Bloomberg Surveillance: The Fed's Unlikely Inflation Goal

Tiffany Wilding, PIMCO Economist, expects growth to stagnate next year as the Fed's policy drags continue to build . David Bailin, Citi Global Wealth Chief Investment Officer & Global Head Of Investments, says there's opportunity in rising earnings as markets begin to normalize . Randy Kroszner, Univ. of Chicago Professor of Economics & Former Fed Governor, says continued wage growth makes the Fed's inflation goal unlikely . Paul Sankey, Sankey Research Founder & Lead Analyst, says he's concerned that Saudi Arabia may dump the oil market as prices continue to drop . Terry Haines, Pangaea Policy Founder, recaps a fiery Republican presidential debate. Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance Full transcript: This is the Bloomberg Surveillance Podcast. I'm Lisa Abramoids along with Tom Keane and Jonathan Farrow. Join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. Right now, I've been out a few days, but I really want to reset here on the American economy, and there's no one better to do that than Tiffany Wilding, economist at Pimco. Tiffy, I'm going to go beyond the labor reports. We'll circle back to that. What is your real GDP growth for twenty twenty four? Yeah, I mean, so we think that the good news from twenty twenty three, the resilient story, the you know, two and a half percent kind of above trend GDP growth, you know, that's probably squarely behind us. You know, the saying kind of goes you can't go to heaven twice, and we think some of the factors that led to that, you know, we're still some of these excess savings sloshing around from the pandemic and other supports, and you know, and those kinds of things in our and under our estimation are going away next year. And when you when those things go away, what you're left with is still tight monetary policy, you know. And obviously we have a Federal Reserve that is telling us they're going to remain on hold. So those policy drags are continuing to build. So overall, we think growth probably is closer to something, you know, the stagnant. You know, whether it's slightly positive or slightly negative, I think is anyone's guest. But we're kind of a stagnant situation next year. So are you basically saying that we're in heaven and that this is the Goldilocks and that you can't go there again it's over? Yeah, I mean, so we do think there's a lot of good news this year with the US economy. There's a lot of surprising resilience in the growth numbers, of course, you know, and and so we think, you know, the supply picture, as the Federal Reserve has also pointed out, has also helped that, you know. But again, if you looked at twenty twenty four, you have demand which is potentially coming down, you know, but some of the things that added to supply, like supply chain normalizations. You know, we have the labor force participation rate for the prime age folks that are now you know, it's back to pre pandemic levels. You know, we're just not convinced maybe that you're going to get as much on the supply side next year. Now. Of course, immigration has been a story here, and that's why we've also seen you know, the unemployment rate rise because some of those labor market inflows aren't getting absorbed by just a strong labor demand. But again, overall, all of those signals kind of point to us of something that's closer to more stagnant. More stagnant economy. Baked into this is this assumption that you're going to have higher yields for a longer period of time. You said, what we're going to be left with is just tighter financial conditions, and yet it's unclear whether that's going to be the case. There have been a lot of people calling for pretty substantial rate cuts by the Fed, by the ECP in response to inflation coming down significantly. Do you agree with the paradigm or oil prices stay lower than they have and keep inflecting lower because of production, because of supply, you start to see a re engagement of global trade, forget deglobalization, and you start to get more people come into the workforce. It's basically everyone that people use. It's the opposite of the this time is different narrative that we heard this year. Yeah, well, I mean, I'm not exactly sure in terms of labor market inflows. You know, higher participation rates for that prime age cohort, you know, I'm not sure that that's going to continue to increase. I do think there's some potential for immigration flows to stay high in twenty twenty four. That's been a story not only in the US but across the developed markets. Obviously geop elevated, you know, geopolitical risks and conflicts are are contributing to that as well. But overall, you know, I guess what we would say is is that, you know, the Federal Reserve has told us that they are still worried about the last mile problem on inflation. In order to really ensure that inflation's back to target, you know, I think we think, you do, you need to see some more labor market loosening. Marketing's coming back here in equity's, bonds, currencies, commodities, a little bit of adjustment off the claims, and we've come back in a little bit. I call it noodling. As we staggered to tomorrow morning at eight thirty, Tiffany, one of the great responsibilities you have is to stagger down the rows at PIMCO, tripping over the antique Monroe traders and looking at people's Bloomberg screens. And the two minute drill is what is a short space going to do, the Jerome Schneider space, And what's it going to do in terms of the wall of