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Speaker 2: Jeff to Graph joins us, Now, is that a Martin
Speaker 2: guitar behind it?
Speaker 3: Right?
Speaker 4: Yeah?
Speaker 2: You know it looks looks like almost like on the
Speaker 2: edge of a deep deep maybe double. Yeah, you know,
Speaker 2: it's very clapped it in. Jeff to Graph joins us, Now,
Speaker 2: in the equity market, what are you learning from Neil Dada?
Speaker 2: How do how do you take Dutta economics the great
Speaker 2: optimist now very cautious. How do you fold that into
Speaker 2: a market belief?
Speaker 5: Jeff to Graph, Well, it's a great question, Tom. You know,
Speaker 5: I think it's important that we distinguished and David hit
Speaker 5: on this before. Are the difference between economics and an
Speaker 5: economic call and a market call. And while they're not
Speaker 5: one hundred percent independent by any means, they're certainly not
Speaker 5: brother or sister. We'd say they're probably second cousins.
Speaker 3: And so, you know, a.
Speaker 5: Lot of the data that we see a lot of
Speaker 5: the trajectory that we see in that data is reflected
Speaker 5: in the market, and then the question becomes, Okay, well,
Speaker 5: at what point does that become fully priced? And is
Speaker 5: the market's starting to look ahead from those things? So
Speaker 5: right now I would say that that's you know, Neil
Speaker 5: and I are more on the same page than not
Speaker 5: in terms of the market's message, the economic message. I
Speaker 5: do think that there's a tactical call here that we
Speaker 5: have to be cognizant of.
Speaker 3: But you know, overall, from a trend perspective, those those
Speaker 3: two things are aligned.
Speaker 6: Me.
Speaker 2: My head's spinning. I had Margaret Franklin to the CFA
Speaker 2: Institute on and then I got the IMF headlines and
Speaker 2: I got Tom morelk a Bloomberg saying it's a paradigmatic
Speaker 2: shift in our equity market thinking, Jeff, is it thinking
Speaker 2: as usual or is it a paradigmatic shift? And how
Speaker 2: we have approach stocks?
Speaker 5: Well, that's a great question. So what you're really asking
Speaker 5: is this is this time different? And I think what
Speaker 5: we can conclude is that from a sentiment standpoint, all
Speaker 5: those things that the IMF is talking about.
Speaker 3: I mean, the.
Speaker 5: Question that David asked was a great question, and I
Speaker 5: would just simplify that and say, does the IMF make
Speaker 5: you money? Because that's really what I'm trying to do here,
Speaker 5: right from a look, I'm a speculator, There's no doubt
Speaker 5: about that. So I'm not trying to call GDP. I'm
Speaker 5: trying to look at where the S and P is
Speaker 5: likely to be in the next one, three, six months.
Speaker 5: And so when I look at sentiment, this is really
Speaker 5: a reflection what the IMF is doing. It's really a
Speaker 5: reflection of the policy uncertainty which is spiked, a reflection
Speaker 5: of some of the correlations that we're seeing which are spiking,
Speaker 5: a reflection of just the general sentiment environment that's out there.
Speaker 5: So I would put those forecasts in that bucket. And
Speaker 5: I think the important part of that is what do
Speaker 5: those forecasts do well? They get people thinking differently, and
Speaker 5: that includes policy makers. That gets them thinking about, hey,
Speaker 5: how can we avert this, how can we soften this blow?
Speaker 5: What can we do to minimize this? And so that's
Speaker 5: where I think you want to be thinking a little
Speaker 5: bit differently. Here is what the reaction function is. When
Speaker 5: everybody starts to pile up on one side of the boat,
Speaker 5: they're still fishing on the other side, and that's what
Speaker 5: we're looking for.
Speaker 7: Jeff, how do you look at this kind of moment
Speaker 7: to moment market, And that's what it seems to have
Speaker 7: been here over these last few weeks. And we talked
Speaker 7: at the top of the show just about this perhaps
Speaker 7: distracting conversation about the position the Fed chair is in
Speaker 7: right now and what the president's saying, but we know
Speaker 7: that that is making its way into how the market
Speaker 7: is moving. How do you kind of focus in a
Speaker 7: more laser like way on the technicals amidst all of that. So, yes,
Speaker 7: it's a distraction, but how do you see through the
Speaker 7: fog of that and sort of chart a path forward?
Speaker 5: A great question, and we say this all the time.
Speaker 5: It's in our disclaimer. This is a probability not a
Speaker 5: prediction business. And so what we're really trying to do
Speaker 5: is find where the mismatches are in probability and prediction.
Speaker 5: And I think one of those that really out to me.
Speaker 5: You know, you can look at the poly market as
Speaker 5: an example of you know, quote unquote, will Trump removed
Speaker 5: your own Powell in twenty twenty five, there's right now
Speaker 5: about a twenty one percent chance of that given the
Speaker 5: poly market. Now obviously you've got players here. This isn't
Speaker 5: a perfectly well distributed probability distribution. But if you think
Speaker 5: about that twenty one percent, the way I want you
Speaker 5: to think about it is that's about the equivalent of
Speaker 5: you having a sixteen at a blackjack table and the
Speaker 5: dealer having a ten.
Speaker 3: That's not a great place to be.
Speaker 5: In other words, I'd much rather it be in the
Speaker 5: dealer's hand, which says I'd much rather be in Powell's
Speaker 5: position that I'm not going to get fired and I'm still.
Speaker 3: Going to be there. And that's the way that we
Speaker 3: think about that.
