WEBVTT - President Trump Defends Tariffs in Congressional Address 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:28.200 us live on YouTube for the next. 0:00:27.920 --> 0:00:30.480 Good amount of time. Bob Michael will join us. You 0:00:30.560 --> 0:00:33.560 know him from the Fed decides driving all of JP 0:00:33.720 --> 0:00:36.640 morgan fixed income. Huge advice he has to give to 0:00:36.680 --> 0:00:40.040 mister Diamond and the senior management. I'd go back to 0:00:40.120 --> 0:00:42.760 Maynard Keynes at Bretton Woods, but why not. Let's go 0:00:42.840 --> 0:00:45.720 back to the guy that really said it, Paul Samuelson, 0:00:45.800 --> 0:00:50.519 his iconic textbook of nineteen forty eight. When the facts change, 0:00:50.640 --> 0:00:53.440 I change. What do you do, sir? For Bob Michael 0:00:53.479 --> 0:00:55.840 and JP Morgan Have the facts changed? 0:00:56.680 --> 0:01:00.440 Well, first, Tom, thank you for reminding Jess forget about 0:01:00.440 --> 0:01:02.960 this equity stuff. Bonds are at the top of the 0:01:03.040 --> 0:01:03.760 Capitol staff. 0:01:03.800 --> 0:01:06.800 This is really important, folks. Bob and I are going 0:01:06.840 --> 0:01:10.040 to talk about this. The way you learn that bonds 0:01:10.120 --> 0:01:13.600 matter when you're a mouthy equity guy like me is 0:01:13.640 --> 0:01:16.720 you lose money and realize you wouldn't have lost it 0:01:16.760 --> 0:01:19.280 if you paid attention to bonds continue. 0:01:19.319 --> 0:01:22.679 We welcome everyone who wants to conserve capital. 0:01:23.400 --> 0:01:26.160 Where are we right now? The facts change, mister Michael. 0:01:26.640 --> 0:01:29.720 I'm going to up you one on Maynard Keynes and 0:01:29.800 --> 0:01:33.440 go with rogue off Ryan Hart. I wonder what they're thinking. 0:01:33.640 --> 0:01:37.119 After spending years writing a series of papers on financial 0:01:37.200 --> 0:01:43.119 repression and warning governments about the problems with excessive borrowing 0:01:43.160 --> 0:01:48.360 and debt to GDP climbing, it has all changed. What 0:01:48.400 --> 0:01:53.360 we knew as core Europe and fiscal austerity is gone. 0:01:53.760 --> 0:01:57.440 They've looked at the US and China. They want to 0:01:57.520 --> 0:02:01.120 join the party and they're coming in and doing it. So, yes, 0:02:01.240 --> 0:02:02.720 everything has changed. 0:02:02.840 --> 0:02:05.960 Two days after this, I had the honor of David 0:02:05.960 --> 0:02:08.639 Folkertzlande of Deutsche Bank, who you and I know is 0:02:09.000 --> 0:02:12.240 work with Peter Garber in AWE, and he was heated 0:02:12.440 --> 0:02:16.280 that Europe would shift to fiscal liquidity. So I guess 0:02:16.400 --> 0:02:20.240 that's happening now. Within all the research capabilities of your 0:02:20.280 --> 0:02:24.799 mind platform and your economics platform, is your confidence Europe 0:02:24.880 --> 0:02:27.560 can make the shift with or without NATO. 0:02:28.639 --> 0:02:31.800 We would argue they have to. If you look back 0:02:31.960 --> 0:02:36.799 over the last couple decades, Europe has underinvested in itself, 0:02:37.520 --> 0:02:41.640 and that's a result of decades of fiscal austerity. And 0:02:41.800 --> 0:02:45.639 they realize, certainly in Germany, that they have to catch up. 0:02:45.680 --> 0:02:48.840 They have to invest in their military, they have to 0:02:48.880 --> 0:02:53.240 invest in fiber optic, they have to invest in roads, bridges, 0:02:53.360 --> 0:02:55.720 all that kind of stuff, and they're going to and 0:02:55.760 --> 0:02:57.760 they have the fiscal capacity to do it. 0:02:58.360 --> 0:03:01.120 So when we're looking at the ten year treasury peaking 0:03:01.200 --> 0:03:05.720 at around actually four point eight in the middle of January, 0:03:05.800 --> 0:03:07.840 to where it is now around four to two, what 0:03:07.840 --> 0:03:09.880 do you think the bond market is telling us in 0:03:09.919 --> 0:03:11.360 the US and the economy. 