money that's out there that's off your remit? But your remit is what are the economic conditions that make cash finally move? Can you come up with a scenario where cash finally moves? Yeah? Absolutely, I mean I do think it's it's certainly this quote soft landing scenario, right, you know. And I think that the fact that the Federal Reserve as well as other central banks have signaled that they're at the top of their cycle, you know, along with this coinciding shock to term premiums, just made bond market valuations look really attractive and as a result, those higher yields just didn't stay around that long, and you are starting to see cash I think, come off the sidelines, go into the bond market now, you know, I think there's a question around the equity market, you know, riskier assets. I mean, certainly the soft landing will be helpful, but when we look at valuations, you know, for equities, for example, we are more cautious. Equity risk premiums are still within their historical range. They're not pricing in a lot of recession risk in our view, and we don't think were out of the water yet or out of the woods yet. There's still a lot of uncertainty here, and we just don't know that you're paid for it going out the risk spectrum. The quality of a lower GDP reset off of the shock of what happened in two thousand and three, two thousand. Listen, ma, I'm decades away. Lisa helped me here twenty twenty three. To me, what's so important, Tiffany, is the productivity discussion of the last ninety days. Give us the PIMCO brief on the efficiencies of the American economy. Yeah, well, you know, I think if you look more, you know, kind of a more broadly, there was a lot of noise around the productivity statistics during the pandemic because you had unproductive sectors that were effectively shut down then they reopened, and so there was kind of a mixshift, if you will, in terms of economic output that impacted the productivity data. But if you look more broadly, it looks like it's on trend at a low level, you know. And I would say that there is you know, probably good news in terms of the productivity outlook that's embedded in you know, AI and large language models and things like that. But if we look at research that you know, just kind of estimates how long it takes for those types of technologies to puller for it, obviously that time has come down, but it's not twenty twenty four. It's still likely a quote secular horiso three to five year time horizon that you're really seeing the productivity gains from something like that. And the last thing I would just highlight is that, you know, we saw PCs or the internet, you know that it took you know, quite some time for us to actually see productivity gains in the nineties to come from that. So you know, at least from a twenty twenty four perspective. You know, we're not as convinced that you really start to see that in the data. But I think there's you know, room for encouragement on a secular timeframe. Just quickly, Tiffany, you seem to be pushing back against market expectations for rate cuts next year. Do you think that we will get rate cuts by the Fed? Do you think that they'll be in the first half or do you think that they're going to be squarely in the second half and not that many? Yeah, well, I mean, look, I do think it depends. I mean the real side of the economy. You know, it does need to slow in our view, and it needs to slow, and you need to see a little bit more you know, loosening of the labor market, we think, in order for central banks to really feel confident that inflation is more sustainably at their target and you know, looking at you know, I think there's definitely some still resilience in the economy and we could see central banks lag worried about that outcome. You know, Powell has very clearly stated, you know, that he wants to be a vulgar you know, and Nana Burns, and so you know, we think they could be laggy in terms of when they start to cut, you know. But but nevertheless, you know, obviously the market's going to price a balance of risks here, and the inflation data certainly has been good over the last couple of months. Tiffany, thank you so much. Tiffany World. With pimcoll they manage Bill's notes and bonds out of Newport Beach, California. I think David Fann is doing what every other guest is comes on this program over the last ten years, does trying to work out the first question that Tom's going to ask, because no one's got any. I got two. It's a double bear. I hear it from guests all the time. I thought he was going to ask me what devis was. That's where I was leaning over David Baale and CIO and head of investments at City Global Wath with this in just a moment, let's turn to the price section equities on the S and P five hundred shaping up as follows, t K positive by point one yields up five basis points four fifteen fifty two on a US ten yet audible question to Baalen, you worked with John Henry years ago, the owner of the Boston Red Sox. How in God's name is John Henry let one Soto go to the New York Yankees and not the Boston Red Sox. And if you I won't answer that question, but tell me how it is that John Henry, as a trend followers won three World Series when the Yankees have only won one. And that's said very nicely finased, Thank you, very much, very good. Let's go to cash. I mentioned at the Bramo. It's in your review here the mystery here of all this cash and you talk about there's just too much cash out there. What do we do with our cash? Next year? You've laid out