There's a productivity boom in the U.S. similar to the 1990s, says KKR's Henry McVey [9:06]

--> YouTube-Generated Transcript <--
0:00 · world's debt. Back to you.
0:02 · >> Okay, Rick. Thank you. Very
0:05 · comprehensive right now, though,
0:06 · let's get a little more
0:07 · reaction to this latest
0:08 · economic data with Henry
0:09 · McVeigh. He's KKR balance sheet
0:11 · CIO. And, Henry, it's been a
0:13 · while since we've seen you.
0:15 · Thanks for coming in.
0:16 · >> It's great to be here.
0:17 · >> Let's talk. I know you just
0:19 · coming back from Asia, and I
0:20 · want to talk about that, but
0:22 · first let's focus on what's
0:24 · happening here in the United
0:25 · States. What do you think of
0:26 · these numbers? Better than
0:27 · anticipated on many levels.
0:28 · >> I think they really justify
0:30 · what we've been saying about
0:31 · KKR and our portfolio companies.
0:33 · Right. We typically own 150 to
0:34 · 200 businesses around the world.
0:35 · Really, when you think about
0:37 · the US, Rick hit on one huge
0:39 · point. There's a CapEx boom
0:40 · going on, and the big beautiful
0:42 · bill will accelerate that. But
0:43 · you're really seeing if you
0:44 · look at the first half of the
0:46 · year, I CapEx was actually grew
0:48 · more than all the growth in
0:50 · personal consumption, which is
0:52 · a massive thing to digest.
0:54 · Second, though, what we saw in
0:56 · the revisions is personal
0:57 · consumption came up. We've been
0:59 · talking about a lower
1:00 · unemployment this cycle. Some
1:01 · of that's demographics. Some of
1:03 · that is a less supply of labor.
1:05 · And so I think that was also
1:08 · echoed in the data. The one
1:09 · thing that's kind of noise is
1:11 · in the first quarter you had a
1:12 · negative GDP. That was because
1:14 · people were pre-buying. And
1:15 · then the second quarter you had
1:16 · a lot of exports. So we really
1:18 · focus on the investment and we
1:19 · focus on the personal
1:20 · consumption, which is about 70%
1:22 · of the economy.
1:23 · >> Mike Wilson was here earlier
1:24 · this week. And Joe, correct me
1:26 · if I'm wrong, I think he was
1:27 · saying that he thought things
1:29 · kind of bottomed out in April
1:30 · and that the economy has been
1:32 · picking up ever since. That's
1:33 · his view on where things stand.
1:35 · And as a result, he thinks
1:37 · equities will continue to climb.
1:38 · Do you share that view?
1:39 · >> He said something about that.
1:41 · Their long term case had been a
1:43 · rolling recession. That's now
1:44 · over and that we're going to
1:46 · start accelerating. But we need
1:47 · rate cuts for the
1:49 · re-acceleration to happen.
1:50 · >> Yeah. When we grew up the US
1:52 · consumer levered up and buy and
1:53 · it would lift the rest of the
1:55 · world. And what we've been in
1:56 · this cycle is kind of this
1:58 · asynchronous recovery where you
2:00 · have a manufacturing recession
2:00 · but services is doing well.
2:01 · Think about what's been
2:02 · happening in the manufacturing
2:03 · sector. The ISM has been below
2:05 · 50 for 30 out of 32 months, and
2:09 · we haven't had a recession,
2:09 · right. And so there are pockets
2:11 · of the world that are doing
2:13 · well, and there are pockets of
2:14 · the US economy are doing well.
2:15 · So every day you could come in
2:17 · and be bearish or bullish based
2:19 · on the data. Our base view. You
2:20 · know I think last time we
2:22 · talked this is like glass half
2:23 · full. This there's a
2:24 · productivity boom going on in
2:26 · the US that is very reminiscent
2:27 · of the 1990s that I think
2:29 · people don't fully appreciate.
2:30 · It allows you to pay higher
2:32 · wages. It allows you to endure
2:33 · the tariff hit to margins, and
2:35 · ultimately it drives revenue
2:36 · growth. And we're that's really
2:38 · from the Covid hangover from
2:39 · digitalization and automation.
2:41 · And now what we're seeing in
2:43 · our companies is some
2:44 · acceleration in AI productivity.
2:45 · >> Does it also mean that the
2:47 · jobs market could suffer
2:48 · because you're going to pay
2:49 · your existing employees more to
2:51 · get squeeze a little more
2:52 · productivity out of them and
2:53 · not necessarily take on new
2:55 · employees?
