WEBVTT - Trump Officials Target Columbia Accreditation Over Protests 0:00:00.080 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.560 --> 0:00:14.440 Week Daily reporting from the magazine that helps global leaders 0:00:14.480 --> 0:00:18.400 stay ahead with insight on the people, companies, and trends 0:00:18.440 --> 0:00:23.440 shaping today's complex economy. Plus global business finance and tech 0:00:23.480 --> 0:00:27.360 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.720 --> 0:00:31.760 with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.600 --> 0:00:34.959 David Gerro here with Emile Griffeo on Bloomberg Business Week 0:00:35.000 --> 0:00:37.640 on Bloomberg Radio and YouTube from the Interactive Broker Studio 0:00:37.720 --> 0:00:40.400 in New York City, where there's some news about a 0:00:40.479 --> 0:00:42.640 university just up the street from US. That is Columbia 0:00:42.720 --> 0:00:45.400 University no longer meeting the accreditation standard set by the 0:00:45.440 --> 0:00:48.560 Department of Education. Some breaking news here in the last 0:00:48.640 --> 0:00:50.760 few minutes. Of course, this is one of a handful 0:00:50.800 --> 0:00:52.440 of schools that have been in the crosshairs of the 0:00:52.479 --> 0:00:55.960 Trump administration. The Secretary of Education Linda McMahon saying in 0:00:55.960 --> 0:00:59.200 a statement the school's leadership quote acted with deliberate indifference 0:00:59.240 --> 0:01:02.520 towards the harassment of Jewish students on its campus after 0:01:02.520 --> 0:01:05.400 the October seventh attack by Hamas on Israel. I'm reading 0:01:05.400 --> 0:01:07.560 there from a piece by Kayla Gardner, who covers the 0:01:07.560 --> 0:01:09.680 White House for US here at Bloomberg News and joins 0:01:09.760 --> 0:01:12.280 US now from Washington. Okay, let's just start with the 0:01:12.280 --> 0:01:14.240 basic facts of this year. We've seen the government go 0:01:14.319 --> 0:01:17.920 after Columbia's finances, threaten to withhold funding for research and 0:01:17.959 --> 0:01:20.440 the like. This seems to be ratcheting up its fight 0:01:20.720 --> 0:01:23.000 even more. What does it mean in effect that the 0:01:23.040 --> 0:01:25.120 government taking away this accreditation for Columbia. 0:01:26.760 --> 0:01:30.520 So we should clarify that the Education Department is notifying 0:01:30.560 --> 0:01:33.800 the entity that has given Columbia University its accreditation, which 0:01:33.840 --> 0:01:38.160 basically gives them the power to issue degrees. Basically is 0:01:38.319 --> 0:01:41.240 the definition for why they are a university. So they're 0:01:41.280 --> 0:01:44.679 notifying here Middle States Commission on Higher Education that they 0:01:44.720 --> 0:01:47.400 believe that the university is an in violation of anti 0:01:47.440 --> 0:01:51.240 discrimination laws. That is, of course, tied to antisemitism that 0:01:51.240 --> 0:01:53.560 they see is happening on campus and the protests that 0:01:53.560 --> 0:01:55.560 we've seen on the war in Gaza here. And this 0:01:55.640 --> 0:01:57.920 is really a turn and narrative when it comes to 0:01:57.960 --> 0:02:01.440 the relationship between the administration and Columbia. Because there had 0:02:01.440 --> 0:02:05.720 been signals from President Trump, from Secretary McMahon that conversations 0:02:05.720 --> 0:02:08.920 were in the right direction between her and the university's president. 0:02:09.120 --> 0:02:12.520 And of course Harvard took a big step with lawsuits 0:02:12.520 --> 0:02:15.000 against the administration. Now Columbia has not been doing that. 0:02:15.160 --> 0:02:18.000 So this certainly suggests that conversations perhaps are not going 0:02:18.000 --> 0:02:20.040 in the direction that certainly Columbia hopes that they are. 0:02:20.800 --> 0:02:25.160 Kayla, you write from a quote here from Linda McMahon 0:02:25.200 --> 0:02:29.480 that accreditors have an enormous public responsibility as gatekeepers a 0:02:29.520 --> 0:02:33.720 federal student aid. They determine which institutions are eligible for 0:02:33.800 --> 0:02:37.760 federal student loans and pelgrants. So just talk about this 0:02:37.800 --> 0:02:41.880 is they're not deifying Columbia, but actually, like in practice, 0:02:42.000 --> 0:02:45.040 is anything changing for the university or its students yet. 0:02:46.560 --> 0:02:49.600 So the responsibility is really on the accreditor here to 0:02:49.680 --> 0:02:53.639 take these findings and assess them and assess Columbia's accreditation 0:02:54.080 --> 0:02:56.760 going forward here. But this is really a concept or 0:02:56.800 --> 0:02:58.520 a theme, if you will, that the president has been 0:02:58.520 --> 0:03:01.519 talking about on the campaign trail. He has long believed 0:03:01.560 --> 0:03:04.440 that the accreditation system is unfair, and he has talked 0:03:04.480 --> 0:03:08.160 about alternatives from traditional universities, and a huge part of 0:03:08.160 --> 0:03:10.120 that is they believe that there is bias on a 0:03:10.160 --> 0:03:12.320 lot of these private campuses, a lot of these Ivy 0:03:12.440 --> 0:03:15.200 League campuses that they believe is not a welcoming place 0:03:15.240 --> 0:03:18.640 for conservatives, and certainly the ideals that are driving his movement. 0:03:19.040 --> 0:03:20.639 I want to go back to something that you mentioned 0:03:20.639 --> 0:03:22.320 just a moment ago, and that is the kind of 0:03:22.360 --> 0:03:26.000 status of dialogue or the relationship between Columbia and the 0:03:26.000 --> 0:03:28.959 Trump administration. So we saw it really deteriorate under the 0:03:29.040 --> 0:03:31.000 leadership of a new Shaffik, who was the president of 0:03:31.040 --> 0:03:34.040 the school for a very short period of time. She 0:03:34.120 --> 0:03:37.120 was succeeded by Katrina Armstrong, who was president for an 0:03:37.120 --> 0:03:39.120 even shorter period of time on an interim basis, she 0:03:39.120 --> 0:03:41.040 was heading the medical school and moved over to the presidency, 0:03:41.240 --> 0:03:43.200 stepped down, and now Claire Shipman, who had been heading 0:03:43.240 --> 0:03:46.560 Columbia's Board of trustees, is the interim president. The new 0:03:46.600 --> 0:03:49.760 interim president get us up to speed on sort of 0:03:49.760 --> 0:03:53.560 how much the two entities are talking, the administration and Columbia, 0:03:54.120 --> 0:03:56.720 and sort of what the university has done in recent 0:03:56.760 --> 0:03:59.240 weeks to side it kind of comport or talk with 0:03:59.440 --> 0:04:01.160 the administration about a path forward here. 0:04:02.560 --> 0:04:04.680 Well, Secretary mc man has been very public that she 0:04:04.720 --> 0:04:08.600 has had conversations with the president. She has spoke somewhat 0:04:08.600 --> 0:04:11.880 admiringly of the current president, but she says these negotiations 0:04:11.920 --> 0:04:14.880 are ongoing, both with Columbia and Harvard, and we saw 0:04:14.920 --> 0:04:17.920 Harvard put or excuse me, Colombia put out a statement 0:04:17.960 --> 0:04:20.200 where they said that they were not open to some 0:04:20.240 --> 0:04:22.880 of these demands that the administration has when it comes 0:04:22.920 --> 0:04:26.840 to quote viewpoint discrimination, where they really asked Columbia and 0:04:27.000 --> 0:04:29.600 Harvard to make these sort of changes to their faculty 0:04:29.920 --> 0:04:32.920 and their students to sort of represent more viewpoints when 0:04:32.960 --> 0:04:36.560 it comes to political or ideological beliefs, because again, they 0:04:36.600 --> 0:04:39.960 believe that these institutions have a bias, particularly a liberal 0:04:40.000 --> 0:04:41.240 bias on campus. 0:04:42.040 --> 0:04:45.280 This is obviously a breaking news situation. And you write 0:04:45.279 --> 0:04:48.400 that Columbia did not yet respond to requests for comments, 0:04:48.440 --> 0:04:52.120 But how do you think the university is going to respond? 