Speaker 2: A lot of America. Jeff toographed with this folks, a
Speaker 2: renaissances should say renaissance Macro here with futures up fifty five.
Speaker 2: We welcome all of you on your commute across the nation.
Speaker 2: Got some good equity chat coming up here. Is Brian
Speaker 2: Belski size Brian Belski still scheduled with us as well.
Speaker 2: Brian Belski's he's leaving the beach in Florida down there early.
Speaker 2: We're you know, to gra We're not you know, we're
Speaker 2: not on a beach like Belski Jeff, that's all great
Speaker 2: and well, but a huge body of our listeners don't
Speaker 2: want to speculate. They got a retirement account. How should
Speaker 2: someone in conservative money, cautious money, actual assumption money, how
Speaker 2: should that person move in this paradigmatic shift.
Speaker 5: Well, look, I think we run allocation models. We've run
Speaker 5: one for about five years now, and we look at
Speaker 5: it on a dynamic basis. It's kind of an optimization problem.
Speaker 5: But I think the best way to explain that from
Speaker 5: you know, kind of a general standpoint is in being
Speaker 5: in an athletic stance, right you want to be able
Speaker 5: to move forward, sideways, backwards, whatever the case may be.
Speaker 5: And right now our allocations are about thirty five percent stocks,
Speaker 5: twenty five percent treasuries, and about thirty percent cash, with
Speaker 5: the remainder in some commodities. And that's really a reflection
Speaker 5: of the trends that we see, the deterioration in the
Speaker 5: data that we're seeing, and what we think is likely
Speaker 5: to happen going forward. And part of that, given the uncertainty,
Speaker 5: is that large commitment to cash. Now, we try to
Speaker 5: solve for sharp races. We try to solve for risk
Speaker 5: adjusted returns, not just absolute returns. And so that's one
Speaker 5: of the reasons why this is a little bit more
Speaker 5: balanced of an approach. But we certainly have seen our
Speaker 5: allocations to equities come down here, really been cut in
Speaker 5: half in about the last i'd say three months, at least,
Speaker 5: probably two and a half to three months.
Speaker 2: David, I didn't realize this on a weekly chart apples
Speaker 2: down thirty three that was a maximum drawing. I had
Speaker 2: no idea was that much agony out there?
Speaker 3: Jeff?
Speaker 7: Where are you on the topic of American exceptionalism? A
Speaker 7: lot of folks pouring one out for American exceptionalism. Given
Speaker 7: all of this, how are you looking at it? How
Speaker 7: much longevity does it have?
Speaker 5: As you see in look, I think it comes down
Speaker 5: to where is capital treated best? And right now you
Speaker 5: know clearly there's some question as to how capital is
Speaker 5: going to be treated here in the US. But I
Speaker 5: think when we take a step back, take a deep breath,
Speaker 5: kind of get through the summer, see what's going on.
Speaker 5: Hopefully this is I don't want to say resolve. At
Speaker 5: least there's a little bit more clarity in this fog
Speaker 5: of war here. I think people are going to look
Speaker 5: back and say, look, where where do we have the
Speaker 5: highest return on invested capital. Where can we really OutKick
Speaker 5: our coverage, if you will, given the risk And I
Speaker 5: think that that's going to take a long time to
Speaker 5: shift that away from the US. And so I think
Speaker 5: there's a sentiment environment here that's certainly percolating.
Speaker 3: It's having an impact.
Speaker 5: I mean, you really are getting into situations with rise
Speaker 5: and treasuries, with the FED likely to cut rates at
Speaker 5: the next meeting, and the decline inequities and the decline
Speaker 5: and dollar. I mean, that's taking you back into the
Speaker 5: Smithsonian stuff of nineteen seventy one. So you know, it's
Speaker 5: a pretty unusual environment. But I do think that when
Speaker 5: the dust settles, people are going to look around and say, hey,
Speaker 5: where's my money going to return the best for its
Speaker 5: risk profile?
Speaker 3: And I think that's still going to be the US.
Speaker 2: Are we in a bear market?
Speaker 3: We are?
Speaker 7: You're trying to take tea up bellski here?
Speaker 2: Yeah, I am. I just you know, I thought i'd
Speaker 2: get a longer answer from Jeff. I just went down
Speaker 2: on flames there discuss.
Speaker 3: I could elaborate. Are we in a circuit?
Speaker 5: A bear market is not about being down twenty percent?
Speaker 5: It's not some magical number. It really is about the
Speaker 5: combination of the increase in volatility, the decrease in returns,
Speaker 5: and what that's happening on a trend basis, and those
Speaker 5: are all sloping downwards now. So in our book, that
Speaker 5: is the definition of a bear market, and that really
Speaker 5: kicked in about a month ago. So it's not this
Speaker 5: is not a new phenomenon. This has been something that's
Speaker 5: in play, and I do think that that's important as
Speaker 5: we think about it from a longer term perspective, The
Speaker 5: question is is has sentiment outdone itself in the very
Speaker 5: near term to get a really nice rally, And that's
Speaker 5: where we are. We think we can rally back to
Speaker 5: at least fifty five hundred, probably close to fifty seven hundred,
Speaker 5: and then the question will be how did we get there.
Speaker 5: Did we get there with momentum? Did we get there
Speaker 5: with a change in the attitude? If we didn't, then
Speaker 5: that's a rally to sell.
Speaker 7: Always good to ask the follow up, Tom, that was great,
Speaker 7: Always good to ask the follow up question.