actually an incredible introduction to our what we're writing for this next year. We're just called slow then Grow, And the idea is that you are going to see a slowing economy at the beginning of the year. A lot of the concerns at LISTA just talked about, you know, actually could come to bear right, which is the economy slows down, but it does not crash. We do not have a recession, we do not have a v shape recovery. And because we don't have a clear signal to investors. They sit there in cash five point eight trillion dollars worth of cash at this point in overnight funds. It's extraordinary. And yet when you take a look at all the different parts of the economy, right, you take a look at the average stock in the US hasn't done that well. Ten stocks have done incredibly well. Bond market's already started to move, energy is down. You are seeing real signs that inflation is not an issue and that the FED will hit their target of two to two and a half percent by the end of the year. So if that's true, right, what you then need is a boost of earnings, right in order to believe that all of this comes together. And this is where I think the story is being missed by the average investor, is that in the US you're going to see ambient like earnings up by probably five percent this year and then eight percent in twenty twenty five. And that sets us up for a thing where you know, an opportunity where a balanced portfolio. Right, you put your money in bonds, and you put your money in stocks, and you sit there and you're patient, and over the next eighteen months you can get yourself a fifteen or twenty percent total return. Now you're giving me the skeptical look, Lisa, Right, and here here's there's the here's the here's the here's the interesting data point. In nineteen thirty one and in nineteen sixty nine, the last two times we had stock and bond markets down for an entire year, if you looked out just two years later, in each of those periods, you know the A balanced portfolio sixty forty was up more than twenty percent. And while that's not statistically significant, what's interesting is we've already had incredible negativity in the stock market and incredible negativity in the bond market this year. Okay, you point to Tom, but this to me is really a question of can you bet on the grow before we get the slow? Right? Well, the grow is already the grow is the is really the is the coming off of it? Was good? One sec. Did you just make that up? Because that's correct. But that's essentially what we're asking is can you bet on the expansion before we get any kind of slow? I love that. That's awesome. Okay, so we have to answer the question that please stake. So let's let's take a look along real estate, right, which, right, has already been in a recession. We've had manufacturing already been in a recession. We've had parts of the you know, parts of our economy like healthcare, right, negative earnings for the first time in fifteen years this last year, lots of these you know parts of our economy. Forty or fifty percent of our sectors are going to be having very positive earnings relative to twenty twenty three. And then the average stock which has gone virtually nowhere this year, you know, has the opportunity to rise. You know, one of the things we put into our portfolios is the most boring investment we've added, which is sn P equal weight. If ten stocks have done well, you want to own the other four hundred and ninety. So I just think that this is where people have sort of missed it is that we haven't seen the overall market rise yet. And that's what twenty four is going to be about in terms of earning. So the double digit percentage point game that you think we can get next year, that's the equal weight and not the market can't whites it index. That's right, Okay, that's right, And I think that's you know, that's the opportunity, is this rising earnings because you've had you know, large portions of the US economy are coming out of a recession. Now, their inventories are down, they've got to rebuild, they're not hiring. Wage cross are coming down. You know. It's it's not about a landing. That's the other things everyone's LP does. This is the hard landing something forget about it. We're now in the situation where we're now beginning a normalization of markets to back to you know, sort of where they were like four years ago, pre pandemic conditions, and we're going to be coming out of this in a grow mode. A bank structured well for that moment, a bank structure or our client structure now a bank structured as in the equities, the bank equities that have struggled so much this year off the back of high yeas. I mean, I definitely believe that the normalization of the yield curve is going to definitely change valuations for banks as a segment. I think that's more of a twelve to eighteen months trade than it is a long term, you know, long term opportunity. I do think that banks are very undervalued at these At this point, I guess I'm trying to understand this perfect scenario and how much oil plays into it as well, given the fact that that has been one of the reasons we've seen this disinflation narrative get some legs. How much is that factor in that we're going to keep seeing suppressed valuations? Right, So, I don't think we expected oil to move down as quickly as it has, and I definitely think it's supply. Like you said earlier, earlier in the program, what we I think discounted as the fact that globalization is still a major disinflationary force. Import costs of goods