0:03:11.880 --> 0:03:14.960 The bond market is telling us, we are your safe harbor. 0:03:15.280 --> 0:03:18.560 We are the anchor in the storm. We have yield now, 0:03:18.760 --> 0:03:23.120 so when there's volatility in policy, when there's volatility and 0:03:23.200 --> 0:03:26.560 risk assets, come in and join us. We will protect you. 0:03:27.080 --> 0:03:29.560 So what is the best way when you're talking to 0:03:29.600 --> 0:03:32.440 your clients to position at this point. 0:03:31.919 --> 0:03:35.960 I'm having meetings with clients every single day. I had 0:03:36.200 --> 0:03:41.200 a meeting yesterday with the University Endowment thinking about these issues, 0:03:41.200 --> 0:03:44.240 and we met with them five years ago. Five years ago, 0:03:44.600 --> 0:03:47.080 the aggregate bond market was yielding two two and a 0:03:47.160 --> 0:03:49.880 quarter percent today it's hielding four and a half percent. 0:03:50.080 --> 0:03:52.760 They didn't invest in, they're coming and now they're making 0:03:52.800 --> 0:03:57.360 smart decisions. Investors want to get into a bond market 0:03:57.400 --> 0:03:59.760 with yield you're starting at four and a half percent, 0:04:00.040 --> 0:04:04.080 can construct a portfolio of over five percent. That's very 0:04:04.120 --> 0:04:06.840 different than zero and negative interest rate policy. 0:04:07.120 --> 0:04:08.880 I look at the yield space and the answer is 0:04:08.920 --> 0:04:11.360 we've got a Bob Michael vector. You have called for 0:04:11.480 --> 0:04:15.600 price up, yield down. Maybe this is not the reasons 0:04:15.680 --> 0:04:19.839 that you looked for, but can you get this price up, 0:04:20.040 --> 0:04:25.120 yield down with tangible economic growth to sustain the machine? 0:04:25.400 --> 0:04:29.240 Dovetail this with Michael Feroli's work. Are we heading towards 0:04:29.640 --> 0:04:33.000 some form of Nber recession where we don't get the 0:04:33.040 --> 0:04:35.640 growth or are you're more optimistic that we can get 0:04:35.640 --> 0:04:39.960 the Michael yield plus some potential GDP growth. 0:04:41.080 --> 0:04:43.920 I think the Fed has done a really good job 0:04:44.040 --> 0:04:46.520 of taking us into a soft landing. I think they're 0:04:46.520 --> 0:04:48.599 going to pull it off. I think we're going to 0:04:48.640 --> 0:04:51.280 get yields to stabilize here, maybe the front end come 0:04:51.320 --> 0:04:55.279 down a little bit. The FET still feels uncomfortable that 0:04:55.320 --> 0:04:57.560 they're too far away from their neutral rate. I think 0:04:57.560 --> 0:05:00.920 there are a couple more cuts coming. I'd like yields 0:05:00.960 --> 0:05:03.880 to just stabilize. And here I don't actually want the 0:05:03.960 --> 0:05:07.440 ten year to tray too far below the mid forest. 0:05:07.480 --> 0:05:09.560 I wish it would just stay there. I wish the 0:05:09.600 --> 0:05:13.120 two year would stay about four percent and give investors 0:05:13.120 --> 0:05:15.600 the opportunity to get into this bond market. 0:05:15.680 --> 0:05:17.840 You and I know, you know with the Pope so Ill, 0:05:17.920 --> 0:05:20.640 there's the Vatican and we hope for his healthy recovery. 0:05:20.920 --> 0:05:23.760 Bob Michael for you and me, the Vaticans on Madison Avenue, 0:05:23.760 --> 0:05:26.839 who at the JP Morgan Library, and you go in 0:05:26.880 --> 0:05:30.920 that red velure room where he locked the door and said, 0:05:30.960 --> 0:05:33.800 we have to save the country. We didn't have a 0:05:33.839 --> 0:05:36.320 FED in the Gilded Age. Doug Erwin's in the Ft, 0:05:36.880 --> 0:05:39.400 I believe it is today with a brilliant interview of 0:05:39.480 --> 0:05:43.400 Dartmouth saying, look, it is the nineteenth century. Abby Joseph 0:05:43.400 --> 0:05:47.400 Cohen said yesterday it is the nineteenth century. How does 0:05:47.440 --> 0:05:51.440 this FED help the nation? Given tariffs? 