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Day 4 | Transcript

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Hello, PRMI!

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We've made it to day
four of Conference

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and I don't know about
you, but I'm loving it.

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We've heard from our fearless
leader, Kenneth Knudson,

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as he recapped our
incredible year

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and laid out a vision
for the future.

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We were inspired by
Victoria Arlen's journey

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of redefining possible as
she fought against all odds

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to become a champion in

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so many ways.

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Yesterday, PRMI's
good friend Lonnie Mayne

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shared new ways we could take
Red Shoes to the next level.

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And then, we had the
privilege of honoring

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two of our colleagues, Karie
Gallegos and Shellie George,

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with the prestigious
Cheri Bruno

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Ambassador of Excellence award.

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Now, this week has
been awesome! If you've

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missed any of our
past presentations,

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you can still view them on our
National Conference website.

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And while you're
there, take a moment

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to help some kids in need by
donating to No Kid Hungry.

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It's a great cause

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and an excellent way to
pay our success forward.

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And now, I'm honored to introduce
our final National Conference

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speaker, Dr. Elliot F.
Eisenberg, also fondly

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known as the Bowtie Economist.

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Dr. Eisenberg is an
internationally acclaimed

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economist with a unique
talent for making

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economics engaging,
accessible and even fun.

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Dr. Eisenberg earned
a BA in economics

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with first class honors from
McGill University in Montreal,

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as well as a Master and Ph.D.
in public administration

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from Syracuse University.

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He's the chief economist
for GraphsandLaughs,

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a Miami-based
economic consultancy

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firm that serves a variety
of clients across the US.

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Dr. Eisenberg has spoken to
hundreds of business groups

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and associations, serving as
a keynote speaker on topics

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including economic forecasts,
economic impact of industries

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such as home building, consequences
of government regulation

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and other current
economic issues.

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He has been invited to
testify before lawmakers

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and is often asked to comment
on proposed legislation.

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His research and
opinions have been

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featured in Bloomberg
Businessweek, Bureau

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of National Affairs,
Forbes, Fortune

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and many other publications.

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We are fortunate to get
the chance to hear from him

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and apply his
insights as we prepare

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for a strong and stable
future at PRMI.

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Thank you, A.J., very much,
for that warm introduction.

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It's really a
pleasure to be here.

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I wish I were here in person
and all that kind of stuff,

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but let's get going.

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There's a ton of
stuff to talk about.

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Let me share my slides
with you right away,

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and we'll be off and
running about the economy.

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There's just so
much to talk about.

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It is really insane.

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And let's begin, as we always
do, as I always do, with GDP.

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GDP is all goods and
services made in the USA

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and there are four parts to it.
C is the first term household

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consumption.

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The second term is I,
the third term G, government

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spending and the last term in
brackets exports minus imports.

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Right. The thing
that matters, these

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aren't the same size.
C is the biggest.

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It's 69% of GDP.

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It's everything we
spend as a household,

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whether it's a pair
of pants or health

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insurance, life insurance,
airplane tickets or shoe

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repair.

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It's everything, right?

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I is corporate investment,
it's much smaller.

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It's 15% roughly and G is just about
15%. C is about 69%. Exports and

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imports about negative 2,
roughly, that gets you ballpark

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100%. Right now, it doesn't
matter too much, exports

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and imports.

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You don't care about sales.

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What you really want to focus
on here primarily is C and G.

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C is beginning to
wane a little bit.

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And because of that,
I think we really

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need more fiscal stimulus.

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Hopefully Congress will
come through with it soon.

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You're going to hear
me talk about this

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as we go through a lot
of this conversation.

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We really do need this
government fiscal stimulus

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coming, or aid package
or financial package,

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whatever you want to call it.

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It'll push up G, which will
give C, households, more

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money in some shape, way or
form, increased unemployment

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insurance benefits,
whatever it is,

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and that will help spending
increase, help employment grow

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and so on and so forth.

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Let's begin by looking at the
good parts of the economy.

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I don't want you to think
that the economy's not good.

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It's made a remarkable
recovery, truly remarkable.

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There's a long way
to go, but we've

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made a staggering improvement,
much better than we

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thought that would occur.

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If you asked me in March or April,
when things were terrible,

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where we'd be now,
I would not have

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thought you'd have made as
much progress as we have,

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let alone the housing market,
which is actually on fire

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and which we'll talk
about somewhat later.

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This is real retail sales.

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They're really good,
as you can see.

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Obviously, they're terrific.

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If you look at the
trend of retail sales

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and you kept it going
all the way through,

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we're a little bit above
trend on retail sales.

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So looking at
retail data alone,

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I'd say, whoa! Economy's
awesome, super great!

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But it's not quite so great.

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If you look at the change
from month to month to month,

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you see it's not so hot.

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You can see here,
March is pretty crummy.

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April, even worse.

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May is great.

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June is terrific.

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And then July, August,
September, October,

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it's kind of waning
down just because it is.

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You can't keep spending
tons and tons and tons forever,

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right? You've bought
everything you need to buy.

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You bought a pair of pants.

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You bought a Peloton.
You bought some bricks.

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You bought some weights,
you bought a bicycle,

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you bought a new car.

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You get the idea.

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You run out of
things to buy, right?

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So the bottom number is
pretty much the same.

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It excludes purchases
of home improvement

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stuff, gasoline or something.

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But it's the same process.

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So it's very good.

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But it's not getting better.

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It's low hanging fruit.

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It's been picked.

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It's gone.

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The second thing I want to
show is automobile sales.

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It's pretty much the same story.

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You can see where we
were before the recession

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here at about 16.4 million
units, 16 and 1/2 million units.

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And now we're at about
16, 15.8, whatever it is.

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Fifteen five,

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no one's quite sure.

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They don't give us
monthly data anymore.

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It's quarterly, so
it's hard to interpret.

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But anyways, the point is
it's a little bit lower.

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And it's a little bit lower
because of fleet sales,

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because Hertz and
Avis, we're not flying

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so much.

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We don't need rental cars

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so much.

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So there's down.

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But other than that, it's
pretty much recovered.

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It's not going to
get much better.

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So a lot of sectors
have really improved,

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but they're done improving.

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Now, if I looked at this
data in isolation and said,

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wow, retail sales are
doing really well,

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automobile sales are
really doing well,

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we know home sales are ripping
the cover off the ball.

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We'll talk about that later

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as I mentioned earlier. I'd
say the economy is terrific.

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But it's not.

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We're still in the recession.

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We're clearly two
or three percentage

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points of GDP
below where we were

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before the recession began.

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So what's going on?

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How come the data
looks so good?

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It looks so good
because of this.

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We're buying tons of goods.

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We're buying the
hell out of goods.

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Again, we can't go to the gym,

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we buy a Peloton.

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We don't want to drive to
work anymore or take a subway

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or something

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or go by train, we buy a car.
Or we want to go on vacation,

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but we don't want to risk
traveling with people,

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let's buy an RV.

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I can't go to, I can't
go to the public pool,

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we'll build a pool
in the backyard.

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I mean, all these are
changing our behavior.

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So the data that used to
really lead us and give us

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really good indications on
the health of the economy

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aren't nearly as
useful as they once

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were because of this bifurcation
in our spending patterns.

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A lot more goods, a
lot fewer services.

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And most importantly
about this graph, services

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are much, much, much
bigger than goods.

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We spend much more
money on services.

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I mean, I know I'm looking
for my cell phone right now,

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but we spend $300 a month
on cell phone bills.

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That's that's a service.

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You get a massage, it's a service,
you go to a ballgame,

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it's a service. You
buy a refrigerator,

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it's a good one,

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how many fridges do you need, right?

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So overall, this
graph where my cursor

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is, we're about two down,
2, 3%, because services

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are so much bigger.

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And of course,
consumer confidence

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isn't quite so great.

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It's not terrible by any
stretch of the imagination,

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but it hasn't really
taken off because we still

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have Coronavirus, right?

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We don't know when the
vaccines are going to come

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even though they're
here now. Things

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are much better as a result.
We're much more confident.

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Still, you can look at the data.

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And you can see that consumer
confidence is bouncing around.

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The top panel, which
is a sentiment directly,

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and expectations on the
bottom, they're bouncing

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around. Coronavirus numbers
go down, we're happy,

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they go up,

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we're less happy.

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There's a vaccine announcement,
but we take two shots,

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it's got to be
transported and stored

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at 120 degrees or something,
we're less confident.

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Oh, there's an
election, and by the way,

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the election's really hammered

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consumer confidence.
It's very interesting.

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If you look at this
graph here, what you see

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is Republicans in
red, not surprising.

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They become much less
happy after the election.

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But in the gray section, here
is the post election day.

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You can see Republicans
become much less happy,

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but Democrats don't
become a lot happier.

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I don't know this
for a fact, but I'm

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guessing what's going
on is Republicans

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are legitimately unhappy
because their candidate didn't win.

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Democrats, by
contrast, aren't happy

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because Coronavirus
cases are really high

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and they're in blue states
and they're closed down

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and so on.

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So you've got this Coronavirus
thing and the election

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has caused turmoil.
This Coronavirus thing

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cannot be...

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This is the single
most important thing.

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What we've got here
is a health crisis

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that morphed into or led to a
recession, an economic problem,

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right? But this wasn't an
inherently normal recession.

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Normal recession is the loss
of consumer confidence.

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00:10:01,810 --> 00:10:03,480
There's a loss of
business confidence.

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People stop spending
on goods and they buy

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continue buying services.
Here,

249
00:10:09,130 --> 00:10:12,000
we stop buying services
and continue to buy goods.

250
00:10:12,000 --> 00:10:14,730
It's completely the reverse
cause we're stuck in our home.

251
00:10:14,730 --> 00:10:16,517
And if you've kept
your job until now,

252
00:10:16,517 --> 00:10:17,850
you kept your job through March

253
00:10:17,850 --> 00:10:19,892
and April, you're probably
much pretty much going

254
00:10:19,892 --> 00:10:20,790
to keep your job.

255
00:10:20,790 --> 00:10:24,240
So Coronavirus cases go up, we
get nervous, we don't stand.

256
00:10:24,240 --> 00:10:25,590
And you see it now in data.

257
00:10:25,590 --> 00:10:26,200
I read data

258
00:10:26,200 --> 00:10:28,920
this morning, I think it was in
South Dakota or North Dakota,

259
00:10:28,920 --> 00:10:32,250
their consumption patterns
and visiting and mobility

260
00:10:32,250 --> 00:10:35,250
data was much elevated when much
of the country wasn't so good.

261
00:10:35,250 --> 00:10:37,140
But now they've
fallen considerably

262
00:10:37,140 --> 00:10:38,830
as Coronavirus cases have risen.

263
00:10:38,830 --> 00:10:42,270
So there's governor effects and state
and city council effects

264
00:10:42,270 --> 00:10:44,580
and county commissioner
effects driving down

265
00:10:44,580 --> 00:10:47,620
consumption patterns and also
personal, just personal safety

266
00:10:47,620 --> 00:10:48,180
and so on.

267
00:10:48,180 --> 00:10:49,990
Now, we have a vaccine coming,

268
00:10:49,990 --> 00:10:50,762
that's great news.

269
00:10:50,762 --> 00:10:52,470
By the end of the
year, if all goes well,

270
00:10:52,470 --> 00:10:55,200
even these small slivers
of data, the red stuff

271
00:10:55,200 --> 00:10:57,960
at the bottom, means 20
million Americans may well

272
00:10:57,960 --> 00:10:59,980
be vaccinated by
the end of the year.

273
00:10:59,980 --> 00:11:01,590
And this is really remarkable.

274
00:11:01,590 --> 00:11:05,100
So and probably by the end
of June, from everything I read,

275
00:11:05,100 --> 00:11:06,460
this is in the rearview mirror.

276
00:11:06,460 --> 00:11:09,570
It's still a bit of a problem,
but we've all been inoculated

277
00:11:09,570 --> 00:11:12,510
or everybody who wants to be
inoculated has been inoculated.

278
00:11:12,510 --> 00:11:15,420
We have achieved herd immunity
because the vaccines have

279
00:11:15,420 --> 00:11:20,130
such a high efficacy rate, over
90%. If we get 70% vaccination

280
00:11:20,130 --> 00:11:25,147
rates, we're probably good to go.
With that 70%, 90% test,

281
00:11:25,147 --> 00:11:26,230
we're probably good to go.

282
00:11:26,230 --> 00:11:29,310
We've got 70% of the population
at that point has probably

283
00:11:29,310 --> 00:11:32,190
been vaccinated, or 80%,
we're probably fine.

284
00:11:32,190 --> 00:11:34,030
So the problem,

285
00:11:34,030 --> 00:11:35,670
the thing here that's
key to remember

286
00:11:35,670 --> 00:11:38,310
is we're now in December.

287
00:11:38,310 --> 00:11:41,130
This problem,
largely ends in June,

288
00:11:41,130 --> 00:11:44,050
but our economy is
beginning to run out of gas.

289
00:11:44,050 --> 00:11:46,020
That's the issue
we've got right now.

290
00:11:46,020 --> 00:11:47,010
So here's data.

291
00:11:47,010 --> 00:11:49,090
This is gasoline
consumption. Okay,

292
00:11:49,090 --> 00:11:50,350
we're not declining here,

293
00:11:50,350 --> 00:11:51,780
so we're not running out of gas.

294
00:11:51,780 --> 00:11:54,210
We're just not pushing the
gas pedal all the way down.

295
00:11:54,210 --> 00:11:55,770
We're pushing it
at 90% and we've

296
00:11:55,770 --> 00:11:58,290
been pushing at 90% for
July, August, September,

297
00:11:58,290 --> 00:12:00,060
October, November.

