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Speaker 2: We always like to start the day and start the
Speaker 2: week with someone with broad perspective. Right now joining us
Speaker 2: is Robert Kaplan. We're thrilled that he could join us today.
Speaker 2: Forever associated with his Goldman Sachs, but his public service
Speaker 2: noted to the nation is the president of the federserv
Speaker 2: Bank of Dallas, and just a really broad view of
Speaker 2: where we are. Thrilled Roberts, you would begin our Monday
Speaker 2: with us, where are we right now? In a broad sense?
Speaker 2: Can our institutions serve vibe this onslaught of uncertainty?
Speaker 3: They can survive, But we've got a number of weeks
Speaker 3: more to go to get through this fog. And in particular,
Speaker 3: you know, there's two or three big changes going on.
Speaker 3: There's the government spending cuts, there's the changes in immigration
Speaker 3: policy which are having even a bigger effect than are
Speaker 3: being discussed.
Speaker 4: And on tariffs. The thing that we're just not sure about.
Speaker 3: Is the Trump administration intending to negotiate tariffs down to zero,
Speaker 3: ten percent, twenty percent. I noticed over the weekend they
Speaker 3: said that they want to settle out at twenty to
Speaker 3: fifty percent. And those are dramatically different outcomes.
Speaker 2: Your charm, Robert Kaplan among You know, the people think
Speaker 2: that everybody within the Caplan school comes from six zip
Speaker 2: codes somewhere in the vicinity of Boston or New York
Speaker 2: or Washington. You are a brethren of Kansas, out of
Speaker 2: the University of Kansas. This makes you different. You understand
Speaker 2: the span of America. I'm looking at a statistic where
Speaker 2: Kansas has two point three billion worth of products in
Speaker 2: aerospace to the rest of the world. How it threat
Speaker 2: is Kansas from this upset in Washington.
Speaker 3: Well, it is threatened, and it's got a lot of farmers,
Speaker 3: big agricultural economy, and our farmers rely very heavily on
Speaker 3: foreign markets China for an example, And so there's a
Speaker 3: lot of concern in Kansas.
Speaker 4: And also there are a lot of.
Speaker 3: Small businesses and bigger businesses I'm seeing are having They
Speaker 3: don't love the uncertainty, but they have a lot of
Speaker 3: levers to manage small businesses are telling me that they're
Speaker 3: at risk if this goes on for a number of
Speaker 3: more months. There are many of them are thinking that
Speaker 3: they won't stay in business.
Speaker 2: Paul, over the weekend buried in the advis I know
Speaker 2: you weren't paying attention. At least it wasn't paying attention.
Speaker 2: China canceled twelve thousand metric tons of United States porkshipmits.
Speaker 2: Oh that's a lot of bacon.
Speaker 5: That's a lot of bacon there, and I think we're
Speaker 5: going to see more of that, Robert. When you have
Speaker 5: discussions with your clients, Robert, with your bankers at Goldman Sachs,
Speaker 5: is discussion about a recession is coming or whether it's coming,
Speaker 5: and whether we can get through this. What's the real
Speaker 5: economic fallout that you're hearing from your clients and bankers.
Speaker 3: I think people see that in certain sectors there's already slowing,
Speaker 3: so travel leisure, there's less tourism that we know, Shipping
Speaker 3: we know is weak, and you were talking about earlier
Speaker 3: and in other parts the sentiment is very negative, but
Speaker 3: we don't see a severe decline. I think most people
Speaker 3: I talked to are expected further slowing.
Speaker 4: It's not a fade to complete.
Speaker 3: But I think they're worried that there's been pre ordering
Speaker 3: it's artificially bolster GDP recently, and that there's a little
Speaker 3: bit of a cliff coming and a more substantial decline
Speaker 3: in growth. But they don't know, but they're preparing for
Speaker 3: a more severe slowing.
Speaker 5: In that regard. Robert, what do you think that the
Speaker 5: Federal Reserve can do should do?
Speaker 4: I think they should be making.
Speaker 3: Clear, as I think Jpal did a couple of weeks ago,
Speaker 3: that they're still very focused on fighting inflation. You don't
Speaker 3: want inflation expectations to get de anchored unanchored here, and
Speaker 3: that's what he was trying to do. And in the otherwise,
Speaker 3: don't make predictions. Don't talk about June or not June
Speaker 3: because they don't know. We don't even know what the
Speaker 3: tariff policies are. Ultimately, keep your options open, and don't
Speaker 3: try to be a prognosticator, be a risk manager.
Speaker 2: Formerly with the Dallas Fed and now at Globin Sex,
Speaker 2: Robert keppan with us to start as strong this morning
Speaker 2: and this extended conversation. I mean, I guess we could
Speaker 2: try it out, Robert Kepp. When the Fisher equation the
Speaker 2: Fisher hypothesis rather of central bank theory. But it does
Speaker 2: come down to lagging or x post or after the fact.
Speaker 2: I mean, that's the only fallback the central bank has.
Speaker 2: They have to wait and see the labor market crack
Speaker 2: before they act, right.
Speaker 3: Well, they need to see more evidence in the hard
Speaker 3: data of slowing. And also they don't know and we
Speaker 3: don't know this cost shock we're about to get how.
