22V Conversations: The Fed’s Dovish Gamble, AI Demand, and Rising Term-Premium Risk

Initial Market Reaction to Fed's Dovish Stance and AI Build-Out Hey, everybody doing a video update, I guess we the kids called a podcast with Peter Williams, superstar economist slash fedwatcher slash hiker slash skier here at 22V. Peter, we have plenty of things to catch up on the Fed, the growth outlook. Before we jump in that into that, if you'll allow me, I'm going to make a few comments on the momentum factor, the bounce back today. And I'll, I'll tie it into just a quick Fed Fed thought. Yeah. And Peter and I will get into this. the Fed was a little bit more dovish, shouldn't say a lot, a little more dovish. It was definitely more dovish in a certain respect than anybody was pretty much expecting. And we'll get back into that. Momentum did not react well yesterday. It stayed on the lows following the Fed meeting and now you're having a significant bounce. Today is probably better that the Fed is relatively dovish for the momentum factor then, you know, being outright hawkish. So I wouldn't deny that. I would just say that when you look at what Meta and Microsoft's commented on about there not being near enough capacity for AI demand, that's a much bigger story than the Fed F4 for the for the for the momentum. And when I say momentum, I hope everybody now realizes that I should make it more clear that if we're talking about the AI build out trade, which is and basket, which is essentially the same thing as the price moment in basket at this point. So that your semis that your power generation names that your AI on site power or liquid cooling, etcetera. So you had very positive commentary and you know not enough compute would suggest higher odds of some positive ROIC for their for their spending which is becoming much more of a focus and has been all week now that their cash flows are negative. So we all know about the circular financing issue and and the concerns related to that. Peter and I well I'll ask Peter and make some comments on this as we go through it on some scenarios where we could be talking about wider CVS spreads and what that might mean for say the highly levered build out beneficiaries and or hyper scaler is like an Oracle. But as it stands today what what we're hearing from companies is fundamentals are OK. Will that lead to a positive Ric, we'll see. But you do not have enough compute according to the to the big three so far, Meta, Microsoft, Google and what companies are telling us on earnings is that margins are expanding, which can we attribute that directly to, to to AI and the usage of AI tools? Maybe, maybe not. We know that AI usage is moving higher and we know that demand is there. Will that demand satisfy meaning the revenues to justify the CapEx That is the $1,000,000 question and people are struggling with that. So things are a little bit better today. I'd also say situational awareness has sold its stock portfolio to Citadel. That was the former open AII forget what his job there leader and I'm sorry he he runs the fund called situational awareness. I'm forgetting his name. I Leopold something and I apologize. I'm forgetting the name. I call it the head on your swivel fund to quote Ron Burgundy. Ron Burgundy could have burned a few tokens and come up with the same long. It was basically a long AI build out trade and being short option being using options to offset that. Not a lot of tokens spent on the Kelly criterion. I see. But now we'll move on from that and interrogating risk management. Apparently I kid this is a tough business and most of the people that watch this are discretionary managers. So they'll probably find that hopefully some humor there. But coming back, we have a large bounce. We have in the momentum names. I do think it's more idiot than and then Fed driven. The Fed probably held situational awareness could be your market meaning they're selling of that stock portfolio to Citadel could or a large portion of it I guess could be marking a a bottom as well from a timing point of view. So maybe we do get a little bit of a bounce. We've been wrong on the momentum factor. We thought we'd get of a bounce through earnings season, then we basically gave up on that because of the volatility. So I'm definitely not going to pretend to take credit for for a bounce now because we're out. We're more focused on the non AI related cyclicals right now and we would be long those assuming inflation behaves and 10 year yields can stay in a relatively range bound called the 4 1/2 to 4 seven range, which gets to the conversation. Analyzing the Fed's Dovish Gamble and Rising Term Premium So that's my Sultan of Segway move there, Peter. All right, so let's first talk about the Fed your your reactions. I thought your note last night was excellent. The the what is it the Maradona Maradona framework? Is that the way? Speaker 2 Yeah, so the old, it's an old line from Mervyn King when he was governor of the Bank of England. Noting that you often feel like appropriate monetary policy was sort of like Maradona, not the hand of