RenMac's Head of Economics Neil Dutta on Recession Indicators

Barry speaks with Neil Dutta, head of economics at Renaissance Macro Research. Neil leads their macroeconomic research efforts, with an emphasis on analyzing the US economy, Federal Reserve, global trends, and cross-market investment themes. Prior to RenMac, Neil spent seven years at Bank of America-Merrill Lynch. There, he was a Senior Economist covering both the United States and Canada. They discuss in initial interest in economic studies and whether we'll see a recession in 2025. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:44Barry Ritholtz?

  This week on the podcast, another extra special guest, Neil Dutta with a tour de force explanation on what a market economist is, how it's their job to take all of the academic and somewhat esoteric economic research and take it from the five-yard line into the end zone. Why it's so important to put stuff into context that investors can use to focus on not just merely the economic data, but what it means for different sectors of the economy, what it means for different companies. I always find Neil fascinating to listen to. He has a really great track record forecasting things in a way that is

• 3:29Barry Ritholtz?

  occasionally out of consensus. So when he's talking about inflation in 2021, or Fed hikes in 2022, or why we weren't going to see a recession in that same year, it's always fascinating to see somebody whose thought process is detailed and interesting and out of consensus, but also right. I thought this conversation was fascinating, and I think you will also. With no further ado, my conversation with Head of Economic Research at RenMac, Neil Dutta. So, last time we were here, we talked about a bunch of things that you got right. I know your views have evolved, we'll get to some of those, but let's just go over

• 4:14Barry Ritholtz?

  your background a little bit. Bachelor's in Economics and Political Science from New York University, from NYU. Was the original career plan to go into finance?

• 4:24Speaker 05

  Uh, no. I think, um, you know, when you go to college, you have no, you don't know that jobs like the one I'm in currently even exist. It's like, you mean to tell me I get to write about economics and talk all day long and someone will pay me for it?

• 4:41Barry Ritholtz?

  No manual labor.

• 4:42Speaker 05

  Yeah, and, um, so, you know, I had no idea. I mean, I knew that I had an interest in economics, um, I had an interest in political science. The original plan was actually, you know, maybe to go to law school. But I ended up, you know, just not doing as well as I thought I was going to on the LSAT, so my senior year of college, I was kind of scrambling, um, because I didn't want to go to school for another three years, but I wanted to stay in the city and I was just like, let me just try to get into Merrill Lynch. Or, not Merrill Lynch, I mean, I got into Merrill Lynch, but any of the bulge bracket banks in the city, right?

• 5:22Barry Ritholtz?

  All had good, back in the day, they all had good training programs.

• 5:25Speaker 05

  Yes, so that was, that was the goal, is to get into one of the analyst programs at the, at the, at the bulge bracket bank. So, I got into Merrill Lynch. I actually started off there as a compensation analyst, and, um...

• 5:38Barry Ritholtz?

  Meaning studying, studying labor, studying salaries and things like that?

• 5:42Speaker 05

  Well, right, I mean, yeah, I mean, a lot of what the job was, um, and the amount of time that I had done it was, I mean, a lot of it is just benchmarking, um, the employees of the firm to the market to make sure that you're paying people to market.

• 5:56Barry Ritholtz?

  Meaning internally? You were looking at Merrill Lynch?

• 5:58Speaker 05

  Yes, internally.

• 5:59Barry Ritholtz?

  Ah, that's very interesting.

• 6:00Speaker 05

  Yeah, and managing the year-end bonus pools, um, so that was a whole process in and of itself. But one of the good things about working in HR is that you kind of, so I got my foot in the door. I mean, I was just happy to have something at that point. I remember... I showed my mother my offer letter, I still have it saved, from Merrill Lynch, where they were paying me $50,000 with a $10,000 signing bonus. And I showed that to my mom, and she was like, "Why would they be paying you this much money?" And I was like, "Well, I don't know."

• 6:27Barry Ritholtz?

  We'll find out soon.

• 6:28Speaker 05

  Yeah, we'll find out what I'm gonna be doing. But the benefit of working in HR in particular is that you kind of know where all the jobs are and where the opening, open positions are in the firm. And there was an open position on David Rosenberg's team at Merrill Lynch. And so then I joined his firm, sorry, his team. That was in early, late '06 or early 2007, so, you know, right when Rosie was really killing it. I mean, you know, he was like a marketing machine, he was like the guy, like number one in II. All these things were happening, you know, I mean. And so it was really exciting to be on his team.

• 7:07Speaker 05

  So it was really, it was like a very quick educate, I mean, it was a real education being on his team during that time.

• 7:14Barry Ritholtz?

  To say nothing of what happened over the next few years, '08, '09, and the great financial crisis was right around the corner.

• 7:23Speaker 05

  Yeah, I mean, I definitely think that, you know, one of the things that I've always come to believe now, like, having been in the business for a long time, is that, as you know, like our, like, the financial industry is very cyclical, right? Like, everyone knows someone who's been laid off, let go, you know, has gone through spells of just not having a job, right? And I do think it says something about you if you've been able to survive these crises.

• 7:48Barry Ritholtz?

  Yeah, yeah, to say the very least. Where was Barron's in your career history? You were an analyst at the weekly Dow Jones publication.

• 7:55Speaker 05

  Yes, that was, that was, that was more of a, when I was in college, I worked for Gene Epstein.

• 8:02Barry Ritholtz?

  Oh, really?

• 8:04Speaker 05

  Yes, noted libertarian, you know, kind of gave me my first taste of like a lot of the tools that we use now in sort of the business economics space, like Haver Analytics. I actually got my first taste of that, working with Gene at Barron's. And, you know, getting my, you know, sort of first sense of, you know, trying to analyze data, looking at, you know, I mean, he had, he had sort of a weekly column on the economy, but a lot of the interesting pieces that he wrote would happen on, you know, days of like the employment report, or, you know, summarizing the ISM data and like what it might mean for the economy and the outlook. So it kind of gave me my first taste of what a business economist would do on a day-to-day basis.

• 8:49Barry Ritholtz?

  And you use, I've noticed you use the phrase "market economist" with "business economist" all the time. How does that differ from the traditional economist, for lack of a better word?

• 9:01Speaker 05

  Well, I don't have like formal PhD training, so I think, you know, that to me is like an important distinction. You know, you have business economists on the street that have PhDs, but I don't think a PhD is required to be a business economist. And to me, it's like also just a way to respect the academic profession, right? I mean, you have people here that are really studying a specific niche area their entire careers, right? I mean, you think about like behavioral economics and like financial economics, I mean, there are economists that are just looking at that, and they're doing it for decades, right? Because that's what they do.

• 9:45Barry Ritholtz?

  I think a Hyman Minsky, looking at the narrow subtopic of stability and instability in economic systems, and toiling away for decades until eventually the market hits a tipping point, and all, suddenly all of this research that seems like a quiet backwater is suddenly...

• 10:05Speaker 05

  Becomes relevant.

• 10:06Barry Ritholtz?

  Yeah, becomes front-page news.

• 10:07Speaker 05

  Or just, I mean, right, or like, you know, strategic trade theory. I mean, these are, these are all sorts of things that have...

• 10:14Speaker 05

  I think, and you could say maybe, and you know, like, the academics take you basically to the five yard line.

• 10:21Barry Ritholtz?

  Right.

• 10:22Speaker 05

  And as a business economist, your job is to kind of run it in for a touchdown and tell, you know, the investor community, like, why is this important to what you're doing right now?

• 10:31Barry Ritholtz?

  Huh, that's very interesting script.

• 10:33Speaker 05

  So that's, that's sort of the way I kind of view it. I mean, obviously, you lean on a lot of their work throughout your career. I mean, you know, I mean, this had gotten a lot of play earlier in the cycle, but Ed Lemer wrote a paper once called Housing Is The Business Cycle, right? I mean, and that was, you know.

