WEBVTT - Bloomberg Intelligence: Trump Tariffs Spark Market Volatility 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>All right, let's get more on the market. How to

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<v Speaker 2>manage all of this? At James Abatte's managing director and

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<v Speaker 2>chief investment officer at Center Asset Management. I mean, here's

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<v Speaker 2>my really dumb question, like do you sell and or

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<v Speaker 2>is there a level to buy? Like, I don't know

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<v Speaker 2>a more sophisticated question than that.

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<v Speaker 3>I don't know if it's a level. I mean, let's

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<v Speaker 3>think about what markets are doing with us today. But

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<v Speaker 3>let's look back at Friday. The selling on Friday, which

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<v Speaker 3>just indiscriminate. We have the highest volume day ever on

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<v Speaker 3>US trading. I mean ETF volume account for about forty

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<v Speaker 3>percent of the volume, which in these there was a

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<v Speaker 3>rush to either hedge or de lever positions. And I

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<v Speaker 3>think one of the things that was telling to us

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<v Speaker 3>is it even the safe havens like consumers, staples, healthcare, utilities,

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<v Speaker 3>even domestic infrastructure stocks participated fully in the drawdout, and

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<v Speaker 3>I told us that even for the short term, maybe

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<v Speaker 3>we might see some stabilization or of vicious counter trendorality

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<v Speaker 3>like we're seeing this morning. You know, the bottom line

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<v Speaker 3>for us is this is a terrific opportunity, you know,

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<v Speaker 3>for true active management, because we think we're on the

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<v Speaker 3>cusp of a potential market leadership pivot. We've been in

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<v Speaker 3>an environment for the last two years where it's been

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<v Speaker 3>the mag seven being the only source of returns, leading

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<v Speaker 3>to some extreme concentration. In fact, you know, we saw

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<v Speaker 3>a lot of large cap core mutual funds have to

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<v Speaker 3>change your investment policies to become non diversified funds because

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<v Speaker 3>of the top heavy buyes of the benchmark. So going

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<v Speaker 3>back to November, we came out very skeptical of the

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<v Speaker 3>analog of just following the Trump trade playbook despite the

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<v Speaker 3>post election rally, and stayed that way. But we've had

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<v Speaker 3>a tremendous reset in prices. We've seen a rallying treasuries

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<v Speaker 3>that I think, you know, leads to opportunities in certain segments.

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<v Speaker 4>Of the market, like the regional banks.

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<v Speaker 3>You've got treasuries that have prepared the balance sheets fed cuts.

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<v Speaker 3>We're the most bullsh on regional banks probably since nineteen

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<v Speaker 3>ninety six. I don't want to date myself, because they're

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<v Speaker 3>going to be growing and really be the leadership of

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<v Speaker 3>the market, we think, because they'll be financing the industrial

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<v Speaker 3>heartwain and build out. So our point of investors is

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<v Speaker 3>now is the time to have a main street portfolio,

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<v Speaker 3>not a Wall Street portfolio. And that's really a key

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<v Speaker 3>thing for us.

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<v Speaker 5>So what is I guess the constituents of that kind

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<v Speaker 5>of portfolio, what are the themes driving it?

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<v Speaker 3>The themes that would drive it are basically regional banks, utilities,

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<v Speaker 3>other domestic infrastructure plays. I think the first thing to

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<v Speaker 3>remember and why we were kind of bearish heading into

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<v Speaker 3>this year, was that markets with price with perfection, you know,

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<v Speaker 3>inequity risk premium that was essentially zero credit risk was

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<v Speaker 3>essentially dismissing any potential of disruption for us.

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<v Speaker 4>Deep Seat, the announcement of deep Seat.

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<v Speaker 3>Was the first match that was thrown on an over

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<v Speaker 3>valued mag seven driven market. The teriffs were kind of

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<v Speaker 3>an accelerate. So I think the real key thing to

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<v Speaker 3>look here for is on the other side of this trade,

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<v Speaker 3>where we do get a rally. I would expect this

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<v Speaker 3>to be in an environment where a mag seven does

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<v Speaker 3>not lead the other side of the cell here, and

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<v Speaker 3>I think that will be confirmation that a Main Street

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<v Speaker 3>driven portfolio, not a Wall Street driven portfolio, will be

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<v Speaker 3>the one to.

