This Is What We Just Learned In Jackson Hole

Hello, and welcome to a special episode of the Odd Lots Podcast.

I'm Joe Wisenthal and I'm Tracy Alloway Racy, So we are.

Here for you and me the first ever time at Jackson Hall.

I know I always wanted to go, partly for the scenery, but also just to get a feel for some of the economic discussions and wonkery. I've seen this described or heard this described as the super Bowl for central bankers.

You know what. I like the description.

It's very apt because like when I think of the Super Bowl, I think of like a bunch of like parties and people just hang out if.

There's the game.

But seriously, like you said, like partly for the scenery, I would say, like for me, that's like ninety five. I was so jar dropped the first time I walked in. It was gogeous, like the gran I was just like, I'm like totally flabbered gust.

Also the chance to finally break out my cowboy boots. I don't get to do that that often in New York.

If anyone sell the photos of me on Twitter this week and Wednesday morning, as I was scrambling out of the house, I could not locate I have multiple cowboy boots.

I couldn't find any of them there.

Sure, Joe, Sure they all go conveniently missing right before you need them. No, but it is an amazing event. It's really interesting to sort of witness it for the first time because it is at this kind of unusual moment for central bankers.

Yes, right, and so it's like this like weird uneasy piece, which is like inflation has come down a lot, the labor mark is robust. We had this hiking cycle, but no one really knows why and how it all happened and what exactly the mechanism was. And I think that leads to a little bit of anxiety about what will the inflation the disinflation persist.

I think it leads to a lot of anxiety. I mean, these are central bankers who are steeped in economic theory, things like the Phillips curve, which tell you that inflation shouldn't be coming down without a corresponding rise in the unemployment rate. And we've seen the exact opposite happen. And if anything, it seems like there are some signs that the economy is accelerating. Now you have the Atlanta Fed GDP now right, which is kind of crazy after we've seen this huge run up in interest rates.

Now I know there's something like there's I'm thinking trying to think of some gift of like some of the person like sort of awkwardly smiling and it's.

Like, yeah, things are good. Well, we can't entirely explain why that's sort of.

The vibe I would say, right, yeah, I think that's right.

All right, So what have we learned? We're going to try and do a little bit of summation of this extraordinary weekend with some very special guest. For this special episode, we are going to be speaking with two of our illustrious colleagues here at Bloomberg. We're going to be speaking with Bloomberg Surveillance co host Tom Keen, who happened to be the first ever ODLOTGS guest years ago. And then afterwards we will be speaking to Bloomberg TV's policy correspondent

It's great to be here. But you gotta paint this. I mean, you don't know, you don't have a video for.

This podcast, I'll take a photo.

We're sitting here in literally an historic landmark. Back in my ute, you there weren't planes, there weren't trains.

Tom.

You went west in the car with four screaming kids and no air conditioning, and you went out to the National Parks and there were these little gorgeous nineteen sixties mad men bungalows. Yes, and I expect Rock Hudson and Kim Novak to walk through the door at any moment.

These are definitely bungalows. So for people who haven't been to the Jackson Lake Lodge, they're kind of rustic. There's no TV. There's a warning sign in the room saying if you encounter mice or bats, please call staff, don't try to trap them yourself.

Take ants.

I haven't, but it doesn't get too hot. But there's no air conditioning either.

Yeah, air conditioning has at to option.

How many times you've been here to Tom, I have been here roughly.

I haven't kept count like Davos, but I've been roughly seventeen years. What I'll say is off and on, but I've had a good fortune of being here most of the maximum tension years.

Tracey, you know what I really like about here, And Tom mentioned Davos, which is why I bring it up. In Davos, you know, they clear out all the civilians, like when all the everyone comes, like you cannot get into that whole town. Here, it's like we're around by tourists, like anyone could actually just sort of come hang out here and sort of like sit on one of the couches and the Jackson like lodge. You just got to

It's true. I did actually have this older Australian couple that came up to me and they were looking at the Bloomberg TV setup and they sort of tapped me on the shoulder and they were like, what's going on, what's happening? And I was trying to get them very excited about Oh, Jerome pal is here and maybe even someone from the RBA is around. They were into it.

