Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. I want to go
Speaker 1: back to something you said a little bit earlier, this
Speaker 1: notion that it's hard to see whether this is a
Speaker 1: one time hit to inflation or whether it's more persistent. Ultimately,
Speaker 1: what do you think? I mean?
Speaker 2: Ultimately, any effort to force manufacturing back onshore into the
Speaker 2: United States is going to be inflationary. There's no doubt
Speaker 2: about it. And what frustrates me on this is that
Speaker 2: one of the reasons that Trump won the election was
Speaker 2: the American people had had enough inflation. They wanted a
Speaker 2: break from seeing their standard of living deteriorated by the
Speaker 2: ever increasing price of goods and services. And so I
Speaker 2: really do think that the president needs to think long
Speaker 2: and hard about the necessity of helping to protect the
Speaker 2: standard of living of the American people by keeping the
Speaker 2: inflation like. It's not a genie, it's like the inflation
Speaker 2: devil in the bottle.
Speaker 1: So what does this mean for FED chair Powell? How
Speaker 1: difficult does this dynamic make his job? And do you
Speaker 1: think his job is secure through May of twenty twenty six.
Speaker 2: I gotta tell you, I'm really happy not to have
Speaker 2: his job, but he is the biggest no win job
Speaker 2: in the country because through the lens of hindsight, we
Speaker 2: will always be able to second guess every single decision
Speaker 2: he makes. Right here, right now, he's grappling with do
Speaker 2: you cut rates as the labor market shows ever so
Speaker 2: slightly signs of softening, or do you hold the course
Speaker 2: because of the risk of an inflationary spite coming from
Speaker 2: tariff increases. He's going to have to make that decision
Speaker 2: based upon evolving policies over the weeks ahead. It's a
Speaker 2: really tough predicament he is in right here, right now.
Speaker 1: Ken, it sounds like you have doubts that the American
Speaker 1: economy can be easily transitioned into a manufacturing one. What
Speaker 1: are the chances of making that work? And do you
Speaker 1: think that it's a realistic goal.
Speaker 2: I mean, look, there's a great video clip from Dave
Speaker 2: Chappelle and it goes something like Americans want to wear nikes,
Speaker 2: not make nikes, And I think you spot on. I
Speaker 2: don't understand why we think it's a virtue to bring
Speaker 2: back to America low skilled jobs in manufacturing. I completely
Speaker 2: agree with the President. We need the ability to ramp
Speaker 2: up our manufacturing base to strengthen our national defense. Spot
Speaker 2: on right. But I don't think the American people are
Speaker 2: looking for a return to low skill, low pain manufacturing
Speaker 2: jobs in our country. I don't think they want those jobs.
Speaker 2: I think they want jobs where we are building high
Speaker 2: value added products, successful businesses, building high value added products,
Speaker 2: where you can create jobs in that factory floor that
Speaker 2: are well paying jobs. Those are the jobs we should
Speaker 2: aspire to create in our country, not jobs that right
Speaker 2: now China is actually trying to move to other even
Speaker 2: lower cost labor countries. Why do we want those jobs
Speaker 2: here in America.
Speaker 1: I'd love to see this from your position leading Citadel
Speaker 1: and also your message to Citadel Securities employees, what do
Speaker 1: you tell them to navigate all of this volatility?
Speaker 2: So I will tell you that from my portfolio managers,
Speaker 2: it has been it has been several really challenging weeks
Speaker 2: because every couple of days there's another big headline M.
Speaker 2: Bloomberg that we need to react to and we need
Speaker 2: to reshape our portfolios with respect to It's been a
Speaker 2: really difficult time for fundamental investors because so much of
Speaker 2: the value the companies that we invest in is being
Speaker 2: dictated by very quickly changing policies from Washington.
Speaker 1: So your best way to navigate that.
Speaker 2: I think in retrospect, perhaps holding cash would have been
Speaker 2: the best way to navigate this. But that's so contrary
Speaker 2: to our culture of always trying to be on the offense,
Speaker 2: always trying to find ways to create value in the markets.
Speaker 1: Is there something fundamental that's changing about the way you
Speaker 1: approach markets?
Speaker 2: Look, I fundamentally believe that this period of instability that
Speaker 2: we're going through will come and go. Like fundamentally, I
Speaker 2: believe that as the Trump administration moves through time, as
Speaker 2: policies become solidified, the economic backdrop or against which one
Speaker 2: invests capital will become easier once again.
Speaker 1: Now, when you look at the tax bill, it looks
Speaker 1: like the direction of travel is such that you have
Speaker 1: four trillion in tax reductions, but one point five billion
Speaker 1: here in spending required one from a trillion, very sorry
Speaker 1: trillion with the tea. How is that going to close
Speaker 1: the US deficit?
Speaker 2: Well, I mean what's clear is that the numbers that
Speaker 2: we talk about in America are almost incomprehensible billions and trillions.
Speaker 2: I mean, it's just unbelievable how big government in Washington
Speaker 2: has become and I think one of the areas that
Speaker 2: the Trump administration is focused on is how to reduce
Speaker 2: the scale and scope of spending here in the United States,
Speaker 2: whether it's the efforts at DOGE or the debates that
Speaker 2: are happening right here right now as we speak about,
Speaker 2: for example, medicaid and the cost of medicaid to the States.
Speaker 2: The Trump administration's really thinking about how do we help
Speaker 2: to solve our nation's spending problem. And then at the
Speaker 2: same time they're grappling with what is the right tax
Speaker 2: policy that helps us to pay for the promises that
Speaker 2: we've made to the American people and yet ignite them
Speaker 2: a maximum amount of growth that we can achieve in
Speaker 2: our economy. Because when it's all said and done, the
Speaker 2: only way the United States will solve for the problems
Speaker 2: it's made to its people is for us to far
Speaker 2: more rapidly grow our economy.
Speaker 1: What role is de regulation going to play in that?
Speaker 2: Well, I mean, deregulation is clearly already in one of
Speaker 2: the huge accomplishments of the Trump administration. And why do
Speaker 2: I say that, Because the onslaught of new regulation has
Speaker 2: stopped that in and of itself has been incredibly powerful
Speaker 2: for corporate America, the ability to focus on growing your
Speaker 2: business again without worrying about what new rule it's going
Speaker 2: to be imposed upon you from Washington. Now, having said that,
Speaker 2: the efforts to do regulate are going to be more
Speaker 2: slow because it takes time to re underwrite. Why was
Speaker 2: the regulation put in place to start with? How does
Speaker 2: this regulation serve the interest of the American people? It
Speaker 2: takes time to think awfully deregulate our economy.
Speaker 1: Now your companies have a footprint all over the world.
Speaker 1: Are you seeing investors hedging against US instability, diversifying away
Speaker 1: from US stocks or even US treasuries given the changes
Speaker 1: and the uncertainties that still exist around them with the administration.
Speaker 2: I think there's been two very strong realizations by investors
Speaker 2: around the world. First, there was a bit of a
Speaker 2: knee Jork reaction to pull back from the United States
Speaker 2: to be anxious spout investing in America given the stance
Speaker 2: and changing stance we took in areas light trade. But
Speaker 2: then there's also just a realization that no country in
Speaker 2: the world enjoys the rate of innovation and commercial development
Speaker 2: that we enjoy here in America. And so you have
Speaker 2: these two competing arguments that investors around the world are
Speaker 2: grappling with, is the United States going to be a real, liable,
Speaker 2: ally and economic player in the world markets? And compare
Speaker 2: and contrast that with the reality that if you take
Speaker 2: a step back, no country in the world other than
Speaker 2: perhaps China, comes anywhere close to America in terms of
Speaker 2: the rate of innovation and creative energy that goes into
Speaker 2: growing our economy.