Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Alan
Speaker 1: Krueger has been so generous at his time with us
Speaker 1: on Job's Day that we usually just bring him in
Speaker 1: and make jokes about you know this, that or the
Speaker 1: other thing. Let us remember that he is a former
Speaker 1: chairman of the President's Council of Economic Advisors and has
Speaker 1: had a distinguished career in thinking about American labor. He
Speaker 1: has been a lightning rod of debate on the minimum wage.
Speaker 1: His exceptionally important book What Makes a Terrorist was a
Speaker 1: mustard ten years ago and painful years ago, and is
Speaker 1: out again with a new redo by Professor Krueger, and
Speaker 1: he joins us on this Job's Day. Um this morning,
Speaker 1: we talked to Iowa. Yesterday, we talked to people who
Speaker 1: are working on the reality of labor in the field.
Speaker 1: Most of the debate seems to be esoteric, and within
Speaker 1: that the President seems to have what I would call
Speaker 1: a classical, more static view of labor versus The Miracle
Speaker 1: of the Marginal with a guy named William Stanley Jevons
Speaker 1: onto Alfred Marshall a hundred and thirty years ago. How
Speaker 1: do we drag Trump policy into modern economic theory? You know,
Speaker 1: I'd like to see the Justice Department become more active.
Speaker 1: How would they do that? Let me give you an example.
Speaker 1: At the end of the Obama administration, the Justice Department
Speaker 1: in the Federal Trade Commission issued guidelines to human resource
Speaker 1: professionals advising them that it's illegal for them to have
Speaker 1: agreements not the not not to rate each other's workers
Speaker 1: like Disney, Pixar and all that out in me exactly
Speaker 1: or what hospitals had been doing. And the current Assistant
Speaker 1: Attorney General for n I Trust has said that they're
Speaker 1: continuing to enforce those those guidelines, And just this week
Speaker 1: they brought charges against two companies agreed that they had
Speaker 1: violated the law or um uh rems UH Manufacturing company
Speaker 1: makes breaks for trains, and then Westinghouse Air Brake Technologies
Speaker 1: wob Tech, and there was a third company and tom
Speaker 1: this is actually kind of what's going on in the U.
Speaker 1: S economy, and a microcosm third company called FAVOLEI was
Speaker 1: part of its cabal, but Bob Tech took over Favoley,
Speaker 1: so now they could actually do what was illegal before
Speaker 1: because they're within the same company. And I think that's
Speaker 1: the sign of the lack of competition that workers are
Speaker 1: facing in the job market. John, you live this growing
Speaker 1: up in the United Kingdom, where they are all sorts
Speaker 1: of agreements, and Paul Krugman brings it up. Paul Kruman,
Speaker 1: I believe is no longer at Princeton. He's the the
Speaker 1: University of New York's June He's emeritus. He's emeritus. Are
Speaker 1: you emeritus? John Farrell is very sameritus to tell you
Speaker 1: that since you've been trying to get me a job
Speaker 1: at at at Deutsche Bank and god knows where else,
Speaker 1: watching to know I've got probably the best job I
Speaker 1: could possibly have. Alan just to get to the payrolls
Speaker 1: figures today and to white just most specifically, to what
Speaker 1: extent of the structural issues that you've identified and done
Speaker 1: so much research on, to what extent are they actually
Speaker 1: holding back those headline wage numbers that we look at
Speaker 1: every month. Now, I think wage growth has been a
Speaker 1: half a percent to a percent lower than you would
Speaker 1: predict based on the historical relationship. So something has changed
Speaker 1: in the job market, and I think the most obvious
Speaker 1: candidate is a lack of competition. The job markets less dynamic.
Speaker 1: We're seeing less mobility across areas. Workers aren't blowing to
Speaker 1: higher paying areas areas where there's greater demand. And we
Speaker 1: also have seen a proliferation of these practices by companies
Speaker 1: to require workers to sign non computer gree mints they
Speaker 1: enter into these no poaching agreements. Franchise companies have no
Speaker 1: poaching agreements, and I think that's restricting competition in the
Speaker 1: job market. And companies are not bidding up wages even
Speaker 1: though they say time after time they can't get enough workers.