God goal, but in your ability to sort of run down the field and everybody's dodging and diving and trying to figure out where you're going and you basically get to go in a straight line sort of unimpeded at the appropriate monetary policy off sort of sees the world go around it relatively smoothly. The issue is that I think worse almost adopted the inverse approach of the sense where financial conditions are driving his framework moving around wishy washy and there's not a real sense of where he wants to go at the moment. And you know, I think the the reaction yesterday and to some extent continuing today with a little bit of attenuation. But the reaction yesterday, especially during the press conference suggested rather than opacity and sort of a lean on markets, markets would have pretty strongly preferred a bit more Teddy Roosevelt of, you know, speaking softly and carrying a big stick. I think ex post at least it seems pretty clear that had the Fed hiked yesterday or at least signal the hike whether explicitly or opaquely coming in September, the market reaction would have been very mild. I think there's, you know, some latent concerns about overheating, about upside inflation risks and especially when there is not guidance from the central bank, you get into a somewhat messier and less palatable process with that and your term premium shocks can radiate out a lot more painfully. They can still do the work of financial tightening, they just tend to do that work in a bit less bit more messy of a way. Speaker 1 So can we just stop on that for a second. You made a point of what the market was pricing as far as what I would take I think I would say is a term premium driven tightening of financial conditions for those that are not totally economic savvy or used to the lingo. That's essentially, you know, you're in your, your risk embedded in longer dated or any bond, but in this case longer dated securities. And I guess that's where the inflation risk would be showing up. And so how did you discern that yesterday? What were the the signals that you were taking from the market that it was more inflation that was inflation risk driving? Yeah. Speaker 2 Yeah. The main thing is, and this is where kind of getting inside the kind of nitty gritty of the yield curve can both be lingo centric, but also very, very helpful. And I think what we saw is that expectations of the Fed funds rate over the very near term came in decently. You saw sort of intermediate duration government body yields or swap yields roughly unchanged. And then very far out the old curve yields moved up pretty steeply. And compositionally what happened is inflation expectations moved higher more or less across the board at basically every horizon, signaling some degree of skepticism about the further commitment, eventual commitment to get back to 2%. Obviously we haven't done that in quite a while. So at this point it's more of a hope still. And then we inside of this sort of real yield. So inflation adjusted yields on TIPS, we also saw a really sharp steepening. So real yields reflecting more ambiguous or perhaps more dovish policy expectations fell for very, you know, short duration treasuries and they went out the belong end. Again, this is pretty consistent with increased inflation, uncertainty, skepticism about the Fed's commitment to getting back to 2%. And also I think I've been posted in all that too, a statement from the market that if the Fed is not going to act, there will still be some financial conditions tightening that happened. It's that happens. It's just going to happen from long term bond yields rather than the front end. There's a bit of an echo in a sense of the taper tantrum under Bernanke. Very different context, but there's a bit of that sort of a feel. Speaker 1 Yeah, it's a good point. I I now that you say that, I remember that pretty vividly. And that's a good, that's a good one. Good pull there. I would say Peter just went and explained very intelligently why the market didn't necessarily believe we're going to get to 2% without doing anything was not essential. I'm going to say the market was skeptical of the idea that that he is committed to doing getting to 2% without and and not having to do anything to get there. Speaker 2 Yeah. I think also if we look across assets to, you know, the dollar sold off, equity sold off pretty sharply as well. And it's like a, it's a fairly classic dovish or stimulative policy mistake response. That sort of steepening combined with weaker currency, weaker risk assets. You know, we've seen that in the UK with the mini budget is the most kind of canonical example. You saw a bit of a similar response to some extent during Liberation Day as well. And the sort of inflationary or potentially inflationary policy mistakes don't go over well. Speaker 1 So you say a mistake, which was to say that inflation was the driver of the moving yield, right? So I'm not disagreeing. I'm saying that's what what you mean by it. Shifting Volatility to Long-Duration Equities and 10-Year Yields But you can get bailed out by luck, right? I