WEBVTT - Surveillance: China Can Stand Tariffs' Shock, Weinberg Says 0:00:00.680 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.560 Bloomberg dot Com, and of course on the Bloomberg Paul. 0:00:27.760 --> 0:00:30.840 We've got to bring in an esteem guest to rap 0:00:31.040 --> 0:00:35.240 in the politics the international relations with the Marcus Carl 0:00:35.240 --> 0:00:39.160 Weinberg high frequency economics, with his work over the years 0:00:39.200 --> 0:00:42.280 O E, C, d I, m F debt workouts internationally, 0:00:42.320 --> 0:00:45.160 and of course would Lehman a couple of coffees ago 0:00:45.840 --> 0:00:48.479 as well. Carl, I'm gonna give you an opening salvo. 0:00:49.000 --> 0:00:54.440 Why should our American listeners care about these EU elections? Well, 0:00:54.800 --> 0:00:57.520 they really shouldn't care very much about these EU elections 0:00:57.560 --> 0:01:00.959 unless they happen to be investing in European bonds. And 0:01:01.160 --> 0:01:04.160 they're worried a little bit about Italy and the license 0:01:04.240 --> 0:01:08.360 that the Italian government might feel free to take. Now 0:01:08.400 --> 0:01:11.800 that the populists got a better reading on this go around, 0:01:11.880 --> 0:01:14.600 the m five star movement is out of it a 0:01:14.680 --> 0:01:17.800 little bit. The more sane league is in charge. They 0:01:17.800 --> 0:01:20.360 have a potential new partner, so maybe we'll see some 0:01:20.440 --> 0:01:23.559 challenges on the budget side from Italy and that could 0:01:23.560 --> 0:01:25.240 give the bond market a little bit of a shake. 0:01:25.319 --> 0:01:28.960 That's an investment opportunity for some futures negative five down 0:01:29.040 --> 0:01:32.520 futures negative fourteen. But the yields are the ten uere 0:01:32.640 --> 0:01:36.520 yield is two point to nine, yeah, and the ten 0:01:36.600 --> 0:01:39.880 year yield on bunds is minus fifteen basis points. That's 0:01:40.040 --> 0:01:42.640 an even more exciting story. You know. That's spread. It 0:01:42.680 --> 0:01:45.600 will be appealing to some uh and people will look 0:01:45.640 --> 0:01:48.720 into that, I'm sure. But at the other end of 0:01:48.720 --> 0:01:51.000 the curve, to me, the German story is what's exciting. 0:01:51.200 --> 0:01:53.800 We've been talking at high frequency Economics for a long 0:01:53.880 --> 0:01:57.680 time now about bun yields going negative, about the shortage 0:01:57.680 --> 0:02:00.600 of bunds in the market, about low and Asian risks 0:02:00.600 --> 0:02:03.720 in Germany despite a high a very low domestic unemployment 0:02:03.800 --> 0:02:06.200 rate because of the open borders and the low jobless 0:02:06.240 --> 0:02:08.560 rate in Europe, and this story is all coming together. 0:02:08.639 --> 0:02:12.120 It's a very exciting story. But negative Bonnils pods risks 0:02:12.160 --> 0:02:15.040 for the financial system, and that too is something American 0:02:15.040 --> 0:02:17.520 investors should be paying attention to. Well, car, what do 0:02:17.520 --> 0:02:21.200 you think the latest twist in the Brexit negotiations and 0:02:21.280 --> 0:02:23.400 the EU elections. What does that mean for Brexit in 0:02:23.480 --> 0:02:26.240 the European economy? And from your perspective, anything changed in 0:02:26.240 --> 0:02:29.480 the last several days. From your perspective, absolutely nothing. You know, 0:02:29.600 --> 0:02:32.480 I don't really care who nothing, I don't really care 0:02:32.480 --> 0:02:35.760 who's Prime Minister. The parliamentary arithmetic isn't changed by any 0:02:35.840 --> 0:02:38.040 of this. We still have no majority in Parliament and 0:02:38.080 --> 0:02:40.680 therefore nothing can get done. I quoted to my high 0:02:40.720 --> 0:02:45.200 frequency economics leaders this weekend Abraham Lincoln, House divided against 0:02:45.240 --> 0:02:50.120 it how's divided against itself? Cannot stand and at the 0:02:50.200 --> 0:02:52.280 end of the day, it won't fall. But it has 0:02:52.320 --> 0:02:54.560 to be all one or all the other in order 0:02:54.600 --> 0:02:57.040 to persist. And that's where we are in Britain. I 