WEBVTT - Bloomberg Surveillance TV: January 16, 2025 0:00:00.080 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:36.920 Terminal and the Bloomberg Business App. We begin the sound 0:00:36.960 --> 0:00:39.760 with stock steady and bond yields moving lower, investors focusing 0:00:39.800 --> 0:00:42.960 on President atlect Donald Trump's first day in office. Matt 0:00:42.960 --> 0:00:45.519 Miskin of John Hancock saying, we are likely moving to 0:00:45.600 --> 0:00:48.200 a new macro regime here, as we have to say 0:00:48.200 --> 0:00:50.960 goodbye to goldilocks. Before the data was not too hot 0:00:51.200 --> 0:00:54.440 and not too cold, which left the FED supportive to markets. 0:00:54.480 --> 0:00:57.320 Now that data is coming in hotter nearly across the board, 0:00:57.520 --> 0:00:59.640 Matt joins us. Now for more. Matt, welcome to the program. 0:00:59.680 --> 0:01:01.880 Did this change things for you in any way, shape 0:01:01.920 --> 0:01:02.760 or form. 0:01:03.360 --> 0:01:06.320 The Philly Fed index John was through the roof. I mean, 0:01:07.000 --> 0:01:09.560 it's a little too sunny in Philadelphia right now. 0:01:09.640 --> 0:01:12.880 It almost seems like and when you see across the 0:01:13.080 --> 0:01:14.840 I mean the NFIB survey. 0:01:14.520 --> 0:01:16.759 Also, I mean, some of these moves in the economic 0:01:16.840 --> 0:01:19.840 data almost look like main stocks in terms. 0:01:19.640 --> 0:01:21.160 Of their parabolic upside. 0:01:21.560 --> 0:01:23.840 And when you see this, and then you hear the 0:01:23.840 --> 0:01:26.680 FED not or FMC members like Waller as you've been 0:01:26.680 --> 0:01:29.560 addressing saying they're still going to be cutting at it's 0:01:29.600 --> 0:01:32.280 hard to put those two pieces together. But at the 0:01:32.360 --> 0:01:34.160 end of the day, you've got a position more for 0:01:34.240 --> 0:01:37.679 a reacceleration of growth. We're looking down in cap mid 0:01:37.760 --> 0:01:40.280 cap stocks, industrials. We've been talking about them for a 0:01:40.319 --> 0:01:43.640 long time, but frankly, the earnings are looking good. They're 0:01:43.640 --> 0:01:45.959 starting to get more appreciation relative strength. 0:01:46.440 --> 0:01:47.520 And if there's. 0:01:47.360 --> 0:01:50.400 More on shoring cap X, that's our favorite place to 0:01:50.440 --> 0:01:51.720 be in global equities. 0:01:51.800 --> 0:01:54.000 So matis built on that. How further down in market, 0:01:54.000 --> 0:01:55.800 camp would you come and would you go down to 0:01:55.840 --> 0:01:57.760 small camps? And let's just talk about it, Brush, So 0:01:58.200 --> 0:02:01.480 can small camps work that interest rates coming down? 0:02:02.800 --> 0:02:05.000 We don't believe so, John, And that is the big 0:02:05.040 --> 0:02:08.840 difference about reading this macro regime. It's almost like the 0:02:08.840 --> 0:02:12.600 macro regime playbook is missing pages here, or the pages 0:02:12.639 --> 0:02:14.400 are so dated you have to go back and get 0:02:14.400 --> 0:02:17.840 a new addition. Because the small cap industries are just 0:02:17.919 --> 0:02:20.239 different than what they used to be ten twenty years ago. 0:02:20.720 --> 0:02:24.000 Now in a booming economy, forty percent of the companies 0:02:24.080 --> 0:02:27.239 don't make money, and so they really actually would prefer 0:02:27.280 --> 0:02:31.000 a zero interest rate regime more than a strong economic regime. 0:02:31.520 --> 0:02:34.480 And MidCap on the other hand, eighty five ninety percent 0:02:34.480 --> 0:02:38.239 are profitable. You're getting more industrial exposure. You're still getting financials, 0:02:38.760 --> 0:02:41.880 but that industrial exposure typically is higher quality with a 0:02:41.919 --> 0:02:45.880 higher ROE. So if you want quality and value combined, 0:02:45.919 --> 0:02:49.040 which is basically our mantra quality at a reasonable price, 0:02:49.440 --> 0:02:51.840 we would go to mid MidCap may be the new 0:02:51.919 --> 0:02:54.840 small cap to implement for this kind of macro regime. 