Transcript: Lakshman Achuthan, ECRI

 

 

The transcript from this week’s, MiB: Lakshman Achuthan, ECRI, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

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00:00:02 [Speaker Changed] Bloomberg Audio Studios, podcasts, radio News.

00:00:09 [Speaker Changed] This is Masters in business with Barry Ritholtz on Bloomberg Radio.

00:00:15 [Barry Ritholtz] On this week’s podcast, I sit down with Lachman Han. He is the co- founder of ri, the Economic Cycle Research Institute. I’ve known Lakshman Achuthan for, I don’t know, 15 years, almost 20 years at least. And I’ve always found his take on the world of economics and recessions and inflation and employment just fascinating and unique and different from what everybody else does. It is very specifically data driven based on a model that was originally co-developed by Professor Joffrey Moore. And I don’t know how else to describe it other than you’re looking at data, you’re looking at leading indicators of different lengths, as well as coincidental indicators, and you’re trying to figure out when cycles turn. Hey, anybody can predict the trend, just stay with it until it ends. But catching the turns is much more challenging. They’ve put together a tremendous track record over the past 30 years, better than just about everybody. Nobody’s perfect, but they’ve gotten more of the turns and more of the major cycle turns than anybody else. And that’s why their research is read by not just big investment houses and companies, but sovereign banks and governments around the world. I, I thought this conversation was absolutely fascinating, and I think you will also, with no further ado, my discussion with Lakshman Achuthan. Welcome back to Bloomberg.

00:01:55 [Lakshman Achuthan] Well, it’s wonderful to be back, and congratulations on this series over all these years.

00:02:00 [Barry Ritholtz] 10 years you were in the first year’s shows, which I have to be honest are pretty unlistenable. I go back and listen to them, and you could tell I’m just like a poppy dog of caffeine and adrenaline. But thank you so much for coming back, and we’ll do this the right way this time. So let’s start out with a little bit of your background had already graduated college and grad school. You were doing some work at Columbia with Geoffrey Moore. Tell us a little bit about the sort of research projects you were doing back in the 1990s.

00:02:32 [Lakshman Achuthan] Right. So thank you and pleasure to be here with you. And thanks for the question I had. The good fortune or, or interesting timing of starting with Dr. Moore right when the 19 90, 91 recession was happening. So it’s very interesting and, and what my whole life’s work is around business cycles. So this was extremely interesting to see in real time, rather than reading it in a, in a history book. And what I found so interesting about his work was it was applied economics and it brought some cohesiveness to the way economies work around the world. Free market oriented economies. ’cause I’d done some earlier traveling around Europe. I saw all these different economies and different currencies, and, and I wondered how does this all fit together? And he had kind of a framework for it, the, the, the makings of one, which I found very interesting. One, one key thing we were doing back then was how are or if cycles are transmitted internationally. That was a big aspect of what we Were working on…

00:03:37 [Barry Ritholtz] What sort of cycles?

00:03:39 [Lakshman Athuthan] Business cycles…

00:03:39 [Barry Ritholtz] How are business cycles transmitted from country to country? Yeah.

00:03:42 [Speaker Changed] So if Europe goes into recession, what’s the impact on the US or vice versa and or Japan, or these were the big economies then, and how do they get transmitted? What are the impacts we have? How does it, you know, what cycles are there that we all are participating in around the world? And which ones are slightly more local to specific economies? So that’s a big

00:04:05 [Speaker Changed] Issue. Can we assume trade is a big impact into those as a transmission mechanism as, or is it more nuanced than that?

00:04:13 [Speaker Changed] It’s always more nuanced, but trade is a big one. Trade is a big one. Markets are a big one. And a lot of people take their cue from what’s going on in the us So there’s an outsized impact of the US market globally, even in local economies around the world. And it’s very much in the goods, in in trades area where we’ve all taken little spots in the manufacturing floor. And so we’re linked that way and for better or worse, can impact us. And meanwhile, our domestic economies may be doing something different.

00:04:43 [Speaker Changed] So everybody thinks of the dollar as our exorbitant privilege, but you’re implying us stock markets are really a giant exorbitant privilege to the us It it is part of what drives the global economy.

00:04:59 [Speaker Changed] Yes. And here I’m, you know, I, I work with a lot of different, we at ri work with a lot of different users of our material. And so to keep it simple, some are investment managers and some are c-suite kind of business managers. And on the investment management side, even if you’re an investment manager abroad, you’re gonna have probably a, a decent sized investment in the United States market. Right? And that’s one of the factors that goes into the big mix. There’s also all kinds of other things in the mix, but transmissions of cycles internationally was a key thing ear early on. I think one of the bigger things that’s critical today that we were working on then was the relationship of really three major aspects of the economy from a cyclical perspective. There’s cycles in growth, which can be at extremes when, when they contract can be business cycles, recessions and expansions.

00:05:55 There’s cycles in employment, which are related but distinct. They’re, they’re actually identifiable and different cycles in employment. And there’s a third cycle, a third aspect, which is cycles in inflation. And being able to see that, just to understand the lay of the land of cycles and free market oriented economies is a huge thing. Just being aware that that’s the pool that we’re all swimming in is, is really important for getting at some of the nuances of what’s going on in the economy. So those, understanding those three key aspects of the economy and not forcing them in our process, doesn’t force them to directly relate to one another. Gives us a great deal of flexibility in understanding what’s happening, growth,

00:06:46 [Speaker Changed] Employment, and inflation. If you have a handle on those three

00:06:49 [Speaker Changed] Aspects, you really

00:06:50 [Speaker Changed] Understand what’s going on in the economy.

00:06:53 [Speaker Changed] I think you, I think, well, I, I don’t know that really, really at the end, there’s stuff I still don’t know, but I, I think you have a pretty good handle on the nuances. Like how can it be that one’s going up and the other’s going down, you know, because you have to tell the story what’s what’s happening of what you’re seeing. Understanding that these three cycles, which are related but distinct in and of itself is a big leap forward in that understanding.

00:07:20 [Speaker Changed] It, it was kind of fascinating in 2022 and to a less degree, 23, watching the kind of prior generation, the old school, 1970s economists get the growth, employment and inflation picture completely wrong. It seemed like they defaulted back to the 19 73, 74 cycle and had a hard time. We were talking earlier about the Paul Graham quote, all experts are experts in the way the world used to be. But you know, when, when people come out pro, probably most famously Lawrence Summers says, you need to have unemployment to shoot up to 10% to kill inflation. Turned out that wasn’t the case, was it?

00:08:07 [Speaker Changed] Well, no, it’s not the case. And again, it’s because these cycles, while related are distinct, there’s more inflation cycles than business cycles, for example. Right. Probably a little fewer employment cycles than inflation cycles. Those will match up a bit more to, to business and growth cycles. But even allowing or understanding that these things can go in different directions, right. Is is critical. 22, 20, 23, 24. It’s very interesting because first, let’s remember that there was a huge massive inflation cycle upturn, right? It’s giant in 2020. Biggest

00:08:44 [Speaker Changed] One we’ve seen much bigger than the one before the financial crisis.

00:08:48 [Speaker Changed] Yeah. And one of the things, just even forget about forecasting or saying what’s gonna happen. One of the things that’s critical to understand is that inflation is cyclical. I know those are easy words for us to say and talk about on, on, on this program, but fundamentally, a lot of models are not built that way. A lot of policy is not driven that way. In fact, you could still see the antecedents of that today in the markets and the way people are thinking, Hey, inflation’s coming down. Yeah, sure. ’cause it went to the moon and, and yeah, it’s coming down from the moon. Okay. So we can agree on that, but does it just keep going down? How do you know? Does it go down and stay flat at your target? Yeah, I don’t, I don’t know. Where have you seen that happen before? If you study inflation over decades and have a cyclical vantage point on it, what you’ll see is that it doesn’t go down to some number and hang out. It likes to cycle. It likes to go up and it likes to go down. And the odds, therefore, in my mind of it going down and hanging out at some prescribed number are pretty low. And so therefore, we look at leading indicators of the inflation cycle. The future inflation gauge is what we call our leading indicator. And it tries to tell us, is there gonna be a turn? So we watch for that in a very simplified way. That’s what we’re doing

00:10:12 [Speaker Changed] When we look at cycles. So let, let, let’s look at the 2020s, but within the context of what came before the 2010s, the Fed talked pretty continuously in the prior decade about the challenge of getting inflation up to 2%. We were in a disinflationary environment, sometimes a deflationary environment around a lot of the world interest rates had gone negative. And that decade seemed to be our, our risk is now deflation like Japan. That’s what we have to be on guard. Suddenly the, the decade flips, the pandemic starts the cares act. The first one was the biggest fiscal stimulus since World War ii, 10% of gdp DP Yeah. The whole regime changes and now we’re off in a completely different cycle. Yep. Or is that just making it too simple and easy?

00:11:09 [Speaker Changed] No, something has changed. I I, let’s agree on that something happened. No, no doubt something happened. Okay. But let, if we’re gonna talk about the 2010s in a way, what you’re dealing with is there was a bit of a freak out after the financial crisis, right?

00:11:25 [Speaker Changed] So, so when we talk about the previous decade Yeah. Then for context, you gotta look at the decade

00:11:29 [Speaker Changed] Before. Yeah. So there’s a bit of, there’s a bit of this

00:11:31 [Speaker Changed] History thing.