0:05:53.200 --> 0:05:56.600 The FED has to balance all of these things. And 0:05:57.000 --> 0:06:01.000 I think a month ago everyone and the market looked 0:06:01.000 --> 0:06:05.880 at tariffs as an impulse to hire inflation. Today they're 0:06:05.960 --> 0:06:09.360 looking at it as a drag on growth the material one. 0:06:09.640 --> 0:06:13.880 I tend to look at tarifs as economy killers. So yeah, 0:06:14.080 --> 0:06:18.280 you get a price shock hire, but that's going to 0:06:18.320 --> 0:06:22.440 dial down aggregate final demand. And that's what I think 0:06:22.480 --> 0:06:24.360 the FED will be focusing on. They're going to be 0:06:24.440 --> 0:06:27.279 laser focused on the labor market. They're going to see 0:06:27.279 --> 0:06:29.400 if businesses and households retrench. 0:06:29.560 --> 0:06:31.560 I agree with you in the labor market, kerl Weinberg 0:06:31.640 --> 0:06:35.120 on yesterday high Frequency Economics solficer Leman is at a 0:06:35.160 --> 0:06:38.719 four point eight percent unemployment rate in the vicinity of 0:06:38.800 --> 0:06:40.920 labor day. We welcome all of you on your commute 0:06:40.960 --> 0:06:45.080 accrastination on YouTube worldwide. Good evening in India. I've got 0:06:45.080 --> 0:06:48.000 a special focus off of Ray YouTube on what you're 0:06:48.000 --> 0:06:51.159 doing in Bangalore and in Mumbai. We say good morning 0:06:51.279 --> 0:06:56.359 internationally on YouTube. Subscribe outit YouTube to Bloomberg Podcast, growing 0:06:56.440 --> 0:06:57.440 each and every day. 0:06:57.520 --> 0:07:00.520 Jess Well, Bob, this is as you know last week, 0:07:00.520 --> 0:07:02.560 we're going to hear FED speakers before they go into 0:07:02.560 --> 0:07:04.960 that blackout period before the decision in the middle of 0:07:05.000 --> 0:07:07.440 this month, and of course we will hear from Fedshaer 0:07:07.520 --> 0:07:10.080 Jerome Pale on Friday when he gives a keynote speech 0:07:10.080 --> 0:07:13.119 at the Chicago Boost twenty twenty five US Monetary Forum. 0:07:13.240 --> 0:07:16.080 So what do you think markets want to hear from 0:07:16.120 --> 0:07:19.040 Fed officials before this week wraps up? Versus in reality, 0:07:19.080 --> 0:07:20.640 what we will end up hearing from them. 0:07:21.520 --> 0:07:24.160 I think what we want to hear is how they're 0:07:24.200 --> 0:07:28.600 weighing taris and are they still looking for an opportunity 0:07:28.680 --> 0:07:31.880 to bring rates down to what they believe is a 0:07:31.920 --> 0:07:35.280 neutral rate. We'll also get the infamous dot plot, so 0:07:35.400 --> 0:07:38.320 we'll have some idea of how much higher the long 0:07:38.400 --> 0:07:41.120 term neutral FED funds rate will have crept up. I 0:07:41.120 --> 0:07:43.520 think it goes up about a quarter of a percent. 0:07:43.880 --> 0:07:48.360 I'd expect jpwell to be very very balanced and basically 0:07:48.400 --> 0:07:49.320 try to take a pass. 0:07:49.400 --> 0:07:52.200 It's almost medical. First, do no harm. Tell me about 0:07:52.240 --> 0:07:54.720 the dynamics of the market. I noticed like three months, 0:07:54.720 --> 0:07:57.960 seven year when inverted the other day. Nothing I ever 0:07:58.040 --> 0:08:00.960 look at. But how does when you go? Bob has 0:08:01.080 --> 0:08:05.240 three bloombergs with twelve screens. Finally, the glow in the 0:08:05.280 --> 0:08:09.680 new JP Morgan building, it shines off Citadel across the street. 0:08:09.680 --> 0:08:12.840 It's amazing how that were They're on their binoculars across 0:08:12.880 --> 0:08:16.120 what's Bob Michael doing today. They're looking at them on 0:08:16.320 --> 0:08:20.000 your Bloomberg. How do you perceive the vanilla two tens spread, 0:08:20.320 --> 0:08:22.680 the ten year or the two year real yield? What 0:08:22.760 --> 0:08:25.880 does Bob Michael look at to ascertain this market? 