0:02:57.080 --> 0:02:58.919 think the only way this will be resolved is through 0:02:59.000 --> 0:03:01.959 national elections and new government, and hopefully someone will win 0:03:02.000 --> 0:03:04.520 those elections and then we'll have a chance of getting 0:03:04.560 --> 0:03:08.360 something done on bregsit. How concerned should your readers our 0:03:08.400 --> 0:03:12.520 listeners be about some of the rising trade tensions over 0:03:12.560 --> 0:03:14.320 the last several weeks. How do you view that between 0:03:14.440 --> 0:03:18.120 US and China. Well, there's two aspects to that. The 0:03:18.160 --> 0:03:21.320 first is that any breaking on world trade through tariffs 0:03:21.400 --> 0:03:25.440 or trade restrictions or predatory commercial policy, that's all bad 0:03:25.480 --> 0:03:28.200 for world trade. And anything that's bad for world trade 0:03:28.280 --> 0:03:31.120 is bad for the world economy. Every time world trade 0:03:31.160 --> 0:03:34.839 growth dips, something bad happens to world GDP. The other 0:03:34.840 --> 0:03:37.720 side of the coin is that so far these this 0:03:37.840 --> 0:03:41.040 war is not all that large. If China lost all 0:03:41.120 --> 0:03:43.440 of its exports to the United States, all five hundred 0:03:43.440 --> 0:03:46.600 billion dollars worth, it would cost its GDP three and 0:03:46.640 --> 0:03:49.360 a half percent once and then it will go right 0:03:49.400 --> 0:03:51.600 back to growing again where it was before. And it's 0:03:51.640 --> 0:03:54.520 growing at six and a half percent. China, despite all 0:03:54.560 --> 0:03:56.960 the stuff you read about in the press, China is 0:03:57.000 --> 0:03:59.280 not in a recession of any kind. It's growing at 0:03:59.320 --> 0:04:02.480 six and three quarters percent. For goodness sake, It's doing 0:04:02.600 --> 0:04:04.920 quite strong enough to be able to withstand the shock. 0:04:05.160 --> 0:04:06.960 And of course China is not going to lose all 0:04:06.960 --> 0:04:09.360 of its trade with the US over this. It'll lose 0:04:09.400 --> 0:04:12.160 just the sliver of it. What is the power dynamic 0:04:12.400 --> 0:04:16.360 right now between Michigan Washington, the President comes back from Japan. 0:04:16.920 --> 0:04:19.359 We've seen all the back and forth, Carl, You're deeply 0:04:19.440 --> 0:04:23.040 experienced it. What is between the lies. Who has the 0:04:23.120 --> 0:04:25.719 upper hand? Right now, Let's see right now, as I 0:04:25.800 --> 0:04:29.440 remember from physics, what power is force times distance or 0:04:29.480 --> 0:04:31.920 something like that, and that implies that something is pushing 0:04:31.920 --> 0:04:35.040 against something else. And right now, nothing is happening, right 0:04:35.080 --> 0:04:38.080 nobody's pushing against anyone. But says, okay, wise guy, we're 0:04:38.080 --> 0:04:40.359 going to go to John Tucker. Can we go to 0:04:40.440 --> 0:04:44.360 Tony and mechanics this morning? Okay? Look, F equals g 0:04:45.320 --> 0:04:48.800 F equals g mm. Over our square the two ms 0:04:48.800 --> 0:04:52.000 of the moon and the sun. What's the mass right 0:04:52.000 --> 0:04:57.080 now of us blather versus the mass of Chinese silence? 0:04:57.480 --> 0:05:00.240 So that's right, it's exactly right. China won't talk. That's 0:05:00.240 --> 0:05:04.400 a very powerful force in an initiation. Alright. So so 0:05:04.520 --> 0:05:07.040 China right now says, we have our principles, and if 0:05:07.040 --> 0:05:09.600 you want to bide with these principles, we'd rather endure 0:05:09.720 --> 0:05:13.080 the pain of the tariffs to achieve our goals, which 0:05:13.080 --> 0:05:16.279 are modernization and development on our plan. And the Trump 0:05:16.320 --> 0:05:19.760 administration is frustrated. So President Trump is doing what he 0:05:19.839 --> 0:05:22.680 has done frequently, what he did with Japan this weekend, 0:05:22.720 --> 0:05:24.800 what he's doing with China, which is he's saying, we're 0:05:24.839 --> 0:05:26.760 not ready to make a deal with China. All right, 0:05:26.800 --> 0:05:31.200 he's disengaging, right China. Beijing won't