0:02:55.160 --> 0:02:57.040 Mat can I go back to what you're saying about 0:02:57.160 --> 0:03:00.280 data looking like memestocks. Peter share of A had to 0:03:00.360 --> 0:03:03.200 me had basically the same read as you, but his 0:03:03.360 --> 0:03:05.560 conclusion was something is wrong with the data that you 0:03:05.560 --> 0:03:08.040 can have a job support that comes in and seventy 0:03:08.080 --> 0:03:10.639 four out of seventy five economists have a number in 0:03:10.760 --> 0:03:14.080 expectation below two hundred thousand, yet it surprises. 0:03:13.600 --> 0:03:14.519 To the upside. 0:03:15.200 --> 0:03:18.600 Is there a factor that maybe the data as hot 0:03:18.600 --> 0:03:21.160 as it's showing, is just not correct. 0:03:22.200 --> 0:03:22.680 It could be. 0:03:22.760 --> 0:03:24.200 I mean, you know, at the end of the day, 0:03:24.240 --> 0:03:28.679 these are surveys, and surveys have been the hardest thing 0:03:28.760 --> 0:03:32.480 to read over this whole cycle since COVID. Basically, surveys 0:03:32.520 --> 0:03:36.280 have been broken leading economic indicators. Surveys that are trying 0:03:36.320 --> 0:03:39.080 to lead the economy have just frankly been wrong. 0:03:39.760 --> 0:03:41.000 They were overly. 0:03:40.680 --> 0:03:43.720 Pessimistic over the last couple of years as the economy 0:03:43.800 --> 0:03:48.160 chugged along pretty well, and now they've really whiplashed into 0:03:48.320 --> 0:03:51.840 more positive, kind of more optimist type outlooks. 0:03:52.040 --> 0:03:56.360 Now, does real GDP improve, does other activity improve? We'll 0:03:56.440 --> 0:03:57.320 just have to see. 0:03:57.920 --> 0:04:00.360 But you've seen such a flip of the switch on 0:04:00.480 --> 0:04:03.080 survey data at the end of the day, though, we're 0:04:03.120 --> 0:04:05.080 seeing it in markets. I mean, even just to start 0:04:05.080 --> 0:04:07.320 this year, I think in the best way, you know, 0:04:07.600 --> 0:04:09.360 ll cool Day made us. 0:04:09.680 --> 0:04:12.480 Have said it best. Don't call it a comeback. You're 0:04:12.560 --> 0:04:13.920 seeing the markets rotate. 0:04:14.120 --> 0:04:17.800 Industrials, financials, materials are all starting. 0:04:17.520 --> 0:04:19.120 To be better. Tech isn't working. 0:04:19.680 --> 0:04:22.479 I know this is like stunning for markets after two 0:04:22.520 --> 0:04:27.080 years of just tech domination. But a rotation's happening in markets, 0:04:27.160 --> 0:04:30.160 and that's reflecting probably what's happening in the economy, a 0:04:30.200 --> 0:04:32.040 better economic outcome. 0:04:32.240 --> 0:04:33.520 I mean, you see that with an S and P 0:04:33.680 --> 0:04:37.000 that declines yesterday, even so seventy five percent of the 0:04:37.040 --> 0:04:40.120 constituents of the S and P were up yesterday. The 0:04:40.200 --> 0:04:42.880 equal weight it is on track for its second best 0:04:42.880 --> 0:04:44.880 week over the past year. The only week that was 0:04:44.920 --> 0:04:48.479 better was after the inauguration of Donald Trump. Matt how 0:04:48.640 --> 0:04:51.520 enduring is that broadening? Is that better breath of the market. 0:04:52.720 --> 0:04:54.720 We've been saying that it's got to be an earning's 0:04:54.800 --> 0:04:58.560 driven rotation in financials this week now, they had low 0:04:58.600 --> 0:05:01.120 base effects. Q four or of twenty twenty three is 0:05:01.160 --> 0:05:05.160 when the SVB payouts happen, so that really hurt Q 0:05:05.240 --> 0:05:08.080 four of twenty twenty three earnings and then Q four 0:05:08.120 --> 0:05:09.760 of twenty twenty four earnings. 0:05:10.160 --> 0:05:13.799 We're strong on top of that. But investment banking. 