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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
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Speaker 3: So here's the latest this morning.
Speaker 2: The President remaining positive on negotiations, as Tehran says there
Speaker 2: has been no tangible progress. Overnight, clashes between Israel and
Speaker 2: Hesbel are complicating talks, as Lebanon's president says a ceasefire
Speaker 2: with Israel could begin within twenty four hours. Joining us
Speaker 2: now round the table, the State Department spokesperson Temmy Figure. Tommy,
Speaker 2: you're the man this morning. Good morning to you. Tell
Speaker 2: us we're making some progress, because I can tell you
Speaker 2: on Wall Street this is the number one story that
Speaker 2: people don't want to talk about right now. Are we
Speaker 2: moving forward?
Speaker 4: Well, look, we're moving forward. And achieving the President's objective.
Speaker 4: I mean, you started saying mixed messaging on Iran, but
Speaker 4: the President's been clear from the beginning what is primary
Speaker 4: objective is here the Ranian regime can't have a nuclear weapon.
Speaker 4: So we saw Operation Epic Fury, the decisive outcomes from that.
Speaker 4: We're seeing in Lebanon and Israel, those talks being separate
Speaker 4: from these talks regard in the nuclear issue, but the
Speaker 4: highest level talks since nineteen ninety three. Progress being made there.
Speaker 4: The President's not going to be rushed into a bad deal.
Speaker 4: He's going to make a good deal for the American people,
Speaker 4: and he's indicated we're seeing some movement here from the
Speaker 4: Iranian side.
Speaker 5: The President yesterday talked about a ceasefire. We talked about
Speaker 5: this a little bit earlier, saying that that basically means
Speaker 5: shooting in a more moderate manner. That's what the ceasefire is.
Speaker 5: What would it take for this administration to say the
Speaker 5: ceasefire is off.
Speaker 4: Well, look, I think what we're seeing here regarding this
Speaker 4: is defensive actions. Of course, saw Operation Epic Fury, decimation
Speaker 4: of their defense industrial complex, their missile complex, their navy,
Speaker 4: for example. But of course We're going to take defensive
Speaker 4: action to protect US interest in US troops. That's a
Speaker 4: common sense approach. We also have in this context economic
Speaker 4: theory that are a blockade, that we have a raniing
Speaker 4: hips are Ragni imports, So there's leverage the president has.
Speaker 3: He has all the cards here and what.
Speaker 4: We saw the Secretary describe before Congress, as we are
Speaker 4: seeing the Iranian regime talk about many of the things
Speaker 4: that they refuse to talk about for months, but the
Speaker 4: President also being clear he's going to see the subjective
Speaker 4: be fulfilled one way or another.
Speaker 3: The Ranian regime cannot have a nucular weapon.
Speaker 5: The Wall Street Journal reporting overnight that Trump told his
Speaker 5: aide that he won't resume in all at war with
Speaker 5: Iran unless US troops are killed. Is that going to
Speaker 5: be the line where potentially we could see more offensive attacks.
Speaker 4: Well, look as the President saying again, we're going to
Speaker 4: take defensive action to protect US troops, US soldiers. I'm
Speaker 4: not here to predict the future about what the President
Speaker 4: may decide, but of course we're going to take that
Speaker 4: defensive action.
Speaker 3: Of course we are.
Speaker 4: That's a common sense approach if we see threats against
Speaker 4: US interests US troops. We're going to be acting and
Speaker 4: the President the DOW has done just that.
Speaker 6: Why isn't the International Atomic Energy Agency involved in these talks?
Speaker 4: Well, I mean we see the President talking about a
Speaker 4: role for the IAEA in terms of the destruction of
Speaker 4: the nuclear dust. The President this has been a longstanding
Speaker 4: concern for the entire world, the threat that the Ranian
Speaker 4: regime having the new the weapon could have. It's the
Speaker 4: President who has taken action to actually address this.
Speaker 6: Well, the IEA came out overnight with a report where
Speaker 6: they said that the risk of Iran developing a nuclear
Speaker 6: weapon right now is higher than it was a number.
Speaker 3: Of months ago.
Speaker 6: We're raising concerns that they don't have access to oversight
Speaker 6: and saying that they would like to be more involved
Speaker 6: in these negotiations. Do you have any understanding of where
Speaker 6: they are in this and the urgency to get them
Speaker 6: in to be able to surveil what's going on.
