{"version":"1.0.0","segments":[{"startTime":0.333,"endTime":4.337,"body":"There's a battle brewing on Wall Street"},{"startTime":0.333,"endTime":4.337,"body":"and it's starting to impact"},{"startTime":4.337,"endTime":8.174,"body":"Main Street, forcing many market"},{"startTime":4.337,"endTime":8.174,"body":"professionals to question"},{"startTime":8.408,"endTime":13.546,"body":"traditional thinking on monetary policy"},{"startTime":8.408,"endTime":13.546,"body":"and with it, how to position risk assets."},{"startTime":14.214,"endTime":17.517,"body":"We all know the phrase The Fed keeps"},{"startTime":14.214,"endTime":17.517,"body":"on hiking until something breaks."},{"startTime":18.051,"endTime":21.454,"body":"The theory being that after you break"},{"startTime":18.051,"endTime":21.454,"body":"a few things the economy starts to slow,"},{"startTime":21.921,"endTime":24.491,"body":"employment softens,"},{"startTime":21.921,"endTime":24.491,"body":"and the shock to you drive consumer"},{"startTime":25.225,"endTime":27.327,"body":"finally falls into the abyss."},{"startTime":28.194,"endTime":28.862,"body":"Lack of demand."},{"startTime":28.862,"endTime":32.365,"body":"Forces, prices lower"},{"startTime":28.862,"endTime":32.365,"body":"and the cycle starts all over again."},{"startTime":33.633,"endTime":35.602,"body":"But today, we're starting to hear voices"},{"startTime":35.602,"endTime":38.505,"body":"push back on that theory, saying,"},{"startTime":35.602,"endTime":38.505,"body":"wait for it."},{"startTime":38.972,"endTime":40.774,"body":"It's different this time."},{"startTime":40.774,"endTime":42.208,"body":"Welcome to the Money Runner."},{"startTime":42.208,"endTime":44.01,"body":"I'm David Nelson"},{"startTime":45.412,"endTime":64.831,"body":"It's ambiguous"},{"startTime":64.831,"endTime":67.901,"body":"at best"},{"startTime":64.831,"endTime":67.901,"body":"whether a higher interest rate helps"},{"startTime":67.901,"endTime":71.071,"body":"bring down inflation"},{"startTime":67.901,"endTime":71.071,"body":"versus actually contributes to it."},{"startTime":72.839,"endTime":73.706,"body":"That's from Rick"},{"startTime":73.706,"endTime":76.743,"body":"Rieder, head of the Global Allocation team"},{"startTime":73.706,"endTime":76.743,"body":"at BlackRock."},{"startTime":77.01,"endTime":78.945,"body":"In a Bloomberg interview."},{"startTime":78.945,"endTime":83.817,"body":"He suggests that interest expenses"},{"startTime":78.945,"endTime":83.817,"body":"for consumers are growing and for those"},{"startTime":83.817,"endTime":87.22,"body":"with lower incomes,"},{"startTime":83.817,"endTime":87.22,"body":"a much higher percentage"},{"startTime":87.22,"endTime":89.389,"body":"of their net worth is debt."},{"startTime":90.457,"endTime":93.96,"body":"Rick argues that at a certain level,"},{"startTime":90.457,"endTime":93.96,"body":"higher rates"},{"startTime":93.96,"endTime":96.129,"body":"actually contribute to inflation."},{"startTime":97.397,"endTime":100.033,"body":"Not only do small companies get hurt"},{"startTime":97.397,"endTime":100.033,"body":"and those with lower"},{"startTime":100.033,"endTime":102.702,"body":"incomes get hurt"},{"startTime":100.033,"endTime":102.702,"body":"and of course, small banks get hurt,"},{"startTime":103.77,"endTime":107.34,"body":"but in some ways it actually helps"},{"startTime":103.77,"endTime":107.34,"body":"divide up both the corporate"},{"startTime":107.34,"endTime":110.643,"body":"and private sector between the haves"},{"startTime":107.34,"endTime":110.643,"body":"and the have nots."