YouSaid · the spoken record

Neil Dutta

lines on the record: 119
first: 2023-01-27
most recent: 2023-01-27
sittings or episodes: 1
sources: podcast

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“Exactly. To me, it's about the process, right? I mean, why should ISM being below 50 now mean I should be negative about things three months from now if all these other things I see happening like China reopening Europe or whatever? You can apply that throughout all different kinds of cycles. The data itself is not what's important. It's about getting your thought process and your outlook correct. And then if you're right about that, then the data will follow soon.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“That what ultimately leads data is your narrative. People don't realize that. But if your narrative is right, the leading indicators will lag your narrative. Do you see what I mean? And I think that's to me”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“That's shocking. And there's nothing those 300 purchasing managers that are surveyed by ISM know about the world that you don't, right? And so I think that that's an indicator I don't like. I think, you know, look, to me, in this business, it's about taking a holistic approach to data, right? It's not about finding the one indicator, right? I mean, oh, look at this weekly leading index. It leads everything else. Well, no, it's just an amalgam of like all these financial market variables. So why do I need that? You know, I mean, so if it was that simple, there wouldn't be, you know, there is, I mean, you don't have to believe like an efficient market theory to know that if it was just one thing, there wouldn't be all these people analyzing the same thing, right? So it's just to me, it's about taking a holistic approach to data, looking at all the indicators, and also remembering.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“To me, the ISM is the one that I harp on the most because there's a cottage industry of people that just drive their entire asset allocation process off of it.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, there's, you know, there used to be a time when I thought someone overlaying a chart of manufacturing production in the ISM was like, wow, you really found something really interesting there. Now I realize it's nonsense. Right. You know, and so”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I wish I had known back then that a lot of these indicators that people put their faith in are just really bogus. I mean, I didn't, I mean, I can't.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“You would never think about it. And I think if I'm giving someone advice, I would say start at a large institution because I get that I'm at a smaller one now. But when you're at a large one, they have so many different departments and so many different asset classes and so many different types of constituents that they serve, right? And you can kind of see every nook and cranny of what goes on in the financial market space and financial services space. And then you can find your passion. And so I would say get your foot in in the door of one of these big firms.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“So, my advice would be just get your foot in the door because that's what I did, right? I mean, when I was in college, I had no idea that there were jobs like this. Oh, there are jobs where you just talk about macro and the economy all day long and people pay you for that? I mean, it's...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“So I have a confession. I don't really read books. I do read a lot of articles on Bloomberg. And opinion columns and Wall Street research, but I'm not a big book reader.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“He's, I think, the head of investment strategy at MentLife, if I'm not mistaken. And he and I work together at Merrow for a period of time. So he would be someone else that I would lead on quite a bit for just advice and not only economics, but just life. I mean, he's got three kids just like I do. So does he have twists? No, he doesn't. And his kids are a lot older than mine.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, those are the two big ones, and I think those are two great ones to have. Drew Mattis would be another one. Oh, sure.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a tear jerker. I mean, but it took me a little bit to get into it, but I did get into it more for her than for myself. But it was well worth it. We need to start White Lotus. We haven't done that yet.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, the last season was great. So we Handmaid's Tale is another one that we watch. She got me into this show called From Scratch.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, because people are paying off the level of prices in some respects, not the rate of change. So I would say that the rate of change in consumer confidence should be getting better over the next several months”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“We just aren't hearing enough about. And then we know that natural gas prices have come down somewhat. That will with a lag bleed into household utility bills. And then grocery bills will probably come down because agricultural commodities have come in somewhat. All of that should provide some tailwind to consumer sentiment. And, you know, look, the stock markets are up about, what, three, four percent so far this year? That should help as well. So, you know, to me, if you think about what drives consumer sentiment, it's wealth, employment, Inflation.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it goes back to a discussion we were having earlier about what's easier to form a political coalition around employment. Or you've never seen this much of a gap between Attitudes about the jobs market and overall consumer sentiment. Ever. It's very weak, but if you look at the labor differential, which is basically consumer attitudes about jobs, it's rarely been this high. It's basically where it was right before the pandemic, in the late 90s when the labor markets were very, very strong. So I think that speaks to this inflation dynamic. But what do we know about inflation, Barry? At least in the things that people buy frequently, there's improvement. I mean, gas price is finished last year lower than where they started them.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Or productivity weakness, right? Because in the former case, there's an opportunity for companies to offset some of the hit to their bottom line with a stronger top line. That's sort of the way I'm thinking about it.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“You'd expect margins to come down somewhat. I mean, obviously, they're very, very high, but that also means that companies are probably more likely to spend some money, right? So that's sort of the way. Company spending money that also helps corporate earnings, right? So it's about why the margins are coming down. A margin decline that's driven by companies spending more on CapEx employment is very different than a margin decline that's driven by”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Coming down because supply chains are using commodity prices are easing. And so that should be a reasonably healthy backdrop for corporate profits. The question is, is what is it, you know, for the markets is, If the Fed is not cutting, that means that rates will be higher. And all else equal higher rates are not good for stocks.