800,000 Jobs About to Disappear, We’re Running on Garbage Data I Peter Tchir
Summary
Market Outlook: The market is optimistic about upcoming Fed rate cuts, with unemployment data suggesting a larger cut might be necessary, while inflation data is also anticipated this week.
Economic Concerns: Peter Tchir expresses concerns about the impact of tariffs, the erratic nature of policies affecting business decisions, and potential slowdowns in AI and data center investments.
Employment Data: The discussion highlights issues with the accuracy of employment data, particularly the overstatement due to the birth-death model and the rise of gig economy jobs.
Investment in AI: There is a questioning of the effectiveness of recent heavy investments in AI, drawing parallels to the overbuild of broadband in the 2000s.
Fed Strategy: Tchir suggests the Fed should consider a significant rate cut of 50 to 75 basis points to address economic challenges, emphasizing the need for coordinated efforts to support long-term yields.
Geopolitical Influences: The potential impact of geopolitical dynamics, such as US-India relations and China's control over rare earth processing, is discussed as a factor that could affect the US economy.
Investment Strategy: Tchir recommends being overweight in income, particularly long-dated bonds, and suggests exposure to emerging markets while being cautious with US equities due to tariff impacts.
Data Quality Concerns: The podcast criticizes the current state of US economic data collection and suggests a need for modernization to improve decision-making and maintain trust in official statistics.
Transcript
The market is absolutely euphoric about the expected rate cuts coming out of the Fed in about nine days time. Unemployment data is pointing towards a bigger cut. Revisions are expected this week as well, which are really interesting because they'll be going back 12 months up to March and those could have a huge impact whether we're seeing a jumbo cut or just a normal Fed rate cut. And on top of things, we're getting inflation data this week. So, lots lots going on on the macro side, lots going on in the data side. And I've invited a fantastic guest to sort of discuss this. It's his name is Peter Cheer. He's the head of macro strategy over at Academy Securities. And I'm really looking forward to getting his insights and trying to make sense of it. Why are markets rallying? Gold is at an all-time high as well. I forgot to mention that here. And is should we should we fight the Fed? He just gave me that that line here. Should we fight the Fed? Should we let things run? And should we just join the party? So, lots to discuss here in a very short time frame. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously. It's a free way to support our channel. Much much appreciate that. Now, Peter, it is great to welcome you on the program. Thanks so much for joining us. >> Thanks a lot for having me. >> Yeah, Peter, really looking forward to this. We just had a chance to chat off camera here for a minute. Lots to discuss, but uh since it's your first time on the program, I'd love to see where your head is at and maybe just get an understanding of how you rank the economy and the financial markets right now. What do you make of them? >> Yeah, and just quickly by because I think it'll help by way of background, I was much more a fixed income and credit trader. I traded the uh credit derivative indices throughout the financial crisis. So that's kind of my background is more from a trading and credit perspective as I kind of morphed into macro and I do get to work with a group of retired generals and admirals at Academy Securities which provide a lot of geopolitical insight but right now I'm a little bit worried about where we stand. I think the tariff data or the tariff impact is only going to start showing up you know months down the road. I think maybe we're getting hints of that. So I think a lot of people have been celebrating oh tariffs didn't have an impact and it's very premature. There haven't been a whole lot of tariff payments. Inventory hasn't rolled over. I think the the flip-floppy nature or the sometimes erratic nature of our policies I think is keeping businesses handcuffed. I think that's been showing up in the data and will continue to show up in the data. And the thing that to me has really been driving this economy is the investment in AI, data centers, chips and electricity production. And you're starting to get a sense, at least I am, that maybe we get a bit of a slowdown there. So I think those things are all weighing on the economy. I think they're all a bit problematic and I don't think rate cuts are just going to be enough to keep markets as high as they are. >> Yeah, exactly. Like $6,500 in the S&P. We we've all probably listened with in very intently to the Nvidia uh earnings calls here um or in the earnings report that just came out about 10 days ago or so it was and the slowdown in data centers. Maybe we stay on that topic just for a second. Just the AI built out. Um maybe if you want to get a bit more granular because the Mac 7 are dominated by AI obviously. So like if any slowdown comes in the S&P 500 is from that side. >> Yeah. And how I would look at it is I was a little bit surprised by just how much AI spending occurred you know Q1, Q2 and even coming into Q3. And part of that is when I go back and talk to our corporations what I realized is a lot were on hold for a lot of things. There's a this kind of on hold mentality towards you know hiring or firing people right people are reluctant to do much. I think in terms of investing big time in property and plant and equipment again that's a little bit on hold because the rules are uncertain but I think what was unleashed was a AI was the story of the day right people were really getting into it b I think people decided well whether the economy is good or bad it would be good to be efficient so I'm going to invest in AI and now here we are 6 months down the road and you're hearing more snippets of conversations about we invested and we're not sure what we got yeah this really seemed cool but how is it actually driving our business going forward. So I I think we're now at that stage where we're questioning it. And to me it reminds me a little bit of the broadband and fiber buildout in the 2000s, right? Fiber was going to dominate. All the companies involved with fiber, right? >> And we overbuilt. >> Yeah. Sorry, there's just a bit of lag here on the on the line here, Peter, but it really seems like we're paying more attention to valuations a little bit as well. Things are still honky dory, of course, on the earnings side. um still still growing, but as you said, there's there are massive headwinds and maybe that's a good segue to discuss employment as well. We're seeing more layoffs across the board. Maybe you can um you know, run us through what you're seeing as well. Of course, the employment data last week was a disaster. U massive underperformance from the uh expected forecast here. Like what are you seeing? >> So, I'm seeing that I think the data has still been overstated even with some of the revisions. So, I believe we're in a no hire, no fire economy for a lot of large corporations. I do think we're seeing entry-level jobs, particularly that would typically go to college grads be taken over by AI. People are saying, well, maybe we'll just hire two analysts instead of four and hopefully those two can deal with the AI spend that we've done. And you're seeing kind of, you know, unemployment for recent college grads tick up. So, that's I think who's bearing the brunt of this. I think you're seeing a bit of a slowdown in consumer spending. You're seeing a bit of a slowdown in restaurants. My favorite data point is the quits rate in Jolts. And the reason I like the quits rate so much is to me it's kind of crowdsourced lower income, you know, earners, right? Those are the people who wake up one day and say, "Hey, you know what? I can get a job better elsewhere or maybe I want to take a couple weeks off and then I'll get a job." So, they quit. That's very low right now. And the other thing I think the Fed's been, you know, the BLS has been doing wrong is the birth death model, right? They see this and what it's linked to, and this will get a little bit wonky, but I think it's really important. People apply for an EIN or an employment identification number when they set up a new company. The birth death model looks at that and says, "Oh, these applices in EIN. It's actually a worrisome signal for the economy. It means people are nervous about their jobs and decide, well, maybe I want to drive Uber, so I might as well set up an EIN if I want to drive Uber." I think you also get some people are getting more sophisticated saying, well, I'm going to separate eat my Uber from my lift or my Uber versus my Uber Eat. So, they're getting multiple EINs and so those applications show up as these big job gains in the birth death model. And I think it's actually a warning sign that people are so nervous about their jobs. They're starting to look to the gig economy and to me that is very well supported by I like the law school applications. I think we're at a postGFC high and to me that's another area where you're sitting there, you're not sure you're going to get a job out of college. Law school seems like a pretty decent way to spend your next three years. So, I think the economic data has still been overstated. It's going down weekly and now we might start getting the firing as people are