WEBVTT - Bloomberg Surveillance TV: January 10, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.320 Terminal and the Bloomberg Business App. Mohammad al Erin of 0:00:37.360 --> 0:00:39.800 Queens College, Cambridge staying focused on the bond market and 0:00:39.840 --> 0:00:43.159 writing some label twenty twenty four as US brink in 0:00:43.240 --> 0:00:46.640 the return of bond Vigilantes. This greater focus on debt 0:00:46.680 --> 0:00:49.800 and political stability is likely to continue into twenty five, 0:00:50.240 --> 0:00:53.000 as will the extent of dispersion between the United States, 0:00:53.280 --> 0:00:56.560 the Eurozone and Japan. Please to welcome a good friend 0:00:56.560 --> 0:00:59.160 of all of ours, Muhammad al Aerian Muhammad, Good morning, 0:00:59.280 --> 0:01:01.240 Good morning John, and a happy new year to years. 0:01:01.280 --> 0:01:03.520 The final Derby Concerts January tenth, So say it, oh there, 0:01:03.560 --> 0:01:06.959 Rose of Bloomberg Survivance Mohammed. Are the bond virgiliancies back 0:01:07.000 --> 0:01:09.120 and if so, what's changed? Why are they back? 0:01:09.840 --> 0:01:12.720 They're back because of three issues, as you know, John, 0:01:12.880 --> 0:01:18.520 One is consistently stronger than expected US economic data. Two 0:01:18.560 --> 0:01:22.480 is the understanding that inflation will be sticky, and three 0:01:23.319 --> 0:01:26.199 is as we needed focus now on debt and deficits. 0:01:26.440 --> 0:01:29.840 Put these three things together, the US leads a global 0:01:29.880 --> 0:01:32.160 bond sell off, and then what that sell off does. 0:01:32.920 --> 0:01:37.320 It picks vulnerabilities in the system and weaknesses, and it 0:01:37.360 --> 0:01:40.680 wouldn't have been good afternoon Britain. Would have just been 0:01:40.720 --> 0:01:44.920 afternoon Britain because they are facing the combination the emerging market, 0:01:44.959 --> 0:01:48.480 combination of higher yields and lower currency, which is really 0:01:48.480 --> 0:01:49.480 bad news for them right now. 0:01:49.520 --> 0:01:51.360 How much of that is in their own control. 0:01:51.960 --> 0:01:55.080 Some of it is in their own control, and it 0:01:55.120 --> 0:01:59.040 is a golden opportunity for this government to redouble or 0:01:59.040 --> 0:02:04.240 westart is economic approach, which has lost its way a 0:02:04.240 --> 0:02:07.320 little bit in the last few months. But they will 0:02:07.320 --> 0:02:11.320 be looking at the US jobs report and critically the 0:02:11.400 --> 0:02:14.239 CPI coming up. You know, it's not so long ago, 0:02:14.280 --> 0:02:16.480 Lisa that we used to say, okay, forget about CPI. 0:02:16.560 --> 0:02:19.880 Inflation's under control all that matters the jobs report. Now 0:02:19.919 --> 0:02:23.760 suddenly we've realized that both are in play, inflation and 0:02:24.200 --> 0:02:25.359 the employment spot. 0:02:25.440 --> 0:02:27.880 So when we say afternoon in Great Britain, because no 0:02:27.919 --> 0:02:30.840 one's saying it's particularly good right now, what is better 0:02:30.919 --> 0:02:34.800 for them an upside surprise to labor markets or downside 0:02:34.840 --> 0:02:38.400 surprise at a time when potentially that could spur some 0:02:38.440 --> 0:02:41.280 sort of risk off move, at a time when even 0:02:41.280 --> 0:02:44.359 in the United States people really questioning the sustainability of 0:02:44.639 --> 0:02:45.359 what's going on. 0:02:45.520 --> 0:02:47.520 Yeah, and that's the if in the US you really 0:02:47.520 --> 0:02:50.400 want an upside surprise, if we had the choice between 0:02:50.400 --> 0:02:52.480 the two, you take an upside surprise. If you're in Britain, 0:02:52.520 --> 0:02:56.280 you take a downside surprise. Yields have got to stabilize 0:02:56.320 --> 0:03:01.080 otherwise you're risk triggering these dynamics that can really hurt. 0:03:01.520 --> 0:03:04.079 So they would look, they would hope for a downside 0:03:04.080 --> 0:03:07.480 surprise that brings yields down here and puts down the 0:03:07.560 --> 0:03:08.560 pressure on their yields. 