0:08:26.720 --> 0:08:30.400 What I'm looking at is is yield settling in at 0:08:30.520 --> 0:08:33.760 levels higher than I believed a year ago they would 0:08:33.760 --> 0:08:36.800 settle in at. And I like it. I like the 0:08:36.800 --> 0:08:39.679 fact that we may have a German yell curve from 0:08:39.760 --> 0:08:43.160 two percent to three percent, we may have a US 0:08:43.280 --> 0:08:46.360 yell curve from four percent to four and a half 0:08:46.400 --> 0:08:50.880 percent two tens. I like credit spreads holding where they 0:08:50.880 --> 0:08:54.600 are because they're pricing in a soft landing. Those are 0:08:54.640 --> 0:08:57.040 the things I look for, and I think it's a 0:08:57.040 --> 0:08:59.200 great environment. By the way, we didn't talk about Japan 0:08:59.360 --> 0:09:01.240 ten year Japan one and a half amazing. 0:09:01.800 --> 0:09:05.240 Jordan Rochester at Missoulu. You should have hired him. Jordan 0:09:05.400 --> 0:09:08.439 Rochester says, this is a sea change for Japan. 0:09:08.840 --> 0:09:11.240 I can't can't remember the last time we were one 0:09:11.240 --> 0:09:11.959 and a half percent. 0:09:12.200 --> 0:09:15.679 Martin years, the late Martin Feldstein who was exquisite on this, 0:09:15.920 --> 0:09:19.080 Robbie Feldman at Morgan Stanley, that's a different bank, Bob 0:09:19.480 --> 0:09:21.680 uh They you know they said this would never happen, 0:09:21.720 --> 0:09:25.480 and here we are. Here, we are happening. You're laughing 0:09:25.520 --> 0:09:27.320 at me, Bob, Bob. 0:09:27.679 --> 0:09:30.960 I think I think we were one before glass, but 0:09:31.000 --> 0:09:31.560 I'm not sure. 0:09:31.559 --> 0:09:34.079 It was a d burgercepthing that we won't go there, 0:09:34.120 --> 0:09:36.559 folks and said, when mister Diamond comes in, we'll harass 0:09:36.640 --> 0:09:40.120 him about it. Bob. I look at this market and 0:09:40.240 --> 0:09:44.520 your advising clients right now. Is it a total return market? 0:09:44.520 --> 0:09:47.240 The great Dan fuss at Lumas sales. Is it that 0:09:47.360 --> 0:09:50.400 kind of market where you can make total return or 0:09:50.440 --> 0:09:52.200 you're clipping coupons in the basement. 0:09:52.559 --> 0:09:56.280 I think you're going to get some total return with 0:09:56.600 --> 0:09:59.800 yield settling a bit lower with the FED coming in 0:09:59.840 --> 0:10:02.640 and cutting rates a couple more times this year. But 0:10:02.720 --> 0:10:05.880 I think it's mostly a Carrie market. I think it's 0:10:05.920 --> 0:10:10.800 mostly an opportunity for active managers to do what we 0:10:11.000 --> 0:10:14.640 used to do pre financial crisis. When sectors get a 0:10:14.640 --> 0:10:17.360 little bit ahead of themselves, you dial them down and 0:10:17.440 --> 0:10:20.120 go into sectors that live. I think this is also 0:10:20.160 --> 0:10:25.280 a bond market for more diversified portfolios to look overseas. 0:10:25.360 --> 0:10:28.120 Now it's safe to go into nine dollars assets. 0:10:28.400 --> 0:10:30.679 Just this is so charming. There was what we call 0:10:30.760 --> 0:10:33.360 the blue Book, which was a standard and Poores thick 0:10:33.400 --> 0:10:35.960 blue book and the value line you trip over on 0:10:36.000 --> 0:10:38.800 the floor and Bob and I would be going, oh 0:10:38.920 --> 0:10:42.760 the Boise cascade. It looks so good today. It's like 0:10:42.840 --> 0:10:45.400 you know, remember it's like a real bond market. 0:10:45.520 --> 0:10:45.720 Yeah. 0:10:45.800 --> 0:10:47.320 Then we didn't know how to price it. There was 0:10:47.360 --> 0:10:49.520 no babk. We had to punch it into our Monro 0:10:49.720 --> 0:10:50.720 bond calculators. 0:10:52.559 --> 0:10:54.960 Yeah. Bill grow still has his own this Good morning Bill. 0:10:55.000 --> 0:10:57.400 Out on the left coast, you had a Monro trader 0:10:57.880 --> 0:11:00.880 and he and Charlie Gogelact were kick field goals. They 0:11:00.920 --> 0:11:03.439 tried to make three points on a twenty year piece 0:11:03.520 --> 0:11:06.440 and a guy named Secunda in Bloomberg showed up and 0:11:06.480 --> 0:11:09.720 they said, no, you're not in overnight. Just the museum's 0:11:09.760 --> 0:11:13.319 right behind us here, folks. Overnight, the Bob Michael act 0:11:13.520 --> 0:11:17.640 went away because people can do to convex the duration. 