Speaker 4: Well, again, part of the discussions we're having here, as
Speaker 4: the President has indicated publicly, is regarding the destruction of
Speaker 4: the enriched uranium uranium that was enriched beyond the point
Speaker 4: of any sort of peaceful purpose. The IEA the President
Speaker 4: indicating would play a role within that regarding where the
Speaker 4: Ranian regime is. As the Secretary discussed before Congress, they
Speaker 4: were attempting to develop a conventional weapon shield which they
Speaker 4: could act with basically impunity to develop a nuclear weapon.
Speaker 4: The President taking clear, concrete action to decimate that conventional
Speaker 4: military shield. So the President taking action to prevent the
Speaker 4: Ranium regime from having a nuclear weapon consistently from the
Speaker 4: beginning of this administration.
Speaker 3: How afective is the blockhite Bean.
Speaker 2: We've had this blinking contest for a while trying to
Speaker 2: work out at what point will we breach storage capacity
Speaker 2: in Iran. Have you got anything to share with this
Speaker 2: morning about how effective that blockchite is been.
Speaker 4: Well, it's been incredibly effective in terms of blocking revenue
Speaker 4: from going to the Iranian regime. Hundreds of millions of
Speaker 4: dollars a day being blocked from the Iranian regime. This
Speaker 4: is also the broader context of that maximum pressure policy.
Speaker 4: We're actually continuing to take action at the State Department
Speaker 4: of Treasury Department to target entities that are trying to
Speaker 4: evade US sanctions that are designed to deny the regime
Speaker 4: the funds they need for their Malian activities. We saw
Speaker 4: actions as recently either yesterday or earlier this week. Those
Speaker 4: actions have continuing, so this economic fury is continuing. We're
Speaker 4: seeing in terms of the effect hundreds of millions of
Speaker 4: dollars being denied to the Iranian regime.
Speaker 5: Secretary Rubio was in front of the Senate for Our
Speaker 5: Relations to committee as well this week, and he said
Speaker 5: that Iran has laid very large parts straight overmosse with
Speaker 5: minds have any of them been cleared? How much of
Speaker 5: the strait is still mined?
Speaker 3: Well?
Speaker 4: The President indicating that we're taking operations to see that
Speaker 4: d mining of the strait. I think this also shows
Speaker 4: the difference here the Ranian regime trying to close the
Speaker 4: Straight of Horm Moves and say that we should be
Speaker 4: able to control who goes to the Straight of Horm Moves.
Speaker 4: That's why we saw this blockade of our Rani and
Speaker 4: ships in Iranian ports. We're not going to be in
Speaker 4: a situation where we're going to accept a country deciding,
Speaker 4: you know, laterally who gets to use an international waterway.
Speaker 4: That's not going to happen. The President and the Secretary
Speaker 4: both indicating.
Speaker 2: That Tomy, can you see why people on Wall Street
Speaker 2: right now are slightly frustrangted with some of the communication
Speaker 2: coming from the White House. And I give an example.
Speaker 2: The President sent the straint with reopen back on eight
Speaker 2: posse seventeenth. The strength did not reopen. It feels like
Speaker 2: we get in the same headlines recinncled every week. Can
Speaker 2: you see the frustrangtion right now for people on Wall
Speaker 2: Street track in this story?
Speaker 4: Well, look, I think fundamentally the president's a deal maker.
Speaker 4: We saw the action he takes, the action he needs
Speaker 4: to take. We saw it with Operation midn at Hammer.
Speaker 4: We saw it with He's not making the day lit See.
Speaker 3: Well, I think he's working on that deal.
Speaker 4: I mean we're seeing him make more progress than anyone's
Speaker 4: ever made in terms of this addressing this issue, in
Speaker 4: terms of the real results we've seen from these operations.
Speaker 4: The President wants that diplomatic approach, but fundamentally they're regime
Speaker 4: Canada of nuclear weapon that would have been an untenable
Speaker 4: threat to the region, the entire world.
Speaker 3: That was being address. That has been addressed. That has
Speaker 3: been addressed.
Speaker 2: Stay with us more Bloomberg surveillance coming up after this
Speaker 2: House for investors bracing for the May payrolls report you
Speaker 2: out tomorrow. The Dallas FED president Lori Logan, signating optimism
Speaker 2: that AI will boost labor demand.
