With us around the table on place to say Gary Cowed morning.

With us around the table on place to say Gary Cowed morning.

Gary, Good morning, John. Thanks.

Gary, Good morning, John. Thanks.

I reflecting on our conversations we used to have many years ago when you were in front of the White House and you use this term the threes, Are we going back to the threes? Is that what you think we're going back to?

I reflecting on our conversations we used to have many years ago when you were in front of the White House and you use this term the threes, Are we going back to the threes? Is that what you think we're going back to?

It feels like we're going back to the threes, you know, in the threes. For those that don't remember me standing in front of the White House talking about the threes, I was talking about three percent GDP, three percent unemployment and three percent wage growth. That was sort of the sweet spot that we were trying to achieve at the time, and we thought that was a really good solid place for the United States economy to be, and that was sort of the goal. That was sort of the middle of the target that we were trying to hit, you know, month after month, as we were talking on those fridays after we released job data.

It feels like we're going back to the threes, you know, in the threes. For those that don't remember me standing in front of the White House talking about the threes, I was talking about three percent GDP, three percent unemployment and three percent wage growth. That was sort of the sweet spot that we were trying to achieve at the time, and we thought that was a really good solid place for the United States economy to be, and that was sort of the goal. That was sort of the middle of the target that we were trying to hit, you know, month after month, as we were talking on those fridays after we released job data.

What I've noticed from you is that we seem to have forgotten what normalists.

What I've noticed from you is that we seem to have forgotten what normalists.

Well, we totally forgot what You've.

Well, we totally forgot what You've.

Been around for a long time. You've seen many cycles what is normal.

Been around for a long time. You've seen many cycles what is normal.

So this is a campaign I'm on in many respects that we have forgot what normalists.

So this is a campaign I'm on in many respects that we have forgot what normalists.

So to go back to what normal.

So to go back to what normal.

Is have to go back to the post two thousand and eight financial crisis, because since two thousand and eight, you know, the FED has been the overwhelming dominant feature of financial markets. So prior to two thousand and eight, you know, FED meetings were important, but we didn't live in die off FED meetings. In fact, I'm old enough to remember when money supply was what drove markets. Now I'm really dating myself on money supply there. But then we get to two thousand and eight and the FED goes into the whole policy of zero interest rates and quantitative easy, followed by many other central banks around the world. And as the FED goes into the zero interest rate policy and they continue to build a bigger and bigger balance sheet, they become the dominant factor in financial markets. Not just in the fixed think of markets, not just in the rate markets. But when you literally have zero rates in return, you're literally forcing people out into the risk spectrum. So you bring many, many other asset classes that have historically not been appealing to people, You bring them into play. Because the search for return, the search for yield, you go farther out on the respector so, we lived through the two thousand and eighth period all the way up to basically, I would say COVID with this zero interest rate policy. People looking for alternative assets, looking for yield, searching for it in unusual places.

Is have to go back to the post two thousand and eight financial crisis, because since two thousand and eight, you know, the FED has been the overwhelming dominant feature of financial markets. So prior to two thousand and eight, you know, FED meetings were important, but we didn't live in die off FED meetings. In fact, I'm old enough to remember when money supply was what drove markets. Now I'm really dating myself on money supply there. But then we get to two thousand and eight and the FED goes into the whole policy of zero interest rates and quantitative easy, followed by many other central banks around the world. And as the FED goes into the zero interest rate policy and they continue to build a bigger and bigger balance sheet, they become the dominant factor in financial markets. Not just in the fixed think of markets, not just in the rate markets. But when you literally have zero rates in return, you're literally forcing people out into the risk spectrum. So you bring many, many other asset classes that have historically not been appealing to people, You bring them into play. Because the search for return, the search for yield, you go farther out on the respector so, we lived through the two thousand and eighth period all the way up to basically, I would say COVID with this zero interest rate policy. People looking for alternative assets, looking for yield, searching for it in unusual places.