Speaker 4: Inflation areas are going to be.
Speaker 3: The irony is, up until January twentieth, goods were disinflating globally.
Speaker 3: There's a lot of global overcapacity for manufacturing, and the
Speaker 3: service sector was where the inflation issue is. Now it's changing,
Speaker 3: and so the Fed's going to have to see more evidence.
Speaker 3: And in fairness to them, it's hard to make policy
Speaker 3: forecasts or judgments when you don't know yet what the
Speaker 3: policies are, and they don't.
Speaker 2: I mean, Paul, should we do a chart on Bloomberg Radio?
Speaker 4: Now that works?
Speaker 2: I think a chart works with Robert Captain And you
Speaker 2: know where I'm going with this, Robert Kaplan. I'm going
Speaker 2: to the ten year real yield. We are in between
Speaker 2: e within the dispersion folks and the answer is at
Speaker 2: one point nine nine percent, Paul, it really begins to
Speaker 2: show this economic slow down down at one point eight zero.
Speaker 2: So we're we are distant from that identifying.
Speaker 5: Of a slowing Yeah, we're certainly seeing a GDP forecast
Speaker 5: on Wall Street coming down, Robert. When you talk to
Speaker 5: your corporate clients at Goldman Sachs, what are they doing
Speaker 5: about some of their longer term plans, whether it's long
Speaker 5: term capbecks, whether it's m are they hitting the pause
Speaker 5: button or are they trying to move forward?
Speaker 3: They're mainly hitting the pause button. They're not canceling plans,
Speaker 3: but they're pausing them. And the other thing they're doing
Speaker 3: is and again, these tariffs have come very abruptly. So
Speaker 3: many CEOs have told me, listen, if I had six
Speaker 3: to twelve months, I couldn't sell, I wouldn't solve.
Speaker 4: This, but I could make moves.
Speaker 3: But this is happening now, and so they're re looking
Speaker 3: at their plans for supply chains and logistics. And on
Speaker 3: the investing side, we are seeing people who started the
Speaker 3: year wanting to overallocate to the dollar are now saying, yeah,
Speaker 3: maybe we're.
Speaker 4: Overallocated to the dollar.
Speaker 3: They're gone they've done a one eighty and they're starting
Speaker 3: to look at broader alternatives away.
Speaker 4: From the dollar.
Speaker 3: That doesn't mean that that's what they're going to be
Speaker 3: doing six months from now. But there again, they're concerned,
Speaker 3: and it's more than tariffs. That they don't understand the
Speaker 3: US economy and US institutional framework as well as they
Speaker 3: thought they did, and that's giving them some pause.
Speaker 2: Should we go to the Dallas FED with Robert Captain?
Speaker 2: I think we can do that, Robert Kaplan. As you know,
Speaker 2: each FED has its own characteristics, its own past. The
Speaker 2: Robert McTeer Robert Kaplan pass of the Dallas FED, but
Speaker 2: it's on the border as well. Not speaking for the
Speaker 2: Dallas FED, I want to make clear that mister doctor
Speaker 2: Kaplan doesn't do that, folks, But Robert Kaplan to be
Speaker 2: clear here, how do you perceive our tension with Mexico
Speaker 2: as you look at all the research of your Dallas FED.
Speaker 3: Yeah, so, Texas, as you note, is the largest exporting
Speaker 3: state in the country. The relationship between Texas and Mexico
Speaker 3: in terms of logistics and supply chain arrangements as well
Speaker 3: as people by the way from Mexico coming across the
Speaker 3: border at a shop in Texas, that those relationships are essential.
Speaker 3: And this is why for many companies domicile not just
Speaker 3: in Texas but in the country. The being able to
Speaker 3: send goods back and forth across the border with Mexico
Speaker 3: as well as Canada has been essential to domiciling in
Speaker 3: Texas and in the United States and making sure we're
Speaker 3: globally competitive. And people don't realize that if you want
Speaker 3: to encourage reshoring to the US and you want to
Speaker 3: take share from Asia, you would want to preserve those
Speaker 3: logistics and the chain arrangements.
Speaker 2: So, with all your experience, Robert Kaplan, how does the
Speaker 2: how do the people around the president, including a Secretary Treasury,
Speaker 2: allow him to save face and walk back from his
Speaker 2: mckinleyite tariffs.
Speaker 3: So I think the nub of the issue right now
Speaker 3: is it's unclear how much costs savings we're getting out
Speaker 3: of doge okay, and I think that's part of this discussion.
Speaker 3: And I think they're still a little bit wetted that
Speaker 3: we're going to get the offset, We're going to get
Speaker 3: revenue from tariffs, and that'll help us in the de leveraging,
Speaker 3: it'll help us justify bigger tax cut, and I think
Speaker 3: all the studies I've looked at have shown that every
Speaker 3: dollar of tariff revenue you get, you give it back
Speaker 3: a portion of it.
Speaker 4: In terms of lower growth and damaging groups.
Speaker 3: But that's the key to I think why they're clinging
Speaker 3: to these tariff tariffs at higher levels, not at zero,
Speaker 3: and I think they may be better served letting go
Speaker 3: a little bit on that concept.
Speaker 2: In the zeitgeist this morning, Paul Sweeney is a bar shirt.