298
00:12:00,060 --> 00:12:02,240
And there's nothing
really new going on here right?

299
00:12:02,240 --> 00:12:04,140
This is the latest data

300
00:12:04,140 --> 00:12:05,170
and it's fine.

301
00:12:05,170 --> 00:12:08,680
We're good, we're flat at 90%.
This is not a problem.

302
00:12:08,680 --> 00:12:11,070
This is just GDP being
lower than it could be.

303
00:12:11,070 --> 00:12:12,510
But we're not declining.

304
00:12:12,510 --> 00:12:15,630
This is hotel occupancy rates.

305
00:12:15,630 --> 00:12:17,220
What I want you to
focus in on here

306
00:12:17,220 --> 00:12:19,710
is the distance, up
and down distance,

307
00:12:19,710 --> 00:12:21,900
not the horizontal,
the vertical distance

308
00:12:21,900 --> 00:12:25,470
between the red line this year
and the 20 year average in dark

309
00:12:25,470 --> 00:12:28,140
blue. When this
distance is shrinking

310
00:12:28,140 --> 00:12:31,710
like it is here, from here to
here, it was a very big gap.

311
00:12:31,710 --> 00:12:34,050
From here to here, small. Things
were getting better.

312
00:12:34,050 --> 00:12:36,290
But now now they're
going down here,

313
00:12:36,290 --> 00:12:36,790
I get it,

314
00:12:36,790 --> 00:12:37,998
they're going down here, too,

315
00:12:37,998 --> 00:12:41,400
but is this distance here
smaller than this distance

316
00:12:41,400 --> 00:12:42,010
here?

317
00:12:42,010 --> 00:12:43,380
I'm not so sure about that.

318
00:12:43,380 --> 00:12:45,690
There's seasonality, lot
of things going on.

319
00:12:45,690 --> 00:12:47,240
It's not getting better either.

320
00:12:47,240 --> 00:12:50,130
It was getting better,
but it's not anymore.

321
00:12:50,130 --> 00:12:51,720
Here's airplane travel.

322
00:12:51,720 --> 00:12:54,760
What I care about here
is the dotted gray line.

323
00:12:54,760 --> 00:12:57,810
The dotted gray line shows us
dividing the current year

324
00:12:57,810 --> 00:13:00,490
in red over last
year in blue, so it's

325
00:13:00,490 --> 00:13:03,810
red over blue gets
us the dotted line.

326
00:13:03,810 --> 00:13:05,840
It's as high as it's
been, but I don't think

327
00:13:05,840 --> 00:13:07,090
it's going to get much higher.

328
00:13:07,090 --> 00:13:10,230
This was this was traffic for
Thanksgiving that pushed it up.

329
00:13:10,230 --> 00:13:12,060
I'm not convinced
it's much better.

330
00:13:12,060 --> 00:13:13,680
Maybe it's a little better.

331
00:13:13,680 --> 00:13:14,288
So the data

332
00:13:14,288 --> 00:13:14,830
I showed you

333
00:13:14,830 --> 00:13:18,400
so far is neutral to maybe
better, maybe a little worse,

334
00:13:18,400 --> 00:13:19,390
but nothing really awful,

335
00:13:19,390 --> 00:13:20,543
really serious.

336
00:13:20,543 --> 00:13:22,460
But now let's look at
the next couple of bits of

337
00:13:22,460 --> 00:13:24,220
data. This is public
transit data.

338
00:13:24,220 --> 00:13:26,530
You might say you don't
go to work anymore.

339
00:13:26,530 --> 00:13:27,480
I get that,

340
00:13:27,480 --> 00:13:29,730
I understand. The
percentage of people

341
00:13:29,730 --> 00:13:34,020
who work is only 25,
26% right now, it's very low.

342
00:13:34,020 --> 00:13:36,690
Highest in Dallas is
40; lowest, I think,

343
00:13:36,690 --> 00:13:40,500
in San Francisco with like 12
or 13 or something like that.

344
00:13:40,500 --> 00:13:42,940
The key thing is
it's going down.

345
00:13:42,940 --> 00:13:45,870
You see, it peaked out
here in late September,

346
00:13:45,870 --> 00:13:47,670
early October, middle
of October where my

347
00:13:47,670 --> 00:13:51,180
cursor is. Since then,
it's been declining.

348
00:13:51,180 --> 00:13:52,870
We're not venturing out

349
00:13:52,870 --> 00:13:54,630
so much.

350
00:13:54,630 --> 00:13:56,260
Not so great.

351
00:13:56,260 --> 00:13:58,630
Next piece of data.
Restaurants, these

352
00:13:58,630 --> 00:14:01,540
are restaurants that are open,
some of them never reopened

353
00:14:01,540 --> 00:14:02,210
after March.

354
00:14:02,210 --> 00:14:03,670
Some have closed along the way.

355
00:14:03,670 --> 00:14:06,680
But among restaurants that
are open, what's footfall?

356
00:14:06,680 --> 00:14:09,670
Essentially, how much
attendance do they have?

357
00:14:09,670 --> 00:14:12,100
How many meals are they turning
over? That kind of stuff.

358
00:14:12,100 --> 00:14:13,990
And you can see these
numbers peaked out

359
00:14:13,990 --> 00:14:16,040
somewhere around late October.

360
00:14:16,040 --> 00:14:21,070
This bump here was
probably a vacation,

361
00:14:21,070 --> 00:14:23,400
a long, long vacation,
Thanksgiving or something,

362
00:14:23,400 --> 00:14:25,770
right? So you get
quirky data here

363
00:14:25,770 --> 00:14:26,270
and there.

364
00:14:26,270 --> 00:14:29,200
But the thing is, look
at this on the far right

365
00:14:29,200 --> 00:14:31,790
where my cursor is. Certainly,
it's falling down.

366
00:14:31,790 --> 00:14:35,080
Now it's true in warmer
states on the top, Texas

367
00:14:35,080 --> 00:14:37,930
and California, Florida,
that's higher than it

368
00:14:37,930 --> 00:14:40,990
is in Illinois or New York.

369
00:14:40,990 --> 00:14:42,220
Right I get that.

370
00:14:42,220 --> 00:14:43,870
But they're all going down.

371
00:14:43,870 --> 00:14:45,010
So things are weakening.

372
00:14:45,010 --> 00:14:46,010
Look at this next graph.

373
00:14:46,010 --> 00:14:48,640
This is people going to
the office and what you see

374
00:14:48,640 --> 00:14:51,790
is working from work, WFW,
not the World Wrestling

375
00:14:51,790 --> 00:14:53,440
Federation or something.

376
00:14:53,440 --> 00:14:55,990
You see here as it
troughs out back in March,

377
00:14:55,990 --> 00:14:58,570
April, when we're locked down,
we can't get out of our house,

378
00:14:58,570 --> 00:15:00,970
it slowly and steadily
improves, improves

379
00:15:00,970 --> 00:15:03,280
improves, improves,
improves 'til there.

380
00:15:03,280 --> 00:15:04,660
And then it stops improving.

381
00:15:04,660 --> 00:15:07,240
And from that point on,
with my cursor--so here,

382
00:15:07,240 --> 00:15:09,350
there's no change. The
last couple of weeks

383
00:15:09,350 --> 00:15:10,430
it's Thanksgiving again,

384
00:15:10,430 --> 00:15:12,680
so I'm not convinced it's a
really effect, real effect

385
00:15:12,680 --> 00:15:13,180
here.

386
00:15:13,180 --> 00:15:13,730
Maybe it is.

387
00:15:13,730 --> 00:15:14,800
That's even worse.

388
00:15:14,800 --> 00:15:16,390
But assuming it's
not just that, we've

389
00:15:16,390 --> 00:15:19,130
had no real change in
the last five, six weeks,

390
00:15:19,130 --> 00:15:20,658
so the improvement has stopped.

391
00:15:20,658 --> 00:15:21,950
We're not going to restaurants.

392
00:15:21,950 --> 00:15:25,180
We're not taking public
transport, we're not going to work.

393
00:15:25,180 --> 00:15:28,270
Our economy's beginning
to lurch backwards

394
00:15:28,270 --> 00:15:30,760
a little. Look at
this graph here.

395
00:15:30,760 --> 00:15:34,130
This tells you how much
movement there is in counties.

396
00:15:34,130 --> 00:15:35,920
I want you to look
at the bottom graph.

397
00:15:35,920 --> 00:15:38,860
The bottom half is much more
interesting than the top graph,

398
00:15:38,860 --> 00:15:41,290
but they both have
something in common.

399
00:15:41,290 --> 00:15:43,390
What they have in common
is they both peak

400
00:15:43,390 --> 00:15:46,160
out right around here.

401
00:15:46,160 --> 00:15:49,640
Right around there,
right? Both graphs.

402
00:15:49,640 --> 00:15:51,680
And then they start declining.

403
00:15:51,680 --> 00:15:54,440
This is again, this is
similar to public transit,

404
00:15:54,440 --> 00:15:58,718
but it's more general, not
just use of public transit.

405
00:15:58,718 --> 00:16:00,260
They're taking your
data for how much

406
00:16:00,260 --> 00:16:03,828
your phone is moving around
and compiling these graphs.

407
00:16:03,828 --> 00:16:04,620
And they're seeing

408
00:16:04,620 --> 00:16:06,230
you're not moving around, you're
not going to restaurants,

409
00:16:06,230 --> 00:16:07,563
you're not going public transit.

410
00:16:07,563 --> 00:16:09,780
You're not going to the office.

411
00:16:09,780 --> 00:16:13,110
So this doesn't really matter
to housing all that much,

412
00:16:13,110 --> 00:16:14,943
because our people who
buy houses have jobs.

413
00:16:14,943 --> 00:16:16,902
Doesn't matter if they're
going to work or not,

414
00:16:16,902 --> 00:16:17,940
are going to restaurants.

415
00:16:17,940 --> 00:16:18,950
It may be even better.

416
00:16:18,950 --> 00:16:19,950
They're not going
to a restaurant

417
00:16:19,950 --> 00:16:22,680
because it means they have more
money to pay their mortgage.

418
00:16:22,680 --> 00:16:24,540
But overall, for the
health of the economy,

419
00:16:24,540 --> 00:16:25,880
this is not such a good thing.

420
00:16:25,880 --> 00:16:27,780
Now, the stock market's
done remarkably well

421
00:16:27,780 --> 00:16:29,310
over this entire period of time.

422
00:16:29,310 --> 00:16:31,110
We had this terrific
collapse where

423
00:16:31,110 --> 00:16:35,520
we go from the end of late Feb
Feb 20 or something, to March 20

424
00:16:35,520 --> 00:16:38,400
or March 24th, somewhere
around this one month

425
00:16:38,400 --> 00:16:41,430
of a precipitous
decline, vertiginous fall

426
00:16:41,430 --> 00:16:43,980
followed by the next,
this tremendous rally

427
00:16:43,980 --> 00:16:46,290
since the end of
March. Then April, May,

428
00:16:46,290 --> 00:16:48,930
June, July, August,
September, October, November,

429
00:16:48,930 --> 00:16:50,400
you've had a terrific rally.

430
00:16:50,400 --> 00:16:51,700
It's made up all the losses

431
00:16:51,700 --> 00:16:54,720
and more. Corporate earnings are
going to be fine in 2021.

432
00:16:54,720 --> 00:16:55,860
Interest rates are low.

433
00:16:55,860 --> 00:16:57,900
I can explain why
this is going on.

434
00:16:57,900 --> 00:16:59,655
This is certainly
helping consumption.

435
00:16:59,655 --> 00:17:01,530
But even with this good
news, there's only so

436
00:17:01,530 --> 00:17:04,470
many Peltons you need, right?

437
00:17:04,470 --> 00:17:05,910
So you put this all together.

438
00:17:05,910 --> 00:17:06,910
This is what you've got.

439
00:17:06,910 --> 00:17:08,579
This is all of
household consumption,

440
00:17:08,579 --> 00:17:11,579
69% of GDP.

441
00:17:11,579 --> 00:17:13,800
Everything a
household buys, it's

442
00:17:13,800 --> 00:17:15,420
making up lots of
distance, you can

443
00:17:15,420 --> 00:17:17,280
see where we are now
with my cursor compared

444
00:17:17,280 --> 00:17:19,560
to where we were before
the recession began.

445
00:17:19,560 --> 00:17:21,720
We've made up a
lot of the space.

446
00:17:21,720 --> 00:17:26,609
The problem is now the
graph is curving out.

447
00:17:26,609 --> 00:17:30,360
As the graph curves out,
the recovery takes longer.

448
00:17:30,360 --> 00:17:32,190
You want the recovery
to be V-shaped.

449
00:17:32,190 --> 00:17:33,660
You don't want it
to look like this

450
00:17:33,660 --> 00:17:35,580
or you don't want it
to look like that.

451
00:17:35,580 --> 00:17:38,920
And that's what's starting
to look like. It falls fast,

452
00:17:38,920 --> 00:17:42,420
it comes back, and
it begins to slow.

453
00:17:42,420 --> 00:17:45,790
If you take this process of
this graph looking like this

454
00:17:45,790 --> 00:17:47,770
and look at the month
to month changes

455
00:17:47,770 --> 00:17:49,680
in the next graph,
this is what it

456
00:17:49,680 --> 00:17:54,720
looks like. Awful March,
disgusting April, the worst

457
00:17:54,720 --> 00:17:55,220
ever.

458
00:17:55,220 --> 00:17:58,710
And May, June, July,
August, September, October.

459
00:17:58,710 --> 00:18:02,860
These aren't inherently bad
numbers, but you go from

460
00:18:02,860 --> 00:18:04,920
it's terrible down, terrific up.