00:11:31 [Speaker Changed] Yeah. This history thing. So in April of 2020, there was a G 20 meeting in London, and the primary concern was depression. Right. Okay. I mean, that’s what the main headline was. And so, and, and actually we were beginning our business cycle recovery, right around then, it was starting, it was gonna start in the summer, but nevertheless, the powers that be were focused on depression. And they had, it was almost like you, you, you don’t let any crisis, good crisis go to waste that quote. Right? Right. So here we have massive stimulus put in and all these different programs, and we go off on this spending spree. And it wasn’t just us, right. It

00:12:09 [Speaker Changed] Was, it was around the world. It

00:12:10 [Speaker Changed] Was around the world. And in particular in China, where I love the statistic. In three years, from 11 20 11 to 13, they poured more cement in China than the United States did in the entire 20 century. Right.

00:12:25 [Speaker Changed] I recall that.

00:12:25 [Speaker Changed] Which is insane. So

00:12:26 [Speaker Changed] That’s, but the fascinating thing about the 2010s Yeah. Was that while Asia and China in particular were engaging in a massive fiscal spends, there was austerity in the uk there was weak spending in Europe and the US it was pretty much all monetary, no fiscal,

00:12:46 [Speaker Changed] All monetary, no fiscal. So you have the stalemate or whatever log jam in Washington. I agree that you have monetary, the lift is being done on the monetary side of policy

00:12:55 [Speaker Changed] A hundred percent.

00:12:56 [Speaker Changed] But, but the result of this whole thing, and, and now I’m, I’m, I’m painting in broad brush strokes, US inflation services, inflation’s actually positive for, for much of the decade it’s really goods disinflation. Right. Which is ripping stuff down to which monetary policy is saying, oh, you know, we’re gonna somehow combat this with more stimulus or easiness or whatever. And it doesn’t really work that way. Right? Right. But it inflated a some things,

00:13:28 [Speaker Changed] Right? If, if, if low rates weren’t the cause of inflation, well, why would you think high rates are gonna impact, you know, there’s gotta be some causality between the, the solution and the outcome.

00:13:39 [Speaker Changed] And so we have this, we, we, we have this China price being set, we have the supply chains being optimized for that as opposed to robustness, which came back with a vengeance once things went off the rails with the supply chains when covid hit. So with, I mean, I’m skipping over a lot of this QE kind of stuff that we, we were, we were really mired in that

00:14:04 [Speaker Changed] Quantitative easing during the 2010s. We now have the opposite of a quantitative tightening.

00:14:09 [Speaker Changed] Well, to a degree we have a little bit of it. Right. We’ll see how far it goes. It was very fascinating. I’m sorry, I’m jumping around here. No, no. This

00:14:17 [Speaker Changed] It very

00:14:17 [Speaker Changed] Interesting. It was, it was very fascinating because Japan, the other day, the event of Japan raised rates for

00:14:22 [Speaker Changed] The first time, first time

00:14:23 [Speaker Changed] In 17 years. Right. Okay. So it’s a big deal. Right? I mean, it was a minuscule rate rise. But, and they’re doing this because they have a little bit of inflation, which they haven’t seen in a long time. Right. And so they’re like, oh, okay, we’re gonna respond to that. But they actually can’t. It’s paper tiger. They can’t, they can’t really raise rates. Right. Because the, the country is so indebted that they can’t service any higher rates.

00:14:51 [Speaker Changed] So they’ve been the poster child to the argument who cares about in deficits. Yeah. Because they’ve been running Yeah. Deficits for forever in part because of their demographic problems rescued in large part because they’ve been an exporter since the end of World War ii. Yeah.

00:15:11 [Speaker Changed] Can you just print money and run deficits of very large sizes forever? And to many of us, we would say, well, it doesn’t sound like that could work. But yet here we’re pushing it.

00:15:25 [Speaker Changed] And yet since I graduated college in the 1980s, all I have heard is if with the US runs big deficits, well that’ll be the demise of the dollar inflation run amuck. You’ll crowd out private capital. No one will lend money to Uncle Sam. And all the things that I have been told are the manifestation of deficits. None of them have come true. Yeah. At a certain point, I think perhaps something goes wrong. But after being wrong for 50 years, it kind of makes me look at the people warning about deficits and saying, I don’t know. You’ve had half a century to get this right. And everything you’ve said has been false. Why should I listen to you today? Yeah. Well this time we’re serious. Yeah. It’s weird, isn’t it?

00:16:14 [Speaker Changed] It’s a really interesting question. So post GFC, we, we ran up the debt to towards 10 trillion. Right? Maybe just under, under 10 trillion. And then post covid we’re north of 30, right? In the us Right. So who, who knows? I, I don’t know. Could we do 60 who I i at this point? I don’t know. The

00:16:34 [Speaker Changed] Thinking is that at some point, eventually I

00:16:37 [Speaker Changed] Remember

00:16:38 [Speaker Changed] The weight of that. You

00:16:39 [Speaker Changed] And I are old enough to remember now, I’m sorry, I’m so sorry for the younger listeners, but I gotta go back even further to President Clinton’s bill Clinton’s first term.

00:16:48 [Speaker Changed] When we, when did we balance the budget? Was it the first term or the second

00:16:51 [Speaker Changed] Term towards the end? No. So in the second term, he, he, he got into surplus. But in the first term, he comes in, I think he’s got, he’s got the whole thing right? He’s got the full hand. Right? He’s got a full house, he’s got the Congress and Senate and him, and he’s in there and they’re gonna go to town. They got programs and the bond market says, no, you don’t. And raises ra raise long-term rates. And they, and Jim Carville’s a who, and he comes back, he says, you know, look, I would’ve, I would’ve wanted to come back as the president, the Pope, a 400 hitter in baseball. But actually now you wanna be a bond, the bond market. It’s the most powerful thing.

00:17:28 [Speaker Changed] I wanna be reincarnated as the bond market. Bond market. Yeah. It’s such a

00:17:31 [Speaker Changed] Great, so did the vigilantes come back? We’ll, see, I don’t know. It’s

00:17:35 [Speaker Changed] Really quite a fascinating story. I’m not necessarily a member of either the, the, the fiscal hawks or the MMTs. I think both extremes in any circumstance raise questions. But I ca I I have a hard point getting past all the forecasts about here are the terrible things that are gonna happen from the eighties. Yeah. Yeah. And if nothing happens in 40 years, she kind of hang, hang on. It makes me say, all right, we have to, we have to break this down to first principles and figure out why are deficits problematic? How do the negativities manifest themselves? And how can we check if we’re right or wrong? What’s the line in the sand that says we got this right, or we got this wrong.

00:18:24 [Speaker Changed] You have a lot of different levers being pulled with a lot of different frameworks on how the economy runs and works. Now, two are great benefit. We’re in a, in economies for the most part, that are dominated by free market oriented activity, which has inherent in it a very Darwinian type of regulation. This is, I’m talking about like, why do economies accelerate and decelerate? You know, so before we had policymakers, before you had the fed, you still had cycles. Okay? It’s not like cycles are new. And it’s not like cycles didn’t turn up and down without policy intervention. They did. So there is a mechanism under there that is kind of optimizing or, or penalizing decision making. And when we look at forecasts that are made, right? What you’re really doing, I think is not so much, Hey, I think it’s gonna be one. And it said, was I right or wrong? Right. That’s, I don’t think, I think that’s kind of a fool’s game. It’s managing risks. What is the risk that things are gonna go the other way than what everybody’s thinking? ’cause as a decision maker, it’s easy enough to go with the crowd. You know, it probably feels less risky. Everybody else is doing it. Whatever. The interesting and tough thing is when you deviate from the crowd,

00:19:51 [Speaker Changed] Right? When you, when you deviate from the crowd, there’s career risk when you’re wrong with the crowd. All right? I was wrong, but so is everybody else.

00:19:59 [Speaker Changed] Correct. And so, but now let’s take this to an economy or a business. So it’s policy or, or private business decision making. I think for an economy, you theory you want this to be healthy, strong, growing, improving quality of life, which probably means not crazy inflation, but decent growth, which is gonna be related to productivity growth on some level. And so how do you achieve all of that? Well, one way to move towards that is to smooth out the cycle a bit. Okay? Booms and busts are very, very freaky. Right? Disruptive. They, they scare you. Right? On the one hand, you’re like, the sky is falling. I got a batten down that hatches. That’s, that’s very expensive and disruptive. On the other hand, when you’re in a boom, you start taking pretty crazy risks, right? Because you say, I’m gonna, the fear of missing out kicks in. And you start to really overextend yourself. So,

00:21:02 [Speaker Changed] And by the way, we saw that at the end of the 1990s, the 82 to 2000 cycle. We certainly saw that in a different asset class in the two thousands Yeah. With houses and mortgages. And then the question is, are we seeing that today? Yeah. When we look around at tech and AI and Yeah. Things that we think are gonna change the future. Yeah. Have we gotten into that fomo things are outta hand phase?