Speaker 1: Every month, we have this discussion about whether the labor
Speaker 1: market is tight, whether we're at full employment. Just from
Speaker 1: a simple sort of layman point of view, if the
Speaker 1: labor market was that tight, how we able to add
Speaker 1: the payrolls figures that we are every single month? How
Speaker 1: can we have a month of three hundred and thirteen
Speaker 1: thousand when a couple of years ago, pretty much every
Speaker 1: single economist I spoke to said, get ready for something
Speaker 1: in the one hundreds. Every single month we can't keep
Speaker 1: this up, but we have. How we doing that? Well,
Speaker 1: that's what's driven the unemployment right down. Don't forget the
Speaker 1: unemployment rates come down very rapidly. We're not seeing workers
Speaker 1: come back who are out of the labor force. We're
Speaker 1: seeing workers who uh would otherwise retire early staying in
Speaker 1: the labor force longer. And we're seeing people move from
Speaker 1: unemployment to employment. Is their monopsidy, Professor crewe when it's
Speaker 1: a great phrase. It's been one of my pets study
Speaker 1: projects over the year. Not monopoly, folks, but think of
Speaker 1: a coal mine. A coal mine owner in a coal
Speaker 1: mining town is the only employer. Good Morning West Virginia
Speaker 1: for for listening in parts of Kentucky. But do you
Speaker 1: agree with Professor Krugman that there's a little bit of
Speaker 1: monopsony out there or a little bit too much? Absolutely,
Speaker 1: I've been saying that for twenty five years. You know,
Speaker 1: you go back to the book David Carton I wrote
Speaker 1: on the minimum wage, our explanation for why we did
Speaker 1: not find job losses from the minimum wage, but the
Speaker 1: Republican pushback to that. I'm not saying ed Lazio out
Speaker 1: of Stanford because i think Professor Lazier would agree with you.
Speaker 1: But the Republican pushback is everyone for themselves, the lockey
Speaker 1: in theory. You know, everybody's in this. They can move
Speaker 1: if they don't like West Virginia, they can move to
Speaker 1: New York City. But it's costly to move. And that's
Speaker 1: what gives the monopsony power. You know, in the in
Speaker 1: the classical neo classical model of the job market, if
Speaker 1: you have perfect competition, if a company were to cut
Speaker 1: it to pay by one any would lose its whole workforce.
Speaker 1: And we know that that's not the case. Or if
Speaker 1: a company is having trouble recruiting, which many companies are today,
Speaker 1: all they have to do is offer the going wage
Speaker 1: and they'll get a flood of qualified applicants. And that's
Speaker 1: not the case. So I think our understanding of the
Speaker 1: nature of monopsony has changed. We can have monopsony even
Speaker 1: if we don't have a company town. Okay, but within that,
Speaker 1: let's say health care is an example. Whether it's doctors,
Speaker 1: young doctors, or nurses or whatever, they're all screaming that
Speaker 1: they're paid. Compensations won't go up even though there's a
Speaker 1: shortage of their skill set. Well, that's a great example
Speaker 1: because that's an error where we've seen increased employer concentration,
Speaker 1: UH large number of mergers where in many cities now
Speaker 1: that industry is not competitive, so the doctors and the
Speaker 1: nurses are UH at risk of being Professor Krueger, are
Speaker 1: we going to become like the health system that John
Speaker 1: Farrell grew up with in England? I don't mean that disparagingly, John,
Speaker 1: but are we going to become a British system? I
Speaker 1: don't think where we are right now is stable, So
Speaker 1: I think we are going to move in one direction
Speaker 1: or another um. But I think we should also be
Speaker 1: very proud of the fact that we expanded coverage for
Speaker 1: so many other Americans. All of these issues sound like
Speaker 1: very structural issues to me. Alan. When the Fed Chess
Speaker 1: speaks later today and he reflects on the payrolls report
Speaker 1: not of today, but on the payrolls reports of the
Speaker 1: last few years, can he look at the labor market
Speaker 1: and safe for the Federal Reserve, it's mission complete. Look,
Speaker 1: the Federal Reserves mission is never complete, so I think
Speaker 1: he certainly wouldn't say that. But one of the real
Speaker 1: challenges for the FED is that monetary policy operates with
Speaker 1: the lag so they have to be thinking about what's
Speaker 1: going to happen six months from now, what's gonna happen
Speaker 1: nine months from now. They have to anticipate whether whether
Speaker 1: we're gonna have imbalances and whether they need to address
Speaker 1: them to keep the recovery going. Now. Uh, And I
Speaker 1: think that's the outlook that that the FED should have.
Speaker 1: So I understand there is that we can get him
Speaker 1: on the board of Governors at the FMC if he
Speaker 1: doesn't want the Deutsche Bank job. So so Alan, if
Speaker 1: you're on the board and you were advising them about
Speaker 1: the labor markets six to nine months out, what would
Speaker 1: you be saying. You know, we've seen over the past
Speaker 1: seven years there's graduate a healing of the job market.
Speaker 1: It's been painfully slow, but we're now we are at
Speaker 1: a point where all of that hard work is paid off.
Speaker 1: It took us a long time to get here. But
Speaker 1: the unappointment rate is poised to go below four percent.
Speaker 1: I'd like to see wage growth get above three percent,
Speaker 1: and from the feed standpoint, that is kind of kind
Speaker 1: of their target. And inflation is has been edging up.
Speaker 1: It's now looking like it's right around two percent. So
Speaker 1: I think the feed should be looking at things and saying,
Speaker 1: how can we keep this going? What's our best our
Speaker 1: best monetary policy to ensure that we can kind of
Speaker 1: uh keep this um recovery going and growing. Yeah, well
Speaker 1: this is good. We're trying to get your job because
Speaker 1: we know you're underemployed. We're going to four hour professorial work.
Speaker 1: We get Princeton. The other job we had for you
Speaker 1: was to coach a C. Milan, but they get out too.
Speaker 1: That's it. You ally doesn't want well, they but they
Speaker 1: advanced to John explained to me this guy who had
Speaker 1: to try out as a coach, and he's done so
Speaker 1: well with these I wouldn't say he's done that. He
Speaker 1: used to be a player a C. Malan, a fantastic
Speaker 1: player of a World Cup winner for Italy as well
Speaker 1: in two thousand and six, and I guess there's some
Speaker 1: nostalgia here or something. Tom, Will you stay around long
Speaker 1: enough to eat the panotoni? That's the question. That is
Speaker 1: a great question. Alan Kruger knows knows the Italian saying
Speaker 1: will he be around long enough to wake the panotoni?
Speaker 1: That is a joke. When you take the job at
Speaker 1: the start of the season, you were around until Christmas
Speaker 1: to have the Panotoni. That's a joke, Elyn. Have you
Speaker 1: know that the only professional soccer game I've ever gotten
Speaker 1: to Milan and I love Panatoni. So to fall asleep
Speaker 1: it was to nothing. It was there are a lot
Speaker 1: of people there, Yeah, it was. It was so different
Speaker 1: to watching American football that you couldn't get food. I
Speaker 1: couldn't believe it. At the halftime, it was almost impossible
Speaker 1: to answer my question. Did you fall asleep like I did?
Speaker 1: Thousand people at the san Cerro? There is no falling asleep.
Speaker 1: It's like it's like going to chanting coast to coast
Speaker 1: across America. We now have a debate going Bloomberg to
Speaker 1: play the Simpsons tape of the soccer game. Get to that.
Speaker 1: It is job today. We love having Professor Krueger with
Speaker 1: US of Princeton University. We're now welcome on Bloomberg Radio,
Speaker 1: Bloomberg Television worldwide. Good morning, William Gross with US of
Speaker 1: Janice Henderson. Bill Gross, is just one month's data. You
Speaker 1: take those moving averages. Do you look at the moving
Speaker 1: averages or do you give caution by a non farm
Speaker 1: statistic of one oh three and a two month payroll
Speaker 1: revision of negative fifty. Is it a fifty three thousand
Speaker 1: month lousy or is it a better report than that? Well,
Speaker 1: it's lows. And I do look at moving average. Is
Speaker 1: too many to tell you the truth to under day
Speaker 1: and uh several years in many cases, but uh yeah,
Speaker 1: I think this is a weakesh type of reef. What
Speaker 1: is true that? And I would have said, um, going
Speaker 1: in that wages where the key consideration point three was
Speaker 1: what was expected over a point one last month, so
Speaker 1: that average is that point too, and two point seven
Speaker 1: on an annual basis, which isn't much change, and so um,
Speaker 1: you know, I would think this makes for more cautious FED,
Speaker 1: especially in light of the global trade situation that we
Speaker 1: see on an overnight basis where we're just gonna have
Speaker 1: to see. But I think the FED will be cautious
Speaker 1: going forward. My forecast is one or two hike nineteen
Speaker 1: or two thousand and eighteen type of year bill gross.
Speaker 1: If we got wage growth is John Farrell mentioned spot on,
Speaker 1: you've got to take inflation out of that to get
Speaker 1: to real or inflation adjusted wage growth. Do we have
Speaker 1: inflation adjusted wage growth. Well, I don't think they have much.
Speaker 1: And I've got an interesting chart in front of me.
Speaker 1: You can't show it, but it starts. It looks good
Speaker 1: on it looks so good on radio. That chart on
Speaker 1: radios gorgeous. Bill continue, Well, let's talk about it then.
Speaker 1: Since real wages have flatlined, it's almost like this patient
Speaker 1: is dead and real output has basically doubled. And so
Speaker 1: where has that productivity gone to. Certainly hasn't gone to wages.
Speaker 1: It's going to corporations. And it's good for stocks, I
Speaker 1: suppose in terms of earnings. But if the Fed's goal
Speaker 1: basically is to get wages up and to get the
Speaker 1: inflation rate at two and war, I don't think they're
Speaker 1: really doing much of a job. Bill. I want to
Speaker 1: talk about how you positioned. You've talked about this short
Speaker 1: that you've got in high yield over the last couple
Speaker 1: of months with us Blomberg Radio and Don Blomberg TV.
Speaker 1: It's a shot that seems to be struggling to pay off.
Speaker 1: We've had risk appetite take a real hit over the
Speaker 1: last couple of months, but all the volatility or the
Speaker 1: downside seems to be in equities and high yield seems
Speaker 1: to be whether relative out performances in risk assets. Can
Speaker 1: you explain why you think that is, Bill, Yeah, hi
Speaker 1: yield is doing okay. Um, you know, hi yield tends
Speaker 1: to in terms of volatility, say the VIX is twenty um.
Speaker 1: High yield tends to have a VIX related volatility of
Speaker 1: about five, you know, about a quarter of what the
Speaker 1: stock market does. And uh, you know, it's a slower
Speaker 1: moving type of type of average. And the investors wait
Speaker 1: on how yield to see, you know, the expected number
Speaker 1: of defaults going forward, and so far they've been relative benign. Jonathan.
