1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Daily we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,600 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Alan 5 00:00:33,640 --> 00:00:35,879 Speaker 1: Krueger has been so generous at his time with us 6 00:00:35,880 --> 00:00:37,800 Speaker 1: on Job's Day that we usually just bring him in 7 00:00:37,840 --> 00:00:40,360 Speaker 1: and make jokes about you know this, that or the 8 00:00:40,400 --> 00:00:42,800 Speaker 1: other thing. Let us remember that he is a former 9 00:00:42,920 --> 00:00:46,320 Speaker 1: chairman of the President's Council of Economic Advisors and has 10 00:00:46,360 --> 00:00:50,839 Speaker 1: had a distinguished career in thinking about American labor. He 11 00:00:50,880 --> 00:00:54,320 Speaker 1: has been a lightning rod of debate on the minimum wage. 12 00:00:54,760 --> 00:00:58,080 Speaker 1: His exceptionally important book What Makes a Terrorist was a 13 00:00:58,200 --> 00:01:01,920 Speaker 1: mustard ten years ago and painful years ago, and is 14 00:01:01,960 --> 00:01:05,399 Speaker 1: out again with a new redo by Professor Krueger, and 15 00:01:05,440 --> 00:01:08,800 Speaker 1: he joins us on this Job's Day. Um this morning, 16 00:01:09,240 --> 00:01:13,640 Speaker 1: we talked to Iowa. Yesterday, we talked to people who 17 00:01:13,680 --> 00:01:16,800 Speaker 1: are working on the reality of labor in the field. 18 00:01:17,520 --> 00:01:21,119 Speaker 1: Most of the debate seems to be esoteric, and within 19 00:01:21,240 --> 00:01:23,640 Speaker 1: that the President seems to have what I would call 20 00:01:23,680 --> 00:01:29,160 Speaker 1: a classical, more static view of labor versus The Miracle 21 00:01:29,560 --> 00:01:32,920 Speaker 1: of the Marginal with a guy named William Stanley Jevons 22 00:01:32,920 --> 00:01:36,880 Speaker 1: onto Alfred Marshall a hundred and thirty years ago. How 23 00:01:36,880 --> 00:01:42,920 Speaker 1: do we drag Trump policy into modern economic theory? You know, 24 00:01:43,000 --> 00:01:45,720 Speaker 1: I'd like to see the Justice Department become more active. 25 00:01:46,400 --> 00:01:48,480 Speaker 1: How would they do that? Let me give you an example. 26 00:01:48,480 --> 00:01:51,240 Speaker 1: At the end of the Obama administration, the Justice Department 27 00:01:51,280 --> 00:01:54,960 Speaker 1: in the Federal Trade Commission issued guidelines to human resource 28 00:01:55,000 --> 00:01:59,080 Speaker 1: professionals advising them that it's illegal for them to have 29 00:01:59,160 --> 00:02:03,480 Speaker 1: agreements not the not not to rate each other's workers 30 00:02:03,520 --> 00:02:06,120 Speaker 1: like Disney, Pixar and all that out in me exactly 31 00:02:06,280 --> 00:02:09,840 Speaker 1: or what hospitals had been doing. And the current Assistant 32 00:02:10,360 --> 00:02:12,680 Speaker 1: Attorney General for n I Trust has said that they're 33 00:02:12,720 --> 00:02:15,679 Speaker 1: continuing to enforce those those guidelines, And just this week 34 00:02:15,720 --> 00:02:20,000 Speaker 1: they brought charges against two companies agreed that they had 35 00:02:20,080 --> 00:02:26,120 Speaker 1: violated the law or um uh rems UH Manufacturing company 36 00:02:26,120 --> 00:02:29,359 Speaker 1: makes breaks for trains, and then Westinghouse Air Brake Technologies 37 00:02:29,400 --> 00:02:31,720 Speaker 1: wob Tech, and there was a third company and tom 38 00:02:31,720 --> 00:02:33,600 Speaker 1: this is actually kind of what's going on in the U. 39 00:02:33,639 --> 00:02:36,880 Speaker 1: S economy, and a microcosm third company called FAVOLEI was 40 00:02:36,919 --> 00:02:40,520 Speaker 1: part of its cabal, but Bob Tech took over Favoley, 41 00:02:40,840 --> 00:02:43,640 Speaker 1: so now they could actually do what was illegal before 42 00:02:43,720 --> 00:02:46,200 Speaker 1: because they're within the same company. And I think that's 43 00:02:46,240 --> 00:02:48,600 Speaker 1: the sign of the lack of competition that workers are 44 00:02:48,600 --> 00:02:51,519 Speaker 1: facing in the job market. John, you live this growing 45 00:02:51,560 --> 00:02:53,480 Speaker 1: up in the United Kingdom, where they are all sorts 46 00:02:53,480 --> 00:02:56,639 Speaker 1: of agreements, and Paul Krugman brings it up. Paul Kruman, 47 00:02:56,720 --> 00:03:01,160 Speaker 1: I believe is no longer at Princeton. He's the the 48 00:03:01,280 --> 00:03:04,880 Speaker 1: University of New York's June He's emeritus. He's emeritus. Are 49 00:03:04,880 --> 00:03:10,800 Speaker 1: you emeritus? John Farrell is very sameritus to tell you 50 00:03:10,840 --> 00:03:13,079 Speaker 1: that since you've been trying to get me a job 51 00:03:13,160 --> 00:03:15,680 Speaker 1: at at at Deutsche Bank and god knows where else, 52 00:03:16,080 --> 00:03:18,120 Speaker 1: watching to know I've got probably the best job I 53 00:03:18,120 --> 00:03:20,880 Speaker 1: could possibly have. Alan just to get to the payrolls 54 00:03:20,880 --> 00:03:23,440 Speaker 1: figures today and to white just most specifically, to what 55 00:03:23,520 --> 00:03:26,239 Speaker 1: extent of the structural issues that you've identified and done 56 00:03:26,240 --> 00:03:28,680 Speaker 1: so much research on, to what extent are they actually 57 00:03:28,680 --> 00:03:31,600 Speaker 1: holding back those headline wage numbers that we look at 58 00:03:31,600 --> 00:03:34,160 Speaker 1: every month. Now, I think wage growth has been a 59 00:03:34,160 --> 00:03:36,240 Speaker 1: half a percent to a percent lower than you would 60 00:03:36,280 --> 00:03:41,000 Speaker 1: predict based on the historical relationship. So something has changed 61 00:03:41,000 --> 00:03:43,040 Speaker 1: in the job market, and I think the most obvious 62 00:03:43,360 --> 00:03:47,080 Speaker 1: candidate is a lack of competition. The job markets less dynamic. 63 00:03:47,120 --> 00:03:50,720 Speaker 1: We're seeing less mobility across areas. Workers aren't blowing to 64 00:03:50,880 --> 00:03:54,360 Speaker 1: higher paying areas areas where there's greater demand. And we 65 00:03:54,480 --> 00:03:57,560 Speaker 1: also have seen a proliferation of these practices by companies 66 00:03:57,600 --> 00:04:00,840 Speaker 1: to require workers to sign non computer gree mints they 67 00:04:00,920 --> 00:04:04,040 Speaker 1: enter into these no poaching agreements. Franchise companies have no 68 00:04:04,120 --> 00:04:08,200 Speaker 1: poaching agreements, and I think that's restricting competition in the 69 00:04:08,240 --> 00:04:10,680 Speaker 1: job market. And companies are not bidding up wages even 70 00:04:10,680 --> 00:04:13,560 Speaker 1: though they say time after time they can't get enough workers. 71 00:04:13,720 --> 00:04:16,280 Speaker 1: Every month, we have this discussion about whether the labor 72 00:04:16,320 --> 00:04:19,520 Speaker 1: market is tight, whether we're at full employment. Just from 73 00:04:19,520 --> 00:04:22,520 Speaker 1: a simple sort of layman point of view, if the 74 00:04:22,600 --> 00:04:25,559 Speaker 1: labor market was that tight, how we able to add 75 00:04:25,839 --> 00:04:28,080 Speaker 1: the payrolls figures that we are every single month? How 76 00:04:28,120 --> 00:04:30,560 Speaker 1: can we have a month of three hundred and thirteen 77 00:04:30,600 --> 00:04:33,360 Speaker 1: thousand when a couple of years ago, pretty much every 78 00:04:33,360 --> 00:04:36,040 Speaker 1: single economist I spoke to said, get ready for something 79 00:04:36,040 --> 00:04:38,240 Speaker 1: in the one hundreds. Every single month we can't keep 80 00:04:38,240 --> 00:04:40,520 Speaker 1: this up, but we have. How we doing that? Well, 81 00:04:40,520 --> 00:04:42,919 Speaker 1: that's what's driven the unemployment right down. Don't forget the 82 00:04:42,960 --> 00:04:47,040 Speaker 1: unemployment rates come down very rapidly. We're not seeing workers 83 00:04:47,040 --> 00:04:49,000 Speaker 1: come back who are out of the labor force. We're 84 00:04:49,000 --> 00:04:52,680 Speaker 1: seeing workers who uh would