00:21:31 [Speaker Changed] Yeah. I, I think so because lemme just tell you the story of our indicators over the last couple of years because that sets, that answers this question in a way. So the indicators, first off, they shoot up in 2020, right? So we, we see the short and, and nasty short recession we were writing about. Right? And so we, we get that correct. And there’s a lot of hand wring that we all felt later in 2020 and 2021. I’m not denying any of that. The indicators don’t feel any of that, right? They’re just, we’re moving to the upside. And so they’re directionally giving us this upside tilt in the way that we’re looking at risk

00:22:12 [Speaker Changed] Separate from the way people experience it, which is after any sort of break or crash or even short reception, there’s that PTSD that follows. Oh yeah, sure. In fact, we were talking earlier about the GFC in oh 8, 0 9. I have a vivid recollection of talking to people in 20 10, 20 12, as late as 2015, still talking about

00:22:37 [Speaker Changed] It,

00:22:37 [Speaker Changed] Still waiting for the other

00:22:40 [Speaker Changed] Shoe to drop. And it, it manifested even I think, you know, maybe an order of magnitude more post covid from what you just described,

00:22:47 [Speaker Changed] PE people did not believe the rally off of the march line. So, so

00:22:51 [Speaker Changed] Two big things happened. One preceded covid, I’m, I’m just talking numbers here. It’s nothing else but legal immigration kind of ground to a halt, right? During the Trump administration that runs about a million people a year. So over the course of four years,

00:23:07 [Speaker Changed] You we’re not talking Mexican border. We’re talking about legal immigrants to the us legal, legal immigration with a card and the right to work. It’s about,

00:23:15 [Speaker Changed] So you lose on the order of 4 million people outta the workforce. I mean, look, we have a big work workforce. It’s a lot, but it’s noticeable number, right? Yeah. And then you have covid and regardless of the shutdowns in this and that, a lot of people didn’t come back to the workforce. You lose another serious hunk. So another

00:23:30 [Speaker Changed] Million people lose. All

00:23:31 [Speaker Changed] I’m describing, I’m, look, I am, I am very empathetic to the human cost here. But I’m just saying from a economic counting, the people who are in the workforce point of view, you have a huge constriction of the labor supply, right? At the same time that PTSD and the, the impulse that we have as a, a country or, or, or people community, is that we want to help, we wanna do something. So the amount of dollar support given to the economy post covid is just mind boggling. Right? Okay. You know, Senator Everett Dirksen used to quip about a billion here, a billion there. Now we’re talking real money, right? We’re talking trillions right here. Trillions there. I think it’s on the order back of the napkin. I think it’s on the order of about $7 trillion dumped on the economy when you have a constrained labor supply. Right? By, by a serious amount, by the

00:24:34 [Speaker Changed] Way to put, to put some flesh on those bones. Yeah. Cares. Act one was $2 trillion, which by the way was under President Trump. Yeah. The Cares Act two wasn’t quite as large. I wanna say it was about 800 billion.

00:24:47 [Speaker Changed] Yeah. Stemmy checks all of these

00:24:49 [Speaker Changed] Things also under Trump. And the fascinating thing about those that hit the economy immediately wasn’t spread out. Then President Biden comes in, cares. Act three was another trillion. Yeah. Then spread out over the next decade, the Infrastructure Act, the Inflation Reduction Act chips, the Semiconductor and Chips Act

00:25:09 [Speaker Changed] Chips and Z

00:25:10 [Speaker Changed] And then there was one other, but those were all, those four things were spread out over a decade. So there they’re still hitting tailwinds? They’re

00:25:19 [Speaker Changed] Actually still hitting now. Yes. I mean, when we look at one of the, now I’m gonna get in the weeds for two seconds. One of the cycles, ’cause we look at many cycles on growth. So one of the cycles we look at, which we can see and, and, and track is non- residential construction in the United States. And so that’s cycling down. The leading indicators are collapsing. The, the actual coincident indicator is turning down and it just does the coincident index, which is the target just as a hockey stick in August of 22. Because I understand that these fiscal infrastructure actions and, and ships sacks are gonna come out over time. But private sector also jumps on that. Right? They’re like, we’re gonna get in on this and we want, we want to, we want to have access to this. So we’ll put in some, you put in some, all of that starts back in the fall of 22. You see a cyclical impulse, which is to the downside. I mean, look, leading indicators of the economy turned down hard in 22 into 23. They were completely consistent with an outright recession. You had ge well

00:26:25 [Speaker Changed] You had rates go up 525 basis points

00:26:28 [Speaker Changed] Even before the rate hike though.

00:26:29 [Speaker Changed] Oh, really? Before

00:26:30 [Speaker Changed] The rate hike. Yes. So from a, which

00:26:32 [Speaker Changed] Began in, let’s call it March, 2022. Yeah. Something like

00:26:35 [Speaker Changed] That. So before that, you’re speeding, the indicators already waned.

00:26:39 [Speaker Changed] But you had a lot of jawboning, there were expectations that rates wouldn’t go up. Yeah. People, some people believed that some people didn’t. All kinds the market clearly anticipated it.

00:26:49 [Speaker Changed] They were a little late on the rates up. The market was late on the rates up compared to leading indicators of inflation. Huh? They were, they were leading indicators of inflation went up end of summer into the fall and the markets started to move

00:27:00 [Speaker Changed] In 21. Yeah.

00:27:02 [Speaker Changed] And markets started to move later in, in, towards the end of 21.

00:27:05 [Speaker Changed] That’s right. That’s, that’s right. And then 22 bad year for both stocks and bonds.

00:27:10 [Speaker Changed] Yeah. That’s putting in mildly, but was a nasty year for bonds. But o okay.

00:27:16 [Speaker Changed] Unusual by the way that you had stocks and bonds both down double digits year. I don’t think we had that for 40 year. That’s 81, 82 was the last time we saw

00:27:25 [Speaker Changed] That. Yeah. That’s not, that’s not your typical thing. You, it’s hard to run a system with that as a likelihood. Right. And I think that’s why a lot of people got tagged then. Understandably. But the point is, when you have that much foam on the runway, that’s a lot of foam. Yeah. ’cause we didn’t even talk about the, the central bank earlier on for the Right. You know, before they started to tighten, they were very, very loose accommodative. Right. So when you have that much foam on the runway, it was very different than what we saw in other economies around the world. And so you, you saw GDP actually contract for a couple of quarters in 22, but jobs did not go negative. In order to have a recession, you need to see output and employment going negative along with sales and income. And, and so those conditions did not present themself. There’s been a tug of war, I think going on for much of 23 between cyclical impulses to the down sign. Right. And foam on the runway pushing to the upside saying

00:28:28 [Speaker Changed] Combined with what you were hinting at earlier, which is a labor force that’s arguably four to 6 million bodies. Short

00:28:37 [Speaker Changed] Bodies. Short. And so you would have employers literally, if you could walk and talk, you got hired. Right. And now I think people are a bit more picky.

00:28:48 [Speaker Changed] Although you still hear some companies talk about labor warehousing. Yeah. ’cause if they labor hoarding have growth, right. Labor hoarding and labor warehousing. If the, if you, if you’re expecting growth, yeah. You don’t know if you’re gonna be able to have the bodies to execute it. You hire sooner rather than

00:29:02 [Speaker Changed] Later. And hiring and firing is very disruptive for a business. So if they could, if they could see over the valley and hang on to people, they try to do that. So you see, when, when you look inside of the different levers that employers can pull, work week, temp hires part-time versus full-time, all these different things that, that employers can do. A lot of them are marginally, you know, they’re moving down. They have been moving down, but they, they’ve fallen short of outright firing because as you say, if things firm, I don’t wanna be scrambling to find someone to work. And there was a, a little bit of a line here. The big businesses were able to hire people. There was a smaller businesses that had a really, really tough time. And they have PTSD today where they’re very reticent to let people go. Again, you’ve got slower jobs growth, but positive jobs growth.

00:29:56 So in the tug of war between the cyclical impulse down and the foam on the runway, we’re staying outta recession so far. Now, meanwhile, we talked about the different cycles. Meanwhile, the inflation cycle downturn, which has been going on and is projected to continue and get towards 2% and hang out there, that’s not cooperating. Right. That has stalled out our future inflation gauge, our leading indicator of inflation has come down and it’s gone sideways for almost a year. It stopped going down. So very consistent with this headline kind of statement of sticky inflation. I, without getting in the weeds of what, what’s what in there, overall inflation is not reducing the way it’s supposed to. And that could be a problem. I think that’s gonna be a problem this year.

00:30:47 [Speaker Changed] So, so let me challenge or push back on that a little bit. Yeah. In the 2010s, we couldn’t get inflation up to 2000. We had a very punk post-crisis recovery, which by the way is not atypical following of a, a financial crisis. You tend to have a weak ish recovery combine that with mostly monetary, hardly any fiscal stimulus Right. Following the financial crisis. So that’s the original framework that we came into this with. And then Roger Ferguson, the former vice chairman of the Federal Reserve, had this delightful column he wrote, I, I don’t,

maybe it was foreign affairs, I don’t remember where I saw it. The 2% target is hilariously made up. Yeah. And it traces its roots to a live television show that it was either Australia or New Zealand. New Zealand, yeah. That a banker had done Right. And kind of just spitballed it. And that was in the 1980s. And Yeah. And why are we still stuck with 2% as a target, especially when we’re in an era of big fiscal stimulus? Well,

00:32:05 [Speaker Changed] I It’s kind of

00:32:07 [Speaker Changed] Kooky,

00:32:08 [Speaker Changed] Isn’t it? Well, it is kooky. Look, I I wanna step back for a second because this is the product of a model driven mindset. Yes. That if you add this to that and tweak this, that we get some number at the end. And a lot of forecasting and model driven, and the way people think about the world is based on econometric modeling. Right? Now, econometric modeling is a very useful tool.

00:32:37 [Speaker Changed] Okay.

00:32:37 [Speaker Changed] But it can help frame like what are we looking at outside our window? But one of its particular weaknesses, probably its biggest weakness, is it can’t handle a turning point. Right? Okay. Now, if you live in an environment that has upswings and downswings and your framework can’t handle turning points, you shouldn’t be surprised that this thing goes awry every once in a while. And so right now, right, so all I do is turning points, right? All ECRI does is turning points. So my mentor, Jeffrey Moore, was the father of leading indicators. His mentor was Lee Mitchell, identified what a business cycle was over a century ago. And so we don’t think in model terms, we’re thinking in directional change terms. And today, if the model is saying, we should go to 2% and hang out there, and the leading indicators of inflation are saying, yeah, it’s not going down a lot, and that risk of an upturn is growing every day, the cyclical upturn, I’m not making a big pronouncement about the amount of debt out there.

