WEBVTT - Tariffs, Inflation, and Bank Earnings 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.200 --> 0:00:30.000 A Landa lining with us was Blackrock right now hugely. 0:00:30.200 --> 0:00:32.680 We got a great set of guests to day now solid. 0:00:32.800 --> 0:00:35.879 It's like, you know, summer dunkin Donuts, you have the 0:00:35.880 --> 0:00:37.080 little dunkin Donut pause. 0:00:37.400 --> 0:00:39.640 Yeah, you know, it's like it's coming in studio to the. 0:00:39.880 --> 0:00:42.040 Studio, and it's like they just they just they're just 0:00:42.080 --> 0:00:45.320 coming in for the from Mike's air conditioning. Don't kid yourself, 0:00:45.479 --> 0:00:47.600 it's cooler here than Larry's air conditioning. 0:00:47.880 --> 0:00:50.800 Good morning, Amanda. I have to impress you. 0:00:51.320 --> 0:00:54.120 I looked at the not the FED yield curve, which 0:00:54.160 --> 0:00:57.080 is not the two year ten year, but the two 0:00:57.240 --> 0:01:01.480 year thirty year curve. I regressed it back three decades 0:01:02.200 --> 0:01:05.120 and we're not even to like normal steepness now, are 0:01:05.120 --> 0:01:05.680 we right? 0:01:05.800 --> 0:01:07.160 Good morning? Thank you for having me. 0:01:07.680 --> 0:01:10.160 You're hitting on one of the themes that is actually 0:01:10.200 --> 0:01:14.080 pretty consistent across our platform, which is an expectation for 0:01:14.200 --> 0:01:18.119 steeper curves, and I think normal, yes, and I think 0:01:18.160 --> 0:01:22.840 we've already had some steepening. But the expectation across a 0:01:22.959 --> 0:01:26.160 variety of different tasks is that that steepening trend could continue, 0:01:26.680 --> 0:01:29.920 driven by a multitude of factors, but at the long end, 0:01:30.319 --> 0:01:33.080 the fiscal situation that ranks among them. And I think 0:01:33.720 --> 0:01:36.280 from our perspective, and this goes back to our views 0:01:36.280 --> 0:01:39.040 on corporate credit. When we're allocating to corporate credit, we're 0:01:39.040 --> 0:01:41.480 doing so because of yield and income and carry, not 0:01:41.640 --> 0:01:45.800 because importantly we expect a long, a material rally in 0:01:45.880 --> 0:01:47.080 rates that would boost total return. 0:01:47.240 --> 0:01:49.680 So Marcus Ashworth does a heavy lifting for me at 0:01:49.720 --> 0:01:52.600 Queen Victoria Street. All I do, folks, is gammer and 0:01:52.600 --> 0:01:57.120 go to lunch. Ashwarth really works. European long bonds are 0:01:57.200 --> 0:02:01.160 near their cell by date on the desk. Do you 0:02:01.200 --> 0:02:03.800 have the tension I have when I look at a 0:02:03.840 --> 0:02:07.720 five year thirty or a Japanese twenty or a French ship. 0:02:07.880 --> 0:02:09.600 It's like a game of risk, folks. 0:02:10.040 --> 0:02:13.440 I mean, I think all of our platforms are focused 0:02:13.480 --> 0:02:16.720 on where can they get the best attractive return, and 0:02:17.120 --> 0:02:20.000 oftentimes outside the US is something that's on the radar 0:02:20.080 --> 0:02:20.480 for sure. 0:02:20.720 --> 0:02:22.160 So are you buying the I'm going to make some 0:02:22.200 --> 0:02:23.880 news here, are you buying the French thirty? 0:02:24.080 --> 0:02:25.880 Well, I think it just depends on the mandate and 0:02:26.000 --> 0:02:28.040 how they're allocating across. But I do think when you 0:02:28.040 --> 0:02:31.280 think about some of the fiscal developments in Europe, whether 0:02:31.320 --> 0:02:35.040 it's German infrastructure defense spending right like, you have a 0:02:35.040 --> 0:02:37.640 return of yield support in Europe that wasn't there for 0:02:37.680 --> 0:02:39.919 the past several years. It wasn't that long ago that 0:02:39.960 --> 0:02:42.680 we were dealing with negative rates in Europe, and so 0:02:42.760 --> 0:02:45.639 we do have a much more attractive I think backdropp 0:02:45.680 --> 0:02:48.440 or income and yield and so absolutely Tom outside of 0:02:48.560 --> 0:02:52.240 US exposures are absolutely on the suite of available options 0:02:52.240 --> 0:02:53.520 depending upon the portrac. 