461
00:18:04,920 --> 00:18:09,420
And then you begin to
get back to normal trend.

462
00:18:09,420 --> 00:18:13,235
This graph looks very much the
same as, and not by accident,

463
00:18:17,660 --> 00:18:19,300
here it is.

464
00:18:19,300 --> 00:18:22,420
This graph, right, they
look almost identical.

465
00:18:22,420 --> 00:18:24,530
It's down, up

466
00:18:24,530 --> 00:18:28,307
and then slowly
returning to trend.

467
00:18:28,307 --> 00:18:29,890
There's nothing you
can do about this.

468
00:18:29,890 --> 00:18:31,598
There's only so
much you want to buy,

469
00:18:31,598 --> 00:18:32,590
only so much you need.

470
00:18:32,590 --> 00:18:34,240
And you're not
going to be spending

471
00:18:34,240 --> 00:18:39,370
on bars, ballet and basketball.

472
00:18:39,370 --> 00:18:41,380
So we can't, we're
not driving a car,

473
00:18:41,380 --> 00:18:43,990
drop our kids off  jiu jitsu
lessons, dropping off the kids

474
00:18:43,990 --> 00:18:44,660
at school

475
00:18:44,660 --> 00:18:46,087
and then going to work.

476
00:18:46,087 --> 00:18:47,420
We're just not doing that stuff.

477
00:18:47,420 --> 00:18:49,450
So our economy's sort
of stymied, and there's

478
00:18:49,450 --> 00:18:51,220
a little bit of
backtracking going on,

479
00:18:51,220 --> 00:18:52,810
giving us this sort of thing.

480
00:18:52,810 --> 00:18:54,050
So we're OK.

481
00:18:54,050 --> 00:18:57,580
We've made a tremendous amount
of recovery, staggering amount,

482
00:18:57,580 --> 00:18:59,600
but it's starting
to soften a little.

483
00:18:59,600 --> 00:19:01,450
Manufacturing is
ripping the cover

484
00:19:01,450 --> 00:19:04,030
off the ball, like housing,
doing remarkably well.

485
00:19:04,030 --> 00:19:05,620
Firms are buying
all kinds of stuff

486
00:19:05,620 --> 00:19:08,600
to deal with COVID. Hand
sanitizers, plexiglass sheets

487
00:19:08,600 --> 00:19:09,100
and all that.

488
00:19:09,100 --> 00:19:10,660
We'll talk a little
more about that.

489
00:19:10,660 --> 00:19:12,110
But they're happy.

490
00:19:12,110 --> 00:19:13,010
Now, you can see it here.

491
00:19:13,010 --> 00:19:15,580
The sentiment among
manufacturing companies

492
00:19:15,580 --> 00:19:17,647
is really good. When they ask
purchasing managers,

493
00:19:17,647 --> 00:19:18,480
Are you happy? They go

494
00:19:18,480 --> 00:19:19,750
Yeah yeah, I'm really happy.

495
00:19:19,750 --> 00:19:21,160
Great! We've recovered.

496
00:19:21,160 --> 00:19:23,410
So this isn't the
level of production.

497
00:19:23,410 --> 00:19:24,880
This is how happy you are.

498
00:19:24,880 --> 00:19:26,770
Are things busy, are sales good,

499
00:19:26,770 --> 00:19:27,640
that kind of stuff.

500
00:19:27,640 --> 00:19:29,950
It's a good reflection,
but it's not the same.

501
00:19:29,950 --> 00:19:31,600
If you look here, it's factory

502
00:19:31,600 --> 00:19:35,020
utilization rates, they're
slowly continuing

503
00:19:35,020 --> 00:19:37,570
to improve. Massive improvement
in the short run there,

504
00:19:37,570 --> 00:19:40,030
and now it's taking
a little bit longer.

505
00:19:40,030 --> 00:19:43,210
This is down in part
because inventories

506
00:19:43,210 --> 00:19:44,710
have been worked down.

507
00:19:44,710 --> 00:19:48,310
So I suspect that even if
Q1 next year is not so hot,

508
00:19:48,310 --> 00:19:50,713
it will get an assist
from this because firms

509
00:19:50,713 --> 00:19:52,130
are going to want
more inventories

510
00:19:52,130 --> 00:19:54,760
and the manufacturers are going
to have to make more stuff,

511
00:19:54,760 --> 00:19:58,030
whatever it is, fans, air
conditioners, pens, cell phones,

512
00:19:58,030 --> 00:19:59,920
whatever it is that
the manufacturers are

513
00:19:59,920 --> 00:20:01,450
manufacturing.

514
00:20:01,450 --> 00:20:03,420
So this, in the short
run, isn't working

515
00:20:03,420 --> 00:20:03,920
so great.

516
00:20:03,920 --> 00:20:05,350
Now it's helping,
but we're going

517
00:20:05,350 --> 00:20:07,990
to get more help, I think,
as inventories get worn down.

518
00:20:07,990 --> 00:20:10,180
But what's working
great is firms

519
00:20:10,180 --> 00:20:13,550
are buying tons of equipment.
Firms are buying equipment

520
00:20:13,550 --> 00:20:14,710
so you can work from home.

521
00:20:14,710 --> 00:20:16,060
In the past, you
worked in the office,

522
00:20:16,060 --> 00:20:17,330
but now you work from home.

523
00:20:17,330 --> 00:20:18,520
Oh, let's buy a green screen.

524
00:20:18,520 --> 00:20:20,720
Let's buy, let's
buy a new computer.

525
00:20:20,720 --> 00:20:22,070
Let's buy some new software so

526
00:20:22,070 --> 00:20:23,560
we can have a virtual
private network.

527
00:20:23,560 --> 00:20:24,710
Let's get a microphone.

528
00:20:24,710 --> 00:20:25,418
Let's get a good...

529
00:20:28,213 --> 00:20:29,630
I can't think of the
right word here.

530
00:20:29,630 --> 00:20:33,322
A camera, or a lens to film things
through, you know, all of these things

531
00:20:33,322 --> 00:20:35,530
that we need, people, companies
are spending lots of money

532
00:20:35,530 --> 00:20:37,720
on equipment. Plexiglass sheets

533
00:20:37,720 --> 00:20:41,420
again. You can open your
office doors

534
00:20:41,420 --> 00:20:42,490
now with your cell phone.

535
00:20:42,490 --> 00:20:43,840
You can pay for things,

536
00:20:43,840 --> 00:20:45,700
look at the menu with a QR code.

537
00:20:45,700 --> 00:20:47,175
All this stuff costs money.

538
00:20:47,175 --> 00:20:48,550
You're seeing
tremendous spending

539
00:20:48,550 --> 00:20:51,550
there because firms are
reorienting themselves in light

540
00:20:51,550 --> 00:20:53,980
of the trauma of Coronavirus.

541
00:20:53,980 --> 00:20:55,190
This is helping spending.

542
00:20:55,190 --> 00:20:56,450
It's helping the economy.

543
00:20:56,450 --> 00:20:58,742
It's helping these firms,
helping corporate spending.

544
00:20:58,742 --> 00:21:00,440
It's good for the
economy overall, too.

545
00:21:00,440 --> 00:21:04,550
And energy's starting
to turn around.

546
00:21:04,550 --> 00:21:06,190
This is a pleasant surprise.

547
00:21:06,190 --> 00:21:08,440
This is a number of rigs,
rotary rigs being used

548
00:21:08,440 --> 00:21:10,480
to drill for oil and stuff.

549
00:21:10,480 --> 00:21:14,080
And you can see there's this
precipitous decline, staggering

550
00:21:14,080 --> 00:21:14,860
decline in March

551
00:21:14,860 --> 00:21:15,460
and April.

552
00:21:15,460 --> 00:21:18,250
Oil prices turn negative
briefly for a day

553
00:21:18,250 --> 00:21:22,420
somewhere back in April.
There was extreme contango,

554
00:21:22,420 --> 00:21:24,610
or contango support, whatever.

555
00:21:24,610 --> 00:21:27,320
They turned that just
dramatically negative.

556
00:21:27,320 --> 00:21:28,540
No place to store oil.

557
00:21:28,540 --> 00:21:29,900
They've come back.

558
00:21:29,900 --> 00:21:32,120
And now they're
about $45 a barrel.

559
00:21:32,120 --> 00:21:33,580
That's pretty good.

560
00:21:33,580 --> 00:21:36,230
This is enough for some
exploration to take place.

561
00:21:36,230 --> 00:21:37,210
It's off the bottom, the

562
00:21:37,210 --> 00:21:40,270
trough where it was here, where my
cursor is. It's moved up nicely

563
00:21:40,270 --> 00:21:42,220
and continues to make progress.

564
00:21:42,220 --> 00:21:44,990
This is because oil prices
hit maybe $50 a barrel and

565
00:21:44,990 --> 00:21:47,450
it'll be even more.
So in energy states,

566
00:21:47,450 --> 00:21:52,360
things will begin to turn
around. Texas, New Mexico, North

567
00:21:52,360 --> 00:21:55,520
Dakota, parts of Colorado,
northern Colorado,

568
00:21:55,520 --> 00:21:56,150
and so on,

569
00:21:56,150 --> 00:21:58,420
Oklahoma, things will
get a little better.

570
00:21:58,420 --> 00:21:59,770
That certainly helps.

571
00:21:59,770 --> 00:22:01,870
And what's amazing
about this recession,

572
00:22:01,870 --> 00:22:03,820
and there's some
still staying power

573
00:22:03,820 --> 00:22:06,310
here, is because the
government flooded

574
00:22:06,310 --> 00:22:08,080
the economy with so much money.

575
00:22:08,080 --> 00:22:11,080
There is, there remains
excess savings around.

576
00:22:11,080 --> 00:22:14,410
You can see the savings
rates of household skyrocket,

577
00:22:14,410 --> 00:22:16,930
in part because of
government spending.

578
00:22:16,930 --> 00:22:19,370
$1,200 for persons, adults,

579
00:22:19,370 --> 00:22:20,980
$500 for children.

580
00:22:20,980 --> 00:22:23,650
The $600 top up in
unemployment insurance.

581
00:22:23,650 --> 00:22:26,410
More people now qualify
for unemployment insurance

582
00:22:26,410 --> 00:22:26,950
than before,

583
00:22:26,950 --> 00:22:29,020
so you widen the
size of it and you

584
00:22:29,020 --> 00:22:31,060
lengthen the duration
of unemployment benefits

585
00:22:31,060 --> 00:22:33,940
from 26 to 39 weeks.

586
00:22:33,940 --> 00:22:36,790
And the other reason
savings are so

587
00:22:36,790 --> 00:22:39,250
high is people aren't
going out to eat.

588
00:22:39,250 --> 00:22:41,020
We're not going to
restaurants, we're

589
00:22:41,020 --> 00:22:42,290
not going to sporting events.

590
00:22:42,290 --> 00:22:43,490
We're not going to
cultural events.

591
00:22:43,490 --> 00:22:45,670
We're not listening to
symphonies, ballets, operas

592
00:22:45,670 --> 00:22:48,410
and tractor pulls and
whatever else you want to go.

593
00:22:48,410 --> 00:22:51,490
We're not taking our kids Chuck
E Cheese for their birthday,

594
00:22:51,490 --> 00:22:52,900
so we're saving money.

595
00:22:52,900 --> 00:22:54,320
This total savings,

596
00:22:54,320 --> 00:22:55,640
it's hard to pin it down

597
00:22:55,640 --> 00:22:58,540
exactly, but my guess is
it's about a trillion dollars.

598
00:22:58,540 --> 00:23:02,500
Now, this isn't equally distributed
among all Americans, right?

599
00:23:02,500 --> 00:23:06,180
The wealthier have more of this
money, the poor have much less.

600
00:23:06,180 --> 00:23:07,790
And that, the savings,

601
00:23:07,790 --> 00:23:12,580
and you can see the savings
rate went way up to over 30%,

602
00:23:12,580 --> 00:23:15,790
and has now come down, continues
to fall, because this money is

603
00:23:15,790 --> 00:23:17,680
dissipated.

604
00:23:17,680 --> 00:23:21,070
So this is helping our
economy in the short run,

605
00:23:21,070 --> 00:23:23,210
even though there's not
this fiscal stimulus,

606
00:23:23,210 --> 00:23:24,162
we need more stimulus,

607
00:23:24,162 --> 00:23:25,120
I'll get to more of the

608
00:23:25,120 --> 00:23:25,720
why.

609
00:23:25,720 --> 00:23:27,910
You've seen some
ramifications of it,

610
00:23:27,910 --> 00:23:30,590
but we're going to discuss more
why in a couple of seconds.

611
00:23:30,590 --> 00:23:32,760
But this is helping our economy.

612
00:23:32,760 --> 00:23:34,270
This will continue to fall.

613
00:23:34,270 --> 00:23:37,550
I'd like to keep it up
a little bit higher.

614
00:23:37,550 --> 00:23:41,410
Banks, they're not so
happy with the world right now.

615
00:23:41,410 --> 00:23:45,070
This is how much banks make
in profit, net interest margin.

616
00:23:45,070 --> 00:23:47,020
Banks borrow at this rate.

617
00:23:47,020 --> 00:23:48,340
They lend at that rate.

618
00:23:48,340 --> 00:23:50,890
That's their gross profit
on a loan. That's if they borrow

619
00:23:50,890 --> 00:23:54,250
at 2%, they're paying
you the deposit of 2%,

620
00:23:54,250 --> 00:23:55,870
they're lending out at five

621
00:23:55,870 --> 00:23:58,610
they make 3%. But now
it's not so high.