give President Trump a 0:05:31.320 --> 0:05:35.039 plank for his reelection platform by giving him a deal 0:05:35.279 --> 0:05:38.080 on trade. That's just where it is right now. And 0:05:38.120 --> 0:05:41.640 maybe the next administration, maybe the next Trump administration or whoever, 0:05:41.880 --> 0:05:44.479 will come in with a more conciliatory view and be 0:05:44.520 --> 0:05:47.760 willing to work with the Chinese, But this administration isn't 0:05:47.800 --> 0:05:50.520 in The Chinese aren't buying it. So you don't expect 0:05:50.560 --> 0:05:54.279 anything over the next year and a half meaningful between 0:05:54.400 --> 0:05:56.480 US and China. I don't think we'll see any agreement. 0:05:56.600 --> 0:05:58.279 You know, we may even even just kind of a 0:05:58.320 --> 0:06:00.680 headline agreement to kind of get it all off the table. Well, 0:06:00.720 --> 0:06:02.520 the Chinese have drawn a red line in the sand. 0:06:02.520 --> 0:06:05.480 They said any agreement must include the immediate elimination of 0:06:05.520 --> 0:06:08.080 all tariffs, and that just ain't going to happen out 0:06:08.080 --> 0:06:11.159 of this current administration team because people on that team 0:06:11.400 --> 0:06:15.400 believe incorrectly that the tarifts are exerting an unbearable force 0:06:15.440 --> 0:06:18.080 on the Chinese economy. And that's not the case. This 0:06:18.160 --> 0:06:22.520 is uh a thirteen fourteen trillion dollar economy, and you're 0:06:22.560 --> 0:06:25.320 threatening it with a tax that we're paying on five 0:06:25.760 --> 0:06:27.800 billion dollars worth of goods that they produce that they 0:06:27.800 --> 0:06:31.039 can easily sell to somebody else. Right, there's no unbearable 0:06:31.080 --> 0:06:34.640 force at work here? Well, I can't. This physics is 0:06:34.720 --> 0:06:37.520 killing me. I feel like it's Sisan Zamanski a few 0:06:38.160 --> 0:06:42.200 years ago. Okay, if there's an unbearable force, something clears, 0:06:42.240 --> 0:06:45.200 there's a leakage. There's a leakage within the system, and 0:06:45.279 --> 0:06:48.800 that is the currency market. Do you have optimism that 0:06:48.920 --> 0:06:53.039 currency markets could compensate for mistakes made along the way 0:06:53.080 --> 0:06:56.400 in trade? Well, you know, there are different there can 0:06:56.440 --> 0:06:58.919 be different views as to where the mistakes are. But 0:06:59.000 --> 0:07:03.279 I believe that the Chinese should not be How should 0:07:03.279 --> 0:07:05.800 I say this? We shouldn't deny the risk that China 0:07:06.120 --> 0:07:09.279 will pursue a devaluation of the yuan against the dollar 0:07:09.600 --> 0:07:13.679 while maintaining its value against its baskets. It's referenced basket 0:07:13.680 --> 0:07:16.720 and currencies as a way of offsetting the impact of 0:07:16.760 --> 0:07:19.280 these tariffs, and that's what we're seeing right now. The 0:07:19.360 --> 0:07:23.320 trade weighted basket is flat and the yuan is depreciating 0:07:23.360 --> 0:07:25.760 against the dollar. And this is a perfect storm for 0:07:25.800 --> 0:07:29.400 the Chinese because every percent that the yuan falls against 0:07:29.400 --> 0:07:32.040 the dollar. That's less of a burden that the tariffs 0:07:32.040 --> 0:07:34.600 impose on the prices of goods that are traded. Physics 0:07:34.600 --> 0:07:37.280 with Carl Weinberg. There it is Tuesday morning, to get 0:07:37.320 --> 0:07:40.840 your expomoral day started. Carl, thank you so much, great, 0:07:40.880 --> 0:07:45.920 We appreciate it. It has been a weekend of tumul, 0:07:46.080 --> 0:07:49.240 particularly for Europe. I guess we knew it. It was 0:07:49.320 --> 0:07:53.880 all news, but nevertheless there are significant reactions as well. 0:07:53.920 --> 0:07:56.080 So let's go a little i R here with negative 0:07:56.080 --> 0:07:59.840 interest rates every more negative in Europe, the Swiss to 0:08:00.040 --> 0:08:03.520 the year uh now a negative rate again that record lows, 0:08:03.560 --> 0:08:06.920 but nevertheless there and we can synthesize all this and 0:08:06.960 --> 0:08:09.560 what it means for