0:02:53.560 --> 0:02:56.080 In the US market, the US corporate highild market, I'm 0:02:56.080 --> 0:02:58.320 looking at the id GO function on the Bloomberg terminal, 0:02:58.400 --> 0:03:00.480 gives me all the returns across all fai s income 0:03:00.880 --> 0:03:03.760 that's been the best performer, like by far, how do 0:03:03.760 --> 0:03:04.880 you think about the hygyiold market. 0:03:05.000 --> 0:03:08.800 So this is something that on actually in early April 0:03:08.840 --> 0:03:13.720 April tenth, we had outlined an expectation that actually corporates 0:03:13.800 --> 0:03:15.919 might be able to navigate this, and we were comfortable 0:03:15.960 --> 0:03:19.280 selectively moving down in credit quality into the high end 0:03:19.280 --> 0:03:21.040 of high yeld, not chasing all the way down the 0:03:21.040 --> 0:03:23.000 credit spectrum, but into the high end of highyield. And 0:03:23.080 --> 0:03:25.520 as you noted, doble B's have won one of the 0:03:25.520 --> 0:03:28.280 best performers so far you're to date. We're expecting that 0:03:28.360 --> 0:03:30.600 to continue. One of the questions that my team gets 0:03:30.600 --> 0:03:34.200 constantly is what explains the resilience in high yield spreads 0:03:34.280 --> 0:03:36.880 given all of the uncertainty we actually dug into this 0:03:37.000 --> 0:03:40.200 last week to a large extent, And I think the 0:03:40.280 --> 0:03:43.000 key takeaway from us is that corporates have a lot 0:03:43.040 --> 0:03:46.480 of levers internally that they can flex to mitigate this 0:03:46.640 --> 0:03:49.440 uncertainty and the impact of tariffs, and we're seeing it 0:03:49.480 --> 0:03:51.640 in real time, and I think that's part of the 0:03:51.680 --> 0:03:54.600 reason why HyG yield and IG spreads have been so resilient. 0:03:54.800 --> 0:03:57.320 Never mind the fact that the technicals are really, really supportive. 0:03:57.720 --> 0:04:00.200 It's like the NFL, we got a whole team in 0:04:00.200 --> 0:04:04.600 a control room in downtown Manhattan. Kylin just emails from 0:04:04.600 --> 0:04:07.440 our surveillance control over sure where we need to rule. 0:04:07.600 --> 0:04:08.960 That was a massive jargon. 0:04:09.280 --> 0:04:12.600 So when a high yield spreads are tight, Paul Helby, 0:04:12.680 --> 0:04:16.000 that's price up, yield down, and so the yield is 0:04:16.080 --> 0:04:17.279 closer to the government. 0:04:17.360 --> 0:04:19.200 I think that's what the bond people think. Okay, I 0:04:19.200 --> 0:04:20.960 mean I learned define Lisa bromok. 0:04:20.600 --> 0:04:22.280 Okay, they say the ref's got to go out in 0:04:22.320 --> 0:04:22.599 the field. 0:04:22.680 --> 0:04:24.680 We can continue to talk to Amanda after that. 0:04:25.120 --> 0:04:26.640 So what are we thinking about earning share? What are 0:04:26.640 --> 0:04:28.119 you guys going to be looking for from an earning 0:04:28.160 --> 0:04:29.240 season this year? 0:04:29.360 --> 0:04:31.040 Yeah, and I think just to go back to your 0:04:31.040 --> 0:04:34.039 point time on spreads, the tighter spreads just means a 0:04:34.120 --> 0:04:37.200 receptivity towards credit risk, right, more comfort towards credit risk. 0:04:37.200 --> 0:04:39.520 That's how we would think about it heading into earnings. 0:04:39.560 --> 0:04:41.160 One of the key things that we're watching is the 0:04:41.200 --> 0:04:44.400 speedback loop between corporate margins, the layoff rate, which is 0:04:44.440 --> 0:04:48.679 still low, consumer spending in overall economic activity right now. 0:04:49.120 --> 0:04:52.159 If you can see this on the Bloomberg terminal, average 0:04:52.279 --> 0:04:56.200 EBITDUM margins for ig are above twenty percent. Average EBITDUM 0:04:56.240 --> 0:04:58.640 margins for high yield are above thirty percent. So what 0:04:58.640 --> 0:05:02.159 we're watching is is there pressure on those margins because 0:05:02.160 --> 0:05:05.159 of higher input costs for example, and do corporates flex 0:05:05.200 --> 0:05:07.120 that lay off tool more aggressively? But going back to 0:05:07.160 --> 0:05:10.919 the earlier discussion, actually, I think we've been pleasantly surprised 0:05:10.920 --> 0:05:13.240 that the multitude of levers that corporates can flex here, 0:05:13.320 --> 0:05:15.640 And so what we're really watching for is is there 0:05:15.680 --> 0:05:19.520 a middle ground between how these corporates navigate this, whether 0:05:19.560 --> 0:05:23.120 that's vendor relationships, inventory purchases, the list goes on to 0:05:23.279 --> 0:05:26.240 navigate these this uncertainty and the policy. 0:05:26.560 --> 0:05:29.120 Because we're really not seeing it in inflation data, yet 0:05:29.200 --> 0:05:32.360 it doesn't appear to be so maybe the consumers aren't 0:05:32.360 --> 0:05:33.719 going to bear the big brunt bed I don't know. 0:05:33.760 --> 0:05:36.400 I think our expectation is that inflation is just stubbornly 0:05:36.520 --> 0:05:37.280 above target. 0:05:37.440 --> 0:05:39.120 It makes it difficult for the FED to cut in 0:05:39.160 --> 0:05:39.680 this environment. 0:05:39.720 --> 0:05:41.960 If you dig under the surface from yesterday's data, you 0:05:42.000 --> 0:05:46.120 did see some categories have upward pressure, and I think 0:05:46.120 --> 0:05:49.120 it was telling actually that we were never expecting a 0:05:49.160 --> 0:05:52.320 cut in July, and I thought even September was difficult. 0:05:52.720 --> 0:05:54.800 The market seems to be further pricing out the next 0:05:54.920 --> 0:05:56.960 bed rate cut, and I think that's probably appropriate. 0:05:57.040 --> 0:05:59.920 Don't be a stranger more questions, is your conditioning okay? 0:06:00.040 --> 0:06:01.040 It's great, better. 0:06:00.800 --> 0:06:02.280 Than Blacklow come in to line him. 0:06:02.279 --> 0:06:04.640 Thank you so much, greatly appreciate it. 0:06:10.040 --> 0:06:13.640 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:06:13.680 --> 0:06:16.839 weekday afternoons from seven to ten am Eastern. Listen on 0:06:16.960 --> 0:06:20.599 Applecarplay and Android Auto with the Bloomberg Business app, or 0:06:20.760 --> 0:06:22.800 watch US live on YouTube on the. 0:06:22.800 --> 0:06:25.600 Banker Innings and Now with Goldman, Sachs and Morgan standing out. 0:06:25.680 --> 0:06:29.840 Someone with decades of experience here, Gerard Cassidy. Gerard, I've 0:06:29.880 --> 0:06:32.760 been dying to ask you this question. I got a 0:06:32.880 --> 0:06:36.080 JP Morgan with an eighteen percent return on equity. 0:06:36.760 --> 0:06:42.160 Everybody is factors away in a ten, nine and eight an. 0:06:42.120 --> 0:06:46.719 Eleven percent return on equity. Is JP Morgan unique and 0:06:46.880 --> 0:06:49.719 superior or the others lagging? 