622
00:23:58,610 --> 00:24:00,880
You can see here for the
average bank, which is blue,

623
00:24:00,880 --> 00:24:03,940
all banks in the US,
that interest margin was

624
00:24:03,940 --> 00:24:08,330
close to 340 bips,
3.4 percentage points,

625
00:24:08,330 --> 00:24:10,270
right? And now it's way down.

626
00:24:10,270 --> 00:24:13,360
They've lost like a sixth
or a seventh, a sixth

627
00:24:13,360 --> 00:24:16,480
of their gross profit
per loan, disappeared.

628
00:24:16,480 --> 00:24:19,850
Lender quality has gone down.

629
00:24:19,850 --> 00:24:21,630
And they're reluctant to loan.

630
00:24:21,630 --> 00:24:23,840
They have lots of cash,
no one to lend it to.

631
00:24:23,840 --> 00:24:25,340
It's a very weird
story, but they're

632
00:24:25,340 --> 00:24:27,680
not a bunch of happy
campers generally right now.

633
00:24:27,680 --> 00:24:32,470
But corporate profits are
doing remarkably well.

634
00:24:32,470 --> 00:24:35,380
They had a very bad second
quarter, as you can see here,

635
00:24:35,380 --> 00:24:38,230
where my cursor is, but
then the third quarter shoots

636
00:24:38,230 --> 00:24:40,210
right up. Firms have
figured out how

637
00:24:40,210 --> 00:24:43,360
to live with Coronavirus.
Chipotle, pick up

638
00:24:43,360 --> 00:24:45,520
delivery, curbside delivery.

639
00:24:45,520 --> 00:24:49,810
Grubhub, you can pay
behind the plexiglass sheet.

640
00:24:49,810 --> 00:24:52,590
You can pay touchless with
your phone or credit card that

641
00:24:52,590 --> 00:24:56,470
you tap, don't even have to put the
card in the machine anymore.

642
00:24:56,470 --> 00:24:59,380
We've all figured out
ways to move around this

643
00:24:59,380 --> 00:25:02,170
and unemployment's very high,
so wages aren't going up

644
00:25:02,170 --> 00:25:04,720
all that much, meaning
corporate profits are good,

645
00:25:04,720 --> 00:25:07,240
and bankruptcies are very low.

646
00:25:07,240 --> 00:25:08,560
It's quite remarkable.

647
00:25:08,560 --> 00:25:12,100
They were very high back
in the immediate aftermath

648
00:25:12,100 --> 00:25:13,300
of the close down in March

649
00:25:13,300 --> 00:25:15,415
and April, but
they peaked in July,

650
00:25:15,415 --> 00:25:17,040
and they've been
going down ever since.

651
00:25:17,040 --> 00:25:20,260
Now, they could rise, because
in the end of December,

652
00:25:20,260 --> 00:25:23,320
if there's no more
fiscal stimulus,

653
00:25:23,320 --> 00:25:26,740
unemployment insurance stops, the
extra unemployment insurance stops,

654
00:25:26,740 --> 00:25:28,690
the extra duration of
unemployment insurance

655
00:25:28,690 --> 00:25:31,503
stops, eviction
notices can start again,

656
00:25:31,503 --> 00:25:33,670
and people have to start
paying their student loans.

657
00:25:33,670 --> 00:25:35,225
So we're not out of the woods yet.

658
00:25:35,225 --> 00:25:36,850
That's why we need
some more protection

659
00:25:36,850 --> 00:25:38,225
from the federal
government here,

660
00:25:38,225 --> 00:25:40,300
helping get us to the bridge in

661
00:25:40,300 --> 00:25:43,690
June when the vaccine has been, we've
all been jabbed in our shoulders

662
00:25:43,690 --> 00:25:44,950
and we're all good to go.

663
00:25:44,950 --> 00:25:47,090
We're not quite there yet.

664
00:25:47,090 --> 00:25:49,840
Right? But the data
is pretty good here,

665
00:25:49,840 --> 00:25:51,940
but we still need more help.

666
00:25:51,940 --> 00:25:54,440
And this gets back to the
graph I showed you earlier on

667
00:25:54,440 --> 00:25:56,020
savings, it's coming right down.

668
00:25:56,020 --> 00:25:57,460
Why is it coming way down?

669
00:25:57,460 --> 00:25:58,660
Because of this.

670
00:25:58,660 --> 00:26:00,730
This is per capita
disposable income.

671
00:26:00,730 --> 00:26:04,420
And you can see it jumps here
because of government stimulus

672
00:26:04,420 --> 00:26:05,350
back in March, April, right,

673
00:26:05,350 --> 00:26:07,790
or government
intervention.

674
00:26:07,790 --> 00:26:10,570
We didn't need stimulus back
then, the virus wasn't around.

675
00:26:10,570 --> 00:26:14,200
We didn't need we need people
be able to survive through it.

676
00:26:14,200 --> 00:26:15,730
And you can see
what happens here

677
00:26:15,730 --> 00:26:20,110
is per capita income declined
because this money is slowly

678
00:26:20,110 --> 00:26:23,770
running out of the system.

679
00:26:23,770 --> 00:26:25,250
It's draining away.

680
00:26:25,250 --> 00:26:26,270
And it all drains away.

681
00:26:26,270 --> 00:26:30,160
And all these plans, 12,
13, 14 million Americans

682
00:26:30,160 --> 00:26:32,410
no longer have assistance,
eviction notices,

683
00:26:32,410 --> 00:26:33,290
there's student loans,

684
00:26:33,290 --> 00:26:34,360
you get the idea.

685
00:26:34,360 --> 00:26:37,820
So I'd like to see some
assistance come in.

686
00:26:37,820 --> 00:26:40,480
The other thing to look at
is permanent job losses.

687
00:26:40,480 --> 00:26:43,090
You can see they've
ticked up quite a lot.

688
00:26:43,090 --> 00:26:45,410
They've stopped going
up of late last month.

689
00:26:45,410 --> 00:26:46,420
They stopped going up.

690
00:26:46,420 --> 00:26:49,630
But you can compare where they
are now to where they were,

691
00:26:49,630 --> 00:26:52,700
this is the prior recession,
the global financial.

692
00:26:52,700 --> 00:26:54,800
But this is the 2000 recession.

693
00:26:54,800 --> 00:26:56,693
And that's the
aftermath of the 1990s.

694
00:26:56,693 --> 00:26:57,860
These are objectively pretty high.

695
00:26:57,860 --> 00:27:01,360
So we aren't out of the woods by
any stretch of the imagination.

696
00:27:01,360 --> 00:27:02,780
We've made huge progress.

697
00:27:02,780 --> 00:27:03,830
We've got a ways to go.

698
00:27:03,830 --> 00:27:06,970
Now, is it true that if
you do more fiscal stimulus

699
00:27:06,970 --> 00:27:11,490
to help reverse this type of
data, that it will worsen,

700
00:27:11,490 --> 00:27:15,400
the budget deficit?
For sure! Will it discourage

701
00:27:15,400 --> 00:27:16,970
some people from working?

702
00:27:16,970 --> 00:27:18,550
Yeah, it will.

703
00:27:18,550 --> 00:27:20,350
But I think if we
focus carefully

704
00:27:20,350 --> 00:27:23,340
on people who need it, not
everybody, don't give checks

705
00:27:23,340 --> 00:27:25,630
to everybody. Give it to
people who need it,

706
00:27:25,630 --> 00:27:27,550
unemployed people, whatever.

707
00:27:27,550 --> 00:27:30,140
And you give them $300
a week, not $600 a week.

708
00:27:30,140 --> 00:27:32,080
You do it for three or
four or five months.

709
00:27:32,080 --> 00:27:35,950
That'll get us through without
saying to people, well,

710
00:27:35,950 --> 00:27:36,890
I'm not going to work,

711
00:27:36,890 --> 00:27:38,813
right, we want to look
for jobs, but we also

712
00:27:38,813 --> 00:27:40,480
don't want them to
lose their apartment,

713
00:27:40,480 --> 00:27:42,940
because if they do that, then
you have a cascading domino

714
00:27:42,940 --> 00:27:43,900
effect, right?

715
00:27:43,900 --> 00:27:45,490
They can't pay their rent.

716
00:27:45,490 --> 00:27:46,353
They get evicted.

717
00:27:46,353 --> 00:27:48,020
The landlord can't
put somebody else in.

718
00:27:48,020 --> 00:27:48,950
They can't get money.

719
00:27:48,950 --> 00:27:52,450
I mean, you get this unpleasant
story starts to unfold.

720
00:27:52,450 --> 00:27:53,352
We would survive it.

721
00:27:53,352 --> 00:27:55,060
We would get through
it, but it would not

722
00:27:55,060 --> 00:27:57,970
be nice. In terms of exports,

723
00:27:57,970 --> 00:28:00,530
we're importing more. And
the dollar's weakening here,

724
00:28:00,530 --> 00:28:01,960
so that's a little helpful.

725
00:28:01,960 --> 00:28:04,430
But we export lots of services.

726
00:28:04,430 --> 00:28:06,430
We export--foreigners
come here for vacation,

727
00:28:06,430 --> 00:28:08,050
but they don't come for Corona.

728
00:28:08,050 --> 00:28:09,380
We export education,

729
00:28:09,380 --> 00:28:11,140
folks come here to get educated,

730
00:28:11,140 --> 00:28:12,640
that's not happening.

731
00:28:12,640 --> 00:28:15,940
We export lots of
airplanes, but the MAX 737

732
00:28:15,940 --> 00:28:17,750
killed; that travel
is not doing so well,

733
00:28:17,750 --> 00:28:19,330
so we're not
exporting much either.

734
00:28:19,330 --> 00:28:21,497
So exports aren't going to
help us in the short run.

735
00:28:21,497 --> 00:28:23,350
Imports have recovered
almost entirely.

736
00:28:23,350 --> 00:28:26,350
Exports have recovered some,
but not as much as imports.

737
00:28:26,350 --> 00:28:28,160
So our trade deficit's getting worse.

738
00:28:28,160 --> 00:28:31,730
We could have a little GDP, but
this is really elevator music

739
00:28:31,730 --> 00:28:34,250
in the short run. In the long
run it matters a little bit,

740
00:28:34,250 --> 00:28:36,280
but. wnd we have a
trade war with China,

741
00:28:36,280 --> 00:28:38,410
which isn't helping
us either toward GDP.

742
00:28:38,410 --> 00:28:39,550
So you put it together

743
00:28:39,550 --> 00:28:43,870
and this is what the story
is: Q1 here, weak, bad,

744
00:28:43,870 --> 00:28:45,610
really bad objectively,
but nothing

745
00:28:45,610 --> 00:28:49,060
compared to the calamity
we experienced in Q2.

746
00:28:49,060 --> 00:28:52,720
And then we had the
euphoria of Q3. And Q4

747
00:28:52,720 --> 00:28:54,700
comes in around four
or five percent,

748
00:28:54,700 --> 00:28:57,010
maybe six, if we're
really lucky and pray

749
00:28:57,010 --> 00:28:59,980
every night before we go
to bed and go to bed early

750
00:28:59,980 --> 00:29:03,550
and we live a clean and safe life,
maybe seven if we're lucky,

751
00:29:03,550 --> 00:29:07,060
Maybe three if we're unlucky, but
somewhere in the--2 percent's trend

752
00:29:07,060 --> 00:29:08,240
growth, we're going to get

753
00:29:08,240 --> 00:29:09,280
well above trend growth.

754
00:29:09,280 --> 00:29:11,822
We would have had more growth
had there been fiscal stimulus,

755
00:29:11,822 --> 00:29:13,180
but it didn't happen.

756
00:29:13,180 --> 00:29:15,310
Q1 is the real issue.

757
00:29:15,310 --> 00:29:19,480
You can see on this graph
here a small decline,

758
00:29:19,480 --> 00:29:21,610
assuming we don't
get fiscal stimulus.

759
00:29:21,610 --> 00:29:22,700
Will we get through this?

760
00:29:22,700 --> 00:29:24,140
Yes. It's just one quarter?

761
00:29:24,140 --> 00:29:26,210
Absolutely. Is it the
end of the world?

762
00:29:26,210 --> 00:29:29,342
No. But it'll be
nice not to have it,

763
00:29:29,342 --> 00:29:30,050
that's the point.

764
00:29:30,050 --> 00:29:32,920
And maybe we waste the money
because the economy is stronger

765
00:29:32,920 --> 00:29:33,730
than I think.

766
00:29:33,730 --> 00:29:35,710
Great! Even better.

767
00:29:35,710 --> 00:29:38,090
So we'll have thrown away
six, $700 billion bucks.

768
00:29:38,090 --> 00:29:38,870
That's too bad.

769
00:29:38,870 --> 00:29:39,700
I get it.

770
00:29:39,700 --> 00:29:41,720
But not a tragedy, but it's Q1

771
00:29:41,720 --> 00:29:43,660
that's really the issue.
The rest of the year

772
00:29:43,660 --> 00:29:46,268
should get--should be OK because
we're going to get injections

773
00:29:46,268 --> 00:29:47,810
and slowly we're
going to come out,

774
00:29:47,810 --> 00:29:50,227
we're going to go to bars and
restaurants and hockey games

775
00:29:50,227 --> 00:29:53,810
and practicals and ballet
lessons and whatever opera,

776
00:29:53,810 --> 00:29:54,910
whatever we do.

777
00:29:54,910 --> 00:29:56,470
And we'll be OK.

778
00:29:56,470 --> 00:29:59,410
We won't be OK,
but we'll get towards OK.

779
00:29:59,410 --> 00:30:03,190
Overall growth in 2021 should
be about 4, 4 and quarter percent,

780
00:30:03,190 --> 00:30:06,460
twice the
natural 2% growth.