},{"startTime":112.112,"endTime":114.013,"body":"You've heard me"},{"startTime":112.112,"endTime":114.013,"body":"say it on this podcast before."},{"startTime":114.013,"endTime":117.35,"body":"If you're at the top of the income"},{"startTime":114.013,"endTime":117.35,"body":"pyramid, you're doing just fine."},{"startTime":118.184,"endTime":122.455,"body":"Asset inflation has its advantages,"},{"startTime":118.184,"endTime":122.455,"body":"especially if you are long"},{"startTime":122.455,"endTime":123.623,"body":"real estate and stocks."},{"startTime":124.958,"endTime":125.825,"body":"Trading down at the"},{"startTime":125.825,"endTime":128.628,"body":"supermarket"},{"startTime":125.825,"endTime":128.628,"body":"and even avoiding fast food restaurants."},{"startTime":129.028,"endTime":132.265,"body":"What many Americans at the bottom"},{"startTime":129.028,"endTime":132.265,"body":"of the income ladder are forced to live"},{"startTime":132.265,"endTime":134.367,"body":"with each and every day."},{"startTime":135.335,"endTime":137.67,"body":"Small companies don't have the fortress"},{"startTime":137.67,"endTime":140.073,"body":"like balance sheets"},{"startTime":137.67,"endTime":140.073,"body":"that Apple or Microsoft have,"},{"startTime":141.341,"endTime":144.511,"body":"but they still have to fund working"},{"startTime":141.341,"endTime":144.511,"body":"capital."},{"startTime":144.511,"endTime":147.48,"body":"Mega-Cap"},{"startTime":144.511,"endTime":147.48,"body":"companies are sitting on a ton of cash"},{"startTime":148.148,"endTime":151.05,"body":"and much of their debt"},{"startTime":148.148,"endTime":151.05,"body":"was funded at much lower rates."},{"startTime":151.784,"endTime":155.889,"body":"The top ten companies in the S\u0026P 500,"},{"startTime":151.784,"endTime":155.889,"body":"as of their last filing,"},{"startTime":156.322,"endTime":159.359,"body":"have over 400 billion in cash, likely"},{"startTime":159.626,"endTime":161.694,"body":"earning at least 5% interest."},{"startTime":162.362,"endTime":166.099,"body":"That's serious money."},{"startTime":168.434,"endTime":170.703,"body":"The list goes on."},{"startTime":170.703,"endTime":173.373,"body":"This is from Jack Manley at J.P. Morgan."},{"startTime":173.373,"endTime":176.342,"body":"We're not going to see a meaningful"},{"startTime":173.373,"endTime":176.342,"body":"downward pressure on inflation"},{"startTime":176.342,"endTime":179.379,"body":"until we see downward pressure"},{"startTime":176.342,"endTime":179.379,"body":"on shelter costs."},{"startTime":179.979,"endTime":182.415,"body":"And you're not going to see"},{"startTime":179.979,"endTime":182.415,"body":"meaningful downward pressure on"},{"startTime":182.415,"endTime":185.451,"body":"shelter costs until the Fed lowers rates."},{"startTime":186.352,"endTime":188.521,"body":"Mortgages"},{"startTime":186.352,"endTime":188.521,"body":"come down to a more reasonable level"},{"startTime":188.521,"endTime":190.857,"body":"and supply comes back online."},{"startTime":191.691,"endTime":195.995,"body":"In other words, no one can sell their home"},{"startTime":191.691,"endTime":195.995,"body":"and give up that low mortgage rate."},{"startTime":197.13,"endTime":198.731,"body":"Buying a new home"},{"startTime":198.731,"endTime":201.167,"body":"is unaffordable with rates this high."