0:06:49.800 --> 0:06:50.400 Which is it? 0:06:52.320 --> 0:06:56.159 I think it's that JP Morgan is unique and superior, 0:06:56.560 --> 0:06:59.000 partly due to the fact, you might recall, during the 0:06:59.040 --> 0:07:02.440 pandemic there was a surge of deposits in the US 0:07:02.440 --> 0:07:05.839 banking industry due to the actions taken by the Federal 0:07:05.880 --> 0:07:09.080 Reserve in the US government. JP Morgan, along with the 0:07:09.080 --> 0:07:12.240 other big banks saw a big increase in their deposits, 0:07:12.360 --> 0:07:16.960 and JP Morgan invested them in a very short duration portfolio, 0:07:17.200 --> 0:07:20.560 cash up at the FED and overnight funds, whereas other 0:07:20.600 --> 0:07:24.000 banks took duration risks, like Bank America. As a result, 0:07:24.320 --> 0:07:28.120 their profitability at JP Morgan as far as superior than 0:07:28.160 --> 0:07:31.160 their peers. The other important part time is that their 0:07:31.200 --> 0:07:36.120 efficiency ratio expenses divided by revenues is around fifty two percent, 0:07:36.640 --> 0:07:39.480 much lower than any of its peers. And that's the 0:07:39.560 --> 0:07:41.440 other factor why they stand out. 0:07:41.800 --> 0:07:44.560 Gered. You and I go so far back. We used 0:07:44.560 --> 0:07:48.080 to go to the Saint Patrick's state party in Boston 0:07:48.120 --> 0:07:50.120 where Albert Gallaton would show up. 0:07:50.360 --> 0:07:53.720 I mean, we go way back. What happens the day 0:07:53.840 --> 0:07:57.680 Jamie Diamond decides to retire? I mean, what happens to 0:07:57.800 --> 0:07:58.520 JP Morgan? 0:07:59.000 --> 0:08:02.360 You know, does it? Does it? Crator? Do they move on? 0:08:02.880 --> 0:08:05.080 How do you see that game happening? Gerard? 0:08:06.520 --> 0:08:10.440 They certainly do not Creter in our review, He's got 0:08:10.480 --> 0:08:15.280 some very strong era parents, in particular Marion Lake, who 0:08:15.360 --> 0:08:18.680 heads up the Consumer Bank. But Tom, you're bringing up 0:08:18.720 --> 0:08:21.840 a good point, because when he steps down, the stock 0:08:22.000 --> 0:08:25.200 is not going to react well to that news. The 0:08:25.240 --> 0:08:28.960 guy is really in a class by his own. He's 0:08:28.960 --> 0:08:31.440 in the Hall of Fame and bank Cegos and he's 0:08:31.440 --> 0:08:34.079 going to be hard to replace. But it doesn't mean 0:08:34.200 --> 0:08:36.960 JP Morgan crashes down. But it may lose some of 0:08:37.040 --> 0:08:40.320 its momentum on the day of the announcement, But as 0:08:40.360 --> 0:08:44.559 they demonstrate under the new leadership, with whoever's at the helm, 0:08:44.880 --> 0:08:48.320 I think you'll see them over time gravitate back to 0:08:48.320 --> 0:08:50.319 where they were when he was in charge. 0:08:50.720 --> 0:08:51.080 Gerard. 0:08:51.120 --> 0:08:53.679 When President Trump was elected to a second term here, 0:08:53.760 --> 0:08:57.080 one of the Trump trades, if you will, was to 0:08:57.080 --> 0:09:00.320 own financials bank stocks here in large part to the 0:09:00.360 --> 0:09:04.920 expectation maybe looser or regulatory framework. Is that kind of 0:09:04.920 --> 0:09:07.880 playing out? How does the market discounting that these days? 0:09:09.240 --> 0:09:12.760 Actually, Paul, it played out extremely well after he was 0:09:12.760 --> 0:09:17.719 elected in November, and the bank stocks were clear outperformers 0:09:17.800 --> 0:09:18.880 in twenty twenty four. 0:09:19.360 --> 0:09:21.800 They were also doing very well through the end. 0:09:21.679 --> 0:09:26.040 Of February, outperforming the market, and then of course the 0:09:26.080 --> 0:09:30.640 Trump tariff policies were announced, the stocks sold off very hard. 0:09:31.080 --> 0:09:33.319 But since the first week of April, you. 0:09:33.280 --> 0:09:36.560 Know, the bank stocks, not including yesterday's trading action, the 0:09:36.640 --> 0:09:40.680 bank indicies had recovered about thirty five percent, which put 0:09:40.720 --> 0:09:43.200 them near to date ahead of the S. 0:09:43.240 --> 0:09:45.959 And P five hundred again the bank indices. 0:09:46.559 --> 0:09:49.000 So I think what you're seeing is that the Trump 0:09:49.080 --> 0:09:53.120 trade is still working for the banks. And the reason 0:09:53.280 --> 0:09:56.880 for Paul is that the deregulation outlook for the banks 0:09:57.160 --> 0:09:58.160 is very positive. 