otherwise retire early staying in 85 00:04:52,720 --> 00:04:56,000 Speaker 1: the labor force longer. And we're seeing people move from 86 00:04:56,080 --> 00:05:00,400 Speaker 1: unemployment to employment. Is their monopsidy, Professor crewe when it's 87 00:05:00,400 --> 00:05:02,920 Speaker 1: a great phrase. It's been one of my pets study 88 00:05:02,960 --> 00:05:06,440 Speaker 1: projects over the year. Not monopoly, folks, but think of 89 00:05:06,600 --> 00:05:09,840 Speaker 1: a coal mine. A coal mine owner in a coal 90 00:05:09,880 --> 00:05:13,520 Speaker 1: mining town is the only employer. Good Morning West Virginia 91 00:05:14,200 --> 00:05:17,520 Speaker 1: for for listening in parts of Kentucky. But do you 92 00:05:17,560 --> 00:05:19,960 Speaker 1: agree with Professor Krugman that there's a little bit of 93 00:05:20,000 --> 00:05:24,200 Speaker 1: monopsony out there or a little bit too much? Absolutely, 94 00:05:24,240 --> 00:05:26,040 Speaker 1: I've been saying that for twenty five years. You know, 95 00:05:26,120 --> 00:05:28,039 Speaker 1: you go back to the book David Carton I wrote 96 00:05:28,279 --> 00:05:31,320 Speaker 1: on the minimum wage, our explanation for why we did 97 00:05:31,320 --> 00:05:34,719 Speaker 1: not find job losses from the minimum wage, but the 98 00:05:34,760 --> 00:05:37,560 Speaker 1: Republican pushback to that. I'm not saying ed Lazio out 99 00:05:37,600 --> 00:05:40,800 Speaker 1: of Stanford because i think Professor Lazier would agree with you. 100 00:05:41,160 --> 00:05:44,080 Speaker 1: But the Republican pushback is everyone for themselves, the lockey 101 00:05:44,120 --> 00:05:47,000 Speaker 1: in theory. You know, everybody's in this. They can move 102 00:05:47,040 --> 00:05:48,760 Speaker 1: if they don't like West Virginia, they can move to 103 00:05:48,760 --> 00:05:51,360 Speaker 1: New York City. But it's costly to move. And that's 104 00:05:51,400 --> 00:05:54,040 Speaker 1: what gives the monopsony power. You know, in the in 105 00:05:54,160 --> 00:05:56,880 Speaker 1: the classical neo classical model of the job market, if 106 00:05:56,880 --> 00:05:59,120 Speaker 1: you have perfect competition, if a company were to cut 107 00:05:59,120 --> 00:06:01,600 Speaker 1: it to pay by one any would lose its whole workforce. 108 00:06:01,880 --> 00:06:03,920 Speaker 1: And we know that that's not the case. Or if 109 00:06:03,920 --> 00:06:06,839 Speaker 1: a company is having trouble recruiting, which many companies are today, 110 00:06:07,000 --> 00:06:08,760 Speaker 1: all they have to do is offer the going wage 111 00:06:08,760 --> 00:06:11,240 Speaker 1: and they'll get a flood of qualified applicants. And that's 112 00:06:11,279 --> 00:06:14,159 Speaker 1: not the case. So I think our understanding of the 113 00:06:14,240 --> 00:06:17,280 Speaker 1: nature of monopsony has changed. We can have monopsony even 114 00:06:17,279 --> 00:06:19,240 Speaker 1: if we don't have a company town. Okay, but within that, 115 00:06:19,360 --> 00:06:21,960 Speaker 1: let's say health care is an example. Whether it's doctors, 116 00:06:22,000 --> 00:06:25,240 Speaker 1: young doctors, or nurses or whatever, they're all screaming that 117 00:06:25,279 --> 00:06:29,520 Speaker 1: they're paid. Compensations won't go up even though there's a 118 00:06:29,560 --> 00:06:32,760 Speaker 1: shortage of their skill set. Well, that's a great example 119 00:06:32,800 --> 00:06:36,440 Speaker 1: because that's an error where we've seen increased employer concentration, 120 00:06:36,960 --> 00:06:40,520 Speaker 1: UH large number of mergers where in many cities now 121 00:06:40,880 --> 00:06:44,040 Speaker 1: that industry is not competitive, so the doctors and the 122 00:06:44,120 --> 00:06:48,160 Speaker 1: nurses are UH at risk of being Professor Krueger, are 123 00:06:48,160 --> 00:06:50,359 Speaker 1: we going to become like the health system that John 124 00:06:50,360 --> 00:06:53,440 Speaker 1: Farrell grew up with in England? I don't mean that disparagingly, John, 125 00:06:53,680 --> 00:06:56,719 Speaker 1: but are we going to become a British system? I 126 00:06:56,760 --> 00:06:58,880 Speaker 1: don't think where we are right now is stable, So 127 00:06:58,920 --> 00:07:00,520 Speaker 1: I think we are going to move in one direction 128 00:07:00,640 --> 00:07:03,440 Speaker 1: or another um. But I think we should also be 129 00:07:03,680 --> 00:07:05,800 Speaker 1: very proud of the fact that we expanded coverage for 130 00:07:05,839 --> 00:07:08,960 Speaker 1: so many other Americans. All of these issues sound like 131 00:07:09,080 --> 00:07:12,160 Speaker 1: very structural issues to me. Alan. When the Fed Chess 132 00:07:12,160 --> 00:07:15,320 Speaker 1: speaks later today and he reflects on the payrolls report 133 00:07:15,360 --> 00:07:17,040 Speaker 1: not of today, but on the payrolls reports of the 134 00:07:17,120 --> 00:07:18,720 Speaker 1: last few years, can he look at the labor market 135 00:07:18,720 --> 00:07:22,080 Speaker 1: and safe for the Federal Reserve, it's mission complete. Look, 136 00:07:22,080 --> 00:07:24,440 Speaker 1: the Federal Reserves mission is never complete, so I think 137 00:07:24,440 --> 00:07:26,440 Speaker 1: he certainly wouldn't say that. But one of the real 138 00:07:26,520 --> 00:07:29,320 Speaker 1: challenges for the FED is that monetary policy operates with 139 00:07:29,360 --> 00:07:31,280 Speaker 1: the lag so they have to be thinking about what's 140 00:07:31,280 --> 00:07:33,080 Speaker 1: going to happen six months from now, what's gonna happen 141 00:07:33,120 --> 00:07:36,960 Speaker 1: nine months from now. They have to anticipate whether whether 142 00:07:37,360 --> 00:07:39,560 Speaker 1: we're gonna have imbalances and whether they need to address 143 00:07:39,600 --> 00:07:42,240 Speaker 1: them to keep the recovery going. Now. Uh, And I 144 00:07:42,280 --> 00:07:44,600 Speaker 1: think that's the outlook that that the FED should have. 145 00:07:44,720 --> 00:07:46,280 Speaker 1: So I understand there is that we can get him 146 00:07:46,280 --> 00:07:48,120 Speaker 1: on the board of Governors at the FMC if he 147 00:07:48,120 --> 00:07:51,320 Speaker 1: doesn't want the Deutsche Bank job. So so Alan, if 148 00:07:51,360 --> 00:07:53,120 Speaker 1: you're on the board and you were advising them about 149 00:07:53,120 --> 00:07:55,200 Speaker 1: the labor markets six to nine months out, what would 150 00:07:55,240 --> 00:07:58,679 Speaker 1: you be saying. You know, we've seen over the past 151 00:07:58,680 --> 00:08:01,240 Speaker 1: seven years there's graduate a healing of the job market. 152 00:08:01,320 --> 00:08:03,720 Speaker 1: It's been painfully slow, but we're now we are at 153 00:08:03,720 --> 00:08:06,400 Speaker 1: a point where all of that hard work is paid off. 154 00:08:06,440 --> 00:08:08,120 Speaker 1: It took us a long time to get here. But 155 00:08:08,160 --> 00:08:11,320 Speaker 1: the unappointment rate is poised to go below four percent. 