce, figure out what you want to do, figure out what you can do with the skill set UM and then if if it seems appropriate, comeback and pursue a higher degree. But it's not necessarily the right path for everyone. And UM I think oftentimes when you're in school, when you're studying, you get so focused on what that

next step is for your education. Sometimes you forgotten what am I actually going to do with this, what should I be doing with and what am I good at? Where are my talents? So UM I took about a year after I graduated UM before entering the industry, and then I applied for jobs at bult bracket Wall Street firms only in their economics department, so not through the

typical analyst class. UM I applied to economic consulting firms such as Nara for example, and I was at the end, I was between Nara and Lehman when it came down to it. And then I I also would have loved have gone into policy and one of my regrets is that I actually didn't go to the federalies. Or first, I think that's a great opportunity that I didn't get at the time. Um. But I was lucky enough, fortunate enough to have an offer at Lean Brothers to join

as a lateral higher in their economics group. So one thing I knew, one thing I figured out is that I loved economics and I wanted to do something purely in economics. So who were your early mentors at Lehman Brothers. Um, what I'd obviously have to say, my boss. Then who's my boss now? Ethan Harris? Um? He was the chief US economist at Lehman when I joined. And he's wait a second, Ethan's the chief US economist chief economists at Bank America Merrill Lynch right now. He is the he

is a co head of global economics. Did you come over from Lehman's Merrow with him as part of a team or is this just coincidence? Um, it's not conscidence. But I did not come. I did not go with him. Um. So I I state at Barkley's. Um. After Lehman went under, and Barkley's took for those people to remember post bankruptcy filing, Barkley's essentially took over all of Lehman Brothers at very advantageous cost. It was great. It was a great deal for Barkley. Yeah, at the time it was hard to

see how anything was great. But in retrospect, yes, that's that's that's exactly right. And more about the financial crisis later, because you were right in the hurricanes. Oh, I was um. But I was fortunate enough to move over to Berkley as they stayed there for some time, and then Ethan recruited me back to work with him again at and Merrow, which has been a great, great move for me. So Um. Of course he is clearly one of my mentors. I've learned a lot from him in terms of how to

be an economist on Wall Street. And there is a lot to learn because it's one thing to understand economics in theory. It's another thing to understand in terms of what it means for the business and how to be a market economists, and there's two distinct things. Other early mentors I mean, I think the economics team overall I worked. I got to work with Drew Maddie who's now UM economist at a U B. S UM. He was quite influential in my career. He really showed me the ropes.

He taught me what it meant to be a trading for economist, how to understand the data, and how to interact with the salesforce. John Shon, who was an economist Leahman at the time. He's now an FX research at Bank America Maryland. Show'm once again a colleague of his, and he also was was was really influential in terms of me understanding, um, what it meant to to to produce quality research notes on Wall Street, but also be

shortened to the point. So those are kind of the mentors in terms of strictly economics, but of course there's these these broader, bigger mentors as well in the industry. So what's your favorite We have a minute left in the segment, what what's your favorite part of the job as an economist at a big from m M. You know, I think what's great about me economists on Wall Street is that for me personally, I sit on the trading floor. I get to be in the action. There's so much adrenaline.

The day goes by so quickly, so I get to think about the big picture. I get to do research. I keep up with the literature coming out of academia and out of the federal Reserve banks. But I get to apply it immediately and I see how the market reacts to it. So I find that I have the best of both worlds in that respect. Take us through a day in the life for someone who has a job like yours, working at a shop like Meryl. Sure, so it starts early because the market start earlier and

there's morning meetings. You have to cover the data. Think about what's going to influence define, define eily. Okay, you're in the office. That's pretty that's pretty good. Yeah, and UM, sit down, try to understand the data it's coming out for the day. Talked to the salesforce, Um, talk to

the traders. So do the basic wrap. I have what's called a hoot or it's like a microphone that I go over when the data comes at squawk exactly what they used to call hoot and holl exactly, which really helps because if I was just to stand up and try to shout, it would not at all be affective. Do not have a voice that's going to penetrate allowed room full of traders. No, I don't think I would. I don't the trading floor and Meryl. For people who

haven't been downtown, that's a phenomenal space. I remember going there for something fifteen years ago, and I'm sure it's changed. The number. Well, when we've moved, Yeah, we're now we're not midtown. Yeah, but you're right the downtown, You're absolutely right. It's exceptionally large. It's like a football field. Now it's a bit more manageable, and that the way they separate the businesses, you can kind of but it's still used. It's massive. It's it's massive. So you walk in and

it's like, wow, how does anybody get anything done here? Yeah, it's but you know, you get you get used to it, and in a certain, a certain extent that that buzz on the training floor makes you more efficient and and and and everybody else around you is picking up two phones and has five screens, so you're doing the same and and it's great. So the morning, I'm very much focused on what's happening in terms of the data flow of the markets, talking to clients, talking to sales and trading.

The afternoon things will quiet down a bit more client meetings UM. Some as I'll go to the research floor where it's a bit more quiet and I can write, talk to the rest of the team UM and try get our weekly publication out UM. Every week it's almost like having a homework assignment. You have to write a piece about what's happening in the economy, what's happening in

the markets, what our readers might care about. How do you get anything written with all that buzz going on, all that din So I think to a certain extent, again, being on the train floor, being close to the action, you you have a better understanding of what's important and what our clients are talking about and what people want to understand. So you get inspired by sitting on the training floor and in terms of getting out relevant research.

But you're right when when you have to read through papers and you have to actually put pen to paper, oftentimes you do need to remove yourself from the floor, which of course I do. I'll either go to a research floor or sometimes I get my best work done at night after I have dinner. It's quiet, from you know, eight o'clock to nine o'clock. I can sit and write and I do right. I find the early morning hours are are just perfect for that. There's no more early

morning hours for me. That four thirty is nothing going on. It's great. So so let's talk a little bit. You are only the second woman we've had as a guest. We have Liz and Sonders scheduled for later this spring. I am honored. Well, we've been trying to bring more people who are not white males as as guests, and it's kind of hard to find people at a certain level on Wall Street who aren't part of the old