0:09:59.520 --> 0:10:04.160 So yard here is by the group, here is it 0:10:04.400 --> 0:10:07.560 try to be selective. How are your clients thinking about 0:10:07.640 --> 0:10:09.640 some of these big banks, because boy, the earnings over 0:10:09.679 --> 0:10:12.280 there today and yesterday you look pretty solid across the board. 0:10:13.600 --> 0:10:14.360 They really do. 0:10:14.440 --> 0:10:17.240 And it's a good question, and you can certainly buy 0:10:17.240 --> 0:10:19.439 the group through one of the ETFs that we're all 0:10:19.480 --> 0:10:22.280 familiar with. But I think if you are in the 0:10:22.360 --> 0:10:24.959 camp that the Federal Reserve could be lowering shor term 0:10:25.040 --> 0:10:27.640 interest rates between now and the end of the year 0:10:27.720 --> 0:10:29.679 twenty five to fifty basis points. 0:10:29.960 --> 0:10:30.760 Maybe a year. 0:10:30.640 --> 0:10:32.520 From now the short end of the curve is down 0:10:32.840 --> 0:10:36.440 seventy five or even one hundred basis points. Is a 0:10:36.679 --> 0:10:40.560 positive slope to the curve, assuming the tenure stays anchored 0:10:40.600 --> 0:10:43.720 at four and a half percent, a three and a 0:10:43.720 --> 0:10:46.280 half three and three quotas sped funds four and a 0:10:46.360 --> 0:10:48.360 half ten uyere is very. 0:10:48.200 --> 0:10:49.240 Positive for the banks. 0:10:49.240 --> 0:10:51.920 In fact, you have to go back twenty years to 0:10:52.040 --> 0:10:54.440 find that kind of environment where the Fed funds rate 0:10:54.440 --> 0:10:57.040 it was over three percent with a positive slope. So 0:10:57.120 --> 0:11:00.840 that would suggest regional banks could which I've logged the 0:11:00.880 --> 0:11:03.240 money centers could be the play for the next six 0:11:03.280 --> 0:11:04.079 to twelve months. 0:11:04.160 --> 0:11:07.600 Gered I need to recover my portfolio. I don't own bitcoin, 0:11:07.760 --> 0:11:10.520 I didn't buy JP Morgan. Give me the small bank 0:11:10.640 --> 0:11:14.040 stock at Gerard Cassidy at Tucker Anthony. 0:11:13.840 --> 0:11:15.079 RLDA this morning. 0:11:15.080 --> 0:11:18.960 That's a great name, it's not so small. 0:11:19.440 --> 0:11:23.240 The challenge Tom is that the small banks are being acquired. 0:11:23.480 --> 0:11:27.720 But I steer people to popular in Puerto Rico. And 0:11:28.080 --> 0:11:33.040 what though it's not a community bank anymore. Puerto Rico 0:11:33.120 --> 0:11:37.240 has fully recovered, obviously from the terrible years they had 0:11:37.520 --> 0:11:40.360 five years ago. And this is the leading bank in 0:11:40.400 --> 0:11:42.839 the on the island and they're doing a great job 0:11:42.960 --> 0:11:45.280 and they have a ton of excess capital and the 0:11:45.320 --> 0:11:46.960 buyback should be very supportive. 0:11:47.040 --> 0:11:49.679 Plus has road trip to me short on it. 0:11:49.800 --> 0:11:53.359 Gerard Cassidy with RBC Capital Markets Legendary. 0:11:53.480 --> 0:11:57.320 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:11:57.400 --> 0:12:00.439 starting at seven am Eastern on Apple Corp Play Android 0:12:00.440 --> 0:12:03.480 Otto with the Bloomberg Business app. You can also listen 0:12:03.559 --> 0:12:06.800 live on Amazon Alexa from our flagship New York station. 0:12:07.360 --> 0:12:10.040 Just say Alexa play Bloomberg eleven thirty. 