Tariffs, The Fed, and Macro Focus with Morgan Stanley’s Ellen Zentner

29:52When are participation rates in the labor force going to peak? When do we hit peak earning years and peak working years and therefore first time home buying years, et cetera, et cetera. So you mentioned housing as being one of our key calls in 2019. Well, that was only accelerated during COVID. For sure. It wasn't, there were many themes that were accelerated during COVID. And housing is one of those in terms of the incredible demand. I mean, we are going to be underbuilding housing for a decade. We have been underbuilding housing really since the financial crisis. We will have an 18 million unit shortfall that we need to make up for.

30:37That's a giant number. It's a giant. Because we've been talking about four to five million currently, and that comes from the National Association of Realtors and the Association of Home Builders. So there's a little asterisk, hey, is this an objective number? That's currently. And then you grow that over time. You pair it with affordability. You pair it with the fact that our surveys do show that millennials in Gen Z by far still want to live in single family homes. They may not all be able to afford single family. And so single family renting will be in high demand. We're going to need to build those units.

31:14Home builders are going to have to respond by building smaller, less expensive homes. We think modular housing will have a big role to play as well. And then you start to think about all the different ways we need to build homes as well. That shortfall, in order to insure all those homes, we're going to have to think about climate-friendly building materials, more climate-resistant building materials, all the different ways that we can appease the insurance companies so that we can actually build in the areas and make up for those shortfalls. So I think housing is certainly, from a thematic perspective, something that can – it's a great example to me because it's something where this is a longer run structural theme, but it can fall out of favor at times cyclically because it is very interest rate sensitive.

32:01Right now, housing is not in a great place in the U.S. Affordability is terrible. And it's not just an interest rate problem. More of the home price is made up from regulatory impacts than anything else. How much of this is a lack of supply? I know Jonathan Miller and folks like that have been writing supplies running 20 to 30 percent of what it normally is. And how much of it is a little bit of NIMBY? Once people buy a home, they don't want to see all the pretty scenery get knocked over and new houses put up over there. What's the solution to this? Well, I think the NIMBY really is a symptom of or a side effect of the regulation.

32:49Or sorry, The NIMBY not in my backyard leads to, is part of what leads to the heavy-handed regulation, right? And heavy-handed regulation by far is a key contributor to the cost of overall housing. Then you add the cost of labor in a sector which has had a shortage of labor since 2008. And we only started to make up for that shortfall during the what I call the immigration period where we were bringing in millions of immigrants a year in 2022, 2023 and part of 2024, only to see that reversal now put labor pressures on that sector again and then tariffs on materials that go into construction. So it's just it's cost upon cost upon cost that home builders are having to deal with that help drive the affordability issues for the home buyers as well.

33:47Really intriguing. So obviously thematic investing is a big part of your job. Is there any other theme bigger than artificial intelligence today? I'm going to say probably not. But artificial intelligence, it's a very broad, it's very broad. And so I would gear it more toward AI tech and diffusion, which has been a key pillar, thematic pillar for Morgan Stanley. But here's why it seems like my answer is just so easy and almost like not well thought out, almost flippant in a way. AI is a generalized technology. So it flows through everything. So whether you're thinking about a multipolar world theme, which importantly includes defense, we had gone long global defense back in January.

34:41And it was based on the fact that you've got your palanteers of the world and open AIs of the world working with the U.S. government to modernize defense for tech and AI. And so if you think about four themes, say longevity, AI, tech, and diffusion, multipolar world, and the energy of everything, AI threads through all of that. It threads through all of it. So when I think about, say, conviction weighting those themes, your highest conviction weight is going to be on the AI, tech, and diffusion because it does thread through everything. So what's more important, the Magnificent 7 or the Magnificent 493 that are going to benefit from AI?

35:32Well, I think it's very difficult to not have those big, big tech names, let's say, in a multi-thematic portfolio or if you're trying to take advantage of an AI theme because they are big players in the space. I mean, as soon as someone in this country moves into contracts with the U.S. government, you've got an incredible amount of funding. Look at someone like Elon Musk, who is a creature of the government. Sure. I mean, how much of his wealth comes from government contracts? Tesla, SpaceX. Exactly. And so when these other players are wrapped up in government contracts and the government has put its priority in winning this seeming two-horse race on AI against China, you would probably be ill-advised to bet against that.