156 00:08:12,160 --> 00:08:14,440 Speaker 1: I'd like to see wage growth get above three percent, 157 00:08:15,120 --> 00:08:18,320 Speaker 1: and from the feed standpoint, that is kind of kind 158 00:08:18,360 --> 00:08:21,400 Speaker 1: of their target. And inflation is has been edging up. 159 00:08:21,440 --> 00:08:23,600 Speaker 1: It's now looking like it's right around two percent. So 160 00:08:23,640 --> 00:08:25,480 Speaker 1: I think the feed should be looking at things and saying, 161 00:08:25,520 --> 00:08:28,320 Speaker 1: how can we keep this going? What's our best our 162 00:08:28,360 --> 00:08:30,880 Speaker 1: best monetary policy to ensure that we can kind of 163 00:08:31,200 --> 00:08:35,720 Speaker 1: uh keep this um recovery going and growing. Yeah, well 164 00:08:35,760 --> 00:08:37,640 Speaker 1: this is good. We're trying to get your job because 165 00:08:37,640 --> 00:08:40,680 Speaker 1: we know you're underemployed. We're going to four hour professorial work. 166 00:08:40,720 --> 00:08:43,200 Speaker 1: We get Princeton. The other job we had for you 167 00:08:43,320 --> 00:08:47,439 Speaker 1: was to coach a C. Milan, but they get out too. 168 00:08:48,480 --> 00:08:51,400 Speaker 1: That's it. You ally doesn't want well, they but they 169 00:08:51,440 --> 00:08:53,520 Speaker 1: advanced to John explained to me this guy who had 170 00:08:53,559 --> 00:08:55,160 Speaker 1: to try out as a coach, and he's done so 171 00:08:55,200 --> 00:08:57,320 Speaker 1: well with these I wouldn't say he's done that. He 172 00:08:57,440 --> 00:08:59,560 Speaker 1: used to be a player a C. Malan, a fantastic 173 00:08:59,559 --> 00:09:01,920 Speaker 1: player of a World Cup winner for Italy as well 174 00:09:01,960 --> 00:09:03,640 Speaker 1: in two thousand and six, and I guess there's some 175 00:09:03,800 --> 00:09:07,079 Speaker 1: nostalgia here or something. Tom, Will you stay around long 176 00:09:07,160 --> 00:09:09,800 Speaker 1: enough to eat the panotoni? That's the question. That is 177 00:09:09,840 --> 00:09:12,800 Speaker 1: a great question. Alan Kruger knows knows the Italian saying 178 00:09:12,800 --> 00:09:14,959 Speaker 1: will he be around long enough to wake the panotoni? 179 00:09:15,040 --> 00:09:16,839 Speaker 1: That is a joke. When you take the job at 180 00:09:16,840 --> 00:09:19,920 Speaker 1: the start of the season, you were around until Christmas 181 00:09:20,280 --> 00:09:22,960 Speaker 1: to have the Panotoni. That's a joke, Elyn. Have you 182 00:09:23,040 --> 00:09:26,040 Speaker 1: know that the only professional soccer game I've ever gotten 183 00:09:26,040 --> 00:09:29,720 Speaker 1: to Milan and I love Panatoni. So to fall asleep 184 00:09:30,800 --> 00:09:32,640 Speaker 1: it was to nothing. It was there are a lot 185 00:09:32,720 --> 00:09:35,720 Speaker 1: of people there, Yeah, it was. It was so different 186 00:09:35,720 --> 00:09:38,400 Speaker 1: to watching American football that you couldn't get food. I 187 00:09:38,440 --> 00:09:41,840 Speaker 1: couldn't believe it. At the halftime, it was almost impossible 188 00:09:41,880 --> 00:09:44,679 Speaker 1: to answer my question. Did you fall asleep like I did? 189 00:09:45,720 --> 00:09:48,960 Speaker 1: Thousand people at the san Cerro? There is no falling asleep. 190 00:09:49,160 --> 00:09:53,200 Speaker 1: It's like it's like going to chanting coast to coast 191 00:09:53,240 --> 00:09:57,120 Speaker 1: across America. We now have a debate going Bloomberg to 192 00:09:57,280 --> 00:10:00,400 Speaker 1: play the Simpsons tape of the soccer game. Get to that. 193 00:10:00,840 --> 00:10:03,880 Speaker 1: It is job today. We love having Professor Krueger with 194 00:10:04,040 --> 00:10:21,520 Speaker 1: US of Princeton University. We're now welcome on Bloomberg Radio, 195 00:10:21,559 --> 00:10:24,880 Speaker 1: Bloomberg Television worldwide. Good morning, William Gross with US of 196 00:10:25,000 --> 00:10:29,400 Speaker 1: Janice Henderson. Bill Gross, is just one month's data. You 197 00:10:29,480 --> 00:10:31,760 Speaker 1: take those moving averages. Do you look at the moving 198 00:10:31,800 --> 00:10:35,120 Speaker 1: averages or do you give caution by a non farm 199 00:10:35,200 --> 00:10:38,920 Speaker 1: statistic of one oh three and a two month payroll 200 00:10:39,360 --> 00:10:43,040 Speaker 1: revision of negative fifty. Is it a fifty three thousand 201 00:10:43,240 --> 00:10:47,920 Speaker 1: month lousy or is it a better report than that? Well, 202 00:10:47,960 --> 00:10:49,839 Speaker 1: it's lows. And I do look at moving average. Is 203 00:10:50,120 --> 00:10:52,880 Speaker 1: too many to tell you the truth to under day 204 00:10:53,000 --> 00:10:56,760 Speaker 1: and uh several years in many cases, but uh yeah, 205 00:10:56,800 --> 00:11:00,040 Speaker 1: I think this is a weakesh type of reef. What 206 00:11:00,280 --> 00:11:03,160 Speaker 1: is true that? And I would have said, um, going 207 00:11:03,240 --> 00:11:06,720 Speaker 1: in that wages where the key consideration point three was 208 00:11:06,760 --> 00:11:09,520 Speaker 1: what was expected over a point one last month, so 209 00:11:09,600 --> 00:11:12,240 Speaker 1: that average is that point too, and two point seven 210 00:11:12,240 --> 00:11:16,280 Speaker 1: on an annual basis, which isn't much change, and so um, 211 00:11:16,320 --> 00:11:18,600 Speaker 1: you know, I would think this makes for more cautious FED, 212 00:11:18,720 --> 00:11:22,600 Speaker 1: especially in light of the global trade situation that we 213 00:11:22,640 --> 00:11:25,760 Speaker 1: see on an overnight basis where we're just gonna have 214 00:11:25,840 --> 00:11:28,559 Speaker 1: to see. But I think the FED will be cautious 215 00:11:28,600 --> 00:11:34,520 Speaker 1: going forward. My forecast is one or two hike nineteen 216 00:11:34,800 --> 00:11:37,720 Speaker 1: or two thousand and eighteen type of year bill gross. 217 00:11:37,760 --> 00:11:41,160 Speaker 1: If we got wage growth is John Farrell mentioned spot on, 218 00:11:41,880 --> 00:11:44,240 Speaker 1: you've got to take inflation out of that to get 219 00:11:44,280 --> 00:11:48,160 Speaker 1: to real or inflation adjusted wage growth. Do we have 220 00:11:48,640 --> 00:11:54,000 Speaker 1: inflation adjusted wage growth. Well, I don't think they have much. 221 00:11:54,040 --> 00:11:56,120 Speaker 1: And I've got an interesting chart in front of me. 222 00:11:56,200 --> 00:11:58,920 Speaker 1: You can't show it, but it starts. It looks good 223 00:11:58,960 --> 00:12:02,199 Speaker 1: on it looks so good on radio. That chart on 224 00:12:02,400 --> 00:12:07,160 Speaker 1: radios gorgeous. Bill continue, Well, let's talk about it then. 225 00:12:07,280 --> 00:12:11,920 Speaker 1: Since real wages have flatlined, it's almost like this patient 226 00:12:12,080 --> 00:12:16,960 Speaker 1: is dead and real output has basically doubled. And so 227 00:12:17,040 --> 00:12:20,880 Speaker 1: where has that productivity gone to. Certainly hasn't gone to wages. 228 00:12:21,080 --> 00:12:23,440 Speaker 1: It's going to corporations. And it's good for stocks, I 229 00:12:23,480 --> 00:12:26,400 Speaker 1: suppose in terms of earnings. But if the Fed's goal 230 00:12:26,559 --> 00:12:29,079 Speaker 1: basically is to get wages up and to get the 231 00:12:29,160 --> 00:12:32,720 Speaker 1: inflation rate at two and war, I don't think they're 232 00:12:32,720 --> 00:12:34,720 Speaker 1: really doing much of a job. Bill. I want to 233 00:12:34,720 --> 00:12:36,880 Speaker 1: talk about how you positioned. You've talked about this short 234 00:12:36,920 --> 00:12:38,680 Speaker 1: that you've got in high yield over the last couple 235 00:12:38,720 --> 00:12:42,120 Speaker 1: of months with us Blomberg Radio and Don Blomberg TV. 236 00:12:42,440 --> 00:12:44,560 Speaker 1: It's a shot that seems to be struggling to pay off. 237 00:12:44,600 --> 00:12:46,960 Speaker 1: We've had risk appetite take a real hit over the 238 00:12:47,000 --> 00:12:49,000 Speaker 1: last couple of months, but all the volatility or the 239 00:12:49,000 --> 00:12:51,839 Speaker 1: downside seems to be in equities and high yield seems 240 00:12:51,880 --> 00:12:54,640 Speaker 1: to be whether relative out performances in risk assets. Can 241 00:12:54,679 --> 00:12:58,000 Speaker 1: you explain why you think that is, Bill, Yeah, hi 242 00:12:58,120 --> 00:13:01,040 Speaker 1: yield is doing okay. Um, you know, hi yield tends 243 00:13:01,080 --> 00:13:04,839 Speaker 1: to in terms of volatility, say the VIX is twenty um. 244 00:13:05,000 --> 00:13:08,640 Speaker 1: High yield tends to have a VIX related volatility of 245 00:13:08,640 --> 00:13:11,240 Speaker 1: about five, you know, about a quarter of what the 246 00:13:11,280 --> 00:13:13,880 Speaker 1: stock market does. And uh, you know, it's a slower 247 00:13:13,880 --> 00:13:17,680 Speaker 1: moving type of type of average. And the investors wait 248 00:13:17,840 --> 00:13:20,839 Speaker 1: on how yield to see, you know, the expected number 249 00:13:20,840 --> 00:13:24,680 Speaker 1: of defaults going forward, and so far they've been relative benign. Jonathan. 