Yeah, Bud Nethel was once on the coach. They're hanging out with this guy sixty five years old Gray they're talking about so how sure it's the wonderful Irvin King from.

The Baker, It's great. What have you learned. What struck you about Paul speech.

Well, well, not much about Paul speech. I mean I listened to it. It's in my ear and we've got all sorts of production issues going on at the time, So to be honest, I don't hear it word for word like you guys do, and Tracy really sits on it and listens. But different than any other meeting, even CenTra and Portugal, this is a meeting where you have no clue what the zeitgeist is going to be until deep into Friday. And the one word for me this

I think that's exactly right. And do you the people you speak to, do they express much anxiety about this current period of economic time or is the vibe very much? Well, last year pwe was talking about how we'd have to have lots of pain in order to bring down to claci media.

Yeah, that's the media. That's a no.

No.

These are people, is you all know? These are the people who were first in their fourth grade class in math and they had a meeting in June with their parents to say, well, we think he should jump to sixth grade. They were those kind of people, and so they have a huge arrogance about how smart they are, but also a built in humility, and the humility right now is maxed out. I don't care if they're you know, Barry Iiking Green of Berkeley or the youngest peahd he

I mean, I I the final paragraph. I think of Powell's speech. He talked about the cloudy skies, which I you know, because the whole question is like the stars are a star neutral rate, which.

You know, one knows what they are.

And I think, you know, Paul expressed that in the speech that it's like the guy's are cloudy. Even if even if such stars even exist, it does not seem like we could see them right now.

I live in New York where there's like one damn star in the sky. It's our terrorists. If you think it's Stevie Winwood and Arc of the Diver, it's one of the stars on the record album You Come out Here, and it's the stars were in the sky last night. You know, there'll be a lot of analysis. Frankly, you guys are better at that than me. It'll be hawkish,

Yeah, it seems like they're struggling with some of the real economy aspects of this. And you saw it in Pal's speech where he was talking about supply chain pressures starting to ease, what's going on in housing. It feels like that's not that's not their comfort spot.

It's oh decidedly not. I mean to take it academic, and to take a structure like a Hicksey and Islm structure, which is, you know, blah blah blah nineteen thirty eight. I don't think that's in play right now. You let meet with a Phillips curve, which was what fifty two. I'm going to think, London School of Economics. None of this is working right now. I don't know what the twenty twenty fourth theory is. It waits odd lots to tell us.

You brought up nothing is working right now, and I'm convinced. I mean, I did a TV hit yesterday. We were talking about the disinflation and something Someone's like, well, in a year, will we have more sense? And I kind of think that, like this is going to be a period that not next year, not ten years, like for twenty and thirty years, people will be writing papers about

I strongly agree with that. My book of the Summer is Olivia Blanchard, very controversial right now, we don't need to go into it. But the answer is Olivier has this phrase for all the stuff we don't get, called other factors. It's like an academic usage with quotes around it, and that we're overwhelmed by the other factors. I mean,

There's a lot happening, that's for sure. So on that note she jured me. This is called a pivot. This is what I learned from the Central Bank meetings. Hot a pivot. So on this note, I'm curious you've been going for a long time. One thing I was kind of surprised about is so much of the focus from us, you know, reporters here to talk about this event is on the short term policy outlook. But the event itself is supposed to be discussing the longer term analytical framework

Tom Hanig and I had a nice chat out front of the door here at the lodge. Tom Hanig reinvented Jackson Hole in the Kansas City FED. This started for years ago with Paul Volker. They said, Paul, I know you hate conferences, you don't want to travel. There's fly fishing. So I Volker showed up, literally, I kid you not. That's how they started this thing, and off the top of my head, eighty two.