Speaker 7: There are a number of data centers that are either
Speaker 7: in the planning stage or in the construction stage, and
Speaker 7: that's creating significant demand for labor. We're seeing wage growth
Speaker 7: in those particular areas.
Speaker 2: Joining us now to discuss Bessie Stevenson of the Ford
Speaker 2: School of Public Policy at Michigan University, Betsy, welcome back
Speaker 2: to the program. So it's good to hear from you.
Speaker 2: There's a great debate on the future of this labor
Speaker 2: market given the technological revolution we're working through right now. Betsy,
Speaker 2: how are your thoughts evolving on that mat.
Speaker 1: Set well, I mean, I think what we've just heard
Speaker 1: her say is we're going to see a lot of
Speaker 1: construction workers as we build data centers, but that's not
Speaker 1: a solution to the challenges for white collar workers as
Speaker 1: AI starts to increase efficiency. I mean, I think what
Speaker 1: we're seeing right now is a lot of companies that
Speaker 1: are still doing really well and able to grow, and
Speaker 1: that's why we're not seeing a lot of layoffs. But
Speaker 1: we're also not seeing a lot of hiring and so
Speaker 1: what they're doing is they're trying to take these gains
Speaker 1: in terms of increased productivity so that they can increase
Speaker 1: their output, but they can do it without hiring workers.
Speaker 1: And that I think is I think that's the best
Speaker 1: way for technology to work through the labor market is
Speaker 1: to do it in a period of growth, so that
Speaker 1: people don't lose jobs, but the people who have jobs
Speaker 1: become more productive. The challenge for the US right now
Speaker 1: is that it is such a low higher, low fire
Speaker 1: environment that the people who do need to enter the
Speaker 1: labor market, either they lose a job or they've been
Speaker 1: out of the labor market and need to re enter.
Speaker 1: They're the ones struggling, and that's why we're seeing the
Speaker 1: rate of long term unemployed increasing.
Speaker 2: Betsy's really hard for us to judge at the moment
Speaker 2: just how tight this labor market actually is. As you
Speaker 2: reflect on there, we've had this negative supply shock to
Speaker 2: the labor market. We haven't had the entrance come into
Speaker 2: the supply polls, so to speak, because of these tights
Speaker 2: of regulations around immigration and the enforcement of the southern border. Betsy,
Speaker 2: with that in mind, how do you gauge how loose
Speaker 2: source supply how loose or tight this labor market actually
Speaker 2: is right.
Speaker 1: Now, you know, I think it's actually a labor market
Speaker 1: where we want to look at the particular skills that
Speaker 1: workers have to think about whether it's loose or tight
Speaker 1: is going to depend on exactly the market that you're
Speaker 1: in and.
Speaker 3: The skills that you have.
Speaker 1: So I think of it as a time of great reshuffling.
Speaker 1: You might find that you're in actually quite wee labor
Speaker 1: market given your skills and where you're at, and that
Speaker 1: might mean that you need to skill up with something
Speaker 1: different or relocate. So that's part of why I think
Speaker 1: we see it as both. Wait, it's a weak labor market. No,
Speaker 1: it's a tight labor market. I think it's because it's both,
Speaker 1: and it really depends on exactly where you are and what.
Speaker 3: Set of skills you have.
Speaker 6: Betsy, where are we in what you referred to before
Speaker 6: as the white collar recession?
Speaker 1: Well, I don't think we're in a white collar recession,
Speaker 1: but I do think that we're not really prepared for
Speaker 1: a lot of white collar workers to need to make
Speaker 1: some transitions. Now, there are some good things. One is
Speaker 1: that white collar workers have developed a lot of skills
Speaker 1: around how to learn and develop new skills. So that
Speaker 1: makes them actually really well positioned to make changes as
Speaker 1: their company says, hey, I don't need you to do
Speaker 1: this anymore, but we might need you to do this
Speaker 1: other set of tasks. Learn how to do them, can
Speaker 1: you scale up? And I think historically we have seen
Speaker 1: that many workers are able to do this. And you know,
Speaker 1: one of the other things with AI is that it
Speaker 1: is disproportionately going to impact women's jobs. Jobs held by women,
Speaker 1: and women have historically been a bit more flexible around
Speaker 1: WHOA I need to change what I'm doing because my
Speaker 1: old job isn't there anymore. So I have a lot
Speaker 1: of optimism that we're going to have a lot of
Speaker 1: ongoing demand for human workers, and we have workers who
Speaker 1: are able to have the flexibility needed to make changes.