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<v Speaker 4>Lead us out.

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<v Speaker 2>Main Street has also and will be hit. I mean,

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<v Speaker 2>as we were just talking about earlier with Morgan Stanley

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<v Speaker 2>is downgrading all the banks. Yes, the ones with the

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<v Speaker 2>capital market exposure get hit first, but the mid size banks,

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<v Speaker 2>the regional banks, they're not going to be spared either.

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<v Speaker 4>Well, we'll think about that or how much of that

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<v Speaker 4>has already reflected.

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<v Speaker 3>Many of these regional banks, whether it's key regions, they're

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<v Speaker 3>trading it less than book value. Many of them have

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<v Speaker 3>seen an inflection and the return on equity. But most

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<v Speaker 3>of the pain in the regional banks occurred when we

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<v Speaker 3>had the sell off driven by the failure of Silicon

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<v Speaker 3>Valley Bank and some.

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<v Speaker 4>Of the others. They have not yet been in the

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<v Speaker 4>growth mode.

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<v Speaker 3>Clearly, there could be some credit issues on the lower

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<v Speaker 3>end of the consumer, but the concentration of commercial real

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<v Speaker 3>estate problems is really dominated in the money center bank.

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<v Speaker 3>So as we would avoid the money centers and really

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<v Speaker 3>for the first time have an opportunity further down on

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<v Speaker 3>the capitalization spectrum with the regional banks.

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<v Speaker 5>So what's the how do you price in this environment

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<v Speaker 5>where now, James, do you think it's something that is

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<v Speaker 5>going to be a longer term issue for this economy?

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<v Speaker 3>Well, I think when we saw President Trump announced potentially

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<v Speaker 3>that there'll be a stay on most tariffs except for China.

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<v Speaker 3>I mean, China is the primary target and going to

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<v Speaker 3>be the biggest loser. I mean the fact that the

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<v Speaker 3>market sold off on their retaliation to the US on

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<v Speaker 3>Friday is kind of, in a fundamental sense immaterial.

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<v Speaker 4>I mean, our biggest exports of.

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<v Speaker 3>China are soybeans, coal, almonds and other things. I mean,

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<v Speaker 3>the US owns the asset that China and everybody needs.

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<v Speaker 3>The US consumer market the key theater.

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<v Speaker 4>And remember with all of this is.

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<v Speaker 3>That you know it's we should stay away from blaming China.

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<v Speaker 3>It was the US multinational companies that closed down US

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<v Speaker 3>production facilities to gain access to cheaper labor and loose

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<v Speaker 3>environmental concerns, and now they're the ones that have to

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<v Speaker 3>reap the negative consequences of those technology transfers.

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<v Speaker 4>As well as the intellectual.

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<v Speaker 5>Property teams that the proper allocation of capital. Why produce something,

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<v Speaker 5>don't you want to produce it in the lowest cost

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<v Speaker 5>environment to pass on the cost savings to US consumers

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<v Speaker 5>through lower prices and lower inflation.

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<v Speaker 4>Sure, would you.

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<v Speaker 3>Rather be unemployed and have access to a seventy nine

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<v Speaker 3>dollars flore having jobs?

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<v Speaker 5>Unemployee? We've got apployment, James, James, we've got full employment here.

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<v Speaker 5>Who's unemployed?

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<v Speaker 3>Well, it's it's the quality of the jobs. It's terming

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<v Speaker 3>about the competitive edge that you can have as a country.

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<v Speaker 3>There are security concerns, I think when you look back.

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<v Speaker 5>Okay, so it's not economic, it's security.

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<v Speaker 4>It's both.

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<v Speaker 3>Actually, you have to have national security issues. I mean,

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<v Speaker 3>let's forget that, Chuck Schumer back.

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<v Speaker 5>Into the fact that we widgets are being made in China.

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<v Speaker 5>That's a security concern to you.

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<v Speaker 4>That's not where Trump is going after. He wants the

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<v Speaker 4>high value out of things like automrkety is going out.