Speaker 8: I.
Speaker 2: See de Graf. What you don't understand is when girls
Speaker 2: in the press conference of the White House, he's like
Speaker 2: looking for the third follow up question. Those days are gone.
Speaker 7: You know, you might have missed this, Jeff. But but
Speaker 7: Tom noted that during the hockey game last night gold
Speaker 7: hit thirty five hundred he got a push alert or
Speaker 7: something like that. When you're watching, What do we take
Speaker 7: away from that, Jeff gold hitting that. Let we've seen
Speaker 7: this amazing trajectory that gold has had over the last
Speaker 7: few months or thirty percent this year, what do you
Speaker 7: make of that? I guess that's my dumb question.
Speaker 3: I'm gonna ask him, Well, I don't think it's dumb
Speaker 3: at all.
Speaker 5: I think, you know, I think that's a reasonable response
Speaker 5: to sanctions that have been in place for a long time,
Speaker 5: kind of the weaponization of the dollar the US financial system.
Speaker 5: I mean, look, if we were on the other side
Speaker 5: of this trade, if we weren't, you know, US citizens
Speaker 5: or the US government, I'd be thinking about the same
Speaker 5: thing too, Right, How can I make sure that I'm
Speaker 5: not just totally dependent on US dollars and treasury? So
Speaker 5: that does make some sense to me, no doubt about it.
Speaker 5: That trend has been in place for a while though,
Speaker 5: I mean, our trend models have been bullish on gold
Speaker 5: for at least eighteen months.
Speaker 3: It's probably longer than that.
Speaker 5: I think what's interesting about gold right here is when
Speaker 5: we start looking at some of our rolling alpha models
Speaker 5: and some of the things that we look at historically,
Speaker 5: we are getting into rarefied air, so we don't yet
Speaker 5: quite have it from a sentiment standpoint on the ETF inflows.
Speaker 5: But the one thing that we will watch when it
Speaker 5: comes to extremes in trend, which we're getting very close to,
Speaker 5: if not there for gold, is the sentiment environment so
Speaker 5: robust that it says to us there's a buyer's frenzy
Speaker 5: and we want to take a step aside. I suspect
Speaker 5: that that's we're within days of weeks of that, so
Speaker 5: I actually think that that's a pretty good spot to
Speaker 5: start to let some of this go again within the
Speaker 5: context of an uptrend. So it's more of a tactical call,
Speaker 5: but I think it is getting kind of into that
Speaker 5: frenzy zone.
Speaker 2: Two shortened answers. I'm sorry, Jeff to grab Is MAG
Speaker 2: seven broken? Is Meg seven broken?
Speaker 3: I think you have to strip it out.
Speaker 5: But for the most part, the trends for MAG seven
Speaker 5: are bearish, and we haven't seen anything from a momentum standpoint,
Speaker 5: and really not even from a sentiment standpoint, Yet for
Speaker 5: those individual names to say that the trend has exhausted itself,
Speaker 5: I would say for semiconductors for the first time, this
Speaker 5: was about three weeks ago, maybe two weeks ago. Now
Speaker 5: our seller's frenzy started to fire in semiconductors. Obviously the
Speaker 5: weakness in Nvidia helped that. That's a stark contrast to
Speaker 5: where we were nine months ago, which was a buyer's frenzy.
Speaker 5: We were warning clients at the trend exactly like gold.
Speaker 5: The trend was too frothy. And I think one of
Speaker 5: the important parts of this from an overall sentiment standpoint
Speaker 5: is that you've got this now repudiation of the sky
Speaker 5: blue narrative.
Speaker 3: That was AI.
Speaker 5: So people are now going from protecting themselves in semis
Speaker 5: to actually trying to profit on the downside. That's a
Speaker 5: really important psychological change, and that tends to be a
Speaker 5: bull of psychological change.
Speaker 2: Jef to Grath, thank you so much, run Us on
Speaker 2: some macro research. He's a really really great griefing there.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. You can also listen live
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Speaker 1: say Alexa play Bloomberg eleven thirty.
Speaker 2: Joining us now. Someone who's enjoyed that humility. Brian Belski,
Speaker 2: Chief Investment Strategies at Beamo Capital Markets. Brian, how are
Speaker 2: you framing out your inherent optimism on equities given this
Speaker 2: time we are living?
Speaker 8: You know, thanks for having us. It's tough to be
Speaker 8: bullish now, but always we always say, you know, pride
Speaker 8: brings disgrace and humility generates wisdom. And you just brought
Speaker 8: some humility my way. Because the very first stock that
Speaker 8: I analyzed at William o'nial in company for William O'Neil
Speaker 8: was three a m. He'd literally walk me over to
Speaker 8: the to the file and cabinet made me pull out
Speaker 8: the file and read it. So it is Minnesota Mining
Speaker 8: and Manufacturing. This is listen.
Speaker 2: I isn't that cool? Yeah?
Speaker 8: So I've been thinking a lot about this, and obviously,
Speaker 8: and you know, the binary reactions of investors have never
Speaker 8: been greater number one.
Speaker 3: Number two.
