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00:00Really such a treat because I usually spend my mornings with this gentleman and his bow tie.
00:05Tom Keene is joining us today as well. He's going to not only talk about the Beige Book and all
00:10things finance, but also he's got a new show because we just like to keep Tom Keene busy.
00:15So he's got Bloomberg Money. It's going to premiere this Friday along with Scarlet Foo.
00:22So we're going to talk to him about all of that. But that Beige Book, it looks like it's just
00:26hitting now the May Beige Book. And Stuart, I don't know if you had a chance to see any of
00:31the
00:32headlines or if you can talk about it. All right, Stuart, what's sort of the big takeaway at the
00:36moment from these headlines? What matters most is what evolves between each Beige Book. So the last
00:41Beige Book that we had was in April. Today we have one for June. As of last April, economic activity
00:46was expanding in just eight of the 12 Federal Reserve districts. Lately, most lately, economic
00:51activity has been expanding in 10 out of the 12 Federal Reserve districts. So a little bit more
00:55growth dynamic taking place as we move further into the second quarter. On the inflation front,
01:02it was the case that prices were increasing at a moderate pace in April, now moderate to strong
01:08across all the districts. Labor market front, labor market is softening between Beige Books.
01:13In the previous report, activity headed or labor market activity, the pace of hiring, had increased
01:19in all but one of the Federal Reserve districts. Now there's little to no change in all but one
01:24district. And in that one district, activity is cooling. What about signs of consumer financial
01:30strain? What are you seeing on that end? Because that's one of the things you were keeping a close
01:33eye on. Well, so look, the consumer is stretched thin. Tax refunds have helped. We have seen nominal
01:39spending continuing basically at pace. But real economic activity, real economic activity on the
01:45consumer spending front is a little bit more fragile right now. That's certainly the case.
01:50Alexis, you know, everyone talks about the K-shaped economy. And when I read one of the notes this
01:55morning by Vincent Delaware of StoneX, he actually talked about the splintering within the upper K.
02:00So I mean, just because you're in the top end of the K, so to speak, doesn't mean that, you
02:04know,
02:04you feel like you're loaded and like money is great.
02:07They're headed over to Dollar General and Family Dollar, right? They're shopping at those places.
02:11Does this report tell us anything at all about gas prices? Because we know that so many Americans are
02:16now grappling with, you know, such high gas prices. A little bit, but beyond gas prices,
02:21consumers are just focusing on those necessities because they are stretched thin by things like
02:26elevated gasoline prices. So not only are there fewer discretionary trips to or fewer trips to
02:31discretionary retailers, but there are notes that consumers are focusing on necessities. And there are
02:36also notes that consumers are depending more on credit cards so that they can afford those
02:42necessities. You know, Fed Bank of New York President John Williams said he sees no obvious
02:46path or direction for the path of future interest rates. I'm wondering if this beige book gives him
02:52any more clarity on that path. Well, when I look district to district and I think about the
02:57preferences of each regional bank president, the federal, the beige book gives us an opportunity to
03:03think about what's going on specifically in Williams district in New York, where both retailers and
03:09businesses are noting that economic activity is still strong and there's been a marginal improvement
03:14in manufacturing activity in New York. So to see a rotation from a relative dove like John Williams to a
03:20more balanced position, it's actually totally reflecting what's going on in his district.
03:24I want to bring Tom Keene in here, bow tie and all, for his thoughts on this beige book.
03:28It's fascinating. What's so cool about this is how twisted Stuart Paul is. I mean, when you do George
03:32Mason economics, it's different than everybody else. The heritage of your academics is it's a free
03:39economy. Are we just getting a stimulus ride right now? Or is it really innovation? Ned Phelps of
03:45Columbia's dynamism? Definitely. We're getting some support from stimulus. Tax refunds are carrying
03:52consumers through right now. And that's definitely the case in the face of higher gasoline prices.
03:56And look, let's face it, there's a reason why a lot of the voting FOMC presidents, the regional bank
04:02presidents are incrementally hawkish. We're looking at people like Kashkari, Logan and Hammock, all the
04:08markets oriented folks. They're all the George Mason types. Well, they're the folks who see basically no
04:14signs of monetary policy restrictiveness in financial markets. And when that's the case, yes, there is
04:22stimulus that is supporting economic activity. And that's what's giving us this hot headline that
04:27activity is increasing in more of the districts around the country. Isabel, what's so cool about
04:32this is the grind of the show that Alexa, I mean, Alexis and I aren't speaking terms, but within the
04:38grind
04:38of the show that we do every morning, I would say, Alexis, one of the underlying themes here is things
04:45are
04:46getting better. It's, it's just, it's a tent, the employment's percolating, that innovation, that
04:53dynamism is out there somewhere. That's the constructive tone. But I wonder if most people
04:59are feeling the dynamism, because I mean, we keep hearing about the large amounts of layoffs,
05:03especially within tech, but then we get the ADP report today, private companies adding 122,000 jobs.