2:55 · >> I think there's let's
2:57 · separate the macro from the
2:58 · micro, the macro level. The
2:59 · government data is going to
3:01 · look poor because of two things.
3:02 · One is the government jobs have
3:04 · been a huge contributor to jobs,
3:05 · and that's probably going
3:06 · negative. And then second is
3:08 · we've had a huge, narrow focus
3:10 · on just health care and
3:11 · education. Outside of that,
3:13 · most sectors are actually flat
3:14 · to negative. And so I think
3:15 · there's going to be a lot of
3:17 · volatility just based on those
3:18 · two sectors. What we see and is
3:20 · kind of corroborated by what
3:21 · Rick said. And what you see in
3:23 · the ADP report is our
3:25 · businesses are doing fine.
3:26 · Maybe there's a little bit
3:27 · slower hiring, but there's no
3:29 · there's no firing boom going on
3:30 · the way that you've seen that
3:32 · kind of predated past
3:34 · recessions. And that's why I
3:35 · get back to this view. I think
3:38 · the fed needs to they've
3:39 · shifted their mandate from
3:40 · inflation to employment. I
3:41 · think if you think about it, if
3:43 · President Trump hadn't slowed
3:45 · the supply of labor, the
3:46 · unemployment rate would be
3:47 · closer to 5% and the fed would.
3:50 · >> Be the immigration. Yes, yes,
3:51 · yes.
3:51 · >> Right. And so there's there
3:53 · are a lot of statistical quirks
3:55 · that are going on right now.
3:56 · What I would say from our perch
3:58 · is things are doing fine.
3:59 · They're a little bit slower.
4:01 · You have to appreciate that
4:02 · most CEOs and CFOs are trying
4:03 · to figure out one tariffs. And
4:05 · then two is the benefits of the
4:06 · tax bill. Our base view at KKR
4:08 · is, is that we will continue to
4:10 · go through, and the economy
4:11 · will be one and a half to 2%,
4:13 · maybe a little bit of upside
4:15 · based on the revision today,
4:16 · but I think we'll be fine. I
4:18 · think the.
4:18 · >> Meaning that the fed doesn't
4:20 · need to cut rates.
4:21 · >> No, I think the fed does.
4:23 · The housing market is very weak
4:24 · right now. You were just
4:25 · reporting on that, that that is
4:28 · true. About 21% of states
4:29 · actually have negative HPA home
4:29 · price appreciation right now.
4:31 · The low income consumers
4:32 · feeling the impact of higher
4:33 · inflation. And ultimately there
4:35 · are levered entities in the
4:37 · community that borrowed when
4:38 · rates were super low and
4:40 · they're feeling some of that
4:41 · pinch. So we have two more cuts
4:43 · this year and we have three
4:44 · next year.
4:46 · >> Your view, though, from the
4:48 · KKR portfolio perspective, with
4:50 · 150 to 200 businesses that
4:51 · you're managing, is that
4:53 · businesses are continuing to
4:55 · spend, CapEx is continuing to
4:57 · go up, consumers are doing okay.
4:59 · And so maybe the market looks
5:02 · pretty pretty safe at these.
5:04 · >> Levels and it's starting to
5:06 · broaden out. I mean, we could
5:07 · have some pullback here because
5:08 · we've had a pretty big run as
5:10 · you guys had mentioned earlier.
5:12 · But ultimately you're seeing
5:13 · some broad now broadening out
5:15 · biotechs performing better.
5:15 · Some of the small caps are
5:17 · performing better. I just got
5:18 · back from Asia Asia Korea is up
5:20 · 60% year to date. China's up
5:23 · 35%. Japan's up another. Last
5:24 · time we were here we talked
5:26 · about Japan. Nobody owns these
5:27 · markets and the dollar is
5:29 · weakening. They're cheap. You
5:30 · know 70% of Korea trades less
5:32 · than 70% of the market trades
5:34 · at less than book value. And
5:36 · Japan three years later after
5:37 · we've been highlighting this,
5:39 · it's still 40% of that. That
5:40 · market trades at less than book
5:42 · value. And from a private
5:44 · equity standpoint, there's huge
5:46 · opportunity where these big
5:47 · companies are shedding
5:49 · unprofitable or non-strategic
5:51 · subsidiaries. And so activism
5:52 · is going to Japan. It's
5:54 · corporate reform has come to
5:56 · Korea. And even the Chinese,
5:57 · you're starting to see some
5:59 · things in that market where the
6:01 · market is performing better.