Speaker 8: I think this has a lot to do with how
Speaker 8: we react to bullet points and emotions and things like that,
Speaker 8: and I'm going to make a parallel, and it's probably
Speaker 8: not going to be very popular. So I think this
Speaker 8: is very parallel in terms of how we're reacting to
Speaker 8: what's going on in the stock market to COVID. Now,
Speaker 8: clearly COVID was a fright. It was a once in
Speaker 8: every four generation event in terms of a pandemic. But
Speaker 8: the emotions in COVID are similar to in the fear
Speaker 8: of COVID, are similar to our personal feelings with respect
Speaker 8: to what's happening politically. Then the other thing is many
Speaker 8: of my compatriots, colleagues, and competitors are not staying in
Speaker 8: their lane. They've become now amateur psychologists that are diagnosed
Speaker 8: think personality disorders, where they should actually be focusing more
Speaker 8: on what's happening in the economy in terms of the earnings.
Speaker 8: Here's what we here's what we know. We don't know
Speaker 8: exactly how long this is going to last. We've already positioned,
Speaker 8: we meaning consensus that this is going to take years
Speaker 8: and years and years and years to unfold. So I
Speaker 8: believe that the majority of portfolios strategists, economists are already
Speaker 8: positioned for the worst case scenario. What we believe in
Speaker 8: our standing in terms of the investment Strategy group at
Speaker 8: BEMO is this could all be over in a matter
Speaker 8: of days. We're not trying to be Pollyanna or flippant.
Speaker 8: We believe in the inherent strength of the US economy,
Speaker 8: the US stock market, and we still believe that we
Speaker 8: have the best assets in the world, and we're going
Speaker 8: to take negativity to add to those assets.
Speaker 2: Bronze it, David, get a question in here before the
Speaker 2: market open. I'm going to come back because folks, this
Speaker 2: is my third rail right now. That Belski address David
Speaker 2: Gerr with a question.
Speaker 7: Probably got about a minute to market opens. But yet,
Speaker 7: so I know that you've revised your your year end target.
Speaker 7: Are are you doing that simply because of historical trends
Speaker 7: where you think things are going or could go? Just
Speaker 7: in the minute we have here, explain why you decided
Speaker 7: to make that revision down.
Speaker 8: Well, again, with much humility, we have to be much
Speaker 8: more realistic, especially given the draw down that we've had, David,
Speaker 8: and I think to have a thirty five to forty
Speaker 8: percent move from here to get to sixty seven hundred
Speaker 8: and be very difficult. Can we get a twenty to
Speaker 8: twenty five percent, absolutely, and that is based on historical standards.
Speaker 2: Who us some vima capital markets Brian Belski, Brian, you
Speaker 2: know I'm on your side on this. We've had a
Speaker 2: number of guests this morning. Go back to Cooney in
Speaker 2: theory of nineteen, I think forty nine or forty seven,
Speaker 2: and use a dreaded word paradigm. When I see that word,
Speaker 2: Brian Belski, I circle it with fear. Why is this
Speaker 2: not a paradigmatic shift in the markets.
Speaker 8: I don't think it's a pair. I think the market
Speaker 8: actually is acting like it's a paradynamic shift. And oh,
Speaker 8: by the way, I have a very good fortune of
Speaker 8: being in Europe last week, Tommy and talking to those
Speaker 8: great investors that have had wonderful returns if they've been
Speaker 8: investing in European stocks. And to be clear, europe investors
Speaker 8: that have not really liked US stocks wholeheartedly and objectively
Speaker 8: since the year two thousand. They've been reluctant buyers of
Speaker 8: US stocks the last ten years, and so they're taking
Speaker 8: victory laps with respect to what's happening now. But I
Speaker 8: think we need to think more objectively about this Tom,
Speaker 8: I think what's happening is more of a reversion to
Speaker 8: the mean. If I go back to my Mary Lynch days,
Speaker 8: I think we're reverting to the mean. I think, again,
Speaker 8: to go back to what I said in the beginning,
Speaker 8: we're making binary decisions in terms of we're not going
Speaker 8: to go all this way, in terms of going back
Speaker 8: to this massive paradigm shift that people are thinking position for.
Speaker 8: I think this is simply being positioned to a shift
Speaker 8: to the mean because we went too far the other side, Brian.
Speaker 7: We had Jeff DeGraf on right before you. So speaking
Speaker 7: of binary, let me set this up one two. Tom
Speaker 7: asked him, are we in a bear market? And he
Speaker 7: didn't waste more than half a second in saying, yes,
Speaker 7: how about you. What's your read on where we are?
Speaker 7: Would you use the same the same name.
Speaker 8: Just from Michigan. So he has the Midwest sensibilities. So
Speaker 8: I don't know yet. So here's what I would say,
Speaker 8: and here's what we actually wrote in a published research report.
Speaker 8: It doesn't matter if we're in a bear market. And
Speaker 8: again we all like to put labels on. Let's go
Speaker 8: back to what we said in the report. Doesn't matter
Speaker 8: if we're down ten percent, fifty percent, or twenty five percent. Again,
Speaker 8: we don't like it when people lose money. I think
Speaker 8: it's terrible. The market was a little bit frothy heading
Speaker 8: into the beginning.
Speaker 2: Of the year.
Speaker 8: We know that, however, why doesn't matter because when the
Speaker 8: market bottoms, and we do think we're in a bottoming process,
Speaker 8: we don't go straight down or strained up. It's a
Speaker 8: process typically in historical new when we have these types
Speaker 8: of exacerbated moves to the downside. Twelve months out, we're
Speaker 8: not up an average of twenty nine point four percent.
Speaker 8: So give me a twenty percent rally still gets us
Speaker 8: to that sixty one hundred target by by hopefully closer
Speaker 8: to your end. Even if we don't get there, I
Speaker 8: think we'll get closer death than most people think. So
Speaker 8: again I think that we'd love to put labels on
Speaker 8: things by the way too, and I know Jeff would
Speaker 8: probably agree to this. I've known Jeff for a long time.
