WEBVTT - Bloomberg Surveillance TV: December 19th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.320 --> 0:00:39.600 Turning two deals TikTok, saying it reached binding agreements for 0:00:39.760 --> 0:00:43.760 a new US joint venture majority owned by American investors, 0:00:43.800 --> 0:00:47.600 the company's CEO telling employees agreements with Oracle, Silver Lake 0:00:47.960 --> 0:00:52.080 Management and MGX have been signed. Joining us now as 0:00:52.120 --> 0:00:55.640 we purse through everything that has happened in twenty twenty 0:00:55.680 --> 0:00:59.160 five around the trade story is the twentieth US Trade 0:00:59.200 --> 0:01:00.840 Representative missing Greer. 0:01:01.040 --> 0:01:01.920 Representative Greer. 0:01:01.960 --> 0:01:04.839 I want to start on how busy twenty twenty five 0:01:05.040 --> 0:01:07.560 really was Looking ahead to twenty twenty six, do you 0:01:07.600 --> 0:01:11.880 expect the same kind of pace with respect to trade deals? 0:01:11.880 --> 0:01:14.480 With respect to trade announcements. 0:01:14.560 --> 0:01:18.840 Well, during twenty twenty five, President Trump the administration has 0:01:18.959 --> 0:01:23.160 essentially reset the global trading order to move from you know, 0:01:23.400 --> 0:01:26.080 total liberal trade in the United States without any cost, 0:01:26.200 --> 0:01:30.000 to a new fair and balanced approach we had. We've 0:01:30.040 --> 0:01:32.480 announced lots of trade deals, We've annowned lots of tariffs, 0:01:32.480 --> 0:01:34.640 as you know, in the coming year, we expect to 0:01:34.640 --> 0:01:37.960 finalize a bunch of those trade deals as well. You know, 0:01:38.240 --> 0:01:40.960 I think that the tariff plan is in good shape. 0:01:41.040 --> 0:01:42.280 I think we have a lot of the tariffs we 0:01:42.319 --> 0:01:44.360 want in place. You know, if there are countries here 0:01:44.400 --> 0:01:46.360 and there that don't comply with their deals or don't 0:01:46.360 --> 0:01:47.920 want to finish a deal, then maybe we have to 0:01:48.000 --> 0:01:52.320 have another conversation. But I think the economy's booming, inflations down, 0:01:52.440 --> 0:01:54.280 wages are up, weren't a really great track. 0:01:54.600 --> 0:01:58.360 How much are you potentially at risk should the Supreme 0:01:58.400 --> 0:02:01.600 Court overturn some of the tariffs that have been enacted 0:02:01.720 --> 0:02:05.040 under the AEPA provision. Do you have something in place 0:02:05.160 --> 0:02:08.639 to get those tariffs through other measures or will there 0:02:08.680 --> 0:02:10.920 be a rethink about what will be put. 0:02:10.760 --> 0:02:12.280 On and what won't. 0:02:12.919 --> 0:02:15.840 Well, it would be terrible if the Supreme Court overturned 0:02:15.840 --> 0:02:18.160 the case, because we have built a new global trading 0:02:18.280 --> 0:02:21.560 order on the back of these tariffs and the tariff system, 0:02:21.840 --> 0:02:24.520 and our trading partners have accepted it, and they've made deals, 0:02:24.560 --> 0:02:26.519 and they've accepted there's going to be some tariff level 0:02:26.520 --> 0:02:28.360 to help protect US industry. 0:02:28.840 --> 0:02:31.200 So it would be disaster if this was pulled out. 0:02:32.080 --> 0:02:35.120 All that being said, we will do whatever we need 0:02:35.200 --> 0:02:36.840 to do to make sure that we can maintain the 0:02:36.840 --> 0:02:39.320 tariffs we need and keep the deals in place. 0:02:39.840 --> 0:02:42.680 Obviously, we want the flexibility. 0:02:41.919 --> 0:02:44.680 Of the emergency powers that Congress has given to the President. 0:02:44.960 --> 0:02:46.640 It's the most effective way to deal with it. So 0:02:46.639 --> 0:02:49.920 what's made them so effective this year in negotiating. But 0:02:50.360 --> 0:02:53.200 absent that, we'll work and we'll find a way to 0:02:53.200 --> 0:02:54.880 make sure we can keep all these games we've made 0:02:54.880 --> 0:02:55.600 over the past. 0:02:55.400 --> 0:02:56.639 Year representative career. 