Boys network. So let's first talk about you know, I want to give you a quote from you that was pretty relevant. You said, when an opportunity presents itself that is challenging, uncomfortable, intimidating, or makes you want to hide unto the table, that's just the sort of opportunity you have to take. Yeah, so discuss that. I stand by those words. I think oftentimes, and perhaps it's more so

for women than for men, I don't know. I think it spends on the individual, but oftentimes you shy away from opportunities that are intimidating, that scare you, that make your heart sink, But those are oftentimes where you have the best career advancement. So one of the things for

for me I was media. When I started getting opportunities to go on on TV, it was actually I was still at Lehman Brothers, so I was fairly new to this industry, was really new to the job, and um, you know, whenever a producer recalled, I would be intimidated. My gosh, maybe maybe the timing won't work out, maybe I don't have to do it, because it was so

nerve racking to me. But that I think has certainly been one of the major things I've supported my career is visibility, and it helps me in terms of being able to communicate and being a more effective economist. So let me give you another quote of your own. You once said, the lack of women at the top of the industry is a challenge for women in finance, So explain what you mean by that. Well, I think, particularly for me starting out at Lehman Brothers, UM, I felt

that there weren't that many role models. So a lot of the senior management were men um and even kind of most all um and even the mid level, like the higher mid level, where heavily dominated by by men. So it was hard to understand looking ahead, how do you are there? Things are there unknowns? Right? Are there? Things that are ultimately going to make it impossible for me to achieve success here because other women have not succeeded and you don't know. Maybe it's because their number

of factors for why that might be. But as a young woman starting out, I think it could be discouraging when you don't see other people that you could relate to that are in senior roles. And one of the things I have to say is a lot has changed over those tres. Literally my next question, what's changed over the best A lot? I mean to me, it's I

promise I'm not looking at your sheet. Um. I think there's been much advancement, and maybe it's simply moving from Lehman to b of A. But here at b A, I have a number of senior role models that are women. The head of research, Ethan's boss, Kennice Browning. Um, she's an exceptional's been there for quite a while, right, She's been had a research for at least. We're mutual friends with Dave Rosenberg, who used to be had Ethan's job a few before him, and I think I met her

through him. I want to say it's a decade ago. She's been a very senior female on Wall Street for a long long time. Supposed to be a tough cookie too. I think she's incredibly good at her job, and she understands the business, and she understands what it means to be an analyst, and I think she understands how to how to how to get appropriate balance. So seeing her have success has been, UM, really important to me. And it's and and and it's it's also across the cross

the business. I can count a number of senior women at Bank of America, Mary Lynch that kind of have done it all and and and and frankly, I now consider myself to be in that camp. Well, you were promoted to managing director at B A m L fairly young? Yes, yeah, And was that process like? Was that was that a surprise? Was that exciting? Um? Well, it wasn't surprised because I had to advocate for myself. You always have to advocate for yourself. It doesn't just happen by accident. Um. But

I did that. And UM. One of the things that I realized very quickly is that I had a very large support network. Um Many particularly women stood up and said, you know you, you are very talented and you should and will be successful, and you deserve the recognition of managing directors. So I had a lot of support from women across the business, but also you know, number of obviously men as well and in senior positions, and it was it was a very enlightening process for me. The

managing director process, it's a hard process. You have to have a network of supporters and almost like a doctoral dissertation, and before the committee it's very competitive. We were beginning to discuss what it was like being a Lehman Brothers right out of school, but less fast forward a couple of years, you were there right through everything hitting the fan.

What was it like in the midst of Lehman Brothers during two thousand and eight there was just a great deal of uncertainty, and that uncertainty ultimately translate to panic. Um we all kind of an idea that there were problems in the housing market, their problems in the financial system. After bear Sterns went under. Let's let's put that into

a little context. In oh seven, a fairly leveraged bear Sterns pair of hedge funds that mostly focused on mortgage backed and other credit derivatives blew up, and then bear Sterns got a little wobbly, and then in the spring bear Sterns ended up going down in last minute, taken over by JP Morgan for originally two dollars a year, and then I think it ended up being ten dollars a year. And after Bear went down, everybody said, well,

who did looks similar to Bear? And Lehman was the next in size and a lot of similar paper and and swamming a lout of the same waters. But did anyone there really have They did a lot of mortgage backed and a lot of securitized things, but did anyone their day to day did Was there really a sense that the whole shooting match is gonna come tumbling down?

Don't know where people really surprised by that. So I think the initial view was that we were Lehman was different than Bear Sterns, spare Sterns was somewhat unique, and although Lehman had issues a lot of other financial institutions had issues, they were manageable and we'd be able to absorb the losses. UM I would say about a few weeks before the d D, the bankruptcy UM see we're

talking of the summer. That's right. By the end of the summer, I think it became pretty clear that there were more severe problems with Lehman, and sitting on the trading floor, we under I saw firsthand what our traders were saying in the salesforce saying people didn't want us, did not want Lehman as a counterparty, so we weren't getting the trading flow. You were seeing serious issues in terms of balance sheet as well. I think traders and

salesforce had an understanding that they were bigger issues. But then again the backdrop was, well, who would let Lehman go under? Lehman Brothers they would be a buyer. Bear Stars went under, but their was a buyer, and there was some there was a savior. Um. The likelihood that Lehman would be able to fall into bankruptcy, I think

everybody up until last minute thought was a very low probability. UM. It wasn't until that Sunday night, UM when it became clear the Bank of America was buying Maryland, not Lehman Brothers, Which weren't that fight for me in the end, but at the time was absolute panic. It became clear that we were indeed filing for bankruptcy, and I remember looking watching TV and Singer, but you go to Lehman Brothers to try to clear out their desks on the view

that maybe we'd be locked out on Monday morning. So, you know, after several glasses of wine, my husband I went over Leman to try to clear my my office and everybody was on the trading floor and it was just it was it was surreal. You know. The one thing, the one little factoid about the Lehman story that I think always surprises people was that Buffett had made a offer that was ultimately rejected by dick Old, and that, compared to what he ultimately ended up doing with Goldman Sachs,

was actually more generous offer. But at the time, the assumption was Lehman isn't going away, He's trying to lower ball us and steal the company, and you end up in a situation that uh. I think the fact that Fold never took that offer kind of made it hard for the FED to come in and rescue them. You know, there was rumors that um Paulson wasn't a fan of Folds, and there was a little back and forth between the two of them any truth to that or is that

just sort of I wouldn't know. I wouldn't know. I think, um, that's the speculation. And I think that a lot of people a Lehman believed that was the case. People at Lehman Blood Green. I mean, there was a lot of loyalty to right a long time, and you know, yes, there was a there were there were excesses, there were problems, there were a lot of mistakes made, but there were a lot of great people there that were heavily committed

to the company, into the into the markets. So I think that it was you know, it was really hard. It was a really hard time for a lot I could I can imagine. How do you know Jack Rivkin very well because he ran Lehman Research back in the eighties and nineties and did a really nice job of it. Yeah, Lehman Research was number one and I i for years it was very Robbie muto Um led research while I was there, and he was incredibly dedicated, diligent. I mean,

the content coming out of Lehman Research was exceptional. Right, That's the great tragedy of Lehman collapsing. It. You know, who really cares about Dick full there was another twenty thousand employees were so and a lot of them ended up at Barklay's. Everybody did. That's what Barclay's what they bought, the human capital, and they did well with him. Let's talk a little bit about the current recovery and economic cycle.