Speaker 1: So I think that's the main point. What I do say,
Speaker 1: in addition to that, and the things that are making
Speaker 1: the short work out over the past month or so,
Speaker 1: is that, you know, the global trade situation and the
Speaker 1: potential you know, economic problems. Uh that higher interest rates
Speaker 1: you know, place on low low quality corporate credits, you know,
Speaker 1: eventually forces those spreads a little wider. And that's basically
Speaker 1: what the beds about. I guess what I'm trying to watch, Bill,
Speaker 1: is there is there a more optimal way of expressing
Speaker 1: this sort of hit against risk appetite from credit insight
Speaker 1: equities where the volatility seems to be contained and isolated
Speaker 1: right now, well volatilely maybe contained. I guess, um, it's
Speaker 1: hard for me to make that description, but I think
Speaker 1: what I'm doing in high yield it's a little sophisticated,
Speaker 1: but basically I'm selling calls and selling puts on the
Speaker 1: h y c d X, which is the you know,
Speaker 1: the benchmark for the high yield market. And to the
Speaker 1: extent that it doesn't move by more than fifty basis
Speaker 1: points one way or the other over a month speriod
Speaker 1: of time, then you're captured a premium. So I'm expecting
Speaker 1: how yield to gradually move higher, but if it doesn't
Speaker 1: significantly move lower than the bed pays off Bill Gross
Speaker 1: with us of Janice Henderson and Bloomberg Television and Bloomberg Radio.
Speaker 1: This Morning, Bill, I do want to turn to the
Speaker 1: politics and folded into your decades of work in financial
Speaker 1: theory and economic theory, I'm going to cut to the
Speaker 1: chase that you're, my guests, a critic of what the
Speaker 1: presidents saying and maybe even doing. What does the president
Speaker 1: most get wrong? Well, he gets the trade deficit wrong.
Speaker 1: I mean the trade deficit is most economists would affirm,
Speaker 1: you know, as a result of over consumption and under
Speaker 1: saving on the part of the United States. Are our
Speaker 1: savings ratio is down to two percent, which is historically low.
Speaker 1: The trade deficit at three plus of g d P
Speaker 1: is um you know, basically relatively high. And to the
Speaker 1: extent that we like to buy things and not save,
Speaker 1: then we're gonna have a trade deficit because we buy
Speaker 1: things here in the United States and then when we
Speaker 1: can't buy enough, we buy it overseas. And so Trump
Speaker 1: basically has it wrong. It doesn't mean that we're not
Speaker 1: being gamed by some countries in terms of uh, you know,
Speaker 1: tariffs are in terms of technology or or cheaper goods
Speaker 1: and services. But it does mean that there's a little
Speaker 1: way to change this situation by imposing tariffs on four
Speaker 1: in good conservice. So then what do you need from
Speaker 1: Larry Cudlo. Mr Cudlo is going to join John Farrell
Speaker 1: here in about I'm guessing forty five minutes, maybe it's
Speaker 1: thirty five minutes. I'm serious, Bill, What does Lawrence Cudlow
Speaker 1: and other free traders, even Secretary Ross, what do they
Speaker 1: need to do to stop the discourse that has a
Speaker 1: political tinge. I understand that we all understand the president's
Speaker 1: angle on that, but it's effect on China. What does
Speaker 1: Cudlow need to do to jump start that process this weekend? Well,
Speaker 1: he needs to calm the verbal tweeting down, so to speak.
Speaker 1: He needs to basically acknowledge that Trump is a negotiator
Speaker 1: and that part of the process of negotiation is to
Speaker 1: go to extremes like you did last night with a
Speaker 1: hundred billion dollars more. You know, the question that the
Speaker 1: markets have to ascertain us whether or not you know,
Speaker 1: there's a semblance of truth to that and they're not.
Speaker 1: There might be a hundred billion behind that, and so
Speaker 1: you know, I think in the equity markets that there
Speaker 1: are risk premiums, as you know, and that you know,
Speaker 1: this continued type of verbalization and tweeting on the part
Speaker 1: of of trade and not only tweeting but real terrorists
Speaker 1: being imposed basically raises the equity premium by a half
Speaker 1: a percent or so relative to what it is, say
Speaker 1: it's a four to five percent premium. It raises it
Speaker 1: by a half of percent. What does that do to prices?
Speaker 1: It lowers it by about three or four percent in
Speaker 1: terms of the stock market bill gross of Jennas Henderson. Uh,
Speaker 1: this morning, futures at negative twenty down, futures negative two
Speaker 1: zero eight. Really the major impact off this jobs report
Speaker 1: with a MOULDI report in a lousy revision, but other
Speaker 1: than that, a pretty buoyant report, as we heard from
Speaker 1: Jim Glassman and Bill Grows. Yeah, I'm pleased to say.