250 00:13:24,800 --> 00:13:28,479 Speaker 1: So I think that's the main point. What I do say, 251 00:13:28,880 --> 00:13:30,800 Speaker 1: in addition to that, and the things that are making 252 00:13:30,840 --> 00:13:33,600 Speaker 1: the short work out over the past month or so, 253 00:13:33,840 --> 00:13:36,160 Speaker 1: is that, you know, the global trade situation and the 254 00:13:36,200 --> 00:13:42,280 Speaker 1: potential you know, economic problems. Uh that higher interest rates 255 00:13:42,320 --> 00:13:47,880 Speaker 1: you know, place on low low quality corporate credits, you know, 256 00:13:48,400 --> 00:13:52,000 Speaker 1: eventually forces those spreads a little wider. And that's basically 257 00:13:52,000 --> 00:13:54,320 Speaker 1: what the beds about. I guess what I'm trying to watch, Bill, 258 00:13:54,400 --> 00:13:56,920 Speaker 1: is there is there a more optimal way of expressing 259 00:13:57,040 --> 00:14:01,080 Speaker 1: this sort of hit against risk appetite from credit insight 260 00:14:01,280 --> 00:14:04,160 Speaker 1: equities where the volatility seems to be contained and isolated 261 00:14:04,240 --> 00:14:11,360 Speaker 1: right now, well volatilely maybe contained. I guess, um, it's 262 00:14:11,360 --> 00:14:13,920 Speaker 1: hard for me to make that description, but I think 263 00:14:13,920 --> 00:14:16,160 Speaker 1: what I'm doing in high yield it's a little sophisticated, 264 00:14:16,200 --> 00:14:21,720 Speaker 1: but basically I'm selling calls and selling puts on the 265 00:14:22,120 --> 00:14:24,760 Speaker 1: h y c d X, which is the you know, 266 00:14:24,800 --> 00:14:26,880 Speaker 1: the benchmark for the high yield market. And to the 267 00:14:26,880 --> 00:14:29,600 Speaker 1: extent that it doesn't move by more than fifty basis 268 00:14:29,680 --> 00:14:31,880 Speaker 1: points one way or the other over a month speriod 269 00:14:31,920 --> 00:14:34,920 Speaker 1: of time, then you're captured a premium. So I'm expecting 270 00:14:34,960 --> 00:14:38,040 Speaker 1: how yield to gradually move higher, but if it doesn't 271 00:14:39,120 --> 00:14:42,280 Speaker 1: significantly move lower than the bed pays off Bill Gross 272 00:14:42,280 --> 00:14:45,440 Speaker 1: with us of Janice Henderson and Bloomberg Television and Bloomberg Radio. 273 00:14:46,040 --> 00:14:47,760 Speaker 1: This Morning, Bill, I do want to turn to the 274 00:14:47,760 --> 00:14:51,520 Speaker 1: politics and folded into your decades of work in financial 275 00:14:51,600 --> 00:14:54,320 Speaker 1: theory and economic theory, I'm going to cut to the 276 00:14:54,440 --> 00:14:56,920 Speaker 1: chase that you're, my guests, a critic of what the 277 00:14:56,960 --> 00:15:00,800 Speaker 1: presidents saying and maybe even doing. What does the president 278 00:15:00,920 --> 00:15:06,160 Speaker 1: most get wrong? Well, he gets the trade deficit wrong. 279 00:15:06,200 --> 00:15:09,760 Speaker 1: I mean the trade deficit is most economists would affirm, 280 00:15:09,800 --> 00:15:13,160 Speaker 1: you know, as a result of over consumption and under 281 00:15:13,240 --> 00:15:15,960 Speaker 1: saving on the part of the United States. Are our 282 00:15:16,000 --> 00:15:19,960 Speaker 1: savings ratio is down to two percent, which is historically low. 283 00:15:20,280 --> 00:15:23,400 Speaker 1: The trade deficit at three plus of g d P 284 00:15:23,760 --> 00:15:27,720 Speaker 1: is um you know, basically relatively high. And to the 285 00:15:27,760 --> 00:15:30,880 Speaker 1: extent that we like to buy things and not save, 286 00:15:31,440 --> 00:15:34,040 Speaker 1: then we're gonna have a trade deficit because we buy 287 00:15:34,080 --> 00:15:36,400 Speaker 1: things here in the United States and then when we 288 00:15:36,440 --> 00:15:38,720 Speaker 1: can't buy enough, we buy it overseas. And so Trump 289 00:15:39,040 --> 00:15:41,400 Speaker 1: basically has it wrong. It doesn't mean that we're not 290 00:15:41,440 --> 00:15:45,320 Speaker 1: being gamed by some countries in terms of uh, you know, 291 00:15:45,760 --> 00:15:50,880 Speaker 1: tariffs are in terms of technology or or cheaper goods 292 00:15:50,920 --> 00:15:53,880 Speaker 1: and services. But it does mean that there's a little 293 00:15:53,920 --> 00:15:59,960 Speaker 1: way to change this situation by imposing tariffs on four 294 00:16:00,040 --> 00:16:01,800 Speaker 1: in good conservice. So then what do you need from 295 00:16:01,880 --> 00:16:04,760 Speaker 1: Larry Cudlo. Mr Cudlo is going to join John Farrell 296 00:16:05,080 --> 00:16:07,720 Speaker 1: here in about I'm guessing forty five minutes, maybe it's 297 00:16:07,760 --> 00:16:11,440 Speaker 1: thirty five minutes. I'm serious, Bill, What does Lawrence Cudlow 298 00:16:11,880 --> 00:16:16,000 Speaker 1: and other free traders, even Secretary Ross, what do they 299 00:16:16,040 --> 00:16:20,480 Speaker 1: need to do to stop the discourse that has a 300 00:16:20,600 --> 00:16:24,359 Speaker 1: political tinge. I understand that we all understand the president's 301 00:16:24,400 --> 00:16:28,360 Speaker 1: angle on that, but it's effect on China. What does 302 00:16:28,440 --> 00:16:34,760 Speaker 1: Cudlow need to do to jump start that process this weekend? Well, 303 00:16:34,800 --> 00:16:41,640 Speaker 1: he needs to calm the verbal tweeting down, so to speak. 304 00:16:41,680 --> 00:16:46,840 Speaker 1: He needs to basically acknowledge that Trump is a negotiator 305 00:16:46,920 --> 00:16:49,520 Speaker 1: and that part of the process of negotiation is to 306 00:16:49,560 --> 00:16:52,000 Speaker 1: go to extremes like you did last night with a 307 00:16:52,080 --> 00:16:55,200 Speaker 1: hundred billion dollars more. You know, the question that the 308 00:16:55,200 --> 00:16:57,640 Speaker 1: markets have to ascertain us whether or not you know, 309 00:16:57,680 --> 00:17:00,440 Speaker 1: there's a semblance of truth to that and they're not. 310 00:17:00,760 --> 00:17:03,760 Speaker 1: There might be a hundred billion behind that, and so 311 00:17:04,200 --> 00:17:07,480 Speaker 1: you know, I think in the equity markets that there 312 00:17:07,520 --> 00:17:11,280 Speaker 1: are risk premiums, as you know, and that you know, 313 00:17:11,320 --> 00:17:16,120 Speaker 1: this continued type of verbalization and tweeting on the part 314 00:17:16,240 --> 00:17:21,080 Speaker 1: of of trade and not only tweeting but real terrorists 315 00:17:21,119 --> 00:17:25,280 Speaker 1: being imposed basically raises the equity premium by a half 316 00:17:25,280 --> 00:17:27,560 Speaker 1: a percent or so relative to what it is, say 317 00:17:27,600 --> 00:17:30,439 Speaker 1: it's a four to five percent premium. It raises it 318 00:17:30,520 --> 00:17:32,520 Speaker 1: by a half of percent. What does that do to prices? 319 00:17:32,720 --> 00:17:35,040 Speaker 1: It lowers it by about three or four percent in 320 00:17:35,119 --> 00:17:39,960 Speaker 1: terms of the stock market bill gross of Jennas Henderson. Uh, 321 00:17:40,000 --> 00:17:43,080 Speaker 1: this morning, futures at negative twenty down, futures negative two 322 00:17:43,200 --> 00:17:46,640 Speaker 1: zero eight. Really the major impact off this jobs report 323 00:17:47,119 --> 00:17:52,400 Speaker 1: with a MOULDI report in a lousy revision, but other 324 00:17:52,440 --> 00:17:54,920 Speaker 1: than that, a pretty buoyant report, as we heard from 325 00:17:54,960 --> 00:18:08,840 Speaker 1: Jim Glassman and Bill Grows. Yeah, I'm pleased to say. 326 00:18:08,840 --> 00:18:11,840 Speaker 1: We're now joined on Bloomberg Television and on Bloomberg Radio 327 00:18:11,920 --> 00:18:15,680 Speaker 1: by Larry Cudlow, the National Economic Council Director, who joins 328 00:18:15,760 --> 00:18:17,879 Speaker 1: us from outside the White House. Larry, it's great to 329 00:18:17,920 --> 00:18:19,919 Speaker 1: catch up with you and get your thoughts on the 330 00:18:19,920 --> 00:18:22,480 Speaker 1: payrolls figure, the labor market, and what has been happening 331 00:18:22,760 --> 00:18:26,480 Speaker 1: with the trade discussion. The