781
00:30:06,460 --> 00:30:08,350
So that'll be, above
trend growth means

782
00:30:08,350 --> 00:30:09,800
unemployment continues to fall,

783
00:30:09,800 --> 00:30:10,390
that's great.

784
00:30:10,390 --> 00:30:12,550
GDP a year from now,

785
00:30:12,550 --> 00:30:17,080
so end of '21, is back where it
was before the pandemic began,

786
00:30:17,080 --> 00:30:19,900
so it takes a year and a half to
make up for that terrible Q2,

787
00:30:19,900 --> 00:30:23,040
a bad Q1, terrible Q2.

788
00:30:23,040 --> 00:30:25,980
Overall employment growth will take
an extra year to get there.

789
00:30:25,980 --> 00:30:27,330
Let's talk about labor.

790
00:30:27,330 --> 00:30:29,040
Where is labor sitting?

791
00:30:29,040 --> 00:30:33,210
Labor is getting better,
but it's slowing down, too.

792
00:30:33,210 --> 00:30:35,740
This is very important.

793
00:30:35,740 --> 00:30:36,880
So here's the data.

794
00:30:36,880 --> 00:30:39,030
This is where we were

795
00:30:39,030 --> 00:30:42,330
at the peak prior to the
onset of the recession.

796
00:30:42,330 --> 00:30:44,770
This is where we were in April,

797
00:30:44,770 --> 00:30:47,230
when it was the
absolute worst. We

798
00:30:47,230 --> 00:30:50,480
lost somewhere around
22 million jobs.

799
00:30:50,480 --> 00:30:53,360
We've now made back
a bunch of jobs,

800
00:30:53,360 --> 00:30:55,560
we've made back over 12 million.

801
00:30:55,560 --> 00:30:59,970
We're now down by 9.7 million
jobs, a huge amount.

802
00:30:59,970 --> 00:31:02,210
The gap between where we
are and where we were here,

803
00:31:02,210 --> 00:31:05,570
this distance here is
bigger than this distance

804
00:31:05,570 --> 00:31:07,400
here, the last recession.

805
00:31:07,400 --> 00:31:12,200
So after this terrible decline
and this spectacular recovery,

806
00:31:12,200 --> 00:31:13,680
we're about sixty, 55.

807
00:31:13,680 --> 00:31:15,320
60% of where we were.

808
00:31:15,320 --> 00:31:18,260
That gap is still bigger than
what it was 12 years ago.

809
00:31:18,260 --> 00:31:21,080
And we have a ways to go.

810
00:31:21,080 --> 00:31:23,862
We've made a lot of
progress, but we're slowing.

811
00:31:23,862 --> 00:31:25,820
Look at the next graph.
This tells you the level

812
00:31:25,820 --> 00:31:27,000
from month to month, right?

813
00:31:27,000 --> 00:31:29,930
So we were here
in March,

814
00:31:29,930 --> 00:31:33,800
March, March, February,
March, April, May,

815
00:31:33,800 --> 00:31:36,530
June, July, August,
September, October, November.

816
00:31:36,530 --> 00:31:40,880
Do it month by month, and
you get this. March declined.

817
00:31:40,880 --> 00:31:46,370
April, May, June,
it peaks out here,

818
00:31:46,370 --> 00:31:49,900
huge growth in July, and then
August, September, October,

819
00:31:49,900 --> 00:31:51,930
November, you get the idea.

820
00:31:51,930 --> 00:31:54,440
It weakens every
month. That's five months

821
00:31:54,440 --> 00:31:59,290
in a row of declining growth,
we're still above zero growth.

822
00:31:59,290 --> 00:32:04,320
But growth is declining. And
at this, rate without stimulus,

823
00:32:04,320 --> 00:32:07,300
well, next month, even
if we get stimulus, it

824
00:32:07,300 --> 00:32:11,520
won't come in time. But next
month is really touch and go.

825
00:32:11,520 --> 00:32:15,130
Maybe it's a little positive,
neutral, mildly negative.

826
00:32:15,130 --> 00:32:18,880
But come January, I
fully expect job growth

827
00:32:18,880 --> 00:32:21,970
to be negative unless we get
some sort of fiscal stimulus.

828
00:32:21,970 --> 00:32:23,060
Will we get through this?

829
00:32:23,060 --> 00:32:27,280
Yes, but this goes back to why
I'm saying that January's GDP

830
00:32:27,280 --> 00:32:31,270
growth number will, in fact, be
negative. Not wildly negative,

831
00:32:31,270 --> 00:32:34,180
but it's going to be driven
in part by this progressively

832
00:32:34,180 --> 00:32:37,450
declining number here.

833
00:32:37,450 --> 00:32:42,140
Unemployment rate's falling
wildly. It was officially 14.9.

834
00:32:42,140 --> 00:32:43,750
It's now 6.7.

835
00:32:43,750 --> 00:32:49,840
Miraculous! But as you saw in the
prior graph, the growth in jobs

836
00:32:49,840 --> 00:32:51,130
is declining.

837
00:32:51,130 --> 00:32:53,490
Part of this...

838
00:32:53,490 --> 00:32:56,800
job growth every month
is going--it went from two million

839
00:32:56,800 --> 00:33:01,180
to one million to 600, 900 thousand
six this past month. On Friday,

840
00:33:01,180 --> 00:33:02,200
they came out with November

841
00:33:02,200 --> 00:33:07,720
250,000 roughly. At 250
thousand, making up 5 million jobs

842
00:33:07,720 --> 00:33:09,340
takes two years.

843
00:33:09,340 --> 00:33:11,210
So we have a long way to go.

844
00:33:11,210 --> 00:33:13,090
That's why I think
the labor force,

845
00:33:13,090 --> 00:33:16,450
total employment number will
take two more years. GDP,

846
00:33:16,450 --> 00:33:19,750
one more year. The labor
force, at least two more years

847
00:33:19,750 --> 00:33:21,460
to come back to
where it was, because

848
00:33:21,460 --> 00:33:24,880
of all the technological
innovations taking place.

849
00:33:24,880 --> 00:33:26,380
And you can see
here, this is people

850
00:33:26,380 --> 00:33:29,920
who lose their job and file, for the
first time, unemployment claims.

851
00:33:29,920 --> 00:33:32,040
This is where it was
before the recession began,

852
00:33:32,040 --> 00:33:34,840
in the low two hundreds.
It hit seven million,

853
00:33:34,840 --> 00:33:36,420
and slowly it declined,

854
00:33:36,420 --> 00:33:38,870
and now it's about 700,000.

855
00:33:38,870 --> 00:33:41,650
But you can see the last couple
of months, last month or two

856
00:33:41,650 --> 00:33:44,830
or three, there hasn't been
much improvement in this.

857
00:33:44,830 --> 00:33:47,410
So not a lot of
improvement here.

858
00:33:47,410 --> 00:33:50,770
Slowing to very little
improvement here.

859
00:33:50,770 --> 00:33:53,830
Less restaurants,
less mobility.

860
00:33:53,830 --> 00:33:56,530
Now you see the
economy, the wheels

861
00:33:56,530 --> 00:34:01,480
grinding, but they're
increasingly slow. And they

862
00:34:01,480 --> 00:34:04,670
may begin to go in reverse.

863
00:34:04,670 --> 00:34:09,650
That's what my concerns are
as an economist, right? Now,

864
00:34:09,650 --> 00:34:11,300
continuing claims
for unemployment

865
00:34:11,300 --> 00:34:16,179
keep dropping off every
week or so by 3 or 400,000.

866
00:34:16,179 --> 00:34:18,250
On one hand, this is
great news, obviously.

867
00:34:18,250 --> 00:34:20,380
On the other hand, I'm
not so sure about this.

868
00:34:20,380 --> 00:34:22,210
I think what's
really happening here

869
00:34:22,210 --> 00:34:24,699
is people have worn out
their unemployment insurance.

870
00:34:24,699 --> 00:34:26,150
They had 26 weeks.

871
00:34:26,150 --> 00:34:28,480
They've gotten the
extra 13 to 39.

872
00:34:28,480 --> 00:34:29,063
They've run--

873
00:34:29,063 --> 00:34:29,730
They've run out,

874
00:34:29,730 --> 00:34:31,040
and that's it.

875
00:34:31,040 --> 00:34:35,360
So this is maybe good news,
there's some good news embedded

876
00:34:35,360 --> 00:34:38,540
in here, obviously, but it's
not as good as it looks.

877
00:34:38,540 --> 00:34:40,969
Just like the unemployment
rate's not quite as good

878
00:34:40,969 --> 00:34:43,250
as it looks either, because
folks have dropped out

879
00:34:43,250 --> 00:34:44,280
of the labor force.

880
00:34:44,280 --> 00:34:46,197
They've exhausted their
unemployment benefits, and

881
00:34:46,197 --> 00:34:46,790
they've left.

882
00:34:46,790 --> 00:34:49,429
To give you a feeling of
how good the unemployment

883
00:34:49,429 --> 00:34:53,270
situation is today
versus historic levels,

884
00:34:53,270 --> 00:34:54,710
look at this number here.

885
00:34:54,710 --> 00:35:01,100
There's now two people, roughly
10 million unemployed Americans,

886
00:35:01,100 --> 00:35:03,740
and roughly 5 million
available jobs,

887
00:35:03,740 --> 00:35:06,890
job openings. End of the month,
both piece of data. 2 to 1.

888
00:35:06,890 --> 00:35:08,010
That's the same level

889
00:35:08,010 --> 00:35:11,450
it was at roughly
in early, mid 2014.

890
00:35:11,450 --> 00:35:15,120
Not a terrible labor market,
not a great one either.

891
00:35:15,120 --> 00:35:17,360
Right? Now, what's
particularly important

892
00:35:17,360 --> 00:35:20,660
for us is education
and relationship

893
00:35:20,660 --> 00:35:22,520
to that to unemployment.

894
00:35:22,520 --> 00:35:24,870
And what you see in this
graph is very interesting.

895
00:35:24,870 --> 00:35:27,090
And it's been true in prior
recessions and our current recession.

896
00:35:27,090 --> 00:35:31,310
Blue are people without
a high school diploma.

897
00:35:31,310 --> 00:35:34,580
They suffered very badly in the
last recession. Unemployment

898
00:35:34,580 --> 00:35:38,300
had then peaked out at 15% and here,
they picked out well over 20,

899
00:35:38,300 --> 00:35:39,890
but much more brief.

900
00:35:39,890 --> 00:35:41,570
But even now, eight
or nine months

901
00:35:41,570 --> 00:35:44,180
with lots of fiscal stimulus,
the unemployment rate

902
00:35:44,180 --> 00:35:49,280
is almost 10%. That's where
it was for them back in 2013.

903
00:35:49,280 --> 00:35:51,380
Look at people with
a college degree where

904
00:35:51,380 --> 00:35:53,180
the color is yellow, at
the bottom.

905
00:35:53,180 --> 00:35:55,310
There it's about 4
and 1/2 percent. That's still

906
00:35:55,310 --> 00:35:57,680
pretty high by
historical standards,

907
00:35:57,680 --> 00:35:59,330
but not all that
higher than people who

908
00:35:59,330 --> 00:36:02,300
earn over $80,000 or $70,000,

909
00:36:02,300 --> 00:36:05,690
the job recovery has
been complete. For people

910
00:36:05,690 --> 00:36:07,110
earning under 35,

911
00:36:07,110 --> 00:36:09,050
there's still a large job hit.

912
00:36:09,050 --> 00:36:13,260
This recovery is like a K.
A lot of people are up here,

913
00:36:13,260 --> 00:36:15,420
they work from home, they're OK,

914
00:36:15,420 --> 00:36:16,580
they make good money.

915
00:36:16,580 --> 00:36:18,950
They're older, they
have an education.

916
00:36:18,950 --> 00:36:20,890
They buy houses.

917
00:36:20,890 --> 00:36:22,810
Conversely, at the
bottom of the K,

918
00:36:22,810 --> 00:36:26,665
younger people, often
minorities, less education,

919
00:36:26,665 --> 00:36:27,790
they may not speak English

920
00:36:27,790 --> 00:36:30,810
so well, they work in retail.

921
00:36:30,810 --> 00:36:32,740
And they're losing their jobs.

922
00:36:32,740 --> 00:36:37,590
This recession, this
gap is now much wider.

923
00:36:37,590 --> 00:36:39,810
Our guys are buying houses here.

924
00:36:39,810 --> 00:36:42,330
These people here are
generally renters.

925
00:36:42,330 --> 00:36:43,780
Now, there's other
social problems

926
00:36:43,780 --> 00:36:45,150
that's going to create.

927
00:36:45,150 --> 00:36:48,090
But for what we
do as an industry,

928
00:36:48,090 --> 00:36:49,657
it's not relevant at all.

929
00:36:49,657 --> 00:36:51,240
Home sales are going
to be great, we're going

930
00:36:51,240 --> 00:36:53,600
to talk about that in
a couple of seconds.

931
00:36:53,600 --> 00:36:54,970
In terms of inflation,

932
00:36:54,970 --> 00:36:59,740
this gets to interest rates,
which we'll come to in a second.

933
00:36:59,740 --> 00:37:03,100
I don't see any. This
is CPI, what we all

934
00:37:03,100 --> 00:37:06,670
think of as inflation. Blue is
headline inflation. Last month,

935
00:37:06,670 --> 00:37:09,820
CPI, 1.4% That's the blue line.

936
00:37:09,820 --> 00:37:14,240
Then they'll say, but core
CPI, excluding food and energy,

937
00:37:14,240 --> 00:37:17,890
that's the red graph
here, is 1.3 or 1.6

938
00:37:17,890 --> 00:37:19,150
or whatever it ends up being.