Speaker 1: We're now joined on Bloomberg Television and on Bloomberg Radio
Speaker 1: by Larry Cudlow, the National Economic Council Director, who joins
Speaker 1: us from outside the White House. Larry, it's great to
Speaker 1: catch up with you and get your thoughts on the
Speaker 1: payrolls figure, the labor market, and what has been happening
Speaker 1: with the trade discussion. The back and forth continues over
Speaker 1: trade and the tensions continue to escalate as well. Larry,
Speaker 1: there is a risk that the damage could be done
Speaker 1: and undermine what this administration is done around things like
Speaker 1: the tax bill, around the deregulation push. Do you see
Speaker 1: the trade effort undermining those things? Larry, I sure don't.
Speaker 1: I absolutely do not. In fact, I think, Uh, to
Speaker 1: rephrase this narrative, China is the problem. Okay, China is
Speaker 1: the problem. President Trump is the solution. In my judgment,
Speaker 1: This is the first president twenty years to have the
Speaker 1: backbone to go in and challenge China on the kind
Speaker 1: of unfair and illegal trading practices that they have adopted
Speaker 1: for the past several decades. I just want to make
Speaker 1: that point, and second directly to your question about growth. Look,
Speaker 1: China is stealing our technology, all right, their intellectual property
Speaker 1: rights for being stone these forced technology transfers. I was
Speaker 1: on the phone last evening with my friend and trade
Speaker 1: ambassador Bob Lyheiser, have known for years in great person,
Speaker 1: and we kind of walked through you know, what is
Speaker 1: the heart of the American economy. It's entrepreneurship, it's innovation,
Speaker 1: and it's based on technology. I think this is a
Speaker 1: very important point, and I want to transmit his his
Speaker 1: views on this because they're terribly important and they're on target.
Speaker 1: We cannot allow our technology breakthroughs, which is what's made
Speaker 1: America competitive and great, and with lower taxes and regulations,
Speaker 1: it's going to be even better. But we cannot give
Speaker 1: them away to be stolen by the Chinese government anymore.
Speaker 1: It doesn't work. Larry, just to jump in the narrative
Speaker 1: of this last weeks important let me let me finish,
Speaker 1: because the narrative of this program has always been that
Speaker 1: China is a problem. China is a problem. The debate
Speaker 1: I want to have with you, the discussion I want
Speaker 1: to have with you, and what our audience needs is
Speaker 1: details on the approach and when you're gonna get results.
Speaker 1: So if we can spend less time talking about the
Speaker 1: problem that I want to talk about the approach. Are
Speaker 1: you actually having discussions with the Chinese? You're either gonna
Speaker 1: let me talk or you're not my friend. You're either
Speaker 1: gonna let me talk or that okay, you wanted me
Speaker 1: to come on, I'm happy to do it. Well, Larry Talks.
Speaker 1: I want you to give me the idea of what
Speaker 1: is happening behind the scenes. Are you having discussions with
Speaker 1: the Chinese? They're always ongoing discussions with the Chinese always.
Speaker 1: And President Trump, I traveled with him all day yesterday.
Speaker 1: President Trump indicated to me for the mpteen time that
Speaker 1: he has great respect for President She and she has
Speaker 1: respect for President Trump, and President Trump regards she as
Speaker 1: somebody who would be a very talented negotiator if and
Speaker 1: when negotiations begin. They have not really begun yet China's
Speaker 1: response to our complaints. Their response has been unsatisfactory, all right,
Speaker 1: and that's why we're looking. I used the word looking.
Speaker 1: We haven't proposed anything. They're considering a second round of
Speaker 1: tariff actions, but it has not come to pass. There
Speaker 1: is no execution of this. It's just consideration. It's really
Speaker 1: up to the U. S TR below the President, and
Speaker 1: so therefore the conversations go on as they always do.
Speaker 1: The President speaks to she, the second and third level
Speaker 1: speak to each other. Perhaps perhaps there will be some
Speaker 1: fruitful negotiations so far, but I would say they've been unsatisfactory.
Speaker 1: So we to see. So Larry, help me understand when
Speaker 1: the negotiations will actually begin, because people are trying to
Speaker 1: find out all the time. Aarris no timetable. There's no
Speaker 1: timetable whatsoever. So you can tell me what the sixty days, Larry, Right,
Speaker 1: that's the thing I really encourage everybody to read carefully.
Speaker 1: Uh the President's announcement yesterday, the White House press release
Speaker 1: and also Ambassador Lighthouses press release. We are considering adding
Speaker 1: tariff pressures considering I don't even want to call that
Speaker 1: a negotiating point. There may be negotiations in the next
Speaker 1: couple of months. I hope so. I think everybody hopes so,
Speaker 1: because I guess to your point in the beginning, UM,
Speaker 1: I don't want to disrupt the economy. President doesn't want
Speaker 1: to disrupt economy. We need not disrupt the economy. But
Speaker 1: the point here is we're gonna have several months open discussion.
Speaker 1: People will submit comments, the public will submit comments, They
Speaker 1: will be reviewed by the U. S TR and elsewhere.
Speaker 1: And at that point, I don't want to put a
Speaker 1: deadline on and I'll use the phrase couple of months.