Speaker 2: I'm going to give credit to the Tax Foundation showing
Speaker 2: the tencen see revenue build from tariffs versus the ginormous
Speaker 2: revenue that comes in from income taxes. Right, it's a
Speaker 2: sobering charge.
Speaker 5: It is Robert as former president of the Dallas FED,
Speaker 5: you have an appreciation for immigration, legal and illegal, being
Speaker 5: in that part of the country here, What do you
Speaker 5: believe the impact of this reduction of illegal immigration coming
Speaker 5: across the border will due to the US labor market,
Speaker 5: because I'm not sure really folks are clear on how
Speaker 5: that works.
Speaker 3: So of the one of the things I would say,
Speaker 3: over the last four years and during the Trump administration,
Speaker 3: we had in excess of a million workers a year
Speaker 3: immigrants who came in and joined the workforce. It appears
Speaker 3: now this year that could be in the low hundreds
Speaker 3: of thousands. We can't tell yet. So that's going to
Speaker 3: slow workforce growth. That slows GDP, it tightens the workforce.
Speaker 3: But the bigger thing going on that I would call out,
Speaker 3: there are millions of undocumented immigrants in this country in
Speaker 3: the workforce who are unsure of their status. And I'm
Speaker 3: hearing from their employers that some number of them are
Speaker 3: not coming into work and they're certainly not shopping and
Speaker 3: because they're concerned. And so that is making the labor force,
Speaker 3: at least in the service sector tighter, and it will
Speaker 3: slow GDP growth, and it's probably affecting consumer spending.
Speaker 2: Robert Kaplan, generous of you to be with us this morning.
Speaker 2: Vice Chairman Goldin Sex, thank you so much, and again
Speaker 2: his public service at the Dallas FED.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: With a shocking statistic. Sephanie Roth joins us right now,
Speaker 2: you say, may second, the April report is where the
Speaker 2: job economy breaks and we only get ninety thousand non
Speaker 2: farm payrolls.
Speaker 6: Yeah, I'm surprised how below consensus we are for this print.
Speaker 6: Combination of seasonal factors, the weather, the early jobs print,
Speaker 6: and then on top of that all the tariff uncertainty.
Speaker 6: We're meaningfully below consent.
Speaker 2: Is where are they to cut to the chase? I mean, folks,
Speaker 2: this is really important. Where's everybody wrong? Who thinks it's
Speaker 2: June or July where the Stephanie Roth number kicks in.
Speaker 6: Yeah, and I think we're going to get a bigger
Speaker 6: job's headwind in the next couple of months, but it
Speaker 6: should probably start to leak in to this print. There's
Speaker 6: a ton of uncertainty. It's hard to know whether you
Speaker 6: should hire or not. It's hard to know whether you
Speaker 6: should invest. And then on top of that you do
Speaker 6: have some funky things about this print that put additional
Speaker 6: downward pressure.
Speaker 5: Stephanie. So we think about some of the economic uncertainties
Speaker 5: that may result from higher tariffs. For you, is it
Speaker 5: more growth or inflation? Where do you think we're going
Speaker 5: to see it?
Speaker 6: I think we'll start so I think we'll see from
Speaker 6: a growth perspective, we'll see it in the jobs prints,
Speaker 6: and then from an inflation perspective, we'll probably we probably
Speaker 6: won't see it until say the June print, So things
Speaker 6: like pre tariff sales, a lot of the inventory is
Speaker 6: going to get worked down, and then companies are going
Speaker 6: to start to raise prices once the new inventory feeds in.
Speaker 6: But by the way, they haven't really been importing that
Speaker 6: much from China because terif rates are well over one
Speaker 6: hundred and forty one hundred and forty percent, which is
Speaker 6: on the well end.
Speaker 2: Of the Lafrica Paul I should mention last month was
Speaker 2: two hundred and twenty eight thousand non farm payrolls the survey.
Speaker 2: I didn't realize how way down it is. It's wicked down.
Speaker 2: Good Morning Boston. One hundred and thirty thousand, and Stephanie
Speaker 2: Roth in Wolf Research, is it ninety thousand zero? I
Speaker 2: like that.
Speaker 5: So, Stephanie, what how do you think this economy is
Speaker 5: going to play to you? Are you guys calling for
Speaker 5: a recession over Wolf Research?
Speaker 6: No, I have point six percent GDP for this.
Speaker 5: Year point six percent.
Speaker 6: We have a couple of weeks until we start to
Speaker 6: sort of reached the point of no return. So if
Speaker 6: Trump and Facts reduces the China teriff rate, which I
Speaker 6: think there is a decent chance of that, then we
Speaker 6: can actually get out of this. We end up with
Speaker 6: a sluggish year with the economy can hold up. If
Speaker 6: we're sitting here in August and the tariffs are still
Speaker 6: well over one hundred percent on China, then yeah, I
Speaker 6: think we are in a different situation. But I just
Speaker 6: don't think the administration has that pain tolerance to really
Speaker 6: deal with companies doing significant layoffs. He cares less about
Speaker 6: the stock market, clearly, but once we start to really
Speaker 6: hear from companies, which has started to happen last week,
Speaker 6: he's very likely to roll back the terriffs.