realizing, hey, some of these tariff policies are here to stay and it's really hurting small and mid-size companies, and that's the last bit I'll add is I think the small and mid-size companies, their data takes a while to make it into the data we see. I think we're good at collecting data from large companies, not so much from small and midsize. They're the ones really feeling the brunt of tariffs. So, I think the data is going to get worse. I think the Fed's way behind the curve. They should have been cutting already. >> You bring up the EIN data, which is really interesting because I had a conversation with somebody this week about that, and I wasn't aware of it, and I haven't really fact checked it, but I he he told me that when somebody creates an EIN, like a a gig economy company or job, like I don't know, even just to manage their only fans, you know, just trying to be funny here a little bit, but only just to do that. It the BLS automatically assumes that seven people might get hired based on that. >> Is that correct? Like, how does that make sense? >> I'm not sure if it's still seven people. I don't know what they currently do, but yeah, they really did think, and at one time it was true, right? Maybe you set up a bakery, so you're going to have yourself, maybe a couple people baking, you're going to have some number of employees. And that's where I think that's this huge overstatement, and that's why we get these big downward revisions, is they really still treat EIN's as though they're small businesses. And I think it's much more a smart way for people to do the gig economy, including Only Fans. And so, people are doing that, and that's where you get this misread. And that's why you're getting these big adjustments. Even LA this past months, you know, payroll was 99,000 of uh uh based on this birth death model that comes from those EIN applications. You really think n that many new businesses started and it was higher the last two months. So I I I think it's a mistake and that's one of the things I think the BLS has been very slow to realize things and change and we are running you know I'm a computer science major by background. We're really running on garbage in garbage out. If you don't have good data coming into you as an analyst or a business person, how do you possibly make good decisions? I think we don't spend enough time scrubbing the data and saying, "Hey, does this data make sense or not?" Um, you know, unfortunately for me, I was on a flight back from London on 3rd of July and I thought the June employment data was going to be really weak. I thought it was going to be awful. Turns out on July 3rd on my flight, employment data was great and I was completely wrong. Two months later, they're saying they actually lost jobs in June, which was what I thought all along. So, it's hard for us to deal with this kind of bad data. I don't mean bad in any sense of, you know, it's good or bad for the economy. I just mean it's poorly done. It's not well calculated. >> Yeah. Like, two follow-up questions here for you, Peter. A, of course, we're we're expecting revisions tomorrow, September 9th. Um, run us a quick through your expectations. I sort of almost like a rhetorical question here, Peter, but what are your expectations? >> You know, I haven't done the work myself. That's that's u but I've some of the people I talked to do a lot of work. I think the number is going to be between 500,000 and 800,000 downward revisions and a lot of that is going to come from this overstatement from the birth death model. I think they just realize they create all these new jobs because that's the EIN applications go and then when they start actually getting the payroll stubs and all these other things, guess what? It wasn't a creation, right? There may have been no jobs. You know, if you still have your job and you apply for an EIN because you might want to drive Uber on the side, that's not a new job. That's not seven new jobs. Certainly, it's zero. And so that's why I think you're going to get such big negative revisions because the BLS has not spent the time or figured out how to deal with the gig economy has done to these EIN applications. Is >> do you think that's a leadership problem? Because the the head of the BLS was just recently fired by President Trump and we're still waiting for the appointment of EJ Anthony here. So, is that a leadership problem or where do you see the problem then? It's a great question because you know I think the other thing to me has been you know that I harp on a lot is the survey response rate used to be above 60% on the initial survey and it's down to 30%. And you know when you look at any sort of market testing right if you get a very low response rate was there a bias to those responses maybe the people who are hiring put in their responses very quickly because they are happy that they're hiring and maybe the people who aren't hiring or firing people don't put in the responses. So I'm not sure why we weren't examining these things more closely. why we weren't saying in this day and age of you know so much data so readily available what would be a good way to get this you know done better so I feel they were in a bit of a rut part of it is I do believe it takes them time they've got a lot of rules and procedures that you know any changes they want to make has to go kind of through various committees and I think part of that is to ensure that there is a procedure that's followed that can't be changed willy-nilly so you don't get good job data or bad data depending on the political view but I I think this could use a real overhaul if you To me, I talked about this when Doge was announced, right? This was the exact sort of thing Doge in theory could be good at, right? A bunch of computer science. Let's figure out how we should calculate the jobs data. Look at CPI. So many of us turn to trueflation now rather than the BLS data because we think things like trueflation are a more accurate measure. So, in this world where we just have so much instant access to data, we have AI. I think the two mistakes that have been made, we haven't thought about how we're getting our data, how we process it, and we also do a lot of adjustments, seasonal adjustments, annual adjustments at the BLS, and why not just send us the raw data and let you know the market kind of crowdsource, hey, these people seem good at figuring out what the seasonal adjustment should be or not. So, I would love an overhaul and a rethink of this because I do feel we're stuck in kind of what might have worked 20 years ago just doesn't fully take advantage of the data and access and computing power we have today. So Peter, like we've been reading about mistrust or eroding trust in the US data in general, not just employment data. Um, what do you make of that? Is it just a is it being politicized or is there actually like a a lack of quality data? Is the data being manipulated? >> You know, I I do not believe it's being politicized. I think it's, you know, how it's collected, how it's we've been in this rut. We aren't willing to make a lot of these changes that I think should be made. You know, I'll talk about owner's equivalent rent as yet another thing. You know, I do a lot in this business. I think I'm reasonably smart. I barely understand what owner's equivalent rent is. Yet, it's this huge important calculation, right? Why aren't we using something like Zillow that measures real-time rents? The Cleveland Fed has actually produced their own real-time rent. It would give us much, much better data. I think the lag effective owner's equivalent rent was part of what caused the transitory beliefs back when they missed hiking. And I think it's a problem now because it's overstating what's going on. You know, I do think a shakeup at the top where we say, "Hey, we have all these disparate entities. We've got the Fed. We've got, you know, Liberty Street. We've got all these great research people. We've got BLS people. Got like, let's unharness them. Let's unleash them and say, if we could start over, how would you do this and see what we can pass through?" Cuz I suspect if people kind of started from scratch and said, "Let's think out of the box. Let's throw out how we've been calculating or how we've been collecting this data for years or decades and how would we do it now given all the tools available, we would have much much better data." But without it, it's, you know, we're in a society where when data comes and gets, you know, mixed up all over the place, gets revised, there is going to be, you know, accusations of politicization. Some people will believe it. I don't think that's true. But it does make it hard to make decisions. If you can't get consistency within the data, you don't believe the data. If ADP, for example, is telling you one thing different than the, how do you make decisions? So, I think it would be a high high priority to do this. At the same time, if we do go politicize, we start looking like China. I cannot tell you what the Chinese data is at any given time because I don't believe any of it's true. So I don't want that to become what happens to the US. I think we have an opportunity to really fix it, make it incredibly useful, real time and accurate so we don't have to turn to things like true inflation to look for, you know, where inflation data is. Um, you know, again, I think that was one big thing even in the presidential race. Everyone's like, "Oh, inflation's tamed according to official data." No one who's living in the real world felt that