Well it worked.

And it still works to this day. But they had to get reinvigorated, and Tom A. Honig did that his head of the Kansas City Fed before Esther George. But what Honig had to do was police the modern media, and they it's sort of been a you know, you see it. You come out of the lodge folks, and there's this huge mountain range picture and there's this place where they take the photos of the central bankers, and off to the right it looks like the Republican National Convention.

It does seem, however, in different years. And obviously the chairman doesn't not every year that most years the chairman gives a speech. But every once in a while I think that German doesn't come. Yeah, I think it's twenty I feel like twenty.

Thirteen or something.

Yeah, but it feels like to some extent it's sort of the dial goes back and forth about how academic they're so like right now and last year was probably more famous.

You know, there's like that pow'll.

Give an eight minute speech in twenty twenty two, which I've characterized as like, we're not here to make friends, We're here to get inflation done. This year, I think this speech was closer to maybe like fifteen or twenty minutes or something like that, but still like not a

And sometimes this happens, and it happened. I believe it was a droggy. It may have been thrche, but the moment here is the European Central Bank, in my conversation with Christine Linguard, is an example of the urgency in in ECB to to September sixteenth and beyond and the complete mystery of the europe An experiment. It makes us look like virtual certitude. What we're doing, it's all insane.

So when you come here, what are the goals?

Like?

What would what constitutes a good Jackson hole for you?

And the tom han is to get me out of a suit. He came up to me once and he said, can we lose the tie?

What do you wear BOTHA?

I traveled when I first joined Bloomberg. Actually I wore a bolo once. We interviewed the art director of mad Men, and I wore a bolo. That was some endorsement from mad Men or something. I can't remember, but it at Jackson's Hole. I travel like I always travel, which is as simple as I can, because I used to travel

I did ask Mike McKee, who we are about to speak to, actually how many hats he typically brings with him to Jackson Hole. I was disappointed to hear it was only one. I imagine him Audrey Hepburn style with like seven hat boxes on the plane.

But I didn't realize he's a he's a western man.

He's Colorado. So this is a joke come out? Did I make that.

He's milking every Western jun kid, the.

Economic Western He's like, this is my natural habitat.

Yeah, he's north of here. He's up by Jellystone Park in Idaho or someplace he's here. Then he'll go down to Arizona. What he's got the whole Mountain time thing. He's nailed it.

Well, now we have to ask Mike about this.

Nice true.

Okay, one more question from me. For people out there who are trying to understand Jackson Hole, what's your most important piece of advice? What should they be looking out for the thing?

And particularly for younger people, this is so true social media podcasts, The blah blah I do doesn't cut it. You have to read the material. And the material can be books, obviously, it can be papers, it can be longer commentaries. You know, what's what we did when we were kids. You read the Economist to cover. I mean, that's how you do it. There's no substitute for reading. There's just absolutely no substitute for reading. That's just it's as simple as that.

Did you read all the papers?

Jeff?

I hate to admit it, but Tom is totally right. And this is like it's taken me like forty three years of my life too, like acknowledge, like actually, you kind of have to do the reading. And if you read an academic paper, you can't just like for years, I just read the abstract and then skipped to the end and look for a chart that I could screenshot and tweet. And I have to admit that there might be actually some good meat in the middle.

The good stuff's in the footnotes.

I know, all right.

My last question, you know, a few more months of this year, three FED meetings before the end of the year.

What are you watching for?

Like?

What do you what do you what are you looking out for for the rest of the year, both from the MACRO and the FED, like, what do you what interest you read the.

Word I over use the TV. People will say to me, why are you saying vector? No one knows what that is. I think a lot of people know what a vector is. It's a straight line essentially, but in two or three dimensional space to the end of this year, with all that we've got, Joe, it's a massive three dimensional space right now. I want to know the power of any of these vectors, like inflation. I want to know which

Well, Jackson Hole is definitely a place that makes you believe in America.