939
00:37:19,150 --> 00:37:23,350
Economists like to look at
core, not the food and energy. We

940
00:37:23,350 --> 00:37:25,840
ignore food and energy, because
food and energy go up and down

941
00:37:25,840 --> 00:37:28,360
because of weather and
war. Right, weather and war,

942
00:37:28,360 --> 00:37:31,480
the Iranians go out with the
Saudis, oil prices go up.

943
00:37:31,480 --> 00:37:35,650
There's a drought in, I don't
know, Australia or Ukraine

944
00:37:35,650 --> 00:37:40,120
or Saskatchewan, or Missouri, or
something, right. Soybean crops are crummy

945
00:37:40,120 --> 00:37:43,300
or wheat or beets
or whatever it is.

946
00:37:43,300 --> 00:37:44,590
And prices rise.

947
00:37:44,590 --> 00:37:45,520
This is inflation,

948
00:37:45,520 --> 00:37:49,520
it costs more money, but it's
not US economy inflation,

949
00:37:49,520 --> 00:37:52,320
so inflation coming
from a one off factor

950
00:37:52,320 --> 00:37:55,180
be it our bad weather or
somebody else's weather or war.

951
00:37:55,180 --> 00:37:56,290
So we ignore it.

952
00:37:56,290 --> 00:37:59,590
Do you see massive
inflation in the red?

953
00:37:59,590 --> 00:38:02,780
No, it's pretty
well behaved. Now,

954
00:38:02,780 --> 00:38:04,750
the Fed doesn't
even look at CPI.

955
00:38:04,750 --> 00:38:07,540
They look at something
called PCE inflation,

956
00:38:07,540 --> 00:38:09,500
personal consumption,
expenditure inflation.

957
00:38:09,500 --> 00:38:10,417
You see it right here, PCE.

958
00:38:10,417 --> 00:38:13,120
No inflation!

959
00:38:13,120 --> 00:38:14,370
That's not happening.

960
00:38:14,370 --> 00:38:16,420
Look at the red. Not!

961
00:38:16,420 --> 00:38:18,880
Now, this is important.

962
00:38:18,880 --> 00:38:21,310
The central bank in
the past would say

963
00:38:21,310 --> 00:38:23,360
2% is the Goldilocks number.

964
00:38:23,360 --> 00:38:26,230
That's where the red arrow is,
2% That's the magic number,

965
00:38:26,230 --> 00:38:31,090
we want inflation at
2%. Core. Red. PCE.

966
00:38:31,090 --> 00:38:34,630
This series, we had it
here for a few months,

967
00:38:34,630 --> 00:38:35,270
No, no,

968
00:38:35,270 --> 00:38:37,780
lower, lower, lower,
lower, lower, lower.

969
00:38:37,780 --> 00:38:40,970
Right and then, oops, did
something wrong there.

970
00:38:43,920 --> 00:38:46,470
Anyway, here we go, and
then it goes back up again,

971
00:38:46,470 --> 00:38:49,630
and then it goes up for a
few, a few months, it goes up.

972
00:38:49,630 --> 00:38:53,460
And as it's going up here in
2018 what's the Fed doing?

973
00:38:53,460 --> 00:38:54,610
The Fed's getting excited.

974
00:38:54,610 --> 00:38:56,430
Oh, inflation is coming!

975
00:38:56,430 --> 00:38:57,810
We're going to see
wages going up!

976
00:38:57,810 --> 00:39:00,160
It's going to cost of goods
to go up, more inflation.

977
00:39:00,160 --> 00:39:02,200
They start to raise rates.

978
00:39:02,200 --> 00:39:06,130
And then the inflation all
goes away. It evaporates.

979
00:39:06,130 --> 00:39:08,950
And the Fed has to lock;
the interest rate hikes up,

980
00:39:08,950 --> 00:39:10,293
so the Fed's changing their tune

981
00:39:10,293 --> 00:39:11,710
now, the Fed said,
we're not going

982
00:39:11,710 --> 00:39:15,400
to raise rates when we think
we start to see inflation go up

983
00:39:15,400 --> 00:39:18,490
or see the signs of inflation,
because unemployment's

984
00:39:18,490 --> 00:39:19,490
getting lower.

985
00:39:19,490 --> 00:39:22,840
The theory is low unemployment
leads to higher wages,

986
00:39:22,840 --> 00:39:27,590
higher wages leads to inflation.
But it doesn't seem to happen

987
00:39:27,590 --> 00:39:28,100
so much.

988
00:39:28,100 --> 00:39:29,980
This is talk of
the Phillips curve.

989
00:39:29,980 --> 00:39:32,455
Yes, the Phillips curve
exists, but it's changing,

990
00:39:32,455 --> 00:39:33,080
it's different,

991
00:39:33,080 --> 00:39:33,980
the world's changing.

992
00:39:33,980 --> 00:39:35,563
It's like, do you
believe in marriage?

993
00:39:35,563 --> 00:39:38,950
Marriages go up and down over
time, you know. Friendships change.

994
00:39:38,950 --> 00:39:41,180
You know, the economy,
it moves.

995
00:39:41,180 --> 00:39:42,730
Things just happen.

996
00:39:42,730 --> 00:39:44,360
So the Fed is now saying
a couple things.

997
00:39:44,360 --> 00:39:45,527
The Fed says we want to see

998
00:39:45,527 --> 00:39:48,440
first, unemployment fall to
its lowest possible level

999
00:39:48,440 --> 00:39:51,910
realistically. We want
to see inflation at 2%

1000
00:39:51,910 --> 00:39:55,310
And we want to see
inflation expectations

1001
00:39:55,310 --> 00:39:57,472
well above 2%.
Which means

1002
00:39:57,472 --> 00:39:58,930
they're not going
to raise interest

1003
00:39:58,930 --> 00:40:01,000
rates for a long, long time.

1004
00:40:01,000 --> 00:40:02,530
Not going to happen.

1005
00:40:02,530 --> 00:40:05,650
You can see here. Fed funds
short term interest rates,

1006
00:40:05,650 --> 00:40:07,420
the short end of
the yield curve,

1007
00:40:07,420 --> 00:40:10,000
not going anywhere.
And the long end of

1008
00:40:10,000 --> 00:40:12,730
the yield curve, it's not really
doing very much either.

1009
00:40:12,730 --> 00:40:13,910
And this may change

1010
00:40:13,910 --> 00:40:15,130
next year.

1011
00:40:15,130 --> 00:40:18,050
Depends how things go with the
vaccine, and how much of a recovery

1012
00:40:18,050 --> 00:40:18,550
is.

1013
00:40:18,550 --> 00:40:22,090
But China doesn't show inflation.
Canada doesn't show inflation.

1014
00:40:22,090 --> 00:40:27,100
Europe shows deflation. Japan's
showing deflation for 30 years.

1015
00:40:27,100 --> 00:40:30,430
It's hard to conjure
up a lot of inflation.

1016
00:40:30,430 --> 00:40:33,880
Inflation is also highly
correlated with population

1017
00:40:33,880 --> 00:40:34,980
growth.

1018
00:40:34,980 --> 00:40:37,090
US doesn't have a lot of that.

1019
00:40:37,090 --> 00:40:40,840
We're not having kids and
we're not having immigration.

1020
00:40:40,840 --> 00:40:44,020
So you're not going to get
a lot of natural inflation

1021
00:40:44,020 --> 00:40:46,730
from--there are a whole bunch of
demographic factors

1022
00:40:46,730 --> 00:40:48,670
that matter here as well.

1023
00:40:48,670 --> 00:40:50,810
Now, if we take a quick
detour to politics

1024
00:40:50,810 --> 00:40:51,510
for one graph

1025
00:40:51,510 --> 00:40:53,510
and then we're going to
rush and look at housing.

1026
00:40:53,510 --> 00:40:55,893
And then we'll wrap it
up. In terms of politics,

1027
00:40:55,893 --> 00:40:57,310
so I don't see a
lot of inflation.

1028
00:40:57,310 --> 00:41:00,200
I just simply don't. Some
people do see inflation.

1029
00:41:00,200 --> 00:41:03,430
There's a good debate in
the economics profession

1030
00:41:03,430 --> 00:41:06,820
about will we see inflation
down the road in a year?

1031
00:41:06,820 --> 00:41:08,180
Will we see bottlenecks?

1032
00:41:08,180 --> 00:41:11,098
Yeah, we'll see some bottlenecks
here and there for sure.

1033
00:41:11,098 --> 00:41:12,640
But is it going to
be enough to cause

1034
00:41:12,640 --> 00:41:14,670
systemic wide
economic inflation?

1035
00:41:14,670 --> 00:41:17,060
No! We'll see airplane
tickets up a little bit

1036
00:41:17,060 --> 00:41:20,920
and then more planes will
come out, and it'll go down.

1037
00:41:20,920 --> 00:41:22,690
There's different
types of inflation.

1038
00:41:22,690 --> 00:41:26,405
I just don't see--they talk
about the 60s. In the 60s

1039
00:41:26,405 --> 00:41:28,030
the central bank made
a lot of mistakes

1040
00:41:28,030 --> 00:41:30,280
in the 60s and the early 70s.

1041
00:41:30,280 --> 00:41:31,900
Comparing what we're
seeing now, what

1042
00:41:31,900 --> 00:41:35,080
we may see in the future, is
vastly different from what

1043
00:41:35,080 --> 00:41:38,270
was going on back then. There
were a whole bunch of reasons,

1044
00:41:38,270 --> 00:41:41,050
but economists understand
monetary policy

1045
00:41:41,050 --> 00:41:44,020
and the role of inflation
expectations much better.

1046
00:41:44,020 --> 00:41:45,020
That's what I mean.

1047
00:41:45,020 --> 00:41:48,400
If you see inflation, it lines
up being like three percent, 3

1048
00:41:48,400 --> 00:41:51,430
and a quarter, 3 and 1/2
would be a lot.

1049
00:41:51,430 --> 00:41:51,930
So this is

1050
00:41:51,930 --> 00:41:52,940
a whole separate world,

1051
00:41:52,940 --> 00:41:53,590
this is not--

1052
00:41:53,590 --> 00:41:55,150
No, no, no, no,
no inflation.

1053
00:41:55,150 --> 00:41:57,310
Let's talk politics
really briefly.

1054
00:41:57,310 --> 00:42:02,290
So what we have now, literally
now, prior to Jan 20th in the new

1055
00:42:02,290 --> 00:42:07,170
set, new president and all
that sort of stuff, is red dotted.

1056
00:42:07,170 --> 00:42:10,830
Republican in the White House,
Republican in the Senate,

1057
00:42:10,830 --> 00:42:12,480
Democrats in the House.

1058
00:42:12,480 --> 00:42:14,520
That's what we
have now, red dot.

1059
00:42:14,520 --> 00:42:18,390
We're probably going to move
to blue dotted. Republicans

1060
00:42:18,390 --> 00:42:22,200
keep the Senate, Democrats keep
the House, and the Democrats

1061
00:42:22,200 --> 00:42:23,520
pick up the White House.

1062
00:42:23,520 --> 00:42:26,560
So the White House goes
from Republican to Democrat.

1063
00:42:26,560 --> 00:42:30,690
OK, this doesn't
change a lot of things.

1064
00:42:30,690 --> 00:42:33,900
The president can sign
executive orders to do things.

1065
00:42:33,900 --> 00:42:35,910
He can get the bureaucracy
to change things

1066
00:42:35,910 --> 00:42:38,160
through rule making and
regulatory changes.

1067
00:42:38,160 --> 00:42:43,650
And the agencies, you know FDA
and all kinds of EPA,

1068
00:42:43,650 --> 00:42:47,110
you get all these sorts of
things. FHA maybe, and so on,

1069
00:42:47,110 --> 00:42:50,640
right? But to spend more
money to get more job

1070
00:42:50,640 --> 00:42:53,610
creation and higher GDP
growth in the short run,

1071
00:42:53,610 --> 00:42:55,980
you need to have control
of the fiscal levels.

1072
00:42:55,980 --> 00:42:57,960
And for that you need the Senate.

1073
00:42:57,960 --> 00:42:59,760
If the Democrats
don't get the Senate--

1074
00:42:59,760 --> 00:43:02,980
they could if they win
two special elections,

1075
00:43:02,980 --> 00:43:07,440
senatorial elections,
two Georgia runoff elections.

1076
00:43:07,440 --> 00:43:10,500
If they win them both, it's
tied 50-50 in the Senate

1077
00:43:10,500 --> 00:43:13,440
and then the vice
president can break ties.

1078
00:43:13,440 --> 00:43:15,510
That's still a tenuous thing.

1079
00:43:15,510 --> 00:43:17,790
And the betting is that
the Republicans win

1080
00:43:17,790 --> 00:43:20,370
one of those two seats at least,
and they hold their majority

1081
00:43:20,370 --> 00:43:21,150
in the Senate.

1082
00:43:21,150 --> 00:43:24,300
So we're going to move
from red dotted to blue dotted,

1083
00:43:24,300 --> 00:43:26,130
not a really big difference.

1084
00:43:26,130 --> 00:43:27,870
That's why the stock
market was relatively

1085
00:43:27,870 --> 00:43:31,080
happy with this victory by Biden
because it wasn't accompanied,

1086
00:43:31,080 --> 00:43:34,620
or it is unlikely to be
accompanied by a concomitant win

1087
00:43:34,620 --> 00:43:37,470
by the Democrats
controlling the US Senate.

1088
00:43:37,470 --> 00:43:39,180
As long as there's
divided government

1089
00:43:39,180 --> 00:43:41,280
like there has been in
the last couple of years,

1090
00:43:41,280 --> 00:43:43,020
very little happens.