inflation was tamed. Right? you go to the grocery store and your price of meat or whatever you're eating is going up every single day. It didn't reflect and I think political mistakes were made. I think you know policy mistakes have been made based on not having that accurate data and there's just so much opportunity this day and age to get that process it correctly put out there let it be evaluated and I think we'd be much better off and you have much better decisions. >> Yeah, it it is interesting because the Fed is basing their their decisions on on the data. They're data dependent. They're telling us, right? And you you brought up true inflation. Well, true inflation is telling us inflation is 1.98% today, but uh the BLS reports 2.7%. Right? So, >> how does that sort of fit together? Like how difficult and the reason we're asking that's why we're doing this exercise, Peter, is to really understand what is moving markets right now and to what will influence the Fed decision moving forward here in about eight days time. Um how how reliant is that then? Like what do you make of that? Like what should the Fed actually do? you know, it's hard because obviously they kind of have to support quote unquote the official data because that's, you know, what it is, but it creates this, you know, real dilemma. Again, I'll go back to that 3rd of July when I thought, you know, June employment was going to, you know, suck. It actually turned out it was great at the time. Now, I was actually right, but it doesn't make difference. I lost money on my long treasury bets because the data that was published. So, it's really, I think, hard for people and it's almost on the one side, you have to make at least shorter term trading decisions on what you think the official data will be because that seems to be what the Fed is reacting to. But on the longer term, I think you have to be deciding like what makes sense. When I look at the preponderance of data of all the things that are available to me, that's what I think is going toffect impact us 3 6 months down the road. I think that we're just seeing the start of, you know, this economic weakness. And I'll go back to one more point on this and you know probably beating this horse to death but um you know it's I go back they still make all these seasonal adjustments in the jobs and traditionally what they would do is add jobs in January February because that's when construction of the northeast slowed which was an important part of the economy and then they take them away in the summer and I've been arguing that our seasonal adjustment should look much different because so much of the construction occurs now in the southeast southwest that it actually picks up in the summer in the winter time and slows down in the summer when it gets too hot to work. So, this is at least the second year, if not third year in a row. We have all these great data, January, February, March, and then it looks awful in the summer. And I think a big part of that's because these seasonal adjustments are incorrect. So, again, send out the raw data, let people play with that, let people make their own adjustments and all these things with how they do the seasonal adjustments. It takes 5 years, they use their set of rules, but you know, creative out of the box thinking, I think, would be a magnificent thing to get do. >> Yeah, it almost sounds like a private institution at that point. that creative out of the box thinking it seems very uh institutionalized meaning government institutionalized the thinking right and but they're they're supposed to be a private separate entity and yet they can't figure that out. >> Yeah. And it's a you know it seems like they need a Dogeike kind of kicking you know the like hey let's again let's just reimagine what this could be if we were building this from scratch. If this was our job or this if we were trying to pitch to someone that you wanted to use our data here's how we do it and reinvent themselves. I think that would be just the best opportunity. On the other hand, again, I think was discussed if we get politicized and then we do start politicizing our data, then you run into the risk that no one trusts it even more, right? It's like sketchy data, but at least people trying hard and honestly is one thing. Sketchy data where people now make it Chinaike where you can't trust anything would be really depressing to me. >> Absolutely. Peter, what would you do in 8 days time if you were the Fed chair? >> I would cut 50 basis points. I think in fact I would be tempted to say cut 75 and say hey we think we're behind. We've seen this jobs data. We're going to cut 75 but we're going to leave it on hold until at least early next year to see how it plays out because I think if they did something like that it would help the long end perform better. Right? So when I think about fighting the Fed, I don't think rate cuts are enough for where we are in the economy. What I'm looking to see is whether the Fed and Treasury Department maybe combined do something to really support the long end of the yield curve. Right? You know, Besson is a very, very smart person. He clearly saw that last September when the Fed cut rates, yields went up at the long end. I think we're going to see some sort of coordinated tactics between the Fed and the Treasury Department to keep long-term yields lower to help mortgage rates. In that case, I would not fight the Fed. Then, I would buy, you know, stocks handover fist because I think they would do a great job. If I don't see that, I think you can fight the Fed for a little while. >> No, it's uh I wouldn't want to be in Jerome Pal's shoes because whatever he does is going to be the wrong decision anyway, quite honestly. Um like we we talked about it briefly before hitting the record button, Peter, but I'm personally concerned about deflation. It really depends on the messaging of course, but deflation meaning well if we signal 25 or if we cut 25 basis points, but we signal a few more cuts later this year. Like why would the consumer or anybody react now? And that's what we want. We want a reaction from the market, but it'll be delayed. What do you think on that? >> Yeah. And again, I just think short-term rates are not really as effective as a tool as they once were, right? Most of us have mortgage rates, you know, that have been locked in for, you know, still 5 to 27 years. You know, corporations took advantage of Zerp. So, you know, it'll help some small companies. You know, credit cards aren't going to be affected. It's like maybe you're paying 19% instead of 20%. that that that's not and that's this consumer I think who needs to be helped the most is kind of that you know lower income struggling consumer. You're having student uh loan repayments start up again. I think the consumer is you know kind of tapped out. They're really struggling. So again I I just don't see how you know moving it down helps. I don't see you know 10 years even if they get to 390 380 it's not going to be this massive driver cuz so many of us have locked in low mortgage rates and things like that. So I I don't think it helps and I think as people lose jobs as you maybe get some you know that job losses start hitting and there's so much uncertainty there's so much I think concern I think spending is going to remain slow so yes I think we can see some goods inflation tick up a little bit through tariffs some of that will feed into service you know inflation but as a whole I think it's going to be capped by the slowing economy by this job losses and I don't think 50 to 100 bips you know even in the next three months stops that job loss we need something to happen. So, a a if the AI spending data centers slows down at all, I think we're in deep trouble. The flip side of that is I do think we're seeing some steps taken towards what we've been calling, you know, production for security. So, you know, whether you look at a deal like Intel or MP, um the magnet maker, right? Those are things I think the government's trying to step in and really spur growth for the US designing, developing, and producing things that we need for national security. I'd like to see deregulation. Deregulation would be a big part of that. So, if we can really turn our attention to that, then maybe we get the growth we need. But if we don't turn our attention to that, I I think we struggle in this economy. And I think we are going to see more and more slowing down. And this ter, you know, just this cuts isn't enough. I think the equity market's a little bit too jubilant over these cuts. >> Yeah, the bad news is good news for the market. It seems like S&P 500 I mentioned is hit record highs. loving the discussion on Fed cuts, especially jumbo cuts or just Chris Waller, Fed Governor Christopher Waller bringing up the term jumbo cuts just fueled a massive rally. Um, are we, as you said, like the market, you you said the market shouldn't be jubilant. It feels like they're almost naive and running to their own uh, what do you call it? You run into your own uh, I want I don't want to use the dword here, but it's they're running into their own like >> it's a >> demise. Yeah. Sort of. No. Yeah. >> Yes. No, and I I think that's the risk is you I saw it on Friday, right? It's we popped immediately after the number. Equities liked it. They faded throughout the day and then they kind of started bouncing back. So, you know, I I think you probably have to get everyone fully on board with the oh, rate cuts are good. And maybe today's the day that happened. People read it