Where where are we in the economy to die? Yeah, I mean, it seems like this has been a pretty old business cycle. So when you think about the number of years we've theoretically been in recovery, it seems like it's old. But in terms of the progress made, you can still argue that it's fairly young. So when you think about the cyclical sectors of the economy, housing is one,

consumer durables as another, capital expenditures another. We're still a level as a share of the economy which are historically low and arguably still close to recessionary territory. So I think it is the case that there's room for growth, there's room for expansion. There's been exceptional monetary policy support. Monetary policy works with long lags um this environment of very low rates and high liquidity ultimately should translate to

stronger economic growth. We mentioned earlier, your colleague Dave Rosenberg. He's fond of showing the chart that shows the housing recovery has bought home sales, both new and existing home sales back to the levels where other recessions tend to bottom, Like we're all the way up to the bottom of preview is now. This was obviously a massive housing recession, and that's where a lot of credit was, where a

lot of the crisis was centered. But when we talked about housing recovery, why so weak, Why so soft despite such fairy low low mortgage rates. And that's been one of the puzzles. I think the challenge has been that there was a lot of equity lost in the housing market, so people have suffered severe home price declines UM, and that held back some of the churn and the housing market. You had to get back into positive equity UM. We had to deal with an exceptional amount of foreclosures and

not quite ten million, but pretty close. Yeah, And that created a lot of distressed inventory in the market that had to clear and and luckily it cleared, and it cleared in part because investors found opportunities in buying out these distressed properties at deep discounts, some of which were converted into rentals um and that's created a floor for home prices. And now home prices have been recovering. They start to turn in early two thousand and twelve, and

last year we're up about five percent. We're looking for about three and a half percent appreciation this year. So we've seen progress, but I still think that there's further upside. And really where the upside is it's not so much for home prices, but it's really for construction. I think the level of our housing stock is too low to accommodate the ultimate growth in householformation in the population, and

that's been very weak. We've had the story is millennials living in their parents basement, but we're seeing signs now that that's starting to turn. We are the most recent data from the Census Bureau show that at the end of last year there was a notable pickup in householfformation. The data is extremely volatile, so you have to kind

of smooth through these quarterly swings. But for last year, by my estimates, we created about eight hundred thousand households normal one one to one to um if you have normal headship rates. I think the good news is that the millennial generation is a large cord the kids that baby boomers, So there's a lot of them. And it is to your point many who have been to laid in entering the economy to a certain extent because of the weakness in this business cycle, because of other challenges

related to student debt and as such. But over time, these are going to be people who form households and we need to build to accommodate it. What happens if towards the latter part of this year, and I don't want to guess if it's the summer or the end of the year, maybe what happens to the housing market if we see rates start to I don't even want to say go up. Let's just say normalize, because this

is not a normal rate environment. If you could get a thirty year fixed mortgage for three and a half percent, that's pretty insane for what we've experienced for the past forty years. There's nothing normal about this economy right now or about the financial markets. I think there's been a lot of distortions. So yeah, so let's say the Fed starts hiking interest rates. There's liftoff, and there's that step

towards as you said, normalization, interest rates rise. I think if it's you know, a reasonable increase is an interest rate, it's a gradual rising percent a year might be a little bit high. But if there's something a little bit less than that, so it's even slower, the fet is really gradual, and it's accompanied by stronger economic growth than

I think the housing market can handle it. If you have something akin to the Taper tantrum, which was in summer of two over a hundred basis point move higher in interest rates in a two month time that shocked the housing market, and that was clearly negative. If something like that happened again, it would be a setback for

the housing market. What what do you think about the theory that or the thesis have heard some people float that as soon as the FETE starts raising rates, people going to realize, hey, these really once in a generation low rates are going away, and we better buy a house now were we're gonna pay a lot more for a mortgage. You know that there may be some initial um move higher, maybe some generation of activity from that,

but I think it's quite temporary. Ultimately, what matters for humbuying is income growth, not only today but also for tomorrow, so expectations that income will remain positive and growing in the years to come, and then affordability mortgage rates. But I think probably the most important factors simply this idea of job security. So the labor market is arguably the most important thing. For housing, Let's put housing aside and

talk about some of your other favorite indicators. What do you really like to look at that gives you a sense of here's what's going on in the overall economy, and here's what this means for equity. You're asking economists for their favorite indicators. That's hard. Which child do you like? I only have one child, that that's an easy question. You're gonna end up having more than one kid, and you're they're all going to ask you who do you like? That have to lie to them and say I like you. So, so,

what is your favorite favorite indicator? Or let me rephrase it, what do you think is the most interesting or perhaps underrated indicator? Obviously, the jobs report every month is going to get a lot of attention, and it is important and you have to smooth through it, but we have to look at it. It's it's relevant. I think retail sales is an important indicator consumers makes up sevent GDP and the consumer is faring I think is really an

important part of the overall story. It gives a sense of what kind of future investment we might need, what what kind of hiring are we actually seeing with the quality of hiring. And what's been somewhat interesting to me recently is the past three months consumer spending a retail sales have been soft despite the dropping gasoline prices, this despite the increase in income. Why do you think that is?