mean, we'll this will which is to say it might just be that we ended up having a dovish payroll report next week. Maybe the inflation data for whatever reason is not as as hawkish as as people are concerned about despite the fact that growth is very strong, which we'll get to you got a note on that today. Maybe there is some less hawkish inflation in which case you can get bailed out. But the the net result is it does seem like for investors the volatility is shifting from the short end of the curve to the long end of the curve as it relates to reaction is in data points. Is that a fair? Speaker 2 Statement. Yeah, it seems spot on. It may just be a period of a bit of yield curve, you know, chaos to some extent, especially as we get more post night meeting fed speak starting up. You know, it may be the case that worse having kind of seated some of that analytical and forward guidance discussions, you know that moves elsewhere on the committee, but there's a lot of ranges of views on the committee. Speaker 1 So the way I internalize, internalize this from a portfolio strategy point of view, where in the previous world where we thought there would be more orthodox or conventional monetary policy response from, from war, I would say that, you know, you obviously have volatility in the long end, but you're biased to curve flatten if they're going to use the, the Fed funds rate to, to as we said beforehand, and you said before, impose A mild restraint on the economy. Yeah, called 2 hikes, maybe a few more, but not like a we're going to crush the economic cycle. So maybe you're at 4 1/2% all things equal on the I'm just guessing, right? You know, called the your, your, your center is 4 1/2% fair value, right. So call using your target call 4 1/2 percent, you know, 47 or 43 around that or something like that. And more upside and or downside risk depending on how inflation comes with the short end. What that 10. That was the way I would think about it from a strategy point of view is that means that the market has is less attractive from a total return point of view. You end up more in a kind of range bound area. I would focus on internals. You have some slowing in economic growth, which obviously would be concerning, but it's it's mild restraint. What's different now from my point of view when I think about 10 year volatility is I can make a case that if we get lucky in a sense and we have lower inflation, this the market could react very positively very quickly. Yeah, like I wouldn't have said that like if we had dovish inflation, you know, pre 2:30 on my my my thought would have been pre 2:30 on yesterday that really dovish, dovish inflation. Not really dovish, somewhat dovish inflation, you say? Yeah, but the Fed will be slow to react to it. You know, they'll they'll need the economy to slow. So they're going to keep that mild restraint in. Now I'm now I'm more skeptical if the markets doing the work, the market could just say, hey, this guy never wants to tighten. It's really dovish and you just have a collapse of the collapse, a very sharp decline in the long end and risk assets go up significantly. Is that and vice versa, right? If you have the, if you have the hawkish data, maybe you're opening the door to 5% on the 10 year. Speaker 2 I think that's right. Yeah, it's certainly by reducing the emphasis on the Fed funds rate in the market size, whether intentionally or not, at least for the short term. You're in a position now where the sort of risk free rate, whether it's the Fed funds rate, the 10 year, the 30 year, the five year, that sort of tightening channel has to come through real effectively real rates at the long end of the old curve and or by increasing risk premia on non treasury bonds. And then the channel is like you go have a lot more volatility, credit spreads go higher. That acts as a bit of a restraint as well. Or just take bank lending becomes a little bit more cautious, perhaps, although we haven't really seen, you know, signs of that. Obviously it's been a day, but I mean, like in general, bank lending has been looking better, not worse. So you may still be in a situation where that's supportive, but you just see a bit more restraint in at least market facing financial conditions coming out of the long end. And you become perversely somewhat twitchier on data points. If you're sort of lacking a sense of what the framework really is and how to internalize new data, you just get more volatility around every data point, which is not what Worse has articulated to see what he wants to see happen, but nevertheless may well be the net effect for at least for a time. Speaker 1 Yeah. So I think about this for for investors here in equity markets that are that are interested, long duration equities will have much higher volatility. I mean, they've already have pretty high volatility, but I'm just looking at the screen as we talk like, man, do I want to be, you know, set up an option strategy long home builders ahead of next Friday, just in case or short, it doesn't matter in case you have an outlier move like and and obviously that