Speaker 2: On ninety thousand jobs, what's a vector of your unemployment rate?
Speaker 2: You're getting onto a five percent unemployment rate.
Speaker 6: So we have well, we have a rising up to
Speaker 6: four point five percent by the end of this year.
Speaker 6: The thing that we haven't really talked about yet when
Speaker 6: it comes to labor market is we also have a
Speaker 6: significant reduction. From an integration perspective, there's going to be
Speaker 6: conflicting forces on the unemployment rate where you have the
Speaker 6: slowdown in the economy, putting upward pressure on the unemployment rate.
Speaker 6: Yet a lot of jobs supply reducing because of immigration,
Speaker 6: putting downward pressure. So that's why the unemployment rate is
Speaker 6: not going to rise as much in our forecast versus
Speaker 6: what it would otherwise be the case.
Speaker 2: See how she did that, That's just something she took
Speaker 2: labor economics, and she's the one in the front row
Speaker 2: I hated because she nailed it.
Speaker 5: I'm going to back row read in the New York Times.
Speaker 2: So that was my market.
Speaker 5: How I did it doing a cross or puzzle? And
Speaker 5: so the question then is the Federal Reserve. Is there
Speaker 5: a role here for the Federal Reserve to kind of
Speaker 5: ease some of the pressure that may be coming into
Speaker 5: the US economy.
Speaker 6: No, No, that is not going to happen. The Fed
Speaker 6: is not going to be influenced by some of this
Speaker 6: political noise. Okay, they are going to wait until the
Speaker 6: unemployment rate starts to rise, jobs are significantly below one
Speaker 6: hundred thousand before they can actually significantly easier. Inflation is
Speaker 6: going to be well above their target, their target by
Speaker 6: at least a percentage point. We're gonna have three ish
Speaker 6: percent inflation this year. There's no way they can ease
Speaker 6: unless they start to see actual weakness in the economy.
Speaker 6: So it's likely that would happen in call it September
Speaker 6: of this year, not much before that.
Speaker 5: How's the consumer doing? I mean I heard a Secretary
Speaker 5: bestent over the weekend saying, yeah, I know the forecast
Speaker 5: are coming down. I know there's concern out there. I
Speaker 5: know the survey data, whether it's you miss or others
Speaker 5: are citing concerns. But he he was saying that this
Speaker 5: weekend that the consumer is still spending. Consumer's okay, and
Speaker 5: that's seventy percent of the US economy. Said, don't worry
Speaker 5: so much.
Speaker 4: How do you view the consumer?
Speaker 6: I think that's right. Today the consumer is fine, they're
Speaker 6: still employed. Prices haven't really risen. Yeah, when you ask
Speaker 6: look at consumer sentiment measures, they're down because the consumers
Speaker 6: realize what's coming in the next couple of months, but
Speaker 6: as of now, they haven't really felt it yet. Once
Speaker 6: they start to see the numbers like we just talked
Speaker 6: about with some of those companies raising prices significantly, once
Speaker 6: shelves start to become there, that's when it could become
Speaker 6: a lot different. And by the way, when job markets
Speaker 6: start to slow down a lot. That's when the consumer
Speaker 6: is very much likely to pull when when you.
Speaker 2: Say this came up this weekend, when someone fancy like
Speaker 2: you says and shelves become beare yes, we look at
Speaker 2: that as like Eastern Europe or Russia fifty years ago.
Speaker 2: What does quote shelves become bear look like?
Speaker 6: Oh, COVID's that's the most recent example, and it's going
Speaker 6: to be a similar type of thing if we don't
Speaker 6: change the tariffs pretty significantly. Tarifreates on China to come
Speaker 6: down all in below fifty percent. If they're sitting much
Speaker 6: above fifty percent, it doesn't make sense. I mean China
Speaker 6: five zero, correct, China five zero, all in.
Speaker 2: Under ten percent? What number under ten percent is a
Speaker 2: trigger point where we calm down. So I haven't seen that.
Speaker 6: So we need to see the China tariffs come down
Speaker 6: to something that's below the fifty percent. Also, that has
Speaker 6: to include the fentannel tariffs too. That's just twenty percent.
Speaker 6: So the number that we got, the reciprocal tariffs that
Speaker 6: we got in April second have to come back to that.
Speaker 6: Thirty four percent is kind of a place that wouldn't
Speaker 6: be okay. And then on the rest of the countries.
Speaker 6: We have to just stay at this ten percent or
Speaker 6: lower or lower.
Speaker 2: I'm studying Paul the or lower okay phrase, and I
Speaker 2: to me, it's almost back to three percent, but you're
Speaker 2: the expert. Or lower is nine percent.
Speaker 6: If we're a ten percent on the rest of the countries.
Speaker 6: And by the way, if we have some sort of
Speaker 6: deal with Canada Mexico, then we're in an okay place.
Speaker 6: Not great, but okay. I don't think we need to
Speaker 6: return back to three percent necessarily, but we cannot stay
Speaker 6: with China particular, is just a really big problem for
Speaker 6: this economy. If we say the rest of ten percent,
Speaker 6: the common can manage that.
Speaker 2: Paul from New Jersey wants to know if we modeled
Speaker 2: in the market reaction to a ninety thousand non farm payroll.