0:02:56.680 --> 0:02:59.080 There's also a feeling right now that cost of living 0:02:59.120 --> 0:03:01.840 concerns are coming to foreign President Trump has talked about 0:03:01.840 --> 0:03:05.360 removing some of tariffs on specific goods, particularly having to 0:03:05.400 --> 0:03:08.400 do with food, as a way of alleviating some of 0:03:08.440 --> 0:03:11.840 the price concerns. How does that factor into discussions going forward? 0:03:11.880 --> 0:03:13.720 Do you think that that will be an increasing part 0:03:14.160 --> 0:03:17.440 of your thought process as you go through some of 0:03:17.480 --> 0:03:18.760 these trade negotiations. 0:03:19.760 --> 0:03:22.720 Well, any good president wants to address affordability, and our 0:03:22.760 --> 0:03:25.480 president is and over the past month we saw you know, dairy, 0:03:26.120 --> 0:03:29.480 you know, fruit and vegetables, all kinds of prices go 0:03:29.560 --> 0:03:33.040 down for basic stables, staples. So that's a great development 0:03:33.680 --> 0:03:37.560 going forward. The President removed some tariffs in connection with 0:03:37.640 --> 0:03:41.600 some deals related to food coming from a broad bananas, coffee, coco, 0:03:41.640 --> 0:03:43.080 the kinds of things we just don't make in the 0:03:43.160 --> 0:03:46.600 United States. United States is a food powerhouse. When we 0:03:46.640 --> 0:03:49.920 saw inflation earlier, it's really about housing, healthcare. 0:03:49.560 --> 0:03:51.040 Driven by Obamacare disaster. 0:03:51.400 --> 0:03:54.720 So I don't think that, you know, food imports are 0:03:54.720 --> 0:03:56.920 really going to be an issue for us. You know, 0:03:56.960 --> 0:03:59.480 the tariff program is really about creating jobs, and the 0:03:59.520 --> 0:04:02.000 President's regulatory approach is really about bringing prices down and 0:04:02.000 --> 0:04:02.960 bringing affordability. 0:04:03.120 --> 0:04:06.200 Ambassador, have you had any specific directives from the President 0:04:06.240 --> 0:04:09.280 though as you carry out your negotiations to make sure 0:04:09.400 --> 0:04:11.600 any tariffs you put on from here are anyones that 0:04:11.680 --> 0:04:16.080 you negotiate specifically are not having an impact on affordability. 0:04:17.040 --> 0:04:19.039 So I know, the kind of the way you put it, 0:04:19.080 --> 0:04:22.480 there are a specific direction I would say no, whenever 0:04:22.520 --> 0:04:25.440 we're imposing tariffs are doing deals. The purpose of the 0:04:25.520 --> 0:04:30.000 trade program is to reshore American manufacturing and protect American 0:04:30.000 --> 0:04:34.520 food security. It's really about jobs and increasing wages, which 0:04:34.560 --> 0:04:37.240 we've seen over the past few months. When it comes 0:04:37.279 --> 0:04:40.360 to prices, the President is undertaking a lot of other actions, 0:04:40.560 --> 0:04:44.840 you know, energy policy, tax policy, regulatory gas prices are down, 0:04:44.880 --> 0:04:47.479 et cetera. So we don't see the trade policy really 0:04:47.480 --> 0:04:49.719 as driving prices. We see it as driving jobs. 0:04:50.000 --> 0:04:52.800 Ambassador, I'd love to go back where Lisa started, and 0:04:52.839 --> 0:04:55.400 that is it looks more likely that we indeed have 0:04:55.560 --> 0:04:58.640 something of a TikTok deal where US buyers will take 0:04:58.680 --> 0:05:02.440 the American portion. You after some of the negotiations in Madrid, 0:05:02.440 --> 0:05:05.200 we're talking about how this deal, how this company was 0:05:05.279 --> 0:05:07.560 part and parcel of a variety of matters when it 0:05:07.560 --> 0:05:11.920 comes to negotiation, negotiating with your Chinese counterparts. So have 0:05:12.000 --> 0:05:15.480 you had more discussions about this deal with TikTok? Does 0:05:15.480 --> 0:05:17.800 it seem likely that China will let it happen? 