would have impacted home builders anyway, but an outlier data point or even a slightly dovish or slightly hawkish data point could lead to an outside move in 10s. Yeah. So, yeah. So there that that's interesting to me. He also gets to like, jeez, if we have very strong data, you know, do we head towards 5% on 10 year yields and then how do we think about credit spreads and the weighted average cost of capital for a lot of the AI build out? I'm not going to ask you that ask you about that second part, but you know, obviously I think that will some questions will be raised, but well I will ask you about is, is there a, if you were to pick a risk like is it 4% versus 5% on 10 year, which way would you go? Speaker 2 5. Speaker 1 Yeah, I, I, I kind of knew the answer to that. That was like my, that was like my sick interviewing skills. Speaker 2 Sometimes, you know, there's the answer comes pretty easily because I think this may be kind of where you're heading on the data section. But like, yeah, when you sort of look at how the economy's been behaving, the strength of AI Cap X, the very uncertain geopolitical environment globally, additional new tariffs which have been coming online and that's process going to keep going and going. And also some new potential additional fiscal policy kind of coming out of Capitol Hill in the last couple days. All the shocks we're kind of getting confronted with are either sort of baseline, maybe things don't get much worse on that sort of overheating scale, or they're pushing you farther in that direction. There's not really anything that's taking you away from overheating on what's called the predictable 6 to 12 month horizon. You know, AI, productivity growth, those are all potential stories like the the longer run. But over the next 12 months when you're doing, you know, 2 1/2 to 3% of GDP and CapEx in one sector, the demand effect swamps the supply side effects near. You know, I think that the timing there is messy and obviously very uncertainist like what the ultimate macro payouts are from all this investment. But when we just take those basic sort of shocks hitting the economy right now, just use not particularly comfortable. And then you throw on obviously five years of above target inflation and the labor market, which now seems to be steadying itself. Some of the labor market data looks incredibly good, like best and like the jobless claims data are as good as they've ever been in history relative to the size of the workforce. Others, you know, more, more of a mixed story. It's still kind of a sluggish, strange labor market, but it certainly looks to be stabilizing. And if your labor market is stabilizing, you're a percentage point plus away from target and the sort of shocks that are hitting the economy all kind of lean in One Direction. You know, the general tringe doesn't feel particularly comfortable if you're rooting for a lot of dovishness. Unpacking Robust Consumer Spending Amidst Productivity Questions So you, you, you had it in there today on non GDP being too strong and that's what we got from the data today. I think Gerard had the the the trend of 3.2% for real personal consumption expenditures IN2Q. I mean that was the print. The trend arguably is lower if you just want to look at it say eye up a trend line. That gets to my question because I think you might have pointed out on your IB and if people want to get on Peter's IB, please reach out because I think he does one of the best jobs of I've seen of bringing company commentary to macro frameworks. Again, I am really excited about myself for this Sultan the Segway move because on the IB today, you know, it's critical that we go from three, two, probably to two on consumer spending if we're going to avoid that upside risk in in 10s. So like back down towards trend that there's one off factors and we talked about in the last time we did this video that arguably have increased spending. So should we have any confidence that we're going to be see a big deceleration in consumer spending? What's your latest read for the high high frequency beta which was on the Bloomberg earlier for those that see. Speaker 2 Nice marketing. Yeah, I think the the basic fact like when you look at the very, very high frequency data, like more granular than I think is often helpful from a macro perspective. But when you look like June looks to be very strong and I think the simple answer for June is Prime Day got pulled forward from July to June. So that's going to ask your year and your comps up a bit. And it's like big enough to be relevant even in the macro data and the World Cup almost really played a role to some extent. And if we look at the sort of commentary from the banks and the card companies sort of around really all of the spending issues, but especially on specific specifically what they say is you know June was a little bit hotter than we not necessarily might have expected, but then it did recent trends, but we have decelerated back to what is still a very strong underlying trend. And you know, depends upon where you look in the consumer stack, regional