It's a puzzle. It could partly be that they're simply a lag between the drop and gasoline prices and spending. Consumers have to believe that it's a persistent drop in gasoline prices and maybe can someum consumers are also saving for bigger ticket items. So although when we see auto sales other than this past month, which I think we can all, I don't. I hate blaming stuff on the weather, but it's been so good awful that I'm willing to give them the benefits now. But we're still had a

sixteen million annual run rate. Those are huge numbers for automs, but also in autos, unlike housing, you've had financing come back and you've had financing come back pretty aggressively. So the ability to get leveraged, the ability to spend again for autos, which is something that I appreciated. You've seen, uh, you know, a nice acceleration, and I actually think there's

sort of repside for auto sales. Really yeah, house information is not even picked up yet, so we're seeing this increase in autos even before you get the rebounded house information. The gain of house information should also generate an increase in demand for autos that's coming. So let's talk about other durable goods. Um, we've seen it, seen this uptick in autos, and you mentioned the credit situation, but we haven't seen a giant uptick endurable goods, of which automobile

is just one. So what is it related to home sales? Why are we not seeing washer dryers? You would think people who can't move, all right, I'm stuck here. I don't have a lot of equity in my house. I'm not anywhere. Let's redo the kitchen or something to that effect. Why have we not seen durable goods really tick up? The way auto to have financing is one aspect, you know, it's it's it's not as easy to get financing for some of these other types of durable goods like appliances

and such. You can put you can take out a you know, a revolving line on your credit card, but the standards there are a little bit stricter than it has been for autos. That's probably one a factor. I think. The other one is that for for housing, yes, home prices have recovered, but you still have a number of homeowners that are either in you know, near negative equity or kind of flat And it's also very hard to extract money out of your house right now for these

types of renovation projects. So the ability to get to do a cash out refinancing or the ability to get a home equity line of credit, there's are much more restricted than they had been in prior cycles. Well, as we saw leading into the financial crisis, that framework reference it was the easiest thing in the world. Now it's not so much. It's the exact opposite. So if you can't withdraw money from your house to renovate, you have

to have and it's hard to borrow. You have to have cash upfront, and a lot of households are still fairly budget constructed, not to get too personal about this, but I tell the story all the time. So we

just moved in September. I recall doing a refinance and I want to say oh six or oh seven, where the guy literally pulled up to our driveway, flung the door open, left the car running, came in with papers and apologized, Hey, I have a clothing to go to im late, sign here here, initial here, and gave us a check and he ran out the door. My wife and I looked at each other like, did that really happen?

We're sitting here with the thirty check and our our mortgage payments are five hundred dollars less a month, and this guy was a ghost, was in and out. Now, we just moved in September. It was the most insane set of experiences. That was no stone left. It was as opposite as anything you can imagine. I'm wondering how significant that is relative to what we're seeing in housing, what we're seeing endurable goods, and we're not seeing that in autos. And maybe that's why. Yeah, I think listen.

Credit is the it's a fuel for the anomic engine. And if credit is tight, which it is now for our mortgages, it will limit the pace of activity. Um, and you have seen the pendulum swing to the extreme from a very easy market to one that's quite tight. Um. And maybe it has been a you know, excessive move, but there were a lot of changes that had to be made and UM, that process has been painful. We've been speaking with Michelle Meyer. She is the deputy chief

economist for North America for Bank America Merrill Lynch. If you've enjoyed this conversation, be shure in here the rest of it. You can find that podcast either at Apple iTunes or on Bloomberg dot com. Check out my Twitter feed at rid Holts or my daily column on Bloomberg View dot com. I'm Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio. Hi, welcome back to the show.

This is our podcast portion, which you know already because if you're hearing this, you're not listening to the radio. You're listening either to an MP three or Apple iTunes or SoundCloud or something like that. My guest today is Michelle Myers. I know Michelle god I think I first met you with Dave Rosenberg so many many years ago, and you've come to some of the um. You know, Scarsdale Equities started something many decades ago if you read the book The Money Game by Adam Smith. Not that

Adam Smith, it's just the nom de PLUMEA. They talked about these idea lunches and I got fortunate enough to be invited to one some years ago, and I said, these are great, but I got work to do during the day. Why don't we make these idea dinners. And they said, no, we we're gonna stick with lunches. So we started doing our own sort of dinners. And you've come to a few of these. I think one of the questions I have for you, um, was who were

some of your economist heroes you'd like to meet? And you finally managed to meet um Paul Krugman at one of these dinners. Yeah, he is one of the economist seers. I just find him to be exceptionally smart, which is not a bold statement given that he is a noble not giving him out to it pretty much that that's one of the qualifications, not stupid, not stupid. So clearly he's an incredibly smart economist. But he is really passionate too, And whether or not you agree with his political stance.

I think his his passion and his ability to lay out a concise, interesting argument is is fascinating. So I read him regularly. I really enjoy his blog. The page that So he's a Monday Friday UM writer for the New York Times, but then he has a blog and then is conscious of a liberal is blocked. But that real estate that he owns on Mondays and Fridays. Some people have called that the most influential commentary quote unquote real estate in the world old of publishing. That that

is an amazing page. He says things that and he says in a way that other people won't say, and and and and sometimes he's sometimes he's wrong, but a lot of time he is right. And he's saying things that other people are thinking but they're not willing to put on paper. I've disagreed with him a couple of times. He and I disagree about securitization. You know, he doesn't

like it. I say, well, if you have garbage in, garbage out, um, but as long as you're not feeding bad sausage into bad meat into the machine, you're not going to get bad sausage. And what we did during the crisis is all those bad mortgages went in and guess what came out the end. So it's it's not the machinery, it's it's it's the food stuff you're you're putting in. What what other rockstar economists impress you? Oh? Um, rock star? What is the rock star? Well? Krugman is one.

Who else is a rock star economist? Um? I would say, I don't know if people still think this of Ryan Hart and rogue office rock star economists. And then we have guys like um Neurio Rubini, who I think maybe uh peaked a few years ago, but was highly holly regarded by a little a little too much. UM. The person who proceeded Dave Rosenberg was Gary Schilling, who's still publishing on a regular basis, and another one who says kind of outrageous things that have turned out to be

more right than wrong. He's been pounding the table about hey, the ten years going to have a one handle on it before you can imagine? Why are the rock stars negative? Um, let's say Justin Wolfer's up and coming. Probably not. I wouldn't describe him as a as a negative. His wife I think UM ended up on was it the c e A or where did where did she end up going? Um, well, let's not use the term rock star. What other economists

do you find influential or especially admire? Reinhardt and rogue Off I think was particularly influential in this cycle because what they their work was around how do economies cope and how do they deal with financial crisis and balance sheet recessions? So their work I think really rang true and mattered a great deal um this time around. So there are a lot of lessons learned from there. People

obsess about the Excel error. But but if you go back and look at and I'm getting the dates right, I want to say January two eight they had a paper called looking at five Financial Crises January o eight, But forget Lehman before Bear Starns, and that they basically said, hey, the typical financial crisis see stock markets cut in half and real estate drop thirty and it looks like we're heading into that sort of a credit crisis that could