over the weekend. People who don't trade for a living maybe decided to put out their allocations this morning. Oh, we're going to, you know, invest in some ETFs. We're going to do that. I think it fades into this week. I think the reality is going to hit that there's too many question marks and cuts alone aren't enough and we would need either some really aggressive, you know, operation twist, something to really help the long end and you know, some sign that there's a bigger plan than just a few rate cuts for me to support equities up here. >> No, exactly. I think the employment data will be a big tell um on to tomorrow, the revision to the employment data and then inflation I think we we sort of expect uh to come in. What what are the forecasts? Actually, I have to have to admit I haven't even looked. Are we staying on 3.1%? Let me just double check here. Uh the 11th we're looking at 2.7 2.9%. So, and then core inflation 3.1 to remain steady. Um which is interesting because you you hinted at it as well, Peter. You do expect inflation to trickle in just a little bit. So, you expect a higher inflation print later this week as well then, Peter? >> No, I think we're going to try to like I I think we're going to be supported around two and a half%. uh it'll be hard to get below 2 and a half% but I don't think we're going to stay above 3%. I think just the state of the economy doesn't bode for that and it's taking time for you know these things to filter out. I will say on the true inflation it has been ticking up last time I checked but again it's probably I think it's still 1.8%. So it's way lower than what the official readings are. I still think this owner's equivalent rent we're making so many mistakes in our you know calculations that are just known mistakes. So why we do that, I don't know. Cuz you look at Zillow rent for example and rents have been very stable. They're not showing inflation. So I I think over time we're going to trickle down to that 2.5 sort of level. Maybe then you know tariff inflation will keep it propped up. But if the economy is slowing I don't see us I I don't I think the Fed is being overly vigilant about inflation and undervigilant about the jobs data. >> Yeah. Peter, let's use the last two minutes to talk about the geopolitical influences which the Feds seem to be completely ignore. Um, they said, "Well, we're watching tariffs a little bit or we have different scenarios for the tariffs playing out, but they're not really tying in anything else. Maybe peace in Russia, Russia, Ukraine crisis or anything else." Like what is the market maybe not pricing in or ignoring and what is the Fed ignoring since we're coming from that angle? >> You know, I think there's two things that I'm watching closely and you know, we call it fairly loosely the American brand, right? what has happened to the American brand and so I want to see over time how US corporate sale you know US are doing overseas right about 40% of S&P 500 earnings come from foreign sales and is there a reluctance to buy US brands you know this is a bit extreme but at one time right during the Soviet Union Levis's represented freedom but I think there's always been this aspirational quality right people want to be associated with the US there's an aspiration to want these goods will that deteriorate over time with all that's going on and I watch India very very closely because I think the US has a lot of difficulty with a country like India. I think the US has two difficulties in particular with India. One is we are very you know yes or no you're for us or against us. So I think we struggle with someone who is just going to do what's right for India and I also think there's a bit of a convergence where a lot of you know some of the I get a sense that a lot of the older US politicians still view India very much as an emerging market country but India itself views itself as an emerging superpower. So I think that creates some friction. You watch Modi was definitely around you know Xi and Putin recently right will China be able to work with India? Will we lose India? India to me is a lynchman right it's going to be one of the largest economies in the world over time right they're 1.1 pe billion people they're growing they are very tech-savvy they're doing a lot of things you look at the AI data centers how much can gravitate towards there and so that to me is going to be a real lynch pin and if we don't treat with them well we run a risk of you know kind of these realignments of the world and you know we talk about the cards who's holding what cards with us versus China I think we underestimate two things One, we're only about 15% of Chinese exports. So, they have done a phenomenal job, if you're a Chinese business person or Chinese economy, to move away from us already. Two, they have a complete strangle hold on the processing and refining of rarest and critical minerals. I hear so much talk about rare earth and critical minerals. I really don't pay that much attention to rarest and critical minerals themselves. We can get those. We have a lot of those here. What it is is the processing and refining of them, which tends to be very dirty, very energyintensive, things that the West doesn't like to do. China has a strangle hold on that. That's been clearly a big driver of these trade negotiations. We are not yet doing anywhere close enough to break that strangle hold. So I I I think we could see a US that over time loses some of their global relationships, feels pressure from that. And again, everyone's going to sign with the US for a deal, shake hands because guess what? For most countries, it's, you know, the largest buyer of their goods. Having said that, the way things have behaved, there are probably a lot of people looking behind the scenes to figure out a way to be less reliant on the US over time. So I think again that's not going to happen overnight but we may start seeing that data over the months and year months and quarters ahead where we have lost some of our competitive advantage. Again I think we tra we are currently trading tangible for intangible. We had so many intangible benefits that didn't show up necessarily as a dollar and cent that someone could easily calculate. I think we've given up some of those. I think that could start influencing us. And again people are saying oh none of this happened. That's only going to happen over months and quarters, not weeks and months. >> May maybe summarize what we've just been discussing here, Peter. And I'm not asking for financial advice, maybe more of a generalization, but how should investors position until like the end of the year or the end of Q1 next year? Like what do you think be the right way to do it? You know, I like longerdated bonds right now. So in my income, I would probably be slightly overweight income relative to equities. So I'd be a little bit underweight equities, little bit overweight income within the income. I like the longerdated part. I actually in my personal account, you know, I like a lot of MUN closed end funds. The longdated MUN market's relatively cheap right now. I think the cost of running that little leverage that the closed end funds have will go down. I think you're going to see long end yields remain stable this time. I think you're going to see spreads. So, I'm very overweight that within my income. And then on the equity side, you know, I've been fairly balanced. Um I'm reducing exposure, but I had a lot of China's exposure. You know, I think it shocks people if you look. I think um QQQ is up 25% I want to say in a year and 13% year to date. The numbers for FXI are 55 and 26%. So it it's been this massive outperformance, I still think you want some exposure to EM in your equity portfolio and you want to shift a little bit away from what's going on. If we are getting these rate cuts and things are going to quiet down in general, I would say I'd like the small caps. problem for me right now with small caps is my belief that the tariffs and everything that's going on is much harder for a small cap company to deal with than a large cap. So again, I think I'm probably underweight in the US relative to the rest of the world still. No, fair enough. Awesome. Peter, really appreciate your insights. We need to get you back later this year just to catch up on what what the Fed is actually up to and how it is impacting the markets. Really appreciate your insights. Like where can we send our audience to follow more of your work, Peter? You know, I am on Twitter at TFMKTS. So, kind of a, you know, short form of TF Markets. Um, and you can look at academy seccurities.com website. We have information published there. >> Fantastic. Peter, really appreciate your time. Thank you so much for joining us and really looking forward to all the data coming out this week because it'll really it could really change the impact the direction of the markets in a heartbeat. So, really looking forward to that. >> Thanks very much. And hopefully next time we're p we're really poking a lot of time of figuring out how we want to deal with crypto given the Genius Act, the change of regulations. I don't have anything I haven't figured out how I want to play that, but I do think that's becoming a more important strategy given what this administration's doing. >> Absolutely. No, it's an interesting part especially gold revaluation is another topic that we can discuss in the same uh breath here as well. I think that really fits the narrative uh with what you're mentioning as well. Fantastic. Peter, thank you so much. Really appreciate it. And uh everybody else, thank you so much for tuning in to Soore Financially. I'm on the road, by the way, in Colorado. I'm on my way to Beaver Creek, one of the probably the world's largest mining investment conferences, and I appreciate you watching us. If you have any comments, if you have any feedback, put that down below. How are you positioned to to to end the year? And what do you expect the employment data to tell us? Should the Fed cut by 50 basis points, 75 basis points, or less? Should they hike? Shri Kumar the other day said maybe they should hike. So, really curious what your thoughts are. Let let us know and we much much appreciate your support. Thank you so much for tuning in. We'll be back with more. Take care out there. [Music]
