Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. Here's the latest, the
Speaker 2: G seven finalizing a fifty billion dollar loan for Ukraine
Speaker 2: using the profits generated by frozen Russian Central Bank assets.
Speaker 2: Treasury Secretary Channel Yellen also announcing the US will en
Speaker 2: vel strong new sanctions against Russia and nations supporting its
Speaker 2: war effort as early as next week. Joining us now
Speaker 2: around the table the US Deputy National Security Advisor for
Speaker 2: International Economics, the leaf Sink Believe gradmoning it's born in
Speaker 2: Johnathon Credit where it's due A lot of this work,
Speaker 2: you had a lot to do with it. Walk us
Speaker 2: through the objective of this plan of this loan.
Speaker 3: So remember the context.
Speaker 4: Two days after Russian invaded Ukraine in twenty twenty two,
Speaker 4: the United States, the G seven, we collectively froze Russia's
Speaker 4: central bank assets held in our countries, about three hundred
Speaker 4: billion dollars.
Speaker 3: Worth in total by all accounts.
Speaker 4: This came as a surprise to putin the severity of
Speaker 4: the action, the speed, the unity of the G seven.
Speaker 4: So two years later, two plus years later, this June,
Speaker 4: as you showed on your screen, the G seven committed
Speaker 4: to lend fifty billion dollars of that value of the
Speaker 4: Russian frozen assets to Ukraine, using the future interest flows
Speaker 4: to pay us back. So yesterday President Biden said, We're
Speaker 4: going to make good in our commitment. We're going to
Speaker 4: leend twenty billion dollars to Ukraine. The rest of the
Speaker 4: G seven will leend thirty billion dollars.
Speaker 3: It's a big deal.
Speaker 4: Never before in history has a multilateral coalition frozen the
Speaker 4: assets of an aggressor country and then found a way
Speaker 4: to unfreeze those assets for the benefit of the party,
Speaker 4: all while maintaining the rule of law and our solidarity.
Speaker 3: So that's where we are. Deep.
Speaker 5: Are you concerned about the consequences though in the future
Speaker 5: you have the bricks right now meeting talking about whether
Speaker 5: or not they should move away from doing transactions in
Speaker 5: the dollar because of.
Speaker 3: Things like this.
Speaker 4: Well, the important aspect of this deal, I would say
Speaker 4: two aspects. Actually, One is we followed the rule of
Speaker 4: law and every single jurisdiction we stuck to the letter
Speaker 4: of the law. Second, we maintained our unity, our solidarity.
Speaker 4: You know, there had been some calls to seize the
Speaker 4: principle of these reserves. We have a legal pathway for
Speaker 4: doing so. Europe does not. We're going to keep working
Speaker 4: towards that. But at this stage, what we're doing is
Speaker 4: harnessing the interest flows that will accrue from these assets,
Speaker 4: and we're saying, let's let's transfer the value of those
Speaker 4: interests flows to Ukraine so it can fight.
Speaker 3: For its existence. I was at the G seven, so
Speaker 3: were you with this?
Speaker 5: Really got pushed over the finish line in terms of
Speaker 5: the European saying okay, we agree with you, We're going
Speaker 5: to come on board. How much does the US presidential election.
Speaker 5: How much did the fact that in November potentially there
Speaker 5: is going to be a change at the White House
Speaker 5: impact of the Europeans wanting to get this done today.
Speaker 4: Look, I would say part of the motivation for this
Speaker 4: G seven deal was to prove to putin no matter
Speaker 4: what happens in our election, time is not.
Speaker 1: On this side.
Speaker 4: I can give you three hundred billion reasons why time
Speaker 4: is not on putent side. It was also meant to
Speaker 4: demonstrate that multilateralism it's a force multiplier, and foreign policy
Speaker 4: and that we're not out of options, We're not out
Speaker 4: of creativity. So all of those were I would say,
Speaker 4: underlying motivations for how this deal came together.
Speaker 2: Some people might suggest, though, that America is losing influence
Speaker 2: on the global stage. We haven't managed to persuade China
Speaker 2: to come to our side of thinking on several issues
Speaker 2: in international farm relations right now. Is there any evidence
Speaker 2: that we've retained regained any kind of influence on the
Speaker 2: global stage at all under this administration.
Speaker 4: Well, you mentioned China, John, I mean, I know there's
Speaker 4: been a lot of talk about protectionism at the IMF
Speaker 4: this week and beyond.
Speaker 3: In my sense, my.
Speaker 4: Interpretation of what we're doing doing is that this is
Speaker 4: a very positive sum view of the world, and we
Speaker 4: hope China other countries come towards our way of thinking.