exposures, kind of sectoral variations across different companies. Speaker 1 But. Speaker 2 It's either strong to ridiculously strong. There's no like third thing of OK or weak. You know, the more exposed you are to hire in consumers and to domestic leisure and hospitality, the stronger those numbers have looked. But the consumer just looks strong. You know, surveys are pessimistic and grumpy and everybody hates residual place level effects from COVID and plenty of other things. But like, consumer spending is accelerating, consumer delinquencies are declining. They're coming in better than banks expected six months ago, three months ago, and household net worth is exceptionally high. That is not necessary an environment which makes for retrenching consumer spending. Yeah. And I think the sort of basic building block there is, if spending growth is maybe coming off of June's anomalously fast dip, but still dipping to a very rapid pace, is there enough productivity growth in the economy to be consistent with that much nominal demand? Speaker 1 Yeah, let's get back to the Fed and productivity because this is a really important point. And and, and when I say the Fed and productivity because of the statement that wash made and then what is actually happening with productivity and what that actually means for inflation. So one part of the task force, one person on the task force, Mervyn King was clearly listened to, I guess the other person, Walsh, am I getting that correct? And his views on productivity was dismissed. Speaker 2 White, William White. Speaker 1 White. Sorry. Yeah, I said OK. Tomato, Tomato. Come on. I'm sorry to which I assume is Professor White. Speaker 2 Yes. Speaker 1 Because I'll ask you first about the productivity data and then let's tie that into what he said or what is said historically, which seems to be ignored too or or deemphasized. The commentary in the statement was that productivity is still very firm. Yep. What has actually happened with productivity then? What is the risk around that from an inflation point of view? Speaker 2 Yes. So productivity growth, we've, there's been kind of a story, been a couple different stories taking place. 1, you know, around COVID, like everything else, they're a bunch of dislocations. And we've seen to some extent, like coming out of the little post reopening slow down in 2324, we've seen productivity growth actually looks pretty good on a called multi year basis recently starting in 2024. And on the composition of productivity growth and also the top line level have both been decelerating compositionally. You can sort of look and see if is it like true, you know, underlying technological change? Is it capital deepening? Is it workers getting more educated? And it looks like what we're seeing in the productivity growth data over the course of the last couple years is that we've kind of swung from efficiency or a technologically driven productivity growth towards capital investment and to some extent just pushing workers and capital a little bit harder. Those things tend to be a bit more ephemeral and often happened right after coming out of a recession. We're kind of a mid cycle downturn. Well, we just came out of a mid cycle downturn. So we should probably expect them to slow a little bit. And then over the last couple quarters, productivity growth has averaged just below 1%. In Q2, it looks like it will have also been quite weak given that we saw pretty good payroll growth and top line GDP growth was not particularly strong. Some of the internals looked a lot better, but top line growth itself was not particularly strong. And so it seems like the sort of basic factual point of productivity growth is very strong is a little bit questionable right now. Certainly over various points of a couple of years you could have said it seems pretty strong, but it's never looked compositionally like or at the level of the 90s. And there are both, I think some short run reasons for that, these sort of little business cycle related swings and also so much bigger like geopolitical forces too, like tariffs make things less efficient. They may be a good inefficiency depending upon your political views. But like tariffs make things less efficient in the short run, kind of unambiguous oil price shocks also make things less efficient in the short run. It's a supply shock. It dislocates the economy. Decelerating Productivity and Inflation Risks: 90s Comparison Yeah. So the recent trend is a bit of a shift down in productivity, which again then given the given the strength and economic demand tilt you a little bit to the higher inflation per unit of growth kind of. Speaker 2 Yes, I think that's the compositional skew in, in growth, in nominal growth looks a little bit worse because you know, sustaining 2% productivity growth may happen over time, but certainly thinking about like the high twos, it's almost 2 percentage points away from where we've been over the last three quarters. Productivity grows noisy, it's revision prone. But even still, you should be a little bit skeptical. And if nominal