},{"startTime":202.135,"endTime":205.305,"body":"Both Rick and Jack"},{"startTime":202.135,"endTime":205.305,"body":"believe that even with a modest reduction"},{"startTime":205.305,"endTime":208.975,"body":"in rates, supply would come back online,"},{"startTime":205.305,"endTime":208.975,"body":"forcing prices lower,"},{"startTime":209.709,"endTime":212.312,"body":"provide some relief to shelter inflation,"},{"startTime":213.646,"endTime":217.083,"body":"government spending"},{"startTime":213.646,"endTime":217.083,"body":"and with it, the share of economic output"},{"startTime":217.083,"endTime":220.32,"body":"influenced by government"},{"startTime":217.083,"endTime":220.32,"body":"outlays is on the rise."},{"startTime":221.254,"endTime":224.557,"body":"Higher rates are doing"},{"startTime":221.254,"endTime":224.557,"body":"nothing to slow down that spending."},{"startTime":225.191,"endTime":228.061,"body":"Trust me, there's no one"},{"startTime":225.191,"endTime":228.061,"body":"in the administration looking at elevated"},{"startTime":228.061,"endTime":232.098,"body":"rates and saying, Hey, we should pull back"},{"startTime":228.061,"endTime":232.098,"body":"because the cost of debt is too high."},{"startTime":233.366,"endTime":235.802,"body":"This is from the Congressional Budget"},{"startTime":233.366,"endTime":235.802,"body":"Office."},{"startTime":236.202,"endTime":241.14,"body":"Federal outlays in 2024"},{"startTime":236.202,"endTime":241.14,"body":"total 6.5 trillion,"},{"startTime":241.741,"endTime":244.644,"body":"which amounts to 23.1% of GDP."},{"startTime":245.511,"endTime":247.981,"body":"We all know"},{"startTime":245.511,"endTime":247.981,"body":"which direction that number is going."},{"startTime":249.816,"endTime":251.517,"body":"The calls for the Fed to cut rates"},{"startTime":251.517,"endTime":254.554,"body":"to lower inflation continues to spread."},{"startTime":255.655,"endTime":256.556,"body":"Starwood Capital"},{"startTime":256.556,"endTime":259.926,"body":"CEO Barry Stearn late"},{"startTime":256.556,"endTime":259.926,"body":"Wednesday on CNBC said"},{"startTime":260.493,"endTime":263.863,"body":"Fed rate"},{"startTime":260.493,"endTime":263.863,"body":"hikes aren't impacting the job market."},{"startTime":264.998,"endTime":269.102,"body":"He says we've added a million jobs"},{"startTime":264.998,"endTime":269.102,"body":"in construction and we've added them"},{"startTime":269.102,"endTime":273.64,"body":"even though we increased rates"},{"startTime":269.102,"endTime":273.64,"body":"500 basis points. Why?"},{"startTime":273.873,"endTime":277.477,"body":"Data centers, the transportation"},{"startTime":273.873,"endTime":277.477,"body":"bill, the Chips Act, etc.."},{"startTime":278.645,"endTime":281.748,"body":"In other words, Barry doesn't"},{"startTime":278.645,"endTime":281.748,"body":"believe the Fed has the right tools"},{"startTime":282.015,"endTime":284.217,"body":"and the playbook is not working."},{"startTime":285.418,"endTime":288.521,"body":"We'll see if Barry's right"},{"startTime":285.418,"endTime":288.521,"body":"when we get a look at the May jobs report."},{"startTime":290.023,"endTime":291.324,"body":"The comments above beg."},{"startTime":291.324,"endTime":293.293,"body":"The question is what?"},{"startTime":293.293,"endTime":294.927,"body":"We are witnessing a frustration"},{"startTime":294.927,"endTime":298.464,"body":"from the investment community"},{"startTime":294.927,"endTime":298.464,"body":"that so desperately wants rate cuts"},{"startTime":299.132,"endTime":302.402,"body":"and are willing to buy into any theory"},{"startTime":299.132,"endTime":302.402,"body":"that supports that view"},{"startTime":302.402,"endTime":308.007,"body":"or does it make sense at this point"},{"startTime":302.402,"endTime":308.007,"body":"in the cycle to think outside the box?"