Speaker 6: Yeah, I think it would probably be a negative one,
Speaker 6: just given how optimistic the forecasts are for this month,
Speaker 6: which is truly surprising to me.
Speaker 2: I totally agree with that.
Speaker 5: This is great, so Tom, I thought my vest but
Speaker 5: last year, so I think I now have a trade
Speaker 5: deficit with Italy. I'm not that worried about it, that's okay.
Speaker 2: Yeah, but I made up for with a beverage of
Speaker 2: my choice. I got the tab on the seventh floor
Speaker 2: of the Hassler and said, well, that made up for
Speaker 2: Paul's Thank you, Stephanie Roth, brilliant, Thank you, really really brilliant.
Speaker 2: With Wolf Research, I can't say nothing.
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Speaker 2: Joining us now. She never has Keena Henrietta Trece Co
Speaker 2: foundered Veda Partners. Henrietta, The people like you in Washington
Speaker 2: this morning are going to read found four hundred thousand
Speaker 2: Biblical words from Ashley Parker and Michael Scherer published in
Speaker 2: The Atlantic today. The rest of us just look at
Speaker 2: the polls and the President is losing color. The character
Speaker 2: of the polls and the impact on Republicans over the weekend.
Speaker 7: Yeah, I mean, I think this is just starting to
Speaker 7: emerge as an area that Republican members can't afford to ignore.
Speaker 7: One of the things that happens when members are out
Speaker 7: of session is they get an opportunity to just avoid
Speaker 7: the press, avoid any bad news, and stay away from
Speaker 7: the topics that are happening in the White House. And
Speaker 7: as soon as they return to Congress, they're going to
Speaker 7: be confronted by these numbers because they're so sharply changed
Speaker 7: from just a couple months ago. The generic Democrat is
Speaker 7: now a net six point swing ahead of Republicans from
Speaker 7: where they were in November. So that is a material issue.
Speaker 7: We have to look at about thirty nine right Republican
Speaker 7: seats that are open now and potentially gettable, and that's
Speaker 7: that's where they're going to be spending their time.
Speaker 2: Billy House Venerable at Bloomberg New Yorker's boo and jeer
Speaker 2: Republicans Lawlor It's circus like town hall. That's the future
Speaker 2: of the GOP, isn't it.
Speaker 7: I mean, that was pretty incredible. I actually posted this
Speaker 7: on Instagram account talking about coming on here this morning.
Speaker 7: There's like a fifteen bullet point rule list for Mike
Speaker 7: Lawler's town hall on how constituents should be expected to
Speaker 7: comport themselves during this meeting in order for him to
Speaker 7: even hold it. The blowback for Mike Lawler is pretty
Speaker 7: substantial right now. I'm sure you've seen that Elie Staphonic
Speaker 7: is pulling ahead of him in the race for a
Speaker 7: national or a statewide race. And I think this really
Speaker 7: puts pressure on Lawler to get a maximum achievable deliverable
Speaker 7: on the stalt deduction. Y'all talk about it all the time,
Speaker 7: and it's because it's so important to New Yorkers. There's
Speaker 7: almost nothing that Mike Lawler can deliver on salt that
Speaker 7: would be sufficient to overcome how negatively New Yorkers are
Speaker 7: going to think about it. And that's because if he
Speaker 7: does nothing, the salt cap reverts back to its previous
Speaker 7: position of totally uncapped. So there's almost only failure here
Speaker 7: if he votes for any of the tax bills that
Speaker 7: are coming through. So it's a really tough spot for
Speaker 7: him to be in right now.
Speaker 5: So, speaking of the tax bill, the twenty twenty five
Speaker 5: reconciliation bill, I guess they'll start work on it. It's
Speaker 5: point very soon, but I mean they're I think they
Speaker 5: need to cut like two trillion dollars worth of federal spending.
Speaker 5: I don't know how you do that. What's the game
Speaker 5: plan there?
Speaker 7: No, you're right to talk about that and then look
Speaker 7: at the sequencing that they've set up. So they're going
Speaker 7: to do all of the dessert first. This week, there's
Speaker 7: going to be hearings at a couple of committees, but
Speaker 7: all of those committees are tasked with increase in the deficit. So,
Speaker 7: for example, one hundred and fifty billion dollars that the
Speaker 7: Armed Services Committee gets to spend, one hundred billion dollars
Speaker 7: that the Judiciary Committee gets to spend. This is where
Speaker 7: all the spending is going to go out on the
Speaker 7: popular stuff like investing in the military, or investing in
Speaker 7: immigration detention facilities and judges and things like that. The
Speaker 7: real heart of this bill the two trillion dollars in
Speaker 7: cuts that they're going to try to identify the what
Speaker 7: four and a half trillion dollar tax bill, three point
Speaker 7: eight trillion of which is already spoken for three ent
Speaker 7: extension of existing rates. That's all going to come late
Speaker 7: this month. I wouldn't be surprised, and I'm starting to
Speaker 7: telegraphic clients now that that could very easily slip past
Speaker 7: Speaker Johnson's already delayed expectation of a Memorial Day rollout.
Speaker 7: So the Ways and Means Committee is really where you
Speaker 7: want to concentrate your time. They're the ones who get
Speaker 7: all the money to raise and spend, and they're not
Speaker 7: scheduled yet. It won't be probably until the very last
Speaker 7: week before in a vile day, that we see their efforts.