1091
00:43:43,020 --> 00:43:44,923
So no new big policies
are going to come.

1092
00:43:44,923 --> 00:43:46,590
Now, again, the
Democrats could win both

1093
00:43:46,590 --> 00:43:47,770
of these special elections.

1094
00:43:47,770 --> 00:43:48,660
Things change.

1095
00:43:48,660 --> 00:43:50,790
Let's wrap it up by
talking about housing,

1096
00:43:50,790 --> 00:43:53,280
because it's fun to
talk about housing,

1097
00:43:53,280 --> 00:43:56,370
because housing is
doing remarkably well.

1098
00:43:56,370 --> 00:44:00,330
It's the single best
sector in the US,

1099
00:44:00,330 --> 00:44:02,790
not in rental. Homeownership.

1100
00:44:02,790 --> 00:44:03,360
Right?

1101
00:44:03,360 --> 00:44:05,730
Single family tax, not condos,

1102
00:44:05,730 --> 00:44:09,160
people don't want to live in condos. But
housing is doing incredibly well.

1103
00:44:09,160 --> 00:44:13,920
This is first time mortgage apps
put out by the Mortgage Bankers

1104
00:44:13,920 --> 00:44:14,650
Association.

1105
00:44:14,650 --> 00:44:20,020
You can see the highly elevated
rate for first time purchases.

1106
00:44:20,020 --> 00:44:22,540
But, is it going up?

1107
00:44:22,540 --> 00:44:26,410
And the answer is
no. It's moved up,

1108
00:44:26,410 --> 00:44:29,370
but it's stayed there now
for a long time, right?

1109
00:44:29,370 --> 00:44:30,560
It's been at this level,

1110
00:44:30,560 --> 00:44:35,320
now, you see my cursor, for a
long time, six, seven months.

1111
00:44:35,320 --> 00:44:37,810
It's kind of been there.
It's up there.

1112
00:44:37,810 --> 00:44:41,180
Look at the same
graph. Different. Now

1113
00:44:41,180 --> 00:44:44,380
we're layering every year on
top of the other year, as opposed

1114
00:44:44,380 --> 00:44:48,190
to adding it on this way
into a little like snake.

1115
00:44:48,190 --> 00:44:52,210
And you can see it jumps up and
collapses in March, April

1116
00:44:52,210 --> 00:44:55,010
and then in May, June
it jumps up.

1117
00:44:55,010 --> 00:44:57,250
And then it just
stays up relative

1118
00:44:57,250 --> 00:44:58,820
to the next the highest year.

1119
00:44:58,820 --> 00:45:00,920
The gap between here and here.

1120
00:45:00,920 --> 00:45:02,210
And here and here.

1121
00:45:02,210 --> 00:45:04,600
And here and here
is about the same.

1122
00:45:04,600 --> 00:45:08,140
So we're up 20, 22
percent, whatever it is.

1123
00:45:08,140 --> 00:45:09,160
And that's it.

1124
00:45:09,160 --> 00:45:10,500
This is remarkably good,

1125
00:45:10,500 --> 00:45:13,977
don't get me wrong, but it
suggests we can't get higher.

1126
00:45:13,977 --> 00:45:14,810
We can't get higher

1127
00:45:14,810 --> 00:45:16,990
because, I'm not sure,
there's no homes to buy,

1128
00:45:16,990 --> 00:45:19,640
there's not enough not enough
lenders to lend the money,

1129
00:45:19,640 --> 00:45:20,610
there's no inventory,

1130
00:45:20,610 --> 00:45:21,860
there aren't enough new homes,

1131
00:45:21,860 --> 00:45:23,110
we'll talk about these things.

1132
00:45:23,110 --> 00:45:25,030
But whatever it
is, we're probably

1133
00:45:25,030 --> 00:45:28,390
at some peak level vis
a vis the prior year.

1134
00:45:28,390 --> 00:45:31,810
This will be a bang up year
for mortgage purchases,

1135
00:45:31,810 --> 00:45:33,100
but it doesn't get better.

1136
00:45:33,100 --> 00:45:36,160
So you can see it here
in existing home sales.

1137
00:45:36,160 --> 00:45:40,080
They're remarkable! I mean, those
taking first time mortgage out

1138
00:45:40,080 --> 00:45:41,110
are skyrocketing.

1139
00:45:41,110 --> 00:45:43,420
This has to lead
to good home sales.

1140
00:45:43,420 --> 00:45:45,250
People are doing this
for their health.

1141
00:45:45,250 --> 00:45:48,220
The best year ever
was back here in 2005,

1142
00:45:48,220 --> 00:45:51,740
just before the housing boom
became the housing bust.

1143
00:45:51,740 --> 00:45:54,310
Right? And we're just
about back there again.

1144
00:45:54,310 --> 00:45:55,690
But there's a difference.

1145
00:45:55,690 --> 00:46:00,050
Back then, there were homes
to buy and credit was easy.

1146
00:46:00,050 --> 00:46:01,010
You fogged the mirror,

1147
00:46:01,010 --> 00:46:03,500
you got a loan.
Now, Dodd-Frank,

1148
00:46:03,500 --> 00:46:04,850
it's a whole new ballgame.

1149
00:46:04,850 --> 00:46:06,770
The appraisers are
being more thoughtful,

1150
00:46:06,770 --> 00:46:08,840
securitizers are
being more thoughtful.

1151
00:46:08,840 --> 00:46:11,450
The model line insurers are
being more thoughtful.

1152
00:46:11,450 --> 00:46:13,730
We understand FICO
scores better.

1153
00:46:13,730 --> 00:46:15,300
I mean, there's been
across the board

1154
00:46:15,300 --> 00:46:17,540
change. Credit's much
harder to get now

1155
00:46:17,540 --> 00:46:19,640
than it was six or
seven months ago.

1156
00:46:19,640 --> 00:46:20,850
In spite of that,

1157
00:46:20,850 --> 00:46:22,550
and in spite of a
lack of inventory,

1158
00:46:22,550 --> 00:46:24,213
we're seeing sales go up.

1159
00:46:24,213 --> 00:46:26,130
They can't get better
if there's no inventory.

1160
00:46:26,130 --> 00:46:29,590
Inventory becomes the limiting
factor to this whole process.

1161
00:46:29,590 --> 00:46:30,590
And you can see it here.

1162
00:46:30,590 --> 00:46:32,995
Remember, this was
back in 05, right?

1163
00:46:32,995 --> 00:46:35,120
Let's look at the next
graph and look at inventory.

1164
00:46:35,120 --> 00:46:37,280
05 is right here.

1165
00:46:37,280 --> 00:46:41,420
So inventory was back here at
the peak of the housing market.

1166
00:46:41,420 --> 00:46:44,780
We were here, somewhere around
2 and 1/2 million units.

1167
00:46:44,780 --> 00:46:47,390
Right now, we're 1
and 1/2 million units.

1168
00:46:47,390 --> 00:46:51,723
There is nothing out
there to purchase.

1169
00:46:51,723 --> 00:46:53,140
That's why housing
can't do better

1170
00:46:53,140 --> 00:46:55,810
than it is. We'd like to,
but there's nothing to buy.

1171
00:46:55,810 --> 00:46:59,140
OK, we can buy existing
now, I'll buy the new home.

1172
00:46:59,140 --> 00:47:00,350
But there's no inventory

1173
00:47:00,350 --> 00:47:01,090
there either.

1174
00:47:01,090 --> 00:47:04,450
Back in 05, if you look here,
you can see here inventory was

1175
00:47:04,450 --> 00:47:07,280
growing rapidly because it
was the end of the boom

1176
00:47:07,280 --> 00:47:09,018
and we already going
into the housing bust.

1177
00:47:09,018 --> 00:47:10,810
But the housing bust
occurred a year or two

1178
00:47:10,810 --> 00:47:12,580
before the overall
global recession.

1179
00:47:12,580 --> 00:47:15,130
The global financial crisis
expedited and led

1180
00:47:15,130 --> 00:47:16,900
on the housing bust.

1181
00:47:16,900 --> 00:47:19,570
At the peak, there were
almost 600,000 houses

1182
00:47:19,570 --> 00:47:21,400
to buy at some
level of production.

1183
00:47:21,400 --> 00:47:25,910
Built in red, being built in
blue. Permanent, but not started

1184
00:47:25,910 --> 00:47:26,480
in green.

1185
00:47:26,480 --> 00:47:28,450
But now we're at
half that level.

1186
00:47:28,450 --> 00:47:30,370
So there's nothing to buy.

1187
00:47:30,370 --> 00:47:32,590
There's nothing
existing, nothing new.

1188
00:47:32,590 --> 00:47:33,127
That's why

1189
00:47:33,127 --> 00:47:35,710
first time mortgage apps can't
go much higher, because there's

1190
00:47:35,710 --> 00:47:37,330
just nothing at
the end of the road

1191
00:47:37,330 --> 00:47:38,710
to get them into the house.

1192
00:47:38,710 --> 00:47:40,430
Their house isn't available.

1193
00:47:40,430 --> 00:47:41,830
And you can see it here.

1194
00:47:41,830 --> 00:47:43,150
Look at this graph.

1195
00:47:43,150 --> 00:47:46,630
This is, this is new sales, so
construction leading to sales.

1196
00:47:46,630 --> 00:47:48,490
And you can see it
jumps up from here

1197
00:47:48,490 --> 00:47:50,560
before the recession
starts, goes way down

1198
00:47:50,560 --> 00:47:52,480
in the recession for
two or three months.

1199
00:47:52,480 --> 00:47:54,460
And then it comes out
like the proverbial ashes

1200
00:47:54,460 --> 00:47:56,650
out of the--phoenix,
out of the ashes.

1201
00:47:56,650 --> 00:47:58,840
And we're at a million,
but we're stuck there.

1202
00:47:58,840 --> 00:48:02,800
Developers can't get enough
money to lend, to develop land.

1203
00:48:02,800 --> 00:48:06,160
There's hard to get land,
builders can't build inexpensive homes.

1204
00:48:06,160 --> 00:48:07,483
Lumber is much more expensive.

1205
00:48:07,483 --> 00:48:09,400
I mean, there are a whole
bunch of impediments

1206
00:48:09,400 --> 00:48:10,510
in the way of the builders.

1207
00:48:10,510 --> 00:48:12,260
So the builders
are selling homes

1208
00:48:12,260 --> 00:48:15,520
they haven't even started yet.
When the contractors sign, that's

1209
00:48:15,520 --> 00:48:16,540
officially a sale.

1210
00:48:16,540 --> 00:48:18,735
But you get the point.

1211
00:48:18,735 --> 00:48:20,110
So there's no
existing inventory,

1212
00:48:20,110 --> 00:48:21,640
there's no new inventory.

1213
00:48:21,640 --> 00:48:23,240
So I think we're
probably coming--

1214
00:48:23,240 --> 00:48:25,510
we're at or near the
peak of the cycle

1215
00:48:25,510 --> 00:48:28,660
in terms of new--in terms of new
first time mortgage purchases,

1216
00:48:28,660 --> 00:48:29,590
right?

1217
00:48:29,590 --> 00:48:30,650
And you can see it here.

1218
00:48:30,650 --> 00:48:33,650
New home sales, they
declined precipitously,

1219
00:48:33,650 --> 00:48:35,260
they recover wildly.

1220
00:48:35,260 --> 00:48:39,340
But since then, they're
very high, very high,

1221
00:48:39,340 --> 00:48:40,400
just like first time

1222
00:48:40,400 --> 00:48:43,220
mortgage apps are very high.
But they're not getting higher.

1223
00:48:43,220 --> 00:48:44,320
That's my point.

1224
00:48:44,320 --> 00:48:47,180
The gap, I don't think,
between here and here,

1225
00:48:47,180 --> 00:48:50,020
got a little bigger here,
went up here, went down there.

1226
00:48:50,020 --> 00:48:54,580
So the gap widened, but I think we're
kind of done with the process, right?

1227
00:48:54,580 --> 00:48:57,070
Now, look at pending sales,
same sort of thing.

1228
00:48:57,070 --> 00:48:59,760
This is the overall level.

1229
00:48:59,760 --> 00:49:01,990
This is the year of
this is putting 2020

1230
00:49:01,990 --> 00:49:04,810
overlaying it on 19 and
18 and 17.

1231
00:49:04,810 --> 00:49:07,100
And you can see the gap
between here and here,

1232
00:49:07,100 --> 00:49:08,570
and here and here, and here

1233
00:49:08,570 --> 00:49:10,160
and here, is the same.

1234
00:49:10,160 --> 00:49:11,827
We've peaked out here as well.

1235
00:49:11,827 --> 00:49:13,660
So pending sales aren't
going to get better,

1236
00:49:13,660 --> 00:49:15,243
existing sales are
probably peaked out.

1237
00:49:15,243 --> 00:49:18,460
New home sales, they're very
high, they're all very high,

1238
00:49:18,460 --> 00:49:22,330
making up what was was lost,
and making up for the desire,

1239
00:49:22,330 --> 00:49:25,300
the desire for a different
type of lifestyle

1240
00:49:25,300 --> 00:49:26,530
in a different house,

1241
00:49:26,530 --> 00:49:29,430
given the pandemic. We
suddenly need a bigger place,

1242
00:49:29,430 --> 00:49:32,200
a place with a gymnasium
and a Zoom room,

1243
00:49:32,200 --> 00:49:35,320
and a place for junior
do homework, and a pool,

1244
00:49:35,320 --> 00:49:37,990
and a backyard, and
all these amenities

1245
00:49:37,990 --> 00:49:39,905
that we didn't need
before because we

1246
00:49:39,905 --> 00:49:41,530
could go to the water,
or go to the gym,

1247
00:49:41,530 --> 00:49:44,260
or go downstairs or play in
the street with our friends.