800,000 Jobs About to Disappear, We’re Running on Garbage Data I Peter Tchir
Summary
Transcript
The market is absolutely euphoric about the expected rate cuts coming out of the Fed in about nine days time. Unemployment data is pointing towards a bigger cut. Revisions are expected this week as well, which are really interesting because they'll be going back 12 months up to March and those could have a huge impact whether we're seeing a jumbo cut or just a normal Fed rate cut. And on top of things, we're getting inflation data this week. So, lots lots going on on the macro side, lots going on in the data side. And I've invited a fantastic guest to sort of discuss this. It's his name is Peter Cheer. He's the head of macro strategy over at Academy Securities. And I'm really looking forward to getting his insights and trying to make sense of it. Why are markets rallying? Gold is at an all-time high as well. I forgot to mention that here. And is should we should we fight the Fed? He just gave me that that line here. Should we fight the Fed? Should we let things run? And should we just join the party? So, lots to discuss here in a very short time frame. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously. It's a free way to support our channel. Much much appreciate that. Now, Peter, it is great to welcome you on the program. Thanks so much for joining us. >> Thanks a lot for having me. >> Yeah, Peter, really looking forward to this. We just had a chance to chat off camera here for a minute. Lots to discuss, but uh since it's your first time on the program, I'd love to see where your head is at and maybe just get an understanding of how you rank the economy and the financial markets right now. What do you make of them? >> Yeah, and just quickly by because I think it'll help by way of background, I was much more a fixed income and credit trader. I traded the uh credit derivative indices throughout the financial crisis. So that's kind of my background is more from a trading and credit perspective as I kind of morphed into macro and I do get to work with a group of retired generals and admirals at Academy Securities which provide a lot of geopolitical insight but right now I'm a little bit worried about where we stand. I think the tariff data or the tariff impact is only going to start showing up you know months down the road. I think maybe we're getting hints of that. So I think a lot of people have been celebrating oh tariffs didn't have an impact and it's very premature. There haven't been a whole lot of tariff payments. Inventory hasn't rolled over. I think the the flip-floppy nature or the sometimes erratic nature of our policies I think is keeping businesses handcuffed. I think that's been showing up in the data and will continue to show up in the data. And the thing that to me has really been driving this economy is the investment in AI, data centers, chips and electricity production. And you're starting to get a sense, at least I am, that maybe we get a bit of a slowdown there. So I think those things are all weighing on the economy. I think they're all a bit problematic and I don't think rate cuts are just going to be enough to keep markets as high as they are. >> Yeah, exactly. Like $6,500 in the S&P. We we've all probably listened with in very intently to the Nvidia uh earnings calls here um or in the earnings report that just came out about 10 days ago or so it was and the slowdown in data centers. Maybe we stay on that topic just for a second. Just the AI built out. Um maybe if you want to get a bit more granular because the Mac 7 are dominated by AI obviously. So like if any slowdown comes in the S&P 500 is from that side. >> Yeah. And how I would look at it is I was a little bit surprised by just how much AI spending occurred you know Q1, Q2 and even coming into Q3. And part of that is when I go back and talk to our corporations what I realized is a lot were on hold for a lot of things. There's a this kind of on hold mentality towards you know hiring or firing people right people are reluctant to do much. I think in terms of investing big time in property and plant and equipment again that's a little bit on hold because the rules are uncertain but I think what was unleashed was a AI was the story of the day right people were really getting into it b I think people decided well whether the economy is good or bad it would be good to be efficient so I'm going to invest in AI and now here we are 6 months down the road and you're hearing more snippets of conversations about we invested and we're not sure what we got yeah this really seemed cool but how is it actually driving our business going forward. So I I think we're now at that stage where we're questioning it. And to me it reminds me a little bit of the broadband and fiber buildout in the 2000s, right? Fiber was going to dominate. All the companies involved with fiber, right? >> And we overbuilt. >> Yeah. Sorry, there's just a bit of lag here on the on the line here, Peter, but it really seems like we're paying more attention to valuations a little bit as well. Things are still honky dory, of course, on the earnings side. um still still growing, but as you said, there's there are massive headwinds and maybe that's a good segue to discuss employment as well. We're seeing more layoffs across the board. Maybe you can um you know, run us through what you're seeing as well. Of course, the employment data last week was a disaster. U massive underperformance from the uh expected forecast here. Like what are you seeing? >> So, I'm seeing that I think the data has still been overstated even with some of the revisions. So, I believe we're in a no hire, no fire economy for a lot of large corporations. I do think we're seeing entry-level jobs, particularly that would typically go to college grads be taken over by AI. People are saying, well, maybe we'll just hire two analysts instead of four and hopefully those two can deal with the AI spend that we've done. And you're seeing kind of, you know, unemployment for recent college grads tick up. So, that's I think who's bearing the brunt of this. I think you're seeing a bit of a slowdown in consumer spending. You're seeing a bit of a slowdown in restaurants. My favorite data point is the quits rate in Jolts. And the reason I like the quits rate so much is to me it's kind of crowdsourced lower income, you know, earners, right? Those are the people who wake up one day and say, "Hey, you know what? I can get a job better elsewhere or maybe I want to take a couple weeks off and then I'll get a job." So, they quit. That's very low right now. And the other thing I think the Fed's been, you know, the BLS has been doing wrong is the birth death model, right? They see this and what it's linked to, and this will get a little bit wonky, but I think it's really important. People apply for an EIN or an employment identification number when they set up a new company. The birth death model looks at that and says, "Oh, these applices in EIN. It's actually a worrisome signal for the economy. It means people are nervous about their jobs and decide, well, maybe I want to drive Uber, so I might as well set up an EIN if I want to drive Uber." I think you also get some people are getting more sophisticated saying, well, I'm going to separate eat my Uber from my lift or my Uber versus my Uber Eat. So, they're getting multiple EINs and so those applications show up as these big job gains in the birth death model. And I think it's actually a warning sign that people are so nervous about their jobs. They're starting to look to the gig economy and to me that is very well supported by I like the law school applications. I think we're at a postGFC high and to me that's another area where you're sitting there, you're not sure you're going to get a job out of college. Law school seems like a pretty decent way to spend your next three years. So, I think the economic data has still been overstated. It's going down weekly and now we might start getting the firing as people are realizing, hey, some of these tariff policies are here to stay and it's really hurting small and mid-size companies, and that's the last bit I'll add is I think the small and mid-size companies, their data takes a while to make it into the data we see. I think we're good at collecting data from large companies, not so much from small and midsize. They're the ones really feeling the brunt of tariffs. So, I think the data is going to get worse. I think the Fed's way behind the curve. They should have been cutting already. >> You bring up the EIN data, which is really interesting because I had a conversation with somebody this week about that, and I wasn't aware of it, and I haven't really fact checked it, but I he he told me that when somebody creates an EIN, like