},{"startTime":309.175,"endTime":309.609,"body":"The Fed"},{"startTime":309.609,"endTime":313.046,"body":"believes, at least if"},{"startTime":309.609,"endTime":313.046,"body":"we take them at their word, that they need"},{"startTime":313.046,"endTime":317.684,"body":"to hold rates in restrictive territory"},{"startTime":313.046,"endTime":317.684,"body":"until they break the back of inflation."},{"startTime":319.152,"endTime":321.02,"body":"If history is any guide, they will get"},{"startTime":321.02,"endTime":325.892,"body":"that wrong."},{"startTime":325.892,"endTime":329.162,"body":"The lag effect in monetary"},{"startTime":325.892,"endTime":329.162,"body":"policy is so big"},{"startTime":329.729,"endTime":332.532,"body":"that the timing of interest rate"},{"startTime":329.729,"endTime":332.532,"body":"changes is as much"},{"startTime":332.532,"endTime":334.634,"body":"art as it is science."},{"startTime":335.635,"endTime":338.071,"body":"Economist Milton Friedman"},{"startTime":335.635,"endTime":338.071,"body":"and Anna Schwartz,"},{"startTime":338.071,"endTime":341.607,"body":"in their book,"},{"startTime":338.071,"endTime":341.607,"body":"A Program for Monetary Stability, wrote"},{"startTime":342.442,"endTime":346.212,"body":"There is much evidence"},{"startTime":342.442,"endTime":346.212,"body":"that monetary changes have their effect"},{"startTime":346.212,"endTime":350.316,"body":"only after a considerable lag"},{"startTime":346.212,"endTime":350.316,"body":"and over a long period."},{"startTime":350.316,"endTime":353.086,"body":"And that lag is rather variable."},{"startTime":354.187,"endTime":357.557,"body":"If the above is true, then"},{"startTime":354.187,"endTime":357.557,"body":"waiting for inflation to hit 2% target"},{"startTime":357.79,"endTime":360.326,"body":"or even waiting for it"},{"startTime":357.79,"endTime":360.326,"body":"to approach that target"},{"startTime":360.993,"endTime":363.363,"body":"might be a bridge too far."},{"startTime":363.363,"endTime":366.866,"body":"The soft landing they hoped to"},{"startTime":363.363,"endTime":366.866,"body":"engineer could prove elusive."},{"startTime":368.101,"endTime":369.535,"body":"Markets react to all sorts of"},{"startTime":369.535,"endTime":372.739,"body":"stimulus, and the above could be feeding"},{"startTime":369.535,"endTime":372.739,"body":"the bullish narrative."},{"startTime":373.74,"endTime":376.109,"body":"Wednesday's better than expected"},{"startTime":373.74,"endTime":376.109,"body":"ISM Services"},{"startTime":376.109,"endTime":379.312,"body":"number helped spark"},{"startTime":376.109,"endTime":379.312,"body":"a rally in risk assets."},{"startTime":379.979,"endTime":384.784,"body":"In addition, the softer than expected ADP"},{"startTime":379.979,"endTime":384.784,"body":"payroll numbers gave hope to bond bulls"},{"startTime":385.251,"endTime":387.787,"body":"that the employment picture"},{"startTime":385.251,"endTime":387.787,"body":"is starting to ease."},{"startTime":388.054,"endTime":392.191,"body":"Whatever the reason, risk assets"},{"startTime":388.054,"endTime":392.191,"body":"are starting to sniff it out."},{"startTime":393.393,"endTime":395.428,"body":"Wednesday's massive surge"},{"startTime":395.428,"endTime":399.632,"body":"in tech up better than 2%"},{"startTime":395.428,"endTime":399.632,"body":"and the Nasdaq 100 at another"},{"startTime":399.632,"endTime":404.203,"body":"all time high is in part"},{"startTime":399.632,"endTime":404.203,"body":"being driven by Fed funds bets."