6:02 · That's kind of that's one half
6:04 · of the Asia story. The second.
6:06 · >> Opportunities for private
6:07 · equity, not necessarily for
6:08 · investors investing.
6:09 · >> But we we have this notion
6:11 · of kind of capital heavy to
6:13 · capital light when people are
6:14 · improving their corporate
6:15 · footprint, the stock goes up. I
6:17 · mean, look at we bought the
6:19 · receivables from Harley
6:20 · Davidson. The stock went up 20%
6:23 · that day. That technology and
6:24 · that structuring is going to
6:25 · Asia, and it's also going to
6:27 · Europe. And that's where you're
6:28 · seeing some pretty big
6:30 · opportunity sets, both for the
6:31 · private markets but also the
6:33 · public market.
6:33 · >> I hear you on the dollar's
6:36 · weakness and making part of
6:38 · that argument. Argument. But
6:40 · what about the tariffs that
6:41 · those countries are going to
6:42 · have to face with exporting
6:44 · things to the United States?
6:45 · >> I mean, look, if you take a
6:48 · country like China, it's
6:48 · redirected towards Southeast
6:50 · Asia, towards Africa and other
6:51 · markets. What's happening,
6:53 · though, bigger picture is that
6:55 · you're getting kind of this
6:56 · tripolar world where Canada,
6:58 · the US and Mexico are trading
6:59 · more, Europe is trading more,
7:01 · and then Asia is starting to
7:03 · trade more with itself. If you
7:05 · look at the data, about 48 to
7:07 · 50% of trade in Asia is with
7:09 · itself. We think that's going
7:11 · to go to 70%, which would be
7:14 · more akin to Europe and the
7:15 · Americas. And that's why you've
7:16 · seen a huge uplift in what's
7:18 · going on around logistics
7:20 · infrastructure. That's a
7:21 · booming business for us. And
7:22 · you see this when you talk to
7:24 · the executives there. They want
7:25 · to have their supply chains.
7:27 · They're uncertain about what
7:29 · the macro and the geopolitical
7:30 · environment is. So they're
7:31 · shortening their supply chains
7:32 · and they're trading more with
7:34 · themselves. And the second big
7:36 · theme is that consumption
7:37 · upgrade within Asia, Vietnam,
7:39 · India, some of the other big
7:40 · markets where we invest,
7:42 · they're starting to see their
7:44 · GDP per capita going up, and
7:46 · they're benefiting from traded
7:47 · goods and services in that in
7:49 · that market, Europe didn't
7:50 · really ever have a as much
7:52 · cross-border services, but
7:53 · we're seeing that in Asia grow
7:56 · faster.
7:57 · >> What, if anything, worries
8:00 · you?
8:01 · >> Look, the two things that
8:03 · the AI spending at the rate
8:04 · that it's growing is a huge
8:07 · positive influence on the
8:09 · economy, if that if we were to
8:11 · see return on capital in that
8:12 · sector fall off faster, that's
8:14 · a real cyclical boom that would
8:16 · affect GDP. The second thing is
8:18 · our our base view at KKR is
8:21 · that unemployment's not going
8:22 · to spike to 5.5%. If you saw a
8:24 · real change in the labor market
8:26 · that that change that really
8:28 · altered the employment
8:30 · landscape, that would be a
8:32 · shock to the system otherwise,
8:34 · I think. And then the final one
8:36 · is more structural. It's hard
8:37 · to measure on a day to day
8:39 · basis. But, you know, folks got
8:41 · to watch this productivity boom,
8:42 · right? And think about it. When
8:44 · we restate the data, right. The
8:46 · BLS is going to told us that
8:49 · they're going to take jobs down
8:50 · by 911,000. What's going to
8:51 · happen to the data? The
8:53 · productivity numbers are going
8:54 · to go through the roof, and
8:55 · it's going to further confirm
8:57 · our thesis. At the same time,
8:58 · it's going to tell you that
9:00 · Americans have a lower savings
9:01 · rate, and that's going to make
9:03 · people more nervous about low
9:04 · income credit. And hence

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0:00	·	world's debt. Back to you.
0:02	·	>> Okay, Rick. Thank you. Very
0:05	·	comprehensive right now, though,
0:06	·	let's get a little more
0:07	·	reaction to this latest
0:08	·	economic data with Henry
0:09	·	McVeigh. He's KKR balance sheet
0:11	·	CIO. And, Henry, it's been a
0:13	·	while since we've seen you.
