The Fed

…these things though are not a discussion for today. They're not even a discussion for a month from now. I think it's going to take some time which is why I think the yen is going to be weaker. And come actually on that interest rate differential we talked about well the BOJ clearly has a role to play. That's the yen side of things. But what about the dollar side of things. I mean how do you we were just discussing before you came on how much hawkishness is actually yes we got quite a lot from wash a couple of weeks ago less last week more doveish the jobs report a little weaker. And where does that leave us in terms of expectations about interest rate hikes because that also is key for that interest rate differential with the yen . Absolutely. And I think you know the minutes this week will be interesting to see whether there is any more color around that. You know our expectation is that you know most likely they're going to hold rather you know for a while you know at least for the remainder of the year rather than sort of you know jump into those hikes. I think the you know there will be some premium in the curve but I just don't think that the kind of energy price moves we are seeing the kind of broader inflation dynamics are going to you know push them into a kind of very aggressive aggressive hiking cycle. So I think that from that from that standpoint I don't necessarily see a very immediate pickup but I would also set that against the macro outlook. We just took down our recession probability odds over the next 12 months back to kind of the you know long term norm over the past week. So things have moved in a better way…From: this video · 4 claims mined from it

…the Fed is getting about the economy will be distorted by the fact that we give forward guidance. To me, this makes no sense whatsoever, because you can be damn sure the markets are, no matter what the Fed does, how the markets respond to the economy is going to be conditioned by who they think the Fed is and what they think the Fed's going to do. It's always going to be a muddled signal. So I think that is just a silly story that he's telling to justify himself. This is what I think is really going on . He is a person who thinks the market counts on the Fed as a backstop. And he wants less of that to be happening. He wants the market to be more volatile and more scared because he thinks the market is too dependent on the Fed put and Fed put like stuff. If we get in trouble, if we leverage ourselves too far, if we whatever, the Fed will always bail us out. And he wants to take that anesthetic out of the system. And I think the communications policy is part of that. Like you guys figure it out for yourselves. And if you find that scary, if you find it scary to operate without us telling you what we're going to do, good. I want you more scared. That's how I like it. You know, that that would be my interpretation of that. And we will see how that goes.…From: this video · 6 claims mined from it

…is that coming to this year, policy uncertainty had subsided. And then, you know, and then this whole AI story, and then the CapEx incentive, all of us look very attractive. And that's what's really going on. I think what you're seeing is pent up demand, okay, of basically hiring. And when it comes to CapEx, that's really propelling the economy forward. So I would say that, you know, the gold rally yesterday was a bit premature because I don't think that, you know, it was a 2% rally, it was a big rally. You know, markets thinking, wow, maybe this is it. Maybe the labor market is gonna roll over and real yields are gonna collapse and the gold is gonna go up from here. I think it's much too early to actually make that case. In fact, I worry that real yields are gonna keep going higher until the AI bubble burst. And that's when gold is gonna get a real, real, basically help. In my view, gold's biggest problem is AI. Until the AI bubble has burst, I think gold is gonna continue to struggle. But my view is that there's a very good chance the AI bubble is gonna burst in the second half of the year. We have a scorecard for you of the calls you've made on my show. You've been on here twice now. Seven months ago, you said that the AI bubble is going to start bursting. You were short the NASDAQ. Actually, barring the big rally we had in April, you were pretty much right. It's starting to happen now. Now, the question is what happens to…From: this video · 6 claims mined from it

…So I would view this as a bit more normalization. And we calculate an underlying job growth trend, which is based on the moving average of payrolls and also some weight on the household survey. That was running 130 as of the last report. It's now running at 74K. Right. So it does feed your general view that we'll get rate cuts before hikes. Yes, although I don't think you're going to get either of those anytime soon. So in the near term, the question is between, you know, stay on hold or hike . Obviously, there are nine participants in the FOMC who said they would want to hike potentially before the end of the year. So that's the debate. I think among the voting members, there's probably still a majority for staying on hold, though. What do you make of the participation rate and how much of that do you attribute to immigration? It's been yeah, it's been a little bit of a head scratcher, in particular in this in this number, the participation rate plunge among 25 to 34 year olds. I mean, there's not a lot of precedent for these kinds of moves month to month . The household service is always noisy, but this is very, very large. I wonder whether there's some, you know , major special factor there that maybe we haven't, you know, we haven't really found yet. But it is, you know, an aspect of the…From: this video · 2 claims mined from it