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<v Speaker 3>Technology, pharmaceuticals. That's where he's trying to gear it up, toys,

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<v Speaker 3>other things.

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<v Speaker 4>Those are not really on the radar.

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<v Speaker 5>Pharmaceutical companies are in New Jersey, James, Thanks for journey

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<v Speaker 5>Appreciate it. James About, the managing director and chief investment

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<v Speaker 5>officer of Center Asset Management, Appreciate it.

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<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 1>weekdays at ten a m. Eastern on Applecarcklay and Android

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<v Speaker 2>All right, let's go to the autos because they ain't

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<v Speaker 2>getting any love you got. GM stock is down by

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<v Speaker 2>about another three point seven percent. Kevin Tynan is director

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<v Speaker 2>of research at the Presidio Group A joining us to

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<v Speaker 2>discuss all things auto. Kevin, I mean, how bad can

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<v Speaker 2>it get for these guys? Like, where's the low here

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<v Speaker 2>in these in the stocks?

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<v Speaker 5>You know?

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<v Speaker 6>The interesting thing, Alex is that if this is, if

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<v Speaker 6>tariffs are a supply constraint for the auto industry, for

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<v Speaker 6>the US auto industry going forward, the last time we

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<v Speaker 6>had a supply constraint, from twenty twenty to twenty twenty

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<v Speaker 6>three was actually the most profitable time for the dealer

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<v Speaker 6>groups and for manufacturers. So it kind of puts supply

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<v Speaker 6>and demand, or has the potential to put supply and

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<v Speaker 6>demand back in balance and or utilize more of the

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<v Speaker 6>domestic capacity. And this actually could be a good thing

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<v Speaker 6>because we're not oversupplied with this narrow margin environment that

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<v Speaker 6>this industry has struggled with for decades. So it's kind

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<v Speaker 6>of interesting that it looks like an opportunity because you're

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<v Speaker 6>talking about tightening up pricing or firming up pricing and

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<v Speaker 6>expanding margins going forward.

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<v Speaker 2>Guys jump in on that for one second. Yeah, but

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<v Speaker 2>then we've heard like you have Ford, I think Volkswagen

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<v Speaker 2>also like Volkswagen's laying off some workers in the US,

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<v Speaker 2>Ford is now discounting their cars or to get people

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<v Speaker 2>in the lot. That feels really different from twenty twenty.

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<v Speaker 4>Well, the difference is it effects.

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<v Speaker 6>Where twenty twenty was supply chain disruption across the board, right,

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<v Speaker 6>almost everybody was impacted the same. Because the supply chain

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<v Speaker 6>is common through a lot of automakers. This is very

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<v Speaker 6>different depending on what your production footprint looks like. So

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<v Speaker 6>for those right, for example, if you look at US

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<v Speaker 6>automotive factories in the fourth quarter, utilization was sixty five percent,

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<v Speaker 6>right where you're really looking for eighty eighty plus to be,

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<v Speaker 6>you know, utilization for your auto factories in this country.

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<v Speaker 6>So the idea is that you're going to have manufacturers

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<v Speaker 6>that don't have enough capacity here to ramp up and

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<v Speaker 6>are going to be penalized by that. And then you

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<v Speaker 6>have the ability for manufacturers who do have capacity here

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<v Speaker 6>that is being underutilized to ramp up output output to

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<v Speaker 6>make up some of that difference or those lost units.

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<v Speaker 6>The way I look at it as this right, sixteen

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<v Speaker 6>million units were sold in the US in twenty twenty four,

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<v Speaker 6>about eleven million were produced here. So if you think

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<v Speaker 6>about five million units in play, whether they get built

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<v Speaker 6>or not built, there's the opportunity for domestic capacity to

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<v Speaker 6>absorb some of those five million units. And when you

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<v Speaker 6>think about it, twenty twenty two, which was the most

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<v Speaker 6>profitable year for manufacturers and dealers, was only a thirteen

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<v Speaker 6>point eight million unit market, So this can be profitable

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<v Speaker 6>for manufacturers on smaller volume. And I think the headline

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<v Speaker 6>is this takes units out overall and that all sales

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<v Speaker 6>are good sales, which isn't necessarily true. This will improve

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<v Speaker 6>the quality of sales because supplying the man will be

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<v Speaker 6>in balance.