Speaker 1: We will then the administration will then make a decision
Speaker 1: with respect to whether these UH proposed terrofs um will
Speaker 1: be put into place. There can be look, there can
Speaker 1: and will be conversations during this whole period. I'm just
Speaker 1: gonna say several months. I can't discussions. There will be
Speaker 1: discussions along the way. And to be honest with you,
Speaker 1: I want to use the phrase Ambassador Life has used
Speaker 1: with me last night. This is a moderate tempered approach
Speaker 1: that we are taking. It is moderate, temperate, and proportional.
Speaker 1: This is not a trade war. There's no war here.
Speaker 1: All we're trying to do is save and defend American technology,
Speaker 1: which is crucial to American economic growth and by the way,
Speaker 1: global economic growth. This whole program out, whether it's tax
Speaker 1: rate reduction or rollback of regulatory costs, or rollback of
Speaker 1: energy problems UH and now trade, this is all designed
Speaker 1: to promote faster economic growth in the United States. And
Speaker 1: I believe we will. I believe time pushed for time,
Speaker 1: and your pio shout at you, and my producer will
Speaker 1: shout at you. And I want to fit a few
Speaker 1: more questions in. I want to understand what the Chinese
Speaker 1: can do to satisfy the concerns of the President in
Speaker 1: this administration over the next several months. What can they
Speaker 1: do tomorrow that can make all of this go away? Well, look,
Speaker 1: I think there'll be a discussion. I want to tread
Speaker 1: lightly here because I don't want to get ahead of
Speaker 1: the game. I think Ambassador Leightheiser and the President are
Speaker 1: thinking about submitting a list of suggestions to the Chinese,
Speaker 1: and I underscore I think, but that is a possibility, Okay, possibility.
Speaker 1: If so, then hopefully the Chinese would respond with some
Speaker 1: ideas that will solve this technology transfer and stealing. What
Speaker 1: would you put on the list. Well, look, my friend,
Speaker 1: there's no secret here. Uh. They've got enormous trade and
Speaker 1: tariff barriers, all right, they have technology uh force technology transfers.
Speaker 1: They got to stop their um stealing of the intellectual
Speaker 1: property that we try to use in any company around
Speaker 1: the world. Those are good places to start. Um. China
Speaker 1: has probably gonna work with this. Look. They have to
Speaker 1: open their markets. Is that a surprise? Their markets are
Speaker 1: relatively closed. Remember, even though twenty years ago they made
Speaker 1: good movement in free markets. I give them credit for
Speaker 1: that absolutely. Nonetheless, in recent years they have moved backwards.
Speaker 1: Half the economy remains state run. The state run corporations
Speaker 1: and the state run banks are operating. Half the economy
Speaker 1: is incredibly inefficient. And they want to stock American exports.
Speaker 1: They have to lower those barriers. They have to open markets.
Speaker 1: They have to look at opening investment opportunities, and they
Speaker 1: have to look at the technology transfers and stealing. And
Speaker 1: in the meantime, markets looking really soft here again, And
Speaker 1: I just wanted just to finish up which market, which
Speaker 1: the equity market. We're down about six tenths of one percent,
Speaker 1: We're off by about seven tenths of one percent. On
Speaker 1: the down, we're raising the weekly gain. I guess my
Speaker 1: final question to you is I understand the problem tremendous
Speaker 1: program and everyone understands around it. Don't correcting, Larry. I'm
Speaker 1: saying the fact of what's on the screen in the moment.
Speaker 1: I can tell you what the year to date prices.
Speaker 1: I can tell you the one year price. Have a
Speaker 1: final ask you this one final question, the question do
Speaker 1: you answer them? Larry? Always struggling to identify the difference
Speaker 1: and policy? And does the White House a communication problem?
Speaker 1: Does the White Does the White House have a communication here?
Speaker 1: You're talking over me so much. I can asked the
Speaker 1: question and you answer it. Does the White House have
Speaker 1: a communication problem? Because so many people don't understand the
Speaker 1: difference between retric policy and proposals. Do you have a
Speaker 1: communication problem, because it appears to me that you do. Well. Look,
Speaker 1: if you read the press releases, it spells out in
Speaker 1: great detail what we're doing here. So I don't know
Speaker 1: how better to communicate. I'm on your show, so when
Speaker 1: you let me talk, I'm trying to communicate exactly what
Speaker 1: this is. We have not by the way, I just
Speaker 1: go through this one more time. We have not executed
Speaker 1: implemented any new tariffs. We haven't even declared our absolute
Speaker 1: hundred percent intention. If you read the press release, the
Speaker 1: President has asked the str Bastard Lightheiser to consider whether
Speaker 1: or not additional tariff discussions or actions will be necessary
Speaker 1: in the future. Nothing has been done so far. As
Speaker 1: I said earlier, these things uh will be put out
Speaker 1: for public comment. Those comments will be received and evaluated.
Speaker 1: SCR will come back to the President with its own report.