0:15	·	Thanks for coming in.
0:16	·	>> It's great to be here.
0:17	·	>> Let's talk. I know you just
0:19	·	coming back from Asia, and I
0:20	·	want to talk about that, but
0:22	·	first let's focus on what's
0:24	·	happening here in the United
0:25	·	States. What do you think of
0:26	·	these numbers? Better than
0:27	·	anticipated on many levels.
0:28	·	>> I think they really justify
0:30	·	what we've been saying about
0:31	·	KKR and our portfolio companies.
0:33	·	Right. We typically own 150 to
0:34	·	200 businesses around the world.
0:35	·	Really, when you think about
0:37	·	the US, Rick hit on one huge
0:39	·	point. There's a CapEx boom
0:40	·	going on, and the big beautiful
0:42	·	bill will accelerate that. But
0:43	·	you're really seeing if you
0:44	·	look at the first half of the
0:46	·	year, I CapEx was actually grew
0:48	·	more than all the growth in
0:50	·	personal consumption, which is
0:52	·	a massive thing to digest.
0:54	·	Second, though, what we saw in
0:56	·	the revisions is personal
0:57	·	consumption came up. We've been
0:59	·	talking about a lower
1:00	·	unemployment this cycle. Some
1:01	·	of that's demographics. Some of
1:03	·	that is a less supply of labor.
1:05	·	And so I think that was also
1:08	·	echoed in the data. The one
1:09	·	thing that's kind of noise is
1:11	·	in the first quarter you had a
1:12	·	negative GDP. That was because
1:14	·	people were pre-buying. And
1:15	·	then the second quarter you had
1:16	·	a lot of exports. So we really
1:18	·	focus on the investment and we
1:19	·	focus on the personal
1:20	·	consumption, which is about 70%
1:22	·	of the economy.
1:23	·	>> Mike Wilson was here earlier
1:24	·	this week. And Joe, correct me
1:26	·	if I'm wrong, I think he was
1:27	·	saying that he thought things
1:29	·	kind of bottomed out in April
1:30	·	and that the economy has been
1:32	·	picking up ever since. That's
1:33	·	his view on where things stand.
1:35	·	And as a result, he thinks
1:37	·	equities will continue to climb.
1:38	·	Do you share that view?
1:39	·	>> He said something about that.
1:41	·	Their long term case had been a
1:43	·	rolling recession. That's now
1:44	·	over and that we're going to
1:46	·	start accelerating. But we need
1:47	·	rate cuts for the
1:49	·	re-acceleration to happen.
1:50	·	>> Yeah. When we grew up the US
1:52	·	consumer levered up and buy and
1:53	·	it would lift the rest of the
1:55	·	world. And what we've been in
1:56	·	this cycle is kind of this
1:58	·	asynchronous recovery where you
2:00	·	have a manufacturing recession
2:00	·	but services is doing well.
2:01	·	Think about what's been
2:02	·	happening in the manufacturing
2:03	·	sector. The ISM has been below
2:05	·	50 for 30 out of 32 months, and
2:09	·	we haven't had a recession,
2:09	·	right. And so there are pockets
2:11	·	of the world that are doing
2:13	·	well, and there are pockets of
2:14	·	the US economy are doing well.
2:15	·	So every day you could come in
2:17	·	and be bearish or bullish based
2:19	·	on the data. Our base view. You
2:20	·	know I think last time we
2:22	·	talked this is like glass half
2:23	·	full. This there's a
2:24	·	productivity boom going on in
2:26	·	the US that is very reminiscent
2:27	·	of the 1990s that I think
2:29	·	people don't fully appreciate.
2:30	·	It allows you to pay higher
2:32	·	wages. It allows you to endure
2:33	·	the tariff hit to margins, and
2:35	·	ultimately it drives revenue
2:36	·	growth. And we're that's really
2:38	·	from the Covid hangover from
2:39	·	digitalization and automation.
2:41	·	And now what we're seeing in
2:43	·	our companies is some
2:44	·	acceleration in AI productivity.
2:45	·	>> Does it also mean that the
2:47	·	jobs market could suffer
2:48	·	because you're going to pay
2:49	·	your existing employees more to
2:51	·	get squeeze a little more
2:52	·	productivity out of them and
2:53	·	not necessarily take on new
2:55	·	employees?
2:55	·	>> I think there's let's
2:57	·	separate the macro from the
2:58	·	micro, the macro level. The
2:59	·	government data is going to
3:01	·	look poor because of two things.