},{"startTime":405.271,"endTime":409.876,"body":"In the space of just 48 hours,"},{"startTime":405.271,"endTime":409.876,"body":"market sentiment has shifted from higher"},{"startTime":409.876,"endTime":414.614,"body":"for longer to we just might get two cuts"},{"startTime":409.876,"endTime":414.614,"body":"before the end of the year."},{"startTime":416.115,"endTime":420.586,"body":"The phrase it's different"},{"startTime":416.115,"endTime":420.586,"body":"this time is frightening for many,"},{"startTime":420.586,"endTime":423.656,"body":"especially those of us"},{"startTime":420.586,"endTime":423.656,"body":"who uttered those same words"},{"startTime":424.157,"endTime":426.492,"body":"during the dot com boom that went bust."},{"startTime":427.693,"endTime":429.429,"body":"From the ashes of that fire."},{"startTime":429.429,"endTime":432.732,"body":"sale we said we'll never make that"},{"startTime":429.429,"endTime":432.732,"body":"mistake again."},{"startTime":434.4,"endTime":438.137,"body":"Well, like most things in life,"},{"startTime":434.4,"endTime":438.137,"body":"the truth rarely lives on the extreme."},{"startTime":438.137,"endTime":440.673,"body":"And perhaps there is a more solid"},{"startTime":441.14,"endTime":443.91,"body":"middle ground we can explore."},{"startTime":443.91,"endTime":446.112,"body":"Contrary to Fed thinking,"},{"startTime":443.91,"endTime":446.112,"body":"I don't believe one"},{"startTime":446.112,"endTime":448.514,"body":"or two cuts would be the end of life"},{"startTime":446.112,"endTime":448.514,"body":"as we know it."},{"startTime":449.615,"endTime":453.219,"body":"A couple of modest"},{"startTime":449.615,"endTime":453.219,"body":"25 basis point cuts to take the edge off"},{"startTime":453.219,"endTime":457.123,"body":"the mortgage"},{"startTime":453.219,"endTime":457.123,"body":"market will quickly bear fruit or won't."},{"startTime":458.491,"endTime":460.226,"body":"Putting the car into neutral."},{"startTime":460.226,"endTime":462.361,"body":"Is it"},{"startTime":460.226,"endTime":462.361,"body":"the same as stepping on the accelerator?"},{"startTime":463.529,"endTime":468.201,"body":"The Fed funds real rate is in restrictive"},{"startTime":463.529,"endTime":468.201,"body":"territory and more than 100 basis points"},{"startTime":468.534,"endTime":471.304,"body":"above the average"},{"startTime":468.534,"endTime":471.304,"body":"for the last half century."},{"startTime":472.405,"endTime":474.373,"body":"Throwing in with Rick, Barry and Jack,"},{"startTime":474.373,"endTime":478.511,"body":"the Fed should cut rates"},{"startTime":474.373,"endTime":478.511,"body":"at least two times before the year's out."},{"startTime":479.078,"endTime":481.414,"body":"Even better, they should cut right now."},{"startTime":482.448,"endTime":484.417,"body":"There I’ve said it."},{"startTime":484.417,"endTime":487.687,"body":"Sometimes it is different."},{"startTime":487.687,"endTime":489.922,"body":"Thanks for sharing your time today."},{"startTime":489.922,"endTime":492.592,"body":"We know you have choices"},{"startTime":489.922,"endTime":492.592,"body":"and I hope you'll come back for more."},{"startTime":493.459,"endTime":495.461,"body":"Don't forget to visit our Substack site."},{"startTime":495.461,"endTime":499.599,"body":"DCNELSON123@SUBSTACK.COM I'm David Nelson."},{"startTime":499.599,"endTime":515.248,"body":"And this is the Money Runner."}]}