0:03:08.800 --> 0:03:11.400 When you talk about bond vigilantes and how they find 0:03:11.440 --> 0:03:14.680 the most vulnerable spots, how long is it before they 0:03:14.680 --> 0:03:17.560 find the United States particularly vulnerable? And this sort of 0:03:17.600 --> 0:03:20.560 goes to the heart of the question that Torsten Slock raised, 0:03:20.600 --> 0:03:23.120 which is, it is highly unusual to see the long 0:03:23.240 --> 0:03:26.000 end yield rise by one hundred basis points after a 0:03:26.080 --> 0:03:28.200 series of one hundred basist points are very cuts from 0:03:28.200 --> 0:03:30.320 the Federal Reserve. Do you have a sense that maybe 0:03:30.600 --> 0:03:32.360 the US is one of those vulnerable spots at this 0:03:32.400 --> 0:03:34.400 point in relative terms? No? 0:03:34.720 --> 0:03:36.520 You know, you've heard me say over and over again, 0:03:36.600 --> 0:03:39.160 the good, the bad, and the ugly. The good is 0:03:39.760 --> 0:03:43.120 the US, The baddest China, and the UK is Europe, 0:03:43.160 --> 0:03:47.160 including the UK. The ugly is Europe, including the UK. 0:03:47.400 --> 0:03:51.800 So US, China, Europe, including the UK. They'll focus on 0:03:52.200 --> 0:03:55.040 the ugly first and then they'll creed pop. 0:03:55.320 --> 0:03:57.200 The US has. 0:03:57.440 --> 0:04:00.880 A particularly a good spot because higher yields here associated 0:04:00.920 --> 0:04:03.360 with stronger growth. That is not the case in Europe. 0:04:03.680 --> 0:04:05.680 So why do you think the Federal Reserve is so confused? 0:04:06.720 --> 0:04:09.160 At least they sound confused by some on these conference 0:04:09.200 --> 0:04:09.920 back in December. 0:04:10.160 --> 0:04:11.160 How much time do we have? 0:04:11.280 --> 0:04:12.560 We've got enough time to get through it all. 0:04:13.400 --> 0:04:16.760 Okay, So they've been confusing their analysis, they've been confused 0:04:16.760 --> 0:04:20.120 in their communication, they've been confusing their approach. When you're 0:04:20.200 --> 0:04:23.360 data dependent and you're just looking at the future through 0:04:23.440 --> 0:04:26.000 the lens of the past. You will get more and 0:04:26.040 --> 0:04:30.320 more confused as we go through these changes. And we 0:04:30.360 --> 0:04:33.760 haven't even talked about policy uncertainty, which adds is the 0:04:33.880 --> 0:04:36.920 reality is right now we could solve at different levels 0:04:36.920 --> 0:04:40.200 of employment and inflation. Whatever scenario you had for recession, 0:04:40.640 --> 0:04:45.800 soft landing, no landing, whatever probabilities you had, now each 0:04:45.839 --> 0:04:48.960 of them is associated with different levels of inflation, and 0:04:49.040 --> 0:04:52.359 that is new. So the Fed, and you've heard me 0:04:52.400 --> 0:04:54.560 say this for a long time, has got to get 0:04:54.560 --> 0:04:58.040 more strategic in this approach and has has got to 0:04:58.040 --> 0:04:59.839 stop being excessively data dependent. 0:05:00.279 --> 0:05:03.440 They say this word, this phrase that you use policy uncertainty, 0:05:03.480 --> 0:05:05.120 and when I hear it, I just think Donald Trump. 0:05:05.279 --> 0:05:07.200 Well they actually mean to say it's Donald Trump. And 0:05:07.240 --> 0:05:08.400 you saw that in the minutes, and I think we 0:05:08.400 --> 0:05:10.680 heard that in the news conference with Chairman Poal. I'm 0:05:10.680 --> 0:05:12.839 struggling to understand this, and I'd love your opinion on this. 0:05:13.520 --> 0:05:16.719 Why some officials on the Federal Reserve are willing to 0:05:16.800 --> 0:05:20.320 preemp policy changes and factor that into their observations and 0:05:20.360 --> 0:05:24.080 their forecasts, but unwilling to do so. When it was 0:05:24.160 --> 0:05:26.200 Biden in the White House and he was pushing through 0:05:26.320 --> 0:05:29.640 massive fiscal stimulus into a supply constrained economy, and they 0:05:29.680 --> 0:05:32.560 sat there and let inflation rip. What explains the difference 0:05:32.600 --> 0:05:35.840 between the behavior and response and the approach to two 0:05:35.880 --> 0:05:36.760 different presidents. 