• 10:52Barry Ritholtz?

  Professor at Harvard or Georgetown?

• 10:55Speaker 05

  I think he was in University of California, if I'm not mistaken. But at any rate, I mean, that was a piece, that was a piece of research that had gotten a lot of attention for, over the years. You know, when, when housing was melting down back in 2022, a lot of people were leaning on that paper again. So it's important. I mean, so to me, it's like, I make that distinction because, A, I don't have a PhD, and I'm not doing the same thing. What I'm basically trying to do is look at all the different sort of pieces of economic information that come out. And on the US economy, there's always something going on, right? I mean, in terms of data, some of it's market movement, some of it's not, and try to kind of formulate an economic outlook that is useful for investors. That is not what academics tend to do, right?

• 11:40Barry Ritholtz?

  For sure, for sure. So when you were at Bank of America Merrill Lynch, you were doing a weekly note that you authored. How did that help carve out your own space and expertise? And how did that ultimately lead to your job at RenMac?

• 11:54Speaker 05

  Well, so, I mean, obviously, Merrill was, was an interesting time because I was sort of coming up the ranks. And, you know, by 2009, Rosie had left. And so.

• 12:12Speaker 05

  It was sort of this weird time where it was like a very important time in the economy because we were just transitioning from recession to expansion. And but Merrill's economic team was kind of without a leader, right? So we didn't really have, so it was, I was able to do a lot at that time just by default because there was no one else really doing it. So I would, I would be writing a lot for the, you know, specifically for the equity market desk. You had to be pretty young back in 09. Yeah, I was, I was very young. I might have been like, oh, God, I don't know, like, not even 30. Wow.

• 12:45Speaker 05

  At any rate, so, I mean, it's one of these things where you, if you, if it's just you and like a couple of other people, you're doing a lot more than you otherwise would be doing had there been like a chief, a formal chief economist. So I remember the summer of 09 vividly because we had, you know, like the team had gotten like a big reputation for being very bearish because, obviously because Rosie? Because of Rosie, but Still bearish. Yeah, but by, but by March, but by, by the time he had left and by the second quarter of 09, it was becoming increasingly clear that things were kind of turning around, right? I mean, you know, credit markets had turned. It looked like, you know, housing wasn't getting any worse, right? Inventories had basically been cut to the bone.

• 13:30Speaker 05

  They couldn't go any lower. And, and so we had written a piece basically talking about how, you know, the recession's over. Like, that's, that's it. And that had gotten a lot of attention from our, from our sales desk. But, you know, that's, to me, like, you know, you talk about writing. One of the things that I've noticed like recently is just, it's just ubiquitous, right? Like, everyone's writing, like, it's just, you know. Peak Substack. Yes, it's like, come view me on my Substack and like, you know, there's like all this research. But to me, like, what's important in the research sales business? Because that's ultimately what I'm in, right? It's about knowing when to say something, you know? Right.

• 14:14Speaker 05

  You know, and there's just a lot of like filler research that comes out. I love the word filler because it's literally all it is. And, and, and there's some important, I mean, I do think it's important for clients to kind of see that continuity, but it doesn't have to be some written product. So to me, one of the things I've learned is like, When you write something, make sure that it has some depth and it serves a purpose. Right? And so, um.

• 14:39Barry Ritholtz?

  As opposed to just cranking something out daily or weekly.

• 14:42Speaker 05

  Yeah, because people don't, it's just like that eventually like, you know, that turns into spam. Right? I mean, from the perspective of your client. So there's, there's, there's many ways to kind of touch people in terms of accounts, like your, your client base that are paying for your, your research and your views and your analysis. And that could, you know, and some of that's written, some of that could be presentations, some of that could be podcasts, some of that, you know, it could be, it's, it's, that to me is what's important. So, um, you know, writing in the beginning was important, but I think one of the things I learned very early on is that it's important to kind of say something that has meaning. And that's not always going to be the case. Right? Like,

• 15:24Speaker 05

  people don't need to hear from me every day. They need to hear from me when my views on something are working out or not.

• 15:30Barry Ritholtz?

  I, I like to say, nobody really cares about ISM or, or fill in the blank, whatever your least favorite.

• 15:36Speaker 05

  Yeah.

• 15:37Barry Ritholtz?

  Economic data point is.

• 15:38Speaker 05

  Right. I mean, and also these days, right? Like the, the, um, the market reaction to it is immediate. So you can pretty much tell right away whether the number was good or bad or whatever else.

• 15:48Barry Ritholtz?

  Right.

• 15:48Speaker 05

  So what do I need to read your analysis for? And so it's, you know, you kind of have to pick your spots about when to, uh, you know, try to chime in and provide some kind of useful context for these data points.

• 15:58Barry Ritholtz?

  So, so there's a little bit of a void in 2009 after the head of the economics coverage for Merrill Lynch departs, uh, and you, you somewhat fill that void nine, 10, 11. What led you to join RenMac in 2012?

• 16:14Speaker 05

  Well, so by the fall of oh nine, um, we had, uh, Ethan Harris, uh,

• 16:20Barry Ritholtz?

  Oh, sure.

• 16:21Speaker 05

  From, from Lehman, uh, um, joined, um.

• 16:26Speaker 05

  The, you know, he started, was named the chief US economist, basically. And, and he, obviously, he was from like a, like a fixed income shop. I mean, Lehman was a huge fixed income shop. You know, Ethan was a Fed economist. So, his passion was really more towards the, the fixed income markets. And so, but obviously Merrill was like a huge, like a legacy equity shop. Equity shop, sure. Yeah, and so, I kinda got a lot of my, like, cut my teeth with the equity sales force. And I, what I tried to do, and one of the things you do find out in, in the research business is that fixed income doesn't pay for research. And it's just, it's just, that's what it is, right? I mean, you look at- Well, the margins are smaller, the, the, basically, what is it? A five to one ratio?

• 17:11Speaker 05

  Yeah, you think about like the, the biggest names in research sales over the last number of decades.

• 17:20Speaker 05

  You think about people like Ed Hyman. Mm-hmm, ISI. Nancy Lazar, right? You think they're writing about like, like rates? No, they're writing about like how economics can be tied into a stock market call. And, and Rosie, to his credit, was great at that. And that's kind of what I tried to do when Ethan was running things, because he didn't really, he didn't really do that, you know? And so, he kinda let me run with it. And he, he kinda gave me a lot of latitude to kind of come up with my own ideas and try to tell, you know, an equity sales force, like, why is this important for your clients? Like, and, and because Merrill had so many equity analysts, there, there was like a, like a wealth of opportunity, right?

• 18:05Speaker 05

  Like, so, let's say we wanted to write a piece on business investment, right? Like, so why is that important for equities? Well, because a lot of EPS comes from CapEx. And now you can go talk to your, like, you can talk to your industrials analysts, you can talk to the machinery analysts and say like, you know, are you guys bullish or bearish on your names? Like, and, and if you can come up with a scenario where a macro view can tie into a specific stock sector view for an, for an equity salesperson, that's a home run, right? And so, it just makes their life a lot easier. The worst thing you could do, especially at a bulge bracket firm, right, is- Well, your economist is really, really negative, but like, you know, this guy is telling

• 18:49Speaker 05

  me like, buy Caterpillar, like, how does that work? Like, and like, whenever, as a salesperson, like, having to deal with that question from a client is annoying. You know what I mean? So, so whenever you can come up with ways to tie a macroeconomic view into, and this goes back to the business economics, right? I mean, tie a macro view to a market call, that's a home run, right? No one cares what your GDP growth view is. Like, I mean, you have all these, like, you go, you look through the Wall Street research, and it's like, in the back, there's like, my GDP forecast, you have this big forecast table, and that's kind of what they're talking off of, right? But that's not really why I think people pay for research. People pay, you know, people pay for having an economics view that can be aligned with

• 19:34Speaker 05

  a market's call.