…aren't open. More, but 57,000 jobs were below expectations, and I think there were some revisions, but the job market has been stronger than people anticipated. However, we had $90 oil at 67, 68 today , and 57,000, would you say that gives W arsh, the new Fed chairman, who you chose, more flexibility? Because for a while, we thought the next move might be a hike. Now, the stars are aligning, would you say, for him to cut? - Well, he's got a boy that maybe is a little bit hostile, and unfortunately, and maybe a boy that wants to do the wrong thing, so I don't know. He's a great guy and a great pro, and I know where he'd like to be, but he has to do what he has to do. I really think that I would love to be able to get back. You know, in the old days, probably, maybe before you started thinking about these things, but if you go back 20 or 25 years, when you announced great numbers, the stock market went up. When you announced bad numbers, the stock market would go down. Today, it's the opposite. When you announce good numbers, the stock market goes down, sometimes really weighted, depending on how good, the better they are that work, because they have this phobia, they have this horrible derangement syndrome about inflation, and growth can be good…From: this video · 3 claims mined from it

…thought would boost this number. World Cup hiring was one. We didn't see it in those numbers. And then some seasonal stuff and more teacher hiring. We also didn't see that . So the payroll number came in quite a bit weaker. You know, with that said, the payroll numbers have been extremely strong, really stronger than was plausible relative to other indicators. So I would view this as a bit more normalization. And we calculate an underlying job growth trend, which is based on the moving average of payrolls and also some weight on the household survey. That was running 130 as of the last report. It's now running at 74K. Right. So it does feed your general view that we'll get rate cuts before hikes. Yes, although I don't think you're going to get either of those anytime soon. So in the near term, the question is between, you know, stay on hold or hike . Obviously, there are nine participants in the FOMC who said they would want to hike potentially before the end of the year. So that's the debate. I think among the voting members, there's probably still a majority for staying on hold, though. What do you make of the participation rate and how much of that do you attribute to immigration? It's been yeah, it's been a little bit of a head scratcher, in particular in this in this number, the participation…From: this video · 2 claims mined from it

…significant wage growth. So, anyway, one man's opinion, good economy, employment, just okay. You are one man, but you are one man we respect and happens to be incredibly brilliant. So, your thoughts matter a lot, Rick. Okay. So, you don't see any reason to hike based on this data, but it is at least data that should allow the Fed to hold. Or do you go so far as to say with this data in hand, there is room for the Fed to be contemplating cuts this year? I mean, you know, I don't think, you know, contemplating cuts, you know, at the beginning of the, or the next meeting or two, I think would be, would certainly be enthusiastic to say the least. Listen, I think you got to wait to the back end of the year or to the very back end, back part of the year. But I don't think they're off the table for the back part of the year. I mean, I think, I think Chair Walsh said yesterday, you know, you are saying, by the way, look at oil now under 70, you are seeing some improvement in energy costs. You know, when you break down inflation and you look at what is the component part of parts of inflation today, core goods is running at pretty close to zero, three months, six month moving average, pretty close to zero. You still have service level inflation, which no doubt is too high. But if you strip out shelter, and I would argue, you know, if we got mortgage rates down in the country, you'd improve shelter inflation, you know, you're running it depending on three months, six months, two and a half to three ish, a little over three. So anyway, I just think you have time. And I think, Chair Walsh, and I, by the way, I have a huge applause for…From: this video · 1 claim mined from it

…them a pre-commitment, but the whole reaction function, how you think of how you're going to make policy. So I think the most important thing we can do is to get policy right. If our communications tools, if our models, if the way we've been playing things makes it harder for us to go into these meetings, have a family fight with our colleagues, and make the best decision in pursuit of our mandates, if that's an obstacle we should get rid of it. It is, it is said in recent weeks, well, we need to know more about your reaction function. If I look at trigger pullers, people that are making decisions in the bond market, in a range of markets, volatility is not up, it's down. Yields aren't up, they're down. Inflation expectations are down. So I hear this that as if people don't understand, I think they actually understand quite well. I feel incredible comfort that I 'm not sure I had internalized, that there is a willingness by my colleagues in the central banking community around the world to go back to first principles. We all want to make the best decisions we can. We've all been burdened with many of the policies that in some sense the Fed created in the 2008 financial crisis. This is a rare moment for us to go back to first principles, ask hard questions…From: this video · 2 claims mined from it