0:05:19.480 --> 0:05:21.760 So there are two layers to the TikTok deal. 0:05:22.080 --> 0:05:24.800 One is the private sector layer, where the private parties 0:05:25.320 --> 0:05:27.520 are concluding a deal and then there's a layer of 0:05:27.560 --> 0:05:30.520 government approvals between the United States and China, and so 0:05:30.600 --> 0:05:33.640 my conversations with the Chinese government over the past few months, 0:05:33.960 --> 0:05:36.000 as you mentioned, have covered a variety of issues. 0:05:36.080 --> 0:05:37.440 One of them has been TikTok. 0:05:37.960 --> 0:05:41.159 Back at our discussions in Madrid, we came to an 0:05:41.240 --> 0:05:45.040 essential agreement that if the private parties came to agreement, 0:05:45.520 --> 0:05:46.880 that the Chinese would approve it. 0:05:47.120 --> 0:05:48.800 So we expect approval by. 0:05:48.680 --> 0:05:51.440 The government of China in alignment with that agreement we 0:05:51.480 --> 0:05:52.400 reached earlier this year. 0:05:52.760 --> 0:05:55.800 We're hearing about not only this deal with respect to 0:05:55.839 --> 0:05:59.359 TikTok and some investors in the US, but also a 0:05:59.400 --> 0:06:01.719 review product is to sell two hundred. 0:06:01.440 --> 0:06:03.280 Chips into China. 0:06:03.400 --> 0:06:06.120 And I'm just wondering, stepping back, if all of these 0:06:06.200 --> 0:06:08.760 are pieces of a bigger deal that will come to 0:06:08.800 --> 0:06:12.960 fruition in twenty twenty six between the US and China. 0:06:13.480 --> 0:06:16.640 I would say with the h two hundred export control issues, 0:06:16.640 --> 0:06:20.800 those really are standalone. That was not a negotiated outcome 0:06:21.640 --> 0:06:24.719 in the United States. With respect to export controls, those 0:06:24.720 --> 0:06:27.440 are not something that are really subject to negotiation. Those 0:06:27.480 --> 0:06:30.760 are national security and commercial decisions made by the federal government. 0:06:30.839 --> 0:06:33.960 So that's kind of standing on its own with respect 0:06:34.000 --> 0:06:36.520 to the rest of the China deal. Right now, we're 0:06:36.560 --> 0:06:39.240 trying to make sure that rare earths continue flowing from China. 0:06:39.640 --> 0:06:42.200 You know, they've bought over five million metric tons of 0:06:42.240 --> 0:06:44.960 soybeans at this point, and we're trying to keep trade 0:06:44.960 --> 0:06:47.520 flowing between the two countries in way that makes sense. 0:06:47.680 --> 0:06:50.200 Do you expect a bigger deal other than just sort 0:06:50.240 --> 0:06:54.200 of steady reset kind of idea that you've talked about 0:06:54.200 --> 0:06:56.080 with respect to the US and China. Do you expect 0:06:56.120 --> 0:06:59.159 something more comprehensive to be outlined next year. 0:07:00.839 --> 0:07:02.920 It's a little hard to say at this point. Goal 0:07:02.960 --> 0:07:04.000 one is stability. 0:07:05.240 --> 0:07:07.800 For me, and everyone's heard me say this before, we 0:07:07.839 --> 0:07:10.400 need trade with China to be much more balanced. Our 0:07:10.440 --> 0:07:13.080 trade deficit with China has decreased by twenty five percent 0:07:13.120 --> 0:07:15.520 this year alone under President Trump's policy, so that's going 0:07:15.520 --> 0:07:18.040 the right direction. I can first see a situation in 0:07:18.080 --> 0:07:20.480 the first half of next year where we come to 0:07:20.520 --> 0:07:22.920 some kind of agreement with China on exactly what we 0:07:22.960 --> 0:07:26.400 should be trading with each other and even in what volumes. 0:07:26.440 --> 0:07:28.600 It's a little bit of managed trade, but it's the 0:07:28.680 --> 0:07:31.360 kind of thing that can be healthy and stable. Given 0:07:31.400 --> 0:07:34.080 the way that Chinese government runs its economy, it just 0:07:34.160 --> 0:07:36.360 doesn't mesh very well with the way we want to 0:07:36.400 --> 0:07:38.720 run our economy. That just means we have to manage 0:07:38.720 --> 0:07:40.400 it a little bit more. And I think there's a 0:07:40.440 --> 0:07:42.760 possibility of that. I'm not sure i'd call it comprehensive, 0:07:42.960 --> 0:07:44.320 but i'd call it confidence building. 