result in that nobody really paid attend. I happen to see that paper and said, wow, this is astonishingly data driven, and that basically paper became the basis of years of financial following this. This Time Is Different was their book, but which is a difficult book to get through. But um, here's another rock star. Colomists and Robert Schiller. Love Schiller, absolutely had Schiller. We had him in here a few months ago. The nicest guy in the world and just

so insightful and so he's just delightful. Have you ever had a chance to work with him in any I've met him as well. Um So I got to shake his hand and talked to him a bit and another Nobel laureate. Yeah, um and he his clearly rational exuberance. Um that went a long way. And he's had great calls both on the stock market around the tech bus and the housing market around the housing bust. Um. But

his analysis is way of thinking. Um, I think it it's you know, it's extraordinarily high quality and it's it's it's very interesting. Um So, yeah, that he would be high up on my list. So let me shift gears a little bit on you. What do you think the role of the economist is on Wall Street? What is

the role of the economists on Wall Street? That's a great question, um So, I think the way I interpret the role is that you're supposed to be a source of information to the salesforce, to our traders, so internally but also externally to our clients. So that means analyzing the high frequency data as it comes in. What is our expectation for the data, where is it relative to consensus, what can go wrong? How do we interpret it once

it comes out? Where are the special factors? So have real time, fast analysis on the high frequency data, but then also be able to paint a picture for the economic account for the economy in the medium term, and some of the risks seem into the longer term. So you have to be able to remove yourself from the day to day volatility and the data and in the day to day volatility in the markets and say what

are we really learn ing? What what do we really know about the economy, and what is our baseline forecasts? And there were the risks around that forecast because I think when you're in the markets and you're in front of a screen day after day, it's really hard not to get influenced by what the market is telling us today in terms of what will mean for tomorrow. Timing and understanding identifying turning points is very hard to do. But to the extent that we can help with that.

As an economist, I think that's that's an important part. So you raise a really interesting issue, is the relationship of markets to the economy. How fast do the markets turn before we start seeing it in the economic data, either up off the lows or down off the off the highs. What's the lag like and why why is it such a sizeable time period? Yeah, I mean, I think, um,

so anything with the markets. That's for equity markets. Um, they're capturing the health of the major corporations in the country. So um, if investors are starting to see problems in these corporations, revenue, earnings misses, things that are essentially suggesting, hey, this economy isn't anyone all cylinders anymore. That's going to show up in the market before we'll see it in the economic data. Yeah, to a certain extent. Now, of course, how companies are doing a not just a function of

their revenues and their sales. It's so so a function of just their profitability, so their cost cutting. So you can have situations where you have really high corporate profits like in this ycle. For a period of time it was a profits recovery because of the excessive cost cutting, but you weren't really seeing underlying economic growth. So there's disconnects. Um. But because the fact that the equity markets are capturing large corporations, it's going to be indicative of what the

economy is saying. And then I think in terms of the fixed income markets, in terms of relay treasuries move um, that's very much driven by expectations for Fed policy. And one of the interesting observations today is that the market is pricing in an extraordinarily low path of the terminal Fed funds rates. So they're saying that the Fed, yeah, they may start hiking interest rates before the end of the year, but they're not going to accomplish that much.

They're not going to get very far. Um. Oh god, that would be dismal. But no, you know, maybe a terminal rate two and a half percent or so. But think about two and a half percent Fed funds right historically very low, very sominating, incredibly low. It's incredible comedy.

So if all the FED is able to achieve is to get the Fed funds right up to two and a half percent, then it means that there's something much weaker about the economy, and that the economy can't handle higher interest rates, and that's what the market is telling us. The FED is not saying that. If you look at what the FED is projecting in their Summary of Economic projections, they say they can get interest rates to three and a half or three and a quarter, but but over

gradual long period of time. Not okay, so that's two years. So let's let's take the counter argument that we have a distortion in interest rates because of QUEI and the purchase of bonds. And when you look at quality a rated sovereign debt, there really isn't all that much of it. I know, we talked about deficits and all these other things, but when you look around the world, how much high

quality sovereign paper is there? And keep in mind, we have this huge demographic that's aging, whose portfolios are becoming more and more bonds heavy. They're big buyers of this. We have lots of foundations. Is a tremor. I don't have to tell you this tremendous amount of wealth around the world. Very often that's a fairly conservative portfolio fifty fifty or sixty forty, not as heavy equities as you

might be typical of a twentysomething. Is it possible that what we're seeing is a shortage of quality sovereign paper, Well, it seems to be. UM certainly one of the themes of last year's everybody was expecting the tenure to head higher. We can get to above three percent. That was very much the consensus view. In the exact opposite have happened.

We got to a one handle briefly, um so. And I think one of the factors that we have probably was underappreciated is what you just said, that there was a search um for yields and for quality assets, and with so much UM liquidity from central banks, it forced investors to, you know, move into U s treasuries because if you think about the yield and US treasuries versus let's say, German bonds, it's more attractive to buy US treasuries.

And and you know, does anyone really think the US is going to default on its treasuries to the point that it were worth a point in a quarter more than than the German bonds or the Swiss bonds it's or or the Japanese bonds. It's really quite an astonishing disparity. There is there is and um That's why when you think about going back to this idea of the markets distorted, and how do you really understand the signal coming out

of the markets. There's a question about that because we've never had such accommodative monetary policy, not just from the Federal Reserve but globally. So let's talk a little bit about Quei and Zurup and monetary policy here in the US with the Federal Reserve and the e c B in Europe and the Bank of Japan. What is the impact of all this monetary policy trying to stimulate the

economy um in light of somewhat missing fiscal stimulus. Certainly in Europe, their austerity is there's been no fiscal stimulus. They finally started some of that in Japan, and I've seen somewhat of a reaction, and in the US we haven't really seen a whole whole lot of compared to pass cycles, this seems to be a fairly muted fiscal response, but an unusually robust monetary response. Yeah, I mean, I think, you know, it seems like the crisis was a long time ago at this point, and it was, but the

initial um response after the crisis was extraordinary. On the fiscal side as well. Let me think about the a r A. The American Recovering Investment Act was a massive amount of eight hundred billion dollars, two thirds of which were temporary tax cuts and extension of of unemployment insurance.