Speaker 1: But I think we should understand that any period where
Speaker 1: people are having to make changes, where there's uncertainty, is
Speaker 1: going to be a period of weaker consumer confidence and
Speaker 1: anxiety around for the public.
Speaker 6: So if you push this through the FEDES response mechanism,
Speaker 6: A lot of people are looking at the Lave of
Speaker 6: Market report tomorrow as a guide to whether the lave
Speaker 6: of mark it can be some sort of indication of
Speaker 6: weakness that could leave the FED on hold and definitely
Speaker 6: or even remaining with an easing bias. Do you think
Speaker 6: it's an appropriate stance for the FED to be a
Speaker 6: bit more dubvish with this type of backdrop, or do
Speaker 6: you think that they should prioritize inflation because of the
Speaker 6: uncertainties around the labor backdrop.
Speaker 1: Look, inflation isn't good for workers either.
Speaker 3: I think you know.
Speaker 1: Jerome pal said that a few press conferences ago, and
Speaker 1: it really stuck with me because I think it's important
Speaker 1: to remember that workers don't want unemployment, but they also
Speaker 1: don't want inflation, and so then what the FED has
Speaker 1: to do is look at what can they be more
Speaker 1: certain about right now. Unfortunately, they can be more certain
Speaker 1: about inflationary pressure than they can about a weak economy.
Speaker 1: Right we still see a GDP now forecast for Q
Speaker 1: two of three percent, where we saw jolt job openings
Speaker 1: actually rise in April.
Speaker 3: I don't think we.
Speaker 1: Should overinterpret those as the economy is really strong, but
Speaker 1: I do think that they make it hard for the
Speaker 1: FED to justify cutting rates at this moment.
Speaker 5: But Betsy, this inflationary pressure is coming from a conflict
Speaker 5: and its energy driven. Isn't the FED historically haven't they
Speaker 5: been taught to look through this?
Speaker 1: I really I love this. I feel like I was
Speaker 1: like in my econ macro class and a student was like, Hey,
Speaker 1: we're supposed to look through this. You're one hundred percent right.
Speaker 1: But there's one problem. We had high inflation in twenty
Speaker 1: twenty one, and we have a public that is on
Speaker 1: tender hooks worried about inflation. What that means is that
Speaker 1: inflation expectations may not be as well anchored as we
Speaker 1: need them to be in order to look through a
Speaker 1: brief period of inflation. So what the FED has to
Speaker 1: be looking at is you're absolutely right, not what is
Speaker 1: the transitory inflation that's going to pass through very quickly,
Speaker 1: but what's the potential for that transitory inflation to become sticky,
Speaker 1: either because it takes the conflict a while to resolve,
Speaker 1: or because inflation expectations are not well anchored.
Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this.
Speaker 2: We begin this now with stock setting lower after broadcome
Speaker 2: results call off the record breaking run for chip makers.
Speaker 2: Tracyman Miller of wels Farco with a year end target
Speaker 2: on the S and P of seventy five hundred, expecting
Speaker 2: no fed rate moves, a better economy, and increased M
Speaker 2: and A activity through to year end. Tracy joins us
Speaker 2: now for more Tracy a rinkle this morning, and good
Speaker 2: to see you, and that wrinkle comes from Broadcome. What's
Speaker 2: the lesson from the price section this morning?
Speaker 8: Good morning, John. So the lesson is that after such
Speaker 8: an amazing run like we've seen in the AI names,
Speaker 8: there is still some room for disappointment. So we have
Speaker 8: overweighted information technology, but we're telling investors not to chase
Speaker 8: those names at these prices right now, and that there
Speaker 8: are probably better opportunities in some other sectors like industrials
Speaker 8: or utilities or even financials.
Speaker 2: We've liked financials. That's been a high conviction coll and
Speaker 2: Tracy hasn't been working. Why hasn't it been working a
Speaker 2: while with that change.