Speaker 4: What we've said is, look, we're going to invest in
Speaker 4: our productive capacity. Number one, we're going to strengthen it
Speaker 4: and scale it up. Number Two, For countries that are
Speaker 4: playing by the same rules, we're going to give access
Speaker 4: to our productive capacity and are purchasing power.
Speaker 3: We hope, we hope it's reciprocal.
Speaker 4: But third, and this is where China comes in, for
Speaker 4: countries that are not playing by the same rules, we
Speaker 4: are going to use restrictive measures like tariffs to level
Speaker 4: the playing field and to prevent hundreds of billions of
Speaker 4: dollars in American tax payer money from getting undercut. That
Speaker 4: is not a defensive approach, that's not a protectionist approach.
Speaker 4: It's a positive sum view of the world. We're trying
Speaker 4: to change the terms of the competition. You know, if
Speaker 4: the terms of the competition are your capacity to innovate,
Speaker 4: your ability to collaborate with a network of alliances and partners,
Speaker 4: your ability to attract ideas and talent and investment, that's
Speaker 4: a vision that every country can buy into, and I
Speaker 4: very much like our chances if that's where the competition goes.
Speaker 2: China included to Amory's point, there are some countries, some
Speaker 2: account some groups of countries starting to think about trying
Speaker 2: to move away from the US dollar. Mohammad al Aium
Speaker 2: wrote in the Financial Times early this week. You might
Speaker 2: have seen the column that you produced said a loss
Speaker 2: of confidence in America's management of the global order may
Speaker 2: have contributed to this run up, the whizzing and the
Speaker 2: gold price. Do you see any evidence of that, a
Speaker 2: breakdown of confidence in America's ability to manage the global order?
Speaker 4: Look, I don't think we're going to see. If there
Speaker 4: was a breakdown, we wouldn't see it in the data.
Speaker 4: By the time it showed up in the data would
Speaker 4: be too late. What matters is whether we continue to
Speaker 4: be who we are, whether we continue to have the
Speaker 4: rule of law, independent and credible institutions, fair and effective regulations,
Speaker 4: trust in our stewardship of the global economy. That's what
Speaker 4: gave US dollar primacy in the first place. If we
Speaker 4: continue to invest in those competitive strengths, will be just fine.
Speaker 3: The leave gold is just one example. Though.
Speaker 5: What do you say to those that say sanctions don't work,
Speaker 5: they just create new.
Speaker 4: Market What I say is what is your alternative? We're
Speaker 4: in an environment of very intense geopolitical competition. Both Russia
Speaker 4: and China have expressed and revealed a desire to disrupt.
Speaker 3: The US led order.
Speaker 4: When there's conflict, we tend to have three options. Do
Speaker 4: nothing and stand aside and watch international rules that underpin
Speaker 4: peace and security get flouted, or go to war. But
Speaker 4: the policy space in between.
Speaker 5: Why do a price cap? Putin makes money every single
Speaker 5: day exporting oil and gas.
Speaker 3: Why not just sanction it.
Speaker 5: That's how he funds this war.
Speaker 4: Well, sanctions work if they're sustainable, and they're only sustainable
Speaker 4: if they hurt our target more than they hurt ourselves
Speaker 4: in the global economy. So take energy for example, coming
Speaker 4: into the war, Russia was the third largest supplier of
Speaker 4: oil and gas to the world when global supplies were
Speaker 4: quite tight. We cut off Russian energy within a month
Speaker 4: of the invasion, sort of other g seven countries. But
Speaker 4: the idea of cutting Russian energy off from the world
Speaker 4: that would have felt good. Believe me, it would have
Speaker 4: felt good, But it would have meant a global shock
Speaker 4: to global energy and food prices. It would have harm
Speaker 4: millions of innocent people at home and abroad. It would
Speaker 4: have flattered Putin's energy export revenues. That's a self defeating strategy.
Speaker 4: So we took a much less sexy, less shokunnaw approach,
Speaker 4: much more nuanced, harder to explain. But the global price
Speaker 4: of oil is down a third since the invasion, his
Speaker 4: revenues are down by a third. The global energy market's
Speaker 4: coming into balance, We're moving away from Russian fossil fuels.
Speaker 3: We're going to have a chance to hit him harder.
Speaker 4: The time is coming, so chance to hit him harder.
Speaker 4: How I'm not going to telegraph that here, but rest assured.
Speaker 4: We have options and it's a.
Speaker 3: Matter of time.
Speaker 5: Let's go back to this idea of Jonathan brought up
Speaker 5: with China and tariffs. China is a big player when
Speaker 5: it comes to what they're doing in Russia. Russia is
Speaker 5: able to get chips, say from refrigerators, and maybe use
Speaker 5: it in their military base. When it comes to tariffs,
Speaker 5: you're talking about the fact that you think they need
Speaker 5: to be used on places like China. What do you
Speaker 5: think separates the democratic position than what the former president
Speaker 5: is saying on the campaign trail.
Speaker 4: So I'm just going to speak hypothetically since I'm not
Speaker 4: on the campaign. Across the board indiscriminate tariffs, they are
Speaker 4: going to have four predictable consequences.
Speaker 3: Number one global retaliation.
Speaker 4: Number two, it's a regressive tax on the most vulnerable
Speaker 4: segments of society. Number three it compresses profit margins for
Speaker 4: any business that imports components. And number four would isolate
Speaker 4: America on the world stage. It would alienate our allies
Speaker 4: and play right into Putin's and Cheese hands. Our approach
Speaker 4: has been there's a role for targeted tariffs, but tariffs
Speaker 4: alte are not a path to prosperity. So we have
Speaker 4: taken an approach which says, number one, we're going to
Speaker 4: invest in our productive capacity, as I mentioned earlier, to
Speaker 4: give access to a productive capacity if you're playing by
Speaker 4: the same rules. But we will use tariffs if they're
Speaker 4: necessary to rebuild our industrial base, especially in strategic sectors.
Speaker 4: We put tariffs on eighteen billion dollars of Chinese products
Speaker 4: over our term. The previous administration put them on hundreds
Speaker 4: of billions of products in an indiscriminate fashion.
Speaker 3: And now we're.
Speaker 4: Hearing about proposals for an order of magnitude greater increase
Speaker 4: in tariffs.
Speaker 1: That's not where we are.
Speaker 2: And then it wouldn't shock me in four years time,
Speaker 2: the Democrats if they fall out a pack, get back
Speaker 2: into power, and keep them. This is what's confused us.
Speaker 2: All there were complaints after complaints about what Donald Trump
Speaker 2: were doing, and then all of a sudden they were kept.
Speaker 2: And not only that, it was a rebrand. We talked
Speaker 2: about the rebrand on this program. I often hear Democrats
Speaker 2: call it attacks, and then we hear really sophisticated things
Speaker 2: about where the Democrats have done themselves, and they say
Speaker 2: things like, well, no, this is about protecting national security.
Speaker 2: These are national security objectives. It's that distinction without a difference.
Speaker 4: No, it's an important distinction because whether it's tariffs or
Speaker 4: export controls or sanctions, we need to have a limiting principle.
Speaker 4: We need to have a strategic anchor. So for tariffs
Speaker 4: or export controls, for example, if we can identify a
Speaker 4: strategic objective, whether supply chain resilience, technological pre eminence, energy security,
Speaker 4: and if we're competing with a trading partner that's playing
Speaker 4: by a very different set of rules, and if that
Speaker 4: competition threatens to undercut the investments we're making, then there
Speaker 4: is a role to level the playing field, and tariffs.
Speaker 3: And export controls can play that role.
Speaker 4: But we have to be really cool, clear with ourselves
Speaker 4: and the public and our counterparts, including in China. Why
Speaker 4: why we're putting on these terms rather than slap them
Speaker 4: on indiscriminately.
Speaker 3: That's the difference.
Speaker 2: Deleep, I could talk to you all day.
Speaker 1: It's good to catch up.
Speaker 2: It's good to see it. Thank you, sir, Thank you
Speaker 2: very much to Leap seeing that the Deputy National Security
Speaker 2: Advisor for International Economics. We begin this out with stocks higher.
Speaker 2: Tesla kicking off Max seven earnings with better than expected
Speaker 2: results Deutsche Bank's Spinky Charter with this to say on
Speaker 2: earning season. It's still early, but the results so far
Speaker 2: are slightly stronger than expected. Go again, especially for the
Speaker 2: financials where investor positioning is our reading in our reading
Speaker 2: was below neutral. Binkie joins us now for more banky.
Speaker 3: Can monitor you.
Speaker 2: Good morning, John, good to see you. We've got a
Speaker 2: big week next week. All the major tach players, with
Speaker 2: the exception of in Nvidio. How high is the bar
Speaker 2: for those tech firms?
Speaker 6: So, I'd say the bar has been fluctuating. It was
Speaker 6: extremely high at the beginning of the year. It came
Speaker 6: down a little bit as positioning came in. Positioning has
Speaker 6: kind of been going sideways to slightly higher, And just
Speaker 6: to be clear, positioning tends to align with earnings growth.
