WEBVTT - Stocks Seek Cautious Recovery as Tariff Uncertainty Lingers 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 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. 0:00:27.360 --> 0:00:28.560 I will not mince words. 0:00:28.600 --> 0:00:31.560 This is a required read for anybody inside the Beltway 0:00:31.640 --> 0:00:32.240 this morning. 0:00:32.680 --> 0:00:34.520 It is a book from a time ago. 0:00:34.720 --> 0:00:38.360 Paul, you walked around because you were cool, because Douglas 0:00:38.760 --> 0:00:40.839 had a book with a sailboat on the cover as 0:00:40.880 --> 0:00:43.400 a lightful book that was against the tide, and it 0:00:43.440 --> 0:00:45.560 was absolutely definitive. I read every word of it, and 0:00:45.600 --> 0:00:49.760 we're thrilled that Professor Irwin could join us from Dartmouth today. 0:00:49.800 --> 0:00:51.800 Let me just get out of the way. Dougarr won 0:00:51.840 --> 0:00:54.440 a cup of coffee with a president this morning as 0:00:54.440 --> 0:00:56.640 he prepares the State of the Union. What would be 0:00:56.720 --> 0:00:58.760 your counsel to President Trump. 0:01:00.360 --> 0:01:02.000 I don't think you'd want to hear anything i'd have 0:01:02.080 --> 0:01:04.680 to say. I'd say the Supreme Court gave him hit 0:01:04.760 --> 0:01:07.759 him a favor by trying to put these tariffs on pause. 0:01:07.840 --> 0:01:11.400 But of course President has just reimposed these similar tariffs 0:01:11.480 --> 0:01:14.280 using different authority, so it had It was a very 0:01:14.280 --> 0:01:17.120 important decision. It was a very historic one, but just 0:01:17.240 --> 0:01:20.839 shunted the president to using different statutory authorities to levy tariffs, 0:01:20.959 --> 0:01:21.440 and he's going. 0:01:21.440 --> 0:01:22.399 To move forward with them. 0:01:22.520 --> 0:01:26.160 Will we see a legal battle of these new tariffs, 0:01:26.240 --> 0:01:30.800 Claudia Sum, it's away from her remit, which is monetary economics. 0:01:30.840 --> 0:01:34.440 But Professor Irwin, do you just assume further legal battles 0:01:34.720 --> 0:01:38.440 about ten percent or fifteen percent, one twenty whatever, two 0:01:38.480 --> 0:01:39.000 thirty this. 0:01:41.120 --> 0:01:43.160 Yeah, a lot of numbers are being thrown around in 0:01:43.280 --> 0:01:46.160 terms of the statutes. Yeah, so the new tariffs, which 0:01:46.160 --> 0:01:49.400 are ten percent, he's promised fifteen percent, but they haven't 0:01:50.200 --> 0:01:53.240 issued the executive order on that quite yet. Those will 0:01:53.240 --> 0:01:55.800 probably be subject to legal challenge. And that's because the 0:01:55.840 --> 0:01:58.680 statute allows for the president to impose tariffs in the 0:01:58.680 --> 0:02:02.560 cases of a balance of payments, deficit or disequilibrium, and 0:02:02.680 --> 0:02:05.120 it's not clear that in an era of floating exchange grades, 0:02:05.160 --> 0:02:07.560 whether it's actually a thing exists anymore. 0:02:07.920 --> 0:02:08.120 Now. 0:02:08.160 --> 0:02:09.799 The other side is that the terroffs can only be 0:02:09.840 --> 0:02:11.840 in effect for one hundred and fifty days and then 0:02:11.880 --> 0:02:15.240 it require congressional approval. So there's a lot of uncertainty 0:02:15.280 --> 0:02:17.160 about how this is going to play out over the next. 0:02:16.960 --> 0:02:17.720 Couple of months. 0:02:18.200 --> 0:02:20.959 Professor I guess most of our viewing and listening to 0:02:21.080 --> 0:02:23.320 audience what they know about teriffs they've learned over the 0:02:23.400 --> 0:02:27.040 last six, seven, eight years, which is just massive tariffs 0:02:27.040 --> 0:02:31.079 on all types of countries, all types of products across 0:02:31.160 --> 0:02:35.880 the board. But typically, how are tariffs historically used and 0:02:35.919 --> 0:02:37.920 how can they be most useful? 