00:00We've been talking about markets facing a positive supply shock. The economy is experiencing
00:04a series of negative supply shocks. So you've got a lot of individual companies raising a
00:09lot of capital pushing demand into a supply constrained economy. Doesn't all of that just
00:14equals inflation for the next 12 months? Absolutely. Unfortunately U.S. consumers
00:20are dealing with the shock from tariffs which are still in the supply chain and now an oil
00:27shock and we don't expect tariffs to go away and we don't expect the oil shock to resolve anytime soon.
00:34Where are the higher prices showing up now and where do you expect them to show up in the future?
00:38Okay so we know high prices are showing up at the pump but they're also showing up for companies with
00:43diesel fuel and jet fuel has doubled you know since the beginning of the year. We're seeing higher
00:49prices with food and we expect that to continue. Now that's obvious because food needs to be
00:55transported right the cost of transportation is going up but food is also packaged and so many
01:01things are packaged. So all those petrochemicals that come into plastics that go to those Asian
01:06markets come back to the U.S. Those are under increasing pressure due to the Strait of Hormuz.
01:12That said it seems like consumers are still buying. It seems like there hasn't been a huge pushback in
01:17terms of consumers going on strike or limiting their purchases at least not in aggregate. We just got
01:22retail sales that showed that still demand. So at what point or are you starting to see already
01:27some pushback or consumers that might be withdrawing some cash from this? Right so when we look at
01:33yesterday's retail sales numbers and we take into consideration the inflationary portion of it they
01:38are slowing down. So we're already seeing retail sales slow down. We know that consumers you know more
01:45than 95 percent of Americans drive to work so they need to buy gasoline. They're still going to buy food.
01:51Our consumer confidence index still has you know the last thing people want to cut back on is sort of
01:55restaurants and bars and takeout food and pet care as I was telling you all earlier. So we know that
02:02they're still going to prioritize some of that but it's some of the larger purchases that we know folks
02:07are going to cut back on. We also know that it's consumers that are around $125,000 annual income and
02:14up that are the ones that are really you know keeping the economy going and they're the ones that
02:19have kept the economy going for the last few years. How much has the perception of inflation changed over
02:25the past seven years or so? There was a time when it was predictable what prices would be at any
02:31given
02:31time. Then post pandemic that was flipping around all over the place a huge inflationary wave and now it
02:37seems like it's harder to gauge what anything's going to cost at any given time so people don't really
02:41know so a lot of companies can kick things up if they want to. Yes. How much has the psychology
02:46around this changed? I think consumers certainly pre-pandemic inflation really wasn't on their mind
02:53at all and so the pandemic was sort of shocked the consumer into realizing that this is a problem
03:00but part of the issue is that even when we saw it sort of come down these other shocks have
03:05been in
03:06place and I think consumers are you know becoming very wary because they know that there's probably
03:11more shocks to come and a lot of that is driven by geopolitical issues you know we are dealing with
03:17the unknown for example if we have a series of hurricanes and we see natural gas and oil exports
03:24and markets in our gulf you know impacted by that this summer or fall that could be another shock and
03:30so there's the known and the unknown and there's a lot out there. And yet Kevin Walsh calls inflation
03:36a choice so what is his north star going to be in the next several months the next several quarters?
03:42Well we don't expect the Fed to cut we know that um that the Fed and you know our new
03:49chair Walsh has
03:50has you know a very political you know sort of environment they're walking into and it's very
03:56unknown and but we don't expect interest rates to come down we don't expect a cut this year. Do you
04:02expect them to go up? I don't think so but again we really don't know what's going to happen when
04:08we
04:08look at four five six months out and it's interesting because you know when we take our consumer confidence
04:14index it's a it's a flashpoint in time it's a two or three week survey period so there's times when
04:20you know just in the last month things felt like okay they're getting better labor market numbers
04:24are looking good there's a truce and then you know a few weeks down the line a month down the
04:30line
04:30and we're entering 12 weeks of this conflict. Do you see numbers from you Mitch and just roll your
04:34eyes what's that survey all about? Record lows. I struggled to get my head around that. There's
04:40room for different numbers and different points of view.
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