0:05:36.960 --> 0:05:40.200 No, you've got to ask them. We thought we understood 0:05:40.240 --> 0:05:44.880 what the FED. How the FED approached this when Chapau said, 0:05:44.960 --> 0:05:47.760 quote something along lines that we don't speculate, we don't predict, 0:05:48.000 --> 0:05:51.240 and we don't assume anything about policies. So everybody assumed, 0:05:51.240 --> 0:05:54.120 you know what, let's wait and see and what we're 0:05:54.120 --> 0:05:58.640 hearing from the FED does not incorporate forecasts about policy changes. 0:05:59.040 --> 0:06:02.359 And then the whole thing got modeled, and now some do, 0:06:02.560 --> 0:06:03.080 some don't. 0:06:03.120 --> 0:06:04.000 You're not quite sure what. 0:06:04.279 --> 0:06:06.239 And I think this is part of a bigger issue, 0:06:06.279 --> 0:06:10.480 which is FED communication has gotten really confused. Bill Dudley 0:06:10.480 --> 0:06:13.000 had a really good piece in Rumor Opinion about this. 0:06:13.760 --> 0:06:16.719 And it does matter because the FED is supposed to 0:06:16.760 --> 0:06:20.279 reduce volatility, not contribute to volatility, and for the last 0:06:20.320 --> 0:06:22.440 few years the FED has contributed to volatility. 0:06:23.080 --> 0:06:26.159 How do they not contribute to volatility when they are 0:06:26.279 --> 0:06:30.040 facing off with policies that offer up profoundly different contours 0:06:30.040 --> 0:06:31.239 of inflation and growth? 0:06:31.760 --> 0:06:34.240 So first of all, they've got to either take the 0:06:34.320 --> 0:06:36.600 approach of this is what we think the baseline is, 0:06:37.080 --> 0:06:40.640 we are gonna check it every single day against more 0:06:40.960 --> 0:06:45.360 signs out of DC. Alternatively, we're not incorporating any new policies. 0:06:46.520 --> 0:06:48.920 Sometimes you need a top down, you need the chair 0:06:49.000 --> 0:06:50.680 to say this is the approach we're going to take 0:06:50.680 --> 0:06:54.880 for now, because the muddled middle causes all sorts of 0:06:55.000 --> 0:06:58.040 spillover effects that are not helpful at all to them. 0:06:58.360 --> 0:07:00.760 So let's talk about the spillover effects. We've talked before 0:07:00.839 --> 0:07:04.560 about how their at risk of maybe allowing inflation to 0:07:04.600 --> 0:07:07.240 creep higher than have to hike rates later, the idea 0:07:07.360 --> 0:07:11.320 of not recognizing inflation enough. There's the other side of things. 0:07:11.360 --> 0:07:13.200 If they hold rates too high for too long, they 0:07:13.200 --> 0:07:16.360 could cause a deterioration and dramatic iteration in the economy 0:07:16.600 --> 0:07:18.600 right now, which is the bigger risk. 0:07:19.440 --> 0:07:22.200 So the only reason we talk about the inflation risk 0:07:23.720 --> 0:07:27.320 is because we compare it to an arbitrary target that 0:07:27.440 --> 0:07:29.640 I'm willing to bet if we were to set today, 0:07:29.840 --> 0:07:31.880 we would not set at two percent. We'd set at 0:07:31.920 --> 0:07:34.680 two and a half to three. Every other indication of 0:07:34.720 --> 0:07:40.360 inflation suggested inflation expectations are stable. It just was structurally 0:07:40.440 --> 0:07:43.080 happening here and in the rest of the world, means 0:07:43.120 --> 0:07:45.960 that you're going to run the economy for now at 0:07:45.960 --> 0:07:49.800 a higher equilibrium inflation rate than before, and it's not. 0:07:50.040 --> 0:07:50.200 So. 0:07:50.240 --> 0:07:52.640 The reason why we're getting in this whole thing is 0:07:52.680 --> 0:07:57.080 because we are judging ourselves against a target that itself 0:07:57.640 --> 0:07:59.560 is not only arbitrary, but would not have been the 0:07:59.600 --> 0:08:03.360 target we would have chosen today. I don't worry, honestly 0:08:03.600 --> 0:08:07.240 about inflation until I have evidence that inflation expectations are 0:08:07.280 --> 0:08:09.280 the anchored, and there's no evidence of that at all. 0:08:09.840 --> 0:08:13.760 I do worry that if the FED truly believes that 0:08:13.840 --> 0:08:17.360 it has to achieve two percent and wants to do it, 0:08:17.360 --> 0:08:19.720 it's going to have to hike rates this year. And 0:08:19.760 --> 0:08:22.040 if it hikes races this year, it's going to pull 0:08:22.120 --> 0:08:25.000 the rug from under US growth. It's going to pull 0:08:25.000 --> 0:08:28.120 the work from under US investment. This is how important 0:08:28.160 --> 0:08:31.720 it is. So my expectation is that fudge they'll say, 0:08:31.760 --> 0:08:34.200 we continue to pursue two percent, but down the road 0:08:34.559 --> 0:08:36.360 they'll stick with a two and a half percent target 0:08:37.120 --> 0:08:39.360 forecast for now, saying on the way to two percent, 0:08:39.720 --> 0:08:42.560 but we will basically be living with a high inflation target. 0:08:42.760 --> 0:08:54.680 Mohammed, We're lucky to have you. I'm Marie joins Us 0:08:54.720 --> 0:08:58.040 now from Washington with admires of Raima James Amory. 0:08:58.160 --> 0:09:00.800 I would see a good morning, Jonathan. 0:09:00.840 --> 0:09:04.199 The clock is literally ticking for TikTok and today they're 0:09:04.240 --> 0:09:06.760 going to have their day at the Supreme Court to 0:09:06.880 --> 0:09:09.480 try to combat this bill and they will either be 0:09:09.760 --> 0:09:14.480 banned unless they divest away from Byteedance, this Chinese company. 0:09:14.720 --> 0:09:17.640 What do you think happens ed I think on January nineteenth, 0:09:17.800 --> 0:09:21.280 TikTok ceases to exist here in the United States. I 0:09:21.320 --> 0:09:24.720 think the wild card here is that under the law, 0:09:24.920 --> 0:09:27.520 the President of the United States has an ability to 0:09:27.640 --> 0:09:31.760 extend one time for ninety days. So the question that 0:09:31.800 --> 0:09:35.120 I have is, come January twentieth, the next day, does 0:09:35.200 --> 0:09:38.760 Trump activate that ninety day extension and is there a 0:09:38.800 --> 0:09:39.640 deal worked out? 0:09:40.080 --> 0:09:43.040 It sounds like he's going to because he's flip flopped 0:09:43.160 --> 0:09:46.160 since his first time in office in the Oval Office 0:09:46.160 --> 0:09:48.840 when he talked about the security concerns of TikTok that 0:09:48.960 --> 0:09:51.840 now he thinks actually, in an interview with my colleagues 0:09:51.840 --> 0:09:53.280 over the summer, talked about the fact that we if 0:09:53.320 --> 0:09:55.480 you don't have TikTok, then Meta is too big, and 0:09:55.520 --> 0:09:58.000 he understands a lot of individuals get their news from there. 0:09:58.160 --> 0:10:00.160 It seems like he wants to keep it around. So 0:10:00.200 --> 0:10:02.239 what are the options even if there's an extension. 0:10:02.440 --> 0:10:04.920 So after the ninety days, one of the things we 0:10:04.960 --> 0:10:07.840 went through the statute at Raymond James yesterday published a 0:10:07.880 --> 0:10:11.320 report about this, and ultimately it is up to the 0:10:11.360 --> 0:10:15.280 president to declar that what has happened with the divestment 0:10:15.880 --> 0:10:19.760 or for foreign ownership has met the needs of the law. 0:10:20.200 --> 0:10:23.440 And so as long as the president declars, it's okay. 0:10:23.760 --> 0:10:26.320 The problem for Trump, though, is that if there is 0:10:26.440 --> 0:10:30.839 not a divestment, a five thousand dollars per user fee 0:10:31.320 --> 0:10:34.160 gets kicked in. And I don't think the app stores 0:10:34.200 --> 0:10:38.320 at Apple or Google or Oracle's hosting of this wants 0:10:38.400 --> 0:10:40.560 to exist because when you look at the number of users, 0:10:40.880 --> 0:10:43.120 I add that up to about an eighty five billion 0:10:43.200 --> 0:10:46.520 dollar fine. And unless you change the law or you 0:10:46.600 --> 0:10:50.160 have this divested, it will cease to exist, assuming it 0:10:50.200 --> 0:10:51.559 is upheld by the Supreme Court. 