36:21It doesn't mean that AI tech and diffusion is just the MAG-7. So, of course, in my role, I can't talk about specific companies, and you don't want to ever take specific company advice from an economist, I'll just say. But you've got very interesting players all the way down to mid-cap and small-cap, all the way down to Russell 3000 that are important in an AI tech and diffusion space. Meaning they become more efficient, productive, profitable by deploying, sort of like what we saw post-internet bust. And they become part of the fabric of that generalized technology that all companies end up using as AI diffuses across the economy.

37:03Makes plenty of sense to me. What other big themes are you paying close attention to? Some big themes. And again, it's hard for me to get away of some sort of flavor of AI. So as an economist, I'm going to go back to demographics every time. What are the incentives for adopting AI? Incentives for adopting are you've got to replace labor shortfalls. That's a huge incentive. And so if you are a country with falling birth rates and you can make up for that in several different ways. One is your existing population. You can put in policies to boost labor force participation. So have a more full participation from your current population.

37:49You can be sure that you are not just have an open immigration system. And I don't mean just opening your borders to indiscriminate flows, but an open immigration system, a traditional open immigration system where you have a sound process for integrating immigrants into the labor market, something the U.S. has been very good at, something Europe is not very good at. Or you can replace that labor with AI and robotics. There's your incentive. There's your incentive for countries like China, like Japan. Maybe not like India right now, but India's demographics are not good when you look further out a decade from now, 15, 20 years from now.

38:34You know, it's funny. You keep talking about demographics. Isn't the trend throughout history that as a country becomes first less poor and then wealthier, the birth rates just drop? Absolutely. People don't want nine kids. More affluent countries. It is a natural way of things. Countries that are able to, let me just say, roll with that, right, and boost productivity by making fuller use of your existing labor pool are those that still continue along that path of affluency. The U.S. has not just higher birth rates than our major trading partners. We've got higher rates of productivity. It's part of what U.S.

39:16exceptionalism is built upon is that not only have we kept birth rates higher, which population growth and specifically growth in your labor force goes into the potential growth in your economy, those calculations, but we're also making those more productive. And it's part of our secret sauce of success. You know, when I talk about U.S. exceptionalism, I'm not even referring to markets, financial markets. I'm talking about the U.S. having a more flexible labor market where we have higher rates of productivity. Very important that we continue to hang on to independent monetary policy, that we have stable currency.

39:55But that comparative advantage lies in your labor force and how far you can push it. And the U.S. is just really good at that. So let me ask you a thematic question, only it's going to be a negative. what's the one economic myth you hear more than others? What question bubbles up from clients, from brokers and advisors, from people within that you wish would just go away? Maybe this gets too nuanced because economists love nothing more than getting nuanced. But it's like you got the chicken and the egg backwards. So it's that the markets are pricing in that the Fed is going to do something at its next meeting, and therefore the Fed has to do that.

40:41But the markets have been so wrong about that for so long. Well, I think the markets over time have had a very difficult... So there's another one, don't fight the Fed. How many times did we say don't fight the Fed and markets fight the Fed and they lose? But the markets lead the Fed. Now, the Fed makes low-frequency decisions in a high-frequency world. The market is very high-frequency. That's a great way to describe that. Yeah. And so the fact of the matter is the market can respond on a dime when the data comes out, when financial conditions change. The Fed can't. The Fed has to look at it.

41:15It has to deliberate it. It has to gain a consensus. And then it moves. Much of the time, the market doesn't have it wrong. The market read the labor report, the most recent labor report, and said, that's not good. And guess what? The Fed also thinks that's not good. Great. You're on the same page. But the market was able to price it in well ahead of the Fed actually delivering. in September. So I do believe that the Fed is going to cut 25 basis points in September. Now, this is with my hat on as the chief economic strategist of Morgan Stanley Wealth Management. There are others in the firm that also have views on the Fed.