0:07:44.840 --> 0:07:45.400 I'm masser. 0:07:45.480 --> 0:07:47.320 I think a lot of the confusion from many people 0:07:47.400 --> 0:07:50.600 comes around national security. One of the points that you 0:07:50.680 --> 0:07:53.680 mentioned just a moment ago, especially things with H two 0:07:53.760 --> 0:07:54.480 hundred chips. 0:07:55.080 --> 0:07:55.840 Giving chips to. 0:07:55.840 --> 0:07:58.480 China has seen an issue of national security. Even giving 0:07:58.560 --> 0:08:02.080 S thirty fives to Saudi Your what does that mean 0:08:02.120 --> 0:08:05.040 for national security? Because critics would say that it means 0:08:05.280 --> 0:08:08.160 that national security is up for sale. What would you 0:08:08.200 --> 0:08:10.520 say to those critics? 0:08:10.240 --> 0:08:13.040 So, with respect to the F thirty five, that's not 0:08:13.080 --> 0:08:14.440 my I used to be in the Air Force, but 0:08:14.480 --> 0:08:17.640 it's not it's not my wheelhouse. I'm H two hundreds 0:08:17.960 --> 0:08:21.240 and export controls generally, export controls have always been fluid, 0:08:21.440 --> 0:08:24.200 They've never been static. The very nature of export controls 0:08:24.240 --> 0:08:27.600 is that the US government is constantly reviewing the state 0:08:27.640 --> 0:08:31.600 of technology and assessing what technologies can be sold and 0:08:31.640 --> 0:08:35.040 which ones can and balancing national security and assessing whether 0:08:35.080 --> 0:08:39.360 or not there's foreign availability. Everyone knows that the Chinese 0:08:39.360 --> 0:08:42.120 are quickly also trying to develop their own AI chips, 0:08:42.360 --> 0:08:44.679 semiconductor tools to make those chips, et cetera. 0:08:45.320 --> 0:08:48.119 It's a race. All of those h two hundred. 0:08:47.840 --> 0:08:50.680 Approvals still have to go through the Commerce Department to 0:08:50.760 --> 0:08:54.520 make sure that any licenses that are granted really respect 0:08:54.640 --> 0:08:57.440 US national security and make sure that it's not violated, 0:08:57.440 --> 0:09:00.160 and there can be conditions on licenses, etc. To they 0:09:00.200 --> 0:09:03.000 go to end users and end uses that don't jeopardize 0:09:03.080 --> 0:09:04.120 US national security? 0:09:04.520 --> 0:09:06.600 Is it fair to say, that, Ambassador that even if 0:09:06.640 --> 0:09:09.040 this does go through the kind of cases where this 0:09:09.160 --> 0:09:11.560 is allowed, where it's approved, will still be quite limited 0:09:11.559 --> 0:09:12.280 in scope. 0:09:13.040 --> 0:09:16.160 So it's hard to say at this point that these 0:09:16.200 --> 0:09:19.400 types of license applications are typically a case by case 0:09:19.679 --> 0:09:23.040 and reviewed. So we'll see the way it's set up 0:09:23.080 --> 0:09:24.560 right now is if the chips are going to go 0:09:24.640 --> 0:09:26.520 to China, they come back to the US for a 0:09:26.559 --> 0:09:28.599 security inspection to make sure that they are indeed the 0:09:28.640 --> 0:09:30.840 types of chips that are being allowed to be sent 0:09:31.280 --> 0:09:33.120 to the Chinese. We know there are a lot of 0:09:33.200 --> 0:09:35.600 Chinese companies that want them. We know the Chinese government's 0:09:35.640 --> 0:09:39.000 pretty interested in having their own domestic champions build them. 0:09:39.440 --> 0:09:41.839 So the Chinese themselves right now are having a conversation 0:09:41.920 --> 0:09:44.640 about the types of chips that they want from the 0:09:44.720 --> 0:09:47.319 United States. We think that they want the Age two Hunters. 