a a gig economy company or job, like I don't know, even just to manage their only fans, you know, just trying to be funny here a little bit, but only just to do that. It the BLS automatically assumes that seven people might get hired based on that. >> Is that correct? Like, how does that make sense? >> I'm not sure if it's still seven people. I don't know what they currently do, but yeah, they really did think, and at one time it was true, right? Maybe you set up a bakery, so you're going to have yourself, maybe a couple people baking, you're going to have some number of employees. And that's where I think that's this huge overstatement, and that's why we get these big downward revisions, is they really still treat EIN's as though they're small businesses. And I think it's much more a smart way for people to do the gig economy, including Only Fans. And so, people are doing that, and that's where you get this misread. And that's why you're getting these big adjustments. Even LA this past months, you know, payroll was 99,000 of uh uh based on this birth death model that comes from those EIN applications. You really think n that many new businesses started and it was higher the last two months. So I I I think it's a mistake and that's one of the things I think the BLS has been very slow to realize things and change and we are running you know I'm a computer science major by background. We're really running on garbage in garbage out. If you don't have good data coming into you as an analyst or a business person, how do you possibly make good decisions? I think we don't spend enough time scrubbing the data and saying, "Hey, does this data make sense or not?" Um, you know, unfortunately for me, I was on a flight back from London on 3rd of July and I thought the June employment data was going to be really weak. I thought it was going to be awful. Turns out on July 3rd on my flight, employment data was great and I was completely wrong. Two months later, they're saying they actually lost jobs in June, which was what I thought all along. So, it's hard for us to deal with this kind of bad data. I don't mean bad in any sense of, you know, it's good or bad for the economy. I just mean it's poorly done. It's not well calculated. >> Yeah. Like, two follow-up questions here for you, Peter. A, of course, we're we're expecting revisions tomorrow, September 9th. Um, run us a quick through your expectations. I sort of almost like a rhetorical question here, Peter, but what are your expectations? >> You know, I haven't done the work myself. That's that's u but I've some of the people I talked to do a lot of work. I think the number is going to be between 500,000 and 800,000 downward revisions and a lot of that is going to come from this overstatement from the birth death model. I think they just realize they create all these new jobs because that's the EIN applications go and then when they start actually getting the payroll stubs and all these other things, guess what? It wasn't a creation, right? There may have been no jobs. You know, if you still have your job and you apply for an EIN because you might want to drive Uber on the side, that's not a new job. That's not seven new jobs. Certainly, it's zero. And so that's why I think you're going to get such big negative revisions because the BLS has not spent the time or figured out how to deal with the gig economy has done to these EIN applications. Is >> do you think that's a leadership problem? Because the the head of the BLS was just recently fired by President Trump and we're still waiting for the appointment of EJ Anthony here. So, is that a leadership problem or where do you see the problem then? It's a great question because you know I think the other thing to me has been you know that I harp on a lot is the survey response rate used to be above 60% on the initial survey and it's down to 30%. And you know when you look at any sort of market testing right if you get a very low response rate was there a bias to those responses maybe the people who are hiring put in their responses very quickly because they are happy that they're hiring and maybe the people who aren't hiring or firing people don't put in the responses. So I'm not sure why we weren't examining these things more closely. why we weren't saying in this day and age of you know so much data so readily available what would be a good way to get this you know done better so I feel they were in a bit of a rut part of it is I do believe it takes them time they've got a lot of rules and procedures that you know any changes they want to make has to go kind of through various committees and I think part of that is to ensure that there is a procedure that's followed that can't be changed willy-nilly so you don't get good job data or bad data depending on the political view but I I think this could use a real overhaul if you To me, I talked about this when Doge was announced, right? This was the exact sort of thing Doge in theory could be good at, right? A bunch of computer science. Let's figure out how we should calculate the jobs data. Look at CPI. So many of us turn to trueflation now rather than the BLS data because we think things like trueflation are a more accurate measure. So, in this world where we just have so much instant access to data, we have AI. I think the two mistakes that have been made, we haven't thought about how we're getting our data, how we process it, and we also do a lot of adjustments, seasonal adjustments, annual adjustments at the BLS, and why not just send us the raw data and let you know the market kind of crowdsource, hey, these people seem good at figuring out what the seasonal adjustment should be or not. So, I would love an overhaul and a rethink of this because I do feel we're stuck in kind of what might have worked 20 years ago just doesn't fully take advantage of the data and access and computing power we have today. So Peter, like we've been reading about mistrust or eroding trust in the US data in general, not just employment data. Um, what do you make of that? Is it just a is it being politicized or is there actually like a a lack of quality data? Is the data being manipulated? >> You know, I I do not believe it's being politicized. I think it's, you know, how it's collected, how it's we've been in this rut. We aren't willing to make a lot of these changes that I think should be made. You know, I'll talk about owner's equivalent rent as yet another thing. You know, I do a lot in this business. I think I'm reasonably smart. I barely understand what owner's equivalent rent is. Yet, it's this huge important calculation, right? Why aren't we using something like Zillow that measures real-time rents? The Cleveland Fed has actually produced their own real-time rent. It would give us much, much better data. I think the lag effective owner's equivalent rent was part of what caused the transitory beliefs back when they missed hiking. And I think it's a problem now because it's overstating what's going on. You know, I do think a shakeup at the top where we say, "Hey, we have all these disparate entities. We've got the Fed. We've got, you know, Liberty Street. We've got all these great research people. We've got BLS people. Got like, let's unharness them. Let's unleash them and say, if we could start over, how would you do this and see what we can pass through?" Cuz I suspect if people kind of started from scratch and said, "Let's think out of the box. Let's throw out how we've been calculating or how we've been collecting this data for years or decades and how would we do it now given all the tools available, we would have much much better data." But without it, it's, you know, we're in a society where when data comes and gets, you know, mixed up all over the place, gets revised, there is going to be, you know, accusations of politicization. Some people will believe it. I don't think that's true. But it does make it hard to make decisions. If you can't get consistency within the data, you don't believe the data. If ADP, for example, is telling you one thing different than the, how do you make decisions? So, I think it would be a high high priority to do this. At the same time, if we do go politicize, we start looking like China. I cannot tell you what the Chinese data is at any given time because I don't believe any of it's true. So I don't want that to become what happens to the US. I think we have an opportunity to really fix it, make it incredibly useful, real time and accurate so we don't have to turn to things like true inflation to look for, you know, where inflation data is. Um, you know, again, I think that was one big thing even in the presidential race. Everyone's like, "Oh, inflation's tamed according to official data." No one who's living in the real world felt that inflation was tamed. Right? you go to the grocery store and your price of meat or whatever you're eating is going up every single day. It didn't reflect and I think political mistakes were made. I think you know policy mistakes have been made based on not having that accurate data and there's just so much opportunity this day and age to get that process it correctly put out there let it be evaluated and I think we'd be much better off and you have much better decisions. >> Yeah, it it is interesting because the Fed is basing their their decisions on on the data. They're data dependent. They're telling us, right? And you you brought up true inflation. Well, true inflation is telling us inflation is 1.98% today, but uh the BLS reports 2.7%. Right? So, >> how does