0:10:51.600 --> 0:10:54.559 Who can buy this. This isn't even like Elon Musk 0:10:54.600 --> 0:10:59.840 buying Twitter. This is an incredibly expensive company. 0:11:00.120 --> 0:11:01.800 I assume the money would be there. 0:11:01.960 --> 0:11:05.040 The bigger question for me is will the Chinese government 0:11:05.160 --> 0:11:08.960 allow it to be sold, Because ultimately, if you yeah, 0:11:09.000 --> 0:11:12.120 because you can open up the hood, you look in 0:11:12.120 --> 0:11:15.600 in everything that the national security folks have said about 0:11:15.640 --> 0:11:22.520 keystroke capture, about geolocation, about the algorithm potentially manipulating the 0:11:22.600 --> 0:11:26.040 users of TikTok, all of that will be very apparent, 0:11:26.480 --> 0:11:29.200 and we will know even more of how the Chinese 0:11:29.240 --> 0:11:32.360 have been spying on Americans using a very popular app. 0:11:32.600 --> 0:11:35.480 Trump will also be breaking with his national security advisor 0:11:35.520 --> 0:11:36.760 and a secretary. 0:11:36.240 --> 0:11:40.360 Of State, and I mean like Trump will break with 0:11:40.440 --> 0:11:43.640 his administration whenever he wants. I do think it's important 0:11:43.640 --> 0:11:46.320 that you highlight the kind of animis that he's had 0:11:46.360 --> 0:11:50.560 towards Meta and towards the potential benefit to Instagram. Because 0:11:50.559 --> 0:11:53.600 of this, it does look like some of that animis 0:11:53.679 --> 0:11:56.800 might be reduced over the actions by Meta by Mark 0:11:56.880 --> 0:11:59.680 Zuckerberg in recent weeks trying to get him okay. 0:12:00.160 --> 0:12:03.000 Concerns grow on a daylight today when CNN comes out 0:12:03.000 --> 0:12:06.280 and says that Chinese hackers breach Siphius in December, not 0:12:06.320 --> 0:12:09.120 really as surprise, as Jonathan said, because we do know 0:12:09.200 --> 0:12:12.480 that there was Chinese hackers breaching the Treasury Department, but 0:12:12.840 --> 0:12:15.040 isn't this doesnes has become even more of a national 0:12:15.040 --> 0:12:17.440 security concern And what's going to be the response from 0:12:17.440 --> 0:12:18.920 Trump two point zero to Beijing. 0:12:19.360 --> 0:12:23.199 Yeah, I mean, I think it is a extraordinary act 0:12:23.400 --> 0:12:27.160 that we knew that there were Chinese hackers that access Treasury. 0:12:27.800 --> 0:12:31.760 It was downplayed by Janet Yellen recently, but for them 0:12:31.800 --> 0:12:34.880 to have hacked into Siphius, the Committee on Foreign Investment 0:12:34.920 --> 0:12:37.320 into the United States, there was a deal that was 0:12:37.440 --> 0:12:40.840 pending me Bon Steel trying to buy us steal. We're 0:12:40.840 --> 0:12:44.360 looking at all of the potential national security concerns about 0:12:44.360 --> 0:12:48.360 that me Bon's operations within China. For them to be 0:12:48.520 --> 0:12:51.680 looking for exactly what was happening at Cyphius at that 0:12:51.800 --> 0:12:55.240 time is a huge concern. And that's why I've always 0:12:55.240 --> 0:12:59.080 said almost everything in DC related to China is bipartisan. 0:12:59.120 --> 0:13:01.559 The only place you'd don't want to be is being 0:13:01.640 --> 0:13:03.400 seen on being on China side. 0:13:03.640 --> 0:13:07.400 Well, except for potentially one we are waiting for a 0:13:07.440 --> 0:13:10.640 Commerce Department to come out and this was a bloomberg scoop. 0:13:10.679 --> 0:13:11.280 But I know you've been. 0:13:11.240 --> 0:13:15.520 Writing about it for months about Ai chips from Nvidia 0:13:15.559 --> 0:13:17.720 and all roads really lead to China when it comes 0:13:17.760 --> 0:13:19.800 to wanting to make those export controls tougher. 0:13:19.840 --> 0:13:20.240 Correct. 0:13:20.440 --> 0:13:22.839 Yeah, So as early as today, and it's going to 0:13:22.880 --> 0:13:25.840 happen between now in January twentieth, there's going to be 0:13:25.920 --> 0:13:29.200 a final export control rule that comes out from the 0:13:29.200 --> 0:13:31.400 Biden administration. This is going to be focused on the 0:13:31.559 --> 0:13:34.880 number of AI chips that are going to countries that 0:13:34.920 --> 0:13:38.160 we have concerns about. Now we've blocked almost everything going 0:13:38.200 --> 0:13:41.400 to China or to Russia. We're going to allow everything 0:13:41.440 --> 0:13:44.000 to continue to go to our closest allies, but there's 0:13:44.040 --> 0:13:47.600 going to be a tier two company or country list 0:13:47.920 --> 0:13:50.640 where we're going to put caps on how much can 0:13:50.679 --> 0:13:54.360 the Middle East get, how much can Southeast Asia receive. Now, 0:13:54.400 --> 0:13:57.479 generally speaking, I would have expected this to be bipartisan, 0:13:57.520 --> 0:14:01.040 but you have Ted Cruz tweeting out last night strong opposition. 0:14:01.080 --> 0:14:04.000 You have Nvidia coming out with strong opposition. So the 0:14:04.080 --> 0:14:04.600 question I. 0:14:04.559 --> 0:14:07.160 Have is as going to allies or because the time. 0:14:07.160 --> 0:14:09.640 No, because they're going to restrict it going into some 0:14:09.760 --> 0:14:13.800 Southeast Asian in Middle Eastern countries. The real issue here 0:14:14.320 --> 0:14:17.320 is almost all of our export controls usually deals with 0:14:17.360 --> 0:14:20.640 the physical location. But when you're developing data centers and 0:14:20.680 --> 0:14:23.280 you can access that via the cloud, it might not 0:14:23.600 --> 0:14:26.840 matter if that AI chip can't go into China. If 0:14:26.880 --> 0:14:29.400 you build that data center in Malaysia or you build 0:14:29.440 --> 0:14:33.000 that data center in the UAE, if they have that 0:14:33.080 --> 0:14:36.600 cloud access to it, they've essentially had that technology. So 0:14:36.960 --> 0:14:39.080 the chips are going to be limited, and there's going 0:14:39.120 --> 0:14:41.600 to be new rules related to data centers to make 0:14:41.640 --> 0:14:44.360 sure that they are certified and verified that they're not 0:14:44.600 --> 0:14:46.160 giving this technology to China. 0:14:46.320 --> 0:14:48.640 So if you have Republicans already coming out and saying 0:14:48.760 --> 0:14:51.200 we don't want to see this happen, Biden administration is 0:14:51.240 --> 0:14:53.680 doing it on literally their final days in office. Does 0:14:53.720 --> 0:14:54.600 Trump reverse it? 0:14:55.120 --> 0:14:56.840 I think it's going to be hard for him to reverse. 0:14:56.880 --> 0:14:59.040 What they're going to do is it's an interim final 0:14:59.120 --> 0:15:03.000 rule DC speak to It goes into effect immediately, but 0:15:03.080 --> 0:15:05.800 there's an opportunity for the Trump administration to put the 0:15:05.800 --> 0:15:08.720 final tweaks on that. If the caps are too low, 0:15:09.080 --> 0:15:12.360 look for foreign governments to be very transactional. I think 0:15:12.480 --> 0:15:14.640 Saudi Arabia will put a lot of pressure that if 0:15:14.640 --> 0:15:17.920 their cap is too low, Other Gulf countries, other kind 0:15:17.960 --> 0:15:20.280 of parts of the tariff conversation. This could be a 0:15:20.320 --> 0:15:23.120 tit for tat hey, I'm willing to do X, Y 0:15:23.160 --> 0:15:27.160 