I was dming with someone early like you need to travel for America is so much, so.

Much, Tom, that was a blast, so much time.

Can I take them out? Yes?

And now let's let's chat with our colleague Mike mcka. Mike McKeith, thank you so much for joining us. Happy to be here, Mike, really important question to start. So Tom said, you're not really Western. He's like, oh, Mike mc so, he just pretends to be a cowboy. What what's the truths there?

I will gladly take Tom out on the range with me. I grew up in Colorado, grew up writing, come out here every year and uh help my friends on the ranch, and so yeah, I mean I can cowboy.

Okay, because you for those who haven't seen the pictures, Mike wears a cowboy. A lot of people like to dress up, but you know, I think Mike is a little more credible than most.

I think Mike probably has the best Jackson Hole wardrobe. I put it that way.

Yes, it's what I would wear. I mean, this is this is Jackson Hole.

It's Jackson Hole.

How many hats do you actually have with you?

Well, I only have one hat with me. I own seven.

And how many times have you've been out here?

I don't know how an exact count, but the first time I came was nineteen ninety seven, and most years between ninety seven and now I've been here.

So one thing I didn't realize about Jackson Hall. I kind of assume that, you know, media was invited and that media would have access to the actual conference. But that's not the case. They have a kind of weird system. Can you describe that to us?

Basically, it's one representative from each news media organization and Bloomberg Radio TV, and unfortunately you guys are blumped under that gets one, and Bloomberg News gets one, and then the Wall Street Journal, the New York Times, et cetera. And so the media presence is there, but it's not huge.

So we're talking about this with Tom earlier. But it feels like the.

Dial changes from time to time.

And some years it's this is clear, you know, the interest is in something very academic, and then some years it feels like the interest is in how fast is the FED GETNA raise right? And over the next three or four months. How does this ear feel different or similar to past Jackson halls You've.

Been Well, it's maybe a little more in the middle. What happened basically was it was an it is an academic conference. People think that something goes on in there that doesn't happen. It's academic economic papers with econometrics math in there, and they talk about things that might happen in the future and in terms of economics. But the

What was your favorite Jackson hole? Is there one that stands out to you as a sort of seminal moment?

I think probably the most interesting seminal one was two thousand and five. Alan Greenspan was retiring, and they set this up as a sort of hay geography to Alan Greenspan, because remember we had had the great moderation and productivity gains and the Fed had its soft landing, and so everybody was here to praise Alan Greenspan except for Ragaran Regin, who was at the University chicag Go and then later the governor of the Indian Central Bank. He came here

So I knew that Rogen had given that speech. I didn't realize that was a jackson Hole speech, and I certainly did not realize that it was essentially at you know, the sort of big Allen Greenspan run at the party. I hadn't realized the context of that before.

Yeah, it was. It was kind of fascinating because he stood it stood out so much from what everybody else was saying. Because the John Clutchiche was the ECB president at the time, came here to talk about how great Alan Greenspan was.

Is anyone getting ostracized this year? Is there someone we should be paying more attention to?

I think this year everybody is kind of welcome at the table, even esther George, who has retired, is back to see her old buddies, and I talked to her. She said she's very happy to sit in the back and not have to worry about it this year.

So something that we were talking about before is that, you know, there's compared to last year obviously, when I think, you know, CPI picked around nine percent.

The FED probably.

Feels and many central bankers probably feel better about things, but there's a few to you know, there's an uneasiness right because no one really knows why inflation fell as fast as it did, given that we saw three and a half percent unemployment, and no one really knows why GDP growth seems to be accelerating in Q three despite the FED having raised rates to five percent. And then on top of that, you just have all these other things going on.

What was the term that Tom.

Used started just all the flexity, other factors and vectors.

I think he said, very very tough vectors matter.

That was a terrible time, Tom Dictionary somewhere.