Speaker 1: You know, just on at one point str Lightheiser, they
Speaker 1: did a hundred eighty page report over the past year
Speaker 1: which shows not only the centrality of technology as central
Speaker 1: to our economy, but why China and their actions which
Speaker 1: break all the laws of the World Trade Organization, why
Speaker 1: they are taking away our technology which is our most
Speaker 1: valuable asset. Right so we can't stand by on this.
Speaker 1: So to answer your question, it's very clear to me
Speaker 1: we are looking evaluating, putting out for public comment the
Speaker 1: worth or utility of additional tariff actions to make our
Speaker 1: point that China's illegal activity in trade and elsewhere can
Speaker 1: no longer be tolerated. Blame China for not playing ball,
Speaker 1: don't blame the president. He standing up for American companies
Speaker 1: in business. That's my take. I don't see how I
Speaker 1: can communicate that more clearly. Hi, Larry, you're a good
Speaker 1: sport and I appreciate your time and thanks for coming
Speaker 1: on the program. I'm giving us your time and hopefully, Larry,
Speaker 1: you'll be back in front of the camera with me
Speaker 1: next month. Larry Cardlo, National Economic Council Director, we appreciate
Speaker 1: his time with us. Michael Darda chief economist m cam Holdings.
Speaker 1: What was not discussed in that conversation, Michael, and you,
Speaker 1: of course have a this is part of your fabric
Speaker 1: with your academics out of Wisconsin, is the discussion of
Speaker 1: this not between the aggregate of the United States the
Speaker 1: aggregate of China, but the distinction between West Virginia and Iowa.
Speaker 1: Could any pre is it in have a trade policy
Speaker 1: that satisfies West Virginia and at the same time Iowa
Speaker 1: follow the hippocratic oath here, which is, first, do no harm.
Speaker 1: You know, we've seen the market reaction to some of
Speaker 1: the verbal bluster coming out of the administration. It's been negative,
Speaker 1: and it's negative for a reason. I mean, if this
Speaker 1: is simply over, you know, if this if this is
Speaker 1: due to a concern about intellectual property. That's very legitimate.
Speaker 1: But you know, what is the proper channel here? Is
Speaker 1: that a legal channel? Is it the w t O
Speaker 1: or is it is it moving forward aggressively with with
Speaker 1: tariffs trade protectionism? And if it's the latter, unfortunately that
Speaker 1: will be disruptive and it will hurt growth and it
Speaker 1: is hurting confidence. Now whether their proposals that become realities
Speaker 1: or not. Um, you know, markets do discount and that's
Speaker 1: where we are, Michael Darda, what have you could just
Speaker 1: look into the future little bit because many of these
Speaker 1: issues have to do with intellectual property, which go into
Speaker 1: products that have yet to even reach the market. We
Speaker 1: don't we know for example, you know every iteration of
Speaker 1: new smartphones, computers and technology and so on, but the
Speaker 1: actual consumer market for those products is shifting to Asia,
Speaker 1: not the United States. And just in terms of just
Speaker 1: the demographics that exists, you know, India is going to
Speaker 1: overtake China's the most populous country by fifty What if
Speaker 1: you could speak to that issue and whether this is
Speaker 1: kind of fighting you know, last centuries wars, Yeah, Pham,
Speaker 1: I think it is. I mean, look, if it's a.
Speaker 1: If it's a matter of intellectual property theft. I mean,
Speaker 1: if that's a that's a legitimate concern. The question is
Speaker 1: what is the proper channel through which to deal with that,
Speaker 1: the w t O, the Justice Department, or if this
Speaker 1: is simply a concern about trade deficits. You know, when
Speaker 1: I listened to President Trump speak, you guys have had
Speaker 1: Peter Navarro on your show, Commerce Secretary Wilbert Ross. You know,
Speaker 1: they seem to be focused on the trade deficit is
Speaker 1: an issue, you know, rather than what we were just
Speaker 1: hearing about intellectual property concerns. And the trade deficit is
Speaker 1: just the reciprocal of a capital inflow coming into the country.
Speaker 1: And if we're moving into larger late cycle deficits and
Speaker 1: as a result investment is higher, you know, than the
Speaker 1: sum of private and public savings, we're going to have
Speaker 1: a bigger trade deficit. The fear I have is that
Speaker 1: if the administration is fighting an accounting identity here with
Speaker 1: protectionist trade efforts, then we end up in sort of
Speaker 1: a smooth holly loop to loop where the trade deficit
Speaker 1: figures the worse the trade the protection is rhetoric is
Speaker 1: ratcheted up. You know, we saw the trade trade deficit
Speaker 1: figures for February. They came in worse than expected. And
Speaker 1: then you know last night, you know we had uh
Speaker 1: news of greater tear of considerations. I don't know if
Speaker 1: they're left, but that kind of the thing scares well.
Speaker 1: The news to meet Pim Fox at Michael Darda is
Speaker 1: Mr Cuddlo and Mr will move the market. I rarely
Speaker 1: say this, folks, but we got a nice hundred point
Speaker 1: lift in the market. And when you see the Bloomberg
Speaker 1: headlines that go out to everybody in finance and economics,
Speaker 1: Pim Fox, Cudlos says there are always discussions with China.