0:11:17.840 --> 0:11:20.679 Boom boom, Oh God, I can't charge your field goal. 0:11:20.800 --> 0:11:21.680 Get another question. 0:11:22.400 --> 0:11:25.040 Of course, I have to bring up our star everyone's 0:11:25.080 --> 0:11:27.280 favorite topic when people want to debate about the neutral rate. 0:11:27.320 --> 0:11:29.720 Because you were bringing up the dop blots. Obviously we 0:11:29.760 --> 0:11:32.320 get those quarterly. We last saw it in December, so 0:11:32.360 --> 0:11:33.800 when we get those in a couple of weeks from 0:11:33.840 --> 0:11:36.160 the Fed. The longer term rate that they had updated 0:11:36.240 --> 0:11:38.320 was at three used to be closer in recent years 0:11:38.320 --> 0:11:40.080 to two and a half percent. Where do you expect 0:11:40.120 --> 0:11:42.720 when people are debating where the neutral rate is actually is? 0:11:42.880 --> 0:11:46.640 Remember they started doing this in twenty twelve because they 0:11:46.640 --> 0:11:49.200 had gone to QE. They had brought rates down this zero. 0:11:49.640 --> 0:11:51.840 They didn't think we in the bond market were smart 0:11:51.920 --> 0:11:54.280 enough to know what neutral was anymore, so they were 0:11:54.280 --> 0:11:57.280 going to help us out. That first long term neutral 0:11:57.320 --> 0:12:00.720 dot was four and a quarter percent, so that was textbook. 0:12:01.000 --> 0:12:04.640 That's two percent inflation targeting, plus the long term real 0:12:04.720 --> 0:12:06.880 yield on the FED funds rate was two and a 0:12:06.960 --> 0:12:09.760 quarter percent. Four and a quarter that's where we are today. 0:12:10.080 --> 0:12:13.240 I think it's closer to four than three twenty seconds. 0:12:13.400 --> 0:12:16.920 Is it stagflation or is it legit damp and but 0:12:17.120 --> 0:12:18.560 good nominal GDP? 0:12:19.120 --> 0:12:22.320 I think it's good nominal GDP. I think we're getting 0:12:22.320 --> 0:12:25.520 the bad stuff now as far away from the midterms 0:12:25.559 --> 0:12:28.400 as possible. The good stuff will come at the back 0:12:28.520 --> 0:12:32.320 end of this year. Extension of the tax cutting Jobs 0:12:32.360 --> 0:12:36.120 Acts some deregulation closer to the midterms, if you will. 0:12:36.000 --> 0:12:39.079 I'll editorialize, folks, for those of you in a panic 0:12:39.200 --> 0:12:42.959 after what we saw it in historic Tuesday. I agree 0:12:43.000 --> 0:12:46.040 with mister Michael, Bob Michael, thank you so much, with JP. 0:12:45.920 --> 0:12:48.240 Morgan and the spirits a nation here and on what 0:12:48.280 --> 0:12:52.120 we see in a constructive nominal GDP, given all the 0:12:52.160 --> 0:12:59.880 policy out there. 0:13:00.000 --> 0:13:03.680 Listening to the Bloomberg Surveillance Podcast. Catch us live weekday 0:13:03.720 --> 0:13:06.839 afternoons from seven to ten am Eastern Listen on Apple 0:13:06.880 --> 0:13:10.240 Karplay and Android Otto with the Bloomberg Business app, or 0:13:10.360 --> 0:13:11.880 watch us live on YouTube. 0:13:12.200 --> 0:13:17.280 Joly Now My Grammarian Terence Hayes joins us with Beengaea policy. Terry, 0:13:17.320 --> 0:13:21.000 thank you for the love note yesterday. Mark, the wonderful 0:13:21.040 --> 0:13:24.559 Mark Crumpton keeps a list of the names I mispronounce, 0:13:25.080 --> 0:13:28.200 starting with Jess Manton, and it's a long list. Terry, 0:13:28.440 --> 0:13:31.440 thank you for adding to it yesterday. So eighty five 0:13:31.520 --> 0:13:36.080 percent of potassium chloride that Republicans in the Midwest need 0:13:36.679 --> 0:13:41.520 comes from Canada. You got fenestra in the fourth Congressional 0:13:41.559 --> 0:13:45.840 District of Iowa. When does the Republican from Southwest Iowa, 0:13:45.960 --> 0:13:49.200 dial one eight hundred Trump and say stop it. When 0:13:49.200 --> 0:13:49.920 does that happen? 