41:50But you've asked me, and the beauty of this podcast is that I get to give my views, and you're only talking to me here. So I do think, though, that our focus on September, it can probably be best spent elsewhere in that the first cut is going to be the easiest because, as Chair Powell said, modestly restrictive. Do you need to be modestly restrictive when job growth has slowed this sharply? If you don't need to be modestly restrictive, just make an adjustment. They're not making any decisions about what happens after that. So the fact that, you know, do they or don't they cut in September? And by the way, 50 basis points, that's a hard no from me.

42:28Right. Because I knew, I could tell. I could tell the question was on your lips. It was about to come out. 100 basis points, someone, the president suggested. No, that's definitely even harder no. Right. But I do believe that once you have made that cut, it's a little harder to justify if the data don't keep coming in in the same fashion to say why that one adjustment was perfect, but not another. So I think where I would rather debate is how far do they need to go? And this is where I do disagree with some powers that be that the Fed is going to need to cut a lot. I think we're going to have a good economy next year.

43:04I think productivity is going to be picking up even more. I think there are parts of the one big, beautiful bill with the investment incentives that are in it, which are going to help put a floor into the economy. And we're not going to have an environment where the Fed's going to need to cut 150, 200 basis points. To be fair, stocks are at all-time highs. Real estate is at all-time highs. Revenue and profits are at or near all-time highs. it doesn't seem to be an economy begging for rate cuts, even as we're starting to see a slowdown in some consumer spending and some hiring. But how much of that justifies lower rates, doesn't tell you need to cut drastically.

43:44That's right. Do you want a good economy or do you want the Fed to cut drastically? Well, we know what the president wants. Yeah. What the what the economy needs and what the market wants, they may be something slightly different. Yeah. And if the Fed is watching it and objectively doing its job, then we will end up in the right place. Coming up, we continue our conversation with Ellen Zentner, Chief Economic Strategist for Morgan Stanley, discussing the state of today's economy in light of tariffs and trade policy. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

44:26I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest is Ellen Zentner. She is chief economic strategist and global head of thematic and macro investing for Morgan Stanley. The firm runs over$7 trillion. So you've written about tariff and trade policy. My question for you is how disruptive or destabilizing is this to either the U.S. or global economy? So we've certainly seen disruption in confidence. Markets don't like opaqueness. They like certainty. And we could see that early on in the volatility of, wow, January hit and it was tariffs, tariffs, tariffs.

45:10And the market clearly was caught off sides. Policymakers were caught off sides. Economists were caught off sides. And so then you kick off the flurry of activity. What does this mean when the world order is being reset? And it can mean a whole host of things. It's one reason why all economists, all forecasters have to take a very big slice of humble pie and take a big bite out of that because the uncertainty bands of any kind of forecast you put out are going to be highly uncertain. There's no way to know the impacts of tariffs truly until well after the fact. And that's because tariffs fall here, there, and everywhere.

45:51You're going to have some degree of manufacturers in the countries that we import from eating the cost. You're going to have importers along the way eating the cost, wholesalers eating the cost, businesses that sell final goods eating the cost, and consumers having to eat some of that as well. The forecasting comes in where, okay, how much of each? What percentage of each? I think one thing that I've observed is businesses have been sitting on a good deal more cushion in terms of cash and free cash flow than I think anybody had suspected that they would be. Meaning they have the ability to eat some of that.

46:29The ability to eat some of it. I do think that even after Chinese manufacturers surprised us in 2019 to the degree that they were willing to eat the costs, I think they've been able to continue to absorb it. I think ultimately for economists, because economists by and large are wearing a lot of egg on our face for getting it wrong, for sounding the alarm. But companies were sounding the alarm too. We're taking our cues from what the surveys are saying, what we're hearing directly from companies that I'm going to pass on these prices to consumers. I am not going to eat this. But then how much of that are companies talking their own book as well?

47:08To be fair, it's the middle of August. Liberation Day was early April. We had a 90-day pause. We really haven't felt the full impact on tariffs, and we probably won't until the fourth quarter or first quarter next year. So is it a little early to say, hey, no harm, no foul? No, I think it's definitely too early to say no harm, no foul. And I don't think anyone, even the administration, is saying there won't be some bit of bearing the brunt of that among consumers, among businesses in the U.S. I think it's just that you've got one faction saying that it's going to be a lot less of an impact than some other factions.

47:48And no one really knows. So let's all be humble about it. No one knows, but there seems to be a bit of a consensus that tariffs are a consumption tax. It's like a VAT tax on U.S. households and businesses. Is that overstating the threat or is that accurate? No, that's exactly how it works. To the extent that companies eat it on the margin or pass it on to households and households eat it and paying higher prices, that is exactly how it works. I mean, that is the economic theory of it. That is sound. It's the degree to which the costs are absorbed and by what players along the import channel that is the unknown factor.

48:32And I can tell you that what the president is doing or has been doing is changing global trade in a way that typically would play out over a decade or so in a very short period of time. And so that's led to a tremendous amount of uncertainty. And like you said, this may be something where the full tariff impacts aren't felt until the fourth quarter or first quarter of next year. And if that is the case, we'll deal with it when it comes. And Chair Powell and the Fed will be there to act very nimbly around that. I am confident of. But has there been unfair trade practices? Absolutely. Do we need to renegotiate trade contracts?

49:18Absolutely. I was at the state of Texas during NAFTA. NAFTA was not renegotiated until it became the USMCA under Trump's first term. Why? The global economy is so dynamic. How could a trade agreement put together in the 90s still be relevant in 2017, 2018, 2019? It makes no sense. So absolutely, we need to be revisiting trade alongside a dynamic global economy. On a more regular basis. On a more regular basis. We're just doing this over a short period of time, and that's created a good deal of disruption and uncertainty and volatility and guesswork, if you will, among the economics community. So let's talk about that guesswork.

50:03There's going to be some of these tariffs showing up on the household level. Is that a headwind for consumption? Same question about businesses. If they have to eat some of the tariffs, that's going to affect profitability. There's no free lunch, is there? No, there's never a free lunch. So we are seeing consumer spending slow. Now, it's slowing for several reasons. One, we've had a reversal of immigration in the U.S. that is no small number of people. Bodies consume. And so if you've got fewer bodies, they're consuming less. And I want to say we have had a negative net new population this year for the first time, I think, in U.S.

50:50history. Is that accurate? Yeah, it's I mean, we've slowed to a trickle in population growth at times, but it is highly unusual, highly unusual. You've got less bodies in the U.S. So you're consuming less. Now, those bodies contributed to low income consumption. You've also got low-income consumers in general in the U.S. that when prices for goods go up from tariffs or for whatever reason, they're going to consume less. So consumer spending has been slowing. Now, why hasn't it slowed even more so than it has when population growth has been negative from a reversal in immigration? Because the top-end consumers are still spending.

51:36So the top income quintile in the U.S. represents 45 % of all consumer spending. If you take just the top two income quintiles, that's more than 60 % of all consumer spending. And so we want what we want. And whether you say maybe that's still an artifact of COVID, we were all taught we're going to die tomorrow, so spend it if you've got it. It's five years later. Or it's just this tremendous, tremendous increase in real estate wealth and tremendous increase in financial wealth. And even though our marginal propensity to consume out of that wealth is smaller for upper income households, the growth in wealth is just enormous.

52:14And so when they're spending, it tends to mask weakness at the low end. But there are some risks along the horizon. Student borrowers have to start paying that back. I don't think that we're out of the woods and that because the economy is growing at half the pace it was last year, we're just fine. I think we can grow even more slowly before it gets better. So let's talk about two issues that are policy concerns that you've raised. One is economic data integrity. We're recording this a few days after Trump fired the head of the BLS. What sort of concerns does this raise in terms of protection of data integrity?

52:55So data integrity cuts both ways. So prior to that very high profile firing of the BLS commissioner, the concern among the economics community for quite some time has been that data integrity has been slipping. And the way we measure that is we look at survey response rates. And especially because the labor market report is the end-all, be-all, number one data point in the U.S. that we follow, the response rates had been slipping. And now why is that? Well, there are myriad reasons. One is that we have frequent government shutdowns. And so when the lights aren't on and no one's there to police the survey and call you the business and say, hey, it's really important that you respond, and you don't get that call as a business, it starts to instill in you this sense of maybe this survey isn't so important.

53:53Maybe I don't need to answer that. And so what we've seen is after those episodes, you tend to have a slippage in response rates that you never quite get back. Another issue is we talked about the youth boom. I don't see a lot of youthful people jumping up and down to work for the government. Maybe that's because the systems are antiquated. I wonder, because you've got older generations at the government that are having to teach an antiquated programming language to younger generations coming in, programming languages that don't exist anywhere else. And so how does that instill excitement among young people to come in and work for the government?

54:36We have also had a systematic underfunding of data agencies for quite some time as well. How can you overhaul your systems without the proper funding? And so it's something that the NAEB, the National Association for Business Economics, has really followed this closely. we have a statistics committee that meets with all the heads of the statistical agencies. And the statistical agencies have a very strong outreach program to economists in academia, in government, and in the private sector to say, here are methodologies, how can we do it better? And so we're constantly searching for ways to improve.

55:18And honestly, to their credit, half the time, the private sector economists are like, crickets, how can we do it better? Oh, you don't like the way we measure housing? Tell us how we can do it better. Cricket, cricket. No, I just like to say I don't like the way you do it. I mean, but we're not really offering a lot of sound solutions. We're a massive economy. It's not easy to measure the data. But one thing that we do well historically is we measure data well, and we have the best, most robust data sets out of any other country we compare ourselves to. But it has been slipping. So what I will advocate for is funding the data agencies and encouraging them to overhaul their systems.

55:59So let's talk a little bit about the Federal Reserve independence. How much risk is there that the Fed could get politicized? So we have to take the risk seriously. And I understand why folks might be concerned that we could be headed for a time when there's collusion between the White House and the Fed, because we've been there before, so you can understand the concern. And that was a very different time between Arthur Burns and the Nixon White House, but it was a very real time, and then it led to the hyperinflation, and those of us of a certain age, we don't want to live through that again.

56:381970s inflation. That was an ugly decade economically. That was an ugly decade, and I tell those harrowing tales to my team of waiting in line for gasoline with my mother, you know, because it was rationed or we couldn't get gasoline on a Sunday. I remember I had a lawn mowing business and I would show up with my little red gas tank can and they would say, do you have an odd number license plate or an even number license plate? And my answer was always, I'm 12. I don't have a license plate. I just need a gallon of gas so I can mow Mrs. McCarthy's lawn down the street. Yeah. I can't believe they had the nerve to ask a 12-year-old.

57:17Oh, no, show up. But it shows you, why should you, a 12-year-old, get priority over someone that needs to commute to work? But apparently... But my parents bought a house at 18 % mortgage interest in 1980. 18%. And that was normal, because if you didn't buy it that day, it was more expensive the next day. That's what strikes fear in the hearts of monetary policymakers, because that is inflation expectations. The price was going to be more expensive tomorrow, so you better buy it today. Structural inflation expectations lead to consumer behavior that helps to drive prices higher. Yes, and it starts off that sort of vicious cycle.

57:54And so this is at the heart of why you need independent monetary policymaking. Because if the market believes that the Fed might keep rates easier than the economy would otherwise dictate, then is that going to again lead to something like runaway inflation? is going to lead to stagnation. And that's why every time there's some headline where the Fed's independence may be threatened, you see term premium increase at the long end of the yield curve. You see the stagnation playbook go into effect among investors. And going back to U.S. exceptionalism, independent monetary policymaking is a pillar of U.S.

58:42exceptionalism. Really, really interesting. There have been a bunch of names floated for Fed Chair, other than Scott Besson, who has said he's not interested, and I think is probably the most thoughtful person that I've heard, names I've heard thrown out. Any of those names make you remotely comfortable? Or what do you think about some of these trial balloons that keep getting tossed around? So I think, I agree with you. I like the steady hand and careful thinking that comes from Treasury Secretary Besson. It would actually, in policy circles, be a demotion to send the Treasury Secretary to become chair of the FOMC.

59:28That's a demotion. We think of it. So in markets, I often hear this from investors is, wait, but the chair of the Fed is the most powerful person in the world. But in policy circles, it is a lesser position than Treasury Secretary. That's very interesting. It's a longer tenure, especially if we look at recent administrations. It's not like someone becomes Treasury Secretary and they're there for all four years. They seem to turn over pretty rapidly. That can be the case. Right. That can be the case. Not always. We've had back-to-back six-year terms for Powell. That's a pretty robust tenure. Four-year terms.

1:00:09But yeah, and there tends to be a lot of longevity with Fed chairs because they also don't change typically with administrations and political parties. They tend to span political parties. so look there are a lot of you know i i obviously am going to have some personal favorites of mine that have been thrown out there but unfortunately i'm not going to give you those names but but well just tell me who you really don't like there is yes yes i'll do the opposite um no but there there are plenty of names in there that have been tossed around as possibilities that would make fine fomc chairs i think what you're going to see is with each of those names as they float to the top, the markets will have their say on whether that is a candidate that would be believed to be a mouthpiece of President Trump or not.

1:01:02When I look at various cabinet members, defense, intelligence, health and welfare, and most recently now BLS, can't say these are the best than the brightest. It's not Camelot under Kennedy. And you could kind of, under John F. Kennedy in 1960, you could kind of get away with that in certain cabinet positions. Am I wrong in saying markets won't tolerate someone like an RFK Jr. and all of his anti-vaccination attitudes at a place like NIH or CDC with a Fed chair? Is the bar higher for the chairman of the Federal Reserve than other specific cabinet positions? Well, I think piggybacking on sort of your exact examples there, who directly has a hand in influencing financial markets?

1:02:07That is the Fed chair. That is the FOMC collectively, not just the Fed chair, but the FOMC as a collective body. And that's why the markets will always be most sensitive to who is the chair of the Fed. So I want to ask a question about policy, not politics. But very often when we talk about, you know, anytime something comes up like taco, whatever, it seems to get overly politicized. But the one descriptor I heard that's kind of fascinating is that there isn't a Trump put, there's a Trump collar. And what that means is when markets are near all-time highs, he's somewhat emboldened and can be very aggressive in doing things like firing the BLS commissioner.

1:02:53When the market sells off and suddenly we're 10, 15, almost 20 % off the highs, hey, we're going to put a pause on tariffs for 90 days. there's a little bit of a floor there, and hence the phrase Trump collar. I know we only have six or eight months worth of recent data. How important do you believe market prices are to this president and this administration? So in the first administration, we were like, okay, we've got his number. We've got his number. He takes the stock market as the single best indicator of his approval rating. And so if the stock market pukes, if it's a huge sell-off, he's going to listen.

1:03:37And so we went into this second Trump term with the markets assuming, aha, yes, all we have to do is speak, and we'll speak volumes with a sell-off, and he will change his tune. Well, that is not what happened. That's not what happened. Because the markets did puke when it became apparent that he was going to be very aggressive on a trade policy in his second term. The market puked and the president stayed the course. So someone asked me my opinion as to what I think trade policy is going to look like going forward, given how frequently we've seen flip-flops and back and forths and extensions.

1:04:18And what I answered, and I'm curious as to your perspective on this, tell me the last person who whispers in President Trump's ear before a decision is made, and that'll tell me where the market will go. If it's Treasury Secretary Scott Besson is the last person to speak to him, I think the markets would be pretty steady and on a gradual move higher. If it happens to be someone like Pino Navarro, well, buckle up. We're in for a bumpy ride. Fair way to describe the policymaking in D.C.? I think so. I mean, basically what you're getting at in a roundabout way is just who do the markets trust? Who do the markets trust?

1:05:03And I think you've had Treasury Secretary Besant that had an active role in that hair-raising time between April 2nd and April 9th, meeting with Chair Powell, helping to persuade the president to sort of back off at that time, adding to that hair-raising moment by threatening to fire Powell. Like the markets have come to know Besant as a calm and steady voice. Steady is the word that always seems to pop into my head. Steady equals certainty equals surety equals the opposite of volatility. And so, you know, the markets will speak volumes as to who they believe they can trust. Coming up, we continue our conversation with Ellen Zentner, Chief Economic Strategist for Morgan Stanley.

1:05:49I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

1:06:01All right, so I only have you for a limited amount of time. Let's jump to our favorite question, starting with, who are your mentors who helped shape your career? Well, Tamara Plout. So I might have mentioned I worked for her at the state of Texas. She was a very influential chief economist at the state of Texas, and that was my, she was my first. Barry, you always remember your first. So she was the first chief economist that I worked for and has followed my career for the next 25 years. She's followed my career. I think my first foray into investment banking, my chief economist was David Ressler at Nomura Securities.

1:06:45He was a 26 year veteran chief economist at 26 year veteran of Nomura Securities. And he's now playing golf 24 seven in the South. But he because it was my first foray into investment banking, into the high frequency world, trading as a trading desk economist, he was very influential there. And I still hear from him all the time when he sees me in the media, or he hears of some forecasting award or something like that. Like he's still the proud papa today. And so those were two big early mentors of mine that helped shape my career. That's great. Before we get to books, and you actually brought a few books, I want to ask you about streaming.

1:07:36What are you listening to or watching? What's keeping you entertained? I really developed a love for streaming. I didn't watch TV before. Very similar. The TV was never on in our apartment. And so with COVID, my eyes were open. And so I really love documentaries. The one that I'm watching right now is on Billy Joel. I'm literally just wrapping up the first. We stopped just before The Stranger. Yeah. So they must have made it for 50 somethings in this world. Right. So. Well, if you grew up in the 60s, 70s, 80s, Billy, especially in New York or Long Island. Yeah. Billy Joel was everywhere. Yeah.

1:08:21Which I'm of an age that that I know him in real time, But I'm from the South. So I didn't know all of these things. So my streaming habits are extremely polarized and polarizing probably. So it's anywhere from documentaries. So I can expand my knowledge and expand my mind to the most base streaming reality shows like Love Island. And I am not kidding you. If anyone wants to say, wow, she really is a real person, it's the fact that I can enjoy Love Island, and then in the next hour, I can enjoy a documentary on Billy Joel. So you have a couple of books here. Let's talk about books. What are you reading now?

1:09:07I have a couple of books. What are some of your favorites? Yeah, I have a couple of books. So when I first, as you mentioned, I was on almost exactly eight years ago, and I talked about Joe Nocera's book, A Piece of the Action, How the Middle Class Became the Money Class. still one of my favorite books on the rise of consumer credit in the U.S. and our love-hate relationship with it. But it's been that analysis of how the middle class suddenly gained entry to homes, mortgages, cars, and lots of consumer discretionary goods, huge boom for middle-class America, right? Yeah, incredible. It really is still an incredible book.

1:09:46And every economist of mine that I have cover the consumer and study household behavior, they have to read it. So I brought in today Kurt Vonnegut's Player Piano. Can't go wrong with Vonnegut. And so I have not read this book, but I'll tell you that what I'm showing you, if the listeners could see, is a handwritten note from a colleague after watching a webcast of mine. How many people get handwritten notes still? Not many. Right. But they catch your attention. And the webcast was me and Adam Jonas. And Adam Jonas is the, he was always referred to as the Tesla guy. He's probably the quintessential thought leader at Morgan Stanley.

1:10:30He's just got a celebrity following, and he is leading the charge on robotics and humanoids. And so after that webcast, I was sent this because this book, written in the 1950s, covered rise of the corporation and replacement of the state, the ruthless efficiency of capitalism in dealing with labor, the overpowering of the worker by AI and automation. That's all in this book from the 1950s. 75 years ago. Amazing. 75 years ago. The other book I brought in, so again, just like my streaming habits, is called The Bluegrass Conspiracy, an inside story of power, greed, drugs, and murder. This is the backstory to Cocaine Bear the movie, which is one of my favorite movies.

1:11:17I haven't seen it because it sounds so crazy. Come on. Yeah, I mean, it just sounds like a wildly fictionalized account of a highly unlikely event. Yeah. How's the book? The book I am just starting, and I cannot wait to get through it because the movie, the only thing that the movie that really happened that was in the movie was that there was a dead bear found in a national park with a belly full of cocaine. That is the only thing in the movie That was accurate. That was accurate. That actually is in the book, but there's a whole backstory here, and I cannot wait to read it. It comes highly recommended.

1:11:59So you can see that my taste in books runs the gambit as well, just like my streaming. So if you haven't read Player Piano yet, have you read other Vonnegut? Have you read Cat's Cradle or Slaughterhouse-Five? I have not read any Vonnegut. All right. So everybody should read Slaughterhouse-Five. And if you're at all remotely interested in science and technology, run amok. Cat's Cradle is his version of that. What makes him so fascinating is he finds these incredible concepts and just so simply explains them in such a compelling and entertaining fashion. But isn't it also scary how books can be written that long ago and then here we are talking about humanoids and robotics because another i have to say piggybacking off of this idea of robotics and humanoids 2013 have you seen the movie robot and frank no robot and frank frank langella was in it susan sarandon peter sarsgaard uh james marsden live tyler wow that's some cast it is um so talk about When we think about thematics, longevity is a thematic.

1:13:15AI tech and diffusion is a thematic in terms of thematic investing. Robot and Frank is about a senior gentleman that he wants to age in place. And to help him do that, his family buys him a home companion robot to help him. Which is really not decades away at this point. No, we're not that far off from that. In Japan, they're already testing it. So this was in 2013. The kicker, though, is that it just so happens that Frank was a petty thief in his prior life. He's now going through early dementia. He was a petty thief, and he co-ops the robot to help him. That's the fun part of the movie. But Robot and Frank, 2013, it's a great movie.

1:14:00I'm going to absolutely check that out. Our last two questions. What sort of advice would you give a recent college grad? interested in a career in economics, finance, investing, what would your advice be to them? I would say for them to find any and everyone they can think of that works in that field already. The best is to, if you can, not to cold call, but to try to find some sort of connection, whether it's your wealth advisor and see who your wealth advisor. I get contacted by our wealth advisors that say, hey, my client has a son who this, do you mind if I put you in touch with them. Find some way.

1:14:37And when you start to have conversations with people that are already working in areas where you think you want to work, never leave that conversation without getting two more names from them of people they think you should contact. And can they make that opening for you so that you always have another conversation to be had. Each call always asks for two more names. That's great advice for someone right out of college. And our final question, what do you know about the world of economics, investing, thematic investing, macro economy today that might have been helpful 25 or so years ago, really when you were first starting out?

1:15:15I think if I were to know that models are not the end-all be-all, I would have started using anecdotal evidence a lot earlier. I am a very big believer in anecdotal evidence. And I've been criticized for that in my career. It's not statistically sound. I like to use my one man data sample, which is my husband, when I when I study behavior. And, and I just it's a great way to connect to people connect to your audience, get a message across. And I'm a big believer in using anecdotal evidence when thinking about how to adjust your forecast subjectively. And so I wish I had started using that in my career even earlier.

1:16:01Ellen, this has been absolutely a pleasure. It's been way too long since we had you in here. We have been speaking with Ellen Zentner. She's Chief Economic Strategist and Global Head of Thematic and Macro Investing for Morgan Stanley Wealth Management. They manage over$7 trillion in total assets. If you enjoy this conversation, well, be sure and check out any of the 547 we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you find your favorite podcast. And be sure and check out my new book, How Not to Invest, the ideas, numbers, and behaviors that destroy wealth and how to avoid them, how not to invest at your favorite bookstore.

1:16:50I would be remiss if I didn't thank the crack team that helps with these conversations together each week. Peter Nicolino is my audio engineer. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.