00:33:48 Or is China exporting disinflation again, or anything? I’m just saying that cyclically these forward looking drivers of inflation collectively stopped falling a year ago and are starting to edge up. What gives me some anxiety that doesn’t give me anxiety. What gives me anxiety is that we look at this around the world, not just the us. So when we look around the world at inflation cycles in Europe, in Asia, emerging markets, major emerging markets, we see that in this century they’ve been largely synchronized. And lo and behold, all the leading indicators of inflation, the future inflation gauges abroad are moving up sharply so that we have an international inflation cycle upturn taking shape. What are the odds that the US is gonna set this out? I, I don’t, I’m not so sure about that. So I’m watching the future inflation gauge very, very closely.

00:34:44 [Speaker Changed] So I really like the framework of, let’s look at three distinct, but interrelated cycles, growth, employment, and inflation. I also have a very vivid recollection of our first interview. You said something that just stayed with me with, with a, for a long time, which is recessions just don’t happen. When the economy is robust and sturdy, the economy can, a robust economy can take a hit and kind of catch its footing and keep going. But if you have an economy that’s weak, that has some structural problems, and there there’s an economic shock, those are the sort of setups that create recessions. Yep. Am I, am I doing

00:35:33 [Speaker Changed] That any justice? Yeah. We talked about the window of vulnerability is what we talked about. About, and so again, the basic structure of, of how we look at the economy is it’s a free market oriented economy. This is what a condition we see in market oriented economies. And they have an upswing and a downswing. And we see this in the United States, and we see this around the world. Wherever free markets present themselves and recessions occur during the downswing, during the slowdown, when the economy’s slowing down. And now I’m talking about a growth rate cycle slowdown. So you’re decelerating, let’s say, from meaning you’re

00:36:11 [Speaker Changed] Expanding, but at a slower,

00:36:13 [Speaker Changed] Yeah. You go from three to two to 1% growth, something like that. So you’re gonna growth rate cycle slow down. Now if a shock hits you when you’re in a slowdown and the forward looking drivers of the economy haven’t turned up yet, now that’s the recipe for recession. That’s how you’re,

00:36:32 [Speaker Changed] You’re

00:36:32 [Speaker Changed] Vulnerable there. You’re vulnerable. So we can have an example of that would’ve been my first recession in real time with Dr. Moore was in 1990. And the leading indicators had turned down most of the Wall Street. And the, the professional forecasting class thought that we had dodged economic risk at this point. But the forward-looking leading indicators were turning down. The economy started to slow a little bit. And then Saddam Hussein invaded Kuwait and you had a a a okay spike in oil prices. So that’s the shock. And that contri together and the fed was a little tight. And so that was the, those combination of events. Boom, we get a recession, we could see other moments where pretty big things happened. But you didn’t have a recession in, in, in 2005, I guess it was Katrina shut down about, shut down about a quarter of the country, no recession.

00:37:30 It was a big hurricane. You had 1987 crash took out a quarter of the market, of the equity market. Right. You didn’t have a, you didn’t have a recession. World War ii, the attack on Pearl Harbor, pretty big shock didn’t cause a recession. Huh. Okay. So, so there are these moments where what you would think would or could be recessionary shocks are not recessionary because of which way you’re trending in the business cycle or in the economic cycle. And then others that seem like, eh, okay, that’s negative. But it wasn’t really that big. But it turns out to be timed right at that moment of weakness. That’s how you get recession. So

00:38:08 [Speaker Changed] Last, we were talking about last decade. You had a couple of periods throughout the 2010s. Most recently 2019, heading into 2020, a number of people were starting to warn about, Hey, we’re decelerating. We could see a recession, I wanna say mid, mid decade, 20 15, 20 16, same sort of thing. A little bit of slowdown. And then 2011, there was a pretty robust consensus that we’re going back into recession. Yeah. Yep. So when I look at that, that decade, and yet we went the entire decade without a recession, what is it that allows those instances to avoid becoming what you taught me? Persistent, pervasive, and pronounced and pronounced are the,

00:38:54 [Speaker Changed] The declines in the indicators, the three

00:38:56 [Speaker Changed] Ps. It’s not just a little dip, it’s not just a sector. It’s big and broad and less.

00:39:01 [Speaker Changed] So there’s a lot of evidence. So, so what I would say is in 20 11, 12, we had a pronounced pervasive and persistent decline in the forward looking leading indicators. Okay. And you had weakness in the coincident indicators. You had a a six month period with the weakest GDP outside of recession in the past half a century. Right. That happened. Right. And that, that happens in, in 2011 into 2012. Now, in retrospect, why wasn’t that a recession? Right? There wasn’t a shock. Right. We didn’t have a shock there. And one of the things that stood out when we did the post-mortem of that period was that it was the most stable period of oil prices ever since oil prices were fixed in the seventies. Okay. There was a moment of price fixing under Nixon. Okay. So since then, we’d never seen the stability in oil prices as we saw during that little window when we had vulnerability. And I think, I mean, I’m not, look, I’m not an oil supply expert, but fracking was coming on. And so when you would have like the Arab Spring or Egypt would shut down or something would shut down and you’d have the supply shock, boom, you had fracking come step right in and be like, we’re here. We’ve got the supply. And your prices were just rock steady. So that’s 20 11, 12 in the mid two thousands.

00:40:30 [Speaker Changed] 2010s.

00:40:31 [Speaker Changed] 2010s. So sorry, the 14, 15, 16. We absolutely nailed that because we weren’t calling for a US recession then. But what we did see, and I alluded to this in the earlier segment, was about the global industrial downturn, which impacted the us. And

00:40:50 [Speaker Changed] How much of that was China? How much of that was Europe and or elsewhere?

00:40:53 [Speaker Changed] It was everybody in that one. It was everybody. Huh? It was it China, Europe, and the United States, other emerging markets all felt this global industrial growth downswing. So much so that the US had a manufacturing sector downturn that was pretty sharp. And anybody in that business would’ve called it a recession for them. Right. They would’ve, that’s how they would’ve felt. Now, the overall economy never went into recession. We didn’t call one there after

00:41:24 [Speaker Changed] Fourth quarter of 2018. Yeah. Market down 20%. Yeah. And then 2019 following that sort of a recovery. Yeah. But people were still a little

00:41:34 [Speaker Changed] Swedish. Let’s stay, stay on 2018 for a second. Yeah. ’cause it’s, we, everybody was so young then, right? We were including, including pre,

00:41:41 [Speaker Changed] Pre covid was a D

00:41:42 [Speaker Changed] Era, including including Jerome Powell. Okay. Okay. And so he goes out and talks to, I think it was Judy Woodruff or something, and starts talking about our star and how it’s, we’re far away from our star and he’s hiking and all this stuff. And, and meanwhile the future inflation gauge has turned straight down. Huh? It has already turned down. Right. So inflation not a problem. But this is what’s keeping him up at night enough so that he freaks out the equity market. Right. And you get a nasty December that sets you up for the Powell pivot in January where he’s just like, oh yeah, screw this. I’m gonna go the other way and says, I’m gonna go on a listening tour and try to figure out what went wrong. And he, you know, I’m not gonna say more about that.

00:42:27 [Speaker Changed] So, so let me, let me stop you there. ’cause you’re, you’re pointing to a couple of really fascinating things I want to talk about and, and I’m taking notes. I’m writing energy, I’m writing FOMC, I’m writing housing. Let’s start with energy. Yeah. So today we simultaneously have these two conflicting Yeah. Challenges. On the one hand, a launch of Iranian missiles at Isra Israel, 99% of them were, were knocked out. Oil prices ticked up, but they didn’t go crazy. Yeah. At the same time, I just was looking at a chart. Was it Torsten Slack? I’m trying to remember who sent it. The US is now the world’s largest producer of oil. More than Russia, more than Saudi Arabia, more than any other country in the world. Yep. So when we look at the challenges to energy as a shock, how do you contextualize geopolitical turmoil? By the way, I didn’t even get to Russia invading Ukraine. How do you balance all of these cross CARSs? So, so

00:43:31 [Speaker Changed] In our forward looking data, so I’m not talking about what’s actually happening, but what are the risks of a turn in the drivers of the economy? We’re looking at hard data from the government. We’re looking at market data. So just what do we price something a barrel of oil at, for example, or something, interest rates and then soft data survey data. And these are our sources of ingredients in a way. Or consider to give us a hint about what are the key drivers of activity or separate cycles like inflation doing. We are looking at it very much from the demand side of things. Okay. So if there’s a supply constraint or, or all of a sudden the supply gets flush, then the demand is interacting with the supply to give us kind of where we are in the world. So one of the things that we’ve been talking about since last year is that this year we’re gonna see a global industrial upturn, a bonafide cyclical global industrial upturn,

00:44:37 [Speaker Changed] Just straight up demand for more manufactured goods

00:44:39 [Speaker Changed] Around the world. And this is not country specific, it’s not specific to somebody’s policy or anything. It’s the way the global industrial cycle works. That’s cycling, that’s bottoming and cycling up. And so you’ve seen this begin to manifest in some very short leading indicators, very short leading indicators of global industrial activity, which would be industrial commodity price inflation and in PMI and in some of the export data that you’ll see out of different countries. And those are all starting to gear because the movement in the forward data has been pronounced pervasive and persistent. This ought to keep going for a couple of quarters.