0:05:13.400 --> 0:05:15.200 You know, you were all just talking about this investment 0:05:15.240 --> 0:05:18.760 banking businesses are starting to come back and starting to 0:05:18.800 --> 0:05:21.920 get more strength. We're seeing, you know, the yield curve 0:05:21.920 --> 0:05:26.840 steep and that helps financials. Financials are the biggest value sector. 0:05:27.279 --> 0:05:30.200 It's really tech verse financials. If you're trying to make 0:05:30.200 --> 0:05:32.400 a growth first value decision, if you're going to see 0:05:32.400 --> 0:05:35.599 that rotation. But the great news of this week was 0:05:35.640 --> 0:05:37.680 really actually the fundamental side. 0:05:37.400 --> 0:05:39.359 And it was all those beats by the big banks. 0:05:40.040 --> 0:05:42.520 You say that the FED is likely done holding markets hands, 0:05:42.560 --> 0:05:47.480 So then what do you make of Governor Waller yesterday. 0:05:45.960 --> 0:05:47.800 To me that it was an outlier. 0:05:47.960 --> 0:05:50.960 And this is where it gets difficult listening to FOMC 0:05:51.040 --> 0:05:52.920 members because they're going to be all over the place. 0:05:53.000 --> 0:05:56.039 And if this divergence really happens over the next couple months, 0:05:56.080 --> 0:05:58.960 I don't think it really helps markets. It's just going 0:05:59.000 --> 0:06:02.960 to add on certainty. But if you're data dependent, I 0:06:03.000 --> 0:06:04.680 don't get it. I mean, you just talked about how 0:06:04.839 --> 0:06:08.479 the CPI report by beat by zero points, zero zero 0:06:08.680 --> 0:06:12.480 two percent, and trillions of dollars were you know, moved 0:06:12.480 --> 0:06:15.960 across markets, and even in this little bit, as soon 0:06:15.960 --> 0:06:17.839 as inflation comes down a little bit, you get the 0:06:17.960 --> 0:06:22.000 speculative frenzy back in things like crypto, and that's not 0:06:22.040 --> 0:06:24.520 going to help your inflation problem. Or you're kind of 0:06:24.880 --> 0:06:27.560 that speculative nature or sentiment of markets. 0:06:27.640 --> 0:06:29.600 So matt Let's address it. Can I just jump in. 0:06:30.200 --> 0:06:32.159 It's kind of a world of dice to dependent or 0:06:32.279 --> 0:06:35.320 is a FED chair I can say dependent. 0:06:36.440 --> 0:06:39.520 I think that's the latter. I think there's other motives, 0:06:39.520 --> 0:06:40.960 but you know, at the end of the day, you know, 0:06:41.279 --> 0:06:43.000 over the course of the year, I think he could 0:06:43.040 --> 0:06:45.360 be right. I think the way we're looking at this 0:06:45.440 --> 0:06:48.599 is a two half story of for FED in twenty 0:06:48.640 --> 0:06:50.640 twenty five. The first half I think they have to 0:06:50.640 --> 0:06:52.800 be hawkish. I think they have to back off and 0:06:53.000 --> 0:06:55.800 let the economy settle in see what happens. And then 0:06:55.839 --> 0:06:57.919 the back half I do think they're going to be cutting. 0:06:58.240 --> 0:07:00.840 But it's hard to say right now. Look we're going 0:07:00.880 --> 0:07:02.560 to get in the first half, I think you're just 0:07:02.640 --> 0:07:05.880 kind of bringing forward an inflationary impulse that you really 0:07:05.920 --> 0:07:09.080 would rather not have upfront. Here is we're going to 0:07:09.120 --> 0:07:11.360 reset into the beginning of twenty twenty five. A lot 0:07:11.360 --> 0:07:13.920 of the inflation and commodities are coming back. That makes 0:07:13.920 --> 0:07:16.120 me a bit nervous on the inflation front, but it 0:07:16.160 --> 0:07:18.880 helps the cypical side of equities, and that's what we're 0:07:18.960 --> 0:07:19.440 leaning into. 0:07:19.560 --> 0:07:21.760 Well, Matt Let's tayk with commodities for a minute. Scott 0:07:21.760 --> 0:07:24.480 Bessett yesterday took a moment to directly say if any 0:07:24.560 --> 0:07:28.720 Russian officials are watching his hearing right now, they should 0:07:28.720 --> 0:07:31.360 be on guard that potentially they will go after the 0:07:31.400 --> 0:07:34.960 biggest Russian oil producer, something we saw Biden do in 0:07:35.000 --> 0:07:38.080 the very last days of his administration. Did you get 0:07:38.120 --> 0:07:39.960 a sense that actually we're going to get a very 0:07:40.000 --> 0:07:43.520 hawkish Donald Trump administration when it comes to Russia and 0:07:43.640 --> 0:07:46.520 sanctions coming into office very shortly. 