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I'm not a stock market strategist, but what I will tell you is that when you think of corporate profits, right? I mean, it's largely based on an identity, right? I mean, it's basically revenue. Less unit labor and unit non labor costs. And so when you think about it through that lens, I think revenues will remain steady because nominal growth is holding up. So, even though inflation is moderating, you'll see real economic growth pick up. I think unit labor costs will moderate somewhat as a labor market's kind of normalized. I mean, we won't see as many people quitting, and that should take some of the pressure off. And we see unit non-labor costs.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“If you peel back the onion a little bit and you think about where's growth coming in, where is inflation, you're still talking about a 5%-ish nominal growth environment. That is not consistent with earnings recession, in my view.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Some recession. Like, call me when rates are going down and building stocks are going down because that would be a big problem, right? But that's not what's happening today. You've been around long enough to know this sort of cottage industry of nonsense on the street about, oh, the ISM is below 50. The Fed's got to come in and do something. How's that been working out for the industrial stocks call? Industrials have been outperforming. Caterpillar is another stock that's doing really well. So I don't see it. I mean, again, I think, I mean, the earnings recession call is purely driven by like, you know, look, the ISM is below 50. I draw your viewer chart of earnings and it looks like it lines up, so that's the earnings recession.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean Google earnings recession. Everyone's talking about, oh, that's the next thing. Oh, this 2022 move in stocks is all about rates. And the next shoe to drop is the earnings recession. How do you get an earnings recession if nominal growth is running at 5%? Has anyone mentioned about the dollar? Like the dollar's off 10%. Doesn't that have a mechanical effect on corporate earnings for the multinationals that trade on the S&P 500? And I guess the other thing is... In a weird way, like interest rates coming down and people betting on the Fed to kind of back off juices the housing market because you see home building stocks at a 52-week high now. Right.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Real growth will pick up as a result. And I think that's the risk. That I'm more likely to highlight now. And I think that's something the consensus is not really positioned for. And I think that that's becoming the more, increasingly the more likely outcome because We've been talking about a recession for the last three quarters, and it just hasn't happened.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“So that should buoy demand. Now, if companies are all on this side of the fence and they think household demand is going to slow down, and then the opposite happens, what does that mean? That creates a risk where you have this situation where the companies are having to catch up to the end consumer.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Right? So companies sort of think things are going to be okay, and then something falls out of bed, and that means that they have to cut their hiring plans, adjust their CapEx budgets, clear out their inventories. But what if we've been doing that for the last six to nine months already? And now there's a risk with inflation falling, gas prices have come down. No one's talking about that anymore. Natural gas prices are down, which means you're going to see lower utility bills. Food prices are coming down, which means you'll see lower grocery bills. What does that mean? That is a tailwind for real disposable income.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“You can, but I don't think the Fed is going to give you that right away. I mean, it's going to take a little bit more time to play out. But more importantly, it's about the mechanism. Like, how do you get the recession? Like, what is the mechanism? Like, for example, is there a massive financial shock that gets companies? So the thing that I've been exploring is that one of the ways you get recession, in my view, is through an element of surprise.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“We're not seeing that now. And I think that is an important sort of, you know, and you can talk about, oh, employment is coincident or it's lagging. Or at the end of the day, initial claims are low. That's a leading indicator. But to me, again, it's not about the data as it's coming in. Tell me why it keeps going. That's what's right. I mean”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. Key feature, key distinction, though, of that period was that we were seeing job loss month in and month out over those first.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Not even about soft landing, it's a recession. I mean, the consensus is overwhelmingly, in a way. I think if you surveyed, it's like 60% recession of the street, if not more. Usually, when the consensus is that overwhelming for the recession, you're already in one.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, there's more. We haven't really invested much in mining CapEx. If you have an incremental pickup in global demand, that could sort of royal energy markets. That's an inflationary risk. We talked about, I mentioned productivity. Productivity hasn't been as strong. You have experienced workers that are now leaving the workforce. That means that the quality of your workforce isn't, it's going to take time to get that back up. So I think there are interesting arguments on both sides of this debate. But for the short run, I think it's really just about the labor markets. And the Fed keeps saying that they think things are out of balance. And so that means that they're going to have to bring it back into balance.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, it wasn't until the very end of that decade that real way just started to look a bit better. But again, it's one of these interesting things, Barry, where. If you look at consumer confidence, it was very, very, it got very good after 2015. So once you started, particularly when gasoline prices started, when we had the windfall from the positive supply shock and energy. But, you know, I do think that”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, it just, again, it goes back to this idea of what's driving inflation over the longer run. Ultimately, to me, it's about labor market dynamics. And, you know, I mean, we had a period of disinflation. It wasn't like, but inflation was sort of stable in the 2010s. I mean, Bernanke famously said if inflation's the benchmark, I have the best inflation record of any chairman because it's basically been 2% the entire time I've been, I've been, so he actually hit it right on the head. So it wasn't like inflation was getting even slower during the financial crisis. And so now.