00:00Mike, is this information like, you know, could have been useful six weeks ago?
00:05Do we get any, do we glean anything from something like this?
00:09Not, not really.
00:10It's been described by one analyst as a sort of Rorschach test.
00:14You see in it what you want to see.
00:16You know, maybe some people see clouds or something like that.
00:20But those who think that the Fed should be on hold point to the strong job creation
00:28and the fact that inflation is still going up.
00:31And those who think the Fed should be cutting can point to the unemployment rate.
00:34Although this unemployment rate rose because of a large jump in the number of people looking for work.
00:41The labor force rose significantly.
00:43Can you explain that?
00:45Well, it's just, it's math.
00:47It's the denominator is higher.
00:51Well, I understand that.
00:51But why, why were more people looking for work?
00:53Why were, why was the pool bigger?
00:55Well, we don't really know.
00:55So there are some theories, Steve Stanley at Santander is pointing out today that in the,
01:03that they have had trouble in the summertime adjusting for all the college graduates who
01:08have not been able to find work coming out of college these days because companies aren't hiring.
01:14And so that seems to have caused a problem in measuring the number of people who are in the labor force.
01:21And that may be one reason.
01:24I don't have a good other reason, but there are a lot of people coming into the labor force according to these data.
01:30We also got weekly jobless today, right?
01:31We got weekly jobless.
01:33And at 220,000, it's pretty much where it was when we, when we last left you back at the 1st of October.
01:41So it, the story is still the same, low hire, low fire.
01:46Low hire, low fire.
01:48You know, it's interesting because we keep trying to figure out, we talk to everybody about kind of where we are in the U.S. economy.
01:54And it seems like not too bad, but there are still inflationary worries.
01:58And it does feel like the job market's softening.
02:00I want to layer something on top of that, and this is from Fed Governor Lisa Cook, who she said officials should monitor how unexpected losses in private credit may spread to the broader U.S. financial system due to the, quote, increased complexity and the interconnections, end quote, with leveraged firms.
02:16It's something we've been focusing on a lot here.
02:18And I know all of Bloomberg has been.
02:20You know, we're going to talk about Blue Owl in just a moment, which is among our most read stories.
02:24But, you know, you were here during the financial crisis, like, you know, and I don't want to say that, you know, the sky is falling, but what are the things that you watch to get an idea if there is stress in the financial system that might portend some problems?
02:43Well, I think the important thing about the financial crises is that they're never the same.
02:48We have one, regulators patch the holes, and then we have a different kind.
02:54And now we're looking at private credit, which has grown tremendously.
02:57And it has also grown in the area where regulators don't have a good idea of what's going on.
03:03And that's what they're afraid of here is the interconnections that might be among these lenders.
03:11The lenders say we do extra due diligence because we're private, and we have to make sure that we're not going to lose money, so we make sure that the borrowers are okay.
03:24But we've seen some of these not work out.
03:28And so if you're not getting paid for one, you're going to be able to make payments on the other, which is always the real start of these problems is contagion.
03:39So you're looking at defaults and the default rate, and you're looking at the rate of fallen angels.
03:50Now, all these private lending are, in most cases, to private companies, so you're not going to get a complete picture, but you get some idea of what's happening out there in the credit world.
04:02And then you can watch some of the interest rates that, you know, what are people charging for subprime loans, and how does that maybe translate into a private equity?
04:14One thing I just want to ask you quickly, though, when a Fed governor starts to talk about this, I mean, I know this is what they're supposed to do, right?
04:19They're in touch with, certainly, the financial community.
04:23But, I mean, I don't know.
04:25Is it – should we read anything into it?
04:27I think there's a rising concern because of the overall state of the economy, but the Fed doesn't have a lot they can do about it because they don't have supervisory ability for this situation.
04:40So maybe raising the issue is the best they can do to try to get people's attention on this.
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