00:45:25 [Speaker Changed] So in other words, when you look out at at least the manufacturing sector, you are not seeing a global recession No. In that space. No,

00:45:33 [Speaker Changed] No, no.

00:45:34 [Speaker Changed] Which makes it harder for there to be a global recession. I imagine

00:45:37 [Speaker Changed] It it certainly is the backdrop on which we’re all operating, let’s say in the US specific tug of war that’s been going on around window of vulnerability to shocks. The window’s been kind of pushed down because of all that foam on the runway. And now with a global industrial upturn happening, it gives some relief to our manufacturing sector, which will get to be able to gear a little bit more. And that gives a bid on energy prices. Not withstanding what happens to supply, you know, supply is, other people are experts on supply. I mean, we’ve been doing fracking for a long time. It’s, it’s, it’s brought us to become the world’s biggest producer of oil. I don’t know how long we can do that. You know, maybe that peaks out, I’m not sure. But,

00:46:22 [Speaker Changed] But it’s not weeks. It’s

00:46:24 [Speaker Changed] Decades. But it’s not weeks. It’s years, decades. It’s exactly.

00:46:26 [Speaker Changed] So then the second related question is, you know, you’ve mentioned the PAL pivot in 2019. I am getting the sense from reading and listening to the chairman that they’re aware of the problem, child in inflation Yeah. Is housing. They’ve locked a bunch of people in who have mortgages, 5%, 4%, 3%. They can’t put those houses up for sale ’cause their new financing is gonna be too pricey. Icy, add to that, the fact that following the financial crisis, the United States wildly underbuilt single family homes for a decade, and you have a recipe for sustained rental prices, sustained home prices and limited supply. How would you imagine the economy is going to respond to what limited choices Powell has in front of him?

00:47:26 [Speaker Changed] Look, jawboning is, is is half of the game here. And so the whole time there’s been this jawboning about like, okay, you know, I, they missed the boat on the inflation upturn, so they had to make up for that. Right? A stitch in time saves nine, they had to make nine stitches. Right? So, so they put in the nine stitches and then now they’re caught up and they’re like, okay, now we’ll go the other way. We’re gonna do that. And the market gets out over it skis, right? Well, the way he talked in December, I think they got six rate hikes

00:47:53 [Speaker Changed] Priced in or something. Right? So wait, so let’s just, let’s just look at this calendar. Yeah. So CARES act in 2020 and then the CARES Act two and three in 20, in 21 inflation spikes passes the 2% upside target March, 2021. By March, 2022 it’s seven 8%. Yeah. And the Fed starts hiking. Yeah. Ironically, by June, 2022, inflation peaks at 9% starts coming down in part to increases in part to Jawboning. By June, 2023, the Fed has done 525 basis points in hikes and kind of says we’re pretty good for a while. That’s nine months, almost a year ago. Whatever the long and variable lag of inflation is, is probably that rate increases have probably been felt in the economy. Now it seems that he’s not gonna do six cuts, but two or three certainly felt like they were on the table.

00:48:56 [Speaker Changed] Yeah. So you went from six to two or three, and then now we’re taking the under on that, right?

00:49:02 [Speaker Changed] On three under on three.

00:49:04 [Speaker Changed] I think that’s where it’s, it seems to be headed, which is again, consistent with the future inflation gauge not falling anymore. Right. Right. And when it’s been going sideways, anybody who’s borrowing money is feeling the pressure of the higher rates. Right? So you’re, you’re seeing,

00:49:19 [Speaker Changed] Especially Uncle Sam,

00:49:20 [Speaker Changed] Uncle Sam, you got delinquencies rising from lower rates, you’ve got bankruptcies, she’s got all those kind of things happening. Credit

00:49:27 [Speaker Changed] Cards tick up, but not problematic yet. Yeah. The

00:49:29 [Speaker Changed] Levels are pretty low, but they’re,

00:49:31 [Speaker Changed] But definitely ticking up.

00:49:32 [Speaker Changed] Right? The direction is clear. Right. They’re moving to the upside. One of the bigger issues out there is probably all that commercial real estate stuff that’s financed and where are those walls of financing out there and when do they have to refinance ’em. And so the hope is very much that rates come down before those loans come home to roost. The problem is the inflation cycle may be firming if, for example, commodity and price inflation has a bid from the demand side, forget, I don’t, I’m not talking about supply side, right. The supply, if supply gets constrained even more so. Right, right. So far I don’t think we’ve had that disinflation from China that we enjoyed in the previous decade. Maybe that’ll come back, maybe it won’t. There’s, there’s some talks of tariffs for example, and then things like that. Right. So this is a very fluid thing in terms of global trade. The all those, all those supply chains, which used to be just in time, they’ve been hardened to become just in case. And that’s expensive

00:50:30 [Speaker Changed] Just in time to just in case.

00:50:32 [Speaker Changed] Right? That’s a big shit.

00:50:33 [Speaker Changed] That makes a lot of sense.

00:50:33 [Speaker Changed] Yeah. So that’s a, and that there’s a cost, when you start to do that, there’s a cost all of a sudden now there’s a cost for holding inventories. Right? Right. Last decade you could, it, it was zero financing. Now this decade, you

00:50:44 [Speaker Changed] Gotta, you gotta finance, you gotta put in a warehouse, you have to have shippers standing by

00:50:48 [Speaker Changed] All that costs money. And then the PTSD on the difficulty of hiring people doesn’t have employers firing people. So wages, which let’s say Atlanta Fed has a wage tracker. It was a, it had a north of a six handle a year ago. Now it’s down, but it’s down to like just above five Right. Percent increase in wages. Now that’s a, a real number. Like that’s, that’s not zero. Right? Right. That’s a real number. And, and this will start to squeeze on margins and, and we touched very quickly on AI and the hope around ai and we’re as hopeful as anyone else that it’s gonna boost overall productivity. But it could take a minute.

00:51:27 [Speaker Changed] But what’s the cost? Right? Like, like every time there’s a new technology comes along, the Luddites come out and they say this is the end of, of the workforce. And for the most part it’s been pretty easy to dismiss that sort of fatalism. Yeah. It almost feels as if AI is the first time where you have to be, Hey, let’s not be quite so dismissive this time. You could see how, and we all kinda laugh at Sir Terrible, and even Alexa is awful, but you could see that, hey, it’s not gonna be a century before the stuff is usable. It’s gonna be months and years, not decades. Right.

00:52:05 [Speaker Changed] But will it happen fast enough to offset the inflation cycle upturn? It’s looking like it’s showing up in 2024. Probably not. Is my,

00:52:14 [Speaker Changed] Is my, I have no

00:52:15 [Speaker Changed] Idea. Right. My guess is, is, is is probably not there. Although I think we can, we can probably adapt reasonably fast. You know, after covid, the, the remote work kind of stuck, right? You people adapted to that pretty quickly.

00:52:29 [Speaker Changed] It, it’s funny because, you know, everybody blames Covid, all this technology has existed for a decade before my office was doing remote work, remote offices in the 2010s. What changed was society suddenly recognized, wait, why are we going to a building nine to five Monday to Friday to sit there and do stuff I can do in my pajamas at home? I don’t understand. Well, it’s a social,

00:52:54 [Speaker Changed] There’s a social component to it that we need

00:52:56 [Speaker Changed] To, there’s mentoring, there’s collaborative work, there are a lot of reasons, but it’s not nine to five, five days a week. No. And what you mentioned with commercial real estate, kind of fascinating that that is a slow motion train wreck because these are 10 and 20 year leases. They come up a little bit every year. So it gives the fed and the regulators time to manage that. Which comes back to, hey, I, I understand why Jerome Powell is concerned about reducing rates if, if low rates didn’t cause inflation, again, are high rates reducing inflation, I would argue not only are high rates keeping rental prices up and limiting supply in real estate, but now you have to deal with commercial real estate and the federal deficit. Like there is a good case for him to take rates from five and a quarter to four and a half and say, let’s see what happens if we leave them here. Right. Is that wishful thinking on my part or

00:54:02 [Speaker Changed] That? No, I think, I think that, you know, that’s a, that sounds plausible. It sounds like everybody has pain but can kind of manage it. Right. Which is probably the course that seems reasonable

00:54:14 [Speaker Changed] In terms and it’s still at a level. If there’s a recession, they could, well they have some room. Yeah.

00:54:18 [Speaker Changed] So this, this, all this all seems reasonable except that there’s a cycle. Right? The cycle has, it is like doesn’t care about that plan. Right. It’s doing what it does. And the inflation cycle doesn’t go down to a number and hang out until you’re ready. Okay. It it, it does what it does. And, and so right now internationally, look, we have a global industrial upturn. So that’s got a bid on your industrial materials, prices, sensitive industrial materials, prices, energy, metals and these things. Then you have recessions have kind of run their course. There’s been, in

00:54:54 [Speaker Changed] Europe, you’ve had a few recessions, you’ve a few in China,

00:54:57 [Speaker Changed] A few, you’ve had a few recessions. So these recessions have been happening. Taiwan, New Zealand, Russia, Japan flirted with recession. Sweden and Austria, Germany, UK and Germany. They, well, so technically, I don’t know if they went in ’cause of the employment. The employment didn’t contract there. They got the negative GDPs, but they didn’t get the negative employment quite quite the

00:55:19 [Speaker Changed] Same. So then let me ask you an employment question here. If the US is pick a number, if we were 4 million immigrants short, we lost a million to 2 million people to Covid. Yep. So whatever the number is, there’s a few million people missing from our labor pool. Is that true? In Europe and in the far east to

00:55:41 [Speaker Changed] A, to a degree they didn’t have the, the same issues. But to a degree it’s tighter.