back and forth continues over 332 00:18:26,560 --> 00:18:30,320 Speaker 1: trade and the tensions continue to escalate as well. Larry, 333 00:18:30,359 --> 00:18:32,960 Speaker 1: there is a risk that the damage could be done 334 00:18:33,000 --> 00:18:36,240 Speaker 1: and undermine what this administration is done around things like 335 00:18:36,359 --> 00:18:39,280 Speaker 1: the tax bill, around the deregulation push. Do you see 336 00:18:39,280 --> 00:18:42,600 Speaker 1: the trade effort undermining those things? Larry, I sure don't. 337 00:18:42,720 --> 00:18:47,280 Speaker 1: I absolutely do not. In fact, I think, Uh, to 338 00:18:47,440 --> 00:18:54,800 Speaker 1: rephrase this narrative, China is the problem. Okay, China is 339 00:18:54,800 --> 00:18:58,760 Speaker 1: the problem. President Trump is the solution. In my judgment, 340 00:18:59,440 --> 00:19:02,439 Speaker 1: This is the first president twenty years to have the 341 00:19:02,480 --> 00:19:07,320 Speaker 1: backbone to go in and challenge China on the kind 342 00:19:07,320 --> 00:19:11,040 Speaker 1: of unfair and illegal trading practices that they have adopted 343 00:19:11,080 --> 00:19:13,680 Speaker 1: for the past several decades. I just want to make 344 00:19:13,760 --> 00:19:18,200 Speaker 1: that point, and second directly to your question about growth. Look, 345 00:19:18,880 --> 00:19:24,600 Speaker 1: China is stealing our technology, all right, their intellectual property 346 00:19:24,640 --> 00:19:28,520 Speaker 1: rights for being stone these forced technology transfers. I was 347 00:19:28,600 --> 00:19:32,160 Speaker 1: on the phone last evening with my friend and trade 348 00:19:32,160 --> 00:19:35,240 Speaker 1: ambassador Bob Lyheiser, have known for years in great person, 349 00:19:35,720 --> 00:19:38,240 Speaker 1: and we kind of walked through you know, what is 350 00:19:38,280 --> 00:19:42,760 Speaker 1: the heart of the American economy. It's entrepreneurship, it's innovation, 351 00:19:43,119 --> 00:19:45,679 Speaker 1: and it's based on technology. I think this is a 352 00:19:45,800 --> 00:19:49,600 Speaker 1: very important point, and I want to transmit his his 353 00:19:49,720 --> 00:19:52,919 Speaker 1: views on this because they're terribly important and they're on target. 354 00:19:53,680 --> 00:19:57,920 Speaker 1: We cannot allow our technology breakthroughs, which is what's made 355 00:19:57,960 --> 00:20:01,840 Speaker 1: America competitive and great, and with lower taxes and regulations, 356 00:20:01,880 --> 00:20:04,080 Speaker 1: it's going to be even better. But we cannot give 357 00:20:04,119 --> 00:20:09,280 Speaker 1: them away to be stolen by the Chinese government anymore. 358 00:20:09,600 --> 00:20:12,159 Speaker 1: It doesn't work. Larry, just to jump in the narrative 359 00:20:12,160 --> 00:20:16,000 Speaker 1: of this last weeks important let me let me finish, 360 00:20:16,040 --> 00:20:18,359 Speaker 1: because the narrative of this program has always been that 361 00:20:18,440 --> 00:20:20,760 Speaker 1: China is a problem. China is a problem. The debate 362 00:20:20,800 --> 00:20:22,960 Speaker 1: I want to have with you, the discussion I want 363 00:20:22,960 --> 00:20:25,359 Speaker 1: to have with you, and what our audience needs is 364 00:20:25,400 --> 00:20:27,840 Speaker 1: details on the approach and when you're gonna get results. 365 00:20:27,840 --> 00:20:29,439 Speaker 1: So if we can spend less time talking about the 366 00:20:29,440 --> 00:20:32,199 Speaker 1: problem that I want to talk about the approach. Are 367 00:20:32,240 --> 00:20:35,480 Speaker 1: you actually having discussions with the Chinese? You're either gonna 368 00:20:35,560 --> 00:20:37,400 Speaker 1: let me talk or you're not my friend. You're either 369 00:20:37,440 --> 00:20:39,320 Speaker 1: gonna let me talk or that okay, you wanted me 370 00:20:39,359 --> 00:20:41,560 Speaker 1: to come on, I'm happy to do it. Well, Larry Talks. 371 00:20:41,600 --> 00:20:43,199 Speaker 1: I want you to give me the idea of what 372 00:20:43,320 --> 00:20:45,720 Speaker 1: is happening behind the scenes. Are you having discussions with 373 00:20:45,760 --> 00:20:51,560 Speaker 1: the Chinese? They're always ongoing discussions with the Chinese always. 374 00:20:51,640 --> 00:20:54,680 Speaker 1: And President Trump, I traveled with him all day yesterday. 375 00:20:55,080 --> 00:20:59,040 Speaker 1: President Trump indicated to me for the mpteen time that 376 00:20:59,119 --> 00:21:02,240 Speaker 1: he has great respect for President She and she has 377 00:21:02,280 --> 00:21:07,320 Speaker 1: respect for President Trump, and President Trump regards she as 378 00:21:07,359 --> 00:21:10,719 Speaker 1: somebody who would be a very talented negotiator if and 379 00:21:10,800 --> 00:21:15,120 Speaker 1: when negotiations begin. They have not really begun yet China's 380 00:21:15,240 --> 00:21:20,560 Speaker 1: response to our complaints. Their response has been unsatisfactory, all right, 381 00:21:20,640 --> 00:21:24,320 Speaker 1: and that's why we're looking. I used the word looking. 382 00:21:24,760 --> 00:21:30,600 Speaker 1: We haven't proposed anything. They're considering a second round of 383 00:21:30,680 --> 00:21:33,880 Speaker 1: tariff actions, but it has not come to pass. There 384 00:21:33,960 --> 00:21:37,720 Speaker 1: is no execution of this. It's just consideration. It's really 385 00:21:37,800 --> 00:21:41,239 Speaker 1: up to the U. S TR below the President, and 386 00:21:41,320 --> 00:21:45,200 Speaker 1: so therefore the conversations go on as they always do. 387 00:21:45,840 --> 00:21:49,000 Speaker 1: The President speaks to she, the second and third level 388 00:21:49,040 --> 00:21:53,359 Speaker 1: speak to each other. Perhaps perhaps there will be some 389 00:21:53,400 --> 00:21:59,080 Speaker 1: fruitful negotiations so far, but I would say they've been unsatisfactory. 390 00:21:59,359 --> 00:22:02,560 Speaker 1: So we to see. So Larry, help me understand when 391 00:22:02,560 --> 00:22:05,240 Speaker 1: the negotiations will actually begin, because people are trying to 392 00:22:05,280 --> 00:22:08,040 Speaker 1: find out all the time. Aarris no timetable. There's no 393 00:22:08,080 --> 00:22:13,040 Speaker 1: timetable whatsoever. So you can tell me what the sixty days, Larry, Right, 394 00:22:13,160 --> 00:22:16,960 Speaker 1: that's the thing I really encourage everybody to read carefully. 395 00:22:17,080 --> 00:22:21,440 Speaker 1: Uh the President's announcement yesterday, the White House press release 396 00:22:21,720 --> 00:22:28,640 Speaker 1: and also Ambassador Lighthouses press release. We are considering adding 397 00:22:28,720 --> 00:22:32,199 Speaker 1: tariff pressures considering I don't even want to call that 398 00:22:32,280 --> 00:22:35,840 Speaker 1: a negotiating point. There may be negotiations in the next 399 00:22:35,880 --> 00:22:38,600 Speaker 1: couple of months. I hope so. I think everybody hopes so, 400 00:22:39,000 --> 00:22:42,040 Speaker 1: because I guess to your point in the beginning, UM, 401 00:22:42,080 --> 00:22:44,359 Speaker 1: I don't want to disrupt the economy. President doesn't want 402 00:22:44,359 --> 00:22:47,439 Speaker 1: to disrupt economy. We need not disrupt the economy. But 403 00:22:47,560 --> 00:22:52,639 Speaker 1: the point here is we're gonna have several months open discussion. 404 00:22:52,720 --> 00:22:55,679 Speaker 1: People will submit comments, the public will submit comments, They 405 00:22:55,680 --> 00:22:58,919 Speaker 1: will be reviewed by the U. S TR and elsewhere. 406 00:22:59,359 --> 00:23:01,399 Speaker 1: And at that point, I don't want to put a 407 00:23:01,440 --> 00:23:03,679 Speaker 1: deadline on and I'll use the phrase couple of months. 