0:04:53.440 --> 0:04:56.440 Well, I can't tell you exactly what they will respond 0:04:56.520 --> 0:04:59.680 until they actually do. But Columbia has been very measured 0:04:59.680 --> 0:05:02.000 as a posed to Harvard, who has taken now two 0:05:02.160 --> 0:05:06.080 lawsuits against the administration, one on student visas and one 0:05:06.160 --> 0:05:08.440 to get their federal funding back. So they have been 0:05:08.480 --> 0:05:11.560 measured up until this point. Really trying to strike a 0:05:11.600 --> 0:05:15.320 deal with the administration through negotiation. So I'm certainly interested 0:05:15.360 --> 0:05:17.120 to see if they go the route that we've seen 0:05:17.160 --> 0:05:20.080 Harvard go or they continue to try to have these 0:05:20.120 --> 0:05:23.400 negotiations behind closed doors to potentially get their funding back, 0:05:23.720 --> 0:05:26.320 and of course here also to defend their accreditation as 0:05:26.320 --> 0:05:27.000 a university. 0:05:27.440 --> 0:05:29.400 Kayla, great to talk to you, as always a Kayla 0:05:29.440 --> 0:05:31.360 Gardner covers the White House for us here at Bloomberg 0:05:31.360 --> 0:05:33.640 News with that breaking news story here that the Trump 0:05:33.839 --> 0:05:38.800 administration is targeting Columbia's accreditation over protests, and Kayler bringing 0:05:38.880 --> 0:05:40.920 up that nuance which is so important here the Education 0:05:41.000 --> 0:05:44.120 Department notifying the Middle States Commission, that is the accreditor 0:05:44.279 --> 0:05:47.040 that they do not think that Columbia meets the qualifications 0:05:47.040 --> 0:05:50.000 for accreditation, and that can have all kinds of ramifications 0:05:50.040 --> 0:05:53.360 I'm sure for the university itself, but certainly students who 0:05:53.440 --> 0:05:56.520 are attending the school or intending to go there. And 0:05:56.560 --> 0:05:58.480 just picking up on one more thing that she mentioned, 0:05:58.480 --> 0:06:00.640 that is the role of Harvard Universe and all of that. 0:06:01.000 --> 0:06:03.640 Alan Garber, the president of Harvard, has been adamant that 0:06:04.120 --> 0:06:05.800 the way in which the administration has dealt with that 0:06:05.880 --> 0:06:08.000 school is a warning sign, as he put it, for 0:06:08.000 --> 0:06:10.440 what might happen with with other schools. So picking up 0:06:10.440 --> 0:06:12.520 on your question, you're very good question, Emily. How they 0:06:12.560 --> 0:06:14.400 might respond. I'm curious if they kind of follow in 0:06:14.440 --> 0:06:17.120 the mold of what Harvard's done recently, which is to 0:06:17.160 --> 0:06:19.000 really stand up against the administration. 0:06:19.360 --> 0:06:23.160 You are listening to the Bloomberg Business Weekdaily Podcast. Catch 0:06:23.240 --> 0:06:26.479 us live weekday afternoons from two to five pm Eastern. 0:06:26.600 --> 0:06:30.360 Listen on Applecarplay and Android Auto with the Bloomberg Business Act, 0:06:30.600 --> 0:06:32.400 or watch us live on YouTube. 0:06:34.480 --> 0:06:35.200 Well, let's get. 0:06:35.080 --> 0:06:39.160 Back to the Big Beautiful Bill. On Capitol Hill. Republicans 0:06:39.160 --> 0:06:41.800 in the Senate are working on their version of what 0:06:41.920 --> 0:06:45.240 President Trump calls this Big Beautiful Bill, and as they 0:06:45.320 --> 0:06:48.080 do that, we're getting new details from the non partisan 0:06:48.160 --> 0:06:52.440 Congressional Budget Office about what the House version, as passed 0:06:52.480 --> 0:06:56.760 would do to the federal deficit. The CBO estimates it 0:06:56.800 --> 0:07:00.719 would add two point four trillion dollars to US budget 0:07:00.720 --> 0:07:04.320 deficits over the next decade. The CBO also says it 0:07:04.360 --> 0:07:07.400 expects it would leave almost eleven million people in the 0:07:07.520 --> 0:07:11.280 United States without health insurance in twenty twenty four. Henrietta 0:07:11.280 --> 0:07:13.920 Trees is the co founder of Veda Partners, where she 0:07:14.080 --> 0:07:17.680 is director of Economic Policy, with a particular expertise in 0:07:17.720 --> 0:07:20.920 how the Senate works. So she joins us, now talk 0:07:20.960 --> 0:07:24.480 about these numbers. What exactly do they tell us, Henrietta. 0:07:24.920 --> 0:07:26.320 These are big numbers. 0:07:26.760 --> 0:07:30.520 Two point four trillion is a record breaker. The last 0:07:30.560 --> 0:07:32.440 highest reconciliation. 