0:07:47.640 --> 0:07:49.160 You know, I did not see that on the twenty 0:07:49.200 --> 0:07:53.280 twenty five bingo card, but what we're seeing yet, you're right. 0:07:53.320 --> 0:07:55.760 I mean, it's just interesting to see that it weighed. 0:07:55.760 --> 0:07:58.560 You know, the administration really waited to the end to 0:07:58.760 --> 0:08:01.240 kind of throw on these sayings, and that is really 0:08:01.320 --> 0:08:04.800 where oil prices started to respond before all the other 0:08:04.880 --> 0:08:08.520 sanctions or other supply issues was just kind of breezed over. 0:08:08.600 --> 0:08:11.480 I mean, WTI was more like seventy dollars. You know, 0:08:11.480 --> 0:08:13.720 it's kind of breaking that. It almost looked like it 0:08:13.760 --> 0:08:16.160 was going to break down even further, and then it 0:08:16.400 --> 0:08:20.800 just really has rallied here. If you wanted disinflation, that 0:08:20.960 --> 0:08:24.440 oil rise is not good news, But at the end 0:08:24.440 --> 0:08:27.040 of the day, look, commodities work in these kind of 0:08:27.480 --> 0:08:28.760 short term spurts. 0:08:28.840 --> 0:08:30.400 Even coppers is ripping. 0:08:30.480 --> 0:08:32.640 I think this also has to do with getting ahead 0:08:32.640 --> 0:08:35.360 of the tariffs more broadly, and just trying to get 0:08:35.400 --> 0:08:40.360 as much inventory, whether it's supplies, finish goods, ahead of 0:08:40.360 --> 0:08:42.880 this as possible. You've seen it in the China data. 0:08:43.080 --> 0:08:46.640 China's basically having this huge export data. They need the 0:08:46.679 --> 0:08:49.000 commodities to do it. But I don't know if it's 0:08:49.040 --> 0:08:51.720 really sustainable. Frankly, we believe inflation is going to come 0:08:51.760 --> 0:08:52.960 down over the course of the year. 0:08:53.000 --> 0:08:55.200 We think housing prices moderate. 0:08:55.600 --> 0:08:58.400 So we would actually use this impulse and lean against it, 0:08:58.679 --> 0:09:01.040 actually maybe grab a little litle bit of duration here. 0:09:01.200 --> 0:09:03.520 I mean it's a lot matt and only the seventeenth 0:09:03.679 --> 0:09:05.920 day so far of twenty twenty five. You think people 0:09:05.920 --> 0:09:08.200 would welcome a long weekend, but you know everybody's going 0:09:08.200 --> 0:09:10.400 to be glued to their screens waiting to see what 0:09:10.480 --> 0:09:13.679 happens on Monday. In terms of executive orders, what's your 0:09:13.720 --> 0:09:17.240 read on how vulnerable the market is to any sort 0:09:17.280 --> 0:09:20.000 of action from Trump beyond immigration or teriffs. 0:09:21.400 --> 0:09:24.240 Right now, we're pricing in a lot of good news 0:09:24.640 --> 0:09:28.000 and sentiment has really skyrocketed to be more positive. I 0:09:28.040 --> 0:09:32.120 think more broadly, what we're seeing is the biggest liability 0:09:32.160 --> 0:09:34.920 to this market is the positive sentiment. One of the 0:09:34.960 --> 0:09:37.920 best things this market had and markets had going in 0:09:38.520 --> 0:09:40.960 to the last year or so was that, you know, 0:09:41.000 --> 0:09:44.320 it was pretty bearish and right. The new administration has 0:09:44.320 --> 0:09:47.000 brought a lot of hope, a lot of optimism, not 0:09:47.040 --> 0:09:50.800 necessarily bad thing. Again, that's probably driven some economic activity 0:09:50.880 --> 0:09:54.680 and more capex, deregulation all that. But at the same time, 0:09:54.720 --> 0:09:57.840 you've got to be careful here looking for everything to 0:09:57.880 --> 0:09:59.720 go right and thinking that you know, it's all going 0:09:59.760 --> 0:10:03.320 to be kind of an easy way to navigate this 0:10:03.320 --> 0:10:07.360 this macro backdrop, there is still policies that could you know, 0:10:07.480 --> 0:10:10.600 kind of dent some economic growth. There is policies that 0:10:10.640 --> 0:10:13.600 could create volatility. So at the end of the day, 0:10:13.640 --> 0:10:16.160 you still got to think about risk management, and again 0:10:16.200 --> 0:10:17.680 that would bring us to the bond market. 