Lots More With Neil Dutta

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1:01mobile devices, message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2025, JPMorgan Chase and Company. How was Future Proof? It was awesome. You had quite the interview with Bill Gross. I was listening to it. I mean, I feel like everyone's kind of known that he hates good luck. Yeah. I kind of love it. Like, I saw a bunch of people talking about like, oh, this crazy old guy. I feel sorry for him. And I was like, I get the sense he's living his best life. He's just like on stage settling old scores because he can like go for it. He has nothing to lose. Yeah. I did think it was funny.

1:38He went off on Peter Lynch though. Like I've never, did you hear that bit? No. He like made fun of Peter Lynch too. And it was like, I've never heard anyone take issue with Peter Lynch. I did a deadlift. One, two, three. Hegemony. Hegemony. Okay, good. Hegemony. Hegemony. Barges. This is an after-school special, except... I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US. Where's the best squid ink pasta? These are the important questions. Is it robots taking over the world? No, I think that like in a couple of years, the AI will do a really good job of making the Odd Lots podcast and people will say, I don't really need to listen to Joe and Tracy anymore.

2:23We do have the perfect guest. Well, in the meantime, this is lots more. Not a lot of spinoff. And we do have the perfect guest. Neil Dutta hanging out with us in studio. Tracy, that was fun out in California, wasn't it? California is lovely. We should live there. No, it was a fun conference. So we were at the Future Proof Conference in Huntington Beach. I think there were 3 ,000 people there, mostly financial advisors. and we did a live interview with Bill Gross. I love going out to Southern California. It's always fun when you can create controversy and rivalry between two asset managers, bond managers who are like rivals and create drama.

3:06We created the drama at the event. Well, I feel like we didn't actually have to do much to create it. I mean, Bill kind of went off on his own. You know, Dada, is there any reason to own a bond right now? Yeah, absolutely. I mean, it is fixed income. Okay. But you could get that, but Tracy gets that in her Marcus account. I mean, I just told my parents to buy a bunch of treasury bills because it's the easiest. Really? Yeah, why not? I mean, it's just like clipping a 5 % return month after month. Bill Gross disagrees with you. Well, I'm not saying rates can't go higher, but if you're not a sophisticated investor, yes, there's plenty of reasons to own treasury.

3:47You know, Bill Gross started his career clipping. He told us this story when we interviewed him that he was hired at PIMCO in 1971 and that part of his job was to literally go down to the vault that PIMCO had every – I don't know how often he went down there and clipped the physical coupons off of paper bonds that they had. And that was part of his job was to like go do that clipping. Well, he's clearly older than we are. Well, he was also talking about how he used to trade on Quotron machines instead of Bloomberg terminals. So, yes, absolutely. But it was a fun interview. But wait, why not just, I'm sorry, I'm hung up on this.

4:24Why not just like, okay, yes, I get that you can earn like 5 % somewhere, but can't you earn like 4 % like basically risk-free with no duration or anything? Four and a half percent in Marcus. In like a, you're right. Yeah, just cash. Cash, yeah. What's wrong with that? Well, five is more than four. And my parents have no need for the money right now. Okay, all right. And I mean, they're not trying to trade for the, you know, to get, you know, to actually make money on the bond itself. So. All right.

4:59Well, let's talk. OK, we don't know. No one knows where rates are going. So we got an inflation, a CPI print this week. You've been saying, Neil, for a while that inflation, we haven't defeated it yet, that either we have a recession and we don't have a recession. is going to pick back up. Is this the first sign of it? Did we sort of like bottom out on the inflation front? I mean, some of the progress is definitely stalling. I mean, for me, it's just, if you don't believe that there's a recession, it's hard to believe that inflation has been resolved. To me, it's really that. That's sort of how I think about it.