0:07:31.800 --> 0:07:33.200 Bill was one point nine trillion. 0:07:33.280 --> 0:07:37.960 So this whilbe winning some awards for sheer deficit increases 0:07:37.960 --> 0:07:41.280 on that account, which is exciting. The bill is going 0:07:41.280 --> 0:07:43.200 to change a lot from here. In my base case 0:07:43.240 --> 0:07:46.040 expectation knowing the Senate is that it's going to become 0:07:46.160 --> 0:07:47.640 more deficit financed. 0:07:48.040 --> 0:07:50.360 I think for bond investors there's something. 0:07:50.080 --> 0:07:52.320 To watch for here, and that the Senators are going 0:07:52.360 --> 0:07:54.920 to use a current policy baseline where the House does not. 0:07:55.360 --> 0:07:57.920 And this is a big differential between the two chambers. 0:07:58.120 --> 0:08:01.040 The House assumes that passing an extension of the twenty 0:08:01.080 --> 0:08:03.960 seventeen tax cuts plus some of the other components of 0:08:03.960 --> 0:08:06.360 the bill will generate two and a half trillion dollars 0:08:06.360 --> 0:08:10.520 of economic activity dynamic growth. On the Senate side, they're 0:08:10.520 --> 0:08:12.840 not going to use that formula to wipe away some 0:08:12.880 --> 0:08:15.080 of the budget costs. They're going to instead assume that 0:08:15.160 --> 0:08:19.280 extending the existing rates costs nothing. Three point eight trillion 0:08:19.320 --> 0:08:21.840 dollars or one point three billion dollars. One point three 0:08:21.880 --> 0:08:25.800 trillion dollars more will be deficit financed. So the scale 0:08:25.800 --> 0:08:27.320 of the Senate bill is going to be quite a 0:08:27.360 --> 0:08:29.280 bit more substantial. They're going to try to make some 0:08:29.320 --> 0:08:32.560 of the business provisions more permanent than the House bill. 0:08:32.640 --> 0:08:34.520 The salt cap is going to have to come down, 0:08:34.600 --> 0:08:36.600 the IRA cuts are going to have to come down, 0:08:36.800 --> 0:08:38.400 the Medicaid cuts are going to have to come down. 0:08:38.440 --> 0:08:40.240 The deficit is going to grow, is the bottom line. 0:08:40.320 --> 0:08:42.800 As the Senate spends the next four weeks crafting their 0:08:42.880 --> 0:08:43.600 version of this bill. 0:08:44.000 --> 0:08:46.960 Henrietta, I'm curious, as I'm sure you are, about how 0:08:47.040 --> 0:08:49.760 a Senator Ran Paul is looking at the numbers from 0:08:49.840 --> 0:08:53.120 CBO today, maybe a Rick Scott, maybe a Ron Johnson, 0:08:53.160 --> 0:08:54.800 as well as I kind of make the argument for 0:08:54.880 --> 0:08:58.040 deeper cuts in the Senate version of this bill. I 0:08:58.080 --> 0:09:00.600 heard Senator Paul talking about the power that he thinks 0:09:00.640 --> 0:09:03.640 he and these other holdouts have here in these negotiations, 0:09:03.720 --> 0:09:07.280 and I'm curious if you think that he's right about that, 0:09:07.280 --> 0:09:09.000 that these holdouts are going to be able to exert 0:09:09.000 --> 0:09:11.400 some real sway here as the Senate gets down to 0:09:11.440 --> 0:09:15.040 brass tacks and reshapes this BILM great question. 0:09:15.120 --> 0:09:16.800 I actually think this is some of the most interesting 0:09:16.880 --> 0:09:19.280 change that we've seen since the Senate has taken up 0:09:19.280 --> 0:09:22.520 this bill and gotten back from recess. Rant Paul's material 0:09:22.559 --> 0:09:25.520 objection is to the five trillion dollar increase to the 0:09:25.559 --> 0:09:28.040 debt ceiling that the Senate bill is going to include, 0:09:28.320 --> 0:09:30.960 and so there's already discussion of trying to get him 0:09:31.040 --> 0:09:34.800 back into the fold as a potential yes vote in 0:09:35.360 --> 0:09:38.680 changing the debt ceiling numbers associated with the Senate package. 