05:09We'll get more clarity, of course, on Friday with the government jobs report, but there still seems to be
05:13that disconnect. Stuart, am I right? Where the average person is just going, really? Are things
05:18okay? It's because a lot of the hiring is concentrated in just a select number of industries.
05:22So that's part of it. And when you look in the aggregate, there's relatively limited wage growth.
05:28If you look over the first four months of this year, so the annualized pace of nominal wage growth
05:34over the first four months of this year is just three and a half percent. It's getting swamped by
05:38inflation. So even if you have hiring, which has been relatively hot, because it's
05:42relatively concentrated, and because there isn't broad-based wage growth, you're getting
05:48exactly the dynamic that you're alluding to, Alexis, which is that folks are just feeling
05:51stretched in, real economic activities being pinched by higher prices, and a lack of real wage growth.
05:58I guess so. And to Tom's point, we're so graced by his presence. I'm so honored, actually. I'm
06:02feeling a little nervous. But to your point, the economy is doing well.
06:05You're feeling a little nervous?
06:06Yes, and you're present.
06:06This studio, Alexis, you're here because this studio is so damn nice. Plus, the interns serve
06:12coffee.
06:13What are we doing wrong in the morning?
06:14Exactly.
06:15That's what I want to know.
06:17I'm sleepy in the morning. So economy is doing well, but consumer sentiment is near historic
06:21lows. I mean, the equity markets, as we all know, are breaking records.
06:24Oh, the Michigan's horrific. Painter. Truly painful.
06:27But how do you reconcile those two stories, Tom, in your years of experience, not to age?
06:31First of all, there's no analog back to this. I'm in the camp. You can't go 1999,
06:351870, whatever the analog is. What I would suggest is it's an original moment of technology. And I'm
06:45using that word like technology review at MIT 50 years ago. It's not about Bryn Jolson and all that
06:53and all the fancy modern Stanford stuff. It's about brute technology, like the railroads. We didn't
07:00know across three spouts of the railroads where this was heading. I don't think we know where
07:05we are right now.
07:06On that note, talk to us about how important and how timely your new show will be, which
07:11is a money show.
07:12We got so lucky on this. I mean, they came to me like, I think, two, three years ago. And
07:16they did a survey and they said they really want to see Scarlett Foo. And they said, you know,
07:20we don't know what to do with you. So come along with Scarlett. So we came up with a show
07:25and it
07:25had 14 different names, including the Alexis Christophoris Hour. And finally, it started
07:30gelling six months ago. And we just got lucky with the news flow. This is about taking my world and
07:38Mr. Bloomberg's world and funneling it with a vengeance into personal finance, retirement,
07:45and wealth management.
07:47Actionable things.
07:48All those things, but doing it from a more academic and more industry standpoint with
07:53that same intensity. And to have Lizanne Saunders on from Schwab, kicking it off as she did for
07:59years with Louis Rukeyser. And I went out to Gabriela Santos and I just begged at J.P. Morgan.
08:04She's got prodigious chops. And then we're just humbled by the people that are coming on right
08:11now.
08:11So it's going to be 12 p.m. Eastern time. Is it one hour, two hours? How much later are
08:16we going to
08:16ask you to stay here, Tom?
08:17No, that's okay. They've set me up. It's really good. The Four Seasons is two blocks
08:21forward in the penthouse. They've got me. It's like, you know, when Lester Holt was at NBC,
08:27you know, they took care of him. It's the same thing here. And I can get the surveillance pre-nap
08:31in before 12 noon on Friday.
08:34But it's a weekly show, just right weekly. We're not keeping it here every day.
08:37We talked a lot about it. And the answer was with Scarlett's success of all of her 12 noon
08:43platforms. Let's not screw that up. Like crypto. I mean, I don't do crypto after 12 noon, so
08:50don't ask me.
08:51She's so versatile.
08:51Do they have crypto at George Mason? I don't think they do do that.
08:54They have a lot of crypto at George Mason.
08:56Crypto has picked up the mantle of free banking. George Mason doesn't have a home of crypto.
09:00Yeah, exactly. It's like James Buchanan 101. The bottom line here is we didn't want to
09:05screw up the success of what Scarlett was doing with those kind of shows. So we slipped it
09:10in. I said, Friday, that's the day I take off starting Labor Day. So you're going to
09:15miss me Monday. The helicopter really helps out. The Sikorsky, I can't say enough how that's
09:21the game changer for us.
09:22Well, Mr. Keene always elevates whatever show he's on here at Bloomberg. So really happy to
09:26hear about the show. Bloomberg money. We are looking forward to it. Stuart, before we let
09:30you go more on this Fed beige book, I mean, is there a region in the country that we need
09:38to worry about regarding this beige book?