408 00:23:04,000 --> 00:23:07,080 Speaker 1: We will then the administration will then make a decision 409 00:23:07,359 --> 00:23:11,800 Speaker 1: with respect to whether these UH proposed terrofs um will 410 00:23:11,840 --> 00:23:15,440 Speaker 1: be put into place. There can be look, there can 411 00:23:15,520 --> 00:23:19,280 Speaker 1: and will be conversations during this whole period. I'm just 412 00:23:19,320 --> 00:23:27,320 Speaker 1: gonna say several months. I can't discussions. There will be 413 00:23:27,440 --> 00:23:31,080 Speaker 1: discussions along the way. And to be honest with you, 414 00:23:31,600 --> 00:23:34,120 Speaker 1: I want to use the phrase Ambassador Life has used 415 00:23:34,240 --> 00:23:39,560 Speaker 1: with me last night. This is a moderate tempered approach 416 00:23:39,960 --> 00:23:44,480 Speaker 1: that we are taking. It is moderate, temperate, and proportional. 417 00:23:44,720 --> 00:23:47,680 Speaker 1: This is not a trade war. There's no war here. 418 00:23:48,080 --> 00:23:53,120 Speaker 1: All we're trying to do is save and defend American technology, 419 00:23:53,560 --> 00:23:57,400 Speaker 1: which is crucial to American economic growth and by the way, 420 00:23:57,440 --> 00:24:01,399 Speaker 1: global economic growth. This whole program out, whether it's tax 421 00:24:01,520 --> 00:24:06,600 Speaker 1: rate reduction or rollback of regulatory costs, or rollback of 422 00:24:06,760 --> 00:24:11,920 Speaker 1: energy problems UH and now trade, this is all designed 423 00:24:11,920 --> 00:24:14,879 Speaker 1: to promote faster economic growth in the United States. And 424 00:24:14,920 --> 00:24:17,800 Speaker 1: I believe we will. I believe time pushed for time, 425 00:24:17,800 --> 00:24:19,840 Speaker 1: and your pio shout at you, and my producer will 426 00:24:19,840 --> 00:24:21,080 Speaker 1: shout at you. And I want to fit a few 427 00:24:21,119 --> 00:24:23,800 Speaker 1: more questions in. I want to understand what the Chinese 428 00:24:23,800 --> 00:24:26,760 Speaker 1: can do to satisfy the concerns of the President in 429 00:24:26,760 --> 00:24:29,679 Speaker 1: this administration over the next several months. What can they 430 00:24:29,720 --> 00:24:34,200 Speaker 1: do tomorrow that can make all of this go away? Well, look, 431 00:24:34,480 --> 00:24:37,840 Speaker 1: I think there'll be a discussion. I want to tread 432 00:24:38,240 --> 00:24:40,840 Speaker 1: lightly here because I don't want to get ahead of 433 00:24:40,840 --> 00:24:45,760 Speaker 1: the game. I think Ambassador Leightheiser and the President are 434 00:24:45,920 --> 00:24:51,520 Speaker 1: thinking about submitting a list of suggestions to the Chinese, 435 00:24:51,960 --> 00:24:57,440 Speaker 1: and I underscore I think, but that is a possibility, Okay, possibility. 436 00:24:57,840 --> 00:25:02,919 Speaker 1: If so, then hopefully the Chinese would respond with some 437 00:25:03,119 --> 00:25:09,439 Speaker 1: ideas that will solve this technology transfer and stealing. What 438 00:25:09,440 --> 00:25:12,920 Speaker 1: would you put on the list. Well, look, my friend, 439 00:25:13,000 --> 00:25:16,439 Speaker 1: there's no secret here. Uh. They've got enormous trade and 440 00:25:16,480 --> 00:25:22,399 Speaker 1: tariff barriers, all right, they have technology uh force technology transfers. 441 00:25:22,720 --> 00:25:27,840 Speaker 1: They got to stop their um stealing of the intellectual 442 00:25:27,920 --> 00:25:31,080 Speaker 1: property that we try to use in any company around 443 00:25:31,080 --> 00:25:35,080 Speaker 1: the world. Those are good places to start. Um. China 444 00:25:35,119 --> 00:25:37,000 Speaker 1: has probably gonna work with this. Look. They have to 445 00:25:37,080 --> 00:25:40,720 Speaker 1: open their markets. Is that a surprise? Their markets are 446 00:25:40,760 --> 00:25:45,520 Speaker 1: relatively closed. Remember, even though twenty years ago they made 447 00:25:45,560 --> 00:25:48,040 Speaker 1: good movement in free markets. I give them credit for 448 00:25:48,119 --> 00:25:52,879 Speaker 1: that absolutely. Nonetheless, in recent years they have moved backwards. 449 00:25:53,640 --> 00:25:58,440 Speaker 1: Half the economy remains state run. The state run corporations 450 00:25:58,480 --> 00:26:01,639 Speaker 1: and the state run banks are operating. Half the economy 451 00:26:01,840 --> 00:26:05,520 Speaker 1: is incredibly inefficient. And they want to stock American exports. 452 00:26:05,800 --> 00:26:08,800 Speaker 1: They have to lower those barriers. They have to open markets. 453 00:26:09,040 --> 00:26:12,080 Speaker 1: They have to look at opening investment opportunities, and they 454 00:26:12,080 --> 00:26:15,080 Speaker 1: have to look at the technology transfers and stealing. And 455 00:26:15,080 --> 00:26:18,560 Speaker 1: in the meantime, markets looking really soft here again, And 456 00:26:18,560 --> 00:26:22,200 Speaker 1: I just wanted just to finish up which market, which 457 00:26:22,840 --> 00:26:25,160 Speaker 1: the equity market. We're down about six tenths of one percent, 458 00:26:25,240 --> 00:26:27,199 Speaker 1: We're off by about seven tenths of one percent. On 459 00:26:27,240 --> 00:26:29,439 Speaker 1: the down, we're raising the weekly gain. I guess my 460 00:26:29,480 --> 00:26:33,440 Speaker 1: final question to you is I understand the problem tremendous 461 00:26:34,400 --> 00:26:38,159 Speaker 1: program and everyone understands around it. Don't correcting, Larry. I'm 462 00:26:38,200 --> 00:26:39,720 Speaker 1: saying the fact of what's on the screen in the moment. 463 00:26:39,760 --> 00:26:41,280 Speaker 1: I can tell you what the year to date prices. 464 00:26:41,359 --> 00:26:42,680 Speaker 1: I can tell you the one year price. Have a 465 00:26:42,720 --> 00:26:47,600 Speaker 1: final ask you this one final question, the question do 466 00:26:47,680 --> 00:26:52,520 Speaker 1: you answer them? Larry? Always struggling to identify the difference 467 00:26:55,160 --> 00:26:59,160 Speaker 1: and policy? And does the White House a communication problem? 468 00:26:59,400 --> 00:27:02,800 Speaker 1: Does the White Does the White House have a communication here? 469 00:27:02,800 --> 00:27:05,920 Speaker 1: You're talking over me so much. I can asked the 470 00:27:06,000 --> 00:27:08,800 Speaker 1: question and you answer it. Does the White House have 471 00:27:09,000 --> 00:27:12,840 Speaker 1: a communication problem? Because so many people don't understand the 472 00:27:12,880 --> 00:27:17,159 Speaker 1: difference between retric policy and proposals. Do you have a 473 00:27:17,200 --> 00:27:22,080 Speaker 1: communication problem, because it appears to me that you do. Well. Look, 474 00:27:22,480 --> 00:27:25,520 Speaker 1: if you read the press releases, it spells out in 475 00:27:25,600 --> 00:27:28,199 Speaker 1: great detail what we're doing here. So I don't know 476 00:27:28,200 --> 00:27:30,760 Speaker 1: how better to communicate. I'm on your show, so when 477 00:27:30,840 --> 00:27:33,560 Speaker 1: you let me talk, I'm trying to communicate exactly what 478 00:27:33,720 --> 00:27:36,040 Speaker 1: this is. We have not by the way, I just 479 00:27:36,080 --> 00:27:39,240 Speaker 1: go through this one more time. We have not executed 480 00:27:39,560 --> 00:27:43,639 Speaker 1: implemented any new tariffs. We haven't even declared our absolute 481 00:27:43,720 --> 00:27:46,760 Speaker 1: hundred percent intention. If you read the press release, the 482 00:27:46,840 --> 00:27:53,160 Speaker 1: President has asked the str Bastard Lightheiser to consider whether 483 00:27:53,359 --> 00:27:59,080 Speaker 1: or not additional tariff discussions or actions will be necessary 484 00:27:59,240 --> 00:28:02,600 Speaker 1: in the future. Nothing has been done so far. As 485 00:28:02,640 --> 00:28:05,960 Speaker 1: I said earlier, these things uh will be put out 486 00:28:06,000 --> 00:28:09,480 Speaker 1: for public comment. Those comments will be received and evaluated. 487 00:28:09,920 --> 00:28:12,640 Speaker 1: SCR will come back to the President with its own report. 