3:02	·	One is the government jobs have
3:04	·	been a huge contributor to jobs,
3:05	·	and that's probably going
3:06	·	negative. And then second is
3:08	·	we've had a huge, narrow focus
3:10	·	on just health care and
3:11	·	education. Outside of that,
3:13	·	most sectors are actually flat
3:14	·	to negative. And so I think
3:15	·	there's going to be a lot of
3:17	·	volatility just based on those
3:18	·	two sectors. What we see and is
3:20	·	kind of corroborated by what
3:21	·	Rick said. And what you see in
3:23	·	the ADP report is our
3:25	·	businesses are doing fine.
3:26	·	Maybe there's a little bit
3:27	·	slower hiring, but there's no
3:29	·	there's no firing boom going on
3:30	·	the way that you've seen that
3:32	·	kind of predated past
3:34	·	recessions. And that's why I
3:35	·	get back to this view. I think
3:38	·	the fed needs to they've
3:39	·	shifted their mandate from
3:40	·	inflation to employment. I
3:41	·	think if you think about it, if
3:43	·	President Trump hadn't slowed
3:45	·	the supply of labor, the
3:46	·	unemployment rate would be
3:47	·	closer to 5% and the fed would.
3:50	·	>> Be the immigration. Yes, yes,
3:51	·	yes.
3:51	·	>> Right. And so there's there
3:53	·	are a lot of statistical quirks
3:55	·	that are going on right now.
3:56	·	What I would say from our perch
3:58	·	is things are doing fine.
3:59	·	They're a little bit slower.
4:01	·	You have to appreciate that
4:02	·	most CEOs and CFOs are trying
4:03	·	to figure out one tariffs. And
4:05	·	then two is the benefits of the
4:06	·	tax bill. Our base view at KKR
4:08	·	is, is that we will continue to
4:10	·	go through, and the economy
4:11	·	will be one and a half to 2%,
4:13	·	maybe a little bit of upside
4:15	·	based on the revision today,
4:16	·	but I think we'll be fine. I
4:18	·	think the.
4:18	·	>> Meaning that the fed doesn't
4:20	·	need to cut rates.
4:21	·	>> No, I think the fed does.
4:23	·	The housing market is very weak
4:24	·	right now. You were just
4:25	·	reporting on that, that that is
4:28	·	true. About 21% of states
4:29	·	actually have negative HPA home
4:29	·	price appreciation right now.
4:31	·	The low income consumers
4:32	·	feeling the impact of higher
4:33	·	inflation. And ultimately there
4:35	·	are levered entities in the
4:37	·	community that borrowed when
4:38	·	rates were super low and
4:40	·	they're feeling some of that
4:41	·	pinch. So we have two more cuts
4:43	·	this year and we have three
4:44	·	next year.
4:46	·	>> Your view, though, from the
4:48	·	KKR portfolio perspective, with
4:50	·	150 to 200 businesses that
4:51	·	you're managing, is that
4:53	·	businesses are continuing to
4:55	·	spend, CapEx is continuing to
4:57	·	go up, consumers are doing okay.
4:59	·	And so maybe the market looks
5:02	·	pretty pretty safe at these.
5:04	·	>> Levels and it's starting to
5:06	·	broaden out. I mean, we could
5:07	·	have some pullback here because
5:08	·	we've had a pretty big run as
5:10	·	you guys had mentioned earlier.
5:12	·	But ultimately you're seeing
5:13	·	some broad now broadening out
5:15	·	biotechs performing better.
5:15	·	Some of the small caps are
5:17	·	performing better. I just got
5:18	·	back from Asia Asia Korea is up
5:20	·	60% year to date. China's up
5:23	·	35%. Japan's up another. Last
5:24	·	time we were here we talked
5:26	·	about Japan. Nobody owns these
5:27	·	markets and the dollar is
5:29	·	weakening. They're cheap. You
5:30	·	know 70% of Korea trades less
5:32	·	than 70% of the market trades
5:34	·	at less than book value. And
5:36	·	Japan three years later after
5:37	·	we've been highlighting this,
5:39	·	it's still 40% of that. That
5:40	·	market trades at less than book
5:42	·	value. And from a private
5:44	·	equity standpoint, there's huge
5:46	·	opportunity where these big
5:47	·	companies are shedding
5:49	·	unprofitable or non-strategic
5:51	·	subsidiaries. And so activism
5:52	·	is going to Japan. It's
5:54	·	corporate reform has come to
5:56	·	Korea. And even the Chinese,
5:57	·	you're starting to see some
5:59	·	things in that market where the
6:01	·	market is performing better.