5:28I know others may disagree, but I think demand is still pretty strong. And you saw that with retail sales today also. Wait, isn't the consensus on CPI that it was mostly gas prices? Because I remember when gas started going up in, I guess it would have been July or early August, Omer Sharif, who's been on this podcast a number of times now, basically said, yeah, and he said like, this is going to mean CPI coming in in August at like 3.5 or 3.6 % ended up at 3.7 year on year, but it seems like it was somewhat expected. Well, I mean, I think for me, what's interesting about this is that when you look at core goods, right, like things, you know, like furniture, and that's actually going back up, excluding cars, right?

6:14So I think that's interesting, because to me, that was sort of the linchpin for a lot of the weaker inflation story that kind of people had going into the year, and that's going away. And I think part of the reason why it's going away is that supplier delivery times are no longer, I mean, it's taking longer for factories to move product out the door. So the supply chain issue isn't improving. And if that's the case, then I think one area of disinflationary pressure is going away. And so I think that there's probably some upside to core goods prices between now and the end of the year. There's also some upside to food prices, I think.

6:48Joe I have a pet theory that a lot of the strong consumption is just down to like economic nihilism where people are just like screw it I don't need to save anymore I'm just going to spend everything go out go to restaurants I mean that's really if that's true that's really bad because isn't that like the sort of like classic precursor to hyperinflation like people just go out and they're like oh I have a little cash so I'm going to like go out and buy TVs like I seem to recall like reading stories about that before like episodes of like Russian hyperinflation I hope you're wrong I hope that's not what all this consumption is about.

7:21I think there's a natural limit to how many TVs you can actually go out and buy. But I do think the psychological impulse behind a lot of the spending hasn't necessarily been appreciated by a lot of economists. Let's put it that way. Neil, didn't you write something about savings? Yeah, I mean, I think that to me there's nothing inherently wrong with the savings rate where it is. I mean, it's certainly lower than it was a few months ago. But if you think about, you know, the period from, let's say, the early 1980s through 2007, I mean, there was a fairly notable inverse relationship between your assets relative to your income and savings, right?

7:56So when assets go up in value, the savings rate goes down. Which makes sense, right? Because people are looking at rising wealth as sort of a low risk form of income. And so, you know, you feel better about things. You don't need to save as much. The financial crisis period kind of upended that, right? So we went through a nearly decade-long period where the savings rate rose. By the time we got – I mean, even before the pandemic, I think the savings rate was like 8 % or 9%. Right? And so there's no reason for that to happen again. And I think that's something that's not well appreciated by people.

8:31And again – Talk about this a little more. So I just pulled up the chart on the terminal, and I hadn't really looked at this chart in a while. So we had been – Wait, what's the ticker, Joe? P-I-D-S-P-S. Oh, I see. Personal display is at least the savings rate is a percentage of disposable income. That's the start. That's the measure you're looking at. So I hadn't realized January 2020, we were at 9.1 on that. Right. Today we're at 3.5%. So go back. What does that tell you, that 9.1 that we had pre-COVID? There was sort of maybe more caution. Okay. Maybe balance sheet repair. It could have just also been fluky.

9:06We had maybe a couple of months a week of consumer spending before the pandemic. But at any rate, I mean, to me, I think the bigger story is that the trend in the savings rate over that entire period was a function of continued household balance sheet adjustment. All right. So right now, going back to the present tense, what's the Fed going to do the next few meetings? Pause in September, right? Yeah. I don't think they're going to do anything at least until December, if they do anything. So nothing in November and then maybe a hike in December. Yeah. I mean, I think part of me feels now increasingly that they'll just keep pushing back on cuts.

9:46Why? Well, I mean, that could be considered like a de facto tightening. I mean, if the market expects cuts next year and I think the market is still right. Oh, pushing back the cuts. I see what you're saying. Yeah, yeah. Just basically pushing back against the idea that they're cutting. So they just keep an extended on-hold policy. Okay. The thing is, at this point, I feel like if they're – I mean, because we're talking right now, you saw the journal article, like fine tuning, they're using these words, right? So if you're going to hike, like what's the point of hiking once more, right? So if you're going to hike, it has to be at least a few, you know, like, I mean, it's very rare to see the Fed do like an abort, like mission, right?

10:21I mean, maybe in the mid 90s that happened, right? They hiked and then they kind of just left it there and they never did anything again. And then the next move was cuts after the LTCM thing. So that's sort of how I'm thinking about it. But I think the risk to them doing this is it's happening at potentially a time of cyclical momentum in the economy. And that to me is what kind of concerns me. You mentioned that there are these – maybe that the momentum on disinflation has stalled. Yes. But like big picture – and look, there's always going to be month-to-month noise. But big picture, if you just sort of zoom out, it still looks like various measures, CPI, PPI, PCE, quit rates, things like that.

11:02It still basically seems like lines are trending down. But what are you doing, technical analysis on the economic nation? No, I'm just saying like – no, no. What I'm more saying is like it's just like zoom out and look big picture. Like, yes, like I get things happen month to month that we can say, like, oh, like strip out gasoline, et cetera. It still looks like most lines, especially, you know, I know like one of the theses of like persistent inflation is going to be that wage growth and the labor market is still robust. But even that's like normalizing. Don't you find it amazing that the folks that were like that are now talking about the quits rate as this sort of magic like wage inflation indicator during the 2010s, they were the ones that were propping up the prime age employment rate as the as the best measure for wages.

11:47And that number is actually still going up because the labor markets are, in fact, still tightening. I've always been a quits rate fan anyway. No, I always have been. I've been shorting for years. But what if the quits rate's going down because people are getting paid more in the jobs that they have? Is it more or less likely that someone at UPS is going to quit their job after striking a deal, after the union struck a deal with the company? is it more is it going to be more or less likely that for gm uh you know the folks that make jeep vehicles are they going to be more or less likely to quit their job yeah and in the next couple of in the next couple of months so i i wonder a little bit about that i mean so um but to me isn't it it's a confidence game right i mean ultimately and i think that's how policy works too i mean this is something that waller was talking about is expectations right businesses I hate to tell you, no longer think there's going to be a recession.

12:41And if they think that, then they're going to be more likely to post job openings. They're going to be more likely to hire. So hiring rates and opening rates probably pick up. And that probably means stronger employment. And so, yes, I agree with you that there has been improvement in a lot of these metrics that you're pointing to, right? I mean, the quits, but if you had to ask me, are these measures going to be higher or lower than they are right now? I would say higher. And to me, that's, I mean, we'll keep the Fed awake, I think. Well, the other thing that's happening is, you know, you mentioned the UAW strike, and we are getting like close to that sort of like triggering.

13:25And I guess, I guess from a production perspective, it feels like we could get into another situation where supply chains start to be affected, which could also maybe start to impact inflation. It's a negative supply shock, right? I mean, that's one of the way, I mean, I don't think we're anything close to the 70s, obviously. But one of the ways that happened was basically you had these sort of persistent supply shocks. I mean, it was just bad luck. I mean, on top of bad policy.

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14:46Support for the show comes from Public.com. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry-leading 3.6 % APY, high-yield cash account. Switch to the platform built for those who take investing seriously.

15:19Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokered services for U.S.-listed registered securities, options, and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA, and SIPC. Crypto trading provided by ZeroHash. Complete disclosures available at public.com slash disclosures. Neil, I posted in our Discord. I think you've hung out in there a couple of times. Yeah, absolutely. I posted in their Discord.

15:52Anyone have any questions for Neil from JG53? Rising long bond yields, how far can that go? And at what point does that really start to impair asset valuations and other aspects? I think we're pretty, I mean, I think four and three quarters. We're sort of hitting the ceiling here. Yeah, we're pretty there. I mean, I think the market's kind of figuring it out, but I think we're close. Our market strategist, Jeff DeGreff, you know he runs this thing called a yield impact model but basically he looks at the probability that a certain level of interest rate starts to negatively affect the stock market and you know it gets worse the higher you know after four and a half percent so we're right there to me when i think about equities this year right the easy money i think has largely been made because the the big upturn for stocks was basically pricing out the recession probability right and now right so if you think about the market as kind of, or the economy as sort of like four potential scenarios, right?

16:46You can have your deflationary bus, which is sort of the classic recession. You can have stagflation. You can have soft landing. You can have an inflationary boom, right? What you have the most, or what I have the most conviction on is that we won't have recession, right? So now I think the markets have kind of come to that view. And so you have to, if you're thinking about probabilities, okay, so then my odds of a negative growth scenario have come down. So where do you allocate this now? I mean, is it soft landing? Is it an inflationary boom? And I think the markets are kind of gyrating back and forth between those two scenarios.

17:17Where do you land on that? I think we're in an inflationary boom. Tracy, can I say, you know what I think people should pay a little more attention to than they are? No, no, it's not a controversial one, actually. The unemployment rate, it ticked up to 3.8 % last month. And a lot of people sort of dismissed it based on, oh, it had to do with more people in the labor force. But on the other hand, it is the highest now since February 2022. So it's the highest in over a year and a half. This way, I go back to some of these labor market indicators, and they're not terrible, clearly, and we're still adding jobs and initial clean-for-load.

17:56But as Neil said, job openings down, quit rates, I think maybe I said that, down, unemployment rate up to 3.8%. Like, it seems like something is happening. Sure. But to Neil's point, if we have entered a period where it seems like recession is firmly off the table, then it feels like that gets reversed pretty quick, especially given that a lot of companies were already kind of focused on being caught flat footed in an expansionary scenario. We've talked about this, right? Yeah. Like a lot of the survey data, they're talking about like, well, we want to hold on to people or we want to hire additional people because we're worried about after the recession.

18:34Yeah. and expanding our capabilities. And then the recession never materialized. And so it feels like there's more upside than downside at this point. Yeah. I love reading the comments like on like the Dallas Fed Manufacturing Report or some of the ISM. And that has been a thing that pops up, which is that basically either managers don't believe that a recession is coming or they see a recession as an opportunity to gain market share from their competitors or gain employees from their competitors, in which case if everyone has that mentality, it's hard to see how you get a recession. Wait, I want to ask Neil about something else you've been writing about, which is the potential for a Fed policy error.

19:09And I've really only seen two people talking about this, and you're coming at it from polar opposite sides. So I've seen Victor Schwetz talk about the Fed's going to hike into a recession and there's going to be an error in that form. But you're talking about they're going to basically pause while inflation is still booming, and that's going to be an error. Yeah. I mean, where's the evidence that they're hiking into a slowdown? They're pausing right now. I mean, no one's talking about them. I mean, so that's, I mean, it's just wrong. It's just, that's, that is not correct. I mean, we've had some version of that argument for so many quarters now, I feel like, oh, they're hiking into a slowdown.

19:45I mean, that was something that people were saying late in 2022, right? I mean, I think, I believe. So to me, we're making very, I mean, job growth is slowing. But if you think about like potential, what is potential? What does break you? And it's around like what, like 100 ,000, maybe a little bit more. And we're still, we're still well above that. I mean, household employment is still reasonably strong. I mean, that's been running like over 200 ,000 in the last few months. I saw something in the journal where one commentator was saying, oh, you know, this is like the classic Fed where they're putting too much weight on lagging indicators.

20:19And now they're setting policy to lagging indicators like like inflation. And but that's they are paying a lot of attention to inflation and a lot of attention to the labor market. But that's exactly why that's wrong is because they are lagging indicators. They have slow. That doesn't mean they will slow. Yeah. So for listeners that don't know, one of the great things about following Neil and being on his distribution list is that he's not afraid to criticize the people who have been calling for a recession for like basically the past 12 months. Who's your Jeff Gundlach? Yeah. Who do you want to take a shot at?

20:55I don't like to name names. With my peers on Wall Street, if I've worked with them, I always try to prop them up or speak highly of them. But I don't need to say anything. I mean, everyone knows who they are. I mean, they come on your program. They come on Bloomberg TV and they talk very confidently about recession. And, you know, and I've talked to Joe about this many times offline, but there is a cottage industry that is just doom and gloom. Right. I mean, think about the people that were like talking about the weekly Red Book sales index over the last like six months because it's been going down and down and down.

21:36And and now it's starting to pick back up. I mean, where are those people now? It's you know, it's one of our and I'm sure Joe knows I'm Sam Rowe. He has this great point. It's like we went out to dinner with Sam Rowe in California. We went to we got a great prime. Yeah. And Sam ordered a smoked old fashioned and they like it was a very fancy looking cocktail. Very good for Instagram. Anyway, sorry. Keep going. His Instagram is great, by the way. Yes. Yeah. Follow Sam Rowe. He does a great job of sifting through all the TikToks so that I don't have to join that platform. But so, for example, like with Walmart, right, like he'll make this joke about, you know, Walmart sales are up.

22:16So the bears say that that's bad because consumers are being stretched. But Walmart sales are now down. and then the bears say that's really, really bad because that means the consumer can't even afford the stuff that's on sale at Walmart. Or the credit card one is one of my favorites. It's like, oh, people are cutting back on their credit card spend because, and that's bad for consumption. Or now they're spending too much on credit cards and they're stretching themselves into oblivion. So it's just, you can't win with some people. And frankly, there is a cottage industry of newsletter subscription writers that make their money selling this sort of thing.

22:49We got to be careful because we also have a newsletter. We don't sell it. No, that's true. It's free. It's free. But my favorite instance of this is everyone who is talking about how the inverted yield curve was predicting recession within the next 12 months or something. We've now had it for months and months and months on end. So all those people have now flipped from the yield curve is a sign of impending recession to the inverted yield curve causes recession, which is a fun little transition. By the way, Tracy, our producers, you're wrong. Actually, you have to be a Bloomberg.com paid subscriber to get the Odd Lots newsletter.

23:24So we are kind of in the business.

23:34you know you uh having worked now both on the at a major bank on the sell side now for renaissance macro why is there demand from customers for the sort of like doom and gloom mongers like why why do people want that in your view because they couldn't all these guys couldn't make a career if there weren't an audience if there weren't a customer base for it i mean the human mind is conditioned to believe that people that pitch a negative story are somehow like the Nostradamus like I mean I have a my view on things is that it usually works out that's that and and and I think that makes me I think that makes some people just think that I'm an idiot right because I just think I mean it's like oh you're like a dopey like you know but things have a tendency of working out like society heals people figure it out like that's what we do I mean we we have a relatively open society.

24:26Things work out. Isn't the Sam Rose line in the long run, stocks go up? Yeah. Well, I came around to your review several years ago because I remember people often say like, oh, hope isn't a strategy. Like that's a thing. I kind of think it's the only strategy because once, no, I really believe this. Like once you sort of have like a crystal clear idea of how a crisis is going to resolve itself, it's probably priced in. So like, for example, you know, if you waited until like after the CARES Act passed and everything else already like you were like way off the bottom on stocks if you waited until mario draghi's omt speech for the eurozone crisis already like the market bottom like if you wait for so in the meantime like the only like bet is like yeah they'll probably work it out i think so i mean that doesn't mean that there aren't periods where things can be going awry and it's important to point that out but what i don't like and i think this is what a lot of these doomers do is that they start with the conclusion first and then they work backwards.

25:22And I hate that. What you need to do is take an astute sort of observation of all the data and then lead yourself to a conclusion. Right. So that's how I think about it. And that's how we try to do our work. Okay. So you're an optimistic sort of sunny guy. That being said, so we are recording this on Thursday. We don't know tonight there might be a strike at the UAW. It's possible that we wake up tomorrow morning when people are listening to this and a strike is on. We don't know, unfortunately. It's just the timing of how recording works. But Goldman put out a note this week, and they said there's three sort of risks right now.