00:55:46 [Speaker Changed] I mean clearly Japan has, look

00:55:48 [Speaker Changed] Demographically, there’s a whole nother structural demographic Right. Discussion we can have where there’s a hunk of people who got old. Right. Right. And then there’s not as much younger people

00:55:57 [Speaker Changed] As tends to happen.

00:55:58 [Speaker Changed] And there’s

00:55:59 [Speaker Changed] Another, so, so Japan has its own specific demographic challenge. Yeah. Then when we look at China, the, the one child policy is coming home to roost. They have an enormous shortfall, generationally speaking,

00:56:12 [Speaker Changed] Huge, not, not easy to solve. And it’s where robots and AI and these kind of things have to pick up the slack. And probably the only significant place in the world that has a lot of people being born, I guess India to a degree, and then Africa. Right. These are the regions of the world where the populations are growing.

00:56:34 [Speaker Changed] South America also, but not as much as

00:56:36 [Speaker Changed] Not quite as much. Right. Right. So growth, which we all want, is really broken down to population growth. When I say growth in the, I’m talking about growth in the economy,

00:56:48 [Speaker Changed] Economic growth

00:56:48 [Speaker Changed] Is, economic growth is populate your workforce growth plus your productivity growth. Productivity growth by the way is really bad. It’s really, really, really bad and has been kind of deteriorating for, for decades and which

00:57:04 [Speaker Changed] Is just so stunning to me. And I imagine you also, yeah, because the work that we do, technology has been nothing but a boon allowing us to accomplish more with less. But that’s, I’ve figured out or, or have had beaten into me over the years. Yeah. You are doing certain type of work that benefits from this, but not everybody gets the benefit of Yeah. Faster internet and quicker computers

00:57:31 [Speaker Changed] Information technology jobs have benefited quite a bit and the productivity is shot up. But our economy is not simply that. Right. It’s much bigger and there’s a lot of hands-on stuff that happens in our economy and we all experience it when we go about our day. And that overall workforce productivity growth has basically been suffering. Now what happened is around Covid and in the aftermath of Covid, you had a gargantuan plunge in productivity growth. So it’s, it’s stair stepping down over decades and it just absolutely plunges really, and then it rebounds. Right.

00:58:11 [Speaker Changed] Because I recall rebound the initial part of when we were in lockdown and work from home, there were all these reports that were surprisingly, and again, not just, that’s

00:58:22 [Speaker Changed] ’cause that’s ’cause the hours worked went down and output stayed up. Right. So your productivity

00:58:25 [Speaker Changed] Shot, and that was people who were, who had the ability to work from home. But if you were not working from home, if you were not able to just log into your office from your computer, I have to imagine that productivity got

00:58:38 [Speaker Changed] Crashed. Yeah. So, so some stuff like if you were, if you were doing hands-on work, you just had to stop working. Right? Right. People were furloughed and so that, that output just collapsed. Now as we open up, we’ve seen a big spike and you get like positive two or 3% productivity growth. And it happens around the same time that we see all of the stories around generative ai. So in our simple human brains we’re like, oh, generative AI gave us this productivity thing, which is not true. Right? What really happened is you had a snapback in productivity growth from horrible numbers, which were not real numbers. They were around the whole recession and Covid debacle. Now, is that kind of productivity growth, sustainable? It’s the only way out of this inflation conundrum that the Fed is stuck with. So currently you’re

00:59:34 [Speaker Changed] Saying productivity growth is the only way out

00:59:36 [Speaker Changed] At the moment, right? I mean, how are you going to pay someone 5% more but not have high inflation, for example? Right? You need productivity growth.

00:59:46 [Speaker Changed] Well, you gotta go back a step. You need more employees, you need more houses, you need need more semiconductors to put into cars. A lot of the inflation that we’ve seen over and above the giant fiscal stimulus Yeah, yeah. Has just been these shortages. Yeah. That kind of were lurking and we really didn’t pay attention to them.

01:00:06 [Speaker Changed] Again, you’re back to just in time versus just in case. And, and so now if a trade route gets pinched, if a bridge goes down, if somebody threatens a factory somewhere or a factory gets messed up, boom. The, the ripples up the supply chain. So there’s probably a new structural floor on inflation, by the way, it’s probably not as low as it was not 2% earlier. That structural floor is probably a little bit higher because of the more robustness that we’re gonna want in our supply

01:00:37 [Speaker Changed] Chain. Are you talking three, three and a half, 4%?

01:00:39 [Speaker Changed] I don’t know. It’s just higher. I, I just,

01:00:41 [Speaker Changed] But, but it ain’t one point a half, 2%.

01:00:42 [Speaker Changed] No, it ain’t one point a half, 2%. The other thing though, you know, history doesn’t repeat, but it rhymes. Right? The seventies inflation stuff is interesting. Not, not that anything that’s happening now is what happened then. But early on in that inflationary era, people weren’t that pissed at inflation. They were more excited about the growth. It was that each time inflation cycled down. It, it didn’t get down as far as it did before, so that you had higher lows in the inflation cycle. And at the end of this decade or so where inflation went from below 3% to above 13%, it was cycling. The average was seven. It was really high

01:01:26 [Speaker Changed] In 1970s.

01:01:27 [Speaker Changed] For the seventies for that decade, roughly. Right.

01:01:29 [Speaker Changed] But it’s such a different decade compared to

01:01:31 [Speaker Changed] Completely different. But I’m saying psychologically in interacting as, as, as consumers with prices, right? When the lows, when inflation turns down, but it doesn’t get low enough, it, it stops at a higher rate. That starts to get pretty annoying. And

01:01:48 [Speaker Changed] People start talking about it as a structural component.

01:01:51 [Speaker Changed] They start talking about it. Look, burns was the Fed Chairman in the early part of the seventies, right. And Volcker was the Fed chairman at the end and towards, into the eighties. And Burns gets a bad rap because he was at the beginning of this inflation era. But understand that the environment was not at all open to him controlling inflation. It was very much like, what are you doing? Don’t raise rates. Are you crazy? Right. And then it’s only towards the end of the era when Volcker kind of had some cover to be as aggressive as he was in fighting inflation. And he was very aggressive.

01:02:29 [Speaker Changed] Huh. Quite interesting. So let’s talk a little bit about predicting business cycles. And I want to talk about your leading and your coincidental indicators. Let’s, let’s start with the Allis. Yeah. What goes into that and how useful are they in letting you know when, hey, a turn is coming? Right.

01:02:50 [Speaker Changed] So the leading economic indicators are very useful in managing risk because they’re, they’re telling you what is the risk that whatever’s going on now is gonna change direction and go the other way, right? So you can have your general plan, Hey, I’ve got my plan for business this year, and you’re running it. But if these indicators turn up noticeably or turn down noticeably, then you ought to start making contingency plans. Being ready and thinking about what would I do if things accelerated? Or what would I do if things decelerate? Am I ready for that play? Am I ready to run that play as a, as an investor or a business manager? That’s the purpose of the leading indicators. Now, inside of those, while ultimately they’re proprietary, inside of them are data from the government. There’s hard data. So they’re counting things. That’s what we mean by hard data.

01:03:49 They’re soft data, which is when someone does a survey, Hey, how are you doing? What do you feel like you’re doing? Are you gonna buy a refrigerator? Right? They ask you these questions and, and hopefully you can see through some of the biases in there. And then there’s the actual price. Like, you know, how much does a bar of gold go for? How much does the thing of oil go for? How much does the lumber go for? How much does the house go for? These are all just prices out there, stocks. What are the stock prices spreads in, in different things? So these are all different measures that reveal how the drivers of the business cycle are acting in concert. So

01:04:25 [Speaker Changed] What’s different from the all to the coincidental indicators?

01:04:29 [Speaker Changed] Okay. So the coincident indicators don’t try to anticipate anything. They’re just like, what’s going on outside your window? So how much output, how much stuff are we making? Either physical stuff or services or houses and things. How many people are working? What is the aggregate sales? Like, what’s the value of everything that we’re selling? And another related point is what’s the income? What are we gaining? It’s the other side of the sales, right? In a, in a way. So those four indicators are the coincident data. They tell you exactly how things are outside your window. The fact that there’s a cycle means that collectively, those four indicators rise together and fall together at the turning points. And when they do that, they tend to keep doing it for at least a couple of quarters,

01:05:18 [Speaker Changed] Some persistency,

01:05:20 [Speaker Changed] Persistency. It’s pervasive. You can’t hide. Right? It’s persistent. You can’t wish it away. It’s gonna keep happening. And it’s pronounced, it’s gonna be big enough that it leaves a mark, either to the upside of the downfall. So

01:05:33 [Speaker Changed] Coincidental will go up and down in real time. Yeah. They’re not giving you a heads up. How much of a lead do you get from the leis versus Oh,

01:05:42 [Speaker Changed] And, and by the way, a coincidental just to be annoying here. Yeah. It’s actually slightly lagging, which

01:05:47 [Speaker Changed] Would make, which would make sense when we get government data about employment. It’s telling you about last month. Yeah. Or GDP last quarter. Yeah. So of course there’s always gonna be a little bit

01:05:57 [Speaker Changed] Lag. It’s a little bit of a lag. We have some stuff that’s a little quicker. And roughly speaking, the US will come out with the data a little faster than some of the other countries. But yeah, that, that’s the coincident data. Now the lead time is, this is probably one of the bigger advancements since where most people think leading indicator technology lives, is that the lead times are different. We have what I would call kind of a standard leading indicator might lead by a quarter or two.