6:02	·	That's kind of that's one half
6:04	·	of the Asia story. The second.
6:06	·	>> Opportunities for private
6:07	·	equity, not necessarily for
6:08	·	investors investing.
6:09	·	>> But we we have this notion
6:11	·	of kind of capital heavy to
6:13	·	capital light when people are
6:14	·	improving their corporate
6:15	·	footprint, the stock goes up. I
6:17	·	mean, look at we bought the
6:19	·	receivables from Harley
6:20	·	Davidson. The stock went up 20%
6:23	·	that day. That technology and
6:24	·	that structuring is going to
6:25	·	Asia, and it's also going to
6:27	·	Europe. And that's where you're
6:28	·	seeing some pretty big
6:30	·	opportunity sets, both for the
6:31	·	private markets but also the
6:33	·	public market.
6:33	·	>> I hear you on the dollar's
6:36	·	weakness and making part of
6:38	·	that argument. Argument. But
6:40	·	what about the tariffs that
6:41	·	those countries are going to
6:42	·	have to face with exporting
6:44	·	things to the United States?
6:45	·	>> I mean, look, if you take a
6:48	·	country like China, it's
6:48	·	redirected towards Southeast
6:50	·	Asia, towards Africa and other
6:51	·	markets. What's happening,
6:53	·	though, bigger picture is that
6:55	·	you're getting kind of this
6:56	·	tripolar world where Canada,
6:58	·	the US and Mexico are trading
6:59	·	more, Europe is trading more,
7:01	·	and then Asia is starting to
7:03	·	trade more with itself. If you
7:05	·	look at the data, about 48 to
7:07	·	50% of trade in Asia is with
7:09	·	itself. We think that's going
7:11	·	to go to 70%, which would be
7:14	·	more akin to Europe and the
7:15	·	Americas. And that's why you've
7:16	·	seen a huge uplift in what's
7:18	·	going on around logistics
7:20	·	infrastructure. That's a
7:21	·	booming business for us. And
7:22	·	you see this when you talk to
7:24	·	the executives there. They want
7:25	·	to have their supply chains.
7:27	·	They're uncertain about what
7:29	·	the macro and the geopolitical
7:30	·	environment is. So they're
7:31	·	shortening their supply chains
7:32	·	and they're trading more with
7:34	·	themselves. And the second big
7:36	·	theme is that consumption
7:37	·	upgrade within Asia, Vietnam,
7:39	·	India, some of the other big
7:40	·	markets where we invest,
7:42	·	they're starting to see their
7:44	·	GDP per capita going up, and
7:46	·	they're benefiting from traded
7:47	·	goods and services in that in
7:49	·	that market, Europe didn't
7:50	·	really ever have a as much
7:52	·	cross-border services, but
7:53	·	we're seeing that in Asia grow
7:56	·	faster.
7:57	·	>> What, if anything, worries
8:00	·	you?
8:01	·	>> Look, the two things that
8:03	·	the AI spending at the rate
8:04	·	that it's growing is a huge
8:07	·	positive influence on the
8:09	·	economy, if that if we were to
8:11	·	see return on capital in that
8:12	·	sector fall off faster, that's
8:14	·	a real cyclical boom that would
8:16	·	affect GDP. The second thing is
8:18	·	our our base view at KKR is
8:21	·	that unemployment's not going
8:22	·	to spike to 5.5%. If you saw a
8:24	·	real change in the labor market
8:26	·	that that change that really
8:28	·	altered the employment
8:30	·	landscape, that would be a
8:32	·	shock to the system otherwise,
8:34	·	I think. And then the final one
8:36	·	is more structural. It's hard
8:37	·	to measure on a day to day
8:39	·	basis. But, you know, folks got
8:41	·	to watch this productivity boom,
8:42	·	right? And think about it. When
8:44	·	we restate the data, right. The
8:46	·	BLS is going to told us that
8:49	·	they're going to take jobs down
8:50	·	by 911,000. What's going to
8:51	·	happen to the data? The
8:53	·	productivity numbers are going
8:54	·	to go through the roof, and
8:55	·	it's going to further confirm
8:57	·	our thesis. At the same time,
8:58	·	it's going to tell you that
9:00	·	Americans have a lower savings
9:01	·	rate, and that's going to make
9:03	·	people more nervous about low
9:04	·	income credit. And hence