Marcus A. Jacob Kirk guard with 0:08:09.640 --> 0:08:13.320 the Peterson Institute, a senior fellow. But that very uh 0:08:13.680 --> 0:08:17.720 just barely, I should say, describes how he thought about 0:08:18.680 --> 0:08:23.040 Europe and what it means for America in all just 0:08:23.200 --> 0:08:25.480 all sorts of ways to go here, including his work 0:08:25.480 --> 0:08:28.720 at our house in Denmark in his book Transforming the 0:08:28.760 --> 0:08:32.839 European Economy. Jacob, let me ask an open question to begin, 0:08:33.200 --> 0:08:36.560 what is your unique insight of what we saw in 0:08:36.600 --> 0:08:40.600 these EU elections. What I think, first of all, we 0:08:40.640 --> 0:08:43.960 should be clear that what it's in some way it's 0:08:44.000 --> 0:08:48.400 actually signaled was the birth of European democracy, because I 0:08:48.440 --> 0:08:50.720 think it was the first time you've ever had a 0:08:50.800 --> 0:08:54.680 European election, which is really kind of twenty eight different 0:08:54.720 --> 0:08:59.080 elections in member states, yeah, really synthesized into more of 0:08:59.120 --> 0:09:02.559 a single on and it was really an election that 0:09:02.679 --> 0:09:06.520 was about, uh, do you want the far right uh 0:09:06.640 --> 0:09:11.080 to march onwards ever stronger? And I think what we 0:09:11.160 --> 0:09:15.079 did see was that participation in these elections were about 0:09:15.120 --> 0:09:20.920 ten percent uh, and therefore we did not see uh, 0:09:21.240 --> 0:09:25.920 anything like uh you know, we basically had a lot 0:09:25.920 --> 0:09:28.680 of people turning out against that. And I think that's 0:09:28.679 --> 0:09:30.920 really the main story. And then there's a lot of 0:09:30.960 --> 0:09:35.640 implications for different individual countries, but this is the big story, 0:09:35.760 --> 0:09:37.600 and I bring it over to and I think if 0:09:37.640 --> 0:09:42.520 your Adam posing at Peterson Institute, the need to provide 0:09:42.640 --> 0:09:47.120 fiscal liquidity into a system with imploding interest rates. All 0:09:47.160 --> 0:09:51.079 of our conversations at Bloomberg Surveillance today, is it's still 0:09:51.080 --> 0:09:55.840 an austere Europe? Is it still austerity across Europe and 0:09:55.880 --> 0:10:00.880 particularly Germany? I would say much less so actually, because 0:10:00.960 --> 0:10:05.239 one thing we did see is the one major breakthrough 0:10:05.280 --> 0:10:08.640 that the far right had was in Italy, where Salvini 0:10:09.520 --> 0:10:13.800 one big and he's certainly going to propose tax cuts 0:10:13.840 --> 0:10:16.840 and more fiscal spending. And even in Germany when you 0:10:16.840 --> 0:10:19.800 look at the German fiscal impulse this year, it's going 0:10:19.840 --> 0:10:22.600 to be positive to the tune of zero point seven 0:10:22.640 --> 0:10:26.120 to zero point eight percent of GDP. And obviously McCall 0:10:26.200 --> 0:10:30.119 in France, who actually, when you look closer at the results, 0:10:30.880 --> 0:10:34.440 did quite well even if he didn't beat Marine Lepin. 0:10:35.000 --> 0:10:39.600 UH is also, of course UH promoting fiscal UH stimulus. 0:10:39.640 --> 0:10:43.040 So I would say that this is not two thousand 0:10:43.120 --> 0:10:46.760 and twelve. This is Europe in some ways reaping the 0:10:46.840 --> 0:10:51.199 benefits of perhaps the policy mistakes that were made UH 0:10:51.280 --> 0:10:53.400 six or seven years ago, by spending some of that 0:10:53.480 --> 0:10:57.240 fiscal space that the continent has. So, Jacob, what are 0:10:57.280 --> 0:11:01.400 these elections mean for the Brexit process in the near too, 0:11:01.440 --> 0:11:05.040 let's say, intermediate term? Well, I think the UK is 0:11:05.040 --> 0:11:09.239 a classic example of how these elections have really shuffled 0:11:09.600 --> 0:11:13.000 the national political circumstances in members dates because what we 0:11:13.080 --> 0:11:15.839 have already seen. What we saw, of course, was that 0:11:15.920 --> 0:11:20.800 the Labor Party lost almost as much as the Conservative 0:11:20.880 --> 0:11:24.840 Party did to