0:09:47.320 --> 0:09:51.280 They've shown an interest in that. So we'll see between 0:09:51.320 --> 0:09:53.360 their process and ours, we'll see where it goes. 0:09:53.440 --> 0:09:55.400 It seems like the tech wars have been behind a 0:09:55.440 --> 0:09:58.120 lot of the negotiations over the past twelve months, in 0:09:58.120 --> 0:10:01.000 particular not only with China, but of the European Union. 0:10:01.120 --> 0:10:03.760 I'm just wondering where some of those discussions are with 0:10:03.840 --> 0:10:09.400 respect to some of the restrictions and regulatory investigations Europe 0:10:09.440 --> 0:10:12.280 has been making toward US tech companies. 0:10:12.559 --> 0:10:14.359 Where are some of those discussions. 0:10:15.559 --> 0:10:19.120 So I just had a conversation yesterday with my counterpart 0:10:19.200 --> 0:10:23.199 in the European Trade in the European Commission yesterday to 0:10:23.800 --> 0:10:27.960 reinforce some of the strong concerns we're hearing from US stakeholders. 0:10:28.600 --> 0:10:32.000 US tech companies are the most competitive in the world, 0:10:32.559 --> 0:10:36.320 and Europe frankly doesn't have those types of competitors. 0:10:37.000 --> 0:10:38.040 If you talk to the Europeans. 0:10:38.040 --> 0:10:40.280 They'll say, that's why we have to regulate and have 0:10:40.400 --> 0:10:45.520 these protectionist measures against US tech companies. Unfortunately, we see 0:10:45.520 --> 0:10:48.240 in the way that they've developed those measures they're discriminatory. 0:10:48.840 --> 0:10:52.480 They only capture companies above a certain threshold of revenue 0:10:52.520 --> 0:10:55.679 globally or certain business models, and magically it only happens 0:10:55.720 --> 0:10:59.400 to capture US companies. They'll say that they're Chinese companies too, 0:10:59.400 --> 0:11:03.120 but we only see actions against American companies. So it's 0:11:03.120 --> 0:11:06.520 a problem. It's discriminatory in fact. You'll hear the European say, well, 0:11:06.559 --> 0:11:09.720 it's fair, but it's discriminatory in fact and an intent. 0:11:10.520 --> 0:11:13.240 So I want to talk to these folks. I want 0:11:13.240 --> 0:11:15.920 to negotiate over it. They've been somewhat resistant to that, 0:11:16.200 --> 0:11:18.319 but again I had a great conversation yesterday with the 0:11:18.360 --> 0:11:21.040 European Trade Commissioner, and I think we just have to 0:11:21.080 --> 0:11:22.959 be able to talk about why they're doing this, so 0:11:22.960 --> 0:11:26.440 why they're purporting to regulate American companies and their global 0:11:26.480 --> 0:11:27.280 business models. 0:11:27.880 --> 0:11:30.400 Ambassador, coming into twenty twenty five, a lot of people 0:11:30.480 --> 0:11:33.600 were wondering who are allies and who our adversaries would 0:11:33.640 --> 0:11:37.040 be on trade, and we were talking about who traditionally 0:11:37.120 --> 0:11:39.839 have been US allies and who haven't. Have you been 0:11:39.880 --> 0:11:42.440 surprised and who has been most difficult to deal with 0:11:42.640 --> 0:11:44.720 in twenty twenty five, it has surprised a lot of 0:11:44.720 --> 0:11:47.240 people in the markets to see the likes of Europe 0:11:47.520 --> 0:11:52.400 be a more contentious discussion than other regions, even sometimes China. 0:11:53.640 --> 0:11:56.439 That's because they haven't been trade negotiators. I have not 0:11:56.559 --> 0:12:00.000 been surprised at where it's been more challenging. Take India, 0:12:00.160 --> 0:12:03.120 for example, who's an important partner and a strategic partner 0:12:03.280 --> 0:12:05.800 in a lot of ways. We started negotiating with them 0:12:05.800 --> 0:12:08.000 early in the year and we're still negotiating with them 0:12:08.040 --> 0:12:10.960 to trying to find a good landing zone. During that time, 0:12:10.960 --> 0:12:13.360 we have other trade partners who have come in, started, 0:12:14.040 --> 0:12:18.440 proceeded with and concluded trade negotiations with US, etc. The 0:12:18.480 --> 0:12:21.600 reality is somebody like Europe and frankly you know some 0:12:21.720 --> 0:12:25.360 jurisdictions that want to emulate them. They know they might 0:12:25.400 --> 0:12:27.679 have relatively low tariffs compared to the rest of the world, 0:12:27.720 --> 0:12:31.720 but they have non tariff barriers regulations that exclude American agriculture. 0:12:31.760 --> 0:12:35.520 There's a major exports and regulations that exclude are industrial 0:12:35.559 --> 0:12:37.640 exports and so you get into US, and this is 0:12:37.640 --> 0:12:40.080 why we have giant imbalances. It's not because Europe is 0:12:40.320 --> 0:12:42.880 really competitive, we know they're not. It's because they have 0:12:42.920 --> 0:12:45.280 a lot of these rules that prevent US goods and 0:12:45.320 --> 0:12:47.000 services from going into the continent. 0:12:47.120 --> 0:12:50.440 Ambassador career just to finish up on Mexico, which. 0:12:50.200 --> 0:12:51.400 Has been negotiating. 0:12:51.840 --> 0:12:55.959 From what we understand, they just recently gave final approval 0:12:56.160 --> 0:12:59.360 to put tariffs on certain Chinese imports and a lot 0:12:59.360 --> 0:13:02.040 of people are affecting there to be some sort of 0:13:02.160 --> 0:13:06.040 reprieve with respect to aluminum and steel tariffs on Mexico. 0:13:06.320 --> 0:13:08.600 Is there any discussion about that going on right now? 0:13:09.760 --> 0:13:12.480 So, first of all, any country in the world who 0:13:12.480 --> 0:13:15.760 exports steel and aluminum to the United States wants to 0:13:15.800 --> 0:13:19.160 have a modification to that regime because the United States 0:13:19.200 --> 0:13:21.720 for many years has been the consumer of last resort, 0:13:21.720 --> 0:13:24.480 and this is why the President puts steel loomed tariff's 0:13:24.480 --> 0:13:27.680 on in the first administration, the Biden administration kept them, 0:13:27.760 --> 0:13:30.679 and the President has tightened them further in his second administration. 0:13:31.400 --> 0:13:34.720 Of course, the Mexicans are asking for this. We have 0:13:34.760 --> 0:13:37.640 found the Mexicans to be quite constructive in some of 0:13:37.679 --> 0:13:40.080 our recent discussions and looking to change some of their 0:13:40.160 --> 0:13:44.360 laws and regulations related to long standing US concerns. So 0:13:44.960 --> 0:13:48.439 have the Mexicans asked about this, Yes, I won't give 0:13:48.440 --> 0:13:51.080 any further detail beyond that, but it's certainly something that 0:13:51.120 --> 0:13:52.240 they would like to see. 0:13:53.160 --> 0:13:56.640 Stay with US. Multbleenberg Savannah's coming up off. 0:13:56.400 --> 0:14:08.000 To this, Osang Quan of Wells Fargo joins US. 0:14:08.120 --> 0:14:09.520 Now. Osan has a. 0:14:09.600 --> 0:14:12.400 Bullish forecast for next year in the equity space, and 0:14:12.480 --> 0:14:14.520 it comes to this question of how much does the 0:14:14.600 --> 0:14:17.440 data even matter if you have a federal reserve that 0:14:17.559 --> 0:14:20.320 is biased to cut rates at a federal government that 0:14:20.400 --> 0:14:21.720 is biased to run this economy. 0:14:21.760 --> 0:14:23.760 Hut, Yeah, I mean I think the set of four 0:14:23.800 --> 0:14:27.240 equities into twenty twenty six is pretty favorable. I mean, 0:14:27.280 --> 0:14:29.640 the prophecycle is still in a lop cycle. We're forecasting 0:14:29.680 --> 0:14:34.200 fourteen percent growth EPs growth forty SMP next year, followed 0:14:34.240 --> 0:14:37.600 by another thirteen percent in twenty twenty seven. I think liquidity, 0:14:38.240 --> 0:14:40.920 which we talk quite a lot about, that's going to 0:14:40.920 --> 0:14:43.640 improve quite a lot in Q one with the fact 0:14:43.760 --> 0:14:46.120 starting to expand this balance sheet. It was a lot 0:14:46.200 --> 0:14:49.600 sooner and a lot bigger than what we had previously forecasted, 0:14:49.920 --> 0:14:52.760 and with that, we're going to see a huge uptake 0:14:52.920 --> 0:14:55.640 in the liquid environment overall, and I think that's really 0:14:55.640 --> 0:14:57.560 going to be the bullcase for equities as you move 0:14:57.560 --> 0:14:58.480 into twenty twenty six. 0:14:58.640 --> 0:15:02.000 But I hear people at the television screen, this isn't 0:15:02.000 --> 0:15:04.440 actually quantitative easing. This is just trying to ease the 0:15:04.480 --> 0:15:08.720 technical backdrop for banks that are using the FED as 0:15:08.840 --> 0:15:12.440 some sort of backstop. So how does this really increase liquidity? 