0:13:50.000 --> 0:13:53.760 Terry the case of Brandy Finstra, I don't think that 0:13:53.840 --> 0:13:58.199 happens at all, frankly. But the issue here is kind 0:13:58.200 --> 0:14:02.240 of how to manage the tariff relationship and what what 0:14:02.280 --> 0:14:03.880 the United States gets out of it? 0:14:04.360 --> 0:14:05.240 Uh. 0:14:05.679 --> 0:14:10.240 Scott Besson has a great uh, a great phrase for this, 0:14:10.480 --> 0:14:13.440 and the you know the essence of it is that, uh, 0:14:13.640 --> 0:14:16.680 it's path dependent. It's path dependent on upon what the 0:14:16.720 --> 0:14:20.400 other side does in tariff negotiations. So uh, I doubt 0:14:20.680 --> 0:14:22.640 mister Fienstra is going to be in a situation where 0:14:22.640 --> 0:14:27.480 he needs more potash from other So you're. 0:14:27.360 --> 0:14:30.040 Optimistic where you able to work out of this or 0:14:30.040 --> 0:14:32.840 do we get into the game theory of reciprocity tip 0:14:32.920 --> 0:14:34.800 for tap Well. 0:14:34.840 --> 0:14:36.600 I think the answer is both. Frankly, you're going to 0:14:36.680 --> 0:14:41.960 have individual tariff negotiations with Canada and Mexico ongoing based 0:14:42.000 --> 0:14:46.000 on geopolitical matters. You're going to get the UH, You're 0:14:46.000 --> 0:14:48.440 going to get the reciprocity overlay on top of it. 0:14:48.640 --> 0:14:52.120 I think what markets aren't fully digesting is that the 0:14:52.240 --> 0:14:54.680 endgame of this is not more and more tariffs. The 0:14:55.040 --> 0:14:57.360 endgame of this for the for the Trump people is 0:14:57.440 --> 0:14:59.320 less and less tariffs. And I don't say that in 0:14:59.320 --> 0:15:04.360 any sort of matter or manner, but the goal is 0:15:04.400 --> 0:15:06.480 to actually reduce trade barriers. 0:15:07.160 --> 0:15:09.520 So let me bring in jes Met here, Jess to 0:15:09.600 --> 0:15:13.000 Terry Haines. Don't say I'll. 0:15:12.880 --> 0:15:13.480 Avoid of that. 0:15:14.760 --> 0:15:17.160 Terry is something I'm thinking about heading into next week 0:15:17.200 --> 0:15:20.160 because those implied volatility is picking up steam for the 0:15:20.240 --> 0:15:22.560 equity market here. So, as you know, we still have 0:15:22.960 --> 0:15:26.240 that deadline for a government shutdown coming on March fourteenth, 0:15:26.240 --> 0:15:28.640 but then also on March twelfth, even ahead of that, 0:15:28.680 --> 0:15:31.400 there's still is supposed to be those tariffs on all 0:15:31.440 --> 0:15:34.920 aluminum products, And so what do you think that really 0:15:34.960 --> 0:15:36.920 means is we're getting closer to those deadlines as well 0:15:36.920 --> 0:15:38.400 as other ones that are supposed to happen in the 0:15:38.440 --> 0:15:39.280 beginning of April. 0:15:40.440 --> 0:15:43.160 I think there's still going to be some tariffs on aluminum. 0:15:43.160 --> 0:15:44.760 They're going to want to show Trump's going to want 0:15:44.760 --> 0:15:46.920 to show bona fides on that, and I think there's 0:15:46.920 --> 0:15:51.040 a rising potential for a government shutdown. You see Democrats 0:15:51.120 --> 0:15:56.080 last night grasp you get anything they can to show 0:15:56.240 --> 0:16:01.280 resistance to show differences and the shutdowns, because what they're 0:16:01.320 --> 0:16:03.840 about at root is more spending. What Trump's about it 0:16:03.960 --> 0:16:08.720 root is less spending. You know, and you know there 0:16:08.760 --> 0:16:13.640 are three parties in the negotiation Congressional Democrats, Republicans, and Trump. 