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<v Speaker 5>Okay, that's what I thought too. That's why I'm very

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<v Speaker 5>surprised that auto stocks have been trading down. Shouldn't this

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<v Speaker 5>be the tariff environment? Should this not be good news?

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<v Speaker 6>Eventually it should be right if that's if it goes

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<v Speaker 6>according to plan, where now we're at eighty percent capacity

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<v Speaker 6>for our automotive factories. The other thing too, and I

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<v Speaker 6>think Paul the burden on the manufacturers because they have

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<v Speaker 6>to right size or utilize more of that capacity. That

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<v Speaker 6>lift is heavier for the manufacturing base than it is

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<v Speaker 6>for the retailers. The retailers went through this process of

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<v Speaker 6>supply constraint fewer units and have sort of rationalized their

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<v Speaker 6>cost structure more recently than the manufacturers did. Right, They

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<v Speaker 6>idled plants, but they really didn't take out that capacity.

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<v Speaker 6>So I think there's a little bit more of a

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<v Speaker 6>longer lead time to get that production where it needs

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<v Speaker 6>to be. And that's a global issue, right. Automotive capacity

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<v Speaker 6>globally is a problem and some of it needs to

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<v Speaker 6>come out. So I think you're going to see a

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<v Speaker 6>different impact on the manufacturing stocks versus the retailer stocks.

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<v Speaker 6>And at the end of the day, the consumer ultimately

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<v Speaker 6>just pays more for everything.

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<v Speaker 2>That's such an interesting take. Let me add on one

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<v Speaker 2>more layer. What about the steel and aluminum tariffs and

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<v Speaker 2>pretty much tariffs. That's the input part. You mentioned that

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<v Speaker 2>we could maybe absorb about those five million cars that

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<v Speaker 2>were bought that weren't made in the US. What's the

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<v Speaker 2>layer though on top of that when it comes to

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<v Speaker 2>these derivative tariffs, and I.

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<v Speaker 6>Think that's an impact on the supply base, right, You're

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<v Speaker 6>going to have some suppliers smaller and depending again what

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<v Speaker 6>your production footprint looks like, that are very much impacted.

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<v Speaker 6>Where there may be one or few big contracts where

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<v Speaker 6>margins are razor thin that this throws everything out of balance.

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<v Speaker 6>But again, even if you think about that at the

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<v Speaker 6>materials and the supplier tier two three going to be

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<v Speaker 6>a problem at the end of the day, that's supply constraint,

0:12:16.360 --> 0:12:19.920
<v Speaker 6>and as you move through the value chain, that impacts

0:12:20.040 --> 0:12:24.679
<v Speaker 6>the manufacturers differently or the retailers differently. If you think

0:12:24.720 --> 0:12:28.520
<v Speaker 6>about the US auto market going back, it's least profitable

0:12:28.559 --> 0:12:31.840
<v Speaker 6>when there's the most inventory we're and it's the most

0:12:31.880 --> 0:12:35.199
<v Speaker 6>profitable when there's the least inventory. So we're moving to

0:12:35.320 --> 0:12:38.640
<v Speaker 6>this period where we're coming out of a rebuild of

0:12:38.720 --> 0:12:42.640
<v Speaker 6>inventory back to dangerous levels, I would argue, and that

0:12:42.800 --> 0:12:45.520
<v Speaker 6>gets right sized back to a two to one ratio

0:12:45.679 --> 0:12:48.760
<v Speaker 6>inventory to sales, and it's actually a good thing longer term.

0:12:48.800 --> 0:12:52.040
<v Speaker 6>There's going to be some pain right now in the uncertainty,

0:12:52.640 --> 0:12:55.920
<v Speaker 6>but if it's according to plan, supply and demand come

0:12:56.000 --> 0:12:57.640
<v Speaker 6>and balance and margins are just better.

0:12:58.400 --> 0:13:01.160
<v Speaker 5>Kevin, we got about a minute left. Does this uncertainty

0:13:01.200 --> 0:13:05.480
<v Speaker 5>in the auto business impact the changeover to EV's I'm

0:13:05.480 --> 0:13:07.440
<v Speaker 5>not even sure where we are there, but is there

0:13:07.440 --> 0:13:07.880
<v Speaker 5>an impact?

0:13:09.400 --> 0:13:11.920
<v Speaker 6>Yeah, I mean, and I think that was happening happening

0:13:12.120 --> 0:13:15.480
<v Speaker 6>organically anyway. I think what's what this does, or this

0:13:15.640 --> 0:13:18.559
<v Speaker 6>administration does, is it takes some of the demand levers

0:13:18.720 --> 0:13:22.120
<v Speaker 6>out of there, which relieves some of the financial pressure

0:13:22.760 --> 0:13:28.360
<v Speaker 6>on manufacturers to do a technology that has proven unprofitable.

0:13:29.080 --> 0:13:31.800
<v Speaker 6>So I think you're starting to see that at state

0:13:31.880 --> 0:13:35.079
<v Speaker 6>by state level. In terms of the California Air Resources

0:13:35.120 --> 0:13:40.079
<v Speaker 6>Board waivers, Virginia didn't go for theirs. There's talk about

0:13:40.160 --> 0:13:43.480
<v Speaker 6>every other state saying like, we can't go one hundred

0:13:43.520 --> 0:13:47.040
<v Speaker 6>percent EV or battery electric and plug in harbrid by

0:13:47.120 --> 0:13:51.400
<v Speaker 6>twenty thirty five, we're going to lose units to noncarved states.

0:13:52.440 --> 0:13:55.480
<v Speaker 6>So I think you're starting to see that that pressure

0:13:55.720 --> 0:13:59.400
<v Speaker 6>from government back off a little bit and let the

0:14:00.120 --> 0:14:02.839
<v Speaker 6>market be a little bit more organic and grow that

0:14:03.000 --> 0:14:03.920
<v Speaker 6>demand naturally.

0:14:04.280 --> 0:14:06.800
<v Speaker 5>All right, Kevin, Kevin, great to talk with you, as always.

0:14:06.840 --> 0:14:09.160
<v Speaker 5>Kevin Tyn and Director of Research at the Presidio Group,

0:14:09.400 --> 0:14:11.760
<v Speaker 5>joining us from New Jersey via zoom. Appreciate getting some

0:14:11.880 --> 0:14:12.400
<v Speaker 5>of his time.

0:14:14.120 --> 0:14:17.800
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:14:17.920 --> 0:14:21.240
<v Speaker 1>weekdays at ten am Eastern on Applecarplay and Android Auto

0:14:21.400 --> 0:14:24.400
<v Speaker 1>with the Bloomberg Business App. Listen on demand wherever you

0:14:24.520 --> 0:14:27.480
<v Speaker 1>get your podcasts, or watch us live on YouTube.

0:14:28.440 --> 0:14:31.880
<v Speaker 5>Think back to the election, to the turn of the calendar.

0:14:31.920 --> 0:14:35.280
<v Speaker 5>You're into twenty twenty five animal spirits, and nowhere did

0:14:35.320 --> 0:14:38.200
<v Speaker 5>animal spirits run more rampant than on Global Wall Street.

0:14:38.240 --> 0:14:40.280
<v Speaker 5>Let's get some deal making. You're gonna have be easy money.

0:14:40.320 --> 0:14:43.560
<v Speaker 5>We're gonna have less regulation, we're gonna have pro business policies.

0:14:43.640 --> 0:14:45.600
<v Speaker 2>Capital market, it's gonna be wide open, yep.

0:14:45.680 --> 0:14:46.960
<v Speaker 4>And let's go rip it.

0:14:47.320 --> 0:14:50.400
<v Speaker 5>A little bit different tone here today, particularly punctuated by

0:14:50.440 --> 0:14:52.160
<v Speaker 5>the letter from Jamie Diamond to his shareholders.

0:14:52.200 --> 0:14:52.360
<v Speaker 6>Here.

0:14:52.760 --> 0:14:55.320
<v Speaker 5>Stritenana Rogen joins us here a Bloomberg News He's a

0:14:55.360 --> 0:14:58.600
<v Speaker 5>senior financial reporter. Sree Times have changed, my friend, over

0:14:58.600 --> 0:15:01.200
<v Speaker 5>the last few months. What are your sources on Wall

0:15:01.240 --> 0:15:05.880
<v Speaker 5>Street saying about deal making IPOs? I see a big

0:15:06.040 --> 0:15:08.560
<v Speaker 5>loan got postponed today to fund the buyout.

0:15:08.680 --> 0:15:09.720
<v Speaker 4>So what's happening?

0:15:10.040 --> 0:15:12.960
<v Speaker 7>And they're looking for dog walking appointments. I mean, look,

0:15:13.040 --> 0:15:16.120
<v Speaker 7>the sentiment is honestly captured by Isabel's story today, where

0:15:16.160 --> 0:15:17.560
<v Speaker 7>if you look at the big take we have out

0:15:17.600 --> 0:15:20.400
<v Speaker 7>on Bloomberg today, the Headlindal trays Wall Street is just

0:15:20.520 --> 0:15:23.200
<v Speaker 7>collateral damage in Trump's trade war. Both of you are

0:15:23.280 --> 0:15:27.080
<v Speaker 7>right five months ago, when after the election, the biggest

0:15:27.160 --> 0:15:30.680
<v Speaker 7>reaction in the markets came from these firms index to

0:15:30.800 --> 0:15:33.760
<v Speaker 7>Wall Street, Index to deal Making Index to Capital Markets,

0:15:33.760 --> 0:15:36.640
<v Speaker 7>who were certain that regulation was going to go down,

0:15:36.720 --> 0:15:38.400
<v Speaker 7>all the obstacles going to get out of their way,

0:15:38.440 --> 0:15:40.880
<v Speaker 7>and it was going to be boom time for their business.

0:15:41.160 --> 0:15:45.040
<v Speaker 7>The only problem was they were not taking President Donald

0:15:45.080 --> 0:15:47.760
<v Speaker 7>Trump seriously, or at least President elect Donald Trump or

0:15:47.800 --> 0:15:52.280
<v Speaker 7>the man who was campaigning to be president seriously when

0:15:52.360 --> 0:15:56.880
<v Speaker 7>on the campaign trail repeatedly he talked about his decades

0:15:57.160 --> 0:16:01.120
<v Speaker 7>long desire to change the global trade order. Tariffs are

0:16:01.200 --> 0:16:05.120
<v Speaker 7>not something that's an idea that's been injected in Trump's

0:16:05.120 --> 0:16:07.080
<v Speaker 7>head in the last week or two weeks or a

0:16:07.080 --> 0:16:09.600
<v Speaker 7>few weeks before that. He's been talking about that for

0:16:09.760 --> 0:16:12.800
<v Speaker 7>nearly forty years. The problem was Wall Street refused to

0:16:12.840 --> 0:16:15.840
<v Speaker 7>take that seriously. Now they're being forced to confront it,

0:16:16.680 --> 0:16:18.600
<v Speaker 7>and the reaction hasn't been great.

0:16:19.320 --> 0:16:21.360
<v Speaker 2>And Jamie Diamond talked about in his letter right that

0:16:21.600 --> 0:16:25.040
<v Speaker 2>there could be irreversible damage if it's not turned around

0:16:25.120 --> 0:16:28.360
<v Speaker 2>or change relatively quickly. What did that entail? What was

0:16:28.400 --> 0:16:30.080
<v Speaker 2>that really speaking to and to.

0:16:30.120 --> 0:16:32.200
<v Speaker 7>Me, it was interesting that Jamie said that again his

0:16:32.360 --> 0:16:34.800
<v Speaker 7>annual shareholder letters something that people look forward to, not

0:16:34.960 --> 0:16:38.360
<v Speaker 7>necessarily the Warren Buffett letter, but with his stature as

0:16:38.440 --> 0:16:41.360
<v Speaker 7>the elder statesman in the banking sector, every time Jamie

0:16:41.360 --> 0:16:43.880
<v Speaker 7>Diamond has something to say, people pay attention. It's a

0:16:43.960 --> 0:16:47.200
<v Speaker 7>sixty page missive, so most of it was written weeks

0:16:47.240 --> 0:16:49.880
<v Speaker 7>and months in advance, but there was a lot of

0:16:49.960 --> 0:16:52.040
<v Speaker 7>changes made in the last forty eight hours. And the

0:16:52.120 --> 0:16:54.400
<v Speaker 7>one that we're all drilling into is the is this

0:16:54.520 --> 0:16:57.760
<v Speaker 7>commentary on Tariff's and he's clear that that the longer

0:16:58.080 --> 0:17:02.600
<v Speaker 7>this goes on, the negative effects negative impact will be cumulative,

0:17:02.960 --> 0:17:04.720
<v Speaker 7>and that's what a lot of people have been talking

0:17:04.760 --> 0:17:07.000
<v Speaker 7>about even if you start trying to change course, you

0:17:07.080 --> 0:17:09.720
<v Speaker 7>try to negotiate those a commentary from a Goldman partner

0:17:09.760 --> 0:17:11.600
<v Speaker 7>over the weekend who said, it's really hard to put

0:17:11.680 --> 0:17:15.159
<v Speaker 7>the toothpaste back in the tube once it's out. And

0:17:15.280 --> 0:17:18.440
<v Speaker 7>that's the concern for Waltreet. If you are taking away

0:17:18.520 --> 0:17:22.240
<v Speaker 7>the critical ingredient that businesses need, that bankers need, that

0:17:22.320 --> 0:17:25.879
<v Speaker 7>the economy needs, which is certainty that gives you confidence,

0:17:26.440 --> 0:17:27.800
<v Speaker 7>then what hope do you have?

0:17:28.280 --> 0:17:30.480
<v Speaker 5>Did the big global investment banks just refresh my memory?

0:17:30.520 --> 0:17:32.199
<v Speaker 5>Do they provide earnings guidance?

0:17:32.400 --> 0:17:37.800
<v Speaker 7>Typically they generally tend to talk about what their quarter

0:17:37.960 --> 0:17:40.160
<v Speaker 7>is looking like. But the problem is when they start

0:17:40.200 --> 0:17:43.360
<v Speaker 7>reporting earnings starting Friday and through the middle of next week,

0:17:43.720 --> 0:17:45.240
<v Speaker 7>you will see that a lot of the numbers that

0:17:45.280 --> 0:17:47.280
<v Speaker 7>they forecast, a lot of the numbers they talked about,

0:17:47.400 --> 0:17:50.720
<v Speaker 7>which was especially relative to trading expectations and even deal

0:17:50.800 --> 0:17:53.720
<v Speaker 7>making expectations, they will match them, perhaps even beat them.

0:17:54.040 --> 0:17:56.760
<v Speaker 7>But nobody really cares anymore because we do not want

0:17:56.800 --> 0:17:59.040
<v Speaker 7>to know what they did between jan one and March thirty.

0:17:59.080 --> 0:18:02.400
<v Speaker 7>First one is paying attention to how badly they will

0:18:02.440 --> 0:18:04.600
<v Speaker 7>be hit going forward. Morgan Stanley's out with a note

0:18:04.640 --> 0:18:08.280
<v Speaker 7>today downgrading the entire banking sector and the breakdown there

0:18:08.359 --> 0:18:12.080
<v Speaker 7>is interesting. They talk about how someone like a Goldman Sachs,

0:18:12.400 --> 0:18:15.840
<v Speaker 7>you will see the immediate impact because the twitch reaction

0:18:16.000 --> 0:18:19.480
<v Speaker 7>in capital markets and deal making is just it's a snap,

0:18:19.800 --> 0:18:23.240
<v Speaker 7>you see it. It's evident with respect to slowing down

0:18:23.320 --> 0:18:26.560
<v Speaker 7>of loan growth and consumer books at banks or consumers

0:18:26.640 --> 0:18:29.280
<v Speaker 7>falling behind on their loans, that is still something that's

0:18:29.320 --> 0:18:31.960
<v Speaker 7>out in the future. And perhaps you know, if you're

0:18:32.000 --> 0:18:36.320
<v Speaker 7>able to somehow navigate through this tariff, whether it's a

0:18:36.359 --> 0:18:39.280
<v Speaker 7>negotiation or a negotiation, whether he goes away with with

0:18:39.640 --> 0:18:41.760
<v Speaker 7>sort of the worst case scenario or dials it back

0:18:41.800 --> 0:18:43.920
<v Speaker 7>a bit, that could have an impact on those things.