1248
00:49:44,260 --> 00:49:45,700
Now, we can't do that.

1249
00:49:45,700 --> 00:49:47,170
We want a different house.

1250
00:49:47,170 --> 00:49:50,290
But this process is
ongoing, but it's not

1251
00:49:50,290 --> 00:49:52,190
going to get bigger
than it is right now.

1252
00:49:52,190 --> 00:49:53,690
I think that's the key point

1253
00:49:53,690 --> 00:49:55,310
I'm trying to drive home.
Now,

1254
00:49:55,310 --> 00:49:57,100
prices keep going
up because demand

1255
00:49:57,100 --> 00:50:00,520
is strong and inventory's low.
Inventory's low, because prior

1256
00:50:00,520 --> 00:50:02,950
to the recession, those
low inventories. The March

1257
00:50:02,950 --> 00:50:05,890
sales, March, April sales,
markets, May didn't happen.

1258
00:50:05,890 --> 00:50:07,060
It's happening now.

1259
00:50:07,060 --> 00:50:11,020
And the pandemic-driven demand has
driven housing demand wild

1260
00:50:11,020 --> 00:50:13,330
without supply. Big
demand, no supply.

1261
00:50:13,330 --> 00:50:14,330
Prices go up.

1262
00:50:14,330 --> 00:50:15,610
And that's what you see here.

1263
00:50:15,610 --> 00:50:18,190
Unlike the prior
recession of 12 years ago,

1264
00:50:18,190 --> 00:50:20,770
where house prices decline
precipitously, they go up,

1265
00:50:20,770 --> 00:50:23,470
and they go down again.
Here, there's no decline.

1266
00:50:23,470 --> 00:50:25,720
There's huge demand because
we want a different living

1267
00:50:25,720 --> 00:50:26,410
situation.

1268
00:50:26,410 --> 00:50:27,760
We want to buy a second home

1269
00:50:27,760 --> 00:50:28,480
if we can afford it.

1270
00:50:28,480 --> 00:50:31,570
We want to get out of the rental market
and condo or apartment

1271
00:50:31,570 --> 00:50:33,970
building and move to
suburbia or exurbia

1272
00:50:33,970 --> 00:50:37,840
as the case may
be. Going forward,

1273
00:50:37,840 --> 00:50:39,500
interest rates are super low.

1274
00:50:39,500 --> 00:50:41,840
This is very good
for refi activity.

1275
00:50:41,840 --> 00:50:45,400
You can see refi activity
has been remarkably strong

1276
00:50:45,400 --> 00:50:46,780
for an entire year.

1277
00:50:46,780 --> 00:50:48,910
And because the Fed's
not going to raise rates,

1278
00:50:48,910 --> 00:50:50,510
this is going to
continue for a while.

1279
00:50:50,510 --> 00:50:52,150
There'll be a lot
of homeowners that

1280
00:50:52,150 --> 00:50:54,700
can refi their house for
financial gain for them

1281
00:50:54,700 --> 00:50:55,460
and save money.

1282
00:50:55,460 --> 00:50:57,950
So this means more
business for us, right?

1283
00:50:57,950 --> 00:51:00,100
This is good news.

1284
00:51:00,100 --> 00:51:02,480
We have we have low rates
are staying on for a while.

1285
00:51:02,480 --> 00:51:05,140
House inventory's low.
Demographics

1286
00:51:05,140 --> 00:51:06,430
are very favorable.

1287
00:51:06,430 --> 00:51:08,890
The millennials, the younger
end of the millennials,

1288
00:51:08,890 --> 00:51:10,840
are now aging into home buying.

1289
00:51:10,840 --> 00:51:13,660
So there'll be ongoing
demand for the next 10 years

1290
00:51:13,660 --> 00:51:14,800
for single families.

1291
00:51:14,800 --> 00:51:17,650
This the older millennials
and the like, the younger

1292
00:51:17,650 --> 00:51:20,770
millennials, they were pushing
multifamily for a long time.

1293
00:51:20,770 --> 00:51:22,600
The older millennials
are now into a house,

1294
00:51:22,600 --> 00:51:26,120
in many cases, middle age
ones in the middle here.

1295
00:51:26,120 --> 00:51:28,510
And the younger ones.

1296
00:51:28,510 --> 00:51:29,800
They're going to want a house.

1297
00:51:29,800 --> 00:51:33,890
You got low rates, big demand,
and credit's hard to get,

1298
00:51:33,890 --> 00:51:36,790
as I mentioned earlier. It
was much easier to get credit

1299
00:51:36,790 --> 00:51:39,400
before the recession
started right here.

1300
00:51:39,400 --> 00:51:40,720
And the recession hits.

1301
00:51:40,720 --> 00:51:42,000
Everybody pulls back.

1302
00:51:42,000 --> 00:51:44,050
It's hard to get a
loan. Despite that,

1303
00:51:44,050 --> 00:51:49,180
and despite the availability
of homes, demand is insatiable.

1304
00:51:49,180 --> 00:51:51,130
Wait till credit
gets easier to get.

1305
00:51:51,130 --> 00:51:54,400
You'll get another 50,000
100,000 homebuyers a month

1306
00:51:54,400 --> 00:51:56,890
wanting in on the
housing market.

1307
00:51:56,890 --> 00:52:00,040
As a result of that,
the fly in the ointment that

1308
00:52:00,040 --> 00:52:03,610
you can talk about is forbearance.
But I don't really see forbearance

1309
00:52:03,610 --> 00:52:04,600
being a big issue.

1310
00:52:04,600 --> 00:52:05,860
I simply don't.

1311
00:52:05,860 --> 00:52:09,160
The number of households in
forbearance is quite low.

1312
00:52:09,160 --> 00:52:13,640
We're now under three
million, 2 and 1/2 million.

1313
00:52:13,640 --> 00:52:15,530
Let's suppose half
of those houses

1314
00:52:15,530 --> 00:52:18,312
come on the market over
a year, 100,000 a month.

1315
00:52:18,312 --> 00:52:20,520
They go through legal, which is
going to take a long time.

1316
00:52:20,520 --> 00:52:22,598
A lot of states have a lot
of ways to prevent you

1317
00:52:22,598 --> 00:52:24,140
from getting to the
house and kicking

1318
00:52:24,140 --> 00:52:26,600
the non-paying borrower out.

1319
00:52:26,600 --> 00:52:28,460
100,000 a month,
if you're selling

1320
00:52:28,460 --> 00:52:31,630
six million homes a year, no
one's even going to notice this.

1321
00:52:31,630 --> 00:52:34,190
This will add a small
amount to supply,

1322
00:52:34,190 --> 00:52:36,920
bringing down price
appreciation a little bit.

1323
00:52:36,920 --> 00:52:39,260
But this is not going
to be a material change.

1324
00:52:39,260 --> 00:52:41,870
And I think the government, in
the new package they hopefully

1325
00:52:41,870 --> 00:52:46,260
pass, will have some extension
on forbearance and evictions

1326
00:52:46,260 --> 00:52:47,720
and so on and so forth.

1327
00:52:47,720 --> 00:52:50,930
As we wrap it up, let's think
about what's going on here.

1328
00:52:50,930 --> 00:52:52,260
Now, big country,

1329
00:52:52,260 --> 00:52:54,200
I can't talk about
every state, but I

1330
00:52:54,200 --> 00:52:58,880
want to give you
one last graph to to show you

1331
00:52:58,880 --> 00:53:00,830
that the economy is slowing.

1332
00:53:00,830 --> 00:53:04,420
This is full economic
data from August.

1333
00:53:04,420 --> 00:53:06,970
I'm now going to move
forward two months

1334
00:53:06,970 --> 00:53:11,230
and show you up to say
sorry, October data. It

1335
00:53:11,230 --> 00:53:15,050
takes a month or two to
get all the data, right?

1336
00:53:15,050 --> 00:53:17,900
Look at this data and
look at this data.

1337
00:53:17,900 --> 00:53:20,000
Darker is better.

1338
00:53:20,000 --> 00:53:24,850
It was darker in August
than it is in October.

1339
00:53:24,850 --> 00:53:28,150
The economy is slowing.

1340
00:53:28,150 --> 00:53:29,630
There's no doubt.

1341
00:53:29,630 --> 00:53:31,320
I showed you data
on mobility data

1342
00:53:31,320 --> 00:53:34,150
that's slowing. On job
growth data that's slowing.

1343
00:53:34,150 --> 00:53:36,430
I showed you retail
sales data that's slowing,

1344
00:53:36,430 --> 00:53:39,820
and I showed you total
household consumption statistics.

1345
00:53:39,820 --> 00:53:41,700
We need some fiscal stimulus.

1346
00:53:41,700 --> 00:53:45,570
You only need it for several
months to avoid a decline,

1347
00:53:45,570 --> 00:53:49,210
the small, W-shaped recovery,
or we go down March, April,

1348
00:53:49,210 --> 00:53:51,850
up June, July, August,
September, October, November,

1349
00:53:51,850 --> 00:53:52,880
maybe December.

1350
00:53:52,880 --> 00:53:54,400
And then down in Jan, Feb,
March a bit,

1351
00:53:54,400 --> 00:53:55,630
and then back up again.

1352
00:53:55,630 --> 00:53:59,680
I'd like not to have to see that.
It's worth buying the insurance

1353
00:53:59,680 --> 00:54:01,540
and spending the
money to get it.

1354
00:54:01,540 --> 00:54:02,690
If we don't get it,

1355
00:54:02,690 --> 00:54:04,490
the economy will
continue to recover in

1356
00:54:04,490 --> 00:54:06,190
April, May, June,
and Q2 and Q3 will

1357
00:54:06,190 --> 00:54:09,400
be better as we all get
jabbed in our shoulders.

1358
00:54:09,400 --> 00:54:12,220
I hope I've given
you food for thought.

1359
00:54:12,220 --> 00:54:13,870
My name is Elliot Eisenberg.

1360
00:54:13,870 --> 00:54:16,480
This is how to reach my cell
number, phone number, Twitter

1361
00:54:16,480 --> 00:54:19,510
handle, email address,
website, all that stuff.

1362
00:54:19,510 --> 00:54:22,780
I put out 70 words
every day on the economy.

1363
00:54:22,780 --> 00:54:26,560
No graphs, no charts, no
ads, no links, no photos.

1364
00:54:26,560 --> 00:54:30,040
If you'd like to get it, you
can call me up on my phone.

1365
00:54:30,040 --> 00:54:34,780
You can go to our website, Econ70,and you
can email me at Elliot@graphsandlaughs.net

1366
00:54:34,780 --> 00:54:38,530
or better yet, you can
text the word "bowtie"

1367
00:54:38,530 --> 00:54:40,240
notice the bow tie.

1368
00:54:40,240 --> 00:54:42,190
It should look familiar.

1369
00:54:42,190 --> 00:54:44,840
Text the word bowtie,
one word, bowtie one word.

1370
00:54:44,840 --> 00:54:50,020
No hyphen, no space, to the five
digit number 22828. You

1371
00:54:50,020 --> 00:54:51,460
offer me an email address,

1372
00:54:51,460 --> 00:54:54,670
you'll hear from me
every day until you die.

1373
00:54:54,670 --> 00:54:57,640
No, you could always hit
"unsubscribe." I'm kidding.

1374
00:54:57,640 --> 00:55:00,670
The economy has made remarkable recovery,
remarkable recovery.

1375
00:55:00,670 --> 00:55:02,810
It's done much better
than I thought.

1376
00:55:02,810 --> 00:55:05,020
And better than most
economists thought.

1377
00:55:05,020 --> 00:55:06,850
But there's a little bit more to go.

1378
00:55:06,850 --> 00:55:10,270
I'd like to buy some insurance
with fiscal stimulus or some

1379
00:55:10,270 --> 00:55:11,710
fiscal systems,

1380
00:55:11,710 --> 00:55:12,800
carefully focused.

1381
00:55:12,800 --> 00:55:14,320
We don't need that much money.

1382
00:55:14,320 --> 00:55:16,750
Seven, 800 billion, 600
billion will probably

1383
00:55:16,750 --> 00:55:18,850
get us through if it's
carefully tailored, it

1384
00:55:18,850 --> 00:55:21,760
will get us through the worst
of the first quarter, the higher

1385
00:55:21,760 --> 00:55:25,420
with higher cases of Corona. By the
end of the second quarter,

1386
00:55:25,420 --> 00:55:28,570
this problem is already in
the rearview mirror. It'll be with us

1387
00:55:28,570 --> 00:55:31,450
a bit longer, but it'll
generally be gone.

1388
00:55:31,450 --> 00:55:33,670
I hope I've given you
some food for thought.

1389
00:55:33,670 --> 00:55:35,740
I hope I've explained
to you where

1390
00:55:35,740 --> 00:55:40,570
we are and given you a decent
road map of where we're going.

1391
00:55:40,570 --> 00:55:44,290
I'd like to, again, thank A.J.
for his very kind introduction.

1392
00:55:44,290 --> 00:55:46,120
I'd like to thank

1393
00:55:46,120 --> 00:55:49,390
PRMI in a big way
for inviting me back,

1394
00:55:49,390 --> 00:55:51,310
and I look forward to
hopefully seeing you

1395
00:55:51,310 --> 00:55:53,830
in a year or two in person.

1396
00:55:53,830 --> 00:55:54,820
Thank you.

1397
00:55:54,820 --> 00:55:55,960
Thank you.

1398
00:55:55,960 --> 00:55:57,210
Thank you.