0:16:13.920 --> 0:16:17.720 Two of those three benefit politically from a shutdown, frankly, 0:16:18.240 --> 0:16:21.240 Democrats and Trump. So you know, there might be one 0:16:22.120 --> 0:16:26.479 short term that never matters for markets particularly, but stylistically 0:16:26.480 --> 0:16:27.200 it's a bad look. 0:16:27.400 --> 0:16:31.240 How do you respond, Terry Haynes to where is John Thune? Well, 0:16:31.280 --> 0:16:34.640 people say, Okay, the House is fracticed, everybody's running for 0:16:34.680 --> 0:16:39.440 office starting Friday. Great, the Senate is more measured. Where 0:16:39.480 --> 0:16:42.560 is the senator from the Dakotas John Thune? 0:16:42.560 --> 0:16:45.320 I think has done a very good job of keeping 0:16:45.320 --> 0:16:49.560 everybody together number one in his party. Number two, he's 0:16:49.600 --> 0:16:53.320 doing a very good job of quietly establishing the Senate 0:16:53.520 --> 0:16:56.840 as an effective counter to Trump. You have to look 0:16:56.880 --> 0:17:01.320 no farther than defense spending to get that. At a 0:17:01.360 --> 0:17:04.520 time where markets think that defense spending is going down 0:17:04.600 --> 0:17:07.600 because of some cost savings that Pete Hegsas wants to do, 0:17:08.000 --> 0:17:11.800 the reality is that there's kind of a dream team 0:17:11.880 --> 0:17:14.880 of senators that are going to pump up defense spending 0:17:15.240 --> 0:17:17.760 in no small part to react to China's announcement that 0:17:17.800 --> 0:17:20.639 it's going to increase by seven plus percent. 0:17:21.080 --> 0:17:23.959 I mean, I look Terry at Ruster. Scharmer's book arguably 0:17:23.960 --> 0:17:25.600 could be my book of the year. I'm not there yet, 0:17:25.640 --> 0:17:29.280 folks on capitalism, and basically he says, whatever the process, 0:17:29.600 --> 0:17:32.920 spending will go up. After the speech last night, after 0:17:32.960 --> 0:17:36.320 what we've witnessed deep into the Trump second term, do 0:17:36.359 --> 0:17:39.280 you see any frugality out there. I don't observe it. 0:17:40.080 --> 0:17:42.240 No, there's no frugality out there. And the reason why 0:17:42.440 --> 0:17:45.320 is because they judge. I mean, to them, this is 0:17:45.359 --> 0:17:48.680 not economic policy only. This is not an economic crisis 0:17:48.760 --> 0:17:52.359 or problem only. What this is all about is marshaling 0:17:52.720 --> 0:17:56.720 and improving the US economy as much as possible, turbocharging 0:17:56.720 --> 0:18:01.320 it to meet geopolitical goals. Everything's arts from debt service. 0:18:01.680 --> 0:18:04.280 We now pay more in debt service than anything else. 0:18:04.520 --> 0:18:08.000 That is an intolerable situation if you're interested in United 0:18:08.000 --> 0:18:11.240 States hegemony, as Trump is, and what they're going to 0:18:11.320 --> 0:18:14.240 want to do is turbo charge the economy, frankly to 0:18:14.359 --> 0:18:18.400 meet those geopolitical needs. That's one reason why you heard 0:18:18.400 --> 0:18:24.120 so much about manufacturing for defense. Last night shift building, steelmaking, 0:18:24.280 --> 0:18:24.560 all that. 0:18:24.880 --> 0:18:27.320 Oh, that's the politics of the moment, Terry Haynes with us, 0:18:27.359 --> 0:18:29.840 and we're going to continue in a moment. A bit 0:18:29.880 --> 0:18:32.720 ago seven oh two am a headline the United States 0:18:32.720 --> 0:18:37.520 cuts off intelligence sharing with Ukraine. That from the Financial Times, 0:18:37.920 --> 0:18:41.399 and now a headline coming out a Ukrainian official says 0:18:41.440 --> 0:18:45.440 the nations still getting US intelligence. We'll see what the 0:18:45.520 --> 0:18:47.480 next headline says jes Terry. 0:18:47.480 --> 0:18:50.160 Of course, there's so much focus on those pro growth 0:18:50.560 --> 0:18:55.040 expectations potentially from tax cuts and deregulation. What is exactly 0:18:55.160 --> 0:18:58.600 the timeline of when investors as well as Americans could 0:18:58.600 --> 0:19:01.359 potentially see some of that happen through Krongers. 