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Speaker 2: in New York City, where there's some news about a
Speaker 2: university just up the street from US. That is Columbia
Speaker 2: University no longer meeting the accreditation standard set by the
Speaker 2: Department of Education. Some breaking news here in the last
Speaker 2: few minutes. Of course, this is one of a handful
Speaker 2: of schools that have been in the crosshairs of the
Speaker 2: Trump administration. The Secretary of Education Linda McMahon saying in
Speaker 2: a statement the school's leadership quote acted with deliberate indifference
Speaker 2: towards the harassment of Jewish students on its campus after
Speaker 2: the October seventh attack by Hamas on Israel. I'm reading
Speaker 2: there from a piece by Kayla Gardner, who covers the
Speaker 2: White House for US here at Bloomberg News and joins
Speaker 2: US now from Washington. Okay, let's just start with the
Speaker 2: basic facts of this year. We've seen the government go
Speaker 2: after Columbia's finances, threaten to withhold funding for research and
Speaker 2: the like. This seems to be ratcheting up its fight
Speaker 2: even more. What does it mean in effect that the
Speaker 2: government taking away this accreditation for Columbia.
Speaker 3: So we should clarify that the Education Department is notifying
Speaker 3: the entity that has given Columbia University its accreditation, which
Speaker 3: basically gives them the power to issue degrees. Basically is
Speaker 3: the definition for why they are a university. So they're
Speaker 3: notifying here Middle States Commission on Higher Education that they
Speaker 3: believe that the university is an in violation of anti
Speaker 3: discrimination laws. That is, of course, tied to antisemitism that
Speaker 3: they see is happening on campus and the protests that
Speaker 3: we've seen on the war in Gaza here. And this
Speaker 3: is really a turn and narrative when it comes to
Speaker 3: the relationship between the administration and Columbia. Because there had
Speaker 3: been signals from President Trump, from Secretary McMahon that conversations
Speaker 3: were in the right direction between her and the university's president.
Speaker 3: And of course Harvard took a big step with lawsuits
Speaker 3: against the administration. Now Columbia has not been doing that.
Speaker 3: So this certainly suggests that conversations perhaps are not going
Speaker 3: in the direction that certainly Columbia hopes that they are.
Speaker 4: Kayla, you write from a quote here from Linda McMahon
Speaker 4: that accreditors have an enormous public responsibility as gatekeepers a
Speaker 4: federal student aid. They determine which institutions are eligible for
Speaker 4: federal student loans and pelgrants. So just talk about this
Speaker 4: is they're not deifying Columbia, but actually, like in practice,
Speaker 4: is anything changing for the university or its students yet.
Speaker 3: So the responsibility is really on the accreditor here to
Speaker 3: take these findings and assess them and assess Columbia's accreditation
Speaker 3: going forward here. But this is really a concept or
Speaker 3: a theme, if you will, that the president has been
Speaker 3: talking about on the campaign trail. He has long believed
Speaker 3: that the accreditation system is unfair, and he has talked
Speaker 3: about alternatives from traditional universities, and a huge part of
Speaker 3: that is they believe that there is bias on a
Speaker 3: lot of these private campuses, a lot of these Ivy
Speaker 3: League campuses that they believe is not a welcoming place
Speaker 3: for conservatives, and certainly the ideals that are driving his movement.
Speaker 2: I want to go back to something that you mentioned
Speaker 2: just a moment ago, and that is the kind of
Speaker 2: status of dialogue or the relationship between Columbia and the
Speaker 2: Trump administration. So we saw it really deteriorate under the
Speaker 2: leadership of a new Shaffik, who was the president of
Speaker 2: the school for a very short period of time. She
Speaker 2: was succeeded by Katrina Armstrong, who was president for an
Speaker 2: even shorter period of time on an interim basis, she
Speaker 2: was heading the medical school and moved over to the presidency,
Speaker 2: stepped down, and now Claire Shipman, who had been heading
Speaker 2: Columbia's Board of trustees, is the interim president. The new
Speaker 2: interim president get us up to speed on sort of
Speaker 2: how much the two entities are talking, the administration and Columbia,
Speaker 2: and sort of what the university has done in recent
Speaker 2: weeks to side it kind of comport or talk with
Speaker 2: the administration about a path forward here.
Speaker 3: Well, Secretary mc man has been very public that she
Speaker 3: has had conversations with the president. She has spoke somewhat
Speaker 3: admiringly of the current president, but she says these negotiations
Speaker 3: are ongoing, both with Columbia and Harvard, and we saw
Speaker 3: Harvard put or excuse me, Colombia put out a statement
Speaker 3: where they said that they were not open to some
Speaker 3: of these demands that the administration has when it comes
Speaker 3: to quote viewpoint discrimination, where they really asked Columbia and
Speaker 3: Harvard to make these sort of changes to their faculty
Speaker 3: and their students to sort of represent more viewpoints when
Speaker 3: it comes to political or ideological beliefs, because again, they
Speaker 3: believe that these institutions have a bias, particularly a liberal
Speaker 3: bias on campus.
Speaker 4: This is obviously a breaking news situation. And you write
Speaker 4: that Columbia did not yet respond to requests for comments,
Speaker 4: But how do you think the university is going to respond?
Speaker 3: Well, I can't tell you exactly what they will respond
Speaker 3: until they actually do. But Columbia has been very measured
Speaker 3: as a posed to Harvard, who has taken now two
Speaker 3: lawsuits against the administration, one on student visas and one
Speaker 3: to get their federal funding back. So they have been
Speaker 3: measured up until this point. Really trying to strike a
Speaker 3: deal with the administration through negotiation. So I'm certainly interested
Speaker 3: to see if they go the route that we've seen
Speaker 3: Harvard go or they continue to try to have these
Speaker 3: negotiations behind closed doors to potentially get their funding back,
Speaker 3: and of course here also to defend their accreditation as
Speaker 3: a university.
Speaker 2: Kayla, great to talk to you, as always a Kayla
Speaker 2: Gardner covers the White House for us here at Bloomberg
Speaker 2: News with that breaking news story here that the Trump
Speaker 2: administration is targeting Columbia's accreditation over protests, and Kayler bringing
Speaker 2: up that nuance which is so important here the Education
Speaker 2: Department notifying the Middle States Commission, that is the accreditor
Speaker 2: that they do not think that Columbia meets the qualifications
Speaker 2: for accreditation, and that can have all kinds of ramifications
Speaker 2: I'm sure for the university itself, but certainly students who
Speaker 2: are attending the school or intending to go there. And
Speaker 2: just picking up on one more thing that she mentioned,
Speaker 2: that is the role of Harvard Universe and all of that.
Speaker 2: Alan Garber, the president of Harvard, has been adamant that
Speaker 2: the way in which the administration has dealt with that
Speaker 2: school is a warning sign, as he put it, for
Speaker 2: what might happen with with other schools. So picking up
Speaker 2: on your question, you're very good question, Emily. How they
Speaker 2: might respond. I'm curious if they kind of follow in
Speaker 2: the mold of what Harvard's done recently, which is to
Speaker 2: really stand up against the administration.
Speaker 5: You are listening to the Bloomberg Business Weekdaily Podcast. Catch
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Speaker 6: Well, let's get.
Speaker 4: Back to the Big Beautiful Bill. On Capitol Hill. Republicans
Speaker 4: in the Senate are working on their version of what
Speaker 4: President Trump calls this Big Beautiful Bill, and as they
Speaker 4: do that, we're getting new details from the non partisan
Speaker 4: Congressional Budget Office about what the House version, as passed
Speaker 4: would do to the federal deficit. The CBO estimates it
Speaker 4: would add two point four trillion dollars to US budget
Speaker 4: deficits over the next decade. The CBO also says it
Speaker 4: expects it would leave almost eleven million people in the
Speaker 4: United States without health insurance in twenty twenty four. Henrietta
Speaker 4: Trees is the co founder of Veda Partners, where she
Speaker 4: is director of Economic Policy, with a particular expertise in
Speaker 4: how the Senate works. So she joins us, now talk
Speaker 4: about these numbers. What exactly do they tell us, Henrietta.
Speaker 6: These are big numbers.
Speaker 7: Two point four trillion is a record breaker. The last
Speaker 7: highest reconciliation.
Speaker 6: Bill was one point nine trillion.
Speaker 7: So this whilbe winning some awards for sheer deficit increases
Speaker 7: on that account, which is exciting. The bill is going
Speaker 7: to change a lot from here. In my base case
Speaker 7: expectation knowing the Senate is that it's going to become
Speaker 7: more deficit financed.
Speaker 6: I think for bond investors there's something.
Speaker 7: To watch for here, and that the Senators are going
Speaker 7: to use a current policy baseline where the House does not.
Speaker 7: And this is a big differential between the two chambers.
Speaker 7: The House assumes that passing an extension of the twenty
Speaker 7: seventeen tax cuts plus some of the other components of
Speaker 7: the bill will generate two and a half trillion dollars
Speaker 7: of economic activity dynamic growth. On the Senate side, they're
Speaker 7: not going to use that formula to wipe away some
Speaker 7: of the budget costs. They're going to instead assume that
Speaker 7: extending the existing rates costs nothing. Three point eight trillion
Speaker 7: dollars or one point three billion dollars. One point three
Speaker 7: trillion dollars more will be deficit financed. So the scale
Speaker 7: of the Senate bill is going to be quite a
Speaker 7: bit more substantial. They're going to try to make some
Speaker 7: of the business provisions more permanent than the House bill.
Speaker 7: The salt cap is going to have to come down,
Speaker 7: the IRA cuts are going to have to come down,
Speaker 7: the Medicaid cuts are going to have to come down.
Speaker 7: The deficit is going to grow, is the bottom line.
Speaker 7: As the Senate spends the next four weeks crafting their
Speaker 7: version of this bill.
Speaker 2: Henrietta, I'm curious, as I'm sure you are, about how
Speaker 2: a Senator Ran Paul is looking at the numbers from
Speaker 2: CBO today, maybe a Rick Scott, maybe a Ron Johnson,
Speaker 2: as well as I kind of make the argument for
Speaker 2: deeper cuts in the Senate version of this bill. I
Speaker 2: heard Senator Paul talking about the power that he thinks
Speaker 2: he and these other holdouts have here in these negotiations,
Speaker 2: and I'm curious if you think that he's right about that,
Speaker 2: that these holdouts are going to be able to exert
Speaker 2: some real sway here as the Senate gets down to
Speaker 2: brass tacks and reshapes this BILM great question.
Speaker 7: I actually think this is some of the most interesting
Speaker 7: change that we've seen since the Senate has taken up
Speaker 7: this bill and gotten back from recess. Rant Paul's material
Speaker 7: objection is to the five trillion dollar increase to the
Speaker 7: debt ceiling that the Senate bill is going to include,
Speaker 7: and so there's already discussion of trying to get him
Speaker 7: back into the fold as a potential yes vote in
Speaker 7: changing the debt ceiling numbers associated with the Senate package.
Speaker 7: So right now, the sort of whisper around the Senators
Speaker 7: in the Republican conference is that, hey, maybe we just
Speaker 7: cut that in half and get rand Paul over to
Speaker 7: our side again, Because right now, if rand Paul is
Speaker 7: in no, just on the debt ceiling alone, then Senator
Speaker 7: Fune only has two votes to lose from there. So
Speaker 7: cutting the debt ceiling hike, which is not the same
Speaker 7: as the deficit but a really important part for Rand
Speaker 7: Paul down at two and a half trillion dollars, which
Speaker 7: would get the Senate and Congress functionality through about March
Speaker 7: of twenty twenty six instead of November twenty twenty six, is,
Speaker 7: I'm told a part of the conversation. So we're really
Speaker 7: trying to move the parameters of what might get Ran Paul,
Speaker 7: which to me really underscores the trouble that Leader Thun
Speaker 7: is going to face when we get back to what
Speaker 7: you were just mentioning the ten point nine million individuals
Speaker 7: will be kicked off Medicaid, nine and a half million
Speaker 7: of whom are not in the undocumented migrant space that
Speaker 7: Republicans talk about a lot. These are just regular everyday Americans,
Speaker 7: so will be kicked off of the Medicaid program. So
Speaker 7: there's going to be a lot of loss from West Virginia,
Speaker 7: Susan Collins in Maine, the Alaska senators that's Sullivan who's
Speaker 7: up for reelection next year, and Murkowski. So there's a
Speaker 7: lot of moving parts that they needs to walk through here.
Speaker 7: Getting Rand Paul on board by cutting the debt ceiling
Speaker 7: hike in half might be very helpful.
Speaker 4: So how then do you anticipate the timeline of this
Speaker 4: bill eventually making its way to President Trump? Maybe assuming
Speaker 4: that we do get those holdouts, the Rand Paul's you know,
Speaker 4: signing off on. It is the timeline really realistic that
Speaker 4: this this does get on Trump's desk by July fourth.
Speaker 7: No, it's going to go through the Senate by July fourth.
Speaker 7: That's the strategy that Senator Foone is working with right now.
Speaker 7: There are three committees who are rolling out their bill
Speaker 7: this week, there will be another next week, and then
Speaker 7: the Senate Finance Committee, which is responsible for almost all
Speaker 7: the package, all the tax provisions and the Medicaid.
Speaker 6: Cuts, they're going to go last.
Speaker 7: And that'll come either the week of the sixteenth, right
Speaker 7: before Juneteenth, or it will come the following week, the
Speaker 7: week of June twenty third. This bill is going to
Speaker 7: get very messy, very complicated. They have a lot of
Speaker 7: changes that they need to make with the House Republican package,
Speaker 7: and as I mentioned, the Salt Caucus alone is going
Speaker 7: to raise holy hell with them and they're going to
Speaker 7: be in a meeting at some point. They haven't been
Speaker 7: given an audience yet, but they will have to do that.
Speaker 7: And then what that creates is a scenario where the
Speaker 7: House and the Senate actually go to conference first and foremost,
Speaker 7: for investors, what you should hear when I say that
Speaker 7: is this is the time suck. It can be one, two,
Speaker 7: three weeks even so that paints the picture for passages
Speaker 7: of this legislation. At the end of July. July twenty
Speaker 7: fourth is when the House is scheduled to go on recess.
Speaker 7: August first is when the Senator's scheduled to go on recess.
Speaker 7: The X date for the debt ceiling is in mid August.
Speaker 7: That's the time horizon folks should work with very quickly.
Speaker 2: Here just what is happening at this moment, drawing on
Speaker 2: your experience working set, what's happening at this moment in time.
Speaker 2: I know committees are releasing their legislation sor have one
Speaker 2: by one, But in the minute that we have left,
Speaker 2: sort of what's the actual state of play. What's happening
Speaker 2: on the ground in Senate office buildings today.
Speaker 7: Lobbyists are fanned out everywhere. They're trying to get their
Speaker 7: IRA tax credit back in. They're trying to tweet the
Speaker 7: eight ninety nine provision that gives the Treasury Secretary of
Speaker 7: the authority to tax unfair fact tax countries, foreign entities,
Speaker 7: and such. There's a lot of behind the scene's work
Speaker 7: going on before that bill gets released. The rule of
Speaker 7: thumb in DC is you want to get your provision
Speaker 7: out before the bill gets released, Get it out before
Speaker 7: it's in.
Speaker 6: Once it's in, you can't get it out.
Speaker 7: So the aggressive lobbying happening behind the scenes right now.
Speaker 2: Henrietta always good to talk to you to get your update.
Speaker 2: That's Henrita Trace. She's the co founder of Vada Partners,
Speaker 2: where she's the director of Economic Policy'll.
Speaker 7: Bet you let me drive.
Speaker 1: Oh no, no, no no, this is not a twin.
Speaker 8: Honey, please, I'll do the velcase. I want to try it.
Speaker 5: It's good question.
Speaker 1: This is the Drive to the Clothes Punk's thing well
Speaker 1: on Bloomberg Radio.
Speaker 6: All right, time now for the Drive to the Clothes.
Speaker 4: Today, we're joined with Brent Shooty, chief investment officer of
Speaker 4: Northwestern Mutual Wealth Management. They have over three hundred billion
Speaker 4: in assets under management. Brent joins us on Zoom from
Speaker 4: Millwall Hockey. I want to get your reaction to the
Speaker 4: economic data that we got today, the subsequent reaction in
Speaker 4: the treasury market yields our down, traders betting that maybe
Speaker 4: we'll get up to three rate cuts this year. What's
Speaker 4: your reaction to the data and those fed bets? Right
Speaker 4: now sure.
Speaker 9: So I think the question that most have been asking
Speaker 9: is does the soft data, so the survey data that
Speaker 9: it has been weak, does it start leaking into the
Speaker 9: hard data. And that's where I think most people believed
Speaker 9: that potentially, there was hope that it would not, But
Speaker 9: I think this morning with ADP, you're starting to see
Speaker 9: that potentially it's leaking into the hard data, which is
Speaker 9: labor markets and job hiring, and you saw those come
Speaker 9: down quite a bit. You have the ISM Services, which
Speaker 9: is still soft data, but a good data source historical.
Speaker 9: That's where the Services index, which has held up the
Speaker 9: economy while manufacturing's in week the past few weeks, our
Speaker 9: past few years, it faltered. Then the last but not
Speaker 9: least you had the page book where it showed weakness
Speaker 9: and it had a comment about consumer spending declining slightly
Speaker 9: in most districts or even faltering or even being neutral.
Speaker 9: So that's where I think you're starting to see after
Speaker 9: yesterday's euphoria about the JILT report kind of wear in
Speaker 9: this yoyog economy to where today the data was weaker.
Speaker 9: That brought in the belief that the Fed may cut rates,
Speaker 9: and I think from the fixed income perspective, because I
Speaker 9: think a lot of people are nervous about yields. To me,
Speaker 9: it still shows that the long end of the curve
Speaker 9: will hedge against the potential for economic contraction, which I
Speaker 9: think the word recession might start coming up a bit
Speaker 9: more if we have more data.
Speaker 10: Like today, you.
Speaker 2: Talk about the nervousness of a lot of people here,
Speaker 2: and I wonder how you're seeing through all of that,
Speaker 2: how you're sort of positioning amidst the uncertainty about trade policy,
Speaker 2: the prospects that maybe they're being a recessions you indicated
Speaker 2: that could could come into play a little bit more.
Speaker 2: Are there clients who are nervous and panicking so or
Speaker 2: what's the council that you're giving folks right now?
Speaker 9: I think the big antidote for uncertainty is called diversification,
Speaker 9: and so I think a lot of people want to
Speaker 9: run and hide in cash and do whatever else. But
Speaker 9: to me, that always means that you think you know
Speaker 9: exactly what's going to happen, because that wins only in
Speaker 9: a few circumstances. I think diversification has been the big
Speaker 9: thing we continue to preach, and that's where I think
Speaker 9: a lot of people over the past few years have
Speaker 9: called it diversification because they've only wanted to own US
Speaker 9: large cap stocks, which have benefited from the past couple
Speaker 9: of years, and that's where most people want to only
Speaker 9: own those. I think there is different leadership going forward.
Speaker 9: This is a macroeconomic trend change. I think the administration
Speaker 9: wants a cheaper dollar. I think from a purchasing power
Speaker 9: parity perspective, the dollar needs to be cheaper. This is
Speaker 9: where there's going to be repatriation of cash possibly, and
Speaker 9: that's where I want people to branch out beyond just
Speaker 9: large cap stocks and look at places that have been
Speaker 9: under loved and underinvested in, like international stocks. I think
Speaker 9: about small and mid cap stocks, which are obviously domestic.
Speaker 9: They've been under the gun a bit the last couple
Speaker 9: of years because you have had a really narrow economy
Speaker 9: pretty much just driven by AI stocks and AI companies,
Speaker 9: and that's where I think whatever happens on the opposite
Speaker 9: side of this, whether it's recession or not, you will
Speaker 9: see the economy broadened back out. And that's where the
Speaker 9: message I think is the same as it always has been,
Speaker 9: which is essentially to diversify and to make sure that
Speaker 9: you're tilting towards those things that I just mentioned, which
Speaker 9: I think offer value for longer term investors.
Speaker 4: I know that you had mentioned kind of the longer term,
Speaker 4: the long end of the treasury curve. A lot of
Speaker 4: those bets have not really posted positive returns, you know,
Speaker 4: over the last couple months. Just walk us through kind
Speaker 4: of the rationale for really extending out further out onto
Speaker 4: the curve when you know you can pretty much collect
Speaker 4: a pretty decent yeal if you just stay in the
Speaker 4: two year or even a money market fund.
Speaker 9: Yeah, if you stand the two year and money market fund,
Speaker 9: what happens if today is two thousand and eight, two
Speaker 9: thousand and nine, and the yields on the two year
Speaker 9: or higher than the tenure, but for the next fifteen
Speaker 9: twenty years, the tenure, you know, basically yield sub two
Speaker 9: and you have to reinvest that two year multiple times
Speaker 9: because it goes to zero. And so that's where I think,
Speaker 9: at a minimum, you should invest across the curve. The
Speaker 9: thesis is is back to diversification. And you look at
Speaker 9: today's action. I use the R word and I use
Speaker 9: the word contraction, and people are now thinking about that
Speaker 9: just a bit. And you can see on days today,
Speaker 9: it does hedge downside risk that would occur if and
Speaker 9: when we actually do have a recession, and so I
Speaker 9: do think longer term, higher yields or more normal yields
Speaker 9: are here to stay. And I think you can possibly
Speaker 9: see higher inflation as a result of the deglobalization, the
Speaker 9: desire to actually maybe inflate away a little bit of
Speaker 9: our debts. But in the here and now, I think
Speaker 9: despite all the noise that's out there, days like today,
Speaker 9: days like we've had over the past few years, where
Speaker 9: you see fears of recession grow, I think it still
Speaker 9: shows that people will run the US treasuries. And that's
Speaker 9: how I think about hedging a portfolio against adverse outcomes.
Speaker 9: I think the one area that people don't have exposure
Speaker 9: to that they should because for the last fifteen twenty years,
Speaker 9: the way that you hedged a portfolio was only through
Speaker 9: long treasuries because you really only had one side of
Speaker 9: the distribution that was essentially deflation. I think your question
Speaker 9: probably ties into the other side of the distribution, which
Speaker 9: now is probably just as likely, which is higher inflation.
Speaker 9: And that's where we, from a diversification standpoint, still think
Speaker 9: people should own real assets like come on these as
Speaker 9: a hedge against a different outcome. Both of those are
Speaker 9: kind of the outside outliers in the tails. We want
Speaker 9: to maintain investments, but we want to make sure that
Speaker 9: we own things that can actually had just through downturns.
Speaker 2: Brandon, I want you to be perspective in the time
Speaker 2: we have left here. So let's look ahead to Friday.
Speaker 2: We're going to get this job support. Do you see
Speaker 2: it as just another element of hard data here does
Speaker 2: a take on kind of increased importance in light of
Speaker 2: what we saw today from the ADP. Is that more
Speaker 2: important than we saw last months? Or what are you
Speaker 2: looking for when the Labor Department releases those data on Friday.
Speaker 9: I think it's incredibly important because I think you've had
Speaker 9: a market rally on the belief that we were at
Speaker 9: max tariff uncertainty, which I'm not for sure that we're
Speaker 9: at and I don't think this is just in a
Speaker 9: goation negotiation. I do believe that if you parse the
Speaker 9: words of the administration, they want the revenue and they
Speaker 9: believe in tariffs, and they're not going away. The second part
Speaker 9: is that hard data into soft data, or soft data
Speaker 9: into hard data I think last week we saw jobless
Speaker 9: clim spike just a bit, we saw continuing claims rise,
Speaker 9: we had ADP today, and so I think Friday's jobs report,
Speaker 9: Friday's labor market report is incredibly important. I think the
Speaker 9: oddity is that right now, people believe that even if
Speaker 9: the labor market were to weekend, or even if the
Speaker 9: data were to weeken, think about days like today, when,
Speaker 9: as Emily mentioned, fed Thatt's go up, the market believes
Speaker 9: that it's a buying opportunity either way, and that the
Speaker 9: FED can actually cushion the blow. I'm not for sure,
Speaker 9: at least historically that the FED can absolutely cushion the blow.
Speaker 9: And so to me, that's where I do think the
Speaker 9: jobs market and the data on Friday will be incredibly important.
Speaker 9: If it's good, it's probably coastal clear for a while.
Speaker 9: If it's bad, then we'll see what actually happens. I
Speaker 9: suppose the reaction will be different than what it is
Speaker 9: today because ADP is kind of thought of as maybe
Speaker 9: a secondary type of employment index. But we'll see on Friday,
Speaker 9: just very.
Speaker 4: Quickly before we let you go twenty seconds here. It's
Speaker 4: interesting then to see kind of these more speculative areas
Speaker 4: of the market rallying. You look at the Nasdaq, one
Speaker 4: hundred is higher, A basket of the most shorted stocks
Speaker 4: from Goldman Sachs is hired today, and yet you're seeing
Speaker 4: that this economic data is weaker. Just in thirty seconds,
Speaker 4: help us understand the difference there between what's going on
Speaker 4: and animal spirit.
Speaker 9: I think there's an inefficial demand from individual investors to
Speaker 9: buy things that I've worked in the past, and that's
Speaker 9: been the formula for a while, and that's where you've seen.
Speaker 9: Most of the buying over the past few months has
Speaker 9: been through individual investors, not institutional and we'll see if
Speaker 9: they continue to follow along those lines. That's where momentum
Speaker 9: buying has worked. And that's what I'd be cautious of
Speaker 9: going forward, because I do believe that if you did
Speaker 9: have a downturn, some of those speculative areas might get hit.
Speaker 7: Quite a bit.
Speaker 4: Brent Shoody, thank you so much. It's always great to
Speaker 4: talk to you. He's the chief investment officer of Northwestern
Speaker 4: Mutual Wealth Management.
Speaker 5: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
Speaker 5: live weekday afternoons from two to five pm. Eastern Listen
Speaker 5: on Apple CarPlay and Android Auto with the Bloomberg Business app,
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Speaker 2: One of the most read stories on the Terminal today
Speaker 2: is the Bloomberg Big Take, a harrowing account of a
Speaker 2: fatal twenty twenty three car crash involving a Tesla model
Speaker 2: why that was using full self driving. A crash took
Speaker 2: place in Arizona on Interstate seventeen between Flagstaff and Phoenix.
Speaker 2: Bloomberg News Senior technology reporter and contributor to the Elon Inc. Podcast,
Speaker 2: Dana Hall writes that as Elon Musk tounts robotaxis in Austin,
Speaker 2: federal regulators are investigating whether the system in the Tesla
Speaker 2: is dangerous even with a human behind the wheel. Dana
Speaker 2: joins us now from the Bloomberg San Francisco Bureau, and
Speaker 2: I should commend this piece to everybody. It's sobering. It
Speaker 2: includes very dramatic video captured by this car as it
Speaker 2: goes at highway speed and crashes into someone next to
Speaker 2: her Toyota Rev four. Dan talk a bit about the
Speaker 2: video that you were able to obtain that Bloomberg News
Speaker 2: was able to obtain here. It was through a public
Speaker 2: records request. But what it shows, what it reveals about
Speaker 2: what seems to be a huge flaw here in this
Speaker 2: feature that Elon Musk has touted.
Speaker 6: Yeah, so thanks David. To back up for a little bit.
Speaker 10: You know, in October, NITSA announced that it was investigating
Speaker 10: what Tesla calls FSD because of four crashes where the
Speaker 10: system seemed to struggle with fog, glare, dust storms, things
Speaker 10: like that, And they mentioned one of the crashes was
Speaker 10: a fatality involving a pedestrian. And I read the nitzav
Speaker 10: report and was like, wait, what a pedestrian was killed?
Speaker 6: Like what was this? What happened?
Speaker 10: And there weren't any other details, So I filed a
Speaker 10: record's request and got the crash report, over two hundred
Speaker 10: and fifty photographs and some pretty harrowing footage, some of
Speaker 10: which we shared with everyone today. And it just really
Speaker 10: shows this vehicle not slowing down despite the glare on
Speaker 10: the screen, and not seeing parked cars with their hazard
Speaker 10: lights on, not seeing another human being like desperately kind
Speaker 10: of signaling to them to slow down, and then hitting
Speaker 10: this one. You know, we stopped before the impact, but
Speaker 10: then obviously this woman has sort of hit.
Speaker 6: Straight on and it just raises a lot of questions.
Speaker 10: And you know, Tesla fans will say that the software
Speaker 10: and the hardware since then has been upgraded, and I'm
Speaker 10: sure that it has. But at the time, you know,
Speaker 10: the driver was using what was likely the most up
Speaker 10: to date version of that FSD that existed. And it's
Speaker 10: just a really tragic case that a lot of people.
Speaker 6: Don't know about.
Speaker 4: So talk a little bit about full self driving and
Speaker 4: in the case of this of this crash, what we
Speaker 4: know about what the driver was doing. What drivers of
Speaker 4: Tesla's with FSD are told. Are they supposed to keep
Speaker 4: their hands on the wheel? Do they have full control
Speaker 4: over the brak?
Speaker 1: Well?
Speaker 6: Does that work?
Speaker 10: So that's been that's been a big issue in terms
Speaker 10: of how Tesla has marketed this. It is marketed as FSD,
Speaker 10: but Tesla makes very clear in all of its literature
Speaker 10: to its owners that the owner of the car is
Speaker 10: responsible for the car at all times and should be
Speaker 10: ready to take over. So we don't really know, you know.
Speaker 10: All we have is what the driver said in the
Speaker 10: crash report, which was I'm sorry. It all happened so fast.
Speaker 10: All of a sudden, there were cars in front of
Speaker 10: me and I couldn't stop, so we don't know more
Speaker 10: than what he told police right in the aftermath of
Speaker 10: the crash. I do think it's significant that Tesla ultimately
Speaker 10: reported this crash to Nitza and the investigation that you know,
Speaker 10: Nissa's investigation is ongoing.
Speaker 2: Danna, you could step outside our bureau in San Francisco
Speaker 2: and you could hail a Weimo, a self driving taxi.
Speaker 2: And I think it's useful to explain the difference in
Speaker 2: the way these self driving systems work. So we're talking
Speaker 2: about a Tesla system here that relies predominantly, if not exclusively,
Speaker 2: on cameras. How does that differ from what Weimo is
Speaker 2: doing from its competitor.
Speaker 10: Yeah, So if you live in a city like San
Speaker 10: Francisco or Austin where Weimo is ubiquitous, now you know
Speaker 10: they have a lot of sensors. They use cameras, they
Speaker 10: use radar, they use light r light RS is the
Speaker 10: thing that kind of spins around on the top. A
Speaker 10: lot of people complain that it looks very clunky, but
Speaker 10: they have a very robust sensor suite so that the
Speaker 10: vehicles not rely on on one input. They are kind
Speaker 10: of gathering actively gathering data from around the are using
Speaker 10: multiple sensors, and that is one approach.
Speaker 6: That is the approach that Weimo has taken.
Speaker 10: It's the approach that you know, others like Aurora and
Speaker 10: Zooks have also taken. Elon Musk has taken a very
Speaker 10: different approach, and his idea is that a vision based
Speaker 10: system or a camera based system with a lot of
Speaker 10: machine learning and these incredible neural nets can basically do
Speaker 10: the same job for much cheaper. And part of the
Speaker 10: argument is that Tesla has so many cars on the
Speaker 10: road that they have a lot of data that they
Speaker 10: have trained their their systems on and so you know,
Speaker 10: there's a big debate in autonomous vehicle vehicle development about
Speaker 10: whether you can truly be self driving without lidar or not.
Speaker 10: I just think what this crash shows is that a
Speaker 10: camera based system struggles sometimes with blair and this was
Speaker 10: one of those very tragic educases.
Speaker 4: What if the regulators said, if anything about these systems
Speaker 4: that just use cameras.
Speaker 10: I mean, they have not you know, they are investigating
Speaker 10: or crashes where you know, they seem to struggle in
Speaker 10: these certain conditions like glare, but they have not like
Speaker 10: I mean, they're not ordering a recall or anything like that.
Speaker 10: And just note that investigations do take quite a lot
Speaker 10: of time. There's typically a lot of back and forth
Speaker 10: between NITZ and automakers. You know, they ask for a
Speaker 10: lot of engineering details, and they often do take several months.
Speaker 2: I'm curious here sort of about the way that this
Speaker 2: administration and the Department of Transportation particularly see the advent
Speaker 2: of and the adoption of self driving vehicles like the
Speaker 2: one that's featured in this story. Do they see it
Speaker 2: as the future? Do they see it as kind of
Speaker 2: a compliment to the way that we drive today? Sort of?
Speaker 2: How are they looking at the prospect of these cars
Speaker 2: being on their own.
Speaker 10: I think they very much see it as the future.
Speaker 10: And you know, we have to remind everyone that, sorry,
Speaker 10: we have to remind everyone that roughly forty thousand people
Speaker 10: die in traffic accidents in the United States every year.
Speaker 10: A lot of traffics are because of speeding, because of
Speaker 10: drug and alcohol use, and if there is anything that
Speaker 10: we could do to really drive that number down, that
Speaker 10: would be terrific. And that has always been the promise
Speaker 10: of autonomous vehicles that you know, autonomous vehicles can drive
Speaker 10: when you're tired and they can do long haul freight
Speaker 10: runs that kind of thing. But as we're seeing these vehicles,
Speaker 10: you know, being deployed, either in testing situations or you know,
Speaker 10: starting to become commercialized, there have been accidents, and I
Speaker 10: think that the industry needs to be very upfront about
Speaker 10: what those accidents have been.
Speaker 4: We only have about a minute left, but I'm wondering
Speaker 4: if you could compare you know, where Tesla currently is
Speaker 4: in this race for autonomous driving versus other US automakers.
Speaker 10: I mean, I think the big competitor to Tesla is Weimo.
Speaker 10: As David mentioned, I can you know, step outside of
Speaker 10: my San Francisco office and hail a Weimo and it
Speaker 10: will show up and there is not a driver there.
Speaker 10: Tesla does not yet have a functioning robotaxi, you know,
Speaker 10: customer service based system. Yet they are talking about kind
Speaker 10: of launching one in Austin this month. We'll see whether
Speaker 10: that's a big event or like a soft launch, but
Speaker 10: you know, they are definitely they don't have a commercial
Speaker 10: business doing a robotaxi yet. However, you know, that's been
Speaker 10: the big promise of the company for quite some time.
Speaker 10: Now that you know we're going to see robotax. He's
Speaker 10: everywhere and eventually you, if you own a Tesla, we'll
Speaker 10: be able to add your vehicle to this growing fleet.
Speaker 2: Dana, thank you very much and thanks for the reporting
Speaker 2: as well. The piece is a fatal Tesla crash shows
Speaker 2: the limits of full self driving by Dana Hall. She
Speaker 2: wrote it with Craig Trudell and features again this very
Speaker 2: sobering video. We didn't show any of it to our
Speaker 2: audience on television and YouTube, but you can see up
Speaker 2: until the moment that that self driving Tesla hits a
Speaker 2: pedestrian in Arizona just a couple of years back, and
Speaker 2: it's well worth reading just to hear about the limitations
Speaker 2: of that software, of that feature in the Tesla. It
Speaker 2: can be the full story and more from the Bloomberg
Speaker 2: Big Take on the Bloomberg Terminal and at Bloomberg dot
Speaker 2: Com slash a Big Take again that piece there by
Speaker 2: Dana Hall with Craig Trudell.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 2: David Dura here with Emily graffeo in for Tim Stenovek
Speaker 2: and Carol Master there off today. It was a good
Speaker 2: time to be in the mortgage business back in twenty twenty,
Speaker 2: That is when Dan Gilbert billionaire Dan Gilbert took his
Speaker 2: Quickened Loans now Rocket Companies public, as Bradstone, the editor
Speaker 2: of Bloomberg BusinessWeek, rights Americans enjoying cheap money and still
Speaker 2: warm stimulus checks were happily refinancing at a rapid clip,
Speaker 2: and Dan Gilbert was then one of the richest people
Speaker 2: on earth. Of course, mortgage rates have gone up since then,
Speaker 2: and Rocket Company's annual revenue is expected to go down,
Speaker 2: its share price down almost thirty percent since that company
Speaker 2: went public. Good occasion for Bradstone to check in with
Speaker 2: Dan Gilbert to see how he's doing, how the company's doing,
Speaker 2: talk about both of those things with him. Now, Brad
Speaker 2: joins us from our bureau in San Francisco. Bred We're
Speaker 2: going to talk about Dan Gilbert the person here in
Speaker 2: just a moment, but let's start with the company and
Speaker 2: the challenges it faces. How different is this company from
Speaker 2: what it was back in twenty twenty.
Speaker 11: Maybe not that different, You know they are in a
Speaker 11: cyclical industry. They have seen rates go up and rates
Speaker 11: go down. You know, Dan is someone who you know
Speaker 11: runs not just a company, but a little bit of
Speaker 11: a corporate cult.
Speaker 8: You know.
Speaker 11: They he doesn't like to lay people off, but you
Speaker 11: know as a result, you know, the company's lost about
Speaker 11: thirty percent of its market cap since rates started creeping
Speaker 11: up after the pandemic, and they're getting a little bit of.
Speaker 8: Outside pressure for the first time.
Speaker 11: There's an activist investor in the stock and he's really rethinking, well,
Speaker 11: what is Rocket? And so recently they made two kind
Speaker 11: of rapid fire acquisitions. One is a brand that most
Speaker 11: people probably know, Redfin, the home listing a company. And
Speaker 11: then another one is called mister Cooper, a Dallas company
Speaker 11: that does underwriting that they have announced a tenpt to acquire.
Speaker 8: For about nine billion dollars.
Speaker 11: Both of those deals have yet to close. But the
Speaker 11: idea the Dan relates to me is like, let's not
Speaker 11: just see our customer once every seven ten years when
Speaker 11: they're ready to take out a new mortgage or refinance,
Speaker 11: but maybe have a relationship with them through the entire
Speaker 11: life span of a mortgage.
Speaker 4: I found it interesting that you write that Gilbert, who
Speaker 4: owns about seventy percent of Rocket, is responding to a
Speaker 4: lot of the uncertainty with the most significant changes to
Speaker 4: his company since nineteen ninety eight. So talk a little
Speaker 4: bit more. I know you mentioned the acquisitions, but just
Speaker 4: about what makes the changes that he's undergoing just so significant?
Speaker 8: Yeah, I mean it's really the acquisition.
Speaker 11: Well, first of all, he's hired a new CEO of
Speaker 11: Arun Krishna, a former PayPal guy. He ran the turbo
Speaker 11: tax business and into it. You know, Dan hasn't been
Speaker 11: the CEO for quite some time, but we all know
Speaker 11: a little bit about founder led companies, and Dan is
Speaker 11: really brought in a kind of Silicon Valley guy to
Speaker 11: sort of run the company and to steer Rocket through
Speaker 11: the revolution. Now underwriting a loan servicing alone, it's an
Speaker 11: enormously employee human intensive business, and so AI is offering
Speaker 11: a lot of opportunities for Rocket to get slimmer. So
Speaker 11: I think the changes are twofold one making these two
Speaker 11: acquisitions and saying Rocket is not just going to be
Speaker 11: your refi company, but it's going to hold the customer's
Speaker 11: hand through the entire home buying process. They want to
Speaker 11: get into the real estate business essentially with Redfin, and
Speaker 11: then it's this mindset of what can we do with
Speaker 11: AI to make the process more efficient? And that will
Speaker 11: be very interesting because, as I said, Danzi's his employees.
Speaker 8: Is sort of an extended family.
Speaker 11: And so the question that value Act and some of
Speaker 11: these other shareholders and value Act is the activist shareholder,
Speaker 11: they probably want to see steeper cuts. And so I
Speaker 11: think there's a little bit of tension and suspense building
Speaker 11: around how Dan will be navigating the next few years.
Speaker 2: Brad, pardon, please excuse the obligatory question about artificial intelligence,
Speaker 2: but I have to ask it, what does Dan Gilbert
Speaker 2: think the role of artificial intelligence is going to be
Speaker 2: here in the mortgage and mortgage servicing industry.
Speaker 11: Yeah, And maybe this kind of comes through in the piece,
Speaker 11: which is I think he's putting a little bit of
Speaker 11: a happy face on it. He thinks that it can
Speaker 11: aid the customer in the paperwork filling out a loan,
Speaker 11: it can be a help to the company in servicing
Speaker 11: customer service calls.
Speaker 8: And yet he doesn't.
Speaker 11: Necessarily project like great displacement.
Speaker 8: In his workforce. I don't know about that.
Speaker 11: I mean, it does seem like, you know, these models
Speaker 11: are now quite good enough that maybe you could start
Speaker 11: to replace some of the human labor behind the underwriting process. So,
Speaker 11: you know, I think the big, the overarching answer is
Speaker 11: it makes the process more efficient. You know, it simplifies
Speaker 11: this labyrinth of paper county by county, state by state paperwork.
Speaker 11: Rocket is a big company because it's been able to
Speaker 11: do that. But then the question is how much does
Speaker 11: it automate? How much does it mean that Rocket doesn't
Speaker 11: need it's thousands of employees anymore.
Speaker 4: Brad, you had the opportunity to actually sit down with
Speaker 4: the billionaire businessman. How is he staying positive amid all
Speaker 4: of these changes in his company, amid health issues that
Speaker 4: he's experienced, right.
Speaker 11: And I think you know that is and Emily and David,
Speaker 11: you're gonna appreciate this.
Speaker 8: I'll give you a little bit of background.
Speaker 11: I'm a Cleveland guy, okay, and so Dan Gilbert, he
Speaker 11: owns the Calves. He has always loomed very large in
Speaker 11: the civic life of not just Cleveland, but Detroit, where
Speaker 11: he's based. I've always wanted to meet him, and in
Speaker 11: particular history has gotten very interesting because he's one of
Speaker 11: the richest people in the world. But in twenty nineteen
Speaker 11: he suffered a debilitating stroke, and really over the past
Speaker 11: six years he's been just battling back. He lost the
Speaker 11: entire use of the left side of his body. He
Speaker 11: really can't walk. He's only now beginning to stand and
Speaker 11: take a few steps unaided without a cane.
Speaker 8: And so I.
Speaker 11: Think, you know, Emily, the way you phrase a question
Speaker 11: is a good one. He does remain positive. He doesn't
Speaker 11: have control over some central things in his life, not
Speaker 11: only his own physical health, but interest rates, which has
Speaker 11: a major impact on his business. He is almost single
Speaker 11: handedly reviving downtown Detroit by buying and rehabit buildings. So
Speaker 11: I think it's just a point of view, you know,
Speaker 11: despite these massive challenges, despite things that are out of
Speaker 11: his control, he has an entrepreneurial mindset, and he's kind
Speaker 11: of continued to battle. And you know, he has amazing resources.
Speaker 11: And so it's not just the rehab, but stem cell
Speaker 11: treatments and testosterone shots, and he's doing everything he can.
Speaker 11: I think he's really defied the odds, not just in business,
Speaker 11: but also in his personal life.
Speaker 2: Just a wonderful photograph of him made bade Bier photographer
Speaker 2: at the beginn at the end of that piece, you
Speaker 2: can see him standing up. So despite those difficulties, making
Speaker 2: the effort to stand up for photograph there at the end.
Speaker 2: Keeping in mind all that you were talking about, you
Speaker 2: mentioned his role in Cleave, his role in Detroit. Talk
Speaker 2: a bit, if you would, about his aspirations in kind
Speaker 2: of the civic life of both of those places. You
Speaker 2: were talking about sports here a moment ago. But he
Speaker 2: has made a name for himself as someone who's very
Speaker 2: philanthropically minded brat right.
Speaker 11: I mean, look, you go ten years ago, you go
Speaker 11: to downtown Detroit, and you know, it looks like something
Speaker 11: out of a seventies dystopian science fiction movie. I mean,
Speaker 11: it was just a central Core was totally abandoned. Cleveland,
Speaker 11: a city I'm more familiar with pretty similar lots of
Speaker 11: sort of development starts and stops. And look, we're very
Speaker 11: familiar with the tech CEOs who have used their wealth
Speaker 11: to get to space, you know, to solve global disease
Speaker 11: on the other side of the world. Dan just decided
Speaker 11: that he's going to have an impact closer to home
Speaker 11: and in downtown Detroit alongside the central Woodward Avenue. He's
Speaker 11: been buying properties. He's building a skyscraper where GM is
Speaker 11: going to move its headquarters when it's when it's completed.
Speaker 8: He moved Rocket from a suburb.
Speaker 11: Downtown I don't know, I think twenty years ago and
Speaker 11: it and the idea is to really, like, you know,
Speaker 11: rehabilitate these industrial Midwest cities with glorious architecture and amazing
Speaker 11: flourishes in the buildings. He's taken a building, I think
Speaker 11: it's called the Library Building in downtown Detroit completely rehabited.
Speaker 11: There's a there's a hotel there. All the original touches
Speaker 11: were there. And he's brought life back to these abandoned
Speaker 11: city city cores. And so that is his mission, as
Speaker 11: well as addressing the disease that took the life of
Speaker 11: one of his children.
Speaker 8: He's donated a lot of money to that.
Speaker 11: So it's really philanthropy around the things, around things close
Speaker 11: to him that is important to him, and that's where
Speaker 11: he wants to leave a legacy.
Speaker 4: And for those just tuning in, we're speaking with Bloomberg
Speaker 4: BusinessWeek editor Brad Stone on his story is feature story
Speaker 4: about Dan Gilbert Brett. I want to finish off by
Speaker 4: going to the headline of your story that Calv's owner
Speaker 4: Gilbert wants to donate his billions. You write that he
Speaker 4: told you he wants to pretty much donate all of
Speaker 4: his wealth before he passes away. It seems like we're
Speaker 4: hearing more billionaires do that. Like there's the billionaires that
Speaker 4: go into space, but then there's also these these businessmen
Speaker 4: that have these major pledges, right.
Speaker 11: Right, I mean, he has signed the giving pledge and
Speaker 11: that I think that you guys could check me on this,
Speaker 11: but I think the goal there is to give away
Speaker 11: half your wealth in your during during your life, right,
Speaker 11: you know, but Bill Gates recently said his intention is
Speaker 11: to spend down the you know, his his his fortune, and.
Speaker 8: Dan Gilbert is very much the same.
Speaker 11: You know, he told me that he is having more
Speaker 11: fun giving the money away than he was accumulating it.
Speaker 11: He's got these causes, the health of downtown Detroit, downtown Cleveland,
Speaker 11: solving not just the disease that took the life of
Speaker 11: a son, but addressing the challenges faced by stroke victims.
Speaker 11: And you know, he wants he wants to leave an impact,
Speaker 11: and so he's still very much focused on Rocket.
Speaker 8: He's there two days.
Speaker 11: A week, but you know, he's also totally invested in
Speaker 11: these other causes and wants to see the impact of
Speaker 11: his philanthropy during the course of his life.
Speaker 8: Brad, great to talk to you.
Speaker 2: It's a great piece as well. Bradstone interviewing Dan Gilbert,
Speaker 2: of course, the founder of Rocket Companies formerly Quicken Loans,
Speaker 2: a really strong profile looking at him and the personal
Speaker 2: struggles he's facing on right now and struggles at the
Speaker 2: company as well, amidst this environment where interest rates are
Speaker 2: higher than they were back when it went went public.
Speaker 2: But commend that to everybody. You can read Brad's story
Speaker 2: on the Bloomberg and at Bloomberg dot com, Slash, BusinessWeek
Speaker 2: Bradstone the editor of BusinessWeek magazine and Emily I was
Speaker 2: just struck. I mean, he details so well the way
Speaker 2: that Dan Gilbert has faced these personal challenges himself. And
Speaker 2: again I go back to that photograph. It's such a
Speaker 2: clearly must have been a very poignant moment when having
Speaker 2: taken a number of photographs sitting down, he stood up
Speaker 2: for a couple shots standing up as well as he
Speaker 2: tries to get his ability to walk once again, and
Speaker 2: Brad alluding to the fact that this is a company
Speaker 2: now that's facing a bit of activist pressure talking about
Speaker 2: Value Act taking a nine point nine percent stake in
Speaker 2: this company, and I think a lot of that has
Speaker 2: to do with this issue of AI and the degree
Speaker 2: to which this company embraces it and begins to kind
Speaker 2: of use it in the mortgage business. You'll be fascinating
Speaker 2: to watch that going forward.
Speaker 4: And let's not forget that he's also the owner of
Speaker 4: an NBA.
Speaker 2: Team, Evliers.
Speaker 4: Bradstone pointed out that Gilbert actually persuaded Lebron James to
Speaker 4: return to the Calves after he had departed for the
Speaker 4: Miami Heat. Of course, now, yes, he's not at Cleveland,
Speaker 4: but I'm sure Bradstone, as a Cleveland guy, a Midwest guy,
Speaker 4: was happy.
Speaker 2: About that you could season send a championship while he
Speaker 2: was there, no small thing.
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