488 00:28:12,920 --> 00:28:16,720 Speaker 1: You know, just on at one point str Lightheiser, they 489 00:28:16,720 --> 00:28:20,000 Speaker 1: did a hundred eighty page report over the past year 490 00:28:20,280 --> 00:28:24,320 Speaker 1: which shows not only the centrality of technology as central 491 00:28:24,359 --> 00:28:28,880 Speaker 1: to our economy, but why China and their actions which 492 00:28:28,920 --> 00:28:31,520 Speaker 1: break all the laws of the World Trade Organization, why 493 00:28:31,600 --> 00:28:34,600 Speaker 1: they are taking away our technology which is our most 494 00:28:34,880 --> 00:28:38,360 Speaker 1: valuable asset. Right so we can't stand by on this. 495 00:28:38,640 --> 00:28:41,520 Speaker 1: So to answer your question, it's very clear to me 496 00:28:41,880 --> 00:28:47,400 Speaker 1: we are looking evaluating, putting out for public comment the 497 00:28:47,480 --> 00:28:51,800 Speaker 1: worth or utility of additional tariff actions to make our 498 00:28:51,920 --> 00:28:57,640 Speaker 1: point that China's illegal activity in trade and elsewhere can 499 00:28:57,680 --> 00:29:01,560 Speaker 1: no longer be tolerated. Blame China for not playing ball, 500 00:29:01,680 --> 00:29:05,560 Speaker 1: don't blame the president. He standing up for American companies 501 00:29:05,560 --> 00:29:07,960 Speaker 1: in business. That's my take. I don't see how I 502 00:29:08,000 --> 00:29:10,760 Speaker 1: can communicate that more clearly. Hi, Larry, you're a good 503 00:29:10,800 --> 00:29:12,680 Speaker 1: sport and I appreciate your time and thanks for coming 504 00:29:12,680 --> 00:29:15,200 Speaker 1: on the program. I'm giving us your time and hopefully, Larry, 505 00:29:15,240 --> 00:29:16,880 Speaker 1: you'll be back in front of the camera with me 506 00:29:16,960 --> 00:29:20,640 Speaker 1: next month. Larry Cardlo, National Economic Council Director, we appreciate 507 00:29:20,920 --> 00:29:39,120 Speaker 1: his time with us. Michael Darda chief economist m cam Holdings. 508 00:29:39,240 --> 00:29:42,920 Speaker 1: What was not discussed in that conversation, Michael, and you, 509 00:29:43,120 --> 00:29:45,280 Speaker 1: of course have a this is part of your fabric 510 00:29:45,360 --> 00:29:49,400 Speaker 1: with your academics out of Wisconsin, is the discussion of 511 00:29:49,440 --> 00:29:52,880 Speaker 1: this not between the aggregate of the United States the 512 00:29:52,960 --> 00:29:58,480 Speaker 1: aggregate of China, but the distinction between West Virginia and Iowa. 513 00:29:59,080 --> 00:30:01,760 Speaker 1: Could any pre is it in have a trade policy 514 00:30:01,840 --> 00:30:06,280 Speaker 1: that satisfies West Virginia and at the same time Iowa 515 00:30:09,080 --> 00:30:12,920 Speaker 1: follow the hippocratic oath here, which is, first, do no harm. 516 00:30:13,720 --> 00:30:16,640 Speaker 1: You know, we've seen the market reaction to some of 517 00:30:16,640 --> 00:30:20,040 Speaker 1: the verbal bluster coming out of the administration. It's been negative, 518 00:30:20,680 --> 00:30:22,840 Speaker 1: and it's negative for a reason. I mean, if this 519 00:30:22,880 --> 00:30:25,720 Speaker 1: is simply over, you know, if this if this is 520 00:30:26,240 --> 00:30:29,760 Speaker 1: due to a concern about intellectual property. That's very legitimate. 521 00:30:29,840 --> 00:30:32,040 Speaker 1: But you know, what is the proper channel here? Is 522 00:30:32,080 --> 00:30:34,080 Speaker 1: that a legal channel? Is it the w t O 523 00:30:34,800 --> 00:30:37,600 Speaker 1: or is it is it moving forward aggressively with with 524 00:30:37,680 --> 00:30:45,320 Speaker 1: tariffs trade protectionism? And if it's the latter, unfortunately that 525 00:30:45,440 --> 00:30:47,640 Speaker 1: will be disruptive and it will hurt growth and it 526 00:30:47,880 --> 00:30:52,160 Speaker 1: is hurting confidence. Now whether their proposals that become realities 527 00:30:52,280 --> 00:30:56,080 Speaker 1: or not. Um, you know, markets do discount and that's 528 00:30:56,080 --> 00:30:58,800 Speaker 1: where we are, Michael Darda, what have you could just 529 00:30:58,840 --> 00:31:01,440 Speaker 1: look into the future little bit because many of these 530 00:31:01,480 --> 00:31:04,440 Speaker 1: issues have to do with intellectual property, which go into 531 00:31:04,480 --> 00:31:07,040 Speaker 1: products that have yet to even reach the market. We 532 00:31:07,120 --> 00:31:09,800 Speaker 1: don't we know for example, you know every iteration of 533 00:31:09,840 --> 00:31:13,680 Speaker 1: new smartphones, computers and technology and so on, but the 534 00:31:13,760 --> 00:31:18,480 Speaker 1: actual consumer market for those products is shifting to Asia, 535 00:31:18,760 --> 00:31:20,760 Speaker 1: not the United States. And just in terms of just 536 00:31:20,840 --> 00:31:23,320 Speaker 1: the demographics that exists, you know, India is going to 537 00:31:23,400 --> 00:31:28,440 Speaker 1: overtake China's the most populous country by fifty What if 538 00:31:28,480 --> 00:31:30,400 Speaker 1: you could speak to that issue and whether this is 539 00:31:30,480 --> 00:31:34,920 Speaker 1: kind of fighting you know, last centuries wars, Yeah, Pham, 540 00:31:34,960 --> 00:31:36,520 Speaker 1: I think it is. I mean, look, if it's a. 541 00:31:36,600 --> 00:31:39,760 Speaker 1: If it's a matter of intellectual property theft. I mean, 542 00:31:39,800 --> 00:31:42,800 Speaker 1: if that's a that's a legitimate concern. The question is 543 00:31:42,800 --> 00:31:45,440 Speaker 1: what is the proper channel through which to deal with that, 544 00:31:45,600 --> 00:31:49,080 Speaker 1: the w t O, the Justice Department, or if this 545 00:31:49,200 --> 00:31:52,280 Speaker 1: is simply a concern about trade deficits. You know, when 546 00:31:52,320 --> 00:31:54,800 Speaker 1: I listened to President Trump speak, you guys have had 547 00:31:54,840 --> 00:31:59,320 Speaker 1: Peter Navarro on your show, Commerce Secretary Wilbert Ross. You know, 548 00:31:59,400 --> 00:32:01,960 Speaker 1: they seem to be focused on the trade deficit is 549 00:32:02,000 --> 00:32:04,440 Speaker 1: an issue, you know, rather than what we were just 550 00:32:04,560 --> 00:32:08,960 Speaker 1: hearing about intellectual property concerns. And the trade deficit is 551 00:32:09,000 --> 00:32:12,560 Speaker 1: just the reciprocal of a capital inflow coming into the country. 552 00:32:12,920 --> 00:32:17,720 Speaker 1: And if we're moving into larger late cycle deficits and 553 00:32:17,760 --> 00:32:21,080 Speaker 1: as a result investment is higher, you know, than the 554 00:32:21,120 --> 00:32:23,400 Speaker 1: sum of private and public savings, we're going to have 555 00:32:23,440 --> 00:32:26,240 Speaker 1: a bigger trade deficit. The fear I have is that 556 00:32:26,640 --> 00:32:30,920 Speaker 1: if the administration is fighting an accounting identity here with 557 00:32:31,000 --> 00:32:34,000 Speaker 1: protectionist trade efforts, then we end up in sort of 558 00:32:34,000 --> 00:32:36,640 Speaker 1: a smooth holly loop to loop where the trade deficit 559 00:32:36,720 --> 00:32:40,440 Speaker 1: figures the worse the trade the protection is rhetoric is 560 00:32:40,520 --> 00:32:43,680 Speaker 1: ratcheted up. You know, we saw the trade trade deficit 561 00:32:43,720 --> 00:32:46,640 Speaker 1: figures for February. They came in worse than expected. And 562 00:32:46,680 --> 00:32:50,280 Speaker 1: then you know last night, you know we had uh 563 00:32:50,440 --> 00:32:53,680 Speaker 1: news of greater tear of considerations. I don't know if 564 00:32:53,720 --> 00:32:56,080 Speaker 1: they're left, but that kind of the thing scares well. 565 00:32:56,280 --> 00:32:58,720 Speaker 1: The news to meet Pim Fox at Michael Darda is 566 00:32:58,840 --> 00:33:02,240 Speaker 1: Mr Cuddlo and Mr will move the market. I rarely 567 00:33:02,320 --> 00:33:05,160 Speaker 1: say this, folks, but we got a nice hundred point 568 00:33:05,240 --> 00:33:07,840 Speaker 1: lift in the market. And when you see the Bloomberg 569 00:33:07,880 --> 00:33:10,760 Speaker 1: headlines that go out to everybody in finance and economics, 570 00:33:11,400 --> 00:33:15,240 Speaker 1: Pim Fox, Cudlos says there are always discussions with China. 