the Brexit, to Farage's Brexit Party, and 0:11:25.000 --> 0:11:29.280 Corbin has already been, if you like, absorbing the consequences 0:11:29.320 --> 0:11:32.200 of that loss to the Liberal Democrats and is moving 0:11:32.320 --> 0:11:38.079 ever more explicitly into backing a second referendum on Brexit. UM. 0:11:38.240 --> 0:11:41.160 And if that happens, UH, then I think you basically 0:11:41.160 --> 0:11:45.120 have a totally bifurcated outlook for the UK. Either you 0:11:45.200 --> 0:11:47.880 have a no deal Brexit or you have no Brexit 0:11:47.960 --> 0:11:52.040 at all. And it really comes down to what the 0:11:52.120 --> 0:11:55.720 majority in the current British Parliament UH will do. And 0:11:55.760 --> 0:11:58.559 then of course who would be the next leader of 0:11:58.600 --> 0:12:02.040 the Conservative Party. But there has been this is already 0:12:02.040 --> 0:12:05.400 a massive in fact on the UK. So again give 0:12:05.480 --> 0:12:08.080 us your sense of you mentioned a second referendum. There's 0:12:08.200 --> 0:12:10.040 those that are saying to you, we're at the point 0:12:10.080 --> 0:12:12.520 now where this might be you know, really the only 0:12:12.559 --> 0:12:14.720 way to go. Do you think that the second referendum 0:12:14.920 --> 0:12:17.760 is on the table? Oh? I think it's very much 0:12:17.760 --> 0:12:19.240 on the table. I think if you look at the 0:12:19.280 --> 0:12:22.360 outcome of each elections, I think you will see that 0:12:23.120 --> 0:12:26.760 parties that were explicitly in favor of a second referendum 0:12:27.520 --> 0:12:32.160 one almost as much as the Conservatives and the Brexit 0:12:32.240 --> 0:12:35.240 Party combined and the switch vote if you like. It's 0:12:35.240 --> 0:12:39.400 basically the Labor Party. And you have seen senior Labor officials, 0:12:39.440 --> 0:12:43.920 including Jeremy Corbyn himself, actually come out and say, well, actually, 0:12:44.000 --> 0:12:48.120 if we don't do this, we're going to be killed 0:12:48.160 --> 0:12:52.199 by the Liberal of Democrats in the next UK general election. Jacob, 0:12:52.240 --> 0:12:55.400 give us a broader picture here in the next few minutes. 0:12:55.480 --> 0:12:58.200 I mean, we go from Conrad at an hour just 0:12:58.240 --> 0:13:01.920 to use Germany as a model, a helmet older Schroeder Americle, etcetera. 0:13:02.559 --> 0:13:06.120 What's the next for Jacob Kirkgard across Europe? I mean, 0:13:06.160 --> 0:13:12.040 what's what's the next wave in the conservative liberal battle 0:13:12.360 --> 0:13:14.920 nation to nation in Europe? And frankly you can drag 0:13:14.920 --> 0:13:17.400 America into it as well. Folks. What do you see 0:13:17.400 --> 0:13:21.480 as the next political continuum? Well, I think that the 0:13:21.800 --> 0:13:25.000 first big battle within having Europe is going to be 0:13:25.120 --> 0:13:29.360 all about who takes the big jobs that are becoming 0:13:29.440 --> 0:13:32.199 vacant at the presidency of the European Commission and the 0:13:32.240 --> 0:13:36.760 European Central Bank, etcetera. That's gonna be a big showdown 0:13:36.840 --> 0:13:41.760 between predominantly France and Germany. Um, and so far, based 0:13:41.760 --> 0:13:46.360 on these elections, I'd say it's as Mt Cole Uh. 0:13:46.480 --> 0:13:48.560 I think he gets to choose which are the two 0:13:48.640 --> 0:13:52.840 jobs he wants, uh basically, and I think he probably 0:13:52.880 --> 0:13:56.680 will choose the Commission, which means that I am personally 0:13:57.200 --> 0:14:02.920 uh thinking that proba probably since one of the effects 0:14:02.960 --> 0:14:08.120 of the increased participation in the European ar is that 0:14:08.360 --> 0:14:12.240 the uh you know, the the legitimacy of the Switzman 0:14:12.360 --> 0:14:15.440 process is much in hunt. So I might bet for 0:14:15.480 --> 0:14:21.520 those jobs will be probably west Ager for Commission president 0:14:21.560 --> 0:14:25.040 and Jan Spiderman at the CD. I think that's just 0:14:25.520 --> 0:14:28.200 ever more likely. Does he have to go out and 0:14:28.240 --> 0:14:31.320 get other nations to join him in voting or his 0:14:31.400 --> 0:14:34.120 friends just dictate what they want? Oh no, no, no, 0:14:34.200 --> 0:14:39.320 he's actively courting other count uh. He you know, he 0:14:39.360 --> 0:14:45.320 had dinner yesterday with the socialist uh premier of Spain. 0:14:45.520 --> 0:14:48.680 He has been talking to a lot of different countries. 0:14:49.240 --> 0:14:52.640 So no, no no, no, he's like actively campaigning among the 0:14:52.720 --> 0:14:58.880 other leaders, also attracting more parties to his new Liberal 0:14:58.920 --> 0:15:01.440 grouping in the europe In Parliament. So he's still very 0:15:01.520 --> 0:15:05.080 much on the campaign trail. Whereas you know quite Frankly, 0:15:05.120 --> 0:15:10.320 Angela Marchol, whose party obviously didn't do very well in Germany, 0:15:10.480 --> 0:15:14.200 is in my opinion, clearly of the defensive UH following 0:15:14.360 --> 0:15:19.400 almost a clear Green victory in the German elections. I mean, 0:15:19.920 --> 0:15:23.480 he's probably getting the Eiffel Tower tickets and the restaurant there, 0:15:23.520 --> 0:15:25.440 you know, way up. You know, I think it's impossible. 0:15:25.720 --> 0:15:28.440 I haven't been there. I I we tried to get in, 0:15:28.840 --> 0:15:32.480 you know, I tried. Francine pulled every string. She couldn't Okay, 0:15:32.520 --> 0:15:34.840 you know, I couldn't get a Jacob Kirkgard, Thank you 0:15:34.880 --> 0:15:37.160 so much, just really well time, thrilled to have you 0:15:37.240 --> 0:15:39.760 with us, with the Peterson and so go to their website. 0:15:39.840 --> 0:15:43.760 Just really really trenched stuff on EU and and how 0:15:43.800 --> 0:15:50.080 it redounds back to the United States as well. Lindsay 0:15:50.120 --> 0:15:53.120 Pigs with us was still she joins us right now, Lindsay, 0:15:53.160 --> 0:15:55.600 it's a border of economic data. What are you focused 0:15:55.600 --> 0:15:58.640 on this week? Well, I think the biggest focus will 0:15:58.720 --> 0:16:02.080 be GP. I think the Street is going to really 0:16:02.160 --> 0:16:04.440 hone in on whether or not we see a sizeable 0:16:04.520 --> 0:16:07.440 revision to the start of the year. I don't expect 0:16:07.480 --> 0:16:09.840 we will. I I do think we'll see maybe a 0:16:09.920 --> 0:16:12.400 tenth or two shaved off of that top line number, 0:16:12.440 --> 0:16:15.640 but it really leaves the thesis in place, meaning that 0:16:15.760 --> 0:16:19.040 growth exceeded expectations at the start of the year, setting 0:16:19.040 --> 0:16:21.360 the bar high. But when we start to look at 0:16:21.400 --> 0:16:24.480 the data leading into the second quarter, does appear to 0:16:24.480 --> 0:16:28.320 be a very short lived above trend positions. Okay, link 0:16:28.360 --> 0:16:31.440 what you just said in the consumer confidence which we're 0:16:31.440 --> 0:16:34.280 going to get a snapshot of today and into what 0:16:34.320 --> 0:16:38.000 we actually see with consumers spending. I mean, does it 0:16:38.040 --> 0:16:42.160 all dovetail nicely together? No, it doesn't. It used to 0:16:42.520 --> 0:16:44.720 before back in the day when we looked to consumer 0:16:44.760 --> 0:16:48.000 confidence and it was strong that generally translated into very 0:16:48.120 --> 0:16:52.200 robust pssessing duck numbers. We saw retail sales very solid. 0:16:52.680 --> 0:16:55.720 This time around, we continue to hear that the consumer 0:16:55.800 --> 0:16:59.200 is confident, that they're feeling good, but their actions aren't 0:16:59.280 --> 0:17:02.760 matching positive sentiments. And in fact, we've seen retail sales 0:17:02.800 --> 0:17:06.200 now trend negative for three of the last five months, 0:17:06.240 --> 0:17:09.800 despite the fact that confident is at multi year highs. 0:17:09.840 --> 0:17:12.960 So the consumer is saying one thing but doing quite another. 0:17:13.520 --> 0:17:15.960 So lyndsay, would you is it your opinion that the 0:17:15.960 --> 0:17:18.520 FED has done a relatively admiral job and kind of 0:17:18.560 --> 0:17:21.359 engineering kind of what can be characterized as a soft 0:17:21.440 --> 0:17:26.400 landing growth, still decent inflation, low consumer generally hanging in there. 0:17:26.440 --> 0:17:29.200 Is that your your take the moment. I think the 0:17:29.280 --> 0:17:31.360 Fed has done a very good job. I do think 0:17:31.400 --> 0:17:33.880 that they got a little over their skis last year. 0:17:33.960 --> 0:17:36.280 They got a little too aggressive with rate hikes. We 0:17:36.320 --> 0:17:39.960 could have done without the fourth, certainly the fourth, maybe 0:17:39.960 --> 0:17:43.080 even the third last year. As we see now from 0:17:43.119 --> 0:17:46.720 market fundamentals that the Fed has pushed beyond neutral and 0:17:46.760 --> 0:17:49.520 I mean the inversion, the partial inversion of the yield curve. 0:17:49.960 --> 0:17:52.800 At this point, we do need a rate cut, if 0:17:52.800 --> 0:17:55.920 not to rate cut, just to right to the slope 0:17:55.960 --> 0:17:58.640 of the yield curve, let alone, start to give back 0:17:58.680 --> 0:18:01.520 some of that accommodation to the market to ensure that 0:18:01.560 --> 0:18:05.000 we do soften the blow from the weakness as we 0:18:05.040 --> 0:18:08.760 expect going further into so, lindsay, in the first quarter 0:18:08.800 --> 0:18:12.200 earnings calls, you know, we started to hear more and more, 0:18:12.440 --> 0:18:15.119 particularly from the retailers, just kind of saying, hey, the 0:18:15.160 --> 0:18:18.200 trade tensions that are out there that are mounting. Um, 0:18:18.240 --> 0:18:20.960 it's not necessarily a big issue now, but it's certainly 0:18:21.600 --> 0:18:23.760 could very well be in the later part of the year. 0:18:23.840 --> 0:18:27.080 How concerned are you that trade tensions are the lack 0:18:27.160 --> 0:18:29.720 of any resolution can weigh on the consumer way on 0:18:29.760 --> 0:18:33.600 the economy. Oh absolutely. Now, when we talk about the 0:18:33.600 --> 0:18:38.479 tears already implemented, so we look at late into we 0:18:38.600 --> 0:18:40.960 estimate the tear of shaved off about two tens of 0:18:40.960 --> 0:18:44.159 a percentage point from GDP. It's so not a significant amount, 0:18:44.240 --> 0:18:48.000 but as we look out beyond and we expect momentum 0:18:48.040 --> 0:18:51.000 to wane in terms of top line funny missals, those 0:18:51.000 --> 0:18:53.840 tents of a percentage point will add up. Now we 0:18:53.920 --> 0:18:56.399 talk about heightened level of tariffs as well as the 0:18:56.440 --> 0:18:59.760 threat of an additional round of love is possibly placed 0:18:59.760 --> 0:19:02.919 in a course Chinese retaliatory action. This is going to 0:19:03.000 --> 0:19:07.159 compound that negative impact on the economy For businesses. We 0:19:07.280 --> 0:19:10.160 hear that many at ten percent were able to eat 0:19:10.240 --> 0:19:12.679 that that cost increase and not pass that on the 0:19:12.680 --> 0:19:17.760 consumer at This is going to be increasingly difficult. Now again, 0:19:17.880 --> 0:19:20.359 businesses may not be able to pass that directly on 0:19:20.480 --> 0:19:23.240 the consumers without the risk of losing market share, but 0:19:23.359 --> 0:19:25.960 that means that internally they're going to have to find 0:19:26.000 --> 0:19:29.960 efficiencies and cost reductions, which is likely to translate into 0:19:30.359 --> 0:19:33.679 income and wage cuts, which again will filter into the 0:19:33.720 --> 0:19:37.199 economy and indirectly hit the consumer. Lindsay thank you so 0:19:37.280 --> 0:19:40.359 much as we can started an economic week and again, uh, 0:19:40.600 --> 0:19:45.600 plethora is there? Is that the right Wordlethora of data 0:19:46.640 --> 0:19:49.400 coming out later in the week, a real snapshot into 0:19:49.440 --> 0:19:52.160 the market, and the right to June and those critical 0:19:52.200 --> 0:19:59.960 I S M numbers as well. There's medicine, there's politics, 0:20:00.160 --> 0:20:03.240 There's all the big issues we talked about every day. 0:20:03.440 --> 0:20:06.240 But no one, and I mean no one, has had 0:20:06.320 --> 0:20:10.080 more effect on families in America than our next guest. 