0:09:38.800 --> 0:09:41.960 So right now, the sort of whisper around the Senators 0:09:42.160 --> 0:09:44.240 in the Republican conference is that, hey, maybe we just 0:09:44.320 --> 0:09:47.440 cut that in half and get rand Paul over to 0:09:47.559 --> 0:09:50.000 our side again, Because right now, if rand Paul is 0:09:50.000 --> 0:09:53.240 in no, just on the debt ceiling alone, then Senator 0:09:53.280 --> 0:09:55.560 Fune only has two votes to lose from there. So 0:09:56.160 --> 0:09:58.760 cutting the debt ceiling hike, which is not the same 0:09:58.800 --> 0:10:02.080 as the deficit but a really important part for Rand 0:10:02.120 --> 0:10:05.040 Paul down at two and a half trillion dollars, which 0:10:05.040 --> 0:10:08.959 would get the Senate and Congress functionality through about March 0:10:09.040 --> 0:10:12.360 of twenty twenty six instead of November twenty twenty six, is, 0:10:12.440 --> 0:10:15.680 I'm told a part of the conversation. So we're really 0:10:15.720 --> 0:10:19.720 trying to move the parameters of what might get Ran Paul, 0:10:19.920 --> 0:10:22.719 which to me really underscores the trouble that Leader Thun 0:10:22.880 --> 0:10:25.160 is going to face when we get back to what 0:10:25.200 --> 0:10:29.880 you were just mentioning the ten point nine million individuals 0:10:29.920 --> 0:10:32.440 will be kicked off Medicaid, nine and a half million 0:10:32.480 --> 0:10:35.960 of whom are not in the undocumented migrant space that 0:10:36.000 --> 0:10:39.560 Republicans talk about a lot. These are just regular everyday Americans, 0:10:39.559 --> 0:10:42.520 so will be kicked off of the Medicaid program. So 0:10:42.600 --> 0:10:45.599 there's going to be a lot of loss from West Virginia, 0:10:45.840 --> 0:10:50.199 Susan Collins in Maine, the Alaska senators that's Sullivan who's 0:10:50.280 --> 0:10:53.760 up for reelection next year, and Murkowski. So there's a 0:10:53.800 --> 0:10:56.640 lot of moving parts that they needs to walk through here. 0:10:56.760 --> 0:10:59.400 Getting Rand Paul on board by cutting the debt ceiling 0:10:59.480 --> 0:11:01.559 hike in half might be very helpful. 0:11:02.040 --> 0:11:06.000 So how then do you anticipate the timeline of this 0:11:06.080 --> 0:11:09.920 bill eventually making its way to President Trump? Maybe assuming 0:11:09.960 --> 0:11:13.400 that we do get those holdouts, the Rand Paul's you know, 0:11:13.600 --> 0:11:17.400 signing off on. It is the timeline really realistic that 0:11:17.480 --> 0:11:20.360 this this does get on Trump's desk by July fourth. 0:11:21.640 --> 0:11:24.320 No, it's going to go through the Senate by July fourth. 0:11:24.440 --> 0:11:27.360 That's the strategy that Senator Foone is working with right now. 0:11:27.800 --> 0:11:29.640 There are three committees who are rolling out their bill 0:11:29.720 --> 0:11:31.679 this week, there will be another next week, and then 0:11:31.720 --> 0:11:34.839 the Senate Finance Committee, which is responsible for almost all 0:11:34.920 --> 0:11:38.439 the package, all the tax provisions and the Medicaid. 0:11:37.920 --> 0:11:39.560 Cuts, they're going to go last. 0:11:39.679 --> 0:11:41.840 And that'll come either the week of the sixteenth, right 0:11:41.880 --> 0:11:44.280 before Juneteenth, or it will come the following week, the 0:11:44.320 --> 0:11:46.439 week of June twenty third. This bill is going to 0:11:46.520 --> 0:11:49.360 get very messy, very complicated. They have a lot of 0:11:49.559 --> 0:11:52.640 changes that they need to make with the House Republican package, 0:11:53.240 --> 0:11:55.520 and as I mentioned, the Salt Caucus alone is going 0:11:55.559 --> 0:11:57.199 to raise holy hell with them and they're going to 0:11:57.240 --> 0:11:59.760 be in a meeting at some point. They haven't been 0:11:59.760 --> 0:12:02.280 given an audience yet, but they will have to do that. 0:12:02.880 --> 0:12:05.080 And then what that creates is a scenario where the 0:12:05.080 --> 0:12:08.120 House and the Senate actually go to conference first and foremost, 0:12:08.160 --> 0:12:09.880 for investors, what you should hear when I say that 0:12:10.040 --> 0:12:12.160 is this is the time suck. It can be one, two, 0:12:12.320 --> 0:12:15.640 three weeks even so that paints the picture for passages 0:12:16.040 --> 0:12:18.520 of this legislation. At the end of July. July twenty 0:12:18.520 --> 0:12:20.559 fourth is when the House is scheduled to go on recess. 