that sort of fit together? Like how difficult and the reason we're asking that's why we're doing this exercise, Peter, is to really understand what is moving markets right now and to what will influence the Fed decision moving forward here in about eight days time. Um how how reliant is that then? Like what do you make of that? Like what should the Fed actually do? you know, it's hard because obviously they kind of have to support quote unquote the official data because that's, you know, what it is, but it creates this, you know, real dilemma. Again, I'll go back to that 3rd of July when I thought, you know, June employment was going to, you know, suck. It actually turned out it was great at the time. Now, I was actually right, but it doesn't make difference. I lost money on my long treasury bets because the data that was published. So, it's really, I think, hard for people and it's almost on the one side, you have to make at least shorter term trading decisions on what you think the official data will be because that seems to be what the Fed is reacting to. But on the longer term, I think you have to be deciding like what makes sense. When I look at the preponderance of data of all the things that are available to me, that's what I think is going toffect impact us 3 6 months down the road. I think that we're just seeing the start of, you know, this economic weakness. And I'll go back to one more point on this and you know probably beating this horse to death but um you know it's I go back they still make all these seasonal adjustments in the jobs and traditionally what they would do is add jobs in January February because that's when construction of the northeast slowed which was an important part of the economy and then they take them away in the summer and I've been arguing that our seasonal adjustment should look much different because so much of the construction occurs now in the southeast southwest that it actually picks up in the summer in the winter time and slows down in the summer when it gets too hot to work. So, this is at least the second year, if not third year in a row. We have all these great data, January, February, March, and then it looks awful in the summer. And I think a big part of that's because these seasonal adjustments are incorrect. So, again, send out the raw data, let people play with that, let people make their own adjustments and all these things with how they do the seasonal adjustments. It takes 5 years, they use their set of rules, but you know, creative out of the box thinking, I think, would be a magnificent thing to get do. >> Yeah, it almost sounds like a private institution at that point. that creative out of the box thinking it seems very uh institutionalized meaning government institutionalized the thinking right and but they're they're supposed to be a private separate entity and yet they can't figure that out. >> Yeah. And it's a you know it seems like they need a Dogeike kind of kicking you know the like hey let's again let's just reimagine what this could be if we were building this from scratch. If this was our job or this if we were trying to pitch to someone that you wanted to use our data here's how we do it and reinvent themselves. I think that would be just the best opportunity. On the other hand, again, I think was discussed if we get politicized and then we do start politicizing our data, then you run into the risk that no one trusts it even more, right? It's like sketchy data, but at least people trying hard and honestly is one thing. Sketchy data where people now make it Chinaike where you can't trust anything would be really depressing to me. >> Absolutely. Peter, what would you do in 8 days time if you were the Fed chair? >> I would cut 50 basis points. I think in fact I would be tempted to say cut 75 and say hey we think we're behind. We've seen this jobs data. We're going to cut 75 but we're going to leave it on hold until at least early next year to see how it plays out because I think if they did something like that it would help the long end perform better. Right? So when I think about fighting the Fed, I don't think rate cuts are enough for where we are in the economy. What I'm looking to see is whether the Fed and Treasury Department maybe combined do something to really support the long end of the yield curve. Right? You know, Besson is a very, very smart person. He clearly saw that last September when the Fed cut rates, yields went up at the long end. I think we're going to see some sort of coordinated tactics between the Fed and the Treasury Department to keep long-term yields lower to help mortgage rates. In that case, I would not fight the Fed. Then, I would buy, you know, stocks handover fist because I think they would do a great job. If I don't see that, I think you can fight the Fed for a little while. >> No, it's uh I wouldn't want to be in Jerome Pal's shoes because whatever he does is going to be the wrong decision anyway, quite honestly. Um like we we talked about it briefly before hitting the record button, Peter, but I'm personally concerned about deflation. It really depends on the messaging of course, but deflation meaning well if we signal 25 or if we cut 25 basis points, but we signal a few more cuts later this year. Like why would the consumer or anybody react now? And that's what we want. We want a reaction from the market, but it'll be delayed. What do you think on that? >> Yeah. And again, I just think short-term rates are not really as effective as a tool as they once were, right? Most of us have mortgage rates, you know, that have been locked in for, you know, still 5 to 27 years. You know, corporations took advantage of Zerp. So, you know, it'll help some small companies. You know, credit cards aren't going to be affected. It's like maybe you're paying 19% instead of 20%. that that that's not and that's this consumer I think who needs to be helped the most is kind of that you know lower income struggling consumer. You're having student uh loan repayments start up again. I think the consumer is you know kind of tapped out. They're really struggling. So again I I just don't see how you know moving it down helps. I don't see you know 10 years even if they get to 390 380 it's not going to be this massive driver cuz so many of us have locked in low mortgage rates and things like that. So I I don't think it helps and I think as people lose jobs as you maybe get some you know that job losses start hitting and there's so much uncertainty there's so much I think concern I think spending is going to remain slow so yes I think we can see some goods inflation tick up a little bit through tariffs some of that will feed into service you know inflation but as a whole I think it's going to be capped by the slowing economy by this job losses and I don't think 50 to 100 bips you know even in the next three months stops that job loss we need something to happen. So, a a if the AI spending data centers slows down at all, I think we're in deep trouble. The flip side of that is I do think we're seeing some steps taken towards what we've been calling, you know, production for security. So, you know, whether you look at a deal like Intel or MP, um the magnet maker, right? Those are things I think the government's trying to step in and really spur growth for the US designing, developing, and producing things that we need for national security. I'd like to see deregulation. Deregulation would be a big part of that. So, if we can really turn our attention to that, then maybe we get the growth we need. But if we don't turn our attention to that, I I think we struggle in this economy. And I think we are going to see more and more slowing down. And this ter, you know, just this cuts isn't enough. I think the equity market's a little bit too jubilant over these cuts. >> Yeah, the bad news is good news for the market. It seems like S&P 500 I mentioned is hit record highs. loving the discussion on Fed cuts, especially jumbo cuts or just Chris Waller, Fed Governor Christopher Waller bringing up the term jumbo cuts just fueled a massive rally. Um, are we, as you said, like the market, you you said the market shouldn't be jubilant. It feels like they're almost naive and running to their own uh, what do you call it? You run into your own uh, I want I don't want to use the dword here, but it's they're running into their own like >> it's a >> demise. Yeah. Sort of. No. Yeah. >> Yes. No, and I I think that's the risk is you I saw it on Friday, right? It's we popped immediately after the number. Equities liked it. They faded throughout the day and then they kind of started bouncing back. So, you know, I I think you probably have to get everyone fully on board with the oh, rate cuts are good. And maybe today's the day that happened. People read it over the weekend. People who don't trade for a living maybe decided to put out their allocations this morning. Oh, we're going to, you know, invest in some ETFs. We're going to do that. I think it fades into this week. I think the reality is going to hit that there's too many question marks and cuts alone aren't enough and we would need either some really aggressive, you know, operation twist, something to really help the long end and you know, some sign that there's a bigger plan than just a few rate cuts for me to support equities up here. >> No, exactly. I think the employment data will be a big tell um on to tomorrow, the revision to the employment data and then inflation I think we we sort of expect uh to come in. What what are the forecasts? Actually, I have