0:19:01.600 --> 0:19:04.600 Well, this is the problem. Just is that in a nutshell, 0:19:04.760 --> 0:19:07.800 is that Trump this time out is front loading the 0:19:08.160 --> 0:19:12.680 bad news for markets, the tariff's news, with the expectation 0:19:12.960 --> 0:19:15.760 that things are going to improve throughout the year in 0:19:15.880 --> 0:19:21.560 markets as they understand that the tax cuts, deregulation, energy dominance, 0:19:21.640 --> 0:19:26.200 and so on. Is very likely that happens, the tax 0:19:26.280 --> 0:19:29.399 cut bill happens in the fourth quarter of calendar twenty 0:19:29.440 --> 0:19:33.200 twenty five. I'd give it eighty percent today. Eight years ago, 0:19:33.280 --> 0:19:35.800 I was almost alone in the markets and telling people 0:19:35.840 --> 0:19:38.119 that the task cut bill was going to happen and 0:19:38.200 --> 0:19:40.320 it was going to be a big one. But the 0:19:40.359 --> 0:19:43.479 same dynamic exists today. It's going to take them that 0:19:43.600 --> 0:19:46.840 long to get to the finish line for a variety 0:19:46.840 --> 0:19:48.000 of procedural reasons. 0:19:48.080 --> 0:19:50.720 Hey, Terry, I got to get this in from Greg 0:19:50.800 --> 0:19:54.399 Juro and Bloomberg government, and you're expert at this. What 0:19:54.480 --> 0:20:00.000 are Republicans saying to mister Trump, President Trump, who are 0:19:59.800 --> 0:20:02.840 in in close districts. Do they have a say in 0:20:02.920 --> 0:20:07.120 the discussion or are they so marginalized nobody cares. 0:20:07.040 --> 0:20:09.480 Well, they have a huge say in the discussion. And 0:20:10.119 --> 0:20:13.040 you know, I point immediately to the New York and 0:20:13.080 --> 0:20:17.399 New Jersey members to whom Trump has owed a House 0:20:17.480 --> 0:20:22.080 majority on the salt negotiations. Right, So, eight years ago, 0:20:22.880 --> 0:20:25.640 salt didn't matter at all. Salt went away. This time out, 0:20:26.400 --> 0:20:31.320 Trump's listening very closely and positive to those who want 0:20:31.320 --> 0:20:36.200 the salt deduction to come back. They will fundamentally, they'll 0:20:36.200 --> 0:20:38.760 play the smartest politics they can and try to make 0:20:38.800 --> 0:20:41.560 sure they do everything to maintain their majorities. Part of 0:20:41.600 --> 0:20:44.359 that is getting the tax bill done in fourth quarter 0:20:44.600 --> 0:20:47.399 of twenty five, so that they can run on it 0:20:47.480 --> 0:20:50.600 right right, benefits in twenty six thirty seconds. 0:20:50.680 --> 0:20:53.239 Is there an El Domato out there to save the 0:20:53.280 --> 0:20:54.440 middle ground? Gop. 0:20:55.920 --> 0:20:58.480 Yeah, there's a bunch of them, actually, you know, and 0:20:58.640 --> 0:21:02.440 I'd put Thune in there among others. But yeah, there's 0:21:02.520 --> 0:21:04.840 there's a bunch of them. And you know, there are 0:21:04.840 --> 0:21:10.159 lots of good pragmatists French Hills one. So yeah, I 0:21:10.200 --> 0:21:12.400 think there's a bunch out there. 0:21:12.800 --> 0:21:13.080 Terry. 0:21:13.119 --> 0:21:17.159 I email me every time I love emails from Terry. 0:21:17.400 --> 0:21:21.359 Email me Terry, every time I mispronounced something. It'd be great, 0:21:21.440 --> 0:21:24.240 Terry as pangea. Thank you so much. There in the 0:21:24.359 --> 0:21:25.320 state of play. 0:21:25.720 --> 0:21:29.640 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:29.680 --> 0:21:32.720 starting at seven am Eastern on Apple Corplay and Android 0:21:32.720 --> 0:21:35.760 Auto with the Bloomberg Business app. You can also listen 0:21:35.840 --> 0:21:39.080 live on Amazon Alexa from our flagship New York station, 0:21:39.640 --> 0:21:42.280 Just say Alexa play Bloomberg eleven thirty. 0:21:42.520 --> 0:21:46.600 Someone who's absolutely nailed this, Bullmark at Brian Belski joins 0:21:46.600 --> 0:21:49.600 from FEMO. Right now, have you adjusted your call? Wow? 0:21:50.320 --> 0:21:53.359 No, I mean, as I stand here next to a 0:21:53.480 --> 0:21:54.160