Speaker 8: Is that how many people how many people sold at
Speaker 8: the peak?
Speaker 9: Huh?
Speaker 8: How many people sold the peak? So a lot of
Speaker 8: this is peak to peak the trough type analysis, And
Speaker 8: again that's more academic than anything.
Speaker 2: Brian Belski thank you so much, greatly appreciate. Let's do
Speaker 2: it again and just appreciate those comments.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: This is exceptionally well timed Alesia Cassia Herrero out of
Speaker 2: Hong Kong when the Texas chief economists for the Pacific Room,
Speaker 2: if you will joins us right now. Alicia, I'm a
Speaker 2: little upset this morning, and I'm playing off with Greg Ip,
Speaker 2: who I think was really terse and to the point
Speaker 2: with the Wall Street Journal. The news that we saw
Speaker 2: in the last four or five days was Japan had
Speaker 2: quote unquote negotiations with a White House, except they weren't negotiations.
Speaker 2: And then two days later, China has come out and
Speaker 2: said anybody that has negotiations that harm China that will
Speaker 2: not be accepted. To me, there's a misunderstanding of teriff
Speaker 2: war dynamics, trade war dynamics in the Pacific rim discuss
Speaker 2: that how fragile are the negotiations right now?
Speaker 6: Well, I think the Trump administration probably thought this would
Speaker 6: be easier. So what was the strategy. I threatened to
Speaker 6: the point of actually imposing times on everybody, so that
Speaker 6: they then realized how dangerous these game is, and they
Speaker 6: did couple from China, but this came quite late. Excuse
Speaker 6: me in the game why because many of these nations
Speaker 6: already depends massively on Chinese. Japan is one of the
Speaker 6: least dependent, and still so for Japan, for South Korea.
Speaker 6: The US is a larger export market, but the problem
Speaker 6: is from the import site. So if you are Vietnam,
Speaker 6: which is an extreme case, you just can't export without China.
Speaker 6: You just can't do what the US is asking you
Speaker 6: to do. You can't impose targets on Chinese inputs, on
Speaker 6: Chinese intermediate goods without which you cannot export to the US. So,
Speaker 6: in a way, the US is requesting something that is
Speaker 6: not feasible for a lot of Asian countries, I would
Speaker 6: say Southeast Asia. That's why it is not going to
Speaker 6: work in the way the Trump administration expects it to work.
Speaker 2: David, you know, I'm curious.
Speaker 7: We've seen the Chinese currency week, and we've seen the
Speaker 7: Beijing government allow that to happen over these last many weeks.
Speaker 7: How do you see that playing out going forward? As
Speaker 7: kind of look at the way in which China is
Speaker 7: I won't say weathering, but but navigating the stale might
Speaker 7: here with the US government.
Speaker 6: Okay, so China has a few tools to I wouldnt
Speaker 6: say withstand but mitigate the shock. The shock is huge,
Speaker 6: Let's face it. This won't be said in China, but
Speaker 6: it is a huge shock. It is even more so
Speaker 6: if the US ultimately imposed the styles on countries through
Speaker 6: which Chinese going to the US, Vietnam, Thailand, Malaysia. One
Speaker 6: way to go about this is what China has already done. Actually,
Speaker 6: China's response post COVID, response to its own weaknesses in
Speaker 6: twenty twenty to twenty twenty three all the way to
Speaker 6: September twenty twenty four was to weaken the currents to
Speaker 6: allow the weakening. They didn't need to weaken themselves because
Speaker 6: the market was already on a weekening cycle because the
Speaker 6: economy was really not doing well, so capitol was leaving China,
Speaker 6: and also US rates were very high, and therefore the
Speaker 6: interre differential was attracting capital. So they are now doing
Speaker 6: the same thing. But very carefully because they know the
Speaker 6: US is watching, which wasn't the case before. I think
Speaker 6: they could do much more if needed, and that will
Speaker 6: create a competitive evaluation in Asia.
Speaker 2: Alicia, thank you so much for joining us. She's within
Speaker 2: Texas and the Pacific Room. Chief Economs for Airpech Alicia
Speaker 2: Percy her Railroad.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple, Corplay and Android
Speaker 1: Otto with the Bloomberg Business App. You can also listen
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty Joining us.
Speaker 2: Now from Australia in the Peterson Institute or mckivin. Are
Speaker 2: they gonna work, doctor mckivin, I mean, just simple? The
Speaker 2: President makes it sounds it's all easy, so simple. Are
Speaker 2: we actually going to bring in revenue from tariffs?
Speaker 4: Great to be here? I guess the question is will
Speaker 4: they work? Depends on what the objective is. If the
Speaker 4: objective is to slow down economic growth, yes they'll achieve that.
Speaker 4: If the objective is to bring in revenue, yes they
Speaker 4: will bring in some revenue. But by our estimates and
Speaker 4: other estimates. The revenue is nowhere near as great as
Speaker 4: advocates of tariffs might suggests. Very narrow tax base, so
Speaker 4: you have to have a very high tax to get
Speaker 4: any revenue.
Speaker 2: Do you indicate or see that there's anyone within the
Speaker 2: Trump orbit that can explain what you just said to
Speaker 2: the president. Is there anyone that can explain this to
Speaker 2: Donald Trump?
Speaker 4: Well, I haven't seen any explanation that makes sense. I
Speaker 4: think the calculation that might have been done is how
Speaker 4: many imports are there in the US at the moment,
Speaker 4: three trillion, muliplied by a tariff of ten percent. How
Speaker 4: much revenue do you get? What you get three hundred
Speaker 4: billion a year for ten years, three trillions. So that's
Speaker 4: a simple calculation. What it ignores is that people will
Speaker 4: stop buying imports because they've become more expensive. People will
Speaker 4: shift their consumption bundles, Inflation will go up, the economy
Speaker 4: will slow, and you'll lose revenue from your corporate taxes
Speaker 4: and from your household income taxes. So when you nettle
Speaker 4: that out, you get a lot more offset than you expect.
Speaker 4: And I haven't seen the calculations of offset being produced
Speaker 4: by anyone in the administration.
Speaker 7: I was having some fun a moment ago talking about
Speaker 7: stochastic models, and you're famous for one with Jeff Sachs.
Speaker 7: Tom mentioned them just a moment ago. Can you just
Speaker 7: talk in plain terms about how you conducted your analysis
Speaker 7: and sort of what variables are there in sort of
Speaker 7: coming to some conclusion about the effect this is going
Speaker 7: to have.
Speaker 4: Yeah, What we've tried to and that's a good question.
Speaker 4: What we've tried to do is bring both the financial
Speaker 4: parts of the world economy, to links between countries through
Speaker 4: asset markets, exchange rate bond markets, together with production networks.
Speaker 4: So we're modeling the real economy, how resources flow within
Speaker 4: the US economy and between the US and China and
Speaker 4: other and so we try and map the physical economy
Speaker 4: and the financial economy and their interaction into a very
Speaker 4: very large, complex system which is based partly on historical
Speaker 4: relationships and partly on observed events such as German unification,
Speaker 4: such as NAFTA, such as events where we saw something
Speaker 4: occur and we see whether our modeling framework can replicate
Speaker 4: what have happened within a reasonable degree of confidence, and
Speaker 4: then we use that framework to project scenarios for central banks,
Speaker 4: for corporations for governments, simple questions as well as complex
Speaker 4: questions like the Taroff war.
Speaker 7: We were talking about the IMFs revised forecast this morning
Speaker 7: and something we heard from our chief economists from Tom
Speaker 7: as well is this being a kind of paradigm shift.
Speaker 7: And I wonder sort of how you are thinking about
Speaker 7: what this portends, what's changing about the global economy visa
Speaker 7: VI what the Trump administration has announced in terms of
Speaker 7: trade policy.
Speaker 4: Well, seeing this transformation going on for decades, we've seen
Speaker 4: the center of global economic activity moving from Europe and
Speaker 4: the US to Asia, and so what's been announced as
Speaker 4: a vast acceleration but still moving in that direction where
Speaker 4: the balance of economic power is shifting away from the
Speaker 4: advanced economies as we know them today. So this is
Speaker 4: actually a very large economic adjustment. It accelerates something that's
Speaker 4: already happening. I guess one of the interesting things is
Speaker 4: the geopolitical adjustment hasn't caught up with the economic adjustment
Speaker 4: we've been seeing, and so the US is very overweighted
Speaker 4: in the international institutions like the IMF and World Bank
Speaker 4: and UN. I think that doesn't really bother the Trump
Speaker 4: administration at all. In fact, they're trying to move that
Speaker 4: away from the current arrangements as well. But this is
Speaker 4: a very major event in world history.
Speaker 2: I would say doctor mckifvin, thank you so much. Mckivin
Speaker 2: there at the Peterson Institute in Washington, writing with Adam Posen,
Speaker 2: Chad Bone and others. Just can't say enough about their
Speaker 2: output in the recent weeks.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
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Speaker 1: Bloomberg terminal.
Speaker 2: In the year, there are few people I want to
Speaker 2: talk to more than Margaret Franklin. Her institution changed my life.
Speaker 2: Joining us not from Charlotte'sville, Virginia, but I believe in
Speaker 2: Washington day, driving steadfastly the charn of Financial Analysts Institute,
Speaker 2: the CFA Institute. Margaret Franklin joins us right now. Margaret,
Speaker 2: the institution of one hundred and seventy thousand people, the
Speaker 2: rite of passage that it is. Are you beyond COVID?
Speaker 10: Well, Tom, I am thrilled to say we are beyond
Speaker 10: COVID and in fact, we're two hundred thousand members and
Speaker 10: COVID gave us the opportunity to really evaluate and I
Speaker 10: would say improve the CFA program so that candidates and
Speaker 10: charterholders are as ready as ever for what lies ahead.
Speaker 10: And it's of course interesting times for investors.
Speaker 2: It was hugely difficult, like at one point India was
Speaker 2: shut down. I can't remember the details, but literally for
Speaker 2: the level one, level two, level three exams, nations couldn't
Speaker 2: take the test. Is it smooth going now? And particularly
Speaker 2: the test taking on the Pacific rim It is.
Speaker 10: Smooth going And you're right. It was completely disjointed and
Speaker 10: inordinately disruptive for candidates we went. When COVID hit, we
Speaker 10: were doing paper based tests and we're now, of course
Speaker 10: completely computer based and so it is seamless, and we
Speaker 10: have more reach than we ever have before, so in
Speaker 10: more markets and making it more accessible for candidates to
Speaker 10: take their exams close to home.
Speaker 2: Margaret David wants to get in here, but I have
Speaker 2: to ask, are you kidding me? A computer based CFA exam?
Speaker 2: There's something about the pain in your hand?
Speaker 3: You can still ring out, Tom. I'm sure it would
Speaker 3: allow you.
Speaker 2: I have on my desk my Hewlett Packard twelve C
Speaker 2: with my Margaret Franklin YELLOWCFA dot.
Speaker 3: What has been the what is it?
Speaker 2: Ben? Margaret like going from handwritten agony over to computer exams.
Speaker 9: The people like it, Yeah, they do, and of course
Speaker 9: you won't be surprised though, Tom, they still feel the
Speaker 9: same amount of agony because the quality, the rigor, and
Speaker 9: of course the content are the tough part.
Speaker 10: So I think it's just a tough new new medium,
Speaker 10: new medium.
Speaker 2: David, Ethics is not the same computer taking market.
Speaker 7: I see you have these specialized pathways now private wealth,
Speaker 7: private markets, and the traditional portfolio management path. I'm still
Speaker 7: waiting for the pedantic amateur radio host path, which I'll
Speaker 7: continue to wait for here. But explain how that works
Speaker 7: and sort of what that leads to. Is it all
Speaker 7: leading to the same thing, all to the same designation, Yeah,
Speaker 7: so it does.
Speaker 10: It's all CFA. It's Margaret Franklin, Tom g comm a CFA.
Speaker 10: But we were able to when we did that audit
Speaker 10: and we used the COVID period to assess the program,
Speaker 10: we were able to keep the entire core of the
Speaker 10: program and then offer pathways in level three for half
Speaker 10: of it to really align better with candidates desires in
Speaker 10: really the core areas that are of interests, private markets,
Speaker 10: private wealth, and then of course traditional portfolio management. And
Speaker 10: you know, that coincided with a number of changes we
Speaker 10: made to the program, including allowing college students to begin
Speaker 10: twenty three months away from graduation so they could be
Speaker 10: really prepared for the market. And in addition, we added
Speaker 10: practical skills modules. We did an assessment with employers and
Speaker 10: they were very keen to share that they valued the
Speaker 10: rigor the quality and the knowledge, but they wanted candidates
Speaker 10: to be much more job ready, and so we added
Speaker 10: our practical skills modules and I think that that has
Speaker 10: been very well received as well as you know, the
Speaker 10: learn the way we know that learners learn is changing.
Speaker 10: So we've set candidates up for success with a great
Speaker 10: learning ecosystem and great ways for them to learn.
Speaker 2: The curricula is better. It's much more formalized now, folks.
Speaker 2: It used to be a three foot pile of books
Speaker 2: that you'd try to get through. The accounting book alone,
Speaker 2: John Dee Accounting would kill you. So the curriculum is better,
Speaker 2: Margaret Franklin, But is it the kids? Are they coming
Speaker 2: out as smart? Equally or is it actually on a
Speaker 2: quantitative basis more rigorous now, Well, I.
Speaker 10: Think Tom, if you and I went back to go
Speaker 10: write it, we would find it pretty difficult because, as
Speaker 10: you know, the course is very very comprehensive, and so
Speaker 10: there are things that when we wrote just weren't part
Speaker 10: of the curricula. But the curricula of course keeps up
Speaker 10: with what the employers are looking for because we have
Speaker 10: always on assessment through a practice analysis. So I'd say
Speaker 10: it remains very challenging. You know, about one in seven
Speaker 10: who started will complete it, and the assess and validation
Speaker 10: of the candidate's knowledge, skills and ability is a critical
Speaker 10: component and that's what differentiates it from so many programs
Speaker 10: and why it remains as valued today as it did
Speaker 10: sixty years ago.
Speaker 2: One final question off Michael Mobison was here and his
Speaker 2: contribution to the you know, Abby, Joseph Cohen, everybody that
Speaker 2: supported the program here over the years, the great George
Speaker 2: VanDerHeyden years ago at Fidelity. Margaret wearing God's Name is
Speaker 2: CFA Level four on derivatives and the Greek letters. Bruno
Speaker 2: de Pierre emails in from Bloomberg Derivatives and says Margaret,
Speaker 2: when do we get level four derivative Greek letters strategy.
Speaker 10: Well, everybody who's writing and everybody who's air Charter knows
Speaker 10: that we will. I can confirm we will not be
Speaker 10: doing a level four And Tom I will say, you
Speaker 10: mentioned Frank Fobosi earlier before we came on the line,
Speaker 10: so you've got you've got all the legends there counted.
Speaker 2: Well we do, Margaret Franklin, thank you so much. And
Speaker 2: again the level three pass rate Catherine Doherty writing in
Speaker 2: Bloomberg today for thirty nine percent, and David, what you
Speaker 2: heard there? One in seven and started it's through and it's.
Speaker 7: What is the what is the former surveillance intern pass rate?
Speaker 3: You keep tabs on that. It's pretty huge.
Speaker 2: Actually, it sounds like, you know, we're humbled by that,
Speaker 2: Margaret frank And out of showsvill Virginia a moment. There
Speaker 2: an annual review of the Charter financial Analyst designation.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station Just say,
Speaker 1: Alexa play Bloomberg eleven.
Speaker 2: Thirty, Lisa Matteo, what do you have to do?
Speaker 4: Oh?
Speaker 11: All right, into the newspapers.
Speaker 12: Okay, so we've all written in an uber right, But
Speaker 12: have you signed up for the uber one service?
Speaker 4: Okay?
Speaker 11: It costs nine to ninety nine a month.
Speaker 12: The company said it's going to help you save some
Speaker 12: money on ride bookings, food deliveries.
Speaker 11: So here's the thing.
Speaker 12: The FTC is saying that canceling the subscription is too difficult,
Speaker 12: so it's filing a law suit now. So they promote it, right,
Speaker 12: they do all these push notifications while while you're using
Speaker 12: the app. But to cancel it, here's what you have
Speaker 12: to do. You have to go through about seven different
Speaker 12: screens that will require at least twelve different actions. And
Speaker 12: they say it's so tough that there's even these tutorials
Speaker 12: that have been sparked online getting so many things, so
Speaker 12: many views, and then some consumers are even saying they're
Speaker 12: getting charts for it without even signing up for it.
Speaker 11: So that's the problem. It's Uber one. I do not
Speaker 11: have that service, but.
Speaker 7: I see I'm getting the push alert right now.
Speaker 12: You see I don't have its simple, They have done
Speaker 12: push it out to you, I know, but to cancel it.
Speaker 11: They're saying it's a little bit too tough.
Speaker 12: Uber says, you know, it's it's clear and simple, you
Speaker 12: can cancel it.
Speaker 2: But this is part of a lot of It's like
Speaker 2: you get an email and you try to unsubscribe, and
Speaker 2: so many places are wonderful about it, you know, Okay, goodbye,
Speaker 2: and then some places you can just tell they just
Speaker 2: do not want you to go.
Speaker 12: Yeah, like the streaming some of the streaming ones are
Speaker 12: pretty easy. You just kind of click a button and
Speaker 12: you can unsubscribe. But yeah, it's Uber one.
Speaker 2: What do you most?
Speaker 12: Okay, I thought we were done talking about this, but
Speaker 12: apparently not.
Speaker 11: We're talking about.
Speaker 12: Egg prices again, not as high as they once were,
Speaker 12: but they're still high of course, stir and and so
Speaker 12: I'm out of stock. But the Financial Times is saying
Speaker 12: the makers of those plant based eggs they're kind of
Speaker 12: trying to take advantage. So they're expanding production, launching these
Speaker 12: fancy marketing campaigns. We're talking about, like I think they're
Speaker 12: called Mungman based liquids.
Speaker 7: Here, please please plant based egg and I've broken bread
Speaker 7: with you many a time time I've never seen your
Speaker 7: order of vegetable based eggs.
Speaker 3: I've seen you order of vegetable once.
Speaker 2: Beyond me and.
Speaker 12: Now you have eate just it's a maker of just egg,
Speaker 12: just egg, just egg. So that's the one that there
Speaker 12: are sales of like five times higher than you know
Speaker 12: over last year.
Speaker 2: These ideas people you know, fancy people from Cornell. I
Speaker 2: don't know.
Speaker 12: The people are looking for alternatives, so they have to
Speaker 12: for the money sumer demand for it.
Speaker 2: So yeah, yeah, just beyond me gone away?
Speaker 3: No, still around?
Speaker 12: No, But that's the thing, like, is this gonna go
Speaker 12: away because it's not as popular, like the beyond Me
Speaker 12: going to go down?
Speaker 2: Eggs still out of stock? Is it just a demand thing?
Speaker 9: Still?
Speaker 12: The bird flow was still so yeah, I was surprised.
Speaker 2: I wrote this weekend I couldn't get eggs.
Speaker 3: It was easter. That's triple them up.
Speaker 7: That's true.
Speaker 2: Use potatoes.
Speaker 12: You can use other substitutes like apple, sauce, mashed bananas, yogurt.
Speaker 12: Che see and is seed morning here?
Speaker 1: Still?
Speaker 2: Is that how you say?
Speaker 11: Yes?
Speaker 6: Next?
Speaker 11: Okay, this is actually an interesting look.
Speaker 12: So the Washington Pos had this into the changing economics
Speaker 12: of college football affecting the NFL Draft because players have
Speaker 12: the option they can make more money by staying in
Speaker 12: college with the NIL deals, the transfer portal, things like that.
Speaker 12: So they're putting off entering into the draft.
Speaker 11: So they gave this example.
Speaker 12: So there's a after five years at Georgia quarterback Carson Beck. He'
Speaker 12: said in December he's going to answer the draft. But
Speaker 12: then in January he came back and he said, you
Speaker 12: know what, I'm going to stay in college. He will
Speaker 12: earn an NIL package at Miami estimated to be at
Speaker 12: least three million dollars a million for college kid, so
Speaker 12: not too bad. And for him it made sense because
Speaker 12: he had an injury, Like, his performance wasn't as well
Speaker 12: as the previous year, so it kind of made sense
Speaker 12: for him to stay in college a little bit longer.
Speaker 12: But they spoke with agents like and they're saying, it's
Speaker 12: it's it's a different world.
Speaker 2: You know, we protect the children of the innocent here,
Speaker 2: but you are living this. Lisa Matteo, you have a
Speaker 2: very gifted child. Yes, basically your young child's age. It's
Speaker 2: professional sports, isn't it.
Speaker 12: Yes, But for my child to make three million, that's
Speaker 12: like kind of scary.
Speaker 2: Well, if she takes. She makes eight hundred thousand. Lisa,
Speaker 2: we'll cash that check.
Speaker 7: We hope you're still here.
Speaker 2: Yes, Lisa, thank you so much for the name. Image
Speaker 2: like this offspring, we should say that's doing better than
Speaker 2: good in the sport of her choice.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
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