Speaker 5: Bloomberg News reporting and others as well. Trump floats new
Speaker 5: income tax cut in bid to eastpite of tariffs. Is
Speaker 5: a new income tax cut possible? Reasonable?
Speaker 7: No, it's not. But I do appreciate that the President
Speaker 7: is acknowledging that the tax bill they're working on right
Speaker 7: now does not include cuts. And we've walked through this
Speaker 7: math in the past, and I think it's really worth
Speaker 7: spending time on. This is a gigantic bill, five point
Speaker 7: three trillion dollars of spending, but almost all of that
Speaker 7: is already allocated to things that have either expired at
Speaker 7: the end of this year or will have expired since
Speaker 7: twenty twenty two. So the main stimulative provisions of this package,
Speaker 7: I think are going to be somewhere in the range
Speaker 7: of about three to five hundred billion dollars. That is
Speaker 7: not enough to eliminate the individual income tax for individuals
Speaker 7: under two hundred thousand dollars, and it's off by several
Speaker 7: trillion dollars, so it's not close. I think the best
Speaker 7: that you can hope for is that of that three
Speaker 7: to five hundred million dollars that they're going to have
Speaker 7: to spend, you could either hike the saltcap a little bit.
Speaker 7: You can try to eliminate taxes on temp which does
Speaker 7: not have support in the United States Senate. You cannot
Speaker 7: come close to eliminated taxes on Social Security because that
Speaker 7: costs one point eight trillion dollars. But there's really just
Speaker 7: not a lot there.
Speaker 2: Henriette, thank you, just brilliant. It's just just really really
Speaker 2: interesting about the political immediacy that is out there. Henrietta
Speaker 2: Treys is with Veda Partners.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: This is an important conversation Joseph Lavorgnia with us around
Speaker 2: the market opening chief Economists, SNBC, NIKO securities, and with
Speaker 2: some public service in the first term of a Trump administration.
Speaker 2: So whatever they're going to do. They're going to save
Speaker 2: face and jabbo down these outrageous tariffs. Okay, begin with that.
Speaker 2: They're going to get down. And let's say they get
Speaker 2: back to a ten percent blended rate, except the pre
Speaker 2: trade war number was a three percent blended rate. Where
Speaker 2: does Jolivarni you see the saving of face going to
Speaker 2: get to an efficacious blended rate? Is it ten? Nine seven?
Speaker 2: Back to three percent? Where's that number?
Speaker 8: Joelivern you I've got a jack in the box story
Speaker 8: I want to tell you, but offline story that off
Speaker 8: my chest. Okay, okay, that's number one.
Speaker 4: Two.
Speaker 8: The President said on the campaign trail last year that
Speaker 8: it was ten percent for everybody but China sixty. Those
Speaker 8: are the numbers that I'm kind of working with that
Speaker 8: we ultimately go back to, at least maybe as terms
Speaker 8: of statutory numbers, but as your point, blended rates will
Speaker 8: probably be a lot less. There'll be carve outs, there'll
Speaker 8: be some exemptions.
Speaker 4: That's what I'm guessing.
Speaker 2: This is study. Yes, you're encyclopedic at this. Where's your
Speaker 2: efficacious blended terriffry.
Speaker 8: For non China my guess? And this is a why
Speaker 8: confidence interval is under ten percent, because if you look
Speaker 8: at what the administration wants, it wants to reindustrialize, raise
Speaker 8: some revenues. China's a peer competitor and a strategic adversary,
Speaker 8: so everything that's being done is really as it relates
Speaker 8: to China. So there will be some tariffs on our
Speaker 8: trading partners for trade unfair trade practices, but as the
Speaker 8: reduction of ten percent minimum, assuming there is reciprocity, that's
Speaker 8: kind of what I think we need to work off of.
Speaker 8: Ten percent is the number. And then again I'm guessing
Speaker 8: because of what's already happened with some announced carveouts and exceptions,
Speaker 8: it'll be lower, but I don't know to what it is.
Speaker 8: I don't know what it is, and China's will be
Speaker 8: much higher. And if it goes from one forty five
Speaker 8: down to sixty, as the President alluded to before, I mean,
Speaker 8: it's still a very high number, but it may not
Speaker 8: feel as bad because the number was coming down for
Speaker 8: such a high high point when the negotiations began.
Speaker 5: What does that tariff level do to your GDP.
Speaker 8: Call not I've been pretty optimistic on GDP generally speaking.
Speaker 8: I mean, when I did the calculations of a ten
Speaker 8: percent teriff on everybody but China, sixty percent on China.
Speaker 8: I got about a nine tenths increase, assuming no offsets
Speaker 8: in the dollar, just a pure math of less than
Speaker 8: one percent. It was nine tenths. And then the Fed
Speaker 8: had done a piece back in September eighteen of fifteen
Speaker 8: percent across the board and they have basically the same number.
Speaker 8: What that would mean for GDP, I mean, initially maybe
Speaker 8: it's a few tenths, like it's not a big number.