• 19:35Barry Ritholtz?

  So, let's talk about that economic view aligned with a couple of market calls. At least, we'll look at the 2020s, because 09, 10, 11 seems like it's so long ago. Let's fast forward a couple of decades. Late in 2021, I very vividly remember, most economists were fairly sanguine about inflation. Fed Chair Jerome Powell had said, "We're gonna let inflation run hot," the previous Jackson Hole. And you made a very out-of-consensus call. You had said, in late 2021, economists were too sanguine about inflation, that the FOMC

• 20:18Barry Ritholtz?

  would have to raise rates, and you said, at least four times, and that turned out to be very prescient. We started with four 75-bit raises, before we had two at 50, and then a sort of afterthought at 25. Tell us what you were looking at in 2021 that so many other economists missed.

• 20:38Speaker 05

  Well, thank you for saying that. I mean, in hindsight, I feel like I wasn't hawkish enough.

• 20:43Barry Ritholtz?

  You were so much more hawkish than the average economist.

• 20:47Speaker 05

  Yeah.

• 20:47Barry Ritholtz?

  That, hey, you know, everybody, most people, forget sticking the landing, most people miss the pool. You managed to at least put, give your clients a heads up of Fed tightening is about to start.

• 21:01Speaker 05

  Yeah, I mean, I, right, I mean, I caught the swing. I mean, I think, and then, you know, eventually I kind of came around to the idea that they'd have to do a lot more than what was priced. But I think, yeah, I think, thank you for saying that. I did kind of catch that. But, you know, to me, it was just like a rapidly accelerating economy. It was, so basically, the call, I think, that, the main issue there was, it was one call that you got right that kind of led to everything else, right? So, basically, what I saw at the time was a V-shaped recovery. And so, since there was a V-shaped recovery, that was going to have ramifications for all the other macro calls that people make.

• 21:41Speaker 05

  Like, whether that's the Fed, rates, stocks, you know? And so, basically, what I said was, we're gonna have a V-shaped recovery. You could see it in the data. They basically turned the lights off, turned it on, and threw a bunch of money at the problem, right?

• 21:57Barry Ritholtz?

  Yeah, $2 trillion solves a lot of headaches.

• 21:59Speaker 05

  Well, it's sort of, you know, they kind of, they fought the last war, right? I mean, they essentially, they diagnosed the problem as a, it was basically a supply shock. It was a negative, it was a very large negative supply shock that they treated as a big demand shock. And so, when you have a demand-side stimulus with a, you know, what is basically a supply shock, don't be surprised if you get, like,

• 22:28Barry Ritholtz?

  Inflation.

• 22:29Speaker 05

  Inflation.

• 22:29Barry Ritholtz?

  Right, $2 trillion in money coursing into the system and everybody stuck at home, guess what they're gonna do with that money?

• 22:36Speaker 05

  And it's, it's not just, and it wasn't just Fed pumping, right? It was, it was a fiscal stimulus, you know, and so, so I think, and also, just like the behavior of people at the time. I mean, you know, typically, in a bad economic situation, you don't see,

• 22:58Speaker 05

  People going out and like, taking out mortgage loans. But that's exactly what was happening at the time, right? So, you know, housing is like one of these irreversible decisions. So you have to be really confident in things in order to buy one. And so, when I started to see people like, you know, mortgage purchase apps are like, basically V-bottoming. Like, it's just going straight up. Like, there's signal there. And at the time, like, everyone was thinking the bottom was gonna fall out.

• 23:24Barry Ritholtz?

  It was the opposite, the bottom was in.

• 23:26Speaker 05

  And I remember at the time, I mean, in April of, I think in April of 2020, in the middle of April of 2020, I said, "We bottomed, it's over." Whatever one, two-week recession that we had, it's over. And I remember, I got so much hate. I remember at the time, like, you know, you had prominent economists telling, like, "It's gonna get a lot worse." Like, "The bottom's still not in." But, it was just sort of, it's one of these things in business economics where it's like, up is up. Right? Like, markets care about, they don't care about whether things are good or bad. They care about whether things are getting better or worse. And so, you know, you can say, "It's not good." But hey, guess what?

• 24:08Speaker 05

  Like, at the margin, we had more DoorDash deliveries in the third week of April than we did in the first week of April.

• 24:15Barry Ritholtz?

  I don't remember if it was Ned Davis, or it might have even been Ed Hyman, who had said, "Don't look for when the economy is great or terrible. Look where, when it goes from terrible to bad. Like, that's your first sign that you're making a bottom. Hey, this is really not a great economic data point, but it's so much better than it was last month, maybe things are turning." Like, that approach is, when it goes from terrible to fair, you're moving in the right direction.

• 24:46Speaker 05

  Yeah, and also, like, I mean, to me, honestly, like, looking back on it, that whole period was probably...

• 24:54Speaker 05

  Was the easiest call I had I made. And it's interesting because it was kind of out of consent. It was out of consensus at the time, but I thought that it was so easy. I mean, you had the, I mean, especially like from a markets perspective, right? I mean,

• 25:08Barry Ritholtz?

  Stocks were straight up after the March line.

• 25:10Speaker 05

  Well, not only that, are we like, are we no longer going to have cruise lines? Are we no longer going to have airlines and hotels? Like, it was just so obvious, like, OK, these are like generational buying opportunities. You better just put everything you have into these names and just ride it out. Because, anyway, I just thought, but to me, I think what I learned there is just, you know, it's just important to kind of just pick a bunch of like indicators and see like, is it getting better or worse? And it was get, it was clearly getting better, right? I mean, you can't go down after, you know, you've gone down. I mean, in some of these indicators, it's like you can't just keep falling, right? And so there was stability. And by the second week of April, I think it was, it was pretty obvious that things were turning around. And also, the nature of the policy response, like, right? It was

• 25:55Barry Ritholtz?

  Huge, biggest GD

• 25:56Speaker 05

  Well, not, not only that, but the way they were doing it, right? Like the phased in approach, so like, OK, so this week, like 10% of the economy is open. And then next week, we're gonna, we're gonna take it, we're gonna expand it out to gyms and restaurants. And then we're gonna expand it out to department stores and things like, you know, you know what I mean? So like, every week, they were kind of flipping on a bunch of on switches, right? And so, obviously, that was going to keep the economic momentum going.

• 26:24Barry Ritholtz?

  So let's talk about another out of consensus call you made the following year. Very few economists were calling for no recession in 2022. Most were pretty bearish. And of course, they looked at the Fed hikes that they had missed the previous year. You were one of the few people that were saying no recession in 2022. Was it simply that V recovery and just the robust momentum that was in the economy?

• 26:51Speaker 05

  Well, I don't know that I said, I mean, I definitely understood where the recession call was coming from. I think for me, the bigger gap with the consensus was really going into 2023. And I had said there wasn't going to be a recession. And I think first, it's important to understand why people were kind of latching on to the recession call back then. It was basically because the Fed told you so, right? I mean, the Fed was basically saying, We need a recession to deal with inflation. That's what they were saying. When Powell was like, "Pain will be required." That's what he means, right? And so...

• 27:26Barry Ritholtz?

  What did Larry Summers come out and say? Summers came out and said 10% unemployment to fight inflation? Turned out to be a little, uh, too 1970s-ish.

• 27:38Speaker 05

  Well, sure. I mean, what was the other? 30% chance of stagflation, 30% chance of this, 30%? I don't know, whatever. But I think part of the reason, I mean, this is part of the way these models work, right? If you have a period of inflation, the model's going to assume that you need a recession in order to kind of get it back to target, right? So I think at some level, like, one of the reasons driving the recession views on the street back in 2022 was because the Fed was basically telling you that's what they thought they needed to get inflation down. Now, by the end of 2022, I think it was becoming increasingly clear to me that we weren't going to have a recession. And again, I kind of put on my business economics hat, right?

• 28:20Speaker 05

  Like, so if you go back to that period, we had the Russian invasion of Ukraine. That sent energy prices through the roof. By the end of the year, gas prices had basically round-tripped, and the labor markets were strong. So we were going into 2023 with upward momentum and real incomes. Okay, so that's good. That should support consumer spending. Next, despite massive Fed hikes, like, the Fed was going 75 bips a meeting, by the end of the year, what was going on with homebuilding stocks? They were actually turning around, right? Homebuilder sentiment was getting better, right? Builders were in a much better balance sheet position. They were able to buy their buyers down in terms of mortgage rate buydowns, right? So...

• 29:03Barry Ritholtz?

  And massive shortage of single-family homes.

• 29:05Speaker 05

  Exactly. So housing was doing well despite hikes. You had governments spending a lot of money. Like, state and local governments were flush with cash, right? They got all this COVID money. So you had government spending. And then everyone was primed for recession, right? I mean, it's like this expectations, you know, element of it. If, you know, one of the ways I think recession happens is through surprise. If people think, you know, things are going to be okay and then they're not, then that prompts a clearing out of inventories and investment and so forth. And then, but if the opposite's true, then that'll happen, right? So if everyone is primed for recession and it doesn't happen, then there's going to be a period where you have to kind of gear up and invest in inventories and hiring and so forth.

• 29:50Speaker 05

  And so, based on those four factors, to me, it was like by the end of 2022, it's like, yeah, we're not going to have a recession. Real incomes are growing too rapidly in order for that to happen and the housing market's doing well. Like, if you can get that right, if housing is working in the US and labor markets and real incomes are growing, you're not getting a recession. So, you know, and so to me, it was like a really easy market call because a lot of the weakness in the market was just predicated on recession risk. And so, like this, the more obvious it became that that wasn't the case, it was, you know, to me, it was very clear that, you know, that equities were a strong buy.

• 30:28Barry Ritholtz?

  So, so you've talked a little bit about the street predicting four to six rate cuts this year. They've been predicting that pretty much since 2022 and have consistently been way too dovish. What do you think the street has been missing over the past, you know, two or three years?

• 30:48Speaker 00

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• 31:20Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 32:02Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 32:44Speaker 05

  Well, I mean, I think the the main story over the last two years, and you know, I'm a little bit more cautious now, but I do think the main story over the last couple of years has just been how resilient the US economy is. And, you know, that's basically been the main story is that we've had very, very strong income growth. You know, we've had, obviously, a lot of state and local government spending, a lot of federal spending. But the main story, I think, has been, you know, very strong growth in real incomes, which has been supporting household consumption. And if you get the consumer right in the US, pretty much everything else will fall into place.

• 33:21Barry Ritholtz?

  So when we look out at the world today, we've seen a lot of volatility and in policy, I hate the word uncertainty, but At least a lack of clarity, which seems to be affecting people's long-term travel plans, corporate capex plans. How significant is all of the back and forth on various policy issues out of the White House impacting your analysis?

• 33:50Speaker 05

  Well, I do think that when uncertainty is high, it just makes sense to kind of double down and look at the data as it's coming in, right? I mean, you shouldn't try to make a big sweeping forecast if the uncertainty is high, but you should kind of think about what's, like, just look at what's happening in front of you. And that's kind of what I've been trying to do. And, you know, when I look at what's happening right now, I mean, I don't get a lot of optimism. I mean, you have, it looks like the labor markets are continuing to cool off.

• 34:23Barry Ritholtz?

  Still positive, but certainly at much lower levels than we saw two, three years ago.

• 34:28Speaker 05

  Well, I mean, I think, to me, momentum matters, right? We talk about better or worse, right? And the labor markets are clearly getting worse. And, you know, is it, is it nonlinear? No, it's not. But, you know, one of the points that I've been making this year is that all recessions begin with a slowdown. Not all slowdowns end in recession, but we know that all recessions start with a slowdown. And it's pretty clear that the labor markets are slowing down. You have a very narrow kind of breadth of industries adding jobs. A lot of it is in kind of acyclical industries like education and health, so sort of the cyclical areas of the labor market are slowing down. You're seeing weakness in like white collar professional services. Recruiting intensity is low.

• 35:11Speaker 05

  So the labor markets, I think, are, to me, that's been my big, my big theme for this year, is that it's far more concerning than, than the consensus seems to appreciate. And I think also for the Fed. I mean, they keep talking about how the labor market is solid and... And what they're, I mean, to me, that's basically a very like surface level analysis. Like they're looking at, okay, the unemployment rate is 4.1% and therefore the labor markets are solid. But I think you can make a very strong case that the that the unemployment rate of 4.1% is really overstating the degree of health in the in the job market, right? Like when the unemployment rate is 4.1%, you typically don't see like the hiring rate

• 35:53Speaker 05

  as low as it is. You don't see the quits rate as low as it is. You don't see consumer confidence in the job market as bad as it is. You don't see, you know, even wage growth is slowing down, right?

• 36:04Barry Ritholtz?

  But it's still, it's slowing down from a pretty high level. Where, what is wage growth now? About 4%? Is that about right?

• 36:10Speaker 05

  Well, it's actually slowing a bit more than that. I mean, it's, it's running, if you look at over the last three months or so, it's around, you know, 3, 3.5%.

• 36:16Barry Ritholtz?

  Uh huh.

• 36:19Speaker 05

  But if, if that, but again, like if the labor markets were tight or tightening, then you wouldn't expect to see wage growth continuing to slow down. And you have ongoing increases in like the number of discouraged workers, right? You have a lot of people exiting the workforce, they're going straight from unemployment to out of the labor force. I mean, these are not things that happen in a healthy or solid job market.

• 36:43Barry Ritholtz?

  How much of this is driven by the past five wacky years, including the pandemic and a giant decrease in, in people working, the recovery and people returning, plus the entire fiscal stimulus making its way through the system? It's not like 2025 is just one in a series of normal years. It's one in a series of very unusual situations, including, what, 525 basis points of Fed hikes in 18 months or so? So how do you contextualize this slowdown as the pig works his way through the python?

• 37:23Speaker 05

  I mean, so this is sort of the argument that like the whole thing was just one giant like bullwhip and we've kind of, you know, now we're just, we're still normalizing from all of it. You know, I think to me it's, that's possible, but it's just again, like the sectors that are slowing down are not the ones you want to see slow down, right? I mean, you know, you're at a point now where it looks like housing market conditions are continuing to deteriorate, right? Like prices are slowing, they're slowing in the, in the markets where builders make homes. That's going to probably lead to job losses in the construction industry.

• 38:00Barry Ritholtz?

  They're not getting any help from the Fed in terms of rates, at least no time soon.

• 38:04Speaker 05

  Well, no, right. I mean, to the extent that the housing market is working, it's basically because sellers are capitulating, right? I mean, they're, they're listing homes for market, they're willing to take price concessions, that's pushing up transaction volumes to some extent, right? So that's, that's, that's been okay. I mean, you see, you have a little bit more elasticity coming into the housing market. You know, but the fact that the labor markets are cooling down, what does that mean? Primarily, that's going to weigh on consumer spending. And, and that, and that kind of sets in motion like a below trend growth outlook.

• 38:38Barry Ritholtz?

  So, so let me ask you what I think is one of the most perplexing issues. Consumer spending, pretty close to record highs right now, and at the same time, consumer sentiment, pretty much still in the dumper, off the lows, but still historically low. How do we reconcile the robust spending with the terrible sentiment? Are one of those indicators, one of those measures broken?

• 39:04Speaker 05

  Well, I don't know that. So, this is like the vibe session kind of story. And I definitely...

• 39:12Barry Ritholtz?

  Are you a vibe session person or no?

• 39:15Speaker 05

  No, I mean, I think consumer sentiment, to me, what's really interesting about what's happened with consumer sentiment is how the link between consumer sentiment and labor market views basically completely detached following 2021, 2022, right? I mean, once inflation started going. So, for most of my career...

• 39:40Speaker 05

  If you basically got like the labor market view right, you pay, you more or less would get the consumer sentiment number right, you know what I mean?

• 39:47Barry Ritholtz?

  But no more.

• 39:48Speaker 05

  No more, right, I mean, so it's just, it's one of these things where when you ask someone like, how do you rate the economy? It'll be like something like, it would be a very low number. How do you rate the labor market? It'll be a very strong number. That's very perplexing, but it's just, it just, it demonstrates that people don't look at the economy solely through the prism of the job market.

• 40:09Barry Ritholtz?

  What, what else is kind of fascinating is if you ask people, how do you rate the economy? And they're like, meh, how do you rate your personal economy? Oh, I'm doing fine. It's like, how do you think of Congress? Oh, Congress is terrible. What about your congressman? Oh, he's great.

• 40:23Speaker 05

  Totally.

• 40:24Barry Ritholtz?

  So, so all of this brings me back to the question, is sentiment broken? When we look at the Michigan consumer sentiment, worse than the pandemic, worse than the GFC, worse than nine 11 and the dot com implosion, worse than the 87 crash, it kind of makes me stop and think, are all of us missing how terrible things are? Or is just this methodology of asking people in 2025 what they think just doesn't work anymore?

• 40:54Speaker 05

  Well, the methodology for the U-Mich number in particular did change. I think they moved online, but I, so I just, to me, it's like, consumer sentiment is basically a function of what stocks are doing, what inflation's doing, and what jobs are doing. And if you think about it that way, the drop in consumer sentiment made a lot of sense because inflation went really through the roof, right? And so that's why sentiment went down. Since then, you've seen some stability in inflation and, you know, now that the stock market's back to all time highs, essentially, you've seen some recovery in consumer sentiment, not surprisingly.

• 41:35Speaker 05

  But what I'm, what I've been focusing on, it's, you know, there's this big debate about, you know, how useful survey measures of economic data are, like consumer sentiment, ISM, versus like hard economic data. Like manufacturing production, jobs growth. So to me, I think the bigger question for people in my field is like, how much do you want to weigh survey measures of economic data in your process? And to me, there is still useful information in these surveys, right? Like, so when you, when you look at the Conference Board data, for example, it's another consumer confidence number. If you look at like the labor differential, so what are consumers telling you about how, how plentiful jobs are? How are jobs hard to get or are they plentiful?

• 42:19Speaker 05

  That number still does a reasonably good job telling you or informing you about like tightness in the job market, right? So if, if, I mean, and if consumers are telling you that things are a little bit more slack, you should probably believe them. So to me, it's about looking at which pieces of survey data are important and which ones aren't, even in, you know, regional manufacturing data, right? You, you get asked, they, they ask the purchasing managers about their capex intentions. Again, it's another indicator. It does a reasonably good job, like mirroring the broad ups and downs in business investment, like core durable goods. So.

• 42:57Barry Ritholtz?

  I think the purchasing manager seems to be, that survey seems to be a little less out of sync with spending than consumer sentiment is with either labor or consumer spending. Fair statement?

• 43:11Speaker 05

  Yeah, I mean, the consumer sentiment number doesn't look like consumer spending. I mean, and that, but that's, that, that is true. That is true. There are elements within the consumer sentiment stuff that kind of makes sense, but, you know, broadly speaking, you're right. Consumer sentiment is dramatically understating how much consumers have been spending. That's true.

• 43:33Barry Ritholtz?

  So, so we're talking about all these different US data series. How do you incorporate global macro trends and global economic data into your models?

• 43:44Speaker 05

  I'm gonna be honest with you, I don't spend a lot of time focusing on the rest of the world.

• 43:49Barry Ritholtz?

  Really?

• 43:50Speaker 05

  That's probably to my own detriment.

• 43:54Barry Ritholtz?

  Especially these days with Europe outperforming the US and emerging markets doing well after underperforming the US for 15 years.

• 44:01Speaker 05

  Yeah, I mean, what's interesting is that you look at, you know, it's, right, I mean, that has been notable, like the outperformance of the euro. You don't really see much outperformance in growth dynamics, so it kind of tells you like, you know, like sentiment in these, towards Europe has been so depressed, so like, there's been like some incremental improvement, some incremental narrowing in growth differentials, and everyone's thinking that like Europe is off to the races. But I don't really see that in the data that we look at. I mean, if you look at purchasing managers' surveys, for example, in Germany, I mean, they're still well below, I mean, they're still below 50. I mean, German manufacturing, French manufacturing have been in the kind of dumps for a while now.

• 44:39Barry Ritholtz?

  And Germany is in the middle of economic contraction, right?

• 44:43Speaker 05

  Yeah, I mean, it's, you know, there's been a lot of, it seems like a lot of like hopium based on like defense spending and fiscal reflation and so forth.

• 44:53Barry Ritholtz?

  Really, really interesting. Let's talk a little bit about the possibility of a recession in '25 or '26. What do you think is the most significant macroeconomic risk facing the United States right now?

• 45:11Speaker 05

  Well, I mean, obviously, the one that's getting the most attention is erratic trade policy. But I don't think that by itself is what's going to cause a recession. I think it's primarily like monetary policy is too tight. You have, essentially, you have nominal GDP slowing, and the Fed funds rate is not doing anything. It's basically flat at 4.5%. So to me, that represents a passive tightening of monetary policy, and that'll continue to build pressure on the economy, particularly on the labor market. So, you know, kind of go down the list, right?

• 45:49Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters,

• 46:33Speaker 01

  advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

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• 48:04Speaker 05

  I think that their left tail risk of the distribution has gone, has gone up. You know, number one, I mean, labor markets are cooling and income growth is slowing. That's probably going to weigh on consumer spending. That was true even before tariffs came into force.

• 48:23Speaker 05

  If you look at housing,

• 48:26Speaker 05

  residential investment is probably slowing because home prices are now declining,

• 48:33Speaker 05

  particularly in the places where the builders are making the homes, right? Which is like the South, Florida, Texas, Arizona. That's weighing on construction activity.

• 48:44Speaker 05

  If you look at

• 48:47Speaker 05

  business investment, it's probably welcome that they just passed this tax law. And that gives some certainty around the tax outlook, but at the same time,

• 48:59Speaker 05

  you know, some of that effect is going to be blunted by by what's going on with trade. So you haven't really seen much in terms of,

• 49:08Speaker 05

  yeah, outside of AI, business investment's been quite sluggish.

• 49:12Barry Ritholtz?

  So it sounds like-

• 49:13Speaker 05

  And then you have state and local governments cutting back, right? So it's just sort of, it's a very unstable kind of equilibrium, in my opinion. And

• 49:25Speaker 05

  I do think that, you know, if as consumer spending is slowing, that creates risks for the US economy.

• 49:32Barry Ritholtz?

  So is your base case that a recession in second half of 2025 or sometime in 26, likely, probable, possible?

• 49:42Speaker 05

  Yeah, I have it on the board. I mean, I definitely think that a recession is more likely than not. And specifically, I think you'll see a period of, you know, a quarter or two where you get a series of negative employment reports. And

• 50:00Speaker 05

  and I think that'll push up the unemployment rate and probably bring in the Fed to cut more aggressively.

• 50:05Barry Ritholtz?

  So unemployment rate ticks up to four and a half, 5%? Where do you see this going, five and a quarter?

• 50:11Speaker 05

  I don't know it goes up that high, but I can easily see it getting at close to 5% at some point over the next 12 months.

• 50:16Barry Ritholtz?

  And that forces the Fed to... So, so let's talk about the Fed for a second. You know, once the first CARES Act, which was, what, $2 trillion, 10% of GDP, the biggest fiscal stimulus since World War II, once that was passed, it seemed like the Fed was increasingly behind the curve. We saw inflation start to tick up in 20, but really take off in 21. And they kind of sat on their hands until, when did the cycle start? March or April of 2022.

• 50:50Speaker 05

  That's right.

• 50:50Barry Ritholtz?

  And by then, by June, it was inflation peaked and started heading down. And so it seems like they were late to recognize inflation. They were late to tighten. Now it seems like they're late to start cutting, at least in your assessment. Is the Fed just a big, slow, ponderous institution? And they're always going to be behind the curve?

• 51:13Speaker 05

  You sound like Trump, too late.

• 51:14Barry Ritholtz?

  Um. By the way, you're the first person ever to accuse me of that.

• 51:18Speaker 05

  Yeah.

• 51:18Barry Ritholtz?

  Uh, but to be fair, it, uh, hold aside the, the beef between Trump and Powell. For my entire professional career in finance, it has felt like the Fed is always late to the party.

• 51:34Speaker 05

  Yeah, I mean, I think, um.

• 51:37Barry Ritholtz?

  They're just conservative and slow and they would rather be late than mistaken, I think is a fair way to describe it.

• 51:44Speaker 05

  You know, there are times when they're, um.

• 51:48Speaker 05

  I mean, even by Powell's own admission, like last year, he said that, uh, when they went 50 in September, that even that was a little bit late. Um, so, yeah, I mean, they're, you know, it's a consensus building institution. You have to kind of corral, uh, your, uh, your colleagues to your view. And so that, that to me might be one reason why, uh, it's a little bit slow. Um, but as I say, I mean, um.

• 52:14Barry Ritholtz?

  So we, we've talked a little bit about, um, or you, you brought up how, um, much uncertainty there seems to be around the tariff policy, especially on again, off again. Um, what are the risks from the tariff policy? Could this be a factor in the recession? What other knock on effects do you see from, from this new policy?

• 52:38Speaker 05

  Well, I think the main effect is that it freezes business investment in place, right? I mean, that to me is the big story.

• 52:43Barry Ritholtz?

  Nobody wants to commit hundreds of millions or billions of dollars till they know what the policy is.

• 52:47Speaker 05

  What trading relationships will be with all these other countries? Sometimes you're announcing tariffs with countries we may already have trading, uh, agreements with.

• 52:54Barry Ritholtz?

  South Korea, we have 2012.

• 52:56Speaker 05

  Korea, Korea is a good example.

• 52:58Barry Ritholtz?

  Sort of bizarre. We don't, we have a.

• 53:00Speaker 05

  So, yeah, I mean, and, you know, look, like this, this to me is like, it's the return of like the Trump collar strategy, right? I mean, one of the things that we thought, uh, very early on was that, um. You know, essentially, he's going to be testing the market, right? I mean, if the market gets, you know, it's sort of bounded in a way, right? A strong stock market, maybe he pushes the trade dial up a little bit. Then if the market sells off, maybe he'll back off, right? So it's sort of, he's trying to find an equilibrium for himself that he's comfortable with. And, you know, that to me, for businesses, right? Like, to me, it's as simple as, part of his shtick is chaos.

• 53:45Barry Ritholtz?

  Mm-hmm.

• 53:47Speaker 05

  And the business community doesn't like uncertainty. So that's a fundamental tension. But I think, so that's going to weigh on investment spending. But I think in the background, you still have this kind of slow bleeding in the job market. You have this ongoing cooling in consumer spending. You have this slow sort of bleeding out in the housing market, where that's weighing on construction. So, and you have, you know, state and local governments cutting back. So you just don't have as many drivers for growth. And ultimately, that becomes a problem.

• 54:19Barry Ritholtz?

  So what is going to finally push the Fed into beginning cutting rates? What do you think is the most important data series they're looking at? I really don't imagine anyone cares whether inflation is two or two and a quarter. But if we see, as you mentioned, a negative non-farm payrolls print, that has to get their attention, doesn't it?

• 54:42Speaker 05

  Yeah, I would think so.

• 54:43Barry Ritholtz?

  What else might get their attention and start a new rate-cutting cycle?

• 54:47Speaker 05

  To me, the most important thing is seeing what happens with, you know, essentially, labor market slack, right? I mean, if, if wage growth continues to slow down,

• 54:57Barry Ritholtz?

  Mm-hmm.

• 54:58Speaker 05

  Then the ability for households to essentially absorb tariffs is nonexistent, which makes it very difficult to see where you get inflation from. So right now, they've been kind of making this point that the labor markets are not a source of inflationary pressure. If you get further slack in the labor market at this point, like, at that point, maybe the labor markets become a source of disinflationary pressure. And so I think that's something they have to keep an eye on.

• 55:25Barry Ritholtz?

  What else might capture the Fed's attention and say, hey, we're really behind the curve? How, what, what do you look at in the housing market? Is it just new home starts or?

• 55:37Speaker 05

  Well, prices are slowing, right? I mean, that to me, so it's.

• 55:40Barry Ritholtz?

  But they're still, they're not negative and especially in the coasts, in, in the big cities and in, in.

• 55:47Speaker 05

  Well, prices aren't negative in the Northeast, but if you look at like California, like inland California.

• 55:50Barry Ritholtz?

  Florida also.

• 55:51Speaker 05

  Prices are down. They're, they're contracting outright in places like Texas, Florida, inland California, Arizona.

• 55:58Barry Ritholtz?

  But they've experienced giant booms over the past five years.

• 56:01Speaker 05

  They have, but at the same, I mean, I would just, that, that's true. But to me, again, it's about what's happening at the margin, at the margin, prices are contracting.

• 56:09Barry Ritholtz?

  And that matters.

• 56:09Speaker 05

  And that matters and inventories are rising and.

• 56:15Speaker 05

  You know, to me, that's the main asset on the most households' balance sheet. And if you look at home prices, I mean, there is an important link between home prices and actual price inflation, right? I mean, you can just look at the data, you know, the, the, the cities across the country that are experiencing the most home price deflation are also the places where you don't see much consumer price inflation. So I think that's notable.

• 56:37Barry Ritholtz?

  So in one of your more recent research pieces, you talked about the importance of the US dollar. Why is this such a huge factor on a macro level? What are we down 10% year to date in the dollar? How, how significant is the dollar to the rest of the economy?

• 56:57Barry Ritholtz?

  And let me know if I'm, if I get, if I'm talking, if you didn't say that. I have so much stuff in my head, I can't keep it all straight.

• 57:05Speaker 05

  Well, I mean, the dollar is important. You know, typically when you have a weaker dollar, right? I mean, you should assume that you get some upward pressure on core inflation. I think what's notable, what's happened with the dollar is that it kind of went the other way in terms of what people thought, right? Remember the, the big line, the line was that, you know, we're going to put these tariffs on. A lot of the shock is going to be neutralized because the dollar is going to get stronger. Didn't actually happen. Yeah, well, I mean, it did for a day, mainly against EM, but most of the weakness in the dollar actually was against G10 FX, so. But at any rate. Yeah, I mean.

• 57:47Barry Ritholtz?

  So what's the significance of the dollar to the economic cycle to things like foreigners buying US homes is a big driver in a lot of cities. How significant is the dollar to either recession call, inflation, or real estate?

• 58:04Speaker 05

  Well, so I mean, I think it depends how, I mean, so it's interesting how you're framing this question. I mean, I think in macro, like, everything is correlated, right? So if the dollar, to me, it's really about why the dollar's moving the way it is. So if we were actually, if I, let's say I'm right and we go into recession, I would assume the dollar to be strengthening in that environment, right? Because it's a safety play, right? So if the US economy is weakening, then, you know, people are going to seek out safety and that should push the dollar value up.

• 58:36Barry Ritholtz?

  You mentioned in April that it was potentially a worst-case scenario, and in that month after the big trade policy, tariff policy announcement on April 2nd, we saw bonds weaken, we saw stocks weaken, and we saw the dollar weaken.

• 58:54Speaker 05

  Right, this is the whole sell America trade. But if you go back to that, though, right, Barry? I mean, if you look at the number of times where that combination of things happened, I mean, you could probably count on one hand.

• 59:07Barry Ritholtz?

  Right.

• 59:07Speaker 05

  How many days that happened. So it was like, it was one of these things where the narrative kind of got way out in front of what was actually happening. And now here we sit, a couple of months later, and we're talking about US equities at all-time highs and, you know, so, I mean, I think, you know, maybe part of it is, maybe there's a little bit more enthusiasm around what's going on in Europe, right? I mean, Europe is taking steps to reflate their economy. That's good for the euro. You know, you have at the margin, like, people are a little bit more optimistic about emerging markets. Emerging market currencies have been doing better, so.

• 59:45Speaker 05

  You know, there's this train of thought that like the dollar is purely a function of like the Trump moron risk premium. But that to me, I don't think that goes... That might be some of it, but I don't think that's nearly all of it.

• 1:00:01Barry Ritholtz?

  That is...I've heard taco, I can't say I've heard moron risk premium before. That's a new phrase. Don't send your hate mail to me. Let me throw a curveball question at you before we get to our favorite questions. What do you think investors are not talking about, but perhaps should be? And it could be any topic, assets, geography, policy. What data point is getting overlooked, but is important and people should be paying attention to?

• 1:00:30Speaker 05

  Well, I think what's interesting is this sort of the Trump Apprentice show with the Fed Chair. I think that's becoming, I mean...

• 1:00:37Barry Ritholtz?

  You mean Scott Besant and...

• 1:00:39Speaker 05

  There's a lot of, right, I mean, there's this whole talk about a shadow Fed Chair. What if you get into a situation where by Trump doing what he's doing, do you actually get him naming a chairman in name only?

• 1:00:57Barry Ritholtz?

  Like Kevin Hassett?

• 1:00:58Speaker 05

  Yeah, or, no, but basically, in other words, what I'm saying is, these guys are trying to get this done early, essentially to kind of create a condition for some sort of shadow Fed Chair, right?

• 1:01:09Barry Ritholtz?

  With no authority, no power, no ability to move rates.

• 1:01:12Speaker 05

  Well, that, but also maybe someone that's...but then, if this person ends up becoming the Chair, does he actually become a Chair in name only because Powell is still sticking around? Right? I mean, that to me is what's interesting is...

• 1:01:26Barry Ritholtz?

  When does Powell's term end?

• 1:01:27Speaker 05

  Well, his term as Chair ends next May, but his term as a Governor doesn't end for another two years after that.

• 1:01:32Barry Ritholtz?

  Oh, really?

• 1:01:33Speaker 05

  So that to me is something that, you know, that's a pretty, that's a card he can play, right? And the way they go, they're going about this, you know, you talk about, you know, we talk about like Supreme Court justices and like litmus tests when you name, right? Like there's, they have a litmus test for judges. Trump is creating a litmus test, in a way, for Fed, for monetary policy officials, right? He wants someone that's going to cut rates.

• 1:02:00Barry Ritholtz?

  Someone who's not going to be independent.

• 1:02:02Speaker 05

  Exactly. And so... If, so I do think that this desire to have this kind of like big show, like The Apprentice Monetary Policy Edition and this sort of like, you know, shadow Fed chair, you know, trying to kind of undercut Powell before he's done with this term, that could potentially backfire in them because it would just mean that it's possible that if they put in it, if they actually get whoever they want across the finish line, once they're there, they're actually a quite, they're a very weak chair because Powell decides to stick around.

• 1:02:40Barry Ritholtz?

  That's really quite fascinating. I haven't heard anybody talk about that. So that is very much an under the radar answer. So let's, in our last few minutes, let's talk about our five favorite questions we ask all of our guests. Starting with, tell us what you're streaming these days. What are you listening to or watching?

• 1:03:00Speaker 05

  What am I watching? I just finished The Handmaid's Tale.

• 1:03:04Barry Ritholtz?

  Oh, really?

• 1:03:05Speaker 05

  That they had their last.

• 1:03:08Barry Ritholtz?

  Did it hold up through all these seasons?

• 1:03:10Speaker 05

  I thought, I thought the last season was actually pretty good. So I like that. I just watched Netflix, The Poop Cruise. That was pretty fun.

• 1:03:19Barry Ritholtz?

  Oh, really?

• 1:03:19Speaker 05

  Yeah.

• 1:03:19Barry Ritholtz?

  That's people stuck on the boat in the beginning of the pandemic?

• 1:03:22Speaker 05

  Yeah, it was a good, like.

• 1:03:23Barry Ritholtz?

  It's such a horrible title.

• 1:03:24Speaker 05

  It was a quick, it was a quick documentary, but I, but I kind of enjoyed it. And yeah, those are, those are the two things that are top of mind for me.

• 1:03:33Barry Ritholtz?

  Those are, those are very eclectic, not at all similar. My, my, I walked in on my wife watching The Gilded Age and somehow I got sucked into this and it's really quite fascinating because all the issues that we argue about today, wealth inequality and new money versus old money and economic strata and economic mobility, themes of The Gilded Age 150 years ago. It's amazing that everything's changed and nothing's changed.

• 1:04:05Speaker 05

  Right.

• 1:04:05Barry Ritholtz?

  It's kind of, kind of fascinating. Let's talk about mentors. Who were some of your early mentors who helped shape your career?

• 1:04:13Speaker 05

  You know, it's interesting.

• 1:04:17Speaker 05

  I mean, I think about, I mean, I remember you asked me this question the last time I was on. And I probably said, you know, Ethan Harris.

• 1:04:24Barry Ritholtz?

  Right.

• 1:04:25Speaker 05

  I think I'd put Drew Mattis in that category of mentor. But I'm also at the point now, I feel like, in my career, where the people that I idolized early on are now actually like my rivals, right? They're my competitors in some respects, right? I mean, you talk about Rosie, I mean, he and I are both in the research business, you know? I mean, so it's sort of, it's interesting.

• 1:04:45Barry Ritholtz?

  If you're bearish the same year he's bearish, or at least the same quarter,

• 1:04:53Barry Ritholtz?

  that's an unusual alignment, because for as long as I've been-

• 1:04:55Speaker 05

  That might be true right now.

• 1:04:56Barry Ritholtz?

  Because for 15 years, you've been fairly-

• 1:05:00Speaker 05

  Bullish, yeah.

• 1:05:00Barry Ritholtz?

  Fairly constructive, and you can't say the same of Rosie. This could be the first time, second half 2025.

• 1:05:07Speaker 05

  We're aligned.

• 1:05:08Barry Ritholtz?

  Right, but, but, you know, that just means you've shifted, because he's been sort of-

• 1:05:12Speaker 05

  But, so now it's more about, like, not so much mentors, but like, who am I, who am I talking to to kind of help me work through my process as like an analyst? And, yeah, I mean, some names that come to mind, like Connor Sen, your Bloomberg, Bloomberg Opinion colleague. I like talking to him about, about the economic outlook. We sort of think about and come at, come at things the same way. Luke Kawa is another one.

• 1:05:39Speaker 05

  I like, so these are sort of like, you know, I guess you could call them like geriatric millennials like myself, like we sort of-

• 1:05:48Barry Ritholtz?

  Geriatric millennials, again, another phrase I've never heard before.

• 1:05:52Speaker 05

  Scanda Amarnath is another one. I mean, he's sort of in like more of like the public policy space, but, I mean, I'm kind of glad he doesn't do it, but he'd make a great business economist himself.

• 1:06:05Speaker 05

  But, I mean, these are people that I just like talk to to kind of stress test my own views. And I think that's, at this point in my career, like, that's what I need more than, than mentors, is sort of smart people that will help me, you know, kind of think through an outlook and stress test.

• 1:06:20Barry Ritholtz?

  Sharpen your focus.

• 1:06:21Speaker 05

  Yeah, or, or just like, where, where are you wrong? Like, what are you, what are you missing?

• 1:06:27Barry Ritholtz?

  That's interesting.

• 1:06:28Speaker 05

  So, so that, that's sort of how I think about it now.

• 1:06:31Barry Ritholtz?

  Let's, let's talk about books. What are some of your favorites? What are you reading currently?

• 1:06:36Speaker 05

  You know, I don't read books. I'm not a book reader.

• 1:06:38Barry Ritholtz?

  We talked about this last time.

• 1:06:40Speaker 05

  We did. I'm an, I, I read the news.

• 1:06:42Barry Ritholtz?

  Right.

• 1:06:43Speaker 05

  I read, I can tell you who are the people that I like reading.

• 1:06:49Speaker 05

  You know, in, in journalism.

• 1:06:51Barry Ritholtz?

  Give us some names.

• 1:06:52Speaker 05

  Like Nick Timmeros, Wall Street Journal.

• 1:06:53Barry Ritholtz?

  Sure.

• 1:06:54Speaker 05

  Love reading his stuff.

• 1:06:55Barry Ritholtz?

  The Fed whisperer these days, too.

• 1:06:57Speaker 05

  Well, I mean, it's not just that, but he has like a very like, you know, I mean, he's a, he, he thinks about things very thoughtfully, too. And he, and he, you know, he does a little data watching himself, so I, I kinda like, um, reading what he has to say.

• 1:07:11Speaker 05

  Jonathan Levin, Bloomberg Opinion. So, you know, tho- those are the, your colleague Josh Brown, I read his stuff. So.

• 1:07:21Barry Ritholtz?

  He's a very thoughtful writer.

• 1:07:22Speaker 05

  Yeah. So I, to me, it's really, um, it's really, I, I, you know, I, I don't have time to read books because I'm too busy like, reading, um, you know, rea- reading the news, reading opinion pieces. The most interesting Fed paper that I came across recently is just, um, you know, we talked a little bit about Ed Lemer before, but the Fed recently published a paper just looking at the housing channel of, of consumer spending, right? Like, so they were basically making a fairly obvious point that if housing transactions or new home sales are down, like, that's gonna have effects on housing-related consumer spending, and that's something that we should be thinking about.

• 1:07:58Barry Ritholtz?

  Durable goods, uh, straight across the board, yeah, absolutely. Housing has always been a big driver of the economy. What's been so shocking about this economy is we've seen home transactions drop significantly just because there's no supply, but the economy has been so resilient. It's really been kinda fascinating watching that happen.

• 1:08:18Speaker 05

  Yeah, I mean, it's interesting, I mean, so again, like, housing is one of the reasons why I'm cautious on the economic outlook. And, um, you know, I think what's different about this time with respect to housing versus, you know, early 2022 is that

• 1:08:31Speaker 05

  Now, units under construction are coming down. You're in a situation where starts are running below completions, which means that units under, I mean, essentially, units under construction will have to keep falling. And, and that's not what you had last time, right? Back then, units under construction were going up. So, so to me, that construction piece of it is different this time versus last time.

• 1:09:00Barry Ritholtz?

  Our final two questions. What sort of advice would you give to a recent grad interested in a career in either economics or investing?

• 1:09:10Speaker 05

  I mean, to me, it's just get a foot in the door, you know? Figure out the details later. You know, it's sort of, it never works out the way you think. But you just have to put yourself in a position where you have the best chance of succeeding. And, and that, to me, is the most, is the best advice I can give someone. So, in my case, that manifested itself in get your foot in the door at a bulge bracket firm.

• 1:09:32Barry Ritholtz?

  And you literally were working in HR before you moved into.

• 1:09:36Speaker 05

  A hundred percent, yeah. It doesn't like, to me, it's about, again, it's about putting in yourself in a position where you can succeed. And, and I think that that's definitely true. I mean, for me, it's a number of ways that happened, right? I went to NYU. I went to NYU because I knew that if I stayed in New York, I'd probably have a better chance at things than if I left.

• 1:09:57Speaker 05

  And, and it just, you know, I mean, NYU, you know, it's not like the best school. It's not like Princeton or Harvard.

• 1:10:04Barry Ritholtz?

  It's still a pretty good school.

• 1:10:04Speaker 05

  It's a pretty good school, and it's like.

• 1:10:06Barry Ritholtz?

  The Business Stern is a great business school.

• 1:10:08Speaker 05

  Yeah, and if you're in New York, you're gonna, recruiters are gonna come after you if you went to NYU.

• 1:10:13Barry Ritholtz?

  Right.

• 1:10:13Speaker 05

  Right? It's just that simple.

• 1:10:15Barry Ritholtz?

  You just need the hundred K a year.

• 1:10:17Speaker 05

  Well, yeah. I mean, it wasn't that much when I was going. But, but my, my advice would just be you have to put yourself in a position to succeed and just let the chips fall, fall where they may. I mean, that, that to me is, you know, and if that means taking a job that may be not the best job, but it's at a firm that you have a lot of, you know, respect for, or it's a good firm, good brand name, take it.

• 1:10:39Barry Ritholtz?

  Our final question. What do you know about the world of investing today you wish you knew 20, 25 years ago when you were first starting out?

• 1:10:49Speaker 05

  Ah, that's a tough one. I mean, I think, um, my favorite thing, I mean, to me, what's important is, and just trying to relay this back to my seat, is it's important to understand the time horizon of the person that you're talking to and you're providing analysis for, because a lot of people live in the short run. But if you're sort of a typical investor, you can tune out a lot of the stuff that we're talking about, to be perfectly honest, because, to quote my friend Sam Rowe, "Stocks usually just go up." And so, you know, it's sort of, you see all this analysis that comes out on the street, like, after the ISM goes to 40%, like, to 40, you know, usually the stock market's higher six months later and 12 months later. Well, yeah, obviously, because the stock market-

• 1:11:34Barry Ritholtz?

  But that's a default, Sam. Depending on the decade you're looking at, it's three out of four or four out of five years.

• 1:11:40Speaker 05

  Yeah, so to me, it's sort of, um, yeah, I would tell myself back then, like, don't worry so much about making big market calls, just give people your thought process.

• 1:11:51Barry Ritholtz?

  Mm-hmm. Really, really interesting. Neil, thank you for being so generous with your time. We have been speaking with Neil Dutta, Head of Economic Research at RenMac. If you enjoy this conversation, well, check out any of the 550 we've done over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. And be sure and check out my new book, How Not to Invest: The Bad Ideas, Numbers, and Behavior That Destroys Wealth and How to Avoid Them. How not to invest at your favorite bookseller right now. I would be remiss if I did not thank

• 1:12:32Barry Ritholtz?

  the crack team, who helps me put these conversations together each week. My audio engineer is Peter Nicolino. Anna Luke is my producer. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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