Can you talk a little bit like, you know, it feels like we're just in a period of it's a cliche, but just like real uncertainty about what is going on.

Well, two thoughts on that one is that coming into this meeting. I talked earlier in the week with a central banker who said, this is a tough one for us because it was easy last year, right inflation, we know what we need to say. We're going to raise rates. We're going to raise rates. We're going to raise rates this year. We don't know what's going to happen, and it's kind of hard to convince people that we don't know and we don't have a plan and we're going

I have a media naval gazing question, which is, why did this expectation that he was going to give some big r star policy stance come about anyway, because if you look at the twenty eighteen speech, he was always kind of doubtful about it, And of course he is not an economist by training, and so I don't know where that expectation came from that he was suddenly going to give a very academic speech about how maybe the neutral rate was higher than we thought.

Yeah, I'm not exactly sure. The estimates of the neutral rate that the New York Fed did got suspended during the pandemic because the data weren't accurate enough to make any kind of determination. They brought it back late this spring in May, I think, and then you had some articles about it that and whether or not it was accurate, and John Williams view that we would see the neutral

Way to know.

I think that description of how the news works, which is like, hey, I saw someone else writing about that, and then the economist is like, well, I got to weigh in, and then we write about is like one of the best descriptions of I mean, we all hope to avoid it, right, we hope to avoid group thing

Is like that talking about it, Well, we better talk about it.

Too, Yeah, And everybody was trying to figure out what to say about Jackson Hall this year. Because of the uncertainty, there wasn't any kind of obvious speech for j Pidle to give.

So the other thing I wanted to ask you is just on this question of uncertainty and why inflation has come down. I haven't heard anyone here utter the dreaded word transitory for obvious reasons, but it does feel like there is an element of the supply side creeping in here. So in Pal's speech, for instance, you see him talking about maybe some of the supply constraints are starting to ease. Maybe that's a factor. And then one of the papers that was presented was all about the supply chain and

Well, I think everybody is. They're looking for evidence that what they're seeing with inflation is going to last. I heard this phrase the other day and I thought it was great. After a period of long COVID, we've got long transitory. Yeah, it is a lot of supply side stuff that the FED was right would go back down, but they got the timing wrong.

I just want to say, you know, you mentioned the grateful dead. So when I walked in I got here on Wednesday afternoon and there was like, no one here. And in the lodge I saw Chairman Powell and he was chatting with CNBC's Steve Leishman, and I was like, I wanted to introduce me, but I couldn't think of anything to say.

You know, I was like, I don't.

But in retrospect, I was like, Oh, that's like that's the Grateful Dead Caucus right there, because I think.

Leaman plays in a tribute.

Baseman is a dead head.

Powell is a dead head, so I should have made some crack and Steve, Steve's a competitor but a friend, and he knows members of the dead and uh he talks to them all the time, and so I'm sure he was telling j Powell, we could maybe introduce you.

That should have been my lines a deadline you're in.

Also, I do think that staring at stars under a cloudy sky would be like a great thirteen minute Robert Hunter instrumental Jam instrumental. So what do you We asked Tom this earlier, but you know, like for the coming months, and the irony is, of course this is an academic conference, but like ninety nine percent of the media attention is like, yeah, but okay, what does it mean for the next three FED meeting or whatever, like the most narrow version of

Well, I think we will probably see relatively restrained inflation, probably rise a little bit, just on base effects and things like that. But if we can maintain a sort of level inflation rate, you'll see the FED on hold for September. We'll watch the inflation rate and the unemployment rate for November, and they might act. Then the trick is going to be if they don't think they need to raise right away, what do they say to keep

I think I have just one more question, which is what's your favorite Jackson Hole moment? I just want to hear the Jackson hole lore, like, did Alan Greenspan wants run into a grizzly bear or something like that.