0:10:18.040 --> 0:10:21.440 Matt Miskin making tears running down like a monsoon. Appreciate it, 0:10:21.480 --> 0:10:32.960 Sir of Johana Hancock. Here's the latest this morning, Trump's 0:10:33.000 --> 0:10:36.680 Treasury pick Scot Besson urging Congress to extend twenty seventeen 0:10:36.760 --> 0:10:40.200 tax cuts, warning their expiration would made any economic crisis. 0:10:40.440 --> 0:10:43.480 Best in appearing on track for confirmation without specific objections 0:10:43.640 --> 0:10:46.439 from Democrats during yesterday's hearing. Joining us now is a 0:10:46.480 --> 0:10:49.760 Botansky of BTIG. Hey is welcome to the program, Sir, 0:10:49.800 --> 0:10:51.959 We need to talk about executive orders and Trump Day one. 0:10:51.960 --> 0:10:53.560 I just want to get your thoughts on yesterday. How 0:10:53.559 --> 0:10:54.760 do you think Scott Beson did. 0:10:55.679 --> 0:10:58.000 Look, I think it's clear that Scott Besson is a 0:10:58.080 --> 0:11:00.800 mind at work, and I think that it should be 0:11:00.920 --> 0:11:03.839 heartened by that, as I think all of us would 0:11:03.920 --> 0:11:06.959 like a steady hand in that role, someone of his, 0:11:07.320 --> 0:11:10.920 with his experience in the office advising the president. But John, 0:11:11.200 --> 0:11:13.720 let's not kid ourselves, right. We are still going to 0:11:13.720 --> 0:11:17.080 be living and dying day to day by whatever Donald 0:11:17.120 --> 0:11:20.960 Trump is typing out on his phone's keypad. So I 0:11:20.960 --> 0:11:23.760 think that it's heartening and positive and best and it's 0:11:23.760 --> 0:11:25.640 going to be easily confirmed, and he's going to be 0:11:25.679 --> 0:11:28.880 a stable voice in the Treasury Department and ultimately in 0:11:28.960 --> 0:11:32.840 the over Office advising the president. But the President himself 0:11:32.920 --> 0:11:35.600 is going to decide what tariffs are going to go 0:11:35.640 --> 0:11:37.719 into place and how those are going to be communicated 0:11:37.720 --> 0:11:38.240 to the market. 0:11:38.559 --> 0:11:41.400 So we're expecting some one hundred executive orders after Donald 0:11:41.440 --> 0:11:43.560 Trump is sworn in ISAAC. What do they look like. 0:11:45.040 --> 0:11:46.680 I think it's going to be a busy day. I 0:11:46.720 --> 0:11:49.800 think that there's an enormous amount of anticipation around what 0:11:49.960 --> 0:11:53.000 we're going to see on Monday. I do want our 0:11:53.040 --> 0:11:55.240 clients in general to be aware of that. Just because 0:11:55.559 --> 0:11:57.920 it doesn't come out Monday doesn't mean it's not going 0:11:57.960 --> 0:11:59.560 to happen. I think that there is a bit of 0:11:59.640 --> 0:12:02.000 a law there in terms of all the different things 0:12:02.000 --> 0:12:04.079 they want to do. From my seat, I think you're 0:12:04.080 --> 0:12:06.760 going to see a fair amount of paper focusing on immigration, 0:12:06.960 --> 0:12:09.480 border security. I think that that's one area where he's 0:12:09.760 --> 0:12:11.920 consistently said he wants to focus, and I think that 0:12:11.960 --> 0:12:15.880 there's some administrative levers that he can pull. My cautionary 0:12:15.880 --> 0:12:17.520 point there is I think that that's going to be 0:12:17.559 --> 0:12:20.960 one area that you see heavily litigated. So that's one 0:12:21.040 --> 0:12:23.679 area and one dynamic that we're aware of. I think 0:12:23.679 --> 0:12:26.439 you're also going to see a fair amount of orders 0:12:26.520 --> 0:12:29.679 on the energy front and the healthcare front. Those have 0:12:29.840 --> 0:12:33.600 less risk of litigation generally speaking, so we'll be keeping 0:12:33.600 --> 0:12:35.520 an eye eye on that, and of course there's a 0:12:35.559 --> 0:12:37.920 lot of signaling. Ann Marie, right, We're going to have 0:12:37.960 --> 0:12:40.400 a lot of things that don't actually have teeth, a 0:12:40.400 --> 0:12:43.000 lot of things relating to the culture wars and things 0:12:43.000 --> 0:12:44.800 that I don't think that the markets are going to 0:12:44.840 --> 0:12:45.880 have to worry about all. 0:12:45.760 --> 0:12:47.880 Too much, and the siglings on the other side as well. 0:12:47.920 --> 0:12:50.959 Biden is continuing a ton of executive actions used as 0:12:50.960 --> 0:12:55.480 staffers are starting to pack up their offices currently right 0:12:55.520 --> 0:12:58.160 now when it comes to tariffs, though, will we get 0:12:58.200 --> 0:12:59.640 executive orders next week? 0:13:00.800 --> 0:13:02.600 I think that we're going to get a few. And look, 0:13:02.600 --> 0:13:04.800 my base case here is still that there's going to 0:13:04.800 --> 0:13:09.720 be an overarching incrementalism to the tariff policy from the 0:13:09.760 --> 0:13:12.840 Trump administration. I think that they are cognizant of the 0:13:12.880 --> 0:13:17.120 economic impact, and I think ultimately they still want tariffs 0:13:17.120 --> 0:13:21.120 to be used primarily primarily as a negotiating hit. And 0:13:21.200 --> 0:13:23.439 the way that I think about this is for those 0:13:23.520 --> 0:13:26.560 negotiating chits to have any value, you still need to 0:13:26.760 --> 0:13:29.840 prove that you're willing to shoot the hostage if you will, 0:13:29.880 --> 0:13:33.439 And so from a framing perspective, I think that ultimately 0:13:33.520 --> 0:13:38.320 they will move quickly on instituting new Chinese tariffs, likely 0:13:38.400 --> 0:13:41.079 using Section two thirty two or Section three oh one, 0:13:41.120 --> 0:13:43.520 which takes a few months to get there, and then 0:13:43.559 --> 0:13:46.960 maybe a few acute areas where they focus on issues 0:13:47.000 --> 0:13:49.720 that they have a fair amount of political backing for 0:13:49.960 --> 0:13:53.280 things like going after European autos. But I don't expect 0:13:53.280 --> 0:13:56.920 the broad based universal tariffs to be where we start from. 0:13:57.240 --> 0:13:59.160 You make a good point that this is really year 0:13:59.240 --> 0:14:02.160 five of truck not year one, But what is going 0:14:02.200 --> 0:14:04.400 to be different from one point zero to two point 0:14:04.520 --> 0:14:05.920 h Yeah. 0:14:05.960 --> 0:14:09.320 Look, I think I think emory it's a lot of amplification, right, 0:14:09.400 --> 0:14:11.760 So we know there's going to be a deregulatory agenda, 0:14:11.800 --> 0:14:13.400 we know there's going to be a focus on tax 0:14:13.480 --> 0:14:16.840 cuts and border security, but there's an amplification of some 0:14:16.960 --> 0:14:19.600 of those issues. So on border security, it's not just 0:14:20.160 --> 0:14:25.800 focusing on the border, it's also the deportation dynamic that's 0:14:25.840 --> 0:14:28.320 in play on the tariffs. I think that they have 0:14:28.440 --> 0:14:31.200 more of an awareness of the different tools, which is 0:14:31.200 --> 0:14:33.480 why you're hearing so much more about i EPO, which 0:14:33.520 --> 0:14:38.320 allows the president to impose tariffs based on national emergency. 0:14:38.320 --> 0:14:40.800 That's something that they didn't really get their arms around 0:14:40.880 --> 0:14:43.880 until probably halfway through the first term. So in general, 0:14:43.920 --> 0:14:46.480 I would just say it's more awareness of the levers 0:14:46.520 --> 0:14:49.480 of power. And then also if the personnel they have 0:14:49.600 --> 0:14:53.520 around them, you have very well vetted, truly loyal folks 0:14:53.560 --> 0:14:56.200 around the president, which should allow them to move a 0:14:56.280 --> 0:14:59.360 little bit more quickly and I think ultimately avoids some 0:14:59.440 --> 0:15:03.000 of the pot holes that they fell into during the 0:15:03.040 --> 0:15:03.880 first administration. 0:15:04.000 --> 0:15:05.920 Well, Isaac, to your point, though, they need to show 0:15:05.920 --> 0:15:08.760 a willingness in your words, to shoot the hostage, to 0:15:08.800 --> 0:15:11.400 do the most of extreme measures in order to use 0:15:11.440 --> 0:15:13.680 it as a negotiating chit. Do you think that that's 0:15:14.040 --> 0:15:18.000 well enough appreciated. Is this administration that would be willing 0:15:18.120 --> 0:15:19.400 to go to the extremes? 0:15:20.520 --> 0:15:24.320 You know, Look, it depends, it depends which client I'm 0:15:24.360 --> 0:15:26.400 talking to, but I think that there's at least an 0:15:26.400 --> 0:15:30.320 awareness that the China tariffs are something that he is 0:15:30.560 --> 0:15:33.520 absolutely serious about. There's a fair amount of debate among 0:15:33.560 --> 0:15:35.600 the client community that I speak to as to whether 0:15:35.640 --> 0:15:38.160 there can be a grand bargain with China over time, 0:15:38.200 --> 0:15:39.880 but I think that we need to have that as 0:15:39.880 --> 0:15:41.760 our base case, that China is going to be where 0:15:41.800 --> 0:15:45.160 he moves quickly. Canada and Mexico, I truly think are 0:15:45.200 --> 0:15:49.200 more about a conversation, more about one off negotiations than 0:15:49.240 --> 0:15:51.920 anything else. And on the European side, I do think 0:15:51.920 --> 0:15:54.400 that he is a true believer, especially on the Auto story. 0:15:54.480 --> 0:15:56.600 So I think what we have now is sort of 0:15:56.640 --> 0:16:00.360 trying to understand that bridge from rhetoric to reality and 0:16:00.400 --> 0:16:02.880 trying to get into Donald Trump's mind, in the mind 0:16:02.920 --> 0:16:05.320 of those who are running this administration as to what 0:16:05.320 --> 0:16:07.880 they're really going to prioritize, because it's clear they can't 0:16:07.920 --> 0:16:12.120 do everything, So what is their prior organization hierarchy on tariffs? 0:16:12.400 --> 0:16:15.720 Well, as Amory started this hour saying, Scott Bessett yesterday 0:16:15.800 --> 0:16:18.840 laid out several different use cases for tariffs. One of 0:16:18.920 --> 0:16:21.080 them that seemed to keep coming up was this idea 0:16:21.120 --> 0:16:25.200 of tariff's as national security, that sanctions pressure the dollar 0:16:25.240 --> 0:16:27.800 and its reserve status and it makes more sense to 0:16:27.920 --> 0:16:31.080 use therefore instead tariffs. When it comes to China, Isaac, 0:16:31.440 --> 0:16:34.120 what is the strategy? Is it negotiation or is it 0:16:34.160 --> 0:16:37.120 one of national security? And that's why terrafs would be 0:16:37.160 --> 0:16:37.480 put on. 0:16:38.640 --> 0:16:42.080 Yeah. Look, I think that it's a full court press, 0:16:42.160 --> 0:16:43.680 That's how I think about it. And I think that 0:16:43.720 --> 0:16:46.600 there's more awareness here than there's ever been in terms 0:16:46.640 --> 0:16:49.920 of we need to have more of a holistic approach 0:16:49.960 --> 0:16:53.000 in terms of our competition with China. And you heard 0:16:53.040 --> 0:16:56.640 it yesterday during the hearing. I think it was noteworthy 0:16:56.680 --> 0:17:00.360 to hear how much was reference in terms of our 0:17:00.480 --> 0:17:04.919 outbound investment screening. Look, we have screening for if foreign 0:17:05.040 --> 0:17:08.000 entities want to buy interest in the US. We should 0:17:08.000 --> 0:17:11.120 also have some awareness and some say as to outbound 0:17:11.119 --> 0:17:14.879 investment and what that means for acute areas of competition. 