We come into the COVID period.

We come into the COVID period.

And sort of the Fed stays in their zero interest rate policy because they have no idea, really what's happening. I'm not sure that that's a mistake. You know, when you don't know what's happening, don't make a change. And then all of a sudden, we get into the we'll call it the Biden administration, and we've gone through five stimulus packages in the United States, and all of a sudden, we've got us consumers with the best balance sheet they've had in their life, enormous amount of disposable income, the ability to finally go out and spend it after not having the ability for almost two years to spend anything that Like I said, you can't buy it at the grocery store, FedEx or UPS or the United States Mail Service can't deliver to you can't buy it. We now have the ability to go out and spend that money and lo and behold, we end up in a highly inflationary cycle. So the FED goes from this zero interest rate trying to drive economic growth, trying to drive inflation. And I always remind my best friends, you know, if you would have picked up any newspaper prior to two thousand, in that two thousand and eight to two thousand and twenty period, the FED headline would have been can the Fed ever create inflation again?

And sort of the Fed stays in their zero interest rate policy because they have no idea, really what's happening. I'm not sure that that's a mistake. You know, when you don't know what's happening, don't make a change. And then all of a sudden, we get into the we'll call it the Biden administration, and we've gone through five stimulus packages in the United States, and all of a sudden, we've got us consumers with the best balance sheet they've had in their life, enormous amount of disposable income, the ability to finally go out and spend it after not having the ability for almost two years to spend anything that Like I said, you can't buy it at the grocery store, FedEx or UPS or the United States Mail Service can't deliver to you can't buy it. We now have the ability to go out and spend that money and lo and behold, we end up in a highly inflationary cycle. So the FED goes from this zero interest rate trying to drive economic growth, trying to drive inflation. And I always remind my best friends, you know, if you would have picked up any newspaper prior to two thousand, in that two thousand and eight to two thousand and twenty period, the FED headline would have been can the Fed ever create inflation again?

So now we're back in.

So now we're back in.

This highly inflated period, and the FED goes from you know, quantitative ease and to quantitative tightening, to zero interust rate policies to fifty basis points sort of month in and month out. So we have been through this fifteen plus year cycle of what I would call abnormal. On top of that, we end up with this inverted yield curve. Because everyone's convinced the Fed's raising rates. The FED has to slow down the economy. We have to see job degradation, so we have to go into recession. I think the missing component there was how strong personal balance sheets were.

This highly inflated period, and the FED goes from you know, quantitative ease and to quantitative tightening, to zero interust rate policies to fifty basis points sort of month in and month out. So we have been through this fifteen plus year cycle of what I would call abnormal. On top of that, we end up with this inverted yield curve. Because everyone's convinced the Fed's raising rates. The FED has to slow down the economy. We have to see job degradation, so we have to go into recession. I think the missing component there was how strong personal balance sheets were.

Don't go into recession.

Don't go into recession.

We still have an inverted yield curve, which I don't think is normal.

We still have an inverted yield curve, which I don't think is normal.

So I think now for.

So I think now for.

The first time, in this fifteen year period, we're getting to position where we're starting, and we're just at the very beginning of heading back towards normal and what normal would be, and so reminding people a little bit what normal looks like. It's going back to the three three three. But historically we have a positively shaped yield curve in the United States, we have a risk premium historically. If you look at ten year yields, the ten year average yield in the United States, you can either put in the vulgar fed or you can take out the vulgar fed. With the vulgar fed, it's it's it's four point six percent without its four point three percent.

The first time, in this fifteen year period, we're getting to position where we're starting, and we're just at the very beginning of heading back towards normal and what normal would be, and so reminding people a little bit what normal looks like. It's going back to the three three three. But historically we have a positively shaped yield curve in the United States, we have a risk premium historically. If you look at ten year yields, the ten year average yield in the United States, you can either put in the vulgar fed or you can take out the vulgar fed. With the vulgar fed, it's it's it's four point six percent without its four point three percent.