Speaker 8: The problem right now, the way I see it, is
Speaker 8: the market's worried about uncertainty, and it's very, very hard
Speaker 8: to quantify uncertainty. What's amazing is if you look at
Speaker 8: this is just what the data show. If you look
Speaker 8: at the small business data between uncertainty and real GDP
Speaker 8: was positive from about late eighties up to about twenty fifteen,
Speaker 8: and now it's gone negative, but not by much so
Speaker 8: the correlation is only about minus point two. So as
Speaker 8: much as we talk about uncertainty, it's probably over overwrought
Speaker 8: and exaggerated. Like this can't go on all year. And
Speaker 8: my own working assumption is that the president is a
Speaker 8: great negotiator, He's going to get something done. And then
Speaker 8: we're going to in the economy is going to be okay.
Speaker 2: The bottom line is the polling is cratering. I don't
Speaker 2: know where it is. I don't know where it's going
Speaker 2: to be in a week or two. There'll be more polls.
Speaker 2: There always are. The concern out there is quote unquote
Speaker 2: empty shells. You've served time with President Trump. What's going
Speaker 2: to be the reaction of this administration if we get
Speaker 2: empty shelves.
Speaker 8: I don't think we're going to get empty shells, Tom,
Speaker 8: for a variety of reasons. I think a lot of
Speaker 8: that is just fear fear miiring in some sense. You
Speaker 8: mentioned the polls, and you have to be careful with
Speaker 8: the polling because I know the internal polling that the
Speaker 8: president uses is not showing that weakness, and neither do
Speaker 8: other good polls like grass MUSCIN. Some of these polls
Speaker 8: from ABC, Washington Post to me do not accurately reflect
Speaker 8: his base of support because it's always been a real
Speaker 8: difficulty in gaining the mag of person in that sample.
Speaker 8: And as someone I used to work with us to say,
Speaker 8: there's a lot of propaganda polling, So I'd be very
Speaker 8: careful on that. The equity market has recovered nicely off
Speaker 8: its lows. The bond markets down about fifty bases points
Speaker 8: from where it was in December. I'm watching gas and
Speaker 8: oil prices. Those are moving lower. That's important. Those kitchen
Speaker 8: table issues are really key to many of the Trump voters,
Speaker 8: and that ultimately will matter more than I think some
Speaker 8: of these other metrics. But we'll see. I mean, I'm assuming,
Speaker 8: of course that these are going these policies are going
Speaker 8: to work, and economy is going to be okay. If
Speaker 8: it turns out the end of the year, you're right
Speaker 8: and there's nothing on the shelves down.
Speaker 2: I got to interrupt in the time we have. Thank
Speaker 2: you Ian Bremer for sending this over to me. Really
Speaker 2: appreciate Ian Bremer being out front the president of the
Speaker 2: United States on a day of election in Canada. And
Speaker 2: it's a long, long, true social whatever tweet. I've got
Speaker 2: to find it here now. If Canada becomes the chaerished
Speaker 2: fifty first state of the United States of America, no
Speaker 2: more artificially drawn line from many years ago on the
Speaker 2: day of an election of our neighbor to the north,
Speaker 2: that has gotta be kidney.
Speaker 8: But but Tom, this is true, No trolling show no,
Speaker 8: there is, there is a budget.
Speaker 7: I went to.
Speaker 2: Canada.
Speaker 8: Well, Vassar certainly is not this college that I went
Speaker 8: to when I graduated in ninety one. I could tell
Speaker 8: you that. But look, this is Trump trolling and having
Speaker 8: fun with it. There's no way that Canada is going
Speaker 8: to be the fifty first state. Ian should know better
Speaker 8: when he comments on that.
Speaker 5: So talk to us about I think what's important coming
Speaker 5: up here is we got to get a tax bill done,
Speaker 5: and that's.
Speaker 4: Going to be great.
Speaker 8: You well, that's exactly right. That's the point that I've
Speaker 8: and that is that the terriffs are obviously important, and
Speaker 8: I've been arguing that we're gonna have some clarity on
Speaker 8: these tariffs because there even though they won't be scored
Speaker 8: in the CBO data, they will they'll be used to
Speaker 8: get preps some of these fiskly conservative people on board.
Speaker 8: Right now, the terriffs, this is only through March, and
Speaker 8: the April data are going to show more strength. We're
Speaker 8: generating one hundred billion and tariff revenue this year, so
Speaker 8: that's a big number. We need the budget done because
Speaker 8: the budget is going to give clarity on taxes. If
Speaker 8: the budget drags on, you know, past the summer recess,
Speaker 8: and we're now in Q three. We're gonna have a
Speaker 8: problem on the account of.
Speaker 2: Fifteen seconds is all I got. We need to have
Speaker 2: you back, Joe. Is tariff revenue gonna substitute for a
Speaker 2: lower income tax burden.
Speaker 8: It will offset the revenue loss from no tax on
Speaker 8: tips over time and some of the Social Security benefits,
Speaker 8: so effectively, Yes, Joe Oliver on.
Speaker 2: You, thank you so much. This morning with SMBC and
Speaker 2: Legal Securities.
Speaker 1: This is the Bloombergs Surveillance Podcast. Listen live each weekday
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Newspapers at least what do you have?