0:17:15.000 --> 0:17:18.120 They think that it's one of the few areas of bipartisanship, 0:17:18.119 --> 0:17:21.639 and so we've got to be aware of how that's playing, 0:17:21.680 --> 0:17:24.560 not just politically but also operationally in terms of the 0:17:24.880 --> 0:17:28.320 different level levers of government they have, from siphius which 0:17:28.359 --> 0:17:33.720 we've seen with the usdel deal, to acute areas of 0:17:33.800 --> 0:17:35.720 legislation like we've seen with the TikTok. 0:17:36.440 --> 0:17:39.480 Ben isaid the horse has bolted, the technology has already lost. 0:17:39.560 --> 0:17:41.800 I wish we were having this conversation twenty years ago, 0:17:42.000 --> 0:17:44.119 but we're not. And then I started to hear things 0:17:44.160 --> 0:17:48.119 like the TikTok CEOs coming to the inauguration. She's invited 0:17:48.160 --> 0:17:51.240 to the inauguration not turning up By the way, Isaac, 0:17:51.320 --> 0:17:53.680 what is going to be the approach to things like TikTok? 0:17:53.760 --> 0:17:57.240 If it is seriously a national security risk and Chinese 0:17:57.240 --> 0:18:01.399 hackers have infiltrated the Treasury, care who's in charge, they 0:18:01.400 --> 0:18:04.240 could possibly do the same thing in the incoming administration 0:18:04.320 --> 0:18:06.919 as well, I don't really understand what the hold up is. 0:18:08.320 --> 0:18:11.520 Well, look, I'm confused by Congress passing a bill saying 0:18:11.560 --> 0:18:14.119 that they want to ban TikTok, and now at this 0:18:14.200 --> 0:18:17.040 eleventh hour, we're seeing many of those lawmakers from both 0:18:17.080 --> 0:18:20.879 sides of the aisle retracting their previous statement saying we 0:18:20.920 --> 0:18:23.280 would love a reprieve, we would love to find a 0:18:23.280 --> 0:18:26.560 way to push this ban out. And so I think 0:18:26.560 --> 0:18:30.359 that they're always those political wins which are tough to dissect, 0:18:30.400 --> 0:18:32.240 but by and large, when I try to step back 0:18:32.240 --> 0:18:34.399 and say what does this actually mean for markets? Was 0:18:34.480 --> 0:18:38.840 this mean for investors? Is one of the persistent tailwinds 0:18:38.840 --> 0:18:44.280 that I see from a spending in a appropriations areas, 0:18:44.320 --> 0:18:46.159 We're going to spend a whole lot more money on 0:18:46.200 --> 0:18:48.680 cybersecurity as a federal government. There's going to be a 0:18:48.720 --> 0:18:52.119 whole of government approach to cybersecurity. That is frankly twenty 0:18:52.200 --> 0:18:55.720 years too late. But in terms of areas, the clients ask, 0:18:55.800 --> 0:18:58.280 where are we going to plus up spending? Where are 0:18:58.280 --> 0:19:00.240 we going to spend more and more? No matter who 0:19:00.280 --> 0:19:04.720 is in charge of that pen, it's cybersecurity and overall 0:19:04.880 --> 0:19:06.760 just defense and national security. 0:19:06.880 --> 0:19:08.520 Forgive me for putting you on the spot, but what 0:19:08.600 --> 0:19:10.640 you actually think happens with TikTok? And the next way, 0:19:10.680 --> 0:19:11.840 kind I said, what's your buys case? 0:19:12.600 --> 0:19:14.119 Look, I think that we're going to get the Supreme 0:19:14.119 --> 0:19:17.119 Court order today. They have a release this morning. My 0:19:17.200 --> 0:19:19.639 base case has been that when you can bet on 0:19:19.720 --> 0:19:22.520 DC taking longer than it should, it will. I think 0:19:22.560 --> 0:19:25.160 that the Supreme Court is likely to say that they're 0:19:25.200 --> 0:19:27.639 going to continue deliberating on this. There's going to be 0:19:27.640 --> 0:19:30.120 a temporary injunction for a couple of months while they 0:19:30.119 --> 0:19:32.960 do so, and that we get their order, I think 0:19:33.080 --> 0:19:36.760 ultimately upholding the statue, which is negative for TikTok. But 0:19:36.800 --> 0:19:38.359