0:12:10.240 --> 0:12:11.119 This is well. 0:12:10.880 --> 0:12:14.679 Timed with David Malpass is making jokes about cors burying, 0:12:15.160 --> 0:12:17.720 you know, taking physics, call it, you know, a huge 0:12:17.760 --> 0:12:21.000 program back in her youth. But the scope and scale 0:12:21.000 --> 0:12:24.400 of what mister Melpass has done, including running for a 0:12:24.480 --> 0:12:27.560 Republican office within the Empire, stayed out of a pickup 0:12:27.600 --> 0:12:30.120 truck or a van. It's like you know, VW van 0:12:30.280 --> 0:12:33.880 or something. And he's done so much, including the former 0:12:33.960 --> 0:12:36.640 president at the World Bank, where thrilled he could join 0:12:36.720 --> 0:12:38.720 us this morning, David, this could be like a four 0:12:38.720 --> 0:12:39.680 hour conversation. 0:12:40.040 --> 0:12:42.720 There's a little bit going on. Hi, Tom and Paul, 0:12:42.840 --> 0:12:43.480 good to see you. 0:12:43.760 --> 0:12:46.400 I look at the Indonesian rupea. I'm sure it's the 0:12:46.440 --> 0:12:49.080 first thing you looked at this morning. And I got 0:12:49.120 --> 0:12:55.440 a moonshot of Indonesia weakness from twenty eleven. I guess 0:12:55.640 --> 0:13:00.640 is capitulate the right words. They've capitulated to Trump tariffs 0:13:01.200 --> 0:13:05.320 for the World Bank and for emerging markets. If we 0:13:05.360 --> 0:13:08.400 get Indonesia like tariffs, do they unravel? 0:13:10.640 --> 0:13:13.400 Currencies are really important to people. If you think about 0:13:13.440 --> 0:13:15.040 working people around the world. 0:13:15.080 --> 0:13:17.240 They buy that. All they do is get. 0:13:17.040 --> 0:13:19.600 A wage and then spend it and they and that's 0:13:19.640 --> 0:13:23.160 where inflation is the rub And so as you I 0:13:23.200 --> 0:13:25.960 do wake up every morning thinking about what currencies are 0:13:26.000 --> 0:13:29.400 doing around the world. There's a huge amount of pressure 0:13:29.440 --> 0:13:33.080 on weaker currencies and they're trying to find how they're 0:13:33.080 --> 0:13:36.240 going to interact in between the US and China. So 0:13:36.400 --> 0:13:38.920 that's the source of this, you know. The mistake, and 0:13:38.960 --> 0:13:42.280 we should remind people of this was becoming the world 0:13:42.360 --> 0:13:46.320 becoming dependent on China. We were all aware of how 0:13:46.400 --> 0:13:50.600 harmed Germany was by depending on Russia for their natural gas. 0:13:50.880 --> 0:13:54.800 Even starting with Reagan, he pleaded with the Europeans not 0:13:54.960 --> 0:13:58.559 to get stuck were the Soviet Union. So but in 0:13:59.160 --> 0:14:02.760 the recent years, year after year, we're more dependent on China. 0:14:02.880 --> 0:14:05.360 So that takes work to get a case. So you 0:14:05.800 --> 0:14:07.080 have the voice of the president. 0:14:07.160 --> 0:14:09.800 I mean you come from the Republican side. If you 0:14:09.880 --> 0:14:13.360 were to advise the group, mister Bessett and all, do 0:14:13.440 --> 0:14:18.520 we want to mandate a weaker dollar policy or is 0:14:18.520 --> 0:14:21.560 that feasible that we can we can tell the rest 0:14:21.560 --> 0:14:22.800 of the world what to do. 0:14:23.840 --> 0:14:27.160 It's clearly what we're doing is building manufacturing in the 0:14:27.280 --> 0:14:30.160 US so that it's competitive and that it can have 0:14:30.360 --> 0:14:34.080 verticals supply chains that get it done. You have to 0:14:34.080 --> 0:14:37.160 have small business loans, You have to have workers with skills, 0:14:37.240 --> 0:14:40.680 better education system, and they're working on that and that 0:14:40.800 --> 0:14:44.240 will work to give to give you the trade balance, 0:14:44.400 --> 0:14:45.760 more balanced trade. 0:14:45.480 --> 0:14:46.120 That we need. 0:14:46.520 --> 0:14:50.040 I think currencies are a slippery slope because once you 0:14:50.400 --> 0:14:53.600 weaken your currency, you get more prices, you get more 0:14:53.600 --> 0:14:56.520 inflation out of that. So my view is that we 0:14:56.600 --> 0:15:01.320 ought to be defending the dollar intense, defending the dollar 0:15:01.560 --> 0:15:03.640 and making clear to the world it's going to be 0:15:03.840 --> 0:15:08.080 the US dollar for fifty years and invest in US 0:15:08.280 --> 0:15:09.920 or losing. 0:15:10.160 --> 0:15:12.560 I can't say how much he bes shown the door 0:15:12.560 --> 0:15:13.680 at the White House faced. 0:15:15.520 --> 0:15:16.160 I don't think. 0:15:16.280 --> 0:15:18.960 I don't think that the White House wants good outcomes 0:15:19.000 --> 0:15:19.800 for workers. 0:15:20.120 --> 0:15:22.040 Come on, David, I'm gonna stop you. 0:15:22.120 --> 0:15:25.640 President Trump has a history at every step of saying 0:15:25.640 --> 0:15:27.720 he wants a week dollar to boost. 0:15:27.400 --> 0:15:33.000 Exports, he wants good outcomes for workers, and that's what's 0:15:33.080 --> 0:15:35.800 going on right now. So I'm not sure I agree 0:15:35.800 --> 0:15:39.200 with that. If you want the yield curved lower, you 0:15:39.480 --> 0:15:43.800 defend the dollar and everybody will invest in your bonds 0:15:44.160 --> 0:15:45.960 and in your bills, and. 0:15:45.880 --> 0:15:49.560 That is going on. Look at what's going on in Europe. 0:15:49.600 --> 0:15:52.880 The euro is strengthening and they're feeling their oats because 0:15:52.920 --> 0:15:56.920 they finally started doing some defense spending. And so that 0:15:57.200 --> 0:16:00.360 Trump is changing the world pretty rapidly in a way 0:16:00.360 --> 0:16:02.840 that we'll make it more secure from Russia and China, 0:16:03.520 --> 0:16:06.400 and we'll get a lot more investment into the US. 0:16:06.920 --> 0:16:10.440 But I don't think the markets should be should expect 0:16:10.440 --> 0:16:13.120 dollar weakness out of that policy. If you're doing good 0:16:13.200 --> 0:16:16.160 policies in the US, it's going to be dollars supportive. 0:16:16.720 --> 0:16:21.800 David, with all the tariff discussions going on, is globalization 0:16:22.720 --> 0:16:26.840 dead or dying because we all grew up with globalization, Well. 0:16:26.600 --> 0:16:29.080 We did, but it was a mistake in many ways. 0:16:29.120 --> 0:16:35.000 So globalization, so let's use two words. Globalization means getting 0:16:35.040 --> 0:16:38.640 parts from other countries in an efficient way. So that 0:16:38.720 --> 0:16:42.120 made sense in areas, But then was it sensible for 0:16:42.200 --> 0:16:45.280 Germany to get its energy from Russia? No, from the 0:16:45.280 --> 0:16:48.800 Soviet Communist Soviet Union and they cut sweet ardeals to 0:16:48.840 --> 0:16:51.680 do it. That was a mistake. Same with China. We 0:16:51.840 --> 0:16:56.320 just went too far and had no knowledge of what 0:16:56.360 --> 0:17:00.080 we were doing in terms of the dependence. So I 0:17:00.120 --> 0:17:04.520 think as we you know, people use words, So globalization 0:17:04.760 --> 0:17:07.160 is this word that we think we know what it means. 0:17:07.359 --> 0:17:08.560 But I think we will. 0:17:08.359 --> 0:17:12.560 Stay in a market based global economy where you can outsource, 0:17:13.160 --> 0:17:14.880 but a lot of it is going to be made 0:17:14.880 --> 0:17:16.119 in the United States. 0:17:16.520 --> 0:17:18.880 Tariffs in general, is that the tool to get us there? 0:17:18.960 --> 0:17:21.200 Do you think is that the best tool to get 0:17:21.240 --> 0:17:21.560 us there? 0:17:22.119 --> 0:17:25.160 What we know is that the WTO wasn't working, and 0:17:25.480 --> 0:17:29.919 the whole idea of most favored nation and permanent normal 0:17:30.040 --> 0:17:34.239 trading relationship didn't work. That was the whole system that 0:17:34.280 --> 0:17:38.360 the US pioneered and led on and really got hurt by. 0:17:39.040 --> 0:17:42.199 It was the idea of we lower ours to everybody 0:17:42.240 --> 0:17:44.920 at the same time, regardless of what they're doing. So 0:17:45.840 --> 0:17:49.000 that's getting that's getting a fully rethought. I think it 0:17:49.040 --> 0:17:52.919 can lead to a more balanced relationship. But you have 0:17:53.320 --> 0:17:54.879 you really have to start with it. 0:17:55.040 --> 0:17:55.359 China. 0:17:56.480 --> 0:18:00.639 You know, China is intensely communists and became a dominant 0:18:00.720 --> 0:18:02.480 country playing that game. 0:18:02.800 --> 0:18:04.760 We need a new game. Let me get the question 0:18:04.800 --> 0:18:05.199 out of the way. 0:18:05.240 --> 0:18:07.120 Have you been contacted by the White House and their 0:18:07.160 --> 0:18:08.320 new FED chairman search? 0:18:09.119 --> 0:18:12.600 I don't want to go into conversations. I want to 0:18:12.640 --> 0:18:15.520 really focus on how do you fix the FED? And 0:18:15.560 --> 0:18:17.920 you have to fix it in its models, in its 0:18:17.920 --> 0:18:20.920 balance sheet, and in its regulatory policy. This is going 0:18:20.960 --> 0:18:23.560 to take an intense effort by the whole board. There's 0:18:23.600 --> 0:18:27.000 got to be leadership of moving the board to the 0:18:27.080 --> 0:18:28.280 idea that they're. 0:18:28.160 --> 0:18:31.320 Different ways to If the president sets up a new 0:18:31.400 --> 0:18:35.080 chairman of whatever ILK, whether it's David Malbus or anyone else, 0:18:35.880 --> 0:18:39.399 can't the other presidents and governors just start dissenting, almost 0:18:39.440 --> 0:18:40.399 as a dissent vote. 0:18:41.320 --> 0:18:42.680 People will talk about that. 0:18:42.800 --> 0:18:46.439 I think leadership really can dominate within the FED system. 0:18:46.720 --> 0:18:49.560 You remember that it's not just the US FED. The 0:18:49.760 --> 0:18:52.920 FED is the central player in the global central banking 0:18:53.040 --> 0:18:56.920 system and has lots of latitude to make it work. 0:18:57.000 --> 0:18:59.679 Can you tell me why Glenn Hubbard's name is not 0:18:59.800 --> 0:19:03.400 being mentioned. I mean, he's absolutely definitive at Columbia. He's 0:19:03.440 --> 0:19:07.360 our most articulate supply side expert. Why in God's name 0:19:07.359 --> 0:19:09.560 as a president not talking to Professor Hubbard? 0:19:10.119 --> 0:19:13.040 Everyone you said our great candidates Kevin and Kevin and 0:19:13.080 --> 0:19:17.679 Scott and Glenn, and so I don't know the list. 0:19:17.960 --> 0:19:21.040 I hope that the search is wide and that that 0:19:21.119 --> 0:19:25.680 people recognize that we don't want incriminalism, we want really 0:19:25.680 --> 0:19:28.080 a sea change in how the FAT operates in a 0:19:28.119 --> 0:19:29.440 way that is confident. 0:19:29.640 --> 0:19:33.080 Is there any historical evidence back to McChesney martin nineteen 0:19:33.160 --> 0:19:35.439 fifty one that we're going to get a sea change 0:19:35.480 --> 0:19:36.520 within that institution? 0:19:36.880 --> 0:19:42.800 What yes on a case? So Paul Volker obviously was 0:19:42.840 --> 0:19:46.160 a sea change point him, well, said Jimmy Carter. 0:19:47.119 --> 0:19:53.159 As you think about it, Yellen even was a sea change, 0:19:53.200 --> 0:19:54.400 but to the negative side. 0:19:54.440 --> 0:19:57.480 So some are nice. Some part of what we're doing 0:19:57.680 --> 0:19:59.120 has to be to reverse. 0:19:59.200 --> 0:20:02.359 Album over there two minutes some sportsman like contact. 0:20:02.359 --> 0:20:03.879 Paul saved the interviews. 0:20:03.680 --> 0:20:05.000 With a little bit of hindsight here, what do you 0:20:05.000 --> 0:20:06.560 think this FED has gotten wrong? 0:20:07.240 --> 0:20:07.760 Has wrong? 0:20:08.000 --> 0:20:12.160 It's you know, the inflation obviously during Biden not recognizing it, 0:20:12.560 --> 0:20:17.600 but the keep keeping buying bonds when the rates were 0:20:17.640 --> 0:20:22.160