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, I mean, we had the flattening out of the global supply chain, and now the global supply chain is actually narrowing. We want to make it more resistant to global shocks. And so I think that's probably inflationary. Final assembly is probably leaking out of the lowest cost destination.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think on the globalization side, I mean, we probably have a little bit more of a home bias now. I mean, if there's one bipartisan thing that's come about from Trump to Biden, it's sort of...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Does that mean, right? I mean, because ultimately, if real growth is getting better, that means you're putting pressure on physical capacity, physical resources, right? Your real growth is what drives more employment. Real growth is what drives more production. That means capacity goes up. And that is what pushes prices up. So I think that's kind of the thing that they have to wrestle with, which is why I say it's difficult for the markets to get the cuts that they are currently pricing if I'm right about the economy. If real growth is holding up and we're growing above potential. Then, even if price inflation is moderating, it's still going to be difficult for the Fed to cut in that environment.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“It's going to be difficult. I mean, I hate to say it like this. It just means the disinflation that you're going to see this year is also transitory. 14 transit? And that's the thing that the Fed I think has to wrestle with is they haven't really to me haven't told us a good kind of framing around this idea of improving composition of growth, right? Real GDP growth is probably accelerating as inflation is coming off.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know, but that's the way the Fed's thinking about it. So, do you see what I mean? Compensation equals inflation plus productivity. So all you're talking about is...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, let's say we had this burst of household formation, and that's what drove this spectacular increase in rents during and immediately after the pandemic. And now it's just becoming too onerous on people, and they've all decided, you know what, I'm going to go find a roommate. I've been dating somebody. I'm going to go move in with them. What have you just done for yourself? You've reduced household formation, but what have you done for yourself assuming you haven't lost your job?”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“The markets don't have a great way of telling you how much your barber is going to charge you for your haircut. So services are more problematic or, yeah, or your dry cleaner. And also...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“That and also, I don't think they view inflation the same way as the markets do, right? The markets are very, very good at kind of telling you about what's happening with goods inflation, right? So we know what commodities are doing at any moment in time. You could price it.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it was after that. But he was right about the inflation being a lagging indicator because he was using that to justify in a more aggressive monetary policy easing. And the Hawks wanted to go because they were making the point that, look, inflation is still high. Well, inflation is a lagging indicator. Interesting. And so it's sort of the same thing that's happening now, kind of in reverse.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, but that's also been well known. I mean, that's been, I think, a well-known feature of the inflation statistics, right? So this idea that, oh, this is such a lagging indicator. No, that's a lot of people just saying that they want the Fed to back off. Right. And they're using that to justify. I'm talking my book. I'm guilty.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Housing rental inflation, which has been quite strong. But is also likely to decelerate quite a bit. I mean, one of the reasons why inflation has historically been a lagging indicator is because shelter, which is a big component of inflation, is the lagging indicator in and of itself, right? And it tends to lag home prices. And home prices have been moderating. And we know that new lease growth has also been moderating quite a bit. So I think it's inevitable that housing rental inflation and as it's measured in the CPI data will come down.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, Powell kind of spliced the inflation data into three parts, right? I mean, you talked about core goods inflation, which is, I think, what you're getting at, which is it's deflating, right? So those are your cars, your furniture appliances, right? Then you have...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it's important to follow the data. And ultimately, if the Fed is saying that it's data dependent, then the data will drive their views on policy. I must admit right now it does feel that the Fed is kind of moving a little bit away from that because it seems like they just want to get rates just above 5% in Congress regardless and wait and see, regardless of whatever happens.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“And sentiment, and you know, the Fed can play a role and sort of backtalking sentiment in the short run, but the Fed can't permanently increase the level of asset values.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“It's absolutely. I mean, to me, it's just a ridiculous thing. Because if you take that to its logical conclusion, the Fed has an infinite ability to expand its balance sheet. Sure. So that means that the stock market should never, ever go down. If that's what, right? I mean, so if you think about it logically, take it to its end conclusion. Does the central bank have, is there any constraint on the Fed in terms of printing money, doing QE? There is none, really. I mean, it's not political, but theoretically there's none. And so if the balance sheet is all that drives the stock market, then the stock market should never go down. You have to think about it that way. And so to me, the stock market is driven by earnings and by...”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“I think QE was basically a way for the Fed to tell the markets that it really meant business about keeping rates low for a long time. And to me. Let's say the Fed came out and stopped QT because they want to maintain an ample level of reserves. Does that tell you anything about what interest rates are going to do? No, the Fed can raise rates whenever they want. So that to me is, I don't think it's really the same thing. And so I don't know. There's always these sort of, there's this like knee-jerk kind of desire, I think, in markets to like... Explain things as simplistically as possible, and so it's like, oh, like, here's this overlay chart of the Fed's QE and the stock market. And that's why the stock market's going up. And it's just.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and remember back when Trump ran and they had the whole TCJA, what was the big 2017? Yeah, what was the big discussion then? Monetary offset. Remember that? Monetary offset. Like the Fed needs to come in and counteract the fiscal stimulus. Well, think about it this time. There's a lot of fiscal stimulus that needs to be counteracted, particularly when people are still sitting on.”
2023-01-27 · Masters in Business · Neil Dutta on Economic Research · IDENTIFIED FROM THE TRANSCRIPT · source