Speaker 9: Okay, So I wanted to start with this one that
Speaker 9: stuck out to me. This was and the Wall Street
Speaker 9: Journal says a new group of people are turning to
Speaker 9: weight loss drugs like ozempic. It's not kind of the overweight,
Speaker 9: heavily overweight. It's amateur athletes that are looking to raise
Speaker 9: their performance. So you know the ones who go out
Speaker 9: and do like the five k or maybe a triathlon
Speaker 9: or something like.
Speaker 5: Weight train every day.
Speaker 9: Okay, show just turn it out there, thanks, but like runners, cyclists,
Speaker 9: anything like that. So the Wall Street journalist bokes and
Speaker 9: they said their bodies are feeling stronger. They said that
Speaker 9: they've shaved like a minute off of their five k time,
Speaker 9: which is huge yep if you're one of those runners.
Speaker 9: But they're warning that you know what, if you suppress
Speaker 9: too much of your appetite, it's not good if you're
Speaker 9: an athlete at that kind of caliber because it can
Speaker 9: affect you.
Speaker 2: And then some of them do I get the whole people,
Speaker 2: but other side effects.
Speaker 9: Different people have different side effects depending on what your
Speaker 9: NAS dose is, yes, and what your dosage is. So
Speaker 9: that's why doctor suggests like microdosing, like giving smaller amounts
Speaker 9: of it. But it's just a new growing group.
Speaker 2: What do you think you're the only one in the
Speaker 2: stern order control room healthy. Would you take I should say,
Speaker 2: slide for seconds off your sterling five kids?
Speaker 9: So I don't think I would. I mean it's because
Speaker 9: of the side effects. I don't think it's worth it.
Speaker 9: But that's just that's just my next to the Okay
Speaker 9: egg price is coming back down. Costco update.
Speaker 6: I went there.
Speaker 9: They're in the seven dollars range now for the two dozen,
Speaker 9: so getting a little bit better. But the effects of
Speaker 9: the sky high rise still being felt. So you had
Speaker 9: tractor supply. They're halfway through. They have this annual baby
Speaker 9: chick sales event and apparently they have strong results. So
Speaker 9: the CEO said that the core customer base, they're expanding
Speaker 9: their flock. But what they pointed out is that they
Speaker 9: have a strong from new customers who want them for
Speaker 9: their backyard, so more people are buying them so that
Speaker 9: they can raise the chickens.
Speaker 5: What do you do from your side?
Speaker 2: What do you do? I got a chicken coop. It's
Speaker 2: just off the frick. I mean you go down to seventy.
Speaker 2: I got fourteen chickens going just off the frick. They
Speaker 2: just reopened the free collection. I saw spectacular renovation success
Speaker 2: of the frick. And you know see they called me
Speaker 2: up and they just said the chicken coop doesn't cut.
Speaker 5: You know, got to take that out to make more chickens.
Speaker 2: Well, you think this is funny, You don't understand. Coyotes
Speaker 2: in Central Park next there you go there you go.
Speaker 9: Okay, last one, Paul this saod that's me because of you.
Speaker 9: You're a Yellowstone like big fan. Okay, So Bloomberg's Greef time.
Speaker 9: Lucas Shaw had.
Speaker 2: This great really really.
Speaker 9: Breaks it down as to how this became this three
Speaker 9: billion out of franchise and then where it goes next
Speaker 9: from here, So it really breaks it down. I mean
Speaker 9: it talked about Taylor Sheridan Granting ready to quit. He
Speaker 9: didn't want to make it because he was, you know,
Speaker 9: getting a lot of feedback. He sold it to HBO,
Speaker 9: who decided not to go ahead with it. Then it
Speaker 9: landed at Paramount and now it's one of the most
Speaker 9: valuable franchises in Hollywood.
Speaker 2: Yeah.
Speaker 5: I mean he's done two or three prequels and there's
Speaker 5: more coming. The risk is here that they're just going
Speaker 5: to burn through this whole concept too quickly. But you know,
Speaker 5: you make money, why you can I guess so. But again, yeah,
Speaker 5: it's been a huge, huge franchise, and they're gonna have
Speaker 5: spinoffs from the Yellowstone Story show which ended, They're gonna
Speaker 5: have spinoffs using some of the existing characters.
Speaker 4: So more to come.
Speaker 2: You seem, like Lucas said nineteen twenty three in.
Speaker 9: Nineteen eighty three.
Speaker 4: Yep, exactly.
Speaker 5: No, I have not seen him. I have not gotten
Speaker 5: into them, but I know they're super popular. But I'll
Speaker 5: be looking for the new spinoffs from the existing yellow Stone.
Speaker 9: Right, there's like Dutton Ranches a good Anyfore, I talked to.
Speaker 2: You more about this because I thought the Lucash say
Speaker 2: it was just I'm.
Speaker 9: Glad you to get you to how Paramount lost a
Speaker 9: lot of money from it, tons.
Speaker 2: Of money, and then boom. We'll talk to Paul about
Speaker 2: that later.
Speaker 6: Folks.
Speaker 2: I think it is, you know, for the culture of America.
Speaker 2: It's really something like, how do you invest in all
Speaker 2: these It needs to be easy. I mean, you know,
Speaker 2: you were little Richard in the fifties, Lisa, tell you.
Speaker 2: Thank you so much.
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