0:02:39.320 --> 0:02:43.120 Well, that's really why this administration marks such a sharp 0:02:43.160 --> 0:02:45.600 break from what we've seen in terms of historical experience. 0:02:46.040 --> 0:02:48.919 You know, you've probably mentioned smooth Holly on the air 0:02:49.240 --> 0:02:53.840 over the past couple of years. Before that actually smoothly itself. 0:02:54.160 --> 0:02:57.200 Congress determined tariffs. It's part of the legislative power of 0:02:57.400 --> 0:03:00.000 tax It's in Article one, section eight of the Constant. 0:03:00.639 --> 0:03:04.400 It was basically Congress's decision. 0:03:04.120 --> 0:03:04.560 What to do. 0:03:05.120 --> 0:03:09.000 Then powers began, delegate began being delegated to the president, 0:03:09.040 --> 0:03:11.040 and we entered the era after World War Two of 0:03:11.400 --> 0:03:15.200 the president negotiating trade rooms to reduce terifts and the 0:03:15.200 --> 0:03:17.000 tariffs have been sort of on a one way path 0:03:17.080 --> 0:03:20.040 down since World War Two. And that's when entered Trump 0:03:20.240 --> 0:03:23.919 and also when they start and that same authority starts 0:03:23.960 --> 0:03:27.240 being used to increase terrans once again across different products, 0:03:27.240 --> 0:03:29.880 across different countries in all manner of way. 0:03:30.280 --> 0:03:31.679 Worldwide and across the nation. 0:03:31.760 --> 0:03:35.080 This morning, Douglas Irwin of Dartmouth College, he is our 0:03:35.120 --> 0:03:39.200 definitive expert on trade only standing with him as Barry 0:03:39.440 --> 0:03:41.520 Ke and Green of Berkeley, we'll get professor I can 0:03:41.520 --> 0:03:44.520 agree on in a bid out with his new book, 0:03:44.520 --> 0:03:46.440 Paul Sweeney with Professor Irwin. 0:03:46.800 --> 0:03:48.920 Professor, we had the New York Fed come out with 0:03:49.440 --> 0:03:51.960 a report, I guess a week or so ago that said, 0:03:51.960 --> 0:03:55.720 you know, ninety percent issue of the tariffs have been 0:03:55.760 --> 0:04:01.160 born by the American economy, either importers, companies, and even consumers. 0:04:02.240 --> 0:04:05.720 Obviously the White House pushing back on that. Who pays 0:04:06.080 --> 0:04:09.800 Who pays really at the end of the day for tariffs. 0:04:10.840 --> 0:04:14.000 Well, the importer in the US actually writes the check, 0:04:14.440 --> 0:04:17.120 but then they pass it on to whoever they're selling 0:04:17.120 --> 0:04:18.680 the products to, and it sort of goes a lot 0:04:18.680 --> 0:04:22.599 of the value chain. That Federal Reserve, that FED study, 0:04:23.320 --> 0:04:26.400 it's been sort of erupted that finding that ninety percent 0:04:26.440 --> 0:04:29.640 of the terrorists get passed through to domestic purchasers. Either 0:04:29.680 --> 0:04:32.800 final consumers or businesses along the way. That's been confirmed 0:04:32.839 --> 0:04:34.920 by you know, at least half a dozen other studies. 0:04:35.279 --> 0:04:37.680 So study after study has sort of consistently shown that 0:04:37.720 --> 0:04:40.840 both for the Trump first term tariffs as well as 0:04:40.880 --> 0:04:42.000 these most recent lines. 0:04:42.520 --> 0:04:45.360 Medlon Marshall has a fabulous video out at the Wall 0:04:45.360 --> 0:04:47.640 Street Journal. I put it out about a week ago, folks. 0:04:47.680 --> 0:04:51.960 I'll redo that with the academic input of Douglas Irwin. 0:04:52.080 --> 0:04:56.839 Doug Your's three hours of trade policy, revenue restriction, reciprocity. 0:04:56.880 --> 0:04:58.920 We're not going to acquisit the end of the interview, 0:04:59.279 --> 0:05:02.760 but professor, and they're very chronological, and what I find 0:05:02.880 --> 0:05:06.640 interesting is the restriction using high tariffs to restrict the 0:05:06.680 --> 0:05:11.360 imports of McKinley in post Civil War America. I mean, 0:05:11.480 --> 0:05:14.640 they were all shown the door in the voting in 0:05:14.680 --> 0:05:20.320 eighteen ninety. The Republicans, including McKinley, basically lost their jobs. 0:05:20.560 --> 0:05:25.799 Do you anticipate that in November a McKinley eighteen ninety 0:05:26.000 --> 0:05:28.160 kind of vote by America. 