0:12:20.600 --> 0:12:23.720 August first is when the Senator's scheduled to go on recess. 0:12:23.760 --> 0:12:26.000 The X date for the debt ceiling is in mid August. 0:12:26.160 --> 0:12:29.040 That's the time horizon folks should work with very quickly. 0:12:29.080 --> 0:12:31.400 Here just what is happening at this moment, drawing on 0:12:31.440 --> 0:12:34.000 your experience working set, what's happening at this moment in time. 0:12:34.040 --> 0:12:36.439 I know committees are releasing their legislation sor have one 0:12:36.760 --> 0:12:38.280 by one, But in the minute that we have left, 0:12:38.320 --> 0:12:40.840 sort of what's the actual state of play. What's happening 0:12:40.840 --> 0:12:43.359 on the ground in Senate office buildings today. 0:12:44.160 --> 0:12:47.200 Lobbyists are fanned out everywhere. They're trying to get their 0:12:47.240 --> 0:12:49.600 IRA tax credit back in. They're trying to tweet the 0:12:49.920 --> 0:12:52.360 eight ninety nine provision that gives the Treasury Secretary of 0:12:52.400 --> 0:12:57.760 the authority to tax unfair fact tax countries, foreign entities, 0:12:57.800 --> 0:13:00.480 and such. There's a lot of behind the scene's work 0:13:00.520 --> 0:13:02.960 going on before that bill gets released. The rule of 0:13:03.000 --> 0:13:05.120 thumb in DC is you want to get your provision 0:13:05.160 --> 0:13:07.800 out before the bill gets released, Get it out before 0:13:07.840 --> 0:13:08.120 it's in. 0:13:08.480 --> 0:13:10.160 Once it's in, you can't get it out. 0:13:10.200 --> 0:13:13.240 So the aggressive lobbying happening behind the scenes right now. 0:13:13.559 --> 0:13:15.480 Henrietta always good to talk to you to get your update. 0:13:15.480 --> 0:13:17.560 That's Henrita Trace. She's the co founder of Vada Partners, 0:13:17.559 --> 0:13:26.199 where she's the director of Economic Policy'll. 0:13:23.000 --> 0:13:23.840 Bet you let me drive. 0:13:24.080 --> 0:13:26.520 Oh no, no, no no, this is not a twin. 0:13:28.559 --> 0:13:34.640 Honey, please, I'll do the velcase. I want to try it. 0:13:34.960 --> 0:13:35.840 It's good question. 0:13:39.800 --> 0:13:42.959 This is the Drive to the Clothes Punk's thing well 0:13:44.600 --> 0:13:45.840 on Bloomberg Radio. 0:13:46.840 --> 0:13:48.640 All right, time now for the Drive to the Clothes. 0:13:48.679 --> 0:13:51.599 Today, we're joined with Brent Shooty, chief investment officer of 0:13:51.679 --> 0:13:55.640 Northwestern Mutual Wealth Management. They have over three hundred billion 0:13:56.000 --> 0:13:59.640 in assets under management. Brent joins us on Zoom from 0:13:59.640 --> 0:14:02.320 Millwall Hockey. I want to get your reaction to the 0:14:02.360 --> 0:14:06.240 economic data that we got today, the subsequent reaction in 0:14:06.280 --> 0:14:11.040 the treasury market yields our down, traders betting that maybe 0:14:11.080 --> 0:14:14.080 we'll get up to three rate cuts this year. What's 0:14:14.120 --> 0:14:17.839 your reaction to the data and those fed bets? Right 0:14:17.840 --> 0:14:19.200 now sure. 0:14:19.240 --> 0:14:21.120 So I think the question that most have been asking 0:14:21.200 --> 0:14:22.960 is does the soft data, so the survey data that 0:14:23.000 --> 0:14:25.080 it has been weak, does it start leaking into the 0:14:25.120 --> 0:14:28.000 hard data. And that's where I think most people believed 0:14:28.080 --> 0:14:30.720 that potentially, there was hope that it would not, But 0:14:30.760 --> 0:14:32.800 I think this morning with ADP, you're starting to see 0:14:32.800 --> 0:14:34.760 that potentially it's leaking into the hard data, which is 0:14:34.800 --> 0:14:37.080 labor markets and job hiring, and you saw those come 0:14:37.120 --> 0:14:39.640 down quite a bit. You have the ISM Services, which 0:14:39.680 --> 0:14:43.400 is still soft data, but a good data source historical. 0:14:43.480 --> 0:14:45.560 That's where the Services index, which has held up the 0:14:45.560 --> 0:14:48.320 economy while manufacturing's in week the past few weeks, our 0:14:48.360 --> 0:14:50.480 past few years, it faltered. Then the last but not 0:14:50.600 --> 0:14:52.960 least you had the page book where it showed weakness 0:14:53.000 --> 0:14:56.360 and it had a comment about consumer spending declining slightly 0:14:56.360 --> 0:15:00.000 in most districts or even faltering or even being neutral. 0:15:00.120 --> 0:15:02.160 So that's where I think you're starting to see after 0:15:02.240 --> 0:15:04.760 yesterday's euphoria about the JILT report kind of wear in 0:15:04.800 --> 0:15:07.600 this yoyog economy to where today the data was weaker. 0:15:07.960 --> 0:15:10.200 That brought in the belief that the Fed may cut rates, 0:15:10.480 --> 0:15:12.520 and I think from the fixed income perspective, because I 0:15:12.520 --> 0:15:15.360 think a lot of people are nervous about yields. To me, 0:15:15.440 --> 0:15:17.400 it still shows that the long end of the curve 0:15:17.560 --> 0:15:21.560 will hedge against the potential for economic contraction, which I 0:15:21.560 --> 0:15:23.720 think the word recession might start coming up a bit 0:15:23.760 --> 0:15:25.160 more if we have more data. 0:15:25.240 --> 0:15:26.760 Like today, you. 0:15:26.760 --> 0:15:29.480 Talk about the nervousness of a lot of people here, 0:15:29.760 --> 0:15:31.880 and I wonder how you're seeing through all of that, 0:15:31.960 --> 0:15:35.800 how you're sort of positioning amidst the uncertainty about trade policy, 0:15:36.200 --> 0:15:38.680 the prospects that maybe they're being a recessions you indicated 0:15:38.800 --> 0:15:41.680 that could could come into play a little bit more. 0:15:41.520 --> 0:15:44.160 Are there clients who are nervous and panicking so or 0:15:44.200 --> 0:15:46.000 what's the council that you're giving folks right now? 0:15:46.880 --> 0:15:50.640 I think the big antidote for uncertainty is called diversification, 0:15:50.720 --> 0:15:52.280 and so I think a lot of people want to 0:15:52.360 --> 0:15:54.240 run and hide in cash and do whatever else. But 0:15:54.240 --> 0:15:55.880 to me, that always means that you think you know 0:15:55.960 --> 0:15:58.160 exactly what's going to happen, because that wins only in 0:15:58.160 --> 0:16:01.480 a few circumstances. I think diversification has been the big 0:16:01.480 --> 0:16:03.720 thing we continue to preach, and that's where I think 0:16:03.720 --> 0:16:05.160 a lot of people over the past few years have 0:16:05.200 --> 0:16:08.520 called it diversification because they've only wanted to own US 0:16:08.640 --> 0:16:11.200 large cap stocks, which have benefited from the past couple 0:16:11.240 --> 0:16:14.760 of years, and that's where most people want to only 0:16:14.840 --> 0:16:17.760 own those. I think there is different leadership going forward. 0:16:17.760 --> 0:16:21.160 This is a macroeconomic trend change. I think the administration 0:16:21.320 --> 0:16:23.800 wants a cheaper dollar. I think from a purchasing power 0:16:23.840 --> 0:16:26.400 parity perspective, the dollar needs to be cheaper. This is 0:16:26.440 --> 0:16:29.080 where there's going to be repatriation of cash possibly, and 0:16:29.120 --> 0:16:31.200 that's where I want people to branch out beyond just 0:16:31.320 --> 0:16:33.640 large cap stocks and look at places that have been 0:16:33.720 --> 0:16:36.640 under loved and underinvested in, like international stocks. I think 0:16:36.640 --> 0:16:39.560 about small and mid cap stocks, which are obviously domestic. 0:16:40.200 --> 0:16:41.880 They've been under the gun a bit the last couple 0:16:41.920 --> 0:16:44.160 of years because you have had a really narrow economy 0:16:44.320 --> 0:16:46.880 pretty much just driven by AI stocks and AI companies, 0:16:47.080 --> 0:16:49.040 and that's where I think whatever happens on the opposite 0:16:49.040 --> 0:16:51.080 side of this, whether it's recession or not, you will 0:16:51.080 --> 0:16:53.560 see the economy broadened back out. And that's where the 0:16:53.560 --> 0:16:55.440 message I think is the same as it always has been, 0:16:55.640 --> 0:16:58.200 which is essentially to diversify and to make sure that 0:16:58.200 --> 0:17:00.800 you're tilting towards those things that I just mentioned, which 0:17:00.800 --> 0:17:03.000 I think offer value for longer term investors. 