01:06:25 [Speaker Changed] That’s a long lead,

01:06:26 [Speaker Changed] Three

01:06:27 [Speaker Changed] To to six

01:06:27 [Speaker Changed] Months. That’s pretty, pretty, pretty good, pretty decent lead. That’s kinda where a standard one, a short leader might lead by a quarter two, two or three months. And a long leader can push it to three to four quarters. From a process point of view, we would look to the long leader for the first heads up that a, that a turn might be taking place and it leads by three or four quarters. So this gives us a prior view to watch the leading indicators. And then if, if we see the leading indicators following what the long leaders did, then we’re looking for it in the short leading indicators. And then finally, sequentially in the coincident data, I have to say the headlines and the, the market tone and the market narrative lives very much between the coincident and very short leading indicators. Right.

01:07:18 [Speaker Changed] They change it on a dime. The, i I love just the past 12 months have been, markets are going up because the fed’s gonna cut. Yeah. Markets are going up ’cause inflation is coming down. Okay, maybe the Fed isn’t gonna cut, but it’s a magnificent seven. Alright. Maybe it’s not the magnificent seven. Maybe it’s AI and the story in ball. Yeah. Right. It’s always an after the fact explanation. That looks silly in hindsight. So

01:07:44 [Speaker Changed] What’s very interesting, right? So I’ve been doing this now again, I’m sorry, I’m I, I’m in my late fifties, so I feel old, but I, but I’m like, wait a minute, I’ve been doing this since 1990 real time. We, we

01:07:54 [Speaker Changed] Prefer the term experienced and whined

01:07:58 [Speaker Changed] Whiz. Yeah. You’ve gone through the process. Yeah, definitely. Whined the pattern. I see, right? Is that sequential stuff with our leading indicators, long leader, long lead,

01:08:07 [Speaker Changed] Lead,

01:08:07 [Speaker Changed] Lead, coincidence. So I’m tracking that. That’s my world. I will live in that. And there’s a hundred indexes I’m watching for the US and around the world in, in growth, the different sectors of growth, inflation, and employment. What I’ll see though is that our indicators will turn and to the extent they diverge from the consensus narrative, and that’s a funny thing, the consensus narrative, right? Right. Because we all have our own consensus or whatever, but I, you know, market prices kind of give us some beat on that and you can get some amalgamation of what, what all the smart people are saying. And you get some sense of what the narrative is or what the fed’s saying or whatever. Right. And when the cyclical story from these objective leading indicators, which they don’t care about the narrative, when they diverge from the narrative and a gap opens up.

01:09:02 That’s interesting. That’s where the really interesting stuff lives. Because if there is a cyclical turn, and these indicators are, I don’t know anything better, right? To get these cyclical turns, the risk of a cyclical turn to, to watch it. If these cyclical indicators are correct, and that divergence has to be resolved, it has to be resolved in some way or another by the narrative moving toward, toward up the indicators up. Right? And so it’s, I don’t know exactly how the narrative’s gonna come catch up. Maybe it’s gonna say housing did it. Maybe it’s gonna say, you know, doesn’t

01:09:35 [Speaker Changed] Matter.

01:09:35 [Speaker Changed] But it did, it doesn’t matter. By hook or by crook, by the end of 2024, you’re gonna see, ooh, there’s some demand for commodities. Right? Or who saw that coming? And, and global industrial or manufacturing emergence, whatever the story is. And then, oh, inflation didn’t go down as far as we thought. All these banks around the world are banking on cutting, E, c, b, everybody. Right? These people are talking about cutting.

01:10:01 [Speaker Changed] So, so let’s talk about those four long leading short Yeah. And coincidental. Yeah. We’re recording this. It’s the second quarter of 2024. Yeah. Markets had a pretty robust rally to start the year, giving up some, some of those gains as the narrative. Yeah. First it was vibe session. Yeah. Then it’s six cuts. Now it’s three cuts, maybe two cuts, maybe one cut, maybe none. What are you seeing across long leading short and coincidental indicators today

01:10:34 [Speaker Changed] For the cycle on growth? I’d say by and large, if I squint, they’re, they’re, they’re firming.

01:10:40 [Speaker Changed] Okay. Meaning doing okay.

01:10:42 [Speaker Changed] They, they’re doing better. This tug of war that has been going on between earlier cyclical impulse to the downside, and all that stimulus that went out the flood of,

01:10:53 [Speaker Changed] You know, the, and continues to go

01:10:54 [Speaker Changed] Out the foam on the runway, we may be seeing the window of vulnerability starting to edge shut. You,

01:10:59 [Speaker Changed] You sound much less recessionary Correct. Than I recall hearing from you. Correct. A couple of quarters ago.

01:11:07 [Speaker Changed] Correct. You were, you were hearing correctly.

01:11:10 [Speaker Changed] And at the same time, I’m not hearing a whole lot of optimism that we’re gonna see inflation fall much below where it is today.

01:11:18 [Speaker Changed] No, I see. So the, so the immaculate disinflation was the pipe dream, right? Right. That’s the one where it just doesn’t seem to work that way. Look, I’ve been trying all my life to have my cake and eat it too. It doesn’t work that way. It doesn’t exactly work that way. So that’s where

01:11:32 [Speaker Changed] It’s the flip side of the strong economy is, yeah, be careful what you wish for, for, Hey, that’s got inflationary impulses. Careful what you wish for. By the way, the, I’ve had people say to me, imagine how great things would be if oil was $30. And my answer is always no. You’d be in a depression if oil was $30. Careful what you want. It’s, it’s how you get there that matter.

01:11:49 [Speaker Changed] So, I mean, oversimplifying, you could pick a recession and squish inflation that way, eventually

01:11:56 [Speaker Changed] Send and send unemployment up to five, 600%

01:11:58 [Speaker Changed] And do all of that. You

01:11:59 [Speaker Changed] Could, nobody wants that.

01:12:00 [Speaker Changed] Nobody wants that. So we’re trying to thread the needle, right?

01:12:03 [Speaker Changed] There’s,

01:12:03 [Speaker Changed] I think it’s an open question on threading the needle by spending over $7 trillion. That’s a, a policy question. A debate. Debate, right. That, that people can debate, you knows, you know, reasonable people can debate that,

01:12:13 [Speaker Changed] But so, so let’s stick with threading the needle. Yeah. Or as most people describe it, a soft landing. Landing. Yeah. Yeah. What is this soft landing and

01:12:21 [Speaker Changed] What is it? Okay. So here, if people can imagine those coincident data, you put them together into an index, it has a growth rate. If output, employment, income, and sales, it’s cycled down very hard into 22 into 23. I’ve seen the picture, it’s a sharp decline, and then it kind of levels out at around 2%. It gets pretty weak back in 22 when GDP goes negative for a couple quarters. But employment keeps it from going negative. And so we’ve been bouncing along. Now, I think that that can start to firm a little bit if it does that and starts to move to the upside, you have a soft landing. You, you had a cyclical downturn in growth without a contraction, without it going negative in overall growth. And again, I’m talking GDP, employment, income and sales. Collectively, there’s no one statistic like GDP, which is gonna define recession, and that would be a soft landing. Okay. But everything I’m talking about is in cyclical terms, I’m looking at a few quarters. I have not said there can’t be a recession over a year from now. Right. There could be. And one of the things that I’m watching for that’s not in the play that everybody is waiting to see is inflation possibly turning up before it’s supposed to.

01:13:48 [Speaker Changed] Let me ask you the question that sums all of this up. You get a phone call from the White House Lockman, we, we have some questions for you about the next six months before the election. What’s gonna happen between now and November with unemployment, with inflation in the economy? And what should we do about it? How, how do you answer the White House? Who, who’s throwing that curve ball at you?

01:14:17 [Speaker Changed] Well, let me take the first part. What’s gonna happen? The indicators, I could just tell you what they’re telling. Right. Growth is going to firm, and I think it’s gonna be industrial based will be the first thing that you see. We are going to see, I think employment kind of hang in there because of

01:14:36 [Speaker Changed] Growth. We’re under 4% unemployment,

01:14:38 [Speaker Changed] Three attractive because growth, because of growth affirming. And the PTSD every, all the employers have in trying to hire people, they’re very reticent to fire. You might see shorter work weeks. You’re gonna see weakness in temp hiring. You’re

01:14:52 [Speaker Changed] Gonna see, you see an uptick in part-time. You

01:14:54 [Speaker Changed] See the uptick in part-time. You’ll see all those levers being pulled. But I don’t think you see the firing, which is part of a recession, right? Right now on inflation, I think you have to really think about it firming and not going down. And so that’s the fly in the ointment. And, you know, an inflation cycle upturn is an inflation cycle upturn. It’s not that you could necessarily do anything about it. It, it is what it is. It’s gonna happen.

01:15:20 [Speaker Changed] You can pound your chest about it if it works out, and try and change the subject. If it doesn’t,

01:15:25 [Speaker Changed] I think you get in front of it and you try to frame it, right? So the whole thing is about the jawboning and the narrative. And if you are the opposition, you’re gonna harp on that every single day. And if you’re an incumbent, you’re gonna say, yeah, but look at all this other stuff that’s going well, where the economy’s growing. Huh.

01:15:42 [Speaker Changed] Really, really interesting. All right. I only have you Yeah. For another 10 minutes. So let’s jump to our favorite questions that we ask all of our guests. Starting with, Hey, what are you streaming? What are you watching or listening these days on Netflix or podcast or whatever. Mm.

01:15:59 [Speaker Changed] Well, this is all entertainment for the most part. That’s

01:16:01 [Speaker Changed] Fine.