0:05:29.279 --> 0:05:32.320 Well, that's a very interesting historical observation, and you're right 0:05:32.320 --> 0:05:34.880 it does have some residents for today. So I mentioned 0:05:34.880 --> 0:05:38.000 the new statutory authority that the President's levied these tariffs. 0:05:38.279 --> 0:05:39.880 After one hundred and fifty days, he might have to 0:05:39.880 --> 0:05:43.040 ask Congress to re up those tariffs. Does Congress want 0:05:43.080 --> 0:05:47.080 to vote for higher tariffs in the summer before midterm elections, 0:05:47.640 --> 0:05:51.280 when Republicans are already divided over trade policy? I don't 0:05:51.279 --> 0:05:55.880 think so. So it leads into the affordability AGCA in prices, 0:05:56.240 --> 0:05:59.560 and so I think tariffs could be toxic come this fall. 0:06:00.080 --> 0:06:02.559 What should China do? There's a lot of the press 0:06:02.640 --> 0:06:06.120 today about how China responds. I guess the president is 0:06:06.120 --> 0:06:08.560 going to Maybe Doug Irwin's going to carry the President's 0:06:08.600 --> 0:06:09.560 luggage to China. 0:06:09.720 --> 0:06:10.200 Could do that. 0:06:10.320 --> 0:06:11.080 I can see it. 0:06:11.279 --> 0:06:14.640 He could stay in Hong Kong and Shanghai rather at 0:06:14.680 --> 0:06:17.600 the Piece hotel where Henry Kissinger state yep, I mean 0:06:17.600 --> 0:06:19.680 it could do that. Professor Irwin, if you were to 0:06:19.720 --> 0:06:22.520 go to China with the president, how do you discuss 0:06:22.600 --> 0:06:25.480 this with Beijing and how do they respond? 0:06:26.440 --> 0:06:26.560 Well? 0:06:26.600 --> 0:06:28.880 I think what Beijing is looking for is stability in 0:06:28.920 --> 0:06:32.240 the bilateral relationship, and that's exactly what we don't have 0:06:32.320 --> 0:06:32.839 at the moment. 0:06:33.440 --> 0:06:33.600 Now. 0:06:33.600 --> 0:06:36.440 We do have special tariffs on China under a different 0:06:36.440 --> 0:06:39.880 provision of trade law, and those can be subject to negotiation, 0:06:39.960 --> 0:06:42.479 but we're sort of in this uneasy truce with Beijing 0:06:43.040 --> 0:06:45.719 about they're not going to restrict rare earths and we're 0:06:45.760 --> 0:06:48.440 not going to impose further tariffs. How we move out 0:06:48.440 --> 0:06:51.440 of that remains to be seen, and it really depends 0:06:51.440 --> 0:06:54.120 on what the administration has in mind. And then Beijing, 0:06:54.160 --> 0:06:56.000 I think is holding its cards close to his chest 0:06:56.040 --> 0:06:58.320 and probably won't do much until it sees what the 0:06:58.360 --> 0:06:59.480 administration wants. 0:07:00.520 --> 0:07:02.960 Professor. One of the I guess. 0:07:02.800 --> 0:07:07.240 The results of the Supreme Court decision last week is 0:07:08.080 --> 0:07:11.160 maybe some companies, some individuals may want to get some 0:07:11.240 --> 0:07:14.360 rebates of the tariffs that they've incurred in. Just today, 0:07:15.400 --> 0:07:18.320 FedEx sues the United States to get full refund of 0:07:18.320 --> 0:07:20.560 emergency tarriffs after Supreme Court ruling. 0:07:21.440 --> 0:07:23.680 Do we have any idea how that process would work. 0:07:25.040 --> 0:07:27.520 We have no idea at the moment. So the administration 0:07:27.600 --> 0:07:30.400 has promised that there will be rebates, but they could 0:07:30.440 --> 0:07:32.920 be slow walked, and that's why I think we'll see 0:07:32.960 --> 0:07:35.800 lawsuits to try to accelerate the process. It could take 0:07:35.840 --> 0:07:39.400 months or even years. Doesn't necessarily have to take that long, 0:07:39.720 --> 0:07:42.040 but it's clear the administration is reluctant to give up 0:07:42.040 --> 0:07:45.240 that revenue, and no processes identified, at least as far 0:07:45.280 --> 0:07:48.040 as I know about what the process will be to 0:07:48.560 --> 0:07:51.920 adjudicate all those claims for the revenue that is amounting 0:07:51.960 --> 0:07:54.200 to tens of billions of dollars to going back to 0:07:54.240 --> 0:07:56.200 American businesses that imported foreign goods. 0:07:56.280 --> 0:08:00.480 Come on, Blache Flower is gonna say, dougg Ruin, David Armth, 0:08:00.840 --> 0:08:04.760 just print more debt. I mean, do we need that revenue? 0:08:05.280 --> 0:08:09.520 I mean, I haven't seen a clear case that we must, must, 0:08:09.600 --> 0:08:12.040 must have the revenue. The first of your. 0:08:11.920 --> 0:08:16.360 Three rs, Well, you're right that the Trump administration has 0:08:16.400 --> 0:08:19.680 used all three of those ours, and revenue has been 0:08:19.680 --> 0:08:22.320 an important one. And they certainly made the case on 0:08:22.680 --> 0:08:25.239 for the tariffs on the revenue grounds. But they're legally 0:08:25.320 --> 0:08:27.680 obligated I think to turn it back. But the question 0:08:27.800 --> 0:08:30.920 is it's not a matter of government have the money, 0:08:30.920 --> 0:08:34.760 but can they go back through the records and isolate 0:08:34.760 --> 0:08:37.480 those who those firms that actually paid the tariffs in 0:08:37.520 --> 0:08:38.079 the first place. 0:08:38.160 --> 0:08:41.200 The continuum of your against the tide, folks, I can't 0:08:41.200 --> 0:08:44.319 emphasize enough. It was like Daniel Jurgen's surprise. Even if 0:08:44.320 --> 0:08:46.760 you didn't read it, you walked around with it because 0:08:46.760 --> 0:08:47.360 it was cool. 0:08:47.600 --> 0:08:50.320 You had to be cool. So Dougrans against the tides. 0:08:50.559 --> 0:08:54.960 The absolute foundation of your book is Robert Solo. 0:08:55.080 --> 0:08:55.960 Technology. 0:08:56.160 --> 0:08:59.800 Technology comes to the rescue is America expands and that 0:09:00.360 --> 0:09:05.040 do you just assume our international trade tensions, Doug Irwin 0:09:05.480 --> 0:09:09.960 will get fixed by further technology leadership in America. 0:09:11.480 --> 0:09:14.120 I think the two are interrelated. I think that the 0:09:14.240 --> 0:09:18.080 US leadership in technology and other matters gets disrupted with 0:09:18.120 --> 0:09:20.800 all these trade frictions across countries and the tariffs that 0:09:20.800 --> 0:09:23.880 are going up and down and can change on a whim. So, 0:09:24.760 --> 0:09:27.840 you know, trade disrupts that process of spreading technology around 0:09:27.880 --> 0:09:30.280 the world. It inhibits our ability to export to other 0:09:30.320 --> 0:09:35.200 countries because there's implicit retaliation against the US, and it 0:09:35.280 --> 0:09:37.880 disrupts all the business relationships that are needed to provide 0:09:37.880 --> 0:09:40.120 the funds for more R and D. So it's not 0:09:40.240 --> 0:09:43.360 good for our technological development. But at the same time, 0:09:43.400 --> 0:09:45.959 technology does march to its own drama to some extent 0:09:46.000 --> 0:09:49.240 and will continue to move forward regardless of what is 0:09:49.280 --> 0:09:50.360 happening on the trade front. 0:09:51.120 --> 0:09:54.760 Professors, is it reasonable to assume that this Supreme Court 0:09:54.760 --> 0:09:59.280 decision may embold in Congress to try to reassert some 0:09:59.360 --> 0:10:01.959 of it's already over tariff policy. 0:10:03.080 --> 0:10:05.040 Well, it certainly was a wake up call, and some 0:10:05.080 --> 0:10:07.800 of the justices really did call out Congress and not 0:10:07.880 --> 0:10:10.600 so many words, saying you have to step up. It's 0:10:10.640 --> 0:10:14.360 really your responsibility under the Constitution to adjudicate an oversee 0:10:14.360 --> 0:10:18.720 trade policy. Question is whether they'll do it under this administration. 0:10:18.760 --> 0:10:21.480 I think Congress would act with act with great trepidation 0:10:22.040 --> 0:10:24.199 in trying to pull back some of the powers it's 0:10:24.840 --> 0:10:26.920 delegated to the president. But I think there is a 0:10:27.000 --> 0:10:31.280 medium term agenda for future Congresses and future administrations to 0:10:31.280 --> 0:10:34.760 write rethink US trade law and ensure that we don't 0:10:34.800 --> 0:10:36.360 go through the mess in the model that we've gone 0:10:36.400 --> 0:10:37.400 through over the past year. 0:10:38.679 --> 0:10:42.400 Professor, is the concept of free trade? Is that still 0:10:42.440 --> 0:10:44.320 relevant in today's global economy? 0:10:46.120 --> 0:10:46.520 I think it. 0:10:46.480 --> 0:10:49.160 Always remains relevant to some extent. Now, free trade doesn't 0:10:49.160 --> 0:10:52.280 mean absolutely no barriers and no interventions whatsoever, but I 0:10:52.280 --> 0:10:54.760 think we do have to distinguish and former Vice President 0:10:54.800 --> 0:10:58.079 Mike Pence has sort of made this clear that between 0:10:58.640 --> 0:11:00.560 you know, what he's called for is free trade with 0:11:00.600 --> 0:11:03.480 free nations, and we have to think about trade as 0:11:03.520 --> 0:11:06.080 part of our alliance system as a way of working 0:11:06.080 --> 0:11:08.880 with allies and then separating out those countries that are 0:11:08.920 --> 0:11:11.400 adversaries and we don't want to treat them the same 0:11:11.480 --> 0:11:13.760 in terms of our trade policy, because that's an extension 0:11:13.760 --> 0:11:14.800 of our foreign policy. 0:11:15.160 --> 0:11:16.719 Oh, this is a really good point here. 0:11:16.760 --> 0:11:18.440 We're going to have to leave here in a big 0:11:18.440 --> 0:11:21.880 Professor Irwin, but off of your wonderful article and essay, 0:11:21.880 --> 0:11:23.880 I should say in the Economist here in the last 0:11:24.600 --> 0:11:27.880 couple of days, can you explain while we're going after 0:11:28.120 --> 0:11:32.840 Canada and not China. I mean, I know that I 0:11:32.920 --> 0:11:35.240 still call them. Governor Kearney from the Bank of England, 0:11:35.440 --> 0:11:38.760 Mark Kearney, good morning and everyone up in Ottawa, Doug Irwin. 0:11:38.880 --> 0:11:41.760 Why are we going after Canada when we have true 0:11:41.840 --> 0:11:43.520 adversaries that we're trading with. 0:11:44.720 --> 0:11:45.640 That's a great question. 0:11:45.800 --> 0:11:48.240 Unfortunately I'm giving a talk in Canada about two weeks, 0:11:48.240 --> 0:11:50.240 so I don't have to think this through for our 0:11:50.720 --> 0:11:51.760 Canadian friends up there. 0:11:51.840 --> 0:11:53.720 Careful, you may lose your teeth. 0:11:55.679 --> 0:11:59.880 Yes, high sticking off the cocktail the Dartmouth hockey team 0:12:00.000 --> 0:12:03.440 about how they prevent such things that from happening. But 0:12:04.679 --> 0:12:07.440 you know, I don't know whether it's a personal relationship 0:12:07.480 --> 0:12:11.760 that Donald Trump didn't forage with Justin Trudeau, whether there's 0:12:11.800 --> 0:12:14.640 some real estate deals that went bad in the past, 0:12:15.720 --> 0:12:18.560 whether some other aggrieved parties within the administration that speaking 0:12:18.600 --> 0:12:20.720 to the President ill of Canada. 0:12:21.360 --> 0:12:22.800 But I agree with you. 0:12:22.679 --> 0:12:25.320 In some sense, it just doesn't make sense that here 0:12:25.360 --> 0:12:29.120 we've had peaceful, cooperative relations with this great neighbor to 0:12:29.160 --> 0:12:31.600 the north of US for so many decades, and yet 0:12:31.600 --> 0:12:33.839 we're jeopardizing that with these trade wars. 0:12:33.920 --> 0:12:37.720 One final question, I mentioned Davenport, Iowa, the first district 0:12:37.760 --> 0:12:41.760 of Iowa, where the congresswoman is fighting for her life. 0:12:42.080 --> 0:12:47.000 What is your counsel to Republican House of Representative types 0:12:47.360 --> 0:12:50.640 on the precipice of losing their seats, what should they 0:12:50.800 --> 0:12:52.080 do on trade? 0:12:53.520 --> 0:12:55.640 Well, I think they really have to speak their constituents 0:12:55.679 --> 0:12:58.679 about how in certain ways they differ from the president. 0:12:59.360 --> 0:13:01.640 Once again, in the West farm states, they've been hammered 0:13:01.640 --> 0:13:05.440 with foreign retaliation against our agricultural exports. So American farmers 0:13:05.480 --> 0:13:09.079 are really suffering, and so they have to offer some 0:13:09.120 --> 0:13:11.840 sort of promise that there's a better days ahead in 0:13:11.920 --> 0:13:15.000 terms of the ability of the US farmers to export 0:13:15.040 --> 0:13:17.440 in other countries. And we're just not seeing it under 0:13:17.440 --> 0:13:18.199 this administration. 0:13:18.600 --> 0:13:21.400 Where in God's name is the update to Against the Tide? 0:13:21.640 --> 0:13:24.000 Yeah, exactly are you smashing off, Dougerwin? 0:13:24.080 --> 0:13:26.920 When do we get the next three chapters of Against 0:13:26.920 --> 0:13:27.600 the Tide? 0:13:28.679 --> 0:13:30.400 I'm not sure, but I've got another book called Free 0:13:30.400 --> 0:13:32.640 Trade under Fire. There's any time free trade has been 0:13:32.720 --> 0:13:34.760 under fire that one's due for a revision. 0:13:35.000 --> 0:13:37.720 Very good, Douglas Irwin, Thank you so much, just wonderful, 0:13:37.760 --> 0:13:38.640 generous of your time. 0:13:38.679 --> 0:13:42.400 This morning is a Dartmouth stay with us. 0:13:42.640 --> 0:13:45.880 More from Bloomberg Surveillance coming up after this. 0:13:53.120 --> 0:13:56.680 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:13:56.760 --> 0:13:59.920 weekday afternoons from seven to ten am Eastern Listen on 0:14:00.040 --> 0:14:03.680 Alplcarclay and Android Otto with the Bloomberg Business up, or 0:14:03.800 --> 0:14:05.400 watch us live on YouTube. 0:14:05.559 --> 0:14:08.400 This is a really good time to talk to Cam Dawson. 0:14:08.520 --> 0:14:10.880 I'm just going to cut to the chase. You're on 0:14:10.920 --> 0:14:13.360 the cover of Barons this weekend. They give you lots 0:14:13.360 --> 0:14:17.200 of play as they deservedly, as you deserve and they should. 0:14:17.640 --> 0:14:19.840 And the question is simply going to be there, is 0:14:19.880 --> 0:14:24.160 this the opportunity of a lifetime to reset in a 0:14:24.200 --> 0:14:25.480 beleaguered mag seven. 0:14:25.880 --> 0:14:28.360 Well, I think that a lot of people have been 0:14:28.440 --> 0:14:31.920 considering it that because if you look at the flows 0:14:32.040 --> 0:14:36.160 into the software ETF, they've been a record relating that 0:14:36.280 --> 0:14:39.760 the dip buyers have been out in force. And I 0:14:39.800 --> 0:14:41.960 think that a lot of people are trying to catch 0:14:42.000 --> 0:14:45.880 that proverbial falling knife. I think the question is is 0:14:46.320 --> 0:14:49.000 or have you seen enough damage to some of these 0:14:49.160 --> 0:14:53.320 what were powerful uptrends to start forming into what could 0:14:53.320 --> 0:14:57.000 be more distributional kinds of patterns. And I think at 0:14:57.000 --> 0:14:59.720 this point we wouldn't be stepping into some of the 0:14:59.760 --> 0:15:02.760 areas is like a software necessarily. I think the one 0:15:02.840 --> 0:15:04.760 key thing is that a lot of these areas have 0:15:04.800 --> 0:15:07.800 been a monolith on the way down. We don't think 0:15:07.840 --> 0:15:09.640 that there'll be a monolith on the way up. And 0:15:09.680 --> 0:15:11.760 this is where we're starting to sharpen our pencils to 0:15:11.760 --> 0:15:14.800 say who are those who will truly be disrupted and 0:15:14.840 --> 0:15:18.040 who are those who could actually benefit from this AI. 0:15:18.680 --> 0:15:23.000 SMP equal weighted up five to six percent, SMP SPX 0:15:23.680 --> 0:15:27.560 actually flat for the year. We don't we rarely see that. 0:15:27.640 --> 0:15:30.360 I guess, so that broadening out trade seems to be 0:15:30.400 --> 0:15:31.080 a thing so far. 0:15:31.360 --> 0:15:33.560 I think the way we would frame it is that 0:15:33.640 --> 0:15:38.360 this market has not been risk off, it's been risk swap. Effectively, 0:15:38.440 --> 0:15:41.160 we are swapping out of the areas of the market 0:15:41.200 --> 0:15:44.800 that we think are AI disrupted into areas that either 0:15:45.040 --> 0:15:49.640 benefit from the AI infrastructure or those that cannot be disrupted. 0:15:50.280 --> 0:15:54.600 HURT a really great new acronym called HALO from the 0:15:54.680 --> 0:15:59.880 Saxo podcast. It stands for high asset low obsolescence. So 0:16:00.240 --> 0:16:03.000 people are crowding into areas of the market that they 0:16:03.040 --> 0:16:06.560 think cannot be disrupted by AI. The challenges those areas 0:16:06.600 --> 0:16:11.400 are higher, higher acid intensity, and lower return on Investigator. 0:16:10.920 --> 0:16:13.880 Kiman Dawson with us here the equity markets, right Paul's talking, 0:16:14.040 --> 0:16:17.240 I'm using the Bloomberg to really look at the charts 0:16:17.280 --> 0:16:18.080 and the technology. 0:16:18.120 --> 0:16:19.200 We'll get to that in a moment. 0:16:19.360 --> 0:16:22.120 But the draw it out on Nasdaq futures Paul back 0:16:22.160 --> 0:16:24.320 to November is all of seven percent. 0:16:24.440 --> 0:16:26.400 Yeah, I would have thought it was fifteen or twenty 0:16:26.440 --> 0:16:30.440 percent exactly. Can We're pretty much through most of the 0:16:30.480 --> 0:16:34.760 earnings so far here. This cycle pretty darn solid. I think, 0:16:35.120 --> 0:16:36.960 how do you think, how do you view earnings and 0:16:37.080 --> 0:16:39.440 what does the market need to see from this earnings 0:16:39.480 --> 0:16:39.960 going forward? 0:16:40.200 --> 0:16:42.840 What's fascinating is that, yes, the earnings have been strung. 0:16:42.920 --> 0:16:45.520 You've been revising up estimates for four Q. They're coming 0:16:45.560 --> 0:16:48.240 in at thirteen percent versus the expected eight percent at 0:16:48.280 --> 0:16:50.520 the start of the quarter. If you look at twenty 0:16:50.560 --> 0:16:53.880 twenty six numbers, those have been revised higher. You're actually 0:16:53.920 --> 0:16:57.280 even revising higher twenty twenty seven numbers, if you can 0:16:57.360 --> 0:17:01.320 even believe so. People are expecting thirteen percent this year, 0:17:01.520 --> 0:17:04.840 thirteen percent growth next year. But all of the pain 0:17:04.920 --> 0:17:08.160 has been coming from the multiple, from the valuation, because 0:17:08.160 --> 0:17:10.600 it does appear like this market is not as eager 0:17:10.680 --> 0:17:14.520 to extrapolate today's earnings power ever into the future. 0:17:14.640 --> 0:17:17.600 Such An Adelegan out tweeting for Microsoft today he's in 0:17:17.600 --> 0:17:20.800 London on regulatory and that'll be their response to these 0:17:20.840 --> 0:17:25.400 real sensitivities of AI. Over at Mike Allen over at Axios, 0:17:25.480 --> 0:17:28.159 really writing up the tension in the State of the 0:17:28.240 --> 0:17:32.439 Union speechs at Washington about artificial intelligence? Can I go 0:17:32.520 --> 0:17:35.159 tech with Cam? Sure, Nerd, let's get practice. You're going 0:17:35.200 --> 0:17:36.600 to be in Phoenix with me next week? 0:17:36.720 --> 0:17:36.880 Right? 0:17:37.000 --> 0:17:37.160 Sure? 0:17:37.480 --> 0:17:38.040 All nerds? 0:17:38.600 --> 0:17:42.280 Phoenix From the CFA Society Kim Dawson and Tom kit Okay, 0:17:42.320 --> 0:17:45.760 the price of Microsoft is back to early twenty twenty four. 0:17:46.119 --> 0:17:50.280 I don't have a cell signal on weekly climate exponential 0:17:50.320 --> 0:17:55.800 moving averages. I don't have a violation of two monthly 0:17:56.240 --> 0:17:58.320 units of parabolic sort. 0:17:58.640 --> 0:18:02.600 What this means is trends in place, but we really 0:18:02.680 --> 0:18:06.600 haven't broken down. Yeah, well that's simple. 0:18:06.800 --> 0:18:09.240 Well, I think that that is the key point, which 0:18:09.280 --> 0:18:12.000 is that right now within the broader Software index, we 0:18:12.040 --> 0:18:15.679 are sitting at exactly the two hundred week moving average, 0:18:15.720 --> 0:18:18.920 not two hundred day two hundred week moving average. This 0:18:19.000 --> 0:18:22.639 has been such powerful support ever since the low's coming 0:18:22.680 --> 0:18:25.879 out of the Great Financial Crisis. Anytime there has been 0:18:25.920 --> 0:18:28.760 a whoopsie in markets, we've gotten to that week move 0:18:28.840 --> 0:18:31.400 that two hundred week moving average. The question is does 0:18:31.440 --> 0:18:32.359 it hold this time? 0:18:32.560 --> 0:18:35.640 Alexis Christopher says, Tom lose the technical mamo jumbo. 0:18:35.920 --> 0:18:36.640 They'll tip there. 0:18:36.720 --> 0:18:39.960 Folks from the pro Cam Dawson is the big mistake 0:18:40.080 --> 0:18:42.360 is to only look at daily charts. 0:18:42.640 --> 0:18:44.920 The pros look weekly. 0:18:45.160 --> 0:18:50.440 Paul sweeing, So Cam's what's screening well for you these days? 0:18:50.480 --> 0:18:52.560 Is it? Is it an industry? Is it a factor? 0:18:52.600 --> 0:18:55.479 What's screaming well well? For the last year or so? 0:18:55.880 --> 0:18:58.440 My colleague Brian coined the term we have to shore 0:18:58.480 --> 0:19:01.399 up the sixty inequity market portfolios, and what that means 0:19:01.440 --> 0:19:03.920 is that we didn't want to be over concentrated in 0:19:03.960 --> 0:19:07.520 one factor, over concentrated in one style. So if you 0:19:07.720 --> 0:19:10.280 rode the growth wave up and you were way overweight growth, 0:19:10.280 --> 0:19:13.080 it was a great opportunity to add some more value 0:19:13.119 --> 0:19:16.240 into portfolios being a bit more balanced. There add international 0:19:16.320 --> 0:19:20.960 into portfolios. Remember the international weight in the Global index, 0:19:21.000 --> 0:19:24.400 so that ACQUI index is about thirty percent, which meant 0:19:24.440 --> 0:19:28.359 that most of our clients were by definition underweight international, 0:19:28.600 --> 0:19:31.480 so there was room to move those allocations higher. So 0:19:31.600 --> 0:19:34.439 all that means is that diversification is now a really 0:19:34.440 --> 0:19:37.600 good friend. Over the course of effectively the last eighteen. 0:19:37.280 --> 0:19:40.640 Months, quickly, do you think the tech companies will finally 0:19:40.680 --> 0:19:44.639 grow up and issue normal debt just going to go 0:19:44.680 --> 0:19:48.040 out like Google did and billions of dollars of debt? 0:19:48.119 --> 0:19:50.040 I mean, I thought that there was a really interesting 0:19:50.080 --> 0:19:53.720 note in the ft from Moody's today talking about effectively 0:19:53.760 --> 0:19:56.240 how a lot of the tech companies are using some 0:19:56.400 --> 0:20:00.680 accounting gimmick it I mean, and you know, being able 0:20:00.760 --> 0:20:03.280 to not have things be on the balance sheet that's 0:20:03.320 --> 0:20:06.960 typically what we see in late cycles. Ops. You off, 0:20:06.960 --> 0:20:08.879 you skate some of the cash flows in order to 0:20:08.880 --> 0:20:11.840 make things look better. You do not play tricks with cash. 0:20:11.880 --> 0:20:13.399 If everything is awesome. 0:20:13.440 --> 0:20:16.320 Thank you so much, and I'll go into detail, folks. 0:20:16.320 --> 0:20:18.399 And the wonderful work the f he did in the 0:20:18.440 --> 0:20:21.199