571 00:33:15,280 --> 00:33:19,280 Speaker 1: Cudlos as second round of tariffs just a consideration. Cuddler 572 00:33:19,320 --> 00:33:22,360 Speaker 1: hopes for negotiations with China in the next months, and 573 00:33:22,440 --> 00:33:24,720 Speaker 1: you see SMP and down pair gains. Yeah, but I 574 00:33:24,720 --> 00:33:27,000 Speaker 1: would also I also mentioned that you're seeing a little 575 00:33:27,000 --> 00:33:30,040 Speaker 1: bit more buying of treasuries right up thirteen thirty seconds 576 00:33:30,120 --> 00:33:33,120 Speaker 1: for the thirty years three point five and the dollar 577 00:33:33,200 --> 00:33:38,400 Speaker 1: at one oh seven kerve flattening. Yes, indeed, all right, 578 00:33:38,440 --> 00:33:41,959 Speaker 1: So so Michael Darda, this idea of a trade wars, 579 00:33:41,960 --> 00:33:46,080 Speaker 1: trade confrontation, it doesn't just exist when it comes to China, 580 00:33:46,320 --> 00:33:50,040 Speaker 1: but also Mexico and Canada. Do you have any thoughts 581 00:33:50,040 --> 00:33:52,080 Speaker 1: on how that is going to be resolved, how that 582 00:33:52,160 --> 00:33:55,040 Speaker 1: will work out, and whether that will have a much 583 00:33:55,120 --> 00:33:59,240 Speaker 1: larger effect on US investors? Well, I think, you know, 584 00:33:59,320 --> 00:34:01,880 Speaker 1: most investors probably hope that the bark is worse than 585 00:34:01,920 --> 00:34:03,959 Speaker 1: the bike here. You know, we've heard a lot of bluster. 586 00:34:04,200 --> 00:34:06,920 Speaker 1: Will have to see what the actual policy follow through is. 587 00:34:07,720 --> 00:34:10,200 Speaker 1: But you know, we've heard a lot about tax reform 588 00:34:10,480 --> 00:34:13,880 Speaker 1: in regulatory relief. Investors have been focused on those things. 589 00:34:13,960 --> 00:34:17,480 Speaker 1: Is potentially boosting growth, but we should be thinking about 590 00:34:17,560 --> 00:34:22,320 Speaker 1: more restrictive trade policies and more restrictive immigration policies. Is 591 00:34:22,600 --> 00:34:27,480 Speaker 1: things that retard growth from the supply side, offsetting you know, 592 00:34:27,560 --> 00:34:32,960 Speaker 1: any potential supply side lift coming from tax reformer, regulatory relief. 593 00:34:33,440 --> 00:34:35,799 Speaker 1: So to me, when I look at you know, the 594 00:34:35,840 --> 00:34:38,879 Speaker 1: whole suite of policies here, it's a real mixed bag 595 00:34:38,920 --> 00:34:43,000 Speaker 1: at best. Looking at Mexico, for example, a big importer 596 00:34:43,120 --> 00:34:48,719 Speaker 1: of US energy products. Absolutely listen, the less disruptive we 597 00:34:48,760 --> 00:34:51,279 Speaker 1: can be, the better outcome that you know that will 598 00:34:51,320 --> 00:34:54,280 Speaker 1: be for the for the business cycle and the equity markets. 599 00:34:54,280 --> 00:34:56,520 Speaker 1: I think we have to be very careful here, and 600 00:34:56,560 --> 00:34:59,799 Speaker 1: I'll just reiterate again, if the concern is over the 601 00:35:00,040 --> 00:35:03,600 Speaker 1: a deficit, that is an accounting identity. If you want 602 00:35:03,640 --> 00:35:06,400 Speaker 1: the trade deficit to fall, the US is going to 603 00:35:06,520 --> 00:35:09,120 Speaker 1: have to save more relative to what it invests. You 604 00:35:09,160 --> 00:35:13,160 Speaker 1: are not going to remedy that with tariff walls. And 605 00:35:13,160 --> 00:35:15,680 Speaker 1: we're at a point now where US consumers are actually 606 00:35:15,680 --> 00:35:19,160 Speaker 1: saving less than they did let's say three months ago, 607 00:35:19,800 --> 00:35:23,279 Speaker 1: well in the sum of public and private savings. That's 608 00:35:23,320 --> 00:35:27,520 Speaker 1: really the issue. So so right with the latest GDP statistics, 609 00:35:27,560 --> 00:35:31,400 Speaker 1: we actually saw the household savings rate moving down pretty significantly. 610 00:35:31,920 --> 00:35:34,920 Speaker 1: Fiscal deficits are headed up nine years into a business 611 00:35:34,920 --> 00:35:37,560 Speaker 1: cycle because we just did a big tax cut and 612 00:35:37,680 --> 00:35:40,600 Speaker 1: raised government spending over the next two years at the 613 00:35:40,640 --> 00:35:45,040 Speaker 1: same time. So you know, look, I'm in favor of 614 00:35:45,080 --> 00:35:48,560 Speaker 1: supply side policies as much as anyone else, but we 615 00:35:48,600 --> 00:35:53,040 Speaker 1: do need to be concerned about responsible fiscal actions as well, 616 00:35:53,200 --> 00:35:58,919 Speaker 1: and doing a tax reform reform really means revenue neutrality, 617 00:35:59,040 --> 00:36:02,120 Speaker 1: at least in my book, and we've utterly failed on 618 00:36:02,200 --> 00:36:04,960 Speaker 1: that score. Mike. One final question, and it goes back 619 00:36:05,000 --> 00:36:07,400 Speaker 1: to what Pitton was talking about. Earlier about the markets. 620 00:36:07,800 --> 00:36:11,440 Speaker 1: What does Michael Darted do with cash right now? Is 621 00:36:11,560 --> 00:36:14,080 Speaker 1: cash avail you to you? Or do you need to 622 00:36:14,120 --> 00:36:18,440 Speaker 1: be in the market? Well, Tom, I mean, I you know, 623 00:36:18,480 --> 00:36:20,239 Speaker 1: I think that is going to have to do a 624 00:36:20,280 --> 00:36:24,920 Speaker 1: lot with a person's age, with their risk tolerances. You know, Um, 625 00:36:24,960 --> 00:36:27,320 Speaker 1: he's just trying to get the April fift. I'm just 626 00:36:27,360 --> 00:36:30,279 Speaker 1: trying to clear my bitcoin trade. I am so underwater. 627 00:36:31,360 --> 00:36:33,640 Speaker 1: I think it always makes sense to you know, to 628 00:36:33,640 --> 00:36:35,719 Speaker 1: to have some cash on hand. Now, it's going to 629 00:36:35,800 --> 00:36:37,920 Speaker 1: depend on on someone's age. You mean, if you're in 630 00:36:37,960 --> 00:36:40,279 Speaker 1: your if you're in your early twenties and you're just 631 00:36:40,320 --> 00:36:42,960 Speaker 1: starting your career and you're mainly investing through your four 632 00:36:43,000 --> 00:36:44,600 Speaker 1: oh one K, then yeah, you don't want to be 633 00:36:44,600 --> 00:36:47,239 Speaker 1: sitting on hoards and words of cash. But especially for 634 00:36:47,280 --> 00:36:49,640 Speaker 1: anyone that's closer to middle age or even moving out 635 00:36:49,719 --> 00:36:53,400 Speaker 1: of middle age. I won't mention any names. Um, you know, 636 00:36:53,560 --> 00:36:58,240 Speaker 1: having that cash, keep it at work, good work. Yeah, 637 00:36:58,640 --> 00:37:02,160 Speaker 1: having that cash cook can come in very handy, right, 638 00:37:02,239 --> 00:37:05,040 Speaker 1: So you know, if you if we do have a 639 00:37:05,200 --> 00:37:08,440 Speaker 1: significant market pullback, let's say there's a recession in a 640 00:37:08,440 --> 00:37:11,319 Speaker 1: bear market out there sometime in the next three to 641 00:37:11,400 --> 00:37:14,279 Speaker 1: five years. You want the ability to be able to 642 00:37:14,360 --> 00:37:16,640 Speaker 1: add to equity positions if we do end up down 643 00:37:17,440 --> 00:37:21,560 Speaker 1: more an equity market, so they can come in quite handy. Well, 644 00:37:21,560 --> 00:37:24,319 Speaker 1: I'll tell you, Michael Data, I am so ready to 645 00:37:24,440 --> 00:37:27,720 Speaker 1: buy into the Long Tuition Fund, which is a good 646 00:37:27,719 --> 00:37:31,160 Speaker 1: place to go. Michael Data, MKM partners with us with 647 00:37:31,280 --> 00:37:35,120 Speaker 1: a terrific perspective, particularly him right at the top, A Data, 648 00:37:35,680 --> 00:37:40,160 Speaker 1: acclaimed for his animal spirits and nominal GDP analysis, talking 649 00:37:40,160 --> 00:37:51,920 Speaker 1: about a dampany of nominal GDP. Thanks for listening to 650 00:37:51,960 --> 00:37:56,480 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 651 00:37:56,560 --> 00:38:02,399 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 652 00:38:02,440 --> 00:38:05,719 Speaker 1: on Twitter at Tom Keane before the podcast. You can 653 00:38:05,760 --> 00:38:08,919 Speaker 1: always catch us worldwide. I'm Bloomberg Radio.