Not quite a trillion dollars your he wanted three. Yeah, he criticizes that it wasn't enough, it wasn't enough stimulus, and maybe it maybe it wasn't, but who knows what the counter factual was, but it was it was a you know, an aggressive response to an extraordinary recession, certainly more aggressive than we saw in Europe. They went the opposite direction. Here's your counterfactual is here's what happens. That's

a counterfactual to the other way. Here's what happens. If we don't put a trillion dollars worth of stimulus in, you end up with a five year long recession. Like yeah. So now the question is, and this is a question always for policy makers, and this is where I think, again, going back to Krugman's arguments, there's a lot of pushback, which is, policymakers are designed to smooth the business cycle, and certainly a federal reserve is you're not supposed to

allow the economy to overheating it all out. Now, suppose allowed the economy to uh to to fall into two deeper recessions, so you smooth the cycle. But the question is what is what is what is the best approach? Is it better to just not have a policy response, to have a very deep recession, but allow for there to be natural clearing and then you have a very

rapid and robust recovery after a period of severe pain. Um. And that's where there's a debate between free market views versus those that have more Keynesian and believe that there should be a policy response. And I think broadly speaking, the Kinesian views have one out in this scenario in this way, um. But history will tell us after the

fact which was really right. The other issue we run into when trying to look at that natural experiment between the US and Europe is that the electorate only tolerates so much pain, and so in a lot of these countries in Europe where you had austerity as the order of the day, they've been tossed out. I look what's

going on in Greece. Hey, we've had enough. We're not going to take this anymore, and we're gonna elect a new group of people who are going to try something else because austerity doesn't seem to be working too well over there. You're right, and so that's what you think about. What about social unrest, it's a problem. And now understand in France when they threatened to cut vacations from sixteen

to fifteen weeks, they're rioting in the streets. The US we tend to be a little more tolerant of that, where where I think philosophically we haven't wrapped our heads around as much of the safety net here as they they're used to in in Europe. I think there are a lot of reasons for that philosophical difference. But at a certain point it looked like the US um electorate was going to get angry, and then it just kind

of faded away. It dissipated. We have a much shorter attention span, apparently on this side of the Atlantic than than they do. I also think the economy just came back. It came back. I mean, think about the unemployment rate fell sharply. Um it cures a lot. If you have stronger economic growth, people have jobs, feel a lot better about what's happening in policy. They're not marching on d C when when the unemployment rate drops in half. Yeah,

not to the same extent, that's for sure. So so now let me ask you, UM, let's let's shift away from from the crisis, and let's shift away from um the austerity argument. Um, what's the big problem with forecasting and economists. It's one of the biggest criticisms we see is g economists makes these forecasts and they're always wrong. What the wrong? Well, someone somebody randomly is going to

be right. But why the obsession with predictions from you know, it's funny you say when you described your job, almost nothing you said is And now I'm gonna tell clients here's where I think payroll is going to be in a month, and here's where the dad was going to be.

And I do that. I don't forecast the market, but I do forecasts the economy, and I always, I always try to represent both sides of the argument by saying, you know, here's my baseline view, but here's what can go right, and here's what can go wrong relative to that view. But when you ask that question, I always think back to this conversation I had with my grandfather who I who I adored um when I first started in the industry, and he said, break guy. He said,

I don't understand. You all look at the same data. You all have the same information. Why are there so many different forecasts out there? And I was like, you're right, But it's the way you interpret the data, and there's a lot of judgment that goes into it, and people have their own leanings in their own biases. So forecasting is, um it's a science, but you know, it's also an art to say. To say the least, I'm I'm guilty

of criticizing economists for playing that game. I wish more of them would say, look, I'd rather analyze and explain what's going on than project A number of history tells us we're not really good at that. As a group, we're not especially good at that. Fair fair criticism or not. Um No, I mean I think it's fair in the sense that there is this tendency to use what happened in the past to explain the future. So it's very

hard to understand turning points. It's always darkest before the dawn, right, So it's it's very hard to say that you're ever gonna be able to get out of whatever the cycle. So when we're in a recession, we're never going to gather recession. Yeah. And when we're an expansion, you always come up with a reason why the good times will

just continue. And for those that have bold calls, um, you said Nori Overbeini, for example, of making a bold call that you know during the the good times that they're going to end, and they're going to end badly. At some point, you're going to be right with that call, and he was, but trying to time, yeah, and that's hard and it's hard to do um. And there's always this tendency also to return to some sort of steady state, some sort of equilibrium, because you don't know what kind

of shocks are going to hit the economy. So I don't want to keep going back to Krugman, but he did a whole analysis on fresh water versus salt water economists, and there was a lot of self flagellation about the profession having not seen the crisis coming beforehand. It well, and even in the early stages of it. Kind of underestimating geesus is bad and it's going to get a whole lot worse. Where where do you come out on that sort of you know, deep self analysis of profession

of economics. Yeah, I mean, listen, it's it's again. It's not perfect. I think we you know, you do what you can with the data you have and with your judgment. But you're right, a lot of people missed it. They missed the crisis. Um. I remember even sitting at at

Lehman Brothers. We had we were working on this piece on the housing market, and I was working with our mortgage strategy team looking at um the vintages of mortgages, so taking um the you know, assuming different default paths, paths for mortgages that have been originated given their credit history, so assuming their credit history was the likelihood of default. And at the time we came up with exceptionally large

numbers for foreclosure. But we had a conversation saying, oh, well, here are the reasons it's not going to happen, because that was the view that yeah, you can kind of smell that there were issues, and um, you can have some problems, but it wouldn't be outright disaster. A lot of people like to say they were there was froth in the housing market, not a bubble. So you look back and you think, oh my gosh, how did I

ever think that? Look at home prices, reultsi's income, look at um, you know all the signs, but cost of rental versus close to like several in real time. I think it's hard to put that that exceptional scenario. It's hard to pencil in that exceptional scenario. And it's always hard to imagine the extraordinary circumstances versus the ordinary. UM.

Oh that's funny. So when you when you're looking at UM, when you're looking at different when you're looking at different scenarios and trying to figure out exactly what's going to blow up and what's not going to blow up, it's much easier to say, well, this is a little crazy and they'll settle down. Then to say, hey, the world's gonna come to an end. This is going to be an abyss. Yeah, of course, of course, it's a much

easier view to communicate UM. And I think we've learned from the crisis though, because you look back at what occurred, and I think that we have to realize that, you know, disaster can strike again at some point. So I think there are lessons learned for the average person. For forecasters, but um, you know, there's this tendency to forecast some sort of return to equilibrium which may or may not

take place soon or rather than later. So what changes would you like to see take place in the profession of economics as practiced on Wall Street. I think it'd be very helpful to have at all times some sort of modal distribution. So you have to find that best. So you give a forecast, You have to give a forecast. Here's where I see GDP growth, Here's where I see jobs, Here's where I see the fed um. But what's my

distribution of risks? Where's the risks around that forecast? Are they leaning to the down side to the upside um? I think that would go a long way in terms of communicating the views and helping market participants. And and I do that. I think we all do it to a certain extent, but maybe to formalize it would be helpful.

So in other words, it's not just the number, but the context and the potential upside and downside to the Yeah, so rather than saying our view is for three percent growth, you say our view is the economy will realize three percent growth, but the risks are that there's a higher probability of a two percent than four percent. So now let's you know, we skipped over the capex question. Let's

let's let's address that. Um. We've seen the uptick endurable goods at least and how in h automobiles, but not in other goods. And we've seen kind of soft retail spending elsewhere. But the big question is we're not seeing the sort of capex spending on the corporate side that you would expect this far into a recovery. Why not? And when are we gonna see some real corporate capital expenditures that perhaps might be good for both UM, the

economy and corporations long term returns. Yeah. So, I think part of the challenge has been that there's a lot of uncertainty about this business cycle. This has been the recovery effits since starts. So that has made many corporations hesitant in terms of doing these bigger, bigger ticket item investments. UM. But the large, large corporations Bardley speaking, should be prepared

to do so. If you look at the health of their balance sheets, look at their ability to refinance dead at low levels, UM, they're very sound and and and and should be ready to go in terms of investments. So I hope that it's just a matter of time. Smaller companies have struggled a bit more in the past several years. I haven't had the same access to credit. Um. It's a big it's a big driver, and not only small businesses, but maybe even more importantly, it's new business formation.

New business formation is absolutely critical to getting investment to pick up and to get hiring to pick up. And it's been a challenge for new businesses to form in this environment. It's been slower than average. Yes, why do you think that is? Well, I think you know one of the issues, and yes, I focus on housing, so maybe I'm always inclined to go back to it. But I do think part of it links into housing and

to the equity issue. A lot of times small new businesses are formed by with drawing money out of your home. It's a it's a personal loan. Yeah, so you you you finance it, you yourself, and you put a lot of your own capital um out front to form a new business. And with difficulty getting home home equity lines of credit, and with a period of negative equity and low equity that's probably made it a bit difficult for

some businesses to form. I think maybe one of the other issues is just how a lot of industries has changed. So think about retail. Think about how much the market

has changed in just the past ten years. UM we went from an environment where it was very common to go to the walls and two brows and to shop in person, to one where technology has made it so easy to just take out your smartphone or take out your iPhone and click on an app and buy exactly what you need for overnight chipping free, which is amazing. It's amazing. I buy an exurbant amount of stuff on

Amazon Prime, especially having a baby at home. You need a lot of things, and you need it quickly, and I don't have to go the store to get it. It's I have. I first became an Amazon client when my college roommate gave me a birthday gift certificate. I want to say, or something like that, and I've kicking and screaming. Finally gave Amazon Prime a try. Because the issue is always what's the big deal. I'll throw something in my um cart and all right, I'll get something else.

And you used to be twenty five dollars now it's thirty five some. And what I found with Amazon Prime, which is kind of funny, I'll do the thirty day why not? And I find that you're shopping style just it's like click, one click, you don't even think about it anymore, whatever you want, and and their two days shipping. I don't want to say often, but surprisingly is there the next day. Like if I order something early on a Monday morning, it's in the mail, I get it

at Tuesday. If you order it Sunday night, it's not showing up until Tuesday Wednesday. But so it's amazing, how it You know? There was a disc I I had lent to somebody and someone said, oh, it was a Mark Knopfler privateering, which is I'm a huge Dire Straits fan and Mark Nof was his fabulous guitarist, and a buddy call to say he's poppy chewed up the disk

and he really I had no problem. We were literally on the phone having a conversation and by the time the conversation finished, he says, you know, don't worry, I'll they'll get you another one. I go too late already ordered like we it was like privateering into the thing done like it's it's so easy and instantaneous, it's astonishing. So what does that mean for you? You've mentioned retail? What does this mean for that? We have hundreds of millions of square feet of retail malls and shopping and

do we have too big a footprints for retail? Is that something that's gonna really contract based on what's going on with technology? Well, I mean I think we're we're consuming differently as as we just talked about, which means you don't need as much brick and mortar, and maybe you need more warehousing, maybe you need more distribution, distribution and strones exactly. But technologly you can't can't avoid technology and you have to embrace technology and and it creates

winners but also creates losers. Are millennials going to the mall the way the baby boom generation would go sports shopping or retail therapy as some people called it? Is this? Is this that different from the early from the previous I mean, I don't know, it seems to be. I think the other issue is that there's been people staying close to city centers, uh for for longer. Um, So if you're living in an urban area then you don't have as much access to the mall, and um, what

do you have access to everything else? You have access to everything else, which is at seven Um. But yeah, I think you do shop a bit differently. For I mean for me, I live in the city. We have you know, a doorman, you you can you can blow out everyone online. It ships there, sit you don't. Yeah, it's just the convenience is exceptional. So um. When I lived in Manhattan, we would have people visit me, visit us in the apartment. My favorite thing was to show

them two stacks of menus. This giant stack are the restaurants that will deliver to us. This smaller stack, these are the restaurants that will deliver twenty four hours a day. It was. It was crazy. And when you move out of the city, that's the first thing you miss is Wait, I could get parogi dropped off at my door at two in the morning. That's amazing. It will be a shock to our system at some point. We're trying to

hold out. The trade off is you just end up with immense amounts of closet space, like to a My first apartment was a four squift with studio on seventeen and third that literally if you the joke was if you wanted to change your mind, you had to step out into the all way, so you know, enough room. Um, but then now you you end up in the bourbs, and it's just it's a whole different. It's a series of trade offs that I loved being able to life.

I guess it really, I guess it really is. So let me ask you about another trade off, um, which a mutual friend asked me to ask you, Um, what research of yours are you especially proud of and and whether or not you nailed the call or a particularly contrary call you had made. What what sort of piece of research? Really? Can you look back and say that was a really great piece of thinking called the bottom

and home prices which we were right on, which was great. Um, So March two thousand and twelve put out a piece sing home prices are bottoming now, and they did and the recovery started. So we nailed that call. Um, you get a lot of pushback from that, got a lot of pushback from it. Um, Yeah, home prices are not going to rise. I haven't fallen enough. Why would they be stabilizing in this environment. Um, what's your answer to that?

What did you say to people that you had, Um, you had a buyer that Um, you had a seller who was highly motivated and you had a buyer who was also very Obviously they were able to find that market clearing price. Um, which meant a lot of pain. But that's been found, and we're now at a situation where inventory is low. We were looking at twelve months to what five months of and it went pretty fat. So it seemed like we were kind of primed for, um,

some stabilization and home prices. Now, did we call for ten percent appreciation two thousand thirteen, No, we were looking for something a bit lower, but for two thousand twelve, just timing that turn, we were right, and um, we're in front of the game. And I remember I went on Bloomberg Surveillance and on Tom King's show the day we published that note. You know, I look back at that and you know, taught me a big, big deal out of it, rightfully, So you know, home prices bought.

I mean, Michelle Meyer calls the Bob and home prices and I remember feeling so uncomfortable about them. I was like, oh my gosh, what if we're wrong, and I tried to pull back a bit um and he, knowing Tom, he won't let you. He won't let you, And he still remembers it, and now he's still references that. So I feel really proud about that. So now let me ask you the contrary of that, what what sort of research piece do you wish you could take back that

you never hit the published button on? Uh? I would say it was a piece on labor force participation. Let's say two thousand eleven or so. Now, for those listeners who aren't as wonky as as the rest of them, how many people are actively in the labor force, meaning a person who is of employment age. But besides, I'm not working, I'm not looking for work. I'm just I'm complete withdrawing for the labor be for uce. Either I'm going back to school or I'm dropping um adelaide force

to raise a child or something. But I'm not an active participant in the labor force. That peaked in the late nineties, didn't it? Um? It did so right before the two thousand one recession. Participation rate peaked and it's been on. It was not like a gradual downward shift. Had some some cyclicality around the two thousand one recession, but then when this recession hit it it felt like

it just collapsed. In my view at the time was it fell too fast and that there's room for cyclico advancement and we'd be able to see a rebound the participation, right, I don't think I appreciate enough how much demographics were playing a role. UM. So we wrote a piece, you know, let the lay before to be with you, arguing that the participation ary was going to pick up and that would that's a clever title, yeah you have. That's one

thing that Wall Street economists you have to have good titles. UM. And arguing the participation rate would would pick up. It creates some stickiness the unemployment rate and it was not the right call. And in fact, the part that was around two that's eleven now. Hasn't it begun to stabilize. It didn't really stabilize until last year, so they was further downside and the unemployment rate fell faster than what

we were predicting. UM. And the odd odd notation of the labor force participation rate is as you have more people coming back into the labor for us looking for work, you'll actually end up seeing and improving economy raises unemployment rate described that. I know a lot of people are perplexed by that. So the participation rate matters because it

tells you how many people are out there looking. So even if you have um you know, a stronger economy, if that healthier job growth encourages people to come back in the labor force, it makes it appear as though the unemployment rate is actually more elevated than it is. UM. Now, if the participation rey falls, if your people are looking for work, uh, and of those looking for work, some of which are unemployed looking for work, obviously the unemployment

rate has downside biased. So it's not just and I think I talked around it a little bit, but the clear answer is that the unemployment rate is not just influenced by the number of unemployed workers. It's influenced by the number of people looking for a job. So you can sometimes perversely have a rising unemployment rate because the economy the job market is actually getting It's more it's it's hard to see it actually rise when the economy

is improving, but it's more that it's sticky. HM. So last last question, because I know you have to get out of here and it's already late in the day. This so much fun. What is what is your So let's talk about what is your what's your favorite part of the job, and um, what changes do you see coming for the role of economists on Wall Street. That's that's a tricky one. Um. Favorite part of the job, I think, um, the amount of adrenaline I have while

doing the job. So it's it's it's fast paced, it's fun, it's constant. Um, you're in demand. People want to talk to they want to understand what you're thinking. Um. And that's that's that's really that's that that pumps you up. So I'm excited to go to work. I feel, um, I feel alive. I'm in the office. It's it's great, no matter how tired I might be. So being on the training floor, being involved in the markets, and being

able to have conversations with exceptionally smart people is is wonderful. Um. So I love that. I love that about the job. Um. I've really enjoyed the media aspect too. I like public speaking. I like I enjoy being on TV. I enjoy being on the radio. I enjoy being able to communicate my views to the public and and hearing the feedback that's really fun. You know, not everybody agrees and I and and I'm okay with that, And I want to hear where there's a difference of views, and I like the debate.

I think it's I think it's healthy, and I think it's exciting. Um. Where is the industry going for economists on Wall Street? Well, I think you could argue that in general, the industry has shrunk, and so clearly opportunities for economist on Wall Street sunk as well. UM. I think one of the big questions that it is thinking is how do you know, how do you monetize research?

Research is extremely important? Um, but if you're in a cost cutting environment, Um, you know, how do you how do you how do you make it as valuable as you can? So I think we always have to keep that in mind. Keep that in mind is that at the end of the day, if you're a Welshire economists, do you have to produce something that's going to be important and going to be relevant for your clients? Um, both internal and external clients that they're willing to pay something,

willing to pay something for Michelle. This has been an absolute delight we've been speaking to Michelle Meyer. She is the chief economist of Worldwide Bank America. Mery Lynch, as the show goes on to get so, what is your exact title? Deputy Deputy head of US Economics. Okay, and you worked directly with Ethan Harris, who's the chief? Who is the chief? He's the co head of Global Economics.

The Developed Economics team reports into him. And if somebody, now, most of your stuff is behind a firewall, if someone wanted to find your work, how would they how would they find it? Well? Bank America is a very large organization. So the good news is that a lot of people do bank with us or have some exposure to to

Bank America. And if you do, UM, you can't get access to our research on the I get stuff from you guys every day in UM and through Bloomberg and through you know, other types of blogs like yourself you can get you can get information, So it's out there. We've been speaking with Michelle Meyer of Bank America. Merrill Lynch. If you've enjoyed this podcast, UM, look an inch higher or an inch lower on iTunes and you'll see all the rest of our podcasts. We're up to thirty something

almost forty podcasts. Be sure and check out my daily column on Bloomberg View dot com or my blog at rid Halts dot com. You can follow me at rid Halts. I'm Barry Ridholts. You've been listening to Masters in Business on Bloomberg Radio. You're listening to Masters in Business with Barry rid Holts on Bloomberg Radio.