coming into the US, both finished and unfinished goods are negative three point seven percent relative to last year. They are adding to the disinflation story. So between energy and import costs, you have this situation where you just don't have inflation on goods, and that of course translates into a better economic scenario. It seems like you're having trouble believing that this is actually that you could have a really good backdrop for markets. Now, what I find fascinating is just how much the narrative has gotten it wrong. Everyone's talking about deglobalization, how that would lead to inflation. Oil prices would be higher because their production just wasn't capable of meeting demand. As all of the transition happens, and all of a sudden, workers are going to cost more to do the jobs that need to get done. And what we're seeing is all of the exact opposite. Isn't that sort of remarkable? Is remarkable? Hiring for the last years has been surprising. We've hired more people with slower gd GDP growth in the US than in history, and now that's coming the other side. And you know, the Saudi's and Opek wanted to keep oil prices higher, right, but they were unable to do so. They were originally willing to cut back production. So there's a lot of things where people, you know, think they can control market. And just to add one more thing, expectations in China and Europe are so low that they can't help but contribute, I think, to the growth story. Sometimes in twenty twenty thirty four, this was great. You should get a podcast. You do that all the time here podcasts. Yeah, we can do another one. Why not? What should we cod it? Help and glue something like that. We just call it sloth and grow or what was the other oh forget okay, but it was good. It was like drive, It's awesome. That's his work time for that. That was the whole thing. I mean, that's the bet that we have going on. That's great, David, Thank you and thanks for sharing you around with us as well. My great pleasure. Depending then, a city glob of waff looking ahead to next year, is the FED put back? There's no better way to answer that question than speaking with a former FED governor, Randy Krasner, professor of economics at the University of Chicago Booth School in Chicago, joining us. Now, Randy, do you believe in this idea that the FED will cut rates aggressively next year simply in response to disinflation, even if it is not accompanied by weakness. So, if they've reached their goal of bringing inflation down to their two percent target, they'll be happy to bring rates down. But I don't think they're going to get to their target anytime soon. I look, Governor Crasner, and I know you had a recent meeting where the Booth School graduate John Stadzinsky, in all of his work now at PIMCO as well, but what the John Stadinski world is about a global sense of we're all in this together. That's been the hallmark of his work for years. How linked now our central banks to develop a constructive disinflationary trend. I think that's right. I think you saw that once the FED took off raising rates fairly aggressively, that the major central banks in the world did the same, so that they kind of played from the same playbook because they were experiencing inflation in a similar way, which suggested that at least part of the inflation wasn't just due to what central banks were doing, but was also doing to some of these broader global supply chain factors. And we've seen inflation come down, we've seen them move down together. But the FED is is really the big player, and so it tends to be that other central banks will follow what the FED is doing. But of course there's some discussion across the central banks, but the Fed's got to do what it's got to do for the US economy if we are the big player. And I guess this is off the job report tomorrow on the American exceptionalism of strong nominal GDP better than good fiscal stimulus. You know, we all know the story, But the answer is we're dealing with the technological excellence. Does the FED pull that into their debate? That's one of the debates about productivity, and because if you have high productivity growth, it's perfectly fine to have high wage growth and not have inflation. But if you have low productivity growth, you can't sustain high wage growth without there being inflation because the costs are going up relative to the outputs. And so that's one of the debates. Are we going to see productivity continue to be strong as we have over the lastree quarters? Is that the main reason? Ready, you don't think we're going to get to the Fed's target. Oh, it's I think their whole variety of reasons. I think you've got expectations that never went up very much for inflation, I think to the Fed's credit, so that never really lost credibility as the FED did in the late nineteen seven in these early nineteen eighties, but I think it did lose a little bit and people have kind of gotten used to asking for a little bit more in wages, and they also have to make up for having lost so much in real terms inflation adjusted terms over the last couple of years, so I think there's going to be a catch up in wages. I think nominal wage growth is going to be above the inflation rate as it has been over the last few months, and that means at some point it will be less exciting for firms to be hiring and holding workers. The employment rate will move up, and as you know I've mentioned before, I think we'll probably have a hard ish landing. Not a hard landing, but hard ish. So if you talk about the nodes of inflation that are stick here that are going to be concerning to the FED, that aren't going to allow them to cut as aggressively as some people are currently pricing in Is it particularly the service sector. Is there an area of inflation that you're focused on to sort of signal what you're talking about. I think the FED is going to be laser focused exactly as you said, on services as well as on the key thing that will be driving services inflation, which will be wage growth, particularly wage growth relative to the inflation rate, which until recently, until really maybe four or five months ago, had been wage growth, nominal wage growth was below the inflation rate, and now nominal wage growth has been above the inflation rate. It's great for workers because they're getting increase in real wages, but that means that firms are going to be a little more reluctant to to higher Randy, our lower prices. If oil inflationary or disinflationary, well it certainly for headline inflation it's lower. It helps to lower the headline inflation rate. But as we know, the oil prices have gone down, gone up, down, down, and so the FED kind of looks through that, and that's one of the reasons why they look at the core numbers that strip out the more volable food and energy sectors. Randy, you're one of our giants in financial economics. Where we are right now? Is it out of the textbooks you learned from or post pandemic? Is this all original? Well, I wouldn't say it's all original, but it's at least a little bit unusual. The amount of supply chain disruption we had. Pandemics so far have only come from along once a century, and hopefully it will be another century before we have another one. And we've also seen an unusual resilience, not only the US economy but elsewhere to very significant interest rate increases, and so that's a little bit off of the traditional playbook. Is it a whole new playbook, I'm not so sure yet. Certainly it's pushed the existing playbook to the edges. Professor Krasner, thank you so much, Randall Krasner, the former governor of the Federal Reserve System. Paul sank joins right now foundered lead analyst at Sankie Research with one of the most red notes on the street. Paul, I want to go to the madness of nineteen eighty six. I'll pack absolutely blow it in nineteen eighty six with a price plunge. Can we get a redux on that again? And particularly with the new American production of oil, it's not eighty six now. And by the way, it's a pump jack and leap to think about the joke. That's kind of more realistic. As you use your swimming pool to store oil that you need a can tango. You need can tango for that swimming pool trait. And we're in vanquidation. So eighty six is not the right one, to be honest, Tom. It's that was when opek increased into the Asian financial crisis, and it's quite the opposite here. What we've got here is a twenty fourteen, probably not a twenty twenty, but in both cases that's where Saudi flushed the market essentially because they got frustrated with cutting back and cutting back production to maintain prices, such as twenty fourteen being the really excellent example. What was happening is they were losing market share, particularly to Iran, which was coming back through sanctions, and you had, of course the growth in US production that was squeezing Saudi from the other side. And then in fourteen they essentially couldn't get the rest of OPEC to agree with them. They dumped the market. They flushed the market. We went in a straight line from one hundred and ten in summer to fifty twenty fifteen January, so in six months we went, we've cut in half and then we bottomed again. If you remember in twenty sixteen, I don't think COVID you know the twenty twenty market share wall, which was more extreme. Sadi went to an all time high level of production in twenty twenty, which was in April twenty twenty, which was truly praised in a lot of ways because of course it made for negative oil prices in the US. But here you've clearly got a situation where Saudi has cut production and is facing a very strong demand environment. So it must be extremely and in fact an all time record demand environment. It must be very frustrating for them to be losing market share to Iran and as John mentioned, to an absolutely booming US industry. And I think everyone's turn negative oil, not least because the US has accelerated this year into the second half in terms of production and you know, taking more market share from Saudi. So our concern is that Saudi said they'll push through Q one with cuts, but by the time you get to Q two and if demand isn't strong enough seasonally, you could see Saudi dump the market and try and make everyone honest again. So you know, that's I think that's the analogy. Paula. Just want to be really clear about where we are right now. There's a lot of people trade in equity as a columnists making recession calls. You think this is about supply and not demand right now currently, I don't know how you can get higher demand than all time record demand. Now. Having said that, because we're one hundred and two point five million barrels a day. We're at over one thousand and two hundred barrels a second of demand, so demand site's pretty much good. And China's been pretty good in the second half too, which was always the balancing item in terms of bullishness and oil. And keep in mind, of course, John, that it's seasonally a weak time for oil here, so we're dumping into the traditional post labor day weakness. And we'd actually think, whilst we're worried about the Saudi market share war, we can see a bounce here in oil. Distillate demand here remains very strong. It's cold this morning in Brooklyn, but more importantly it's cold in Europe. And you know, I think we're a bit over sold in oil here. Doesn't change the fact that we think there's a structural problem in the market, which exactly as you say, is too much supply and too much better capacity. Particularly well, but Paul, I want to just develop. You think that were over sold here, and you think that there is a good chance that Saudi Arabia flushes the market, increases, production goes away from some of those cuts, as you said, make everyone honest again. In that case, how low could prices go, well, it's an interesting question because what you're trying to do at that point is shut down US supply growth, and that becomes the knotty debate, that's the analysis, that's the Permian question, because of course what Saudi's trying to flush at this point is going to be excellon Chevron Conicco. You know, it's not your old school emp's with a lot of that kind of collapse at the first side of trouble. And of course all these companies have basically planned at sixty dollars maybe less in terms of what they're doing, and have growth targets that they want to meet. So I think it's going to be a more inelastic supply side for the Saudis to attack. Additionally, in twenty five we're adding eight FPSOs that's a floating production and storage vessel, which are very big in places like Guyana, Senegal, and those are very priced and sensitive as too. That is to say, once you've built your huge production vessel, you don't shut it down. Because I was at fifty So it's a pretty it's a fascinating market. By the way, Tom, going back to eighty six, the whole peak oil question is like what were you talking about the supply side. The supply side has got excess at one hundred and two point five million doles of their demand. It's like what I think, a lot of bit of technology and AI. Actually, seriously, I'm very proud to say I didn't believe in peak oil for one minute. That's maybe one thing I got somewhat right. Paul, we see mister Putin on a junket to Saudi Arabia or Muhammad ben Salman. What's a dynamic there? Does the Saudis tell the Russians what to do? In the Paul Sanke world, I think they ask them for help, for sure. The problem is the Russians lie, right, I mean, whatever they say is like whatever they say, I don't know how much they really do. It's possible that they realize that there's enough of a problem and that they want that relationship with Saudi to be good, that they do get on board. And I think it is very significant obviously the Putin's meeting MBS, because there must be some quid pro quo here. We suspect and we really don't know that. The Saudis have also asked the US to tighten sanctions on particularly Iran, but also Russia obviously, because those have been two other major problems for the Saudis. The US has essentially been allowing a lot of additional oil onto the market into an election year. We think that maybe the Saudis have said, if you tighten sanctions, will make sure the ol price doesn't get too high for elections. But of course then the camp next years to the Saudis really preferred Donald Trump. So you know, I'm not sure about that that speculation, but certainly there's been evidence the US has been tightening somewhat the Iranian and Russian sanctions, which would help Saudi apoor. Didn't they try that going into the midterms last year, tried to tighten sanctions or try to try to get the Saudis to boost output to get THRUD prices lower. Yeah, I think Saudi US relations have improved over the last year, for sure, and I think through the Hamas, you know, a nightmare, we've seen obviously a lot of work from Blincoln to try and get everyone back on the page. And of course it's said in the press that the NBS actually kept blinking waiting for quite a long time at a time when he was insanely busy, which I'm sure he didn't appreciate. So I think they're still sending messages that the original language of this administration, which you'll remember well before the election, when Biden was very negative about oil and very negative about the Saudis. They don't forget that stuff easily. But at the same time, they're very pragmatic people. I think they realize that the US is hugely important to them. We've had subsequently had security agreements between Saudi and the US. So it's really complex, and I think a lot of people are saying a lot of things to a lot of you. There's a lot of multipolar world going on here. I don't know how much they really truly love the Russians as well. I mean, the history of that relationship is nothing like the quality of the history of the US Saudi relationship. Well said Paul, appreciate the explanations this morning. Thank you, sir. You're one of the best pol of Sanki research joining us right now. Terry Haynes and Pangae are really timely discussion here. Staggering to January, Terry Haynes, the zeitgeist out there is OMG a red nation a Republican presidency, a Republican Senate, and a Republican House. Maybe maybe not. Where are we heading? Here? Are we heading to a Republican sweep? I think where we're heading is very much like what you see today, Tom Frankly, Whether or not the president is Democratic or Republican, I'd still give Biden Biden Trump race. I'd still give Biden a little bit of edge. So let's start there. I think what you've got is a Senate that is more likely