0:17:03.760 --> 0:17:06.399 I know that you had mentioned kind of the longer term, 0:17:06.640 --> 0:17:10.760 the long end of the treasury curve. A lot of 0:17:10.760 --> 0:17:15.520 those bets have not really posted positive returns, you know, 0:17:15.600 --> 0:17:19.000 over the last couple months. Just walk us through kind 0:17:19.040 --> 0:17:23.880 of the rationale for really extending out further out onto 0:17:23.920 --> 0:17:26.080 the curve when you know you can pretty much collect 0:17:26.480 --> 0:17:29.040 a pretty decent yeal if you just stay in the 0:17:29.119 --> 0:17:31.000 two year or even a money market fund. 0:17:31.800 --> 0:17:33.520 Yeah, if you stand the two year and money market fund, 0:17:33.600 --> 0:17:35.320 what happens if today is two thousand and eight, two 0:17:35.320 --> 0:17:38.320 thousand and nine, and the yields on the two year 0:17:38.359 --> 0:17:40.399 or higher than the tenure, but for the next fifteen 0:17:40.440 --> 0:17:42.960 twenty years, the tenure, you know, basically yield sub two 0:17:43.119 --> 0:17:45.440 and you have to reinvest that two year multiple times 0:17:45.480 --> 0:17:47.800 because it goes to zero. And so that's where I think, 0:17:47.840 --> 0:17:50.600 at a minimum, you should invest across the curve. The 0:17:50.600 --> 0:17:53.119 thesis is is back to diversification. And you look at 0:17:53.119 --> 0:17:55.959 today's action. I use the R word and I use 0:17:56.000 --> 0:17:58.119 the word contraction, and people are now thinking about that 0:17:58.280 --> 0:18:00.479 just a bit. And you can see on days today, 0:18:00.520 --> 0:18:04.240 it does hedge downside risk that would occur if and 0:18:04.280 --> 0:18:06.639 when we actually do have a recession, and so I 0:18:06.680 --> 0:18:09.160 do think longer term, higher yields or more normal yields 0:18:09.200 --> 0:18:11.119 are here to stay. And I think you can possibly 0:18:11.119 --> 0:18:16.119 see higher inflation as a result of the deglobalization, the 0:18:16.200 --> 0:18:18.600 desire to actually maybe inflate away a little bit of 0:18:18.600 --> 0:18:21.120 our debts. But in the here and now, I think 0:18:21.160 --> 0:18:23.960 despite all the noise that's out there, days like today, 0:18:24.040 --> 0:18:26.160 days like we've had over the past few years, where 0:18:26.200 --> 0:18:29.359 you see fears of recession grow, I think it still 0:18:29.400 --> 0:18:31.840 shows that people will run the US treasuries. And that's 0:18:31.840 --> 0:18:34.600 how I think about hedging a portfolio against adverse outcomes. 0:18:34.840 --> 0:18:37.520 I think the one area that people don't have exposure 0:18:37.520 --> 0:18:40.360 to that they should because for the last fifteen twenty years, 0:18:40.440 --> 0:18:42.800 the way that you hedged a portfolio was only through 0:18:42.840 --> 0:18:45.359 long treasuries because you really only had one side of 0:18:45.359 --> 0:18:49.359 the distribution that was essentially deflation. I think your question 0:18:49.400 --> 0:18:51.440 probably ties into the other side of the distribution, which 0:18:51.480 --> 0:18:54.200 now is probably just as likely, which is higher inflation. 0:18:54.600 --> 0:18:58.320 And that's where we, from a diversification standpoint, still think 0:18:58.320 --> 0:19:00.800 people should own real assets like come on these as 0:19:00.840 --> 0:19:03.600 a hedge against a different outcome. Both of those are 0:19:03.720 --> 0:19:06.760 kind of the outside outliers in the tails. We want 0:19:06.760 --> 0:19:08.639 to maintain investments, but we want to make sure that 0:19:08.680 --> 0:19:10.840 we own things that can actually had just through downturns. 0:19:11.160 --> 0:19:12.960 Brandon, I want you to be perspective in the time 0:19:13.000 --> 0:19:14.600 we have left here. So let's look ahead to Friday. 0:19:14.640 --> 0:19:17.200 We're going to get this job support. Do you see 0:19:17.200 --> 0:19:20.720 it as just another element of hard data here does 0:19:20.720 --> 0:19:22.879 a take on kind of increased importance in light of 0:19:22.880 --> 0:19:24.800