If you put aside all of this right, if you take a look at the FED and say, okay, it's on the back table, you start to look at the economy.

If you put aside all of this right, if you take a look at the FED and say, okay, it's on the back table, you start to look at the economy.

It looks pretty good.

It looks pretty good.

It doesn't look like we're going.

It doesn't look like we're going.

Into recession a great. Why do people feel so bad?

Into recession a great. Why do people feel so bad?

Here's why people feel bad. Like the inflation number or the inflation data is the most peculiar data we have in the United States. We count inflation either month over month or year over year. We don't zero baseline it anywhere and so when we talk about inflation, we say how much inflation do we have over last month? And if we had inflation month over month, it means what you paid last month this year and what you're paying this month is higher. If we have inflation year over year, same thing. So we've seen the compounding effect of a three percent inflation year, a nine percent in place year, a three percent all that adds up to twenty plus percent. So when you're a consumer today, you're a hard working consumer. Today, your basket of groceries is twenty plus percent more than you think it should be worth and what it was worth two years ago. So the compounding effect of inflation, because we don't have a zero baseline basket, is really what's affecting people's mentality. The second part of the equation is people are working harder. They're working more jobs to be able to buy what they want to buy. The savings from the pandemic is gone.

Here's why people feel bad. Like the inflation number or the inflation data is the most peculiar data we have in the United States. We count inflation either month over month or year over year. We don't zero baseline it anywhere and so when we talk about inflation, we say how much inflation do we have over last month? And if we had inflation month over month, it means what you paid last month this year and what you're paying this month is higher. If we have inflation year over year, same thing. So we've seen the compounding effect of a three percent inflation year, a nine percent in place year, a three percent all that adds up to twenty plus percent. So when you're a consumer today, you're a hard working consumer. Today, your basket of groceries is twenty plus percent more than you think it should be worth and what it was worth two years ago. So the compounding effect of inflation, because we don't have a zero baseline basket, is really what's affecting people's mentality. The second part of the equation is people are working harder. They're working more jobs to be able to buy what they want to buy. The savings from the pandemic is gone.

It's not all gone.

It's not all gone.

There's still a lot of it sitting in treasury and money market.

There's still a lot of it sitting in treasury and money market.

But if you look at the.

But if you look at the.

Financial position of many Americans that went from high consumer debt going into the pandemic, then they went from consumer debt being wiped out. They went to high savings right because they were sort of forced in. They've actually spent all that money back. They're back the way they started. They're back at consumer debt. So they do care a lot about the inflation and they care about their purchasing power. And we are talking about wages today exceeding inflation, but that's on a sort of spot market basis. We haven't talked about it over a one year or a.

Financial position of many Americans that went from high consumer debt going into the pandemic, then they went from consumer debt being wiped out. They went to high savings right because they were sort of forced in. They've actually spent all that money back. They're back the way they started. They're back at consumer debt. So they do care a lot about the inflation and they care about their purchasing power. And we are talking about wages today exceeding inflation, but that's on a sort of spot market basis. We haven't talked about it over a one year or a.

Two year basis.

Two year basis.

You know, I got to say, I wonder how messy the data is as well. And if you were still the head of the Economic Council advising the president, how would you communicate the idea that we're seeing churn, massive churn in response to technological advancement. Something about eBay laying off nine percent of its staff because it needs to upgrade certain things, or SAP in Germany. You're seeing this again and again. How much is that featuring into the messiness of the data.

You know, I got to say, I wonder how messy the data is as well. And if you were still the head of the Economic Council advising the president, how would you communicate the idea that we're seeing churn, massive churn in response to technological advancement. Something about eBay laying off nine percent of its staff because it needs to upgrade certain things, or SAP in Germany. You're seeing this again and again. How much is that featuring into the messiness of the data.

You know, we always have mess with data, you know, we're always we never really get totally totally clean data. You know, we could talk about all the revisions to the unemployment data. You know, it's a survey data, and then they go, they go and revise the data from a month and two months ago, and sometimes the revisions are bigger.

You know, we always have mess with data, you know, we're always we never really get totally totally clean data. You know, we could talk about all the revisions to the unemployment data. You know, it's a survey data, and then they go, they go and revise the data from a month and two months ago, and sometimes the revisions are bigger.

Than the actual data. But we of course fixate.

Than the actual data. But we of course fixate.

On the data on that Friday, and then a month later we say, oh, that data was completely wrong. So if you're in the world of looking for the clean, pure answer, our economic data doesn't give you really clean, pure answers on a real time basis. If you look at the data over a cycle and over a period, it gets very clean over time. I think you've got to look at the data on a longer period of trend.

On the data on that Friday, and then a month later we say, oh, that data was completely wrong. So if you're in the world of looking for the clean, pure answer, our economic data doesn't give you really clean, pure answers on a real time basis. If you look at the data over a cycle and over a period, it gets very clean over time. I think you've got to look at the data on a longer period of trend.

That's why a lot of people like like I look at the Jultry report.

That's why a lot of people like like I look at the Jultry report.

I think jolts is really interesting to me because it shows job openings, amount of people looking.

I think jolts is really interesting to me because it shows job openings, amount of people looking.

But like what's in there.

But like what's in there.

There's some really interesting numbers in there. It shows you how many people quit their job. Quits to me is like one of the important numbers. People only quit their job when they feel like there's a better job out there, So it's a pure measure of what people's psychology on the market is. When the quit rate goes up, it means I believe I can get a better job, better paying, better quality of life.

There's some really interesting numbers in there. It shows you how many people quit their job. Quits to me is like one of the important numbers. People only quit their job when they feel like there's a better job out there, So it's a pure measure of what people's psychology on the market is. When the quit rate goes up, it means I believe I can get a better job, better paying, better quality of life.

And I'm not worried about quitting.

And I'm not worried about quitting.

When the quick rate goes down, people are saying, Okay, the job market's not very good. I should be happy with the job I have. I don't love it, but I should be happy happy with the job I have.

When the quick rate goes down, people are saying, Okay, the job market's not very good. I should be happy with the job I have. I don't love it, but I should be happy happy with the job I have.

So there's data out there.

So there's data out there.

If you put it all together, I think you can create a pretty clean picture for yourself.

If you put it all together, I think you can create a pretty clean picture for yourself.

Unlike this administration. Gary would actually communicate Ramo that would be the answer to that, but we won't get into that now. With us around a table for some final thoughts, Gary cond Gary, I know you don't want to talk about a horse Rice. We won't do that, But I do want to talk about policy. Sure, tax cuts, Tarrists. Let's start with tax cuts. Haven't you been talked about You and I caught up yesterday, and I have to say, I haven't talked about the tax cuts and all the money that starts to come back into the country for the best part of six years or something like that. How relevant are yesterday's tax cuts to today's economy.

Unlike this administration. Gary would actually communicate Ramo that would be the answer to that, but we won't get into that now. With us around a table for some final thoughts, Gary cond Gary, I know you don't want to talk about a horse Rice. We won't do that, But I do want to talk about policy. Sure, tax cuts, Tarrists. Let's start with tax cuts. Haven't you been talked about You and I caught up yesterday, and I have to say, I haven't talked about the tax cuts and all the money that starts to come back into the country for the best part of six years or something like that. How relevant are yesterday's tax cuts to today's economy.

Well, the twenty seventeen tax cuts, and I think they're really important. So this is back on the theme of normalization. So since we really got the tax cuts through that were signed December twenty second of twenty seventeen. We sort of had eighteen nineteen. We had two normalized years. Eighteen was sort of an implementation year, and we saw some really amazing things start happening.

Well, the twenty seventeen tax cuts, and I think they're really important. So this is back on the theme of normalization. So since we really got the tax cuts through that were signed December twenty second of twenty seventeen. We sort of had eighteen nineteen. We had two normalized years. Eighteen was sort of an implementation year, and we saw some really amazing things start happening.

We saw real repatriation.

We saw real repatriation.

Of foreign overseas money, so trillion and a half dollars come back in the United States because in the old tax system, corporations because leave their money offshore and they didn't have to pay US taxes, so they brought it back. We deemed that money to have brought back, so we taxed it.

Of foreign overseas money, so trillion and a half dollars come back in the United States because in the old tax system, corporations because leave their money offshore and they didn't have to pay US taxes, so they brought it back. We deemed that money to have brought back, so we taxed it.

It got brought back.

It got brought back.

I think when you see what's going on as the manufacturing boom in the United States right now, which started in that period of time, a lot of that has to do with this repatriated money. Historically, when companies couldn't bring their money back, they had to invest it overseas. They built manufacturing overseas, they invested in property, plant and equipment. Now that they're being tax no matter whether they bring it back or not, they're bringing it back, they're paying the tax.

I think when you see what's going on as the manufacturing boom in the United States right now, which started in that period of time, a lot of that has to do with this repatriated money. Historically, when companies couldn't bring their money back, they had to invest it overseas. They built manufacturing overseas, they invested in property, plant and equipment. Now that they're being tax no matter whether they bring it back or not, they're bringing it back, they're paying the tax.

And they're investing.

And they're investing.

So you've seen the creation of manufacturing in the United States. This started in twenty eighteen and nineteen as companies started bringing back their repatriated money. You've also seen the growth that we've seen in consumption. You've seen the growth in the.

So you've seen the creation of manufacturing in the United States. This started in twenty eighteen and nineteen as companies started bringing back their repatriated money. You've also seen the growth that we've seen in consumption. You've seen the growth in the.

Middle class is ability to spend money.

Middle class is ability to spend money.

Hard working individuals got a real tax cut, and that's why I think people have missed the economic picture of the United States so badly. Everyone calling for this recession over the last year and a half, I don't think they understood the additional consumptive powers that the tax cuts created. We put real additional disposable income into people's pockets, and we did it on purpose. We made some very conscientious decisions to make sure that we were delivering real taxable returns or less tax to the hardest working individuals in America. And it takes time for that to feed through the system. It doesn't happen year one and then we go through COVID, So you get all these unnatural, dominous and now we're back that what I say is more normal behavior. People are understanding what their taxable income is. You know, we're some of the programs that we put in twenty seventeen have expired, and I'm happy to say that we're seeing some bipartisan legislation to reinstate some of those programs.

Hard working individuals got a real tax cut, and that's why I think people have missed the economic picture of the United States so badly. Everyone calling for this recession over the last year and a half, I don't think they understood the additional consumptive powers that the tax cuts created. We put real additional disposable income into people's pockets, and we did it on purpose. We made some very conscientious decisions to make sure that we were delivering real taxable returns or less tax to the hardest working individuals in America. And it takes time for that to feed through the system. It doesn't happen year one and then we go through COVID, So you get all these unnatural, dominous and now we're back that what I say is more normal behavior. People are understanding what their taxable income is. You know, we're some of the programs that we put in twenty seventeen have expired, and I'm happy to say that we're seeing some bipartisan legislation to reinstate some of those programs.

There's a bill going through the House right now to.

There's a bill going through the House right now to.

Reinstate some of the child tax credits along with accelerated appreciation and the write off of R and D credits. We think both sides of that equation they were in the original tax bill.

Reinstate some of the child tax credits along with accelerated appreciation and the write off of R and D credits. We think both sides of that equation they were in the original tax bill.

We think they're both important.

We think they're both important.

You know, you're taking care of both sides of the equation. We have to take care of hard working families with children, and we have to incentivize companies to continue to do R and D and continue to invest in the country.

You know, you're taking care of both sides of the equation. We have to take care of hard working families with children, and we have to incentivize companies to continue to do R and D and continue to invest in the country.

There are those individual tax Customer twenty seventeen are set to be expired.

There are those individual tax Customer twenty seventeen are set to be expired.

As you say, that helps individuals and taxes.

As you say, that helps individuals and taxes.

But if you have a ten percent tariff wall around the United States, it's a massive tax on consumers.

But if you have a ten percent tariff wall around the United States, it's a massive tax on consumers.

It is.

It is.

So Look, the tariff wall is something that needs to be discussed. I know it's a potential. It's being discussed out there, and it's an idea. It's something that's being used to potentially pay for the.

So Look, the tariff wall is something that needs to be discussed. I know it's a potential. It's being discussed out there, and it's an idea. It's something that's being used to potentially pay for the.

Future tax plan. When it negated.

Future tax plan. When it negated.

It's like, I think we shouldn't get too far ahead of ourselves right now. As you said, the personal side of the tax reform package terminates in twenty twenty five, there will be enormous amount of discussion to what happens between now and twenty twenty five. It will be important to what the makeup of Congress looks like, to what you are able to do, what you're not willing to do. Are you going to be able to do this through reconciliation? Are you going to be able to do through normal order? Are you going to be able to do with a simple majority? To do that, that means the Republicans would have to control the House, the Senate, in the White House, if you've got to split Congress, or maybe the Democrats control all three. If you're doing it through reconciliation, you're going to be able to do it through one set of policies.

It's like, I think we shouldn't get too far ahead of ourselves right now. As you said, the personal side of the tax reform package terminates in twenty twenty five, there will be enormous amount of discussion to what happens between now and twenty twenty five. It will be important to what the makeup of Congress looks like, to what you are able to do, what you're not willing to do. Are you going to be able to do this through reconciliation? Are you going to be able to do through normal order? Are you going to be able to do with a simple majority? To do that, that means the Republicans would have to control the House, the Senate, in the White House, if you've got to split Congress, or maybe the Democrats control all three. If you're doing it through reconciliation, you're going to be able to do it through one set of policies.

If you do it through.

If you do it through.

Regular order, you're going to have to have a much more of a compromise on what goes on here. So I think that the ideas that are being talked about right now are concepts. And this is what's interesting about the electro process in the United States, And I think this is why it's important.

Regular order, you're going to have to have a much more of a compromise on what goes on here. So I think that the ideas that are being talked about right now are concepts. And this is what's interesting about the electro process in the United States, And I think this is why it's important.

This is a time where where.

This is a time where where.

Potential candidates and incumbents and we actually have a couple of incumbents running. They get to tell us about their ideas of how they want to run the government.

Potential candidates and incumbents and we actually have a couple of incumbents running. They get to tell us about their ideas of how they want to run the government.

And these are ideas.

And these are ideas.

If you look at the history, there are concepts, and they're starting places, they're not necessarily ending places.

If you look at the history, there are concepts, and they're starting places, they're not necessarily ending places.

Premos go thoughts, I know when Lass go thoughts.

Premos go thoughts, I know when Lass go thoughts.

Oh no, I just to me the idea. So many people have come on and said, we're taking it seriously. If Trump says something, we're starting seriously. And Gary Cone is saying.

Oh no, I just to me the idea. So many people have come on and said, we're taking it seriously. If Trump says something, we're starting seriously. And Gary Cone is saying.

Eh, maybe not.

Eh, maybe not.

You know, you got to look at the whole process. Unfortunately, we're out of time, but we'll have to get you back to talk about that.

You know, you got to look at the whole process. Unfortunately, we're out of time, but we'll have to get you back to talk about that.

Gary's going to see you. Thanks Morna, Thank you, sir Gary Khan.

Gary's going to see you. Thanks Morna, Thank you, sir Gary Khan.