to be marginally Republican majority and a House that's more likely to be marginally Democratic majority. So it's another version of the same thing. People will spend the next year winding themselves up about this, but the reality in Washington is, unless you have a sweep of all three parties plus a sixty vote majority in the Senate, which nobody's had for decades, not much changes. Do you see a Trump Haley ticket. I was asked at least three times this week about that. Is she running for vice resident? No? I think she's running for president, And you know, I think she's doing reasonably well. As I say, and as you well kindly headlined, six out of ten Republican voters don't want her. You know, even in the Trump numbers in early primary states, one third of those people at least are what pollsters call soft, in other words, willing to entertain other options. Iowa has a history of surprising. She's very much running for president and thinks that if a couple of breaks go her way, she might well get the nomination. And if that's the case, poll show today she do much better than Biden would do. So there's a path there for her, and you know she sees it and she's trying to seize it. Could you develop a little bit more what that path is considering the fact that Trump is still pulling in about sixty percent of Republican voters and she currently is it at fifteen percent. Well, the path is this. Firstly, throw out the national number. At no point in the presidential race is a national beauty contest number ever relevant. It's all about getting a nomination. It's all about primary states. You get down to the primary states, Iowa, New Hampshire. Now Trump's at about forty five to forty to forty five depending on the polls. So what you have is you've got fifty five to sixty percent that already don't want Trump. A third of those, as I say, or at least willing to entertain an alternative. So it doesn't take much to see the quick consolidation and the race that's already happened, combined with some Trump underperformance. Say, you know a lot of those people decide, you know, gee, cry what I heard from Christie's right, you know Trump's not really going to be able to govern or anything else, and make a break all of a sudden. What you've got in the in the first race or two is you've got a real race where Trump looks like he's underperforming and the not Trump field is coalescing' that's the race, Hayley sees. My only point is there's a much bigger chance of that than most people are willing to entertained, because I think, frankly they're blinded by the national number. In the meantime, terry, there's this question around the ability to govern before that, especially heading into the new year, given the fact that Kevin McCarthy is going to be stepping down the former House speaker who is going to leave at the end of this year, how much more likely, given the thin majorities, how much more luck likely does that make some sort of government shutdown. Well, you know, I think marginally, I think there's a likelihood that what you see either in January or February from House Republicans is some sort of a shutdown. You know, a lot of this vast majority of this course is performative. They're wrangling over thirty percent one percent cuts in thirty percent of the budget, so it's not as if they're taking an act to anything. But you know, what they'd like is some backtracking and spending. You've heard that from the presidential candidates last night, where you know, Hayley frankly proposed something Gill return to pre COVID levels. Then even House Republicans are doing so, you know they want to not in that direction, but you know there's not a lot of meeting that opens on the spending thing. Terry. The middle of July next year, the Yankees are going to be playing seven hundred baseball with Aaron Judge in one Soto. I mean, it's a no brainer right there. There's going to be a confab in Milwaukee to the convention in Milwaukee and frankly the Democratic equivalent. Are these going to be normal conventions? If Biden is the nominee. It's going to be a fairly normal convention. If Trump is the nominee. In the Republican Party, I'd predict kind of mass affections and even a temporary split in the party as a lot of people walk out and refuse to support. Not unlike in a very broad sense, not unlike what happened to Democrats in nineteen seventy two, where you know, a lot of the traditional Democratic coalition, including Labor, refused to support mcgovernor instead, you know, supported Nixon. I think you see a lot of that stuff. The other great unknown between now and Joel I is what happens with third party races, whether it be with Bob Kennedy, whether it would possibly be with Joe Manchin somebody else. I say, I think there's a huge restiveness in the electorate, and you could see a third party candidacy gaining buyer really quickly. When do we see the machinery to have a third party candidate? Is that a January event, an April event, or dare I say into the convention season? I think more like a March to April event. Frankly, that is kind of what the labels people have promised but more importantly, what No Labels has promised is the idea that, look, once things begin to take shape and we know whether there's a Trump versus Biden likelihood or not, you know, then we'll make a decision. So you're looking at Super Tuesday in early March, and after that I think you probably get a decision. Terry Hines of PANCHEA Policy, Terry, thank you. 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