Speaker 8: Yeah, so it hasn't been working because of the steepening
Speaker 8: yield I'm sorry, the flattening yield curve and the private
Speaker 8: credit issues. And we think that going forward we are
Speaker 8: going to start to see that yield curve steep in
Speaker 8: some Right now, there are a couple of price rate
Speaker 8: hikes priced into the markets. We think those are going
Speaker 8: to come out by the end of the year, and
Speaker 8: we also see some additional potent upside and rates on
Speaker 8: the long end. M and A activity You mentioned that
Speaker 8: as well IPO activity both really good for investment banking.
Speaker 8: So all of those things we think support financials.
Speaker 6: We were talking about concerns around private credit. We're getting
Speaker 6: another headline this morning the Blackstone Private Credit fund plants
Speaker 6: of cap investor redemptions at five percent. This comes amid
Speaker 6: a slew of different information that we've been hearing and
Speaker 6: including from the Swiss Partners Capital we were talking about
Speaker 6: earlier this morning. Does this give you pause or do
Speaker 6: you think that this is noise given a duration mismatch,
Speaker 6: and not necessarily a broader signal about the market.
Speaker 8: Yeah, so we think that that is not necessarily a
Speaker 8: broader signal about the market. We're watching spreads in the
Speaker 8: public markets that are at near record tights, and so
Speaker 8: we don't see broad concern in the fixed income markets.
Speaker 8: That said, there are some pockets in the private credit
Speaker 8: market that obviously investors are starting to worry about, and
Speaker 8: so we would tell investors that it's important to keep
Speaker 8: that diversification within a fixed income portfolio, with some potentially
Speaker 8: in private credit if that fits their risk profile. But
Speaker 8: in the public markets we are just not seeing that strained.
Speaker 6: There's also an issue of consumer spending with their wages
Speaker 6: not really keeping pace. We just saw credit card balances
Speaker 6: hit a record one point two eight trillion dollars. On
Speaker 6: the margins delinquencies picking up.
Speaker 3: Do you see.
Speaker 6: Signs that consumer is getting tired?
Speaker 3: Does that give you pause?
Speaker 8: Yeah, so definitely there is a component, a segment of
Speaker 8: the consumer that is starting to get stretched, get tired,
Speaker 8: if you will. We've talked about, you know, the higher
Speaker 8: prices that they are experiencing, and so they continue to spend,
Speaker 8: but some of that spending is now coming from saving,
Speaker 8: some of it's going onto credit cards. And I think
Speaker 8: the positive here is that it's not all consumers, and
Speaker 8: we are continuing to see you know, some firming in
Speaker 8: the labor markets. And as long as consumers have jobs,
Speaker 8: they can continue to spend. And really all we're expecting
Speaker 8: from the consumption part of GDP this year is maybe
Speaker 8: a modest improvement because most of our GDP expectation is
Speaker 8: coming from cafets.
Speaker 5: Christy, what do you think about the energy space right now.
Speaker 5: I notice in your note you said you want your
Speaker 5: investor's portfolios to trim energy equities and commodities. But we
Speaker 5: just heard from almost Hawkstein who basically said, we're living
Speaker 5: right now globally on a buffer, and when that dries up,
Speaker 5: you know, we could see tremendous upside when it comes
Speaker 5: to energy prices.
Speaker 8: Yeah, so we are telling our investors that it is
Speaker 8: a source of funds for some other areas of the
Speaker 8: market where we see better valuation. So we're not necessarily
Speaker 8: the fact that almost a billion barrels of oil have
Speaker 8: been lost through this conflict, and that there are going
Speaker 8: to be some pockets of the global economy that are
Speaker 8: going to start to experience severe shortages if we don't
Speaker 8: get oil flowing again. That said, though, we do think
Speaker 8: that when oil spikes that it is an opportunity for
Speaker 8: investors to reposition because we don't think this is a
Speaker 8: long term supply issue. It's a supply shock.
Speaker 5: Is this basically investors needing some capital to allocate elsewhere
Speaker 5: maybe with some upcoming IPOs? Where else do you see
Speaker 5: investors moving money around to make sure that they are
Speaker 5: getting in on that AI race.
Speaker 8: Yeah, so we definitely think we see that happening. We
Speaker 8: have seen the mag seven starting to underperform, we've seen
Speaker 8: crypto underperforming, and so we think it's some of those
Speaker 8: higher beta areas of the market where investors are pulling funds,
Speaker 8: raising cash, so they will have us that cash available
Speaker 8: as these big IPOs come to market through the summer.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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