0:15:12.560 --> 0:15:15.640 Is this more of a boost to liquidity than some 0:15:15.680 --> 0:15:16.920 people are accounting for. 0:15:17.240 --> 0:15:19.920 I mean, it depends on how you define Q. If 0:15:20.000 --> 0:15:22.720 Q is really about shortening duration, then it's not a Q. 0:15:23.520 --> 0:15:27.800 But if QE is about boosting liquidity into the system, 0:15:27.800 --> 0:15:30.080 Because the funding market was really seeing a lot of stress. 0:15:30.160 --> 0:15:32.840 If you look at the SOFA spread between the sulfur 0:15:32.960 --> 0:15:35.280 rate versus the fat funds rate, it blew up back 0:15:35.280 --> 0:15:37.800 in October to as much as thirty five basis points. 0:15:38.000 --> 0:15:40.160 So there was a real stress that we saw back 0:15:40.200 --> 0:15:42.960 in October and November in the funding market. I think 0:15:43.240 --> 0:15:45.640 I think that was really the main crporate for the 0:15:45.680 --> 0:15:48.800 selloff that we saw over the past, you know, or 0:15:48.800 --> 0:15:50.720 the volatility that we saw over the past six weeks 0:15:50.840 --> 0:15:55.120 or so and looking at things like bitcoin quantum stocks 0:15:55.240 --> 0:15:58.920 nonprofitable tag those guys sold off the most. And that's 0:15:59.000 --> 0:16:02.520 essentially what happens when liquidity dries up. Everyone's risk curves 0:16:02.680 --> 0:16:05.680 just to the left, and the assets that are farthest 0:16:05.680 --> 0:16:08.760 out the riskurves, the most speculative assets, they gets all 0:16:08.840 --> 0:16:09.160 the most. 0:16:09.600 --> 0:16:11.440 I think we liquid are coming back. 0:16:11.440 --> 0:16:16.800 And potentially condition liquid conditions overall being actually good in 0:16:16.920 --> 0:16:20.000 Q one, I think speculation is going to pick back up. 0:16:20.120 --> 0:16:20.920 I think I. 0:16:20.800 --> 0:16:22.840 Think AI is going to AI trade is going to 0:16:22.880 --> 0:16:25.760 work more in the second half the year that we're thinking, well, 0:16:25.800 --> 0:16:28.600 I think the overall equity market it's going to be 0:16:28.640 --> 0:16:29.960 pretty bolish. 0:16:30.280 --> 0:16:32.880 Is that why you have the assumption that into next 0:16:32.960 --> 0:16:36.640 year you write your research that inflation reacceleration is going 0:16:36.680 --> 0:16:39.120 to be worse for equities than a recession would be, 0:16:39.120 --> 0:16:41.520 because a lot of people would look at the dichotomy 0:16:41.560 --> 0:16:44.120 between the two and say, inflation coming off the back 0:16:44.160 --> 0:16:46.720 of COVID, equity still did well. But it's growth that's 0:16:46.720 --> 0:16:48.960 really an earnings that's underpretning this equity market, and if 0:16:48.960 --> 0:16:50.760 we get a recession then that would be worse. 0:16:51.400 --> 0:16:53.960 Yeah, I mean, if I have to, you know, think 0:16:53.960 --> 0:16:57.360 about the probability of recession and inflation. I would assign 0:16:57.400 --> 0:17:02.240 a higher probably of inflation. I'm not too concerned about 0:17:02.240 --> 0:17:06.720 inflation either, because I think there's that AI productivity, this 0:17:06.880 --> 0:17:11.359 inflationary pressure that's going to keep inflation pretty low. But 0:17:11.840 --> 0:17:15.320 there's the physical as well as monetary policy that's coming 0:17:15.359 --> 0:17:18.199 back in to potentially drive inflation higher. So if I 0:17:18.200 --> 0:17:21.119 have to choose, I'll say inflation has a higher potential 0:17:21.680 --> 0:17:24.359 than recession. Well, I'm not overall, I'm not too concerned 0:17:24.359 --> 0:17:25.200 about it either. 0:17:25.720 --> 0:17:28.320 But inflation would be worse for equities than a recession 0:17:28.320 --> 0:17:29.400 would be at this point. 0:17:29.480 --> 0:17:32.520 I mean, both would be bad, but I think the 0:17:32.560 --> 0:17:36.600 probability of inflation is probably higher than probability over session 0:17:36.720 --> 0:17:39.520 at this point because of physical we estimate about eighty 0:17:39.520 --> 0:17:42.440 basis points of GDP contribution for the full year twenty 0:17:42.440 --> 0:17:45.040 twenty six. Most of that is happening in the first 0:17:45.080 --> 0:17:47.080 half of the year, really through the tax return, so 0:17:47.119 --> 0:17:49.240 I think consumption is going to pick back off. Consumption 0:17:49.400 --> 0:17:51.359 is seventy percent of the economy, so I'm not too 0:17:51.440 --> 0:17:53.560 concerned about the economic downturn. 0:17:53.680 --> 0:17:56.159 What's the sort of break the glass moment in the 0:17:56.240 --> 0:17:58.960 yield space for equities, And I asked this, as you 0:17:59.000 --> 0:18:02.639 do see longer yields globally creep up on the backs 0:18:02.640 --> 0:18:04.719 of a hawkish move from the Bank of Japan, albeit 0:18:04.800 --> 0:18:07.120 whatever people are thinking in the currency space, but also 0:18:07.160 --> 0:18:09.080 this idea that the ECB is getting to the end 0:18:09.080 --> 0:18:11.919 of their using cycle. How much do you see this 0:18:12.040 --> 0:18:14.440 sort of line in the sand, let's say, at four 0:18:14.440 --> 0:18:16.760 and a half percent for the tenure at five percent, 0:18:16.840 --> 0:18:19.200 where suddenly the book case just isn't there. 0:18:19.760 --> 0:18:21.840 Yeah, I think I think it's going to matter more 0:18:21.920 --> 0:18:25.600 for what works within the equity market. So we're more 0:18:25.600 --> 0:18:28.320 bullished on the reflation cycle into the first half of 0:18:28.320 --> 0:18:30.439 the year because of the physical stimulus that we're going 0:18:30.480 --> 0:18:34.600 to get. But if rates climbable four and a half 0:18:34.640 --> 0:18:36.920 percent or so, I think that's potentially what kills the 0:18:37.320 --> 0:18:41.560 reflation cycle and potentially back into AI. I think closer 0:18:41.600 --> 0:18:44.440 to five percent is going to be actually pretty bearish 0:18:44.440 --> 0:18:45.080 for equities. 0:18:45.600 --> 0:18:48.800 So in this pollish environment for twenty twenty six, the 0:18:48.840 --> 0:18:50.760 speculative stuff starts doing well again. 0:18:51.320 --> 0:18:52.480 Is that a healthy bull market? 0:18:52.560 --> 0:18:54.800 Is that a healthy turn in the continuation of the 0:18:54.800 --> 0:18:56.000 games we've seen in equities? 0:18:57.359 --> 0:19:02.520 I mean, I think, you know, the bullmarket food boollmarkets 0:19:02.560 --> 0:19:05.560 typically have a little bit of speculation at least especially 0:19:05.600 --> 0:19:09.080 in this AI cycle. There's there is going to be speculation. 0:19:09.760 --> 0:19:12.440 It's new technology, and I don't think it's a bubble yet, 0:19:12.440 --> 0:19:14.840 but I think there's a potential it becomes a bubble 0:19:15.040 --> 0:19:17.159 in the second half of the year, especially you know, 0:19:17.200 --> 0:19:20.080 with the FED continuing with this easing cycle, liquidly being 0:19:20.119 --> 0:19:23.040 more ample. And I don't think the AI trade is over. 0:19:23.160 --> 0:19:25.280 I mean, there's quite a lot of concerns around AI 0:19:25.359 --> 0:19:29.000 cap backs and because Hyperscalers, the market started pushing back 0:19:29.040 --> 0:19:34.280 band on hyperscalars capbecs. There's CONSISTUS view is that Hyperscalers 0:19:34.320 --> 0:19:37.920 are going to moderate its capbecs and that's been basically 0:19:37.960 --> 0:19:42.640