01:16:02 [Speaker Changed] Owl House, really? Do you know Owl House? No, I don’t think you would. I’m, I’m joking, Barry. It’s, it’s, this is a show, it’s a fantasy show for the kids about,

01:16:14 [Speaker Changed] I know. I’ve seen the tile on something.

01:16:16 [Speaker Changed] It’s really, it’s a lot of fun. It’s a great, it’s really well written and nice storytelling and a group of, a group of kids.

01:16:22 [Speaker Changed] Yeah. But your kids are older now, you know, of little kids.

01:16:24 [Speaker Changed] I, no, I got a nine and I have nine and 12 and 16, and I try to keep ’em young Okay. As best I can. They’re gonna get older no matter what I do. I

01:16:31 [Speaker Changed] Forget about the 9-year-old, I know about the 16-year-old.

01:16:34 [Speaker Changed] And so, Al House and Troll Hunter, those are nice kids shows. I was impressed with how Apple Handled Foundation and the Foundation

01:16:45 [Speaker Changed] Trilogy. I love the books. And I watched the first season. I haven’t gotten into the second season yet. Right. I, they

01:16:49 [Speaker Changed] Did a reasonable job. I mean, look, there’s no way you can tell the story, that kind of story. It’s like Dune also, it’s very hard to tell the story. Right. Or three body problem that you were talking about.

01:16:58 [Speaker Changed] Which, which by the way, they did a really good job in the first season because

01:17:02 [Speaker Changed] They’re so expansive, these stories. Right. How do you put it to film? I enjoyed that. The one that disturbs me, but for some reason I watch it from time to time is Black Mirror.

01:17:12 [Speaker Changed] Yeah.

01:17:12 [Speaker Changed] Which is, every once in a while when I’m like, can I take something shocking? I’ll, I’ll watch that. And then I don’t watch it for a moment because it’s very disturbing. But I, but I’ve been liking all of those. I mean, there, there’s so much good stuff. Yeah. And, and some of the, some

01:17:27 [Speaker Changed] Of the, there’s too much good stuff. My wife and I have been saying, all right, let’s wrap up. We’re, we’re finishing up Curb, and it’s like, after we’re done with this, I want to cut out tv, you know, a few days

01:17:37 [Speaker Changed] A week without, without getting political. Something that I, I rewatched it with my 16-year-old was Gandhi.

01:17:43 [Speaker Changed] Really?

01:17:44 [Speaker Changed] Yeah. And it held up really, really well. The movie, it’s, it’s what, it’s three hours. Something long. But it’s so interesting to see how, you know, to remember the history and then to see how the politics get in and, and do things in there.

01:18:00 [Speaker Changed] There’s been a few shows like The Bodyguard and the Diplomat that are to say nothing of the Crown Yep. That are of an era. And they’re just so informative and fascinating, so informative, especially, I don’t really think of myself as an Anglo file, but The Crown was just one of those things Yeah. Where you fall into a whole nother world. Yeah. And Gandhi, I would imagine is the same sort of,

01:18:23 [Speaker Changed] Gandhi is amazing, and you’re seeing it from the other side of the table. Right. Right. Right. So it’s, it’s fascinating. And, and, and I enjoyed watching that, but I mean, there’s so much stuff to watch for sure.

01:18:31 [Speaker Changed] It’s very good. Let’s talk about your mentors. Yeah. Who helped shape your career.

01:18:35 [Speaker Changed] I, I don’t wanna leave anyone out. There are so many people. Well,

01:18:38 [Speaker Changed] Kind is the, obviously the

01:18:40 [Speaker Changed] Dr. Moore is, is huge. Who really was the pinnacle of my mentors, I would say. Others. I, some teachers shout out to my teachers. Yeah. I met with Sam Lockwood, who taught me fourth and fifth grade last summer. And that was really nice to see him. And, and he was just, he loved letting me be curious. And then as I got into college and to, into cycles, I had a, a professor at Rockton College in, in the uk, Dr. Baldwin, who taught me a lot about politics and the civil service, the power of the civil service, which I never, which I now have come to appreciate

01:19:19 [Speaker Changed] Or, or the deep, the deep state deep as some

01:19:21 [Speaker Changed] People, the deep say, but I don’t think it was so nefarious. But yes, it was, it was definitely that they’re powerful. Dr. Rene Harris, who introduced me to Dr. Moore, to ge, to Jeffrey Moore, and then also my father-in-Law, who came from a different angle, more from a financial investing angle, but very interested in economics and psychology, always i in the markets, which was, which was very important.

01:19:44 [Speaker Changed] Let’s talk about books. What are some of your favorite and what are you reading right now?

01:19:48 [Speaker Changed] I’m a sci-fi buff. Right. Okay. So I, I, I like the Culture series. It’s a, who wrote

01:19:53 [Speaker Changed] The Culture series?

01:19:55 [Speaker Changed] Ian M Banks.

01:19:56 [Speaker Changed] Okay.

01:19:57 [Speaker Changed] And it’s, it’s a few thousand years in the future. It’s very philosophical, but it’s excellent. It, it’s like space opera stuff. It’s, if you like Dune and those kind of things. Sure. You’ll, you’ll love Ian Banks and the, and the culture series. And I’m reading the Player of Games. It’s a fun one.

01:20:13 [Speaker Changed] The Player of games.

01:20:14 [Speaker Changed] Player of games, yeah. Rather. Okay. Who, who

01:20:16 [Speaker Changed] Wrote

01:20:16 [Speaker Changed] That? Ian Banks. Oh, same Tim Ian Banks. Yeah. It’s a series of things. On a more practical sense in terms of thinking, there’s an old favorite that I go back to, which is called Deep Work by Cal Newport. I

01:20:30 [Speaker Changed] Recall that book

01:20:30 [Speaker Changed] For sure. Yeah. Very, very good. I’m showing my age, but Outlive by Peter Atia.

01:20:37 [Speaker Changed] And On Longevity.

01:20:38 [Speaker Changed] Yeah. On longevity. And

01:20:39 [Speaker Changed] I’m looking, I’m looking for the name of a book as we

01:20:41 [Speaker Changed] Speak. And then for fun, my wife does, she’s a graphic novelist, Tracy White. And so I, I dig through her library and find things. And there’s one that I love, which is, it’s very dated, but it, it kind of does. Well today it’s called Trans Metropolitan by Warren Ellis. It’s a graphic novel, and it’s about a, a journalist spider Jerusalem. And he’s this funny, funny character who’s trying to speak truth to power and all that, but a great graphic novel. I’m reading this with my son. He is 12 Be Useful by Arnold Schwartzenegger. Oh, really? And that’s,

01:21:17 [Speaker Changed] That looks kind of interesting

01:21:18 [Speaker Changed] And that’s pretty interesting. And it’s, you know, whatever, whatever you think about individuals, the, the message that he, he’s got in that book is a positive one.

01:21:27 [Speaker Changed] There’s a book I’m looking for, the title of that is a series of related but disconnected short stories. And the name of the book is Intergalactic Refrigerator Repairman. Seldom Carry Cash. And let me recommend that. That’s been my, my favorite recommendation.

01:21:46 [Speaker Changed] That almost sounds like Doug Adams or something. I

01:21:48 [Speaker Changed] It’s got a touch of that. Yeah. It’s not quite as absurd. Yeah. But it’s got just a flavor of mixed in with harder science fiction. Oh,

01:21:58 [Speaker Changed] I’ll, I’ll look it

01:21:58 [Speaker Changed] Up. An element of, of that goofball ness. Nice. Our final two questions. And by the way, that’s a really good list of Yeah. Books. You have our final two questions. What sort of advice would you give to a recent college grad interested in studying either market cycles or investing, or any sort of economic research?

01:22:19 [Speaker Changed] This goes for any kind of pursuit, let alone economic or financial research. Be sure that you truly enjoy the work. That’ll make it easy, easier to be successful, because you’re gonna have to persist. Right. None of this is easy. You’re going to have to persist. It doesn’t just fall in your lap. And, and so if you enjoy it, you can keep doing it. That’s, that’s my main advice.

01:22:43 [Speaker Changed] And our final question. What do you know about the world of cycles economy, investing research today? You wish you knew back in the early 1990s when you were first getting started?

01:22:58 [Speaker Changed] Well, I think the overarching concept is you don’t know what you don’t know. And, and that’s the thing that can hurt you. Probably the thing that has surprised me the most is the sheer size and extent of deficit spending. When you take a look at what happened in the 2010s post GFC, and then you take a look at what’s happened post covid. We’re not in Kansas anymore, we’re somewhere new. It’s different for the US in many ways because we are the world’s superpower. And, and, and we are the biggest market. So it’s not the same as if Japan did it or someone else did it. So I, I don’t wanna underestimate the ability for us to do deficit spending. Hmm. Really

01:23:53 [Speaker Changed] Quite fascinating. Thank you, Laman, for being so generous with your time. Thank you. We have been speaking with Laman Chuan, co-founder of the Economic Cycle Research Institute, and author of Beating the Business Cycle. If you enjoy this conversation, check out any of the previous 500 discussions we’ve had over the past nine and a half years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. Check out my new podcast at the Money short, 10 minute conversations with experts about issues that affect your money, earning it, spending it, and most importantly, investing it at the money wherever you find your favorite podcasts. And in the Masters in Business Feed, I would be remiss if I did not thank the crack team that helps put these conversations together each week. Juan Torres is my audio engineer. Atika Al is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I’m Barry Ltz. You’ve been listening to Masters in Business on Bloomberg Radio.

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