…and Chairman Warsh you have talked about before you became Fed Chairman that the balance sheet was too big in the United States so it's at six point seven trillion right now what level would you be comfortable with it at no forward guidance and I'm not going to get it's the balance sheet okay just we're just among friends we have a task force for that too we're gonna play drinking game on task force I'll say this there is no secret that from the 2011 period when I was leaving the Fed through now I wanted the feds balance sheet to be smaller and I long wrote about and described interest rates should be the dominant means through which we make monetary policy if we're in a crisis that could be a different set of rules it's always struck me that interest rate policy is the fairest so the broad constellation of our citizens interest rate policy whether we move it up or down transmits its way into a new mortgage credit card debt transmits its way through a lending channel and credit channel I've always had a view that the balance sheet works mostly through asset prices works mostly through signaling effects my four weeks at the Fed haven't disabused me of that idea as we're hearing an alarm that must be my way of saying that I've gone…From: this video · 2 claims mined from it

…Let's turn back to what we just heard out of Cintra. Kevin Worsch, of course, and bring in Columbia University economics professor , former Federal Reserve Governor, Frederick Mishkin, talk about what we learned. Frederick, good to have you. Thanks for the help today. We listed a few headlines that we got on the mechanics of the Fed, but also sort of how he's thinking about broader issues like AI. What did you hear? Well, first of all, I think very importantly to see reaffirm the issue of the independence of the Fed and the importance of the Lisa Cook decision. And also consistent with his press conference, he's very much emphasized that the Fed's job is to promote price stability. And I think all of this is really good news that we dodged a bullet that I think that Kevin is going to be very focused on inflation as part of his remit. And that actually protects us a lot from Donald Trump's push to, always lower interest rates. So I think that's very important. I think another important issue is the whole issue for guys, which of course is a big part of the joking around at this session. I think the issue, and it came up actually by discussion by other people, I think Kevin has talked about lowering, shrinking the balance sheet. But I think that what's key is the way that monetary policy and setting of…From: this video · 1 claim mined from it

…much more on the how than the what. Okay. And what about cutting the balance sheet? That's also something that he's priorit ized. He has. And he, and I'm really happy he's done this, has pointed out we have no theory of the balance sheet. You know, when we talk about interest rates, we have this notion of what our star is. What is the equilibrium interest rate? When it comes to the balance sheet, we took it from two trillion to nine trillion back to six trillion without any idea of what the equilibrium balance sheet is. And he's come in and rightly said we need a theory of the balance sheet. And I think that's really, really important because that balance sheet has been used in such, in my view, excessive manner that we've got to underpin it by something. Yeah. Yeah. Do you expect any rate cuts? Do you expect any rate hikes from Kevin Warsh's Fed this year? So I would be absolutely shocked if we get a rate hike in July. And I would be very surprised if we get any rate hikes this year. I also would be surprised if we get a rate cut. I think we're going to have a Fed that 's going to stay on hold for this year and wait for the inflation to go through the process . We've now only left to one of the three components of inflation. Now, that's basically where you are as well. A hundred percent. Yeah. If you look at inflation, like the core is at like 3%. That's the historical average. We have normal inflation now where we should be. That shouldn't do anything here. A hundred percent agree. All right. We will leave it here. Muhammad, great to get your take as always. Thank you.…From: this video · 2 claims mined from it

…example. Okay. So do you remember what it was? Was it 70? And where will it go now? What does a modest overweight mean? So it depends on how the client, what their goals and their risk tolerance is . But just take a 70/30 risk profile, yes , that means that we have about 73/74 percent in equities, a little bit, you know, the opposite of that. So 27 percent in fixed income. And we've diversified it across large cap, small cap and emerging markets, where large cap has had a lot of gains, but small cap has also done very well. And one other reason why we've turned more constructive is that we do have a more dovish outlook on the Fed, where we think the Fed is going to be cutting rates this year, not because of weakness in the economy, but more because of disinflationary trends. And that should be very good for small cap and also emerging markets, emerging markets being an area that's obviously had a tremendous amount of AI momentum as well. Right. So at this point, is it, I mean, if you had to pick Dow, S&P, NASDAQ, is the Dow where you're like a Wilmington Trust is more focused? Sir, you're ready to roll the dice on the mag eight now, people say. Well, we did deploy that. Within large cap, we kind of split it between growth and value. We have a slight overweight to growth…From: this video · 3 claims mined from it