Speaker 1: Cudlos as second round of tariffs just a consideration. Cuddler
Speaker 1: hopes for negotiations with China in the next months, and
Speaker 1: you see SMP and down pair gains. Yeah, but I
Speaker 1: would also I also mentioned that you're seeing a little
Speaker 1: bit more buying of treasuries right up thirteen thirty seconds
Speaker 1: for the thirty years three point five and the dollar
Speaker 1: at one oh seven kerve flattening. Yes, indeed, all right,
Speaker 1: So so Michael Darda, this idea of a trade wars,
Speaker 1: trade confrontation, it doesn't just exist when it comes to China,
Speaker 1: but also Mexico and Canada. Do you have any thoughts
Speaker 1: on how that is going to be resolved, how that
Speaker 1: will work out, and whether that will have a much
Speaker 1: larger effect on US investors? Well, I think, you know,
Speaker 1: most investors probably hope that the bark is worse than
Speaker 1: the bike here. You know, we've heard a lot of bluster.
Speaker 1: Will have to see what the actual policy follow through is.
Speaker 1: But you know, we've heard a lot about tax reform
Speaker 1: in regulatory relief. Investors have been focused on those things.
Speaker 1: Is potentially boosting growth, but we should be thinking about
Speaker 1: more restrictive trade policies and more restrictive immigration policies. Is
Speaker 1: things that retard growth from the supply side, offsetting you know,
Speaker 1: any potential supply side lift coming from tax reformer, regulatory relief.
Speaker 1: So to me, when I look at you know, the
Speaker 1: whole suite of policies here, it's a real mixed bag
Speaker 1: at best. Looking at Mexico, for example, a big importer
Speaker 1: of US energy products. Absolutely listen, the less disruptive we
Speaker 1: can be, the better outcome that you know that will
Speaker 1: be for the for the business cycle and the equity markets.
Speaker 1: I think we have to be very careful here, and
Speaker 1: I'll just reiterate again, if the concern is over the
Speaker 1: a deficit, that is an accounting identity. If you want
Speaker 1: the trade deficit to fall, the US is going to
Speaker 1: have to save more relative to what it invests. You
Speaker 1: are not going to remedy that with tariff walls. And
Speaker 1: we're at a point now where US consumers are actually
Speaker 1: saving less than they did let's say three months ago,
Speaker 1: well in the sum of public and private savings. That's
Speaker 1: really the issue. So so right with the latest GDP statistics,
Speaker 1: we actually saw the household savings rate moving down pretty significantly.
Speaker 1: Fiscal deficits are headed up nine years into a business
Speaker 1: cycle because we just did a big tax cut and
Speaker 1: raised government spending over the next two years at the
Speaker 1: same time. So you know, look, I'm in favor of
Speaker 1: supply side policies as much as anyone else, but we
Speaker 1: do need to be concerned about responsible fiscal actions as well,
Speaker 1: and doing a tax reform reform really means revenue neutrality,
Speaker 1: at least in my book, and we've utterly failed on
Speaker 1: that score. Mike. One final question, and it goes back
Speaker 1: to what Pitton was talking about. Earlier about the markets.
Speaker 1: What does Michael Darted do with cash right now? Is
Speaker 1: cash avail you to you? Or do you need to
Speaker 1: be in the market? Well, Tom, I mean, I you know,
Speaker 1: I think that is going to have to do a
Speaker 1: lot with a person's age, with their risk tolerances. You know, Um,
Speaker 1: he's just trying to get the April fift. I'm just
Speaker 1: trying to clear my bitcoin trade. I am so underwater.
Speaker 1: I think it always makes sense to you know, to
Speaker 1: to have some cash on hand. Now, it's going to
Speaker 1: depend on on someone's age. You mean, if you're in
Speaker 1: your if you're in your early twenties and you're just
Speaker 1: starting your career and you're mainly investing through your four
Speaker 1: oh one K, then yeah, you don't want to be
Speaker 1: sitting on hoards and words of cash. But especially for
Speaker 1: anyone that's closer to middle age or even moving out
Speaker 1: of middle age. I won't mention any names. Um, you know,
Speaker 1: having that cash, keep it at work, good work. Yeah,
Speaker 1: having that cash cook can come in very handy, right,
Speaker 1: So you know, if you if we do have a
Speaker 1: significant market pullback, let's say there's a recession in a
Speaker 1: bear market out there sometime in the next three to
Speaker 1: five years. You want the ability to be able to
Speaker 1: add to equity positions if we do end up down
Speaker 1: more an equity market, so they can come in quite handy. Well,
Speaker 1: I'll tell you, Michael Data, I am so ready to
Speaker 1: buy into the Long Tuition Fund, which is a good
Speaker 1: place to go. Michael Data, MKM partners with us with
Speaker 1: a terrific perspective, particularly him right at the top, A Data,
Speaker 1: acclaimed for his animal spirits and nominal GDP analysis, talking
Speaker 1: about a dampany of nominal GDP. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio.