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Speaker 2: Joining us now.
Speaker 3: Michael Darta, Always on the Vineyard, forever looking north to Fenway.
Speaker 3: Michael Darta, Chief Economists, Rough Capital Partners. Michael from a
Speaker 3: GDP standpoint, does a shutdown?
Speaker 2: Is it Germaine?
Speaker 4: It really depends how long this goes on, Tom. You know,
Speaker 4: hopefully calmer and cooler heads can prevail in Washington, so
Speaker 4: we don't end up, you know, weeks and potentially months
Speaker 4: on end, because the longer this goes on, the more
Speaker 4: disruptive it will be to the economy into the macro data,
Speaker 4: which we now don't have. Right, we're kind of flying
Speaker 4: blind into the end of the week here, and we're
Speaker 4: missing some pretty important necro reports.
Speaker 2: So what do you do?
Speaker 3: You know, then, start is so good at this folks
Speaker 3: linking economics into investment. If you're blind, Michael, what do
Speaker 3: you do with a trading strategy?
Speaker 4: Well, luckily we still do have some private sector reports
Speaker 4: that are coming out. So we got some data from
Speaker 4: ADP yesterday which was not very good. I've got some
Speaker 4: data from the Institute of Supply Management, and so abstracting
Speaker 4: from that, you know, we can still construct running forecast
Speaker 4: estimates for how the economy's doing. And interestingly enough, I mean,
Speaker 4: the Atlantic beed tracking data for the third quarter is
Speaker 4: really still holding in there at pretty robust levels. For
Speaker 4: real final sales to the private sector sector still running
Speaker 4: pretty close to three percent for Q three. It would
Speaker 4: be completely shocking if we were actually in an environment
Speaker 4: of negative job growth with the real economy humming along
Speaker 4: at three percent. So I would take all of this
Speaker 4: and take a bit of a step back, and you know,
Speaker 4: I think these jobs numbers are probably weak more in
Speaker 4: a temporary way, unless the economy just goes off a
Speaker 4: cliff in the fourth quarter.
Speaker 5: You know, Michael, you mentioned you referenced the ADP data yesterday.
Speaker 5: I know people take that with a grain of salt,
Speaker 5: but boy, that was kind of startling there. A negative
Speaker 5: number there for the month and a negative revision for
Speaker 5: the prior month. What'd you take away from that?
Speaker 4: Yeah, definitely was not good data. You know, at a
Speaker 4: time when private payroll growth has slowed very sharply, with
Speaker 4: quite significant downward revisions over the course of the last
Speaker 4: year through March. I think there's a you know, there's
Speaker 4: a bigger focus on these weak data points. And within
Speaker 4: ADP we saw three down months, three negative job growth
Speaker 4: months out of the last four, so that's not a positive.
Speaker 4: And there was also some weakness that showed up in
Speaker 4: the conference board data. You ask people about jobs being
Speaker 4: hard to get or plentiful, that tends to correlate with
Speaker 4: the unemployment rate pretty well. So that deteriorated again in
Speaker 4: the most recent reading. So it does look like there
Speaker 4: is some lingering softness in the labor market. The question
Speaker 4: is is that going to intensify or is it more
Speaker 4: temporary and likely to rebound. And Tom, I think that's
Speaker 4: where you bring in the financial markets, which are quite optimistic.
Speaker 4: And you know, you hear that old refrain all the
Speaker 4: time that you know, the economy is not the stock market. Well,
Speaker 4: actually the economy is the stock market. If you take
Speaker 4: a look at the data. Equity markets are not perfect predictors,
Speaker 4: but they do need growth rate of real and nominal
Speaker 4: GDP by about one quarter, and so you know easy
Speaker 4: financial conditions, the Fed continuing to eat He's monetary policy.
Speaker 4: I think you want to be a little bit more
Speaker 4: optimistic than pessimistic in terms of where the labor market
Speaker 4: is as we move into next year.
Speaker 3: Acrastination. This morning, Michael Darty with this rough capital thrilled
Speaker 3: he could.
Speaker 2: Be with us on YouTube.
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Speaker 3: Paul's in my future. Thank you so much for your
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Speaker 3: just growing every day. Thank you so much for a
Speaker 3: record September for us.
Speaker 2: Michael.
Speaker 3: I look at that then, and I look at the
Speaker 3: fold over the green spanning. An idea that the equity
Speaker 3: market really matters is the equity market is an expectation vehicle.
Speaker 2: How far out is expecting right now?
Speaker 6: Yeah?
Speaker 4: I mean the equity market. Look, Tom, you know it's volatile.
Speaker 4: Equity investors are not always correct, and with any market
Speaker 4: you can have a sudden, abrupt and unexpected turn of course. Right,
Speaker 4: all of that said, investors are looking ahead. And if
Speaker 4: you look at how the correlations tend to run from
Speaker 4: markets into data, markets lead data lags and on average,
Speaker 4: you know, the equity market leads by about three months.
Speaker 4: If you bring the credit markets into the mix and
Speaker 4: you look at overall financial conditions, you know, the lead
Speaker 4: is maybe six or seven months at best. So you know,
Speaker 4: we're not able to forecast really long horizon situations here
Speaker 4: you're using these market based indicators, but at least over
Speaker 4: the next one or two quarters, you know, I think,
Speaker 4: especially now with the shutdown, these financial variables are pretty.
Speaker 6: Important, Michael.
Speaker 5: Looking at the consumer, the retail sales, other metrics like that,
Speaker 5: the consumer seems to be more than hanging in there,
Speaker 5: actually doing quite well.
Speaker 2: Does that surprise you at all?
Speaker 6: Yes?
Speaker 2: And no.
Speaker 4: I mean, you know, we're talking about the equity market,
Speaker 4: and you know the fact that household net worth has
Speaker 4: risen pretty dramatically. Now the worry is that, oh, that's
Speaker 4: concentrated on the higher end, but the higher end is
Speaker 4: driving a very large and growing share of total consumption.
Speaker 4: And even with these weak jobs numbers, the unemployment rate
Speaker 4: is only pushed up a little bit, you know, it
Speaker 4: hasn't pushed up in a dramatic fashion, and so you
Speaker 4: have still essentially a fully employed economy, very high asset prices,
Speaker 4: so household balance sheets are in quite good shape, and
Speaker 4: that's underpinning the you know, the consumer and you know,
Speaker 4: the tracking estimates for Q three around three percent, So
Speaker 4: that does not look like a recession.
Speaker 3: I look, Michael, at where we are, and it comes
Speaker 3: back to something quaint. It's really falling. It's fallen off
Speaker 3: the radar use of cash. Okay, I got nominal GDP.
Speaker 3: They're going to deliver better than good revenue growth once again. Oh,
Speaker 3: earnings are going to be terrible. Yeah, okay, Michael, earnings
Speaker 3: will be okay. Let's say and margins. Do you see
Speaker 3: a use of cash that just continues to drive this
Speaker 3: bullmarket forward.
Speaker 4: Well, that's really the key, Tom. If top line growth
Speaker 4: is you know, looks Q three looks like it's about
Speaker 4: six percent. But even if we take that down by
Speaker 4: a percentage point and top line is compounding at five
Speaker 4: and companies are profitable, you know, and corporate profits have
Speaker 4: been strong, that is not going to sustain itself for
Speaker 4: any period unless you're getting positive hiring at the same time.
Speaker 4: So companies will do different things. They can buy backstock,
Speaker 4: they can invest. You know, we might see some lift
Speaker 4: in capex, but they'll be hiring as well. So you know,
Speaker 4: if you have top line growth, and you have corporate profits,
Speaker 4: you're going to have employment as well.
Speaker 3: So this is something I think people have trouble with, Michael.
Speaker 3: And let's not get into like nominal GDP, animal spirits.
Speaker 3: Let's just say, is inflation good for Procter in gamble?
Speaker 3: Is inflation good for you know, name another you know,
Speaker 3: Church and Dwight, I mean, you know arm and Hammer
Speaker 3: and all that. Is inflation good for basic companies?
Speaker 4: Well? Tom, you know it's a good question. I mean,
Speaker 4: you do want some corporate pricing power, but the flip
Speaker 4: side of that is costs. Right, So if you do
Speaker 4: end up in an environment where inflation is high and volatile,
Speaker 4: and then you have the central bank that has to
Speaker 4: iron that out and restrain the economy, that's not good
Speaker 4: for anyone.
Speaker 2: Okay, then carry it forward, Mike.
Speaker 3: I don't mean to interrupt, but this is this is
Speaker 3: darta is central Carry it forward. If I go from
Speaker 3: a FED moodeling two percent out to two point x percent,
Speaker 3: what does it do to those companies? Do they see
Speaker 3: wage lift?
Speaker 2: Yeah?
Speaker 4: And I think you are, you know you are seeing that.
Speaker 4: You know, nominal wages and real wages are growing. So
Speaker 4: that's consistent with the real economy expanding. Inflation is still
Speaker 4: above the fedce target. But I think, you know, an
Speaker 4: in an environment where inflation is trending at around three
Speaker 4: you know, that can still be a very strong environment
Speaker 4: for corporate profits if the economy is you know, staying
Speaker 4: out of recession, and that's you know, I think that
Speaker 4: is likely with the FED easing monetary policy. They've already
Speaker 4: taken rates down one hundred and twenty five basis points
Speaker 4: and with inflation expectations moving up forty to sixty basis
Speaker 4: points over that period, real rates have fallen about two
Speaker 4: hundred basis points. So the FED is definitely removed quite
Speaker 4: a bit of restraint from its policy, so the top
Speaker 4: line should hang there. I do think, you know, I
Speaker 4: do worry about the FED getting back to two percent
Speaker 4: inflation on a reasonable timeline. If we're still stuck at
Speaker 4: three percent inflation over the course of the next two years,
Speaker 4: and that's part of the Fed's forecasts, boy, that's a
Speaker 4: long overshoot seven years, So I worry a little bit
Speaker 4: that that bleeds into credibility. You know, the administration really
Speaker 4: wants FED to ease because they want lower market interest rates,
Speaker 4: but you know, you're not going to get lower market
Speaker 4: interest rates of inflation expectations continue moving off, so the
Speaker 4: FED needs to stay credible here. I think, you know,
Speaker 4: four to five percent nominal, that's the sweet spot You'll
Speaker 4: have corporate pricing power, Inflation won't be too high long
Speaker 4: rates will be at reasonable levels.
Speaker 6: There you go.
Speaker 2: Bottle that, folks.
Speaker 3: Michael Darter, thanks so much, rough Capital.
Speaker 2: Stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
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Speaker 3: Our next guest on short Notes, we are honored to
Speaker 3: have with us Ian Bremmer. Of course, he has changed
Speaker 3: the discussion of international relations at worldwide. We're going to
Speaker 3: have an extended conversation here for all of you across
Speaker 3: the nation. Good morning internationally on the Pacific rim on YouTube,
Speaker 3: and your evening is well. Ian, Let's talk about the
Speaker 3: international relations of a fractured America. What is the state
Speaker 3: of our State Department right now?
Speaker 7: Well, the State Department, I mean, you know, at least
Speaker 7: you have someone who's quite capable that's actually running it.
Speaker 7: Having said that, USAID has been eviscerated, as you know,
Speaker 7: and the biggest concern among the professional diplomats I know,
Speaker 7: both in office now and also those that have left,
Speaker 7: is that countries around the world no longer believe the
Speaker 7: United States is reliable as an ally, that America's ward
Speaker 7: is no longer something that you want to count on.
Speaker 7: The US is incredibly powerful. It's not in decline, but
Speaker 7: that what the US will do for you is not
Speaker 7: necessarily what it will say. And that's true on trade,
Speaker 7: it's true on collective security. It's true on the treatment
Speaker 7: of your citizens living in the United States or traveling
Speaker 7: to the United States.
Speaker 6: These things can.
Speaker 7: Change on a dime on the whims of the President
Speaker 7: and his top advisors, and that worries these country is
Speaker 7: a great deal.
Speaker 5: That level of disengagement Ian, do you think that is
Speaker 5: reflective of this Republican Party?
Speaker 6: When you say disengagement, I'm sorry, what do you mean
Speaker 6: by that?
Speaker 5: No, just in the America first, a type of feeling
Speaker 5: within the Trump administration.
Speaker 7: I think the Republican Party is completely loyal to Trump,
Speaker 7: and it doesn't really matter if a lot of them
Speaker 7: feel differently about his doing a deal with China on
Speaker 7: the Age twenty chips or coming to terms on TikTok.
Speaker 7: It doesn't really matter if he says Ukraine's not that
Speaker 7: important because it's an ocean away. Of course, a lot
Speaker 7: of Republicans historically disagree with that, They disagree with Trump
Speaker 7: opposing free trade, but the population has changed. So first
Speaker 7: of all, there are a lot of people that really
Speaker 7: oppose a lot of neocons in the Republican Party that
Speaker 7: led to very expensive, very deadly failed wars, and there
Speaker 7: are a lot of traditional free trade Republicans that no
Speaker 7: longer have the support of the population in pushing for
Speaker 7: globalization and for taking tariffs down.
Speaker 6: We're in a radically.
Speaker 7: Different environment, right We have tariffs at one hundred level,
Speaker 7: historic highs, one hundred year highs, and we also have
Speaker 7: a president that's doing his damndest to reduce American security
Speaker 7: guarantees and commitments to other countries around the world, even
Speaker 7: making big questions about whether the US would stand up
Speaker 7: for Taiwan, for example, long term. So I mean, clearly
Speaker 7: a lot of Republicans quietly uncomfortable with that.
Speaker 3: There's so many ways to go here, Ian Bremer, with
Speaker 3: this for an extended conversation.
Speaker 2: With Eurasia Group. I know what people want to know.
Speaker 2: When's the next book?
Speaker 6: Give me a date sometime next year.
Speaker 3: Sometime next year, Like, that's good enough. Ian, I want
Speaker 3: to talk about Gaza. I want you to triangulate it
Speaker 3: with Qatar, the president's relationship there, maybe with this desire
Speaker 3: to win a peace prize and all that. How should
Speaker 3: our listeners and viewers synthesize the cacophony of Gaza. I'm
Speaker 3: looking at a video in the Washington Post this morning,
Speaker 3: Greta Thunberg and others being the Israelis have taken over
Speaker 3: flotilla whatever, how does the and Bremer translate the horror
Speaker 3: of Gaza us through the American prism?
Speaker 7: The two combatants have very little consequence for.
Speaker 6: Continuing to engage in the fight.
Speaker 7: It's been extremely hard to convince Israel that they should
Speaker 7: limit the warfare on the ground in Gaza or against
Speaker 7: the Axis of Resistance more broadly, because there have been
Speaker 7: no consequences for them doing so, and of course, because
Speaker 7: they're militarily and technologically dominant in the entire region. It's
Speaker 7: been extremely difficult to convince Hamas that they have to
Speaker 7: actually let the hostages go, which was Trump's only applause
Speaker 7: line in his fifty five minute speech at the UN
Speaker 7: Nations General Assembly last week. Because they're terrorists, because there
Speaker 7: are a bunch of dead enders, and because they recognize
Speaker 7: that they face assassination kind of either way. And look,
Speaker 7: it's hard to put yourself in the position of what
Speaker 7: would create rationality among leadership of Hamas. But they're putting
Speaker 7: their own people at risk every day, and they have
Speaker 7: for years now. So in that regard, it's hard to
Speaker 7: maneuver much, though I think that there has been success
Speaker 7: in putting a few small constraints on Israeli behavior. Trump
Speaker 7: had been indifferent to Israeli annexation of the West Bank,
Speaker 7: and he came out last week and said that they
Speaker 7: will not do that on the back of the UAE,
Speaker 7: saying that they would leave the Abraham Accords if the
Speaker 7: Israelis proceeded. Trump had been actively promoting the idea of removing.
Speaker 6: Palestinians from Gaza.
Speaker 7: In fact, he said as much when he was on
Speaker 7: stage with the King of Jordan a few months ago,
Speaker 7: and he's now shifted away from that to a plan
Speaker 7: that has been approved by the golf Arabs and by
Speaker 7: the Israeli Prime Minister that says that the Palestinians aren't
Speaker 7: going to be forced to leave that rather, they're going
Speaker 7: to be able to stay in Gaza. And so, I mean, look,
Speaker 7: it's not stopping the war, and as long as Hamas
Speaker 7: refuses to release the hostages, I don't expect the war
Speaker 7: to end, even though I think it would be much
Speaker 7: better for Israel and everyone else involved.
Speaker 6: If they would stop.
Speaker 7: But I do think that we have a few guardrails,
Speaker 7: however limited today.
Speaker 6: That we didn't have a week ago.
Speaker 5: Ian Let's switch gears to another hot spot, which would
Speaker 5: be Ukraine. Is there any reason to believe that there
Speaker 5: is some type of peace process possible in the near
Speaker 5: intermediate term here?
Speaker 6: I would say it's more likely that the.
Speaker 7: Completely stalled offensive that Russia has had, it's been this grinding,
Speaker 7: virtually no territory being taken, massive casualties, particularly in terms
Speaker 7: of the Russian soldiers, over a million casualties in this
Speaker 7: war for Russia so far in three and a half years.
Speaker 7: It's a staggering number. It's hard to even imagine what
Speaker 7: that means for society, but Putin doesn't care. It's hard
Speaker 7: to imagine that that's going to continue the way it
Speaker 7: has for the next six to twelve months, in part
Speaker 7: because it's going to be very difficult for Ukraine to
Speaker 7: continue to defend their territory and field the soldiers to
Speaker 7: do so over the coming year, but also in part
Speaker 7: because Trump.
Speaker 6: Is angry about this.
Speaker 7: He thought that he was going to leverage his relationship
Speaker 7: with you. However it existed into a ceasefire. He made
Speaker 7: Putin a lot of offers, ending sanctions and the like,
Speaker 7: and Putin said no, thank you, and has embarrassed Trump,
Speaker 7: has angered Trump, and Trump Trump is bringing it up.
Speaker 7: He never brings up his failures. He forgets about them.
Speaker 7: It's one of his political skills, not on Russia. And
Speaker 7: instead he's talking about providing extended range missiles to Ukraine
Speaker 7: that could take out Russian energy capability. And he's privately
Speaker 7: pushing the Hungarians, the Turks, the Indians saying, you know,
Speaker 7: I want you to end your purchasing of Russian oil.
Speaker 7: He wasn't willing to do that a month ago. So
Speaker 7: that there is real movement here from President Trump himself
Speaker 7: to try to not just offer putin a care ineffectually.
Speaker 6: It would also include some stick.
Speaker 2: Doctor Reimer, let's finish up with this.
Speaker 3: We had a riveting conversation with Edwinal Mullen at the
Speaker 3: Bloomberg Global Forum the other day.
Speaker 2: He was just on the South China Sea.
Speaker 3: Extraordinary the submarine secrets there, the Heinan, the island off China.
Speaker 3: I think Americans Ian are ignorant that Taiwan isn't one
Speaker 3: monolithic island. Explain to us the strategic realities for Americans
Speaker 3: of Kinmen and Matsu islands just off the coast of China.
Speaker 3: What are the immediate risks to those frontline islands in Taiwan.
Speaker 7: Well, of course, China's ability if they wanted to engage
Speaker 7: in warfare with less consequence, taking those over or blockading
Speaker 7: those much easier, right and with very little ability for
Speaker 7: the Americans to respond or its Asian allies to respond militarily.
Speaker 6: But nobody really believes near turn that's going.
Speaker 7: To happen, in part because the United States is oriented
Speaker 7: to work with China on Taiwan. Look, Trump and Chizhinping
Speaker 7: had a phone call much anticipated last Friday, and the
Speaker 7: single thing that Trump most wanted, which he got was
Speaker 7: a nod from Xijin Ping on the US taking over
Speaker 7: TikTok with political loyalists installed in charge of it. And
Speaker 7: that's the thing that matters most to Trump. It allows
Speaker 7: him to undermine the free media, control the information space,
Speaker 7: and better ensure that he and his.
Speaker 6: Advisors can control twenty twenty six and twenty twenty eight.
Speaker 7: What the Chinese want is for Trump to back away
Speaker 7: and say that they oppose independence for Taiwan as Bush
Speaker 7: had President Bush had once before, and I think that
Speaker 7: Trump is oriented to provide that. Frankly, so, we're not
Speaker 7: heading towards escalation right now with the Chinese. We're actually
Speaker 7: heading towards both sides getting something that really matters to
Speaker 7: the individual leaders.
Speaker 3: You mentioned. There was one final question. I got a
Speaker 3: ways to go here. Folks with Ian Bremer are always
Speaker 3: the case. You mentioned the collapse of US AID USAID.
Speaker 3: I've got family members abroad that say it's been devastating
Speaker 3: for Africa. Explain right now, at the beginning of this
Speaker 3: fourth quarter the impact of the lack of us AID.
Speaker 7: The United States is the most powerful country in the world.
Speaker 7: It's the strongest economy by far, and the US has
Speaker 7: historically been doing the most in terms of providing aid
Speaker 7: to other countries and to the people in those countries
Speaker 7: that need it, whether they're suffering from malaria, whether they're
Speaker 7: vulnerable to HIV AIDS, whether they're start whether they're facing
Speaker 7: forced migration.
Speaker 6: The US has done that directly.
Speaker 7: It's also led the charge in doing that indirectly through
Speaker 7: American support for the United Nations and the organizations that
Speaker 7: it stands up, like the World Food Program, for example.
Speaker 7: The United States has decided that those things should no
Speaker 7: longer be priorities. That America first means that these other
Speaker 7: countries should have to make their own way, They should
Speaker 7: have to pay for themselves.
Speaker 6: Now, the Chinese see this is a great opportunity.
Speaker 7: In the same way that when the Americans cut back
Speaker 7: on visas, the Chinese immediately say we're going to make
Speaker 7: it easier for talented people to come. They won't be
Speaker 7: as attractive in terms of their aid. But if they
Speaker 7: are the lead power. I mean, they made up their dues,
Speaker 7: many of which were in arrears at the UN the
Speaker 7: Americans aren't paying. The Chinese said, okay, we'll pay some
Speaker 7: of ours now, so that they can put forward that
Speaker 7: they're the ones that are more accountable.
Speaker 6: Look, if you think that only American hard.
Speaker 7: Power matters, and maybe in the short term that's true,
Speaker 7: and you don't care very much about non Americans and
Speaker 7: don't think that they are as deserving or that we
Speaker 7: should take care of any of them, we don't have accountability.
Speaker 6: Then it doesn't matter. But that's never been my view,
Speaker 6: and I think it's a mistake long term.
Speaker 3: And thank you so much, doctor Bremmer, with you raise
Speaker 3: your group, and we thank him for his years of
Speaker 3: support of what we.
Speaker 2: Do at Surveillance. Stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
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Speaker 8: Eleven thirty, nineteen.
Speaker 3: Eighty, all of a sudden, we had federal funding gaps,
Speaker 3: and the Attorney General issued an opinion that the eighteen
Speaker 3: eighty four Anti Deficiency EC required shutdown. Joining us now
Speaker 3: Wendy Schuller, who knows all this from Brown university. So
Speaker 3: we shut down in nineteen eighty one. What's different now
Speaker 3: versus the early eighty one and nineteen eighty four shutdowns, Wendy,
Speaker 3: good morning.
Speaker 9: Well, the biggest thing is the size and scope of
Speaker 9: the federal government. In Ronald Reagan argued that it was
Speaker 9: too big then, and we started the practice under Ronald
Speaker 9: Reagan really of big crs continuing resolutions where you'd wrap
Speaker 9: up all the separate appropriations bills and Reagan would have
Speaker 9: to sign or vito them. He famously shut the government
Speaker 9: down for a little while in eighty six eighty seven,
Speaker 9: also because he got this, you know, two thousand page
Speaker 9: bill and said, what's in this bill? So we've seen
Speaker 9: that before, but the scope of the government was smaller,
Speaker 9: from everything from regulation to benefits or relationships to the
Speaker 9: individual voter in revital person in America. So the profound
Speaker 9: impact of a shutdown is so much larger. And that's
Speaker 9: why we have a partial shutdown. Tom, That's why you know,
Speaker 9: you and Paul know this is partial. The whole government
Speaker 9: isn't shutting down. They've learned to get around that by
Speaker 9: designating essential services. You know, when New gaingers shut the
Speaker 9: government down in nineteen ninety five ninety six, there wasn't
Speaker 9: essential services.
Speaker 8: It was just everybody was furloughed. Now they carve.
Speaker 9: Out things like TSA, for example, a traffic controllers, the
Speaker 9: federal court system. So it's not as big a wide
Speaker 9: shutdown as it was forty years ago.
Speaker 8: But the government is much bigger.
Speaker 3: Quickly, or because Paul's got eight questions smarter than me
Speaker 3: when they is to cut to the chase. The heart
Speaker 3: of the matter is a political movement coming across the
Speaker 3: twentieth century that the federal government is bad.
Speaker 2: Where did that come from?
Speaker 8: Well, I mean, you want me to do this quickly.
Speaker 9: You can go back to antipathy towards the federal government
Speaker 9: all the way to the Civil War to FD are
Speaker 9: the new deals, Southern resistance to civil rights. The bigger
Speaker 9: it grew, the more regulation, environmental protection, all sorts of
Speaker 9: regulation of people who believe that, like Jefferson and Madison,
Speaker 9: that the federal government should be small, limited in scope
Speaker 9: and purpose, grew to resent the power of the federal government.
Speaker 9: And now we're seeing the flip side of that. The
Speaker 9: Republican president is exercising enormous federal power over both.
Speaker 8: State governments, and individuals.
Speaker 9: That's the Republicans and the conservative movement has always been
Speaker 9: the opposite, let's limit the government's power.
Speaker 8: So what's interesting is when.
Speaker 9: Jadevance talks about, you know, cutting jobs or furloughing or
Speaker 9: shrinking the size of the federal government, at the very
Speaker 9: same time, this federal government is exercising unprecedented power over
Speaker 9: states and individuals.
Speaker 5: Wendy, President Trump is threatened to use this shutdown to
Speaker 5: actually fire federal workers.
Speaker 2: Is that happening, Paul?
Speaker 9: I think we're seeing really the cracks and protection, even
Speaker 9: though there's collective bargaining among unionized federal workers.
Speaker 8: The cracks and the protection going back all.
Speaker 9: The way to the Pendleton Act in eighteen eighty three,
Speaker 9: which is supposed to protect federal workers and Jimmy Carter's
Speaker 9: reforms in the seventies. But now we see that they
Speaker 9: are not very well protected. And you know, it's a
Speaker 9: big risk to fire.
Speaker 8: Who are going to fire? Are you going to fire
Speaker 8: Park service workers?
Speaker 9: We've seen that the Republicans from the West are not
Speaker 9: excited about that. That backfired on the Republicans in the
Speaker 9: nineteen nineties.
Speaker 8: You know, who are you going to fire? Where do
Speaker 8: they live?
Speaker 9: And what is the political disposition of the area that
Speaker 9: they live in, and then the services that they provide
Speaker 9: to people who voted for Donald Trump. So this is trickier,
Speaker 9: I think, to do it in a mass way than
Speaker 9: the Republicans right now.
Speaker 2: Are letting on Here in New York City.
Speaker 5: We got some news yesterday that's some funding for some
Speaker 5: infrastructure here in the Greater New York City area. The
Speaker 5: Gateway project in particular has been halted here. So what's
Speaker 5: the strategy behind some of these targeted funding? I guess reductions.
Speaker 8: At the moment, the strategy looks fairly part of it.
Speaker 9: You'd have to say that, you know, the Republicans have
Speaker 9: been saying that we spend too much money, So now
Speaker 9: President Trump can say, well, look, eighteen billion dollars, do
Speaker 9: you really need it?
Speaker 8: New York State has what.
Speaker 9: Almost a trillion dollar If not, if I'm not mistaken
Speaker 9: budget as a state, why can't they pay for it themselves?
Speaker 8: But it looks like it's.
Speaker 9: Targeting blue states, but blue states also tend to spend
Speaker 9: more on mass transit and infrastructure in in densely populated
Speaker 9: areas than other states.
Speaker 8: So it's hard to figure out exactly how partisan. This is,
Speaker 8: but that's where we are. But it can always be reversed.
Speaker 9: So you know, people say this is again Higee Jeffries
Speaker 9: and Chuck Schumer, both from New York.
Speaker 8: But really it's a broader effort to tram.
Speaker 9: The reliance of these states on federal dollars for things
Speaker 9: like mass transit and improving infrastructure bridges. I don't think
Speaker 9: it works in the end because these states also generate
Speaker 9: a lot of economic activity and tax revenue for the
Speaker 9: federal government.
Speaker 5: Is there actually an on off ramp here for both
Speaker 5: sides that maybe just find some common question, thank you,
Speaker 5: thank you.
Speaker 9: I do think I think there's an off ramp where
Speaker 9: the Republican leader John Thune, instead of saying, oh, we'll
Speaker 9: talk to you later, just keep the government open for
Speaker 9: seven weeks, which is what the Democrats used to do
Speaker 9: when they were in charge, he should say, we will
Speaker 9: vote on an extension of these tax subsidies for Obamacare premiums,
Speaker 9: which expired December thirty first and affect millions of people.
Speaker 9: We will give you a vote, a scheduled vote, and
Speaker 9: if they if the Democrats can walk away with a
Speaker 9: scheduled vote on this question, knowing that they'll have access
Speaker 9: to pushing it on the floor of the Senate. Then
Speaker 9: I think they have enough cover to go back to
Speaker 9: the table and get the government back up.
Speaker 3: Well, I look at the politics of this, and of
Speaker 3: course it's all finessing. Does a shutdown play into the
Speaker 3: election coming up next November or is it just so
Speaker 3: far distant in all of the.
Speaker 9: Ancient history, Tom, I think that this shutdown plays into
Speaker 9: the elections we've got for governor in.
Speaker 8: New Jersey and for Virginia. Those polls are tightening. You know,
Speaker 8: this is a way of mobilizing Democrats.
Speaker 9: You know, we've been complaining that their Washington based leadership
Speaker 9: has done nothing to stop or fight or for Donald Trump.
Speaker 9: This is a way of galvanizing and encouraging those voters
Speaker 9: to get out to the polls for.
Speaker 8: The Democratic candidates.
Speaker 9: And it's a sort of a pseudo off, you know,
Speaker 9: mitchrum cycle that Democrats should do better.
Speaker 8: So that's where the interest of the Democrats lie.
Speaker 9: How long they can keep this going without hurting other
Speaker 9: parts of their constituency is the calculation that both Republicans
Speaker 9: and Democrats are trying to make right now.
Speaker 3: Professor Shower hugely informative thank us so much. Learned a
Speaker 3: lot there, Wendy Schulders at Brown University.
Speaker 2: Stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Play and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
Speaker 1: us live every weekday on YouTube and always on the
Speaker 1: Bloomberg terminal.
Speaker 3: Away from Baseball, the newspapers are swarnings.
Speaker 10: All right, we're going to dive right into the tech
Speaker 10: job market, and there's there's kind of like growing divide
Speaker 10: in it. You have those with AI skills and those without.
Speaker 10: And the Wall Street journals like really gets into this,
Speaker 10: so they talk about the skills. Those at the highest
Speaker 10: level of skills they can get multimillion dollar pay packages.
Speaker 10: Those with okay MAAI savvy they can get about a
Speaker 10: million dollars a year. Job seekers are saying they just
Speaker 10: want someone to hire them and teach them on the job.
Speaker 10: But what they're looking for is someone who can train
Speaker 10: AI models to do these patterns and direct predict outcomes.
Speaker 10: Right because some people have you know, AI experience. They
Speaker 10: get certifications and they're saying well that's not enough. You know,
Speaker 10: just because you know how to use chat GPT, it
Speaker 10: doesn't certify you as an AI expert.