Speaker 6: And if you think about earnings growth for the megacap
Speaker 6: growth in tech companies, I think it's important to keep
Speaker 6: in mind that basically this very very clear trend channel
Speaker 6: over the last thirty years, and so if they deliver
Speaker 6: as they have been the best possible earnings, they hug
Speaker 6: the top of the channel. That's eleven percent growth. That's
Speaker 6: down from forty percent that be printed in the fourth
Speaker 6: quarter of last year and thirty eight percent in the
Speaker 6: first quarter of this year.
Speaker 1: So the slowing, we would argue, is inevitable.
Speaker 6: It's happening, but it should not be confused with bad earning.
Speaker 6: So you are absolutely right that it's all a question
Speaker 6: about the bar and the expectations. And I would say,
Speaker 6: you know, it's going to fluctuate as you go through
Speaker 6: sort of this period. It's not all meant to happen
Speaker 6: on one fine morning. It is going to take a
Speaker 6: while because there is genuine uncertainty.
Speaker 2: We don't often do single names with you, but there
Speaker 2: is one single name which is basically a market, which
Speaker 2: is in video. Tolson Slock man, you know, well now
Speaker 2: at Apollo right this this morning, that it's now bigger
Speaker 2: than the total market cap of five and the G
Speaker 2: seven countries, the foreigner zone eighteen percent of the US
Speaker 2: stock market. And the bottom line for him is the
Speaker 2: global equity markets, including retirement allocations to equities, are basically
Speaker 2: leverage to invidea What do you think will define earning season?
Speaker 2: Does it come down to that one name, one theme?
Speaker 1: Ai, No, I don't think so.
Speaker 6: You know, the size means, they're definitely important, the size
Speaker 6: and the growth rates. But no, I would say, you know,
Speaker 6: the issue of the year has really been whether we
Speaker 6: would broaden out. And I would say that is happening.
Speaker 6: It's you know, for it to happen, you need the
Speaker 6: fundamental underpinning of earnings growth also rotating, which is what
Speaker 6: would drive you know, moves in positioning. You just spoke
Speaker 6: about positioning in earnings growth. So it's all happening, I think.
Speaker 6: Unfortunately it's happening rather slowly and pretty noisily. And the
Speaker 6: noise mostly comes really from energy and materials, and that's
Speaker 6: really oil and commodity prices. And you have to go
Speaker 6: two years back to Russia, Ukraine. You know, but we
Speaker 6: would argue it is happening. So for this quarter, for example,
Speaker 6: you know, we're looking for sort of a modest deceleration
Speaker 6: from twelve percent to nine percent in round numbers. About
Speaker 6: half that slowing is just the year and year decline
Speaker 6: in oil and commodity prices, So it's not really telling
Speaker 6: you anything about where.
Speaker 1: The economy or earnings are going. The other half's coming
Speaker 1: from what.
Speaker 6: We already spoke about, which is the well understood generally
Speaker 6: at least among the analyst community, both bottom up and
Speaker 6: top down, that you know, their earnings growth is basically
Speaker 6: slowing from megga half growth in tech everybody else kind
Speaker 6: of going sideways.
Speaker 1: But you know, but the same token.
Speaker 6: I mean, if you look at Q four right now,
Speaker 6: you know we're looking for sort of year and young
Speaker 6: growth in the mid teens.
Speaker 2: Those take firms responsible for some massive buyback plans as well.
Speaker 2: You often refer to what you call this robust demand
Speaker 2: bank drop for US secuities. Can you walk us through
Speaker 2: where things are aut with regards to that.
Speaker 6: Yeah, So conceptually, basically, you know, I think one very
Speaker 6: simple way to think about equity from demand supply point
Speaker 6: of view is how existing equity money is positioned, so
Speaker 6: that's our positioning measures. There's new money coming into equities,
Speaker 6: that's equity inflows. And if you want, you could put
Speaker 6: on the supply side, because it's not nice to put
Speaker 6: everything on one side is buybacks and so you know,
Speaker 6: if you think through where we are on each of
Speaker 6: the three in terms of positioning, positioning is actually today
Speaker 6: lower than it was at the July sixteenth peak. How
Speaker 6: can that be when the market is a little bit higher.
Speaker 6: Because we've had very robust inflows into equities, and that's
Speaker 6: been going on for.
Speaker 1: Quite a while.
Speaker 6: It's not just equities that are getting robust inflows. Bonds
Speaker 6: have been getting robust inflows too, So positioning has upside.
Speaker 1: Even do the mid July peak.
Speaker 6: We have very robust inflows, and the biggest driver is
Speaker 6: really the buybacks. And buybacks basically move with earnings, so
Speaker 6: we're looking for eleven percent earnings growth next year that
Speaker 6: by itself are used for eleven percent upside in buybacks.
Speaker 1: And then there is the matter of.
Speaker 6: The buyback payout ratio, which tends to fluctuate between forty
Speaker 6: and sixty percent. We are sitting in the middle and
Speaker 6: at around fifty percent. So if the economic backdrop improves
Speaker 6: and corporate confidence continues to improve, then you're going to see.
Speaker 1: That buyback payout ratio also go up.
Speaker 6: So there's so in short, all three cylinders from a
Speaker 6: demand supply point of view look very, very robust.
Speaker 5: So what could spoil the party? Because you talk about catalysts. Two,
Speaker 5: you mentioned our geopolitical risk and the US election? How
Speaker 5: do you take those into account with this pretty rosy
Speaker 5: picture you have?
Speaker 6: So what I would say is, you know, the election,
Speaker 6: for example, I mean the traditional pattern is for the
Speaker 6: equity market to pull back basically starting about a month earlier,
Speaker 6: and it really sort of you know, the way to
Speaker 6: think about that is the premium for volatility in that
Speaker 6: first week basically.
Speaker 1: After the election. As Jonathan already stole my punch.
Speaker 6: Lune, which is it happens to coincide with all the
Speaker 6: early month macro data that comes out at the same time,
Speaker 6: and it is only a few weeks since the last
Speaker 6: payrolls report, which had a huge impact.
Speaker 1: So I would say today there's.
Speaker 6: A whole whole bunch of catalysts having an impact. And
Speaker 6: if you look basically across asset classes, just look at
Speaker 6: the vix. I mean, so you know, a little bit
Speaker 6: below twenties to many people seems very reasonable. But if
Speaker 6: you compare that basically with what actual volatility is doing,
Speaker 6: you've got almost a ten percentage point premium in the VIX.
Speaker 6: That's just enormous by historical standards. And it's not just equities.
Speaker 6: You can do the same for rates. Look at the
Speaker 6: move relative to realize volatility. Look at currency, the c VEX.
Speaker 6: The same is true in currency. So the market is
Speaker 6: really all volved up, is the way I would put
Speaker 6: it on these multiple catalysts or risks.
Speaker 5: Definitely an angsty market when you have people coming on
Speaker 5: talking about this idea of a Trump trade in equities
Speaker 5: in the bond market, why don't we see in the
Speaker 5: tech companies?
Speaker 6: So you know, I would emphasize more the uncertainty basically
Speaker 6: coming from the election and the market really buying protection
Speaker 6: for potential volatility around the election.
Speaker 1: I think it's a.
Speaker 6: Little bit too early to start to factor in or
Speaker 6: you know, the policies and the implications. There is a
Speaker 6: natural tendency for all of us to focus on that.
Speaker 6: But I mean, just take the last tax cut, I mean,
Speaker 6: the tax reform package we have the twenty sixteen election.
Speaker 6: By December, you know, proposals were being circulated, feedback was
Speaker 6: being sought, and when did the tax reform come to pass?
Speaker 6: It came to pass in late twenty seventeen, when I remember,
Speaker 6: you know, me and my team running a piece called
Speaker 6: we had nothing priced in for tax reform. So there's
Speaker 6: a lot of water that flows out of the bridge
Speaker 6: between now and when actual things happened.
Speaker 5: I mean, you know, well, when it comes to when
Speaker 5: it comes to corporate tax rate, there's a huge spread
Speaker 5: though between both these candids fifteen percent twenty eight percent.
Speaker 5: But to your point, that likely won't get finalized till
Speaker 5: the end of twenty twenty five. So does that get
Speaker 5: pushed out for twenty twenty six story for these companies?
Speaker 6: Yeah, it's it's it's it will depend on if and
Speaker 6: when it passes, And that's sort of a complicated route
Speaker 6: to basically, you know, bet on right now. I mean,
Speaker 6: what I would offer in terms of thinking about corporate
Speaker 6: tax reform and earnings is there is no doubt that
Speaker 6: there is an immediate impact, but over time, you know,
Speaker 6: if you look at the S and P. Five hundred
Speaker 6: from the nineteen thirties. Still today, there is a very
Speaker 6: very very.
Speaker 1: Clear trend line. And now you know on.
Speaker 6: This chart you should overlay the corporate tax rate in
Speaker 6: the US. It's done lots of things, and the trend
Speaker 6: hasn't changed. And I'm not saying that equities are the
Speaker 6: present value of really trend earnings, but if they were,
Speaker 6: then you know the trend hasn't changed.
Speaker 1: So short term impacts yes, but long term no.
Speaker 2: This is a long term policy discussion. I'd love your
Speaker 2: thoughts on the shorter term because I imagine a lot
Speaker 2: of people will be down in one eight hundred binky
Speaker 2: when we wake out November six with the real possibility
Speaker 2: we don't have a result on November seventh, on November eighth,
Speaker 2: on the ninth, or tenth, and maybe even longer. We're
Speaker 2: talked about that Federal Reserve decision a million times. Two
Speaker 2: days after the election, they might not know the results.
Speaker 2: What are you going to tell people that week if
Speaker 2: we don't have results to this election when it could
Speaker 2: have a pretty profound impact on policy years out. Is
Speaker 2: that what you're going to say? You're just going to say,
Speaker 2: oh to me, look at the trend line. King Bundstocks
Speaker 2: it's not be okay, you tell them.
Speaker 6: No, It's it's about basically, you know, what's happening in
Speaker 6: short term to positioning and of course perceptions of what's
Speaker 6: going on.
Speaker 1: So I think.
Speaker 6: Basically, you know, a result that takes time really doesn't.
Speaker 1: You know, to resolve itself.
Speaker 6: Assuming that it does resolve itself, does it really changed
Speaker 6: the story? I mean, it's it's it's you know, instead
Speaker 6: of one day event ball, it's about a few days
Speaker 6: of event bol.
Speaker 1: But the point is, really, you know, does it pass?
Speaker 2: Is that a dip you'd buy?
Speaker 1: I'm sorry, is that a dip that you would buy?
Speaker 3: Yeah?
Speaker 6: We think of it as a temporary pullback basically. And
Speaker 6: so going back to your question, you know, is the
Speaker 6: election or risk? I mean, historically presidential elections haven't really
Speaker 6: changed the business cycle. That the biggest, highest, big picture
Speaker 6: level equities.
Speaker 1: Are about the business cycle.
Speaker 6: So and I would remind that, you know, once anybody
Speaker 6: comes into power, they have a strong incentive not to
Speaker 6: destroy the business cycle. So you know, there is a
Speaker 6: built in check there is that.
Speaker 2: How you see in Republican administration that they will be
Speaker 2: constrained by where the equity market is, that will be
Speaker 2: regulated by responsive sensitive to it in our experience, based
Speaker 2: on what happened first time around with Donald Trump.
Speaker 6: So I think the evidence formed the last time around
Speaker 6: is very very clear.
Speaker 1: I have a piece on it, and I can dig
Speaker 1: it up.
Speaker 6: You know, every time the trade war, you know, sort
Speaker 6: of fired up. Let's put it that way, equity market
Speaker 6: went down by ten percent. I called it Trump relenting,
Speaker 6: but he would basically argue we have a deal, and
Speaker 6: the market would bounce, and then he would say, no,
Speaker 6: we don't actually have a deal. We're going to escalate.
Speaker 6: The market will go down. So yeah, so are we
Speaker 6: going to get more pullbacks?
Speaker 1: Yes? But did it change the trajectory completely?
Speaker 7: No.
Speaker 2: I called it the presidential put which is basically the
Speaker 2: same thing. And we were talking about this earlier this week.
Speaker 2: We all remember that time when the equity market was
Speaker 2: camping lower and the president ultimately pretended to have a
Speaker 2: call with China and suggested that things were better than.
Speaker 5: They were, because that would mean that, okay, the equities
Speaker 5: can then start to rally again. Basically, puts out a tweet,
Speaker 5: puts out a statement, saisling to a reporter, and equities fall.
Speaker 5: I mean this happened as well with him wanting to
Speaker 5: rip up NAFTA, and then sort of had to massage
Speaker 5: the message because the Dow Jones was doing so bad.
Speaker 5: And ultimately I think, Jonathan, you've called it. That's what
Speaker 5: he's regulated by.
Speaker 1: Thank you, it's good to see you. It's good. So
Speaker 1: it's good to catch up. Thank you, sir. Send over
Speaker 1: that pace.
Speaker 3: I wasn't rate that. How old is that perce fgs.
Speaker 1: It's from the last administration to take at least four
Speaker 1: years old.
Speaker 2: Thank you, appreciate it and tested the catch up. Thank
Speaker 2: you may get shout of that. If don't you think,
Speaker 2: don't I guess now form a speake for the House
Speaker 2: Kevin McCoy speak of mccouthe good to.
Speaker 3: Say, yeah, good to be here. It's a tight one.
Speaker 2: And if I could offer you the outcome of any
Speaker 2: one race right now, which one would you want to know?
Speaker 7: I would watch Pennsylvania. Why's that because we elect presidents
Speaker 7: not by popular vote, by electoral college. So you assume,
Speaker 7: if you look at the last election, which was only
Speaker 7: won by forty and eighteen votes, that Donald Trump would
Speaker 7: get pretty much the same electoral states that he got before.
Speaker 7: And I believe he'd pick up Georgia. If he picks
Speaker 7: up Pennsylvania, it's over. He's gotten to his two seventy.
Speaker 7: He wouldn't need Arizona, he wouldn't need Nevada. And when
Speaker 7: you look at where the play is, even the Union
Speaker 7: voters in Pennsylvania overwhelmingly support Trump over Kamala and Kamala
Speaker 7: at the end of the day, if she loses this race,
Speaker 7: it's going to be her listening to Pelosi when Pelosi
Speaker 7: pushed her to pick Waltz. Not because Shapiro's too ambitious.
Speaker 7: I like leaders who want people who are ambitious around them,
Speaker 7: not people who say I won't compete.
Speaker 5: He's beloved in Pennsylvania, and he's out there still campaigning
Speaker 5: for whether or not he's on the ticket or not.
Speaker 5: Do you think in Pennsylvania they would reject the Democratic
Speaker 5: Party even though they love their Democratic governor.
Speaker 3: They're not rejecting the Democratic Party.
Speaker 7: They're tired of high inflation prices, They're tired of the
Speaker 7: border being wide open. They want someone to do with
Speaker 7: something that they'll actually say. You watch President Trump go
Speaker 7: into a Steeler game and people start chanting USA. What
Speaker 7: do you think they would chant if Kamala was sitting there.
Speaker 7: They probably wouldn't say anything. And listen, if I asked,
Speaker 7: you are America, tell me the three things Kamala Harris
Speaker 7: will do if she gets elected president. She has spent
Speaker 7: a billion dollars. The only thing I know is she's
Speaker 7: going to give people twenty five thousand dollars for the
Speaker 7: first House and bring inflation.
Speaker 3: To home prices. That's the only thing I know.
Speaker 1: You can't sweep.
Speaker 7: Okay, it's going to be a very tight race. Republicans
Speaker 7: will win the Senate. We're in a good place, and
Speaker 7: that's purely map.
Speaker 3: The presidency.
Speaker 7: I give a sixty percent chance that President Trump's going
Speaker 7: to win there.
Speaker 3: I just watch. It's a tight race in the House.
Speaker 7: It's actually easier for Republicans to win seats this cycle.
Speaker 7: But Republicans now are behind on money. I just came
Speaker 7: back and saw four races that were tied. The Democrats
Speaker 7: had but they don't have the money to go play.
Speaker 7: They've made a mistake in this process. We always had more.
Speaker 7: I don't see the strategy in the House where you're
Speaker 7: on offense. I would go out. We beat the D
Speaker 7: triple C chair last time. Remember the last two cycles, leaders,
Speaker 7: I only won. When Biden won the presidency, it was
Speaker 7: the first time since nineteen ninety four no Republican incumbent lost,
Speaker 7: but speaker.
Speaker 5: The Republicans are feeling really good this time two years ago.
Speaker 5: Remember Kerry Lake was supposed to be the governor of Arizona.
Speaker 5: It wasn't the red Wave, no, but.
Speaker 7: There was one place that still won where everybody else lost.
Speaker 7: Same thing as the election before in the House, and
Speaker 7: we elected the most Republican women, most Republican minorities. We
Speaker 7: won five seats in California, five in New York. We
Speaker 7: won Oregon, we won Arizona. We won where Republicans were losing.
Speaker 7: And if they keep the problem is they're not keeping
Speaker 7: with that same strategy.
Speaker 3: President Trump, though, this is the thing you want to
Speaker 3: look at it. Who's going to win?
Speaker 7: Okay, First of all, the campaigns in Wisconsin and Pennsylvania,
Speaker 7: the incumbent Democrat senators are using Trump and their campaigns
Speaker 7: not against them but hugging them. So tell me how
Speaker 7: that's going to turn out. That's a good sign for
Speaker 7: a puppet. Then you're looking at articles where there's infighting
Speaker 7: in the Democratic Party because they want to know who
Speaker 7: to blame when they lose, and now they're literally talking
Speaker 7: about would it have been better to keep Biden on
Speaker 7: the ticket. And now you have people really going after
Speaker 7: Pelosi because not only did she and Obama push Biden off,
Speaker 7: she's the one who selected the VP candidate that put
Speaker 7: him in this problem.
Speaker 5: You're very well versed in the House races.
Speaker 3: You want to walk through them. Well no, no, no,
Speaker 3: not all of them. There's too many.
Speaker 5: But well, no, there's some Cubans prolific. You were a
Speaker 5: prolific fundraiser. You saying they don't have money? Now, whose
Speaker 5: fault is that? That Speaker Johnson's problem?
Speaker 3: Well, look he just came in.
Speaker 1: No.
Speaker 3: Look I wouldn't put that on Johnson.
Speaker 7: I put that on the Age who partnered with all
Speaker 7: the Democrats who are helping Why would the Democrats partner
Speaker 7: with these eight Republicans because they knew it would give
Speaker 7: them an advantage in an election that they couldn't just
Speaker 7: our super pac last cycle had more money than the
Speaker 7: D tripleC and their super pack. Now, if you want
Speaker 7: to look at the makeup of the environment, and this
Speaker 7: is where you want to you want to see Timing
Speaker 7: is everything in politics. Gallup does an interesting poll where
Speaker 7: they don't ask you if you'll vote for Harris or Trump.
Speaker 7: They ask you which party do you identify with? And
Speaker 7: they've done this for decades. Republicans are leading forty eight
Speaker 7: to forty five. Now is that important? Yes, Republicans have
Speaker 7: never led and they ask a second question, who's best
Speaker 7: to solve the problems?
Speaker 3: Republican leading that.
Speaker 7: So it's a good environment in the House North Carolina redistrict,
Speaker 7: so you automatically start with three new seats you can
Speaker 7: pick up. You've got a race in Colorado that last
Speaker 7: time was a new seat that we had a libertarian
Speaker 7: in that picked up four percent of the vote. They're
Speaker 7: not and Gabe Evans could pick up there. Alaska a
Speaker 7: ranked system, we don't have the second Republican running there.
Speaker 3: We'll pick that seat up. Then if you go to Pennsylvania, we.
Speaker 7: Had a bad top of the ticket last time for Governor.
Speaker 7: Dave McCormick is fantastic. Donald Trump is fantastic. So one
Speaker 7: or two seats there. You got Michigan where you have
Speaker 7: Slotkin who pulled out Tom.
Speaker 5: Barrett's running to the Republicans were talking two years ago,
Speaker 5: we only have a little bit of time left.
Speaker 3: I have to ask about Eil.
Speaker 7: I'm telling you there's opportunities if you had the resources.
Speaker 5: You see the opportunities if there was resources, maybe if.
Speaker 7: Okay, every cycle I was leader, we gained seats in California,
Speaker 7: there's two other seats we can gain. The question is
Speaker 7: are you putting the resources in to get the message out,
Speaker 7: to get it The environment is there.
Speaker 3: If you don't turn it out, there's a problem.
Speaker 5: Let's talk about man with resources. Elon Musk. He's saying
Speaker 5: that if you are a registered voter, you can get
Speaker 5: one million dollars. There's some legal issues with that, But
Speaker 5: that's not what I want to ask you. I want
Speaker 5: to ask about this idea that he can become the
Speaker 5: head of the Department of Government Efficiency.
Speaker 3: Does that make sense?
Speaker 5: Because now he's talking about if he does become that person,
Speaker 5: maybe there's a pathway to approve autonomous vehicles that will
Speaker 5: directly help his company that he's the chief executive officer of.
Speaker 5: Can he do both?
Speaker 3: Is that what now? Now I've known Elon for a
Speaker 3: long time.
Speaker 7: He's never said I want to go into government so
Speaker 7: I can get autonomous vehicles approved.
Speaker 3: That's not even on his mind.
Speaker 7: But listen to the question you just asked, Oh, my god,
Speaker 7: could we have Elon Musk go to government and make
Speaker 7: it efficient?
Speaker 3: I don't know.
Speaker 7: We just had a hurricane in North Carolina and the
Speaker 7: only way people can get the Internet is because of Elon.
Speaker 7: We have astronauts stuck in space. The only way that
Speaker 7: can come down is if we ask Elon. We just
Speaker 7: watched a rocket that no government did, but Elon set
Speaker 7: it up, created an engine only made in America, where
Speaker 7: before him we paid putin for their rockets and he
Speaker 7: lands it right on back. I would pray Elon would
Speaker 7: come in and make our government efficient. My god, you
Speaker 7: would have accountability. You would have a government that works
Speaker 7: for the people. And does he want any money from it? No,
Speaker 7: we want more people like that. I mean, there is
Speaker 7: no other country in the world. Every single one would
Speaker 7: beg for Elon to come and do it. And somehow
Speaker 7: the Democrats want to think that's wrong.
Speaker 3: That is what's wrong with them.
Speaker 2: He's gonna be tweeting this clip a little bit later speaking,
Speaker 2: mcconfie is going to see you. Thanks for having me back,
Speaker 2: Thank you appreciate it. The Folmhouse speak of that. Kevin mccarthie.
Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best
Speaker 2: in markets, economics, antient politics. You can watch the show
Speaker 2: live on Bloomberg TV weekday mornings from six am to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,
Speaker 2: or anywhere else you listen, and as always, on the
Speaker 2: Bloomberg Terminal and the Bloomberg Business app
Speaker 7: MHM