No. Don Cone, who was vice chairman, was known as a slave driver on the trails because when they would go hiking, he would just power up the trails and people had to follow him. But I think the most fun that people have had is when they've taken us out a couple of times to ranch for the horse whisperer, to see horse whisper training of horses. And then of course there are those of us who slip away to the Jackson Hole Rodeo and have a great deal.

We're taking me and Tracy at the rodeo tomorrow.

All right, we're all going to the rodeo.

Thank you, Mike. Wait, I just thought of one more question. I heard a rumor that you have a plaque at the bar, the famous bar in Jackson, the.

Million dollar Cowboy Bar.

Yeah.

Yeah, I try to hide that, but there have been some memorable moments there, but we can't talk about them on that What happens as.

Soon as we turn off the microphone, we'll get this. Yeah, there we go, Mike mckaith, thank you so much for coming off here.

Tracy. I love talking. I love our colleagues.

You know, what do you do?

You remember the old ESPN commercials? Did you ever see those where it's.

Like you're gonna have to describe them.

To me, it's like.

They're walking through the ESPN grounds and there's all these like famous athletes just doing stuff like filling up the coffee pot and like raking and stuff like that. That's what I often feel like that working at Bloomberg, it's like it's I love getting to run it talk to our college.

No, it's absolutely fantastic. And I love hearing the old sort of Jackson Hole war from Mike and Tom. I gotta say, we need to set up like a satellite au Lolot's office here in Jackson.

Hole for listeners.

All weekend, Tracy has just been talking about why can't we have a Bloomberg jackson Hole bureau like twenty four or seven.

I would move here in an instant.

Tracy is like I would live in a Bloomberg dorm, kind of like a fox Con dorm if it meant I could just be in Jackson Hole all the time.

Joe, what's your favorite Jackson Hole moment?

Uh?

Well, I really enjoyed hiking. I really every morning. The view I just like have not gotten over, Like the view of the Grand Tetant behind the lodge here is incredible.

I am looking forward to actually going into Jackson tonight and going to the Silver Dollar Bar and trying to find Mike's plaque.

I'm looking forward to that.

Should we talk ekon for a second.

Should we talk about.

You don't just want to talk about Jackson Hole? Yes, okay. I actually thought Pal's speech leaned a little bit dubbish, and I've seen it. It's sort of like a warsh test I think for everyone's preferred policy positions at this point in time. Because I've seen some people say it was hawkish and others say it was dubbish. I lean towards the dubbish camp. He's saying that policy is restrictive.

Yeah, and I think like the market is coming here on to your view, and like even a month ago there or like more rate cuts priced in, and I think, like, yeah, it's like it would be tough to make. We're still the FED is a long way from feeling like they'd be comfortable stopping the hikes, let alone cutting rates.

I think, like, you know, both.

Tom and Mike talked about it, but like it still feels like if there were a way to measure uncertainty.

Yeah, it would be high, be very high right now.

For so many different reasons. And I do think like.

You brought this up with Tom, which is that like things like supply chains, things like the effects of Russia's invasion of Ukraine, et cetera, like climate spending. I don't think there's like particularly comfortable ground for monetary economists who are sort of like it's you know, navigate these waters. But like, I think this is like kind of uncharted territory for me.

Right, you're telling a bunch of economists that used car prices are now a significant portion of inflation, and so they all need to become experts in the used car market.

Yeah, and they have to understand like a semiconductors that are going to allow for the expansion, Like they're all these sort of distinct variables.

Yeah, all right, shall we leave it there for now?

Let's leave it there.

This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.

I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our guests Tom Keane. He's at Tom Keen and Michael McKee at mconomy. Follow our producers Carmen Rodriguez at Carmen Armant and dash O Bennett at Dashbot, and our special Jackson Hole guest producer Sebastian Escobar at Under the Sea vass. Follow all of the Bloomberg podcasts under the

Topics specifically, and if you enjoy Oddlots, please leave us a positive review on your favorite podcast platform. Thanks for listening.