0:20:10.160 --> 0:20:12.880 His name is Brian Kelly. I don't know what he did. 0:20:12.920 --> 0:20:15.919 He was on Wall Street doing something to various and 0:20:15.920 --> 0:20:18.439 he set up a website called The Points Guy to 0:20:18.520 --> 0:20:22.680 talk about bank cards and frequent flyer miles and change 0:20:22.840 --> 0:20:27.000 the language and action of every one of us. Mr 0:20:27.080 --> 0:20:29.240 Kelly joins us. Now, Brian, I want to say thank 0:20:29.280 --> 0:20:32.320 you again and and just all you've done to make 0:20:32.400 --> 0:20:35.680 us travel maybe more reasonable. Let's get out of the 0:20:35.720 --> 0:20:39.000 way the tension between the airlines and the banks right now, 0:20:39.480 --> 0:20:41.840 what do the banks want in the next twenty four 0:20:41.880 --> 0:20:45.120 months from the airlines, and what do the airlines want 0:20:45.200 --> 0:20:48.600 in the next twenty four months from all these charge cards. Well, 0:20:48.600 --> 0:20:51.159 it's interesting. Delta and m X actually just re up 0:20:51.240 --> 0:20:54.639 their relationship for the next five years, so we can 0:20:54.680 --> 0:20:57.639 probably expect to see some new bonuses and even some 0:20:57.720 --> 0:21:00.320 new credit cards. You know, the banks and the airlines 0:21:00.320 --> 0:21:03.560 have a pretty cozy relationship. The frequent flyer programs are 0:21:03.680 --> 0:21:07.840 huge profit centers, so for for for the airlines, the 0:21:07.880 --> 0:21:10.439 airlines sell billions of dollars worth of miles to the 0:21:10.440 --> 0:21:12.560 credit card companies, and then of course the credit card 0:21:12.560 --> 0:21:15.760 companies make a whole ton of money, you know, every 0:21:15.760 --> 0:21:18.920 time people swipe their cards on the transactions, so it's 0:21:18.960 --> 0:21:22.719 a pretty profitable ecosystem for everyone. I want to go 0:21:22.920 --> 0:21:26.719 to your Scott Clark who wrote a brilliant small article 0:21:26.960 --> 0:21:30.480 on Air New Zealand in Auckland and buried in it. 0:21:30.600 --> 0:21:33.840 Brian Kelly is the future I see, which is nobody 0:21:33.880 --> 0:21:37.440 wants to fly economy but they can't afford business class 0:21:37.440 --> 0:21:40.600 and first class is dead. Tell us about all these 0:21:40.640 --> 0:21:44.520 new levels to get me out of economy. Well, the 0:21:44.840 --> 0:21:48.240 big thing is premium economy. Um. The US airlines, you know, 0:21:48.280 --> 0:21:50.320 the three major US airlines. They used to have fake 0:21:50.400 --> 0:21:52.920 premium economy where it was basically just a coach seat 0:21:52.920 --> 0:21:56.960 with a little bit of extra records. I know that 0:21:57.200 --> 0:21:59.680 I could say this so because Sweeney's six ft three, 0:22:00.119 --> 0:22:04.080 Brian Kelly's like six seven, and then there's me. But 0:22:04.160 --> 0:22:06.600 the airline is now Delta, United and American all have 0:22:06.720 --> 0:22:09.640 real true premium economy that that's rolled out with over 0:22:09.640 --> 0:22:11.960 the last year, and they're making a ton of money 0:22:12.000 --> 0:22:14.400 off of it. That they're yielding twice as much from 0:22:14.440 --> 0:22:17.680 premium economy than they are traditional economy because air fares 0:22:17.720 --> 0:22:20.680 are still really cheap an economy with so many low 0:22:20.720 --> 0:22:22.560 cost carriers. So I think the sweet spot for the 0:22:22.640 --> 0:22:26.359 US airlines is on the premium economy and charging a 0:22:26.440 --> 0:22:29.439 premium for their you know, the business class suites that 0:22:29.480 --> 0:22:33.560 we've seen Delta roll out with. So Brian is as 0:22:33.640 --> 0:22:35.640 much as I love spending my summers on the Jersey Shore, 0:22:35.680 --> 0:22:37.640 I think I want to go to Europe this summer. 0:22:37.880 --> 0:22:39.800 Where's the where where do I go? What's the cheapest 0:22:40.000 --> 0:22:43.000 place to go? Well, Norwegian Era is probably you know, 0:22:43.080 --> 0:22:45.960 I would look at where Norwegian is flying their their 0:22:46.040 --> 0:22:50.000 fares are really really low, even for last minute travel. Now, 0:22:50.000 --> 0:22:53.320