09:41There's just one that stands out to me. And as I mentioned to Tom, I like to look in the
09:44beige book for how things are evolving around the country so that I can have a little bit
09:47of a feel as to which way each regional Federal Reserve Bank president might be experiencing
09:53economic activity on the ground.
09:54And one of the voters on the FOMC who we don't hear very much from is Anna Paulson in
10:00Philadelphia. She's a voter now. And economic conditions in the Philadelphia region are relatively
10:05weak compared to much of what else I'm reading in the beige book. And so it shouldn't come
10:11as a surprise that just a few weeks ago, she was incrementally more dovish than a lot of the
10:17folks that we've heard from more recently. For example, she did not want to change the easing
10:21bias that was included in the previous FOMC statement. Now the consensus seems to be moving
10:26towards removing that easing bias as Kevin Warsh takes the helm. But based on what we're seeing
10:31in local conditions in the Philadelphia Federal Reserve Bank region, I would not be surprised
10:35to see her continuing to advocate, for example, for that modest dovish bias.
10:40Can I just say one thing?
10:41Please do.
10:41You just heard there.
10:42Please, 10 things.
10:43Bronze it. Quickly, bronze it. People here are like me without a real job. People like Mike
10:49McKee and Stewart grind it. I've never read the beige book. I wouldn't know. To me, it's a phone
10:57book of Staten Island. What he just said is what Bloomberg's all about, that minutiae about some
11:03of these documents.
11:04I want to get your thoughts, though, Stewart, on something outside of the beige book. Governor
11:09Chris Waller wanting to centralize sort of these back office operations at the regional banks
11:14and have it be in one large, I guess, Federal Reserve Bank. He's being met with a little bit
11:21of backlash here, saying, you know what, we're afraid that the power is going to be centralized
11:26in Washington. Waller's saying, hey, look, it's going to be better for taxpayers.
11:30Sure. Look, Federal Reserve operations and scope creep are a constant point of debate. What's
11:37interesting about the Federal Reserve's distribution of systems is that it's based on a time when
11:44banking was really segregated around the country. Banking was really isolated by region. The Federal
11:50Reserve districts and the regional Federal Reserve banks did a very specific job in helping to
11:55facilitate transactions that were primarily local. Now that transactions do not need to be local and
12:02the share of transactions that are local has been shrinking through time, it does make some sense to
12:07follow exactly what Waller is suggesting by consolidating some of these processes in
12:13Washington. But there is a lot of inertia, especially if the large bureaucratic organizations
12:17in the Federal Reserve is certainly one of them. Tom, can you share with us 0.01% of your
12:22infinite
12:23wisdom? If you were to choose one market that's getting the story right, do you think it's a bond
12:26market, the equity market, oil? Oh, that's an awfully dangerous question right now. The answer is I don't
12:33think any grizzled pro knows that distortions are so great with this mass. I've been going back to
12:38momentum. I kid Lizanne about a mass and velocity. It's so out of the ordinary that I fall back and
12:45Isabel, you know this from the Pacific Rim, the litmus paper of the foreign exchange market. And the
12:51answer is I got resilient dollar. And two hours ago, we got a 160 print on yen. That confirms down
12:58from
12:59that, folks, all the other tensions in the yield space coming up on 5% 30-year bond. The economic
13:07data, both hard and soft. You mentioned the Michigan number earlier. And in the stock market,
13:13the oddities of just how well we do. I've lost a mental grip of, for example, SOX or the Korean
13:19index. I just, I can't understand it. You know, I'm just looking, I'm so glad you brought up the
13:24Japanese yen because it's forcing us to look at the currencies, Tom. Bloomberg dollar spot index
13:29up about 4% here at 120563. I haven't seen it that high in, I don't know, I think I'm
13:34going to say
13:34months. Stuart, do you see a contagion here? I mean, forget about, you know, gaming, whether we're
13:38going to see intervention again by the Japanese. Forget about that. But the bottom line here is it
13:44is a sense of contagion, not now, but at some point. I think that's part of it. I can't help
13:50but
13:50think that a lot of what's going on in markets is just strictly driven by flows and a desire to
13:55achieve some sort of flight to safety in high-tech and AI-focused assets. And so when we're thinking
14:07about, say, macro fundamentals in Korea, it's completely disconnected from what we're seeing
14:11in South Korean equities. It's really just a global desire to gain additional exposure to
14:16a very specific industry. Now, who would think that in a period where global central banks are
14:23hiking to combat the broadening, the potential broadening of inflation, that you would see
14:28increased rotation or increased interest in the growthiest industry around? But it does seem like
14:35that's exactly what's going on because this is a structural technological shift, like you said,
14:40on par with the road. And quickly, Isabel, I would mention the little tea leaves out there.
14:45When you look at the politics of your Philippines right now, the complete upside down world of
14:51the Philippines. To see peso go to 61. I don't know if it's hit 62 yet, but these are some
14:58of the
14:58little tea leaves the pros look at away from what's the Dow Jones Industrial Average doing.
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