GDP growth is running north of 6%, that's a very pronounced degree of demand decline. I need to see if we're talking about 2% productivity growth even with some degree of hiring in the labor market, you're not, you know, it's not 1999 or even 2019 as far as underlying sort of Labor supply capacity. We could get bailed out and you get a ton of, you know, domestic workers kind of rejoining the labor force. But given demographics, that does not seem like the basis for a, the center part of your forecast. It may happen, there's a chance, but. Speaker 1 So let's have a little fun with this then. Based on your reading of White, how do you think he would have interpreted the statement and comments from Warsh? I mean, is there a chance he hasn't gotten around a meeting with that part of the task force yet and he only met with the? Speaker 2 The excited. Speaker 1 Portion of the task force, I feel like yeah, I was like, so I I'm not asking you to speak for the. Speaker 2 For. Speaker 1 For the extremely accomplished Professor White, I'm just wondering what would be. Speaker 2 The challenge is if you're trying to use productivity growth as a reason to be dovish, that can well be the case. The issue, though, is that monetary policy impacts the economy through financial conditions, and you have a bunch of productivity growth. You're kind of capitalizing typically a ton of earnings growth at the same time. So in the 90s, we see arguably going to see that now as well. So you're already seeing very stimulative conditions for households and firms because of all that productivity. The trick now is that we aren't really seeing that productivity growth. We're seeing very good margins. We're seeing good earnings conditions, all things considered. But if you're going to sort of justify dovishness at the moment on the basis of future unrealized productivity growth, not productivity growth, we actually see in the data, you really run the risk of overheating financial markets and financial conditions kind of Broadway. Speaker 1 Interesting. Speaker 2 On the basis of expected future productivity gains and disinflation and positive earnings. And if you don't realize that, it starts to feel a little bit more tenuous for certain. But also you may just have to play catch up on the inflation side because your forecast is proved wrong. Speaker 1 Yeah, it's just interesting that then then you, you you reinforce that term premium shock risk against it. Yeah, right, right, right. So it just crystallized really for me once something you said about the market maybe wanting the Fed to do a little bit more of the heavy lifting versus now you're in a situation, let's just assume for a second, we're going to have all this wonderful productivity growth in the future. But the investments now are leading to not necessary productivity, but very strong earnings, some margin appreciation. You're getting that very stimulative kind of financial asset contribution, I guess for growth then bang, you might offset that. A different kind of type of the, the Japan problem, different kind of like, yeah, like you just Oh no, 10 year yields have to go up to offset that. And that's going to be coming through the term premium and inflation risk, which then sets off a whole other point of problems when it might have just been better to say, I don't know, we're going to hike a little bit to hopefully quell inflation, so. Speaker 2 It's, you know, I think the thing with and the here's where the contrast from the 1990s is incredibly obvious. Obviously two tech booms, you know, lots of future games to be had. In the 90s, there was a tremendous amount of global disinflationary pressure. You had China was about to join the WTO. We just had NAFTA, the fall of the Cold War. Labor supply dynamics in the US were extremely favorable. Needless to say, none of those things quite hold now. Certainly like there are some disinflationary forces coming out of China, but that's sort of it. You know, globalization may not have started running in reverse, but it's certainly slowed tariffs. We have all sorts of other geopolitical tensions kind of adding inefficiencies and costs all across the global economy. And you know, demographics are not the incredible tale when they were back then either. And so we're sort of thinking through the general backdrop. We have these secure challenges. We also had years of above target inflation, which I think the market is now going to be much less tolerant of how like the other experimentation then you would have been back. I mean arguably I would say two years ago, but especially in the late 90s or after the GFC, because even a few years ago there was a sense that inflation descent was going to come about because policy was restrictive and we were still generally moving down. We stopped moving down. We've moved back up on inflation and there's naturally a question about will we ever get back to 2%, or at least to use the Greenspan a definition. Will inflation ever get low enough that we kind of stop thinking about it all the damn time? Speaker 1 Yeah. The Fed's Communication Strategy