0:18:43.960 --> 0:18:46.560
<v Speaker 7>But where you're seeing the immediate impact just the fact

0:18:46.600 --> 0:18:49.040
<v Speaker 7>that it is hanging out there is deal making, is

0:18:49.160 --> 0:18:52.760
<v Speaker 7>capital markets, and when that is shut, banks and firms

0:18:52.840 --> 0:18:55.520
<v Speaker 7>that are indexed to that part of the business are

0:18:55.560 --> 0:18:56.600
<v Speaker 7>going to bear the brunt of it.

0:18:56.880 --> 0:18:59.880
<v Speaker 2>Okay, but but but but just there's not a last

0:19:00.160 --> 0:19:02.680
<v Speaker 2>Like ten minutes stocks have just turned around. Now you

0:19:02.720 --> 0:19:04.000
<v Speaker 2>have the S and p up say one and a

0:19:04.040 --> 0:19:06.720
<v Speaker 2>half percent. You got bonds selling off hard on that

0:19:06.880 --> 0:19:09.159
<v Speaker 2>back end, like kind of out of nowhere. Isn't that

0:19:09.240 --> 0:19:11.560
<v Speaker 2>volatility supposed to be good for banks?

0:19:12.520 --> 0:19:15.720
<v Speaker 7>It turned around is a strong word, because yes, if

0:19:15.800 --> 0:19:20.080
<v Speaker 7>you if you checked that, if you if you're checked

0:19:20.119 --> 0:19:22.399
<v Speaker 7>out Friday evening and came in Monday morning and you're

0:19:22.440 --> 0:19:24.160
<v Speaker 7>down one and a half percent, that's still bad news.

0:19:24.280 --> 0:19:26.439
<v Speaker 7>But yes, if your weekend ended at six pm Sunday

0:19:26.440 --> 0:19:28.440
<v Speaker 7>and you were watching Bloomberg surveillance last night and you

0:19:28.520 --> 0:19:31.080
<v Speaker 7>saw stock futures at down five percent, you started this

0:19:31.200 --> 0:19:33.040
<v Speaker 7>morning down four and a half percent, down one and

0:19:33.040 --> 0:19:36.359
<v Speaker 7>a half percent, is not that bad. But again, this

0:19:36.600 --> 0:19:39.440
<v Speaker 7>is this is not your volatility. This is not good volatility.

0:19:39.520 --> 0:19:42.800
<v Speaker 7>This is not even informed market reaction. At this point,

0:19:42.880 --> 0:19:45.400
<v Speaker 7>people are just trying to get how long can this last?

0:19:45.520 --> 0:19:47.880
<v Speaker 7>Will there be a flip? Donald Trump himself has come

0:19:47.920 --> 0:19:51.040
<v Speaker 7>out with tons of messages, including his excitement about meeting

0:19:51.080 --> 0:19:53.120
<v Speaker 7>the Dodgers at the White House this morning. So maybe

0:19:53.160 --> 0:19:54.880
<v Speaker 7>that's what's causing the positive market reaction.

0:19:55.000 --> 0:19:57.520
<v Speaker 5>We just don't know, right, We'll.

0:19:57.400 --> 0:19:57.879
<v Speaker 4>Stick with that.

0:19:58.040 --> 0:20:00.520
<v Speaker 5>I think that might be the winning forecast there. Shread

0:20:00.560 --> 0:20:03.080
<v Speaker 5>Don Roger, and thanks so much for joining us giving

0:20:03.160 --> 0:20:04.800
<v Speaker 5>us the thoughts kind of how Wall Street's trying to

0:20:04.840 --> 0:20:08.240
<v Speaker 5>price in some of this uncertain to hear from the terrorist.

0:20:08.960 --> 0:20:13.639
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:20:13.840 --> 0:20:17.280
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0:20:17.359 --> 0:20:20.800
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0:20:21.240 --> 0:20:24.680
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0:20:25.160 --> 0:20:28.080
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0:20:28.520 --> 0:20:30.720
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