to have to admit I haven't even looked. Are we staying on 3.1%? Let me just double check here. Uh the 11th we're looking at 2.7 2.9%. So, and then core inflation 3.1 to remain steady. Um which is interesting because you you hinted at it as well, Peter. You do expect inflation to trickle in just a little bit. So, you expect a higher inflation print later this week as well then, Peter? >> No, I think we're going to try to like I I think we're going to be supported around two and a half%. uh it'll be hard to get below 2 and a half% but I don't think we're going to stay above 3%. I think just the state of the economy doesn't bode for that and it's taking time for you know these things to filter out. I will say on the true inflation it has been ticking up last time I checked but again it's probably I think it's still 1.8%. So it's way lower than what the official readings are. I still think this owner's equivalent rent we're making so many mistakes in our you know calculations that are just known mistakes. So why we do that, I don't know. Cuz you look at Zillow rent for example and rents have been very stable. They're not showing inflation. So I I think over time we're going to trickle down to that 2.5 sort of level. Maybe then you know tariff inflation will keep it propped up. But if the economy is slowing I don't see us I I don't I think the Fed is being overly vigilant about inflation and undervigilant about the jobs data. >> Yeah. Peter, let's use the last two minutes to talk about the geopolitical influences which the Feds seem to be completely ignore. Um, they said, "Well, we're watching tariffs a little bit or we have different scenarios for the tariffs playing out, but they're not really tying in anything else. Maybe peace in Russia, Russia, Ukraine crisis or anything else." Like what is the market maybe not pricing in or ignoring and what is the Fed ignoring since we're coming from that angle? >> You know, I think there's two things that I'm watching closely and you know, we call it fairly loosely the American brand, right? what has happened to the American brand and so I want to see over time how US corporate sale you know US are doing overseas right about 40% of S&P 500 earnings come from foreign sales and is there a reluctance to buy US brands you know this is a bit extreme but at one time right during the Soviet Union Levis's represented freedom but I think there's always been this aspirational quality right people want to be associated with the US there's an aspiration to want these goods will that deteriorate over time with all that's going on and I watch India very very closely because I think the US has a lot of difficulty with a country like India. I think the US has two difficulties in particular with India. One is we are very you know yes or no you're for us or against us. So I think we struggle with someone who is just going to do what's right for India and I also think there's a bit of a convergence where a lot of you know some of the I get a sense that a lot of the older US politicians still view India very much as an emerging market country but India itself views itself as an emerging superpower. So I think that creates some friction. You watch Modi was definitely around you know Xi and Putin recently right will China be able to work with India? Will we lose India? India to me is a lynchman right it's going to be one of the largest economies in the world over time right they're 1.1 pe billion people they're growing they are very tech-savvy they're doing a lot of things you look at the AI data centers how much can gravitate towards there and so that to me is going to be a real lynch pin and if we don't treat with them well we run a risk of you know kind of these realignments of the world and you know we talk about the cards who's holding what cards with us versus China I think we underestimate two things One, we're only about 15% of Chinese exports. So, they have done a phenomenal job, if you're a Chinese business person or Chinese economy, to move away from us already. Two, they have a complete strangle hold on the processing and refining of rarest and critical minerals. I hear so much talk about rare earth and critical minerals. I really don't pay that much attention to rarest and critical minerals themselves. We can get those. We have a lot of those here. What it is is the processing and refining of them, which tends to be very dirty, very energyintensive, things that the West doesn't like to do. China has a strangle hold on that. That's been clearly a big driver of these trade negotiations. We are not yet doing anywhere close enough to break that strangle hold. So I I I think we could see a US that over time loses some of their global relationships, feels pressure from that. And again, everyone's going to sign with the US for a deal, shake hands because guess what? For most countries, it's, you know, the largest buyer of their goods. Having said that, the way things have behaved, there are probably a lot of people looking behind the scenes to figure out a way to be less reliant on the US over time. So I think again that's not going to happen overnight but we may start seeing that data over the months and year months and quarters ahead where we have lost some of our competitive advantage. Again I think we tra we are currently trading tangible for intangible. We had so many intangible benefits that didn't show up necessarily as a dollar and cent that someone could easily calculate. I think we've given up some of those. I think that could start influencing us. And again people are saying oh none of this happened. That's only going to happen over months and quarters, not weeks and months. >> May maybe summarize what we've just been discussing here, Peter. And I'm not asking for financial advice, maybe more of a generalization, but how should investors position until like the end of the year or the end of Q1 next year? Like what do you think be the right way to do it? You know, I like longerdated bonds right now. So in my income, I would probably be slightly overweight income relative to equities. So I'd be a little bit underweight equities, little bit overweight income within the income. I like the longerdated part. I actually in my personal account, you know, I like a lot of MUN closed end funds. The longdated MUN market's relatively cheap right now. I think the cost of running that little leverage that the closed end funds have will go down. I think you're going to see long end yields remain stable this time. I think you're going to see spreads. So, I'm very overweight that within my income. And then on the equity side, you know, I've been fairly balanced. Um I'm reducing exposure, but I had a lot of China's exposure. You know, I think it shocks people if you look. I think um QQQ is up 25% I want to say in a year and 13% year to date. The numbers for FXI are 55 and 26%. So it it's been this massive outperformance, I still think you want some exposure to EM in your equity portfolio and you want to shift a little bit away from what's going on. If we are getting these rate cuts and things are going to quiet down in general, I would say I'd like the small caps. problem for me right now with small caps is my belief that the tariffs and everything that's going on is much harder for a small cap company to deal with than a large cap. So again, I think I'm probably underweight in the US relative to the rest of the world still. No, fair enough. Awesome. Peter, really appreciate your insights. We need to get you back later this year just to catch up on what what the Fed is actually up to and how it is impacting the markets. Really appreciate your insights. Like where can we send our audience to follow more of your work, Peter? You know, I am on Twitter at TFMKTS. So, kind of a, you know, short form of TF Markets. Um, and you can look at academy seccurities.com website. We have information published there. >> Fantastic. Peter, really appreciate your time. Thank you so much for joining us and really looking forward to all the data coming out this week because it'll really it could really change the impact the direction of the markets in a heartbeat. So, really looking forward to that. >> Thanks very much. And hopefully next time we're p we're really poking a lot of time of figuring out how we want to deal with crypto given the Genius Act, the change of regulations. I don't have anything I haven't figured out how I want to play that, but I do think that's becoming a more important strategy given what this administration's doing. >> Absolutely. No, it's an interesting part especially gold revaluation is another topic that we can discuss in the same uh breath here as well. I think that really fits the narrative uh with what you're mentioning as well. Fantastic. Peter, thank you so much. Really appreciate it. And uh everybody else, thank you so much for tuning in to Soore Financially. I'm on the road, by the way, in Colorado. I'm on my way to Beaver Creek, one of the probably the world's largest mining investment conferences, and I appreciate you watching us. If you have any comments, if you have any feedback, put that down below. How are you positioned to to to end the year? And what do you expect the employment data to tell us? Should the Fed cut by 50 basis points, 75 basis points, or less? Should they hike? Shri Kumar the other day said maybe they should hike. So, really curious what your thoughts are. Let let us know and we much much appreciate your support. Thank you so much for tuning in. We'll be back with more. Take care out there. [Music]