and Political Implications Do you mind briefly describing, I mentioned the the Japan issue, do the the self reinforcing nature of it. I use it in a different context, but do you mind describing that for people that I think it's important when you think about the downside of this potential downside of the framework that appears to be from Wash, if you don't mind going through that, yeah. Speaker 2 Yes, I think that the basic challenge with the BOJ right now we kind of see there is the risk that you sort of outsource near term kind of counter cyclical policy to markets and you end up getting in this sort of reinforcing loop where long term rates rise, currency eases and then you don't hike rates because on that financial conditions of tighten the bed, there's a bit of a credibility question. Then you that happens that kind of goes again don't high grades because long term rates are higher and it sort of just keeps rolling forward for some time. When you know if you use a policy maker sort of asserted a bit more counter cyclical intention yourself, you may be able to truncate away that loop and now the old curve can sort of flatten and maybe the net effect across the entire curve. It's still a little bit of is a little bit of tightening in financial conditions, but it happens much more evenly across the curve in a more controlled non term premium driven way. Speaker 1 Got it. Thank you. That's all I've got. I mean, we've done 31 minutes and 40 seconds. I, I did take up 4 minutes to start, so I apologize. So it was 25 minutes of of Peter time and then 55 minutes of some commentary for me. It's Bill White, correct? Is the yes. I'd like to formally apologize to Mr. Bill White for calling him Walsh, to quote slap shot. I feel shame. So I just want to lay that out there. I feel lots of shame. And so I was not trying to diminish you in any way. Speaker 2 One suspects we will all become a lot more familiar with the varying task force members over the next four or five months. Speaker 1 I But I hadn't. Just as a side note, I hadn't thought about it until you mentioned it. Like you have these task force members and then you got to figure out which ones he's listening to. Speaker 2 Right. I mean, it's the trick is it's like with there seems to be some sort of deference to the task forces either as a way to maybe forestall some bigger more less comfortable decisions or just to sort of try and see what policy should look like. And there perhaps a new somewhat more robust kind of kind of framework and you have to figure out both what on earth the task forces are going to say, who is he listening to inside the task forces? But also is worse, say yesterday, the FOMC is still the decision maker. And if the task forces cut, you know, there was the article Wall Street Journal over the weekend where Waller was apparently saying, like, tell me who's on the task forces and I'll tell you the result. I think that basic point still holds. And ultimately statutory authority rests in the FOMC and the Board of Governors with the chair obviously in a leadership role that you have to sort of persuade them both the chair and the task forces have to persuade the rest of them that whatever recommendations they're making are actually good at delivering on the feds stable price and maximum employment mandates and. Speaker 1 They're not going to leave with this because I've been pondering it. If I were, you know, wanted the markets to do the tightening of financial conditions because I really didn't want to raise the Fed funds rate, I don't know if I would tip my hand that that was the plan. You've told investors, you've told the market that they're supposed to tighten because you don't want to. Yeah. So why would they? Why? Speaker 2 Would they? Why would they respond positively? Speaker 1 On that, because what's? Speaker 2 That the issue is that like hawkish market reactions usually come on the basis of expecting future policy to tighten, right? And if you're just telling markets I don't want to do anything, it's a very different constellation of shocks into markets in the economy and potential also open. If, like that rhetoric leaks out into the real economy, it may well not play particularly well with like business leaders, political leaders, everyday households for who at this point, inflation is something they think about a lot and deeply dislike. Speaker 1 Yeah, it's just the tail risk associated from a political point of view I think is interesting where if inflation doesn't come down because you said the market was going to do it, you say, oh, shucks, sorry, anyway, I'll leave, I'll leave it there. It's just, it's just, yeah, I would just say that if that was a plan, it would have been probably more appropriate just to say we're raising rates. This was the vote. You know, we're going to take it meeting by meeting data, you know, you know, our forecast and move on. Yeah, right. So that that's what was curious to be is why make it so obvious what the plan was? Because that's how it potentially doesn't work. Anyway, I'll move on. Speaker 2 Good to catch up, that is.