and Z to avoid tariffs, including trying to remove these 0:15:27.600 --> 0:15:31.040 these AI caps. Is actually going to give Trump a 0:15:31.120 --> 0:15:35.440 new tool in his negotiations globally in terms of what 0:15:35.560 --> 0:15:38.800 does the US have someone that these other countries want. 0:15:38.920 --> 0:15:40.800 I just want to finally end on this point. You're 0:15:40.840 --> 0:15:43.640 talking to everyone on the Hill about the process of 0:15:43.720 --> 0:15:46.520 how his agenda gets accomplished. The bond market, though, is 0:15:46.560 --> 0:15:47.600 focused on the price. 0:15:48.120 --> 0:15:49.000 What do you think we're going to. 0:15:49.000 --> 0:15:51.400 See in terms of how big this bill is going 0:15:51.480 --> 0:15:51.680 to be? 0:15:52.120 --> 0:15:54.480 Yeah, So I put the over under as it relates 0:15:54.480 --> 0:15:56.680 to both an extension of the tax cuts and if 0:15:56.680 --> 0:16:00.000 we do an immigration energy defense bill at one point 0:16:00.000 --> 0:16:02.200 point nine trillion, why do I do that? Because that 0:16:02.320 --> 0:16:04.880 was the cost of the American Rescue Plan. I don't 0:16:04.920 --> 0:16:09.240 see Republicans doing a bill bigger than build back better 0:16:09.280 --> 0:16:11.840 for Biden, and so I do think that we're on 0:16:11.920 --> 0:16:12.920 the under of that. 0:16:13.000 --> 0:16:15.160 But extending the tax cuts is yes. 0:16:15.360 --> 0:16:17.480 Ten years of the tax cuts is four point six 0:16:17.680 --> 0:16:20.440 trillion dollars. Four or five years of the tax cuts 0:16:20.640 --> 0:16:23.080 is about one point five trillion. What would you do? 0:16:23.240 --> 0:16:25.680 I probably see it goes to four or five years. 0:16:25.680 --> 0:16:27.880 The original was eight. You say, hey, we did about 0:16:27.920 --> 0:16:30.400 half as good in trying to get those other things. 0:16:30.600 --> 0:16:33.040 People have been too focused on the ten year extension. 0:16:33.080 --> 0:16:35.080 I think it ends with a much shorter extension. 0:16:35.240 --> 0:16:36.680 Ed Mills, thank you so much for joining me in 0:16:36.720 --> 0:16:40.760 the studio this morning. From DC Jonathan a long list 0:16:40.960 --> 0:16:43.640 of issues that the incoming Trump administration is going to 0:16:43.680 --> 0:16:46.720 deal with, TikTok, export controls, and of course trying to 0:16:46.720 --> 0:16:48.840 get this agenda through which ed Mill says could be 0:16:48.920 --> 0:16:50.280 under true trillion dollars. 0:16:50.480 --> 0:17:02.760 I might a freie time thank you with this amount 0:17:02.760 --> 0:17:04.880 of tybe with Stephanie Roth the Wold Race, said Stephanie, 0:17:04.920 --> 0:17:06.600 and wanted, that's quite a number. 0:17:06.640 --> 0:17:09.479 What you might here is I mean, first of all, 0:17:09.480 --> 0:17:11.720 it is quite a number, but average early earnings were 0:17:11.760 --> 0:17:14.159 point two eight. So this is kind of a goldilocks 0:17:14.200 --> 0:17:15.840 type of report, and this in a way, of course, 0:17:16.000 --> 0:17:19.399 markets are training it as a hotish print, but the 0:17:19.440 --> 0:17:22.879 reality is that wages are growing at below four percent, 0:17:23.000 --> 0:17:24.520 even with job gains running the strong. 0:17:24.640 --> 0:17:26.399 So we don't have to stop talking about interests, right 0:17:26.480 --> 0:17:28.399 hikes anytime soon at the Federal Reserve. 0:17:28.600 --> 0:17:30.080 I don't think we have to be talking about hikes, 0:17:30.119 --> 0:17:31.919 but we have to start thinking about when is the 0:17:31.920 --> 0:17:32.680 FED going to be pausing? 0:17:32.680 --> 0:17:33.560 That's in the real question. 0:17:33.920 --> 0:17:36.080 Well now, I think that that's what people are saying, right, 0:17:36.520 --> 0:17:37.800 they're on pause period. 0:17:38.080 --> 0:17:40.040 I think the question is where they're going to revive. 0:17:40.280 --> 0:17:42.040 I want to go to the point that you're making 0:17:42.080 --> 0:17:45.320 about inflation and that this does sort of question just 0:17:45.359 --> 0:17:47.480 how much inflationary pressure is under the hood of some 0:17:47.560 --> 0:17:51.040 of these gains. How accurate I have the average hourly 0:17:51.080 --> 0:17:55.159 earnings actually been when it comes to inflationary pressures. Because ultimately, 0:17:55.440 --> 0:17:57.720 if people have jobs, they have been shown the willingness, 0:17:57.760 --> 0:18:01.399 particularly of millennials and paying premium form seats on airplanes 0:18:01.400 --> 0:18:03.560 and other things. I mean, there still is the impetus 0:18:03.600 --> 0:18:04.680 to spend if you have a job. 0:18:05.200 --> 0:18:06.720 Yeah, I mean it all comes down to the labor market. 0:18:06.760 --> 0:18:08.679 If the labor market remains healthy, then people are going 0:18:08.760 --> 0:18:11.359 to go out and spend. The thing is that wage 0:18:11.359 --> 0:18:14.320 growth is still running, you know that four percent, which 0:18:14.359 --> 0:18:16.800 given where productivity is, the FED can kind of accept 0:18:16.800 --> 0:18:19.320 something like that. So, and the FED has said this 0:18:19.359 --> 0:18:20.840 a couple of times that they don't believe that the 0:18:20.880 --> 0:18:24.560 labor market is really causing significant inflationary pressures. So now 0:18:24.600 --> 0:18:27.200 the question is just that can the fence they stay 0:18:27.240 --> 0:18:28.840 on pause from here or can they cut one. 0:18:28.800 --> 0:18:29.520 Or two more times. 0:18:30.000 --> 0:18:33.560 So Wednesday's ADP numbers on earnings showed a difference between 0:18:33.600 --> 0:18:37.520 four percent wage increases for those who are on the 0:18:37.520 --> 0:18:41.479 same job seven percent for those who are changing jobs. 0:18:42.000 --> 0:18:45.600 And the question becomes, if we continue to create so 0:18:45.640 --> 0:18:49.200 many jobs, if vacancy is awaited a six month high, 0:18:49.400 --> 0:18:54.119 at what point do earnings become the lagging indicator? At 0:18:54.160 --> 0:18:58.120 what point do earnings respond to what's happening in terms 0:18:58.200 --> 0:18:59.960 of the quantity of jobs. 0:19:00.760 --> 0:19:02.679 Yeah, and that's that's the trend that we saw, you know, 0:19:02.680 --> 0:19:04.159 in twenty twenty two and twenty twenty three, and the 0:19:04.280 --> 0:19:06.000 labor markets are to heat heat, heat up. Is that 0:19:06.200 --> 0:19:09.720 there was that d differentiation between job switchers and job stayers, 0:19:10.040 --> 0:19:11.919 and that is something to keep a close eye on. 0:19:12.040 --> 0:19:14.160 But as of now, the you know, the wage data 0:19:14.240 --> 0:19:17.320 have been fairly contained and if we didn't see a 0:19:17.320 --> 0:19:19.400 a wage price spiral on twenty twenty two and twenty 0:19:19.440 --> 0:19:21.200 twenty three, it's very unlikely we'll see at this time 0:19:21.200 --> 0:19:24.080 around that was the the real strength in the labor market, 0:19:24.119 --> 0:19:26.679 and it didn't really unfold into something that was out 0:19:26.720 --> 0:19:29.639 of controlled wage inflation. So this time I don't anticipate 0:19:29.680 --> 0:19:31.400 that will be the case. To get to your your 0:19:31.440 --> 0:19:34.320 your question earlier, how accurate is is the wage data 0:19:34.320 --> 0:19:34.960 from month to month? 0:19:35.280 --> 0:19:35.720 Not great? 0:19:35.960 --> 0:19:38.920 This this probably was had some calendar effects that pushed 0:19:38.920 --> 0:19:40.480 down some of the data, but on a year of 0:19:40.520 --> 0:19:42.320 a year basis, it's in line close to to what 0:19:42.359 --> 0:19:44.040 the ECI is saying, which is kind of the gold 0:19:44.040 --> 0:19:46.680 standard anyway, So I would say, y, you know, yeah, 0:19:46.680 --> 0:19:48.879