Speaker 5: I don't know what is an AI expert. This technology
Speaker 5: happened like fifteen minutes ago.
Speaker 10: Yeah, yeah, yeah, they did. They need to train the
Speaker 10: AI models and to know how to do it. And
Speaker 10: it's a very intricate way that you have to know.
Speaker 2: But it's a.
Speaker 3: Small percentage of people with the gift of that current
Speaker 3: I'm going to say coding is an a.
Speaker 8: It's a new technology.
Speaker 10: What you know.
Speaker 3: I hear from a lot of tech people. You know,
Speaker 3: they're they're like way smarter than me, but they just
Speaker 3: don't have employable skills.
Speaker 2: I don't understand it now. It's moving super super quick.
Speaker 5: So again, young people will figure it out.
Speaker 8: They're good at that.
Speaker 2: They're good at that.
Speaker 10: They are Okay, So I want to stick with AI
Speaker 10: and see how it's impacting the music industry. Okay, this
Speaker 10: is interesting source of telling the Financial Times. You have
Speaker 10: Universal Music, Warner Warner Music, right, they know Taylor Swift,
Speaker 10: Kendrick Lamar, Coldplay, like those are all their artists.
Speaker 8: They're nearing AI licensing deals.
Speaker 10: They reportedly involved startups like eleven lab Stability AI, but
Speaker 10: even big companies like Google and Spotify. So they want
Speaker 10: to know how the labels license their songs for creating
Speaker 10: AI generated tracks, for training large language models.
Speaker 8: They want to get paid, that's the bottom line.
Speaker 10: So they want a payment structure that's similar to streaming,
Speaker 10: where you know, you play a song and that triggers
Speaker 10: this micro payment. So that's the whole battle in AI
Speaker 10: in the music space, and it's a really really big battle,
Speaker 10: and it's starting to come up a lot more nowadays,
Speaker 10: especially on Spotify. You hear AI just AI generated music
Speaker 10: pop up on Spotify nowadays.
Speaker 5: But it's is it attributed to anybody that like is it?
Speaker 6: It's saying here's a song by.
Speaker 10: X, No, that's not and that's the thing, and that's
Speaker 10: the thing. So like YouTube has this thing that where
Speaker 10: they can identify where music is being used, so they're saying,
Speaker 10: maybe use something like that technology. But it's a long
Speaker 10: ways to go.
Speaker 2: It's a lot tougher than just tracking radio. So it's
Speaker 2: a big deal. I don't understand it, but it's a
Speaker 2: big deal among music people.
Speaker 10: They're like, oh sure, They're like they're fired up, they're
Speaker 10: very fired up.
Speaker 1: I got it.
Speaker 10: And then lastly, I want to talk about DC fans.
Speaker 10: So those listening in DC, they may have to find
Speaker 10: another way to watch Wizards Capitals games. There's an issue
Speaker 10: Monumental Sports Network. They went dark on YouTube TV, dizzy
Speaker 10: on Hulu plus Live TV distribution deals expired. You can
Speaker 10: still get it through Direct TV because they carry Monumental
Speaker 10: Sports Network. But I thought what was interesting is this
Speaker 10: whole issue about regional sports networks and how the difficulty
Speaker 10: that they're starting.
Speaker 2: To baseball next season.
Speaker 5: It's been a couple of seasons already with the regional sports,
Speaker 5: think hockey, think baseball, not so much the NFL, which
Speaker 5: is a national sport, but the regional sports really dependent
Speaker 5: upon regional sports networks. We have Yes Network here in
Speaker 5: New York. There's need send nessing up there in Boston.
Speaker 5: That was the backbone of the media rights fees for
Speaker 5: these teams, and that model is just it's broken permanently,
Speaker 5: and so now you got to find a substitute.
Speaker 6: Its streaming going to be that substitute.
Speaker 5: I don't know.
Speaker 2: So there you go. Let's see is that it?
Speaker 3: I mean, you're not concentrated because you're worried about the
Speaker 3: Yankees today.
Speaker 10: I know, I know, but I can't at eight o'clock pm.
Speaker 5: Yeah, that's yeah, I know.
Speaker 2: When are they gonna learn and the kids can't watch school?
Speaker 6: What?
Speaker 2: Okay?
Speaker 3: Six pm, I get it, it's clumsy. Yeah, seven, seven pm.
Speaker 3: The kids get to see the starter Pitchers for.
Speaker 2: The fourth dting.
Speaker 5: Yeah, they don't care. They don't care because more and
Speaker 5: would lease advertising dollars from the networks in that time.
Speaker 2: Lisa mt tell the newspapers thank you so much.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each
Speaker 1: weekday seven to ten am Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal.