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Speaker 2: Julian Emmanuel With is chief equity quantitative strategist at Evercourt
Speaker 2: Isi with an incredible note. I can't say enough about this.
Speaker 2: I mean, is Stephen Fandozi doing all the work. He's
Speaker 2: doing a lot of work. With the summary paragraph you have,
Speaker 2: which is like ten sentences long, maybe eight sentences long,
Speaker 2: how do you create the math? How do you collate
Speaker 2: in your summary where earnings are modeling up fifteen point
Speaker 2: six percent?
Speaker 3: It's you know, really taking all the statistics and extraplating
Speaker 3: the potential surprises and the beat percentages. I mean, there
Speaker 3: is an enormous, as you know, amount of statistical work
Speaker 3: that goes into it. But the bottom line is this
Speaker 3: is another extraordinary earnings.
Speaker 2: You even look like Bill Murray. It's ground on day
Speaker 2: every ninety days. The world's coming to an end. Ball yep.
Speaker 2: And then Julian goes, no, double digit, what a shock?
Speaker 2: Double digit double digit Julian.
Speaker 4: So what are you looking for in earnings? What do
Speaker 4: you think the market's looking for in earnings this period?
Speaker 5: So the issue with.
Speaker 3: The start of this season is there was an expectation
Speaker 3: that it was going to be as strong. It's actually
Speaker 3: incrementally stronger than expected. But the reason the market hasn't gone,
Speaker 3: you know, streaming through seven thousand on the S and P,
Speaker 3: is that after the last several quarters where you had
Speaker 3: surprises on the order of six percent or so above
Speaker 3: the baseline expectation, getting you to that double digit number,
Speaker 3: we thought it would happen again. It is happening again.
Speaker 3: But the underlying messages it sets the table for twenty
Speaker 3: twenty six very effectively, Julian.
Speaker 4: Starting late October early November, we started to see a
Speaker 4: little bit of a rotation in the market, you know,
Speaker 4: maybe out of some of the tech names into some
Speaker 4: of the more value maybe smaller mid cap.
Speaker 5: Is that a longer term trend? Is that something we
Speaker 5: should play in twenty six? How do you think about that?
Speaker 3: Well, from our point of view, it actually started when
Speaker 3: healthcare started to recoup the underperformance of the prior year,
Speaker 3: when the government shut down the first time I've lost
Speaker 3: track of the number. The government shuts down, and then
Speaker 3: what you got toward the end of the year was
Speaker 3: the start of the rotation away from technology because you
Speaker 3: had some disappointment on earnings and you had concerns about debt,
Speaker 3: and then to start January.
Speaker 5: It's very typical for.
Speaker 3: These areas to have performed the prior years laggers. In
Speaker 3: our mind, it is one of those things that in
Speaker 3: projecting seventy seven point fifty at year end twenty twenty
Speaker 3: six on the S and B five oh NERD technology,
Speaker 3: because of the waiting and the index, the math drives
Speaker 3: the fact that it should and in our mind, there's
Speaker 3: enough negative sentiment for the wall of worry to be
Speaker 3: overcome that it will regain the leadership.
Speaker 4: So for tech to regain that leadership, is that simply
Speaker 4: a function. That's where the earnings are, that's where the
Speaker 4: cash flow growth is.
Speaker 3: Well, it's that, but if you look at the last
Speaker 3: few weeks, it's also where the speculation has not been
Speaker 3: okay okay. So in fact, the fact that it's come
Speaker 3: off the boil in gold and silver is likely going
Speaker 3: to be a tailwind for technology.
Speaker 2: June Emmanuel Ever cry I sorry with this a lengthy
Speaker 2: conversation to get a started run on YouTube. Subscribe to
Speaker 2: Bloomberg podcasts on YouTube, growing each and every day. We
Speaker 2: had some youngsters over, you know, the kids, had some
Speaker 2: youngster they're so hip, and of course they don't they
Speaker 2: don't do YouTube. Now they've spent the whole time talking
Speaker 2: about Bruno Mars and the Grammys. But you know, on YouTube,
Speaker 2: we're doing a digital distribution there. Tell me about revenues.
Speaker 2: You know, I look at Pepsi. They're cutting prices on
Speaker 2: Cheetos and and all that. There's a real battle here
Speaker 2: to sustain a nominal GDP revenue stream are we.
Speaker 3: It's actually stunning, quite frankly, that revenue looks like it's
Speaker 3: going to come in north of seven percent growth.
Speaker 2: Blended five hundred.
Speaker 3: I mean, it's you and I have never said that now, yeah,
Speaker 3: and and and and it is really points to the
Speaker 3: extraordinary resilience of the economy. And and and frankly, again,
Speaker 3: this idea that as as uncomfortable as it is when
Speaker 3: we see this affordability issue, the fact is is that
Speaker 3: for now, and this is changing at the margin because
Speaker 3: of this kind of commentary, is that as long as
Speaker 3: the employment picture is as strong as it is, revenue
Speaker 3: can continue to be as strong as it is.
Speaker 2: What do you see about use of free cash flow?
Speaker 2: I got a four percent dividend lifted PEPSI they announced it.
Speaker 2: Not an Apple like share buyback, but nevertheless, are non
Speaker 2: tech companies getting like Apple where they're trying to really
Speaker 2: deploy cash to shareholders?
Speaker 6: No?
Speaker 3: That yeah, and that's that's an ongoing trend, but accelerating
Speaker 3: again because when you look at twenty twenty six, what
Speaker 3: you see is a macro backdrop where you're going to have,
Speaker 3: you know, stimulus via the one big beautiful bill, You're
Speaker 3: going to have stimulus via two maybe three FED rate cuts,
Speaker 3: and so you really don't need to have the war
Speaker 3: chest ready, as corporate America does from time to time
Speaker 3: in n anticipation of a market slowdown.
Speaker 4: Boy, Tom, I'm looking at another big tech naque Pollunteer
Speaker 4: Technology forecast revenue for FISTOL twenty six that's expected to
Speaker 4: grow sixty one percent this year.
Speaker 5: Holy count. So it stocked up on.
Speaker 3: The No.
Speaker 2: I mean, I'm in the triple levers doll cash run,
Speaker 2: so who cares? But I look at a folks, I'm
Speaker 2: not going to mention the name of the company. But
Speaker 2: I got a bell Weather toothpased company that I just
Speaker 2: sort of use Paul. It's popped in like two weeks
Speaker 2: up twenty percent a boring toothpaste.
Speaker 5: Little rotation there, but because.
Speaker 2: Yeah, rotation, and also I think used the cash.
Speaker 4: Yep, Julian, we saw twenty twenty five US equity markets
Speaker 4: did very, very well, but many markets outside of the
Speaker 4: US did way better than the US. How do you
Speaker 4: think about the US versus rest of the world from me?
Speaker 3: So that actually goes back to Tom's last observation on
Speaker 3: the toothpaste company. Part of that was the fact that
Speaker 3: the US dollar has fallen as far as it has
Speaker 3: over the last year, and that Paul has driven a
Speaker 3: lot of this outperformance of the rest of the world.
Speaker 3: You know, in our mind, the dollar did make a
Speaker 3: significant multi year peak last year at about this time,
Speaker 3: similar to you had a multi year dollar down trend
Speaker 3: from two thousand and one to two thousand and seven.
Speaker 3: And the bottom line there, and we think the bottom
Speaker 3: line over the longer term here is that you saw
Speaker 3: rest of world outperformance over that long period because of
Speaker 3: the dollar weakness. Now, what we would say here is
Speaker 3: that it is not likely that you're going to have
Speaker 3: a dramatic rest of the world outperformance kick in until
Speaker 3: the AI trade peaks. And you know, we believe the
Speaker 3: AI trade has a lot further to run, not.
Speaker 5: Just valuation in the market. How you frame that conversation
Speaker 5: with your clients these days, Well, the last year has
Speaker 5: been a transition.
Speaker 3: Is that you know, most value oriented investors had to
Speaker 3: make the leap of faith, as did we into this
Speaker 3: idea that this is one of these times where valuations
Speaker 3: are higher than normal due to the potential for this
Speaker 3: productivity bump from AI and due to the fact that
Speaker 3: there's just an enormous amount of liquidity in the system
Speaker 3: right now, and so so you know, it's an put
Speaker 3: it this way, if we get to a point where
Speaker 3: people are no longer questioning valuations, that's when we're going
Speaker 3: to start worrying. We hope that time doesn't happen.
Speaker 4: What's screening well for you guys these days? Is it
Speaker 4: a sector? Is it a factor out there? What's screening
Speaker 4: well for you guys?
Speaker 3: These says Well, interestingly, what we like is this concept
Speaker 3: of low leverage. Okay, and normally you might think that
Speaker 3: that would be something reasonably defensive in anticipation of a downturn.
Speaker 3: But no, what it actually is is a manifestation of
Speaker 3: rporate America's ability to generate free cash flow and in
Speaker 3: fact lower leverage. Happens to be found in some of
Speaker 3: the marquee names across technology.
Speaker 2: For instance, how do you dovetail in Christian de Gua's work.
Speaker 2: I mean, you know, he's acclaimed as a Fed watcher
Speaker 2: and all that are you taking? Are you on an
Speaker 2: Emmanuel worsh watch? Well, a worsh watch.
Speaker 3: I think the concerns around the hawkishness are probably overdone.
Speaker 3: If you think about Donald Trump's propensity to nominate an
Speaker 3: overtly hawkish FED chair, it just doesn't make a ton
Speaker 3: of sense. Christian's view is that this year is stronger,
Speaker 3: not hotter, which actually will give the you know, the
Speaker 3: Fed chair an ability to cut rates again, a boost
Speaker 3: for the economy and markets.
Speaker 2: Bring it down to basics, like people that that don't
Speaker 2: read your fabulous earning summary your conviction to buy new
Speaker 2: shares here? I get it if somebody's on board this bullmarket,
Speaker 2: But do you have a conviction that you should acquire
Speaker 2: shares here?
Speaker 3: So this is how you think about bull market cycles. Okay,
Speaker 3: and it makes sense when you think about the last
Speaker 3: year in particular, lots and lots of macronoids, lots of
Speaker 3: things to disrupt the narrative, scare people. At the end
Speaker 3: of the day, earnings kept going. And the four things
Speaker 3: that we think are hallmarks of the end of a
Speaker 3: bullmarket a recession, a FED that's more likely to hike
Speaker 3: than cut, longer term yields moving.
Speaker 5: You know, dramatically higher.
Speaker 3: By that we mean closer to five percent, and then
Speaker 3: overt FOMO or you know, you know, incredible capital markets intensity.
Speaker 3: None of those have been present, and so for us,
Speaker 3: the recipe is the bull market has further to go,
Speaker 3: and if you're under invested, you probably want to get
Speaker 3: to where you feel like, you know, you're reasonably fully invested.
Speaker 4: We haven't really talked about the FED here. We're gonna
Speaker 4: get a new FED chairman. I guess we're getting rape cuts.
Speaker 4: How do you factor in just the FED into your
Speaker 4: equity kind of mosaic there.
Speaker 3: Well, again, you go back to last week and and
Speaker 3: that presser was fortunately happily non dramatic.
Speaker 5: Okay, there's all this, you.
Speaker 3: Know, back and forth in the background, and at the
Speaker 3: end of the day, the messages the economy is doing fine,
Speaker 3: thank you very much, and that we will end up
Speaker 3: being in a position where at some point in the
Speaker 3: future we will be able to reduce rates and you know,
Speaker 3: on a measured basis. Chilian Emmanuel, thank you so much.
Speaker 2: Can't say enough about the It's not every day. It's
Speaker 2: like every three days you put out you're earning song.
Speaker 5: No, no, every day.
Speaker 2: Every day your team is putting it out, not you.
Speaker 3: Stephen Fandozi, Mike Chu and Barack Hurwitz.
Speaker 2: Superstars there there. Jun Emmanuel, thank you so much. Evercore I,
Speaker 2: I really appreciate it. Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: The great thing about billions or industry is there's always
Speaker 2: a wacko economist who studied social studies at Harvard and
Speaker 2: became actually hugely acclaimed in housing economics, and wandered over
Speaker 2: to see Adam Posen at the Peterson Institute. That must
Speaker 2: be Jed Coco with us right now. How in God's
Speaker 2: name did you end up at the Peterson Institute? How
Speaker 2: did that happen?
Speaker 6: But it is where some of the most thoughtful and
Speaker 6: natual economists are. It's a great place to be. It's
Speaker 6: a fantastic community and Adams wonderful. Was it like a
Speaker 6: one hand in the Washington Post or you know, well,
Speaker 6: I used to be the chief economist, And indeed, so,
Speaker 6: of course I have to tell you that, you know,
Speaker 6: it's one of those jobs that happened outside of those postings.
Speaker 2: But it's great to be there. A couple I got.
Speaker 2: I asked one housing questionnaire before we get to your
Speaker 2: important work with Peterson Institute. I'm the American labor disaster.
Speaker 2: You own granular housing research. You did as far as
Speaker 2: I'm concerned, you did it before anybody else. With all
Speaker 2: the data we now have in the Internet about housing,
Speaker 2: what's your summary of twelve months and five years forward
Speaker 2: in residential housing.
Speaker 6: So we are at a point where, of course rates
Speaker 6: are still high. There is strong construction on the multifamily side,
Speaker 6: but residential construction is where both tariffs and immigration.
Speaker 2: Both pose a risk.
Speaker 6: Those two big policy uncertainties are headwinds for residential construction.
Speaker 6: And the good news is that prices are not rising
Speaker 6: as fast as they were, so there might be some
Speaker 6: easing of affordability concerns. But you know, we went from
Speaker 6: a world back, you know, back when we talked in
Speaker 6: the days that I was at truly I lived in
Speaker 6: San Francisco, and everybody talked about housing affordability, but it
Speaker 6: was thought of as mostly a local issue. Then a
Speaker 6: few years ago, when I was at the Commerce Department
Speaker 6: traveling around the country talking to mayor's economic developments around
Speaker 6: the country, every place felt that housing affordability was one
Speaker 6: of their biggest labor market challenges. Rapid City, South Dakota, Syracuse,
Speaker 6: New York. I would go there ask what's holding back
Speaker 6: economic development, and the answer was we don't have enough housing.
Speaker 6: And I thought, really like, this is you know, I
Speaker 6: think of this as a San Francisco in New York issue,
Speaker 6: but it became a nationwide issue. Now as we're seeing
Speaker 6: more construction, particularly the multifamily side, those price increases are
Speaker 6: easing a teriffs and immigration both still our headwinds for construction.
Speaker 2: Jeff Coco with US he invented the Internet study of
Speaker 2: housing for US at truly years ago. Back then, Paul
Speaker 2: he was in San Francisco in Avocado six days a week.
Speaker 5: At Green's restaurant they did.
Speaker 2: Now he's at the capitol of grill and pounded sakestpos.
Speaker 5: The New York Strip jed talk to us about immigration.
Speaker 4: One of the concerns when President Trump came to office
Speaker 4: in a much stricter immigration policy was, aside from any
Speaker 4: social issues, was the economic impact would be felt in
Speaker 4: a number of areas, including supply of labor, which would
Speaker 4: impact some really important industries like agricultural, like home building,
Speaker 4: like the service sector.
Speaker 5: I don't think we've seen that in the data, have we?
Speaker 6: So we have seen that. Just start looking by the
Speaker 6: monthly jobs numbers. Okay, that headline number that we all watch.
Speaker 6: It used to be that we expected a break even
Speaker 6: rate to get the lid market study of about one
Speaker 6: hundred and seventy thousand jobs a month. Now that's something
Speaker 6: under fifty thousand jobs of Okay, fifty today is a
Speaker 6: reasonably good number, given how much more slowly the workforce
Speaker 6: is growing. The main reason for that is the slow
Speaker 6: down in immigration. Immigrants, of course, are disproportionately working age.
Speaker 6: When we have a huge shift in immigration policy that
Speaker 6: slows down the rate of immigration, the economy grows more slowly.
Speaker 6: We're seeing that particularly in sectors that rely on immigrants
Speaker 6: more than others. Construction, home, healthcare, food, manufacturing. You know,
Speaker 6: these are all sectors that have not grown in terms
Speaker 6: of their jobs, are even shrunk in the past year
Speaker 6: under current immigration policy.
Speaker 4: Feels underreported to me because quite frankly, I've been looking.
Speaker 5: For that in the news slow and I see it.
Speaker 4: I don't see the you know, the beef factory, you know,
Speaker 4: slaughterhouse shutting down for Hormel or whomever. I don't see
Speaker 4: these big companies saying we can't build the houses because
Speaker 4: we don't have the workers. We can't pick the I
Speaker 4: haven't seen the stories where fruits and vegetables are going
Speaker 4: bad in California because nobody's there to pick them.
Speaker 5: I just feel like it's not happening.
Speaker 6: Yeah, So in the data, we see it as flat
Speaker 6: or slow growth rather than faster growth. So it is
Speaker 6: not a decline of ten or twenty percent in employment
Speaker 6: in these sectors. It's not a huge drop in production,
Speaker 6: but it means almost all the job growth has been
Speaker 6: in sectors that don't particularly rely on immigrants in the workforce.
Speaker 2: If we get to five percent unemployment, is it the same?
Speaker 2: I mean Adam Post and I would know that in
Speaker 2: August of sixty four, the Red Sox were in last place.
Speaker 2: Is five percent unemployment now like five percent unemployment in
Speaker 2: nineteen sixty four? I don't buy it.
Speaker 6: So the biggest difference today with unemployment compared to sixties, nineties,
Speaker 6: twenty tens is the relatively low unemployment rate is still
Speaker 6: hand in hand with very low hiring. It's a very
Speaker 6: low turn economy right now. The hiring rate is what
Speaker 6: we typically see when unemployment is close to eight percent.
Speaker 6: Of course, unemployment actually is it?
Speaker 2: I want to say that again. Right now, the hiring.
Speaker 6: Rate, the rate at which employers are bringing new people on,
Speaker 6: is at the lowest level since twenty twelve, except for
Speaker 6: a brief moment during the pandemic. That low level is
Speaker 6: typically what we see when unemployment is at eight percent.
Speaker 2: One hundred and four percent of our listeners agree with
Speaker 2: what you just said. Do you sense any urgency at
Speaker 2: the Peterson Institute for Washington with our moldly eight percent
Speaker 2: unemployment like economy.
Speaker 6: So I think we see this in the consumer sentiment.
Speaker 6: You know, we see this very clearly in the surveys
Speaker 6: that ask people how likely do you think it is
Speaker 6: you could find a.
Speaker 2: New job if you lost yours?
Speaker 6: How good an economy is this for finding a job?
Speaker 6: So I think this explains some of what we see
Speaker 6: in consumer sentiment. But that is not the headline number. Yeah,
Speaker 6: of course, the headline number is the unemployment rate.
Speaker 2: Okay, but Briga Warsh has the cut rates because we
Speaker 2: have an eight percent unemployment economy, so.
Speaker 6: It is it is not an eight percent of unemployment economy.
Speaker 6: The hiring rate makes it feel like an eight percent
Speaker 6: unemployment economy for people who are looking for work, and
Speaker 6: so we see.
Speaker 7: This for young people.
Speaker 6: Young people are much less likely to be working than
Speaker 6: they were a year ago, even though middle age and
Speaker 6: older adults, if anything, are more.
Speaker 2: Likely to be working a year ago.
Speaker 6: So the pain in this low hiring rate is concentrated.
Speaker 6: It's still a strong labor market if you already.
Speaker 2: Have a job.
Speaker 6: Real earnings are essentially at record levels, so it's a
Speaker 6: very strong labor market for people who have a stable
Speaker 6: job that are not worried about losing having to find one.
Speaker 6: But it's a very tough market if you need to
Speaker 6: get a new job.
Speaker 5: What role does AI play in the labor market? I e.
Speaker 4: We don't need as many new workers in the economy
Speaker 4: because AI is making the existing employees more efficient.
Speaker 5: Is that? Do we see that in the numbers?
Speaker 2: We don't see it yet.
Speaker 6: Okay, this low higher rate is not because of AI.
Speaker 6: The hiring rate has been falling even before the launch
Speaker 6: of the public launch of champ GPT. The low hiring
Speaker 6: rate really started after the pandemic and the pandemic recovery,
Speaker 6: when there was some over hiring at many firms. Of Course,
Speaker 6: the effective AI longer term is anyone's guests on the
Speaker 6: labor market. There will be disruption, there will be rough transition,
Speaker 6: and there are lessons from history from technological changes.
Speaker 2: Even if the.
Speaker 6: Ultimate effect of those past lessons don't look anything like AI,
Speaker 6: we do know about what transitions look like, what disruptions
Speaker 6: look like. Disruptions are especially bad if they're geographically concentrated.
Speaker 6: They're especially bad if people can't easily move to new jobs,
Speaker 6: if they don't have health insurance benefits that let them
Speaker 6: easily move across church.
Speaker 2: Let we get one more in here. You got Chad Bone,
Speaker 2: you got Olivier Blanchard, you got the emeritus William Klein,
Speaker 2: one of my heroes. You get to work with these
Speaker 2: guys every day. The summation of Peterson Institute on.
Speaker 6: Tariffs, UH, the tariffs clearly pose risks. We see this
Speaker 6: in declining manufacturing employment. Some of the effects are still
Speaker 6: too soon to show up in the data. A lot
Speaker 6: of it is playing out in uncertainty, and so you know,
Speaker 6: the risks from tariffs are definitely not behind us. Some
Speaker 6: of this is not even what we've seen yet in
Speaker 6: terms of impact on prices and output.
Speaker 5: But what is likely brewing because of uncertainty?
Speaker 2: I get, I got eight more. We gotta go, We
Speaker 2: got a week before you got to you gotta come back.
Speaker 2: I mean, I just want to talk Zillo and truly,
Speaker 2: I mean I can't emphasize enough. Jed Coco invented the
Speaker 2: madness of our internet real estate world. I mean, you're
Speaker 2: at home sitting on the like six houses of the
Speaker 2: Juicy Yep.
Speaker 5: You know all the time, it's all Jed Cocos, and
Speaker 5: it makes you a much better consumer. You know what
Speaker 5: the comps are?
Speaker 2: Are we better consumers now in real estate.
Speaker 6: Joy Aricley, we are better data nerds.
Speaker 2: Hes Yes, I'll take you.
Speaker 6: Yeah.
Speaker 2: Good Jed Coco, thank you so much for the Peterson Institute. Brilliant.
Speaker 2: We'll get them back in here again. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 2: The book is The Doom Loop, Why the World Economic
Speaker 2: order is spiraling into disorder. This is shockingly gloomy for
Speaker 2: such a nice guy. Let me explain as our prosade
Speaker 2: to you. If you are Robby Rogen out of Chicago,
Speaker 2: Robert rub In, the former Secretary Treasury. He codified the
Speaker 2: word likelihood in terms of probability Summer's Up at Harvard
Speaker 2: and Janet Yellen from the University of Brooklyn. The answer
Speaker 2: is who do they listen to? They listened to zwar
Speaker 2: Prasad on the China Watch at the International Monetary Fund
Speaker 2: and Legendary at Cornell. This is a really important book.
Speaker 2: Why are you so gloomy. This is not like you.
Speaker 2: What is a doom loop?
Speaker 8: I did not start out being gloomy, Tom. In fact,
Speaker 8: the book I planned to write was a very different book.
Speaker 8: It was about how we might be moving from a
Speaker 8: unipolar world when, after the collapse of the Soviet Union
Speaker 8: in the US, became the domum power in aavy respect,
Speaker 8: to one where economic power is more evenly balanced. And
Speaker 8: as an economist, one thinks competition is good for balance,
Speaker 8: efficiency and stabidity. But as I thought about all the
Speaker 8: forces that I was going to argue would push us
Speaker 8: back to a more stable world, a more stable equilibrium,
Speaker 8: I began to realize that each of these forces might
Speaker 8: actually generate more instability rather than steadily. So the book
Speaker 8: ended up being one about where economics, domestic politics, and geopolitics,
Speaker 8: which always go on parlate tracks, they intersect with each other,
Speaker 8: but in this case they're feeding off each other into
Speaker 8: a negative loop, a negative feedback loop, and bringing out
Speaker 8: the worst in each other.
Speaker 2: So your publishers didn't say make it gloomy so you
Speaker 2: could sell the movie rights.
Speaker 7: Tom.
Speaker 8: As I was writing this book, my heart was pulling
Speaker 8: in one direction, but my head was pulling in completely
Speaker 8: under their direction. And I think the reality is that,
Speaker 8: you know, we're in a difficult world right now, and
Speaker 8: the book ultimately is going to help us at least
Speaker 8: understand the forces that brought us here before we think
Speaker 8: about solutions.
Speaker 4: Professor, we I think most of our listeners, most of
Speaker 4: our viewers, grew up in a world of globalization. Is
Speaker 4: globalization unraveling right before our eyes right here.
Speaker 8: So globalization was once seen as a positive some game,
Speaker 8: you know, which should offset the zero some game of geopolitics.
Speaker 8: The US China relationship was a perfect example, you know,
Speaker 8: the two countries could not you know, come to terms
Speaker 8: on certain gy political issues, but the economic relationship was
Speaker 8: seen as one that could benefit both countries. But now
Speaker 8: even globalization is being seen as a negative or zero
Speaker 8: sum game where even there there are no common benefits
Speaker 8: to be had. And it's worth thinking about what happened here.
Speaker 8: Globalization did deliver aggregate benefits, but these were not well
Speaker 8: distributed within countries or between countries. So within countries, in
Speaker 8: both advanced and emerging market countries, it created this sense
Speaker 8: of a discantled community that essentially felt left out of opportunity,
Speaker 8: and that infected domestic politics, which in turn, is hurting geopolitics.
Speaker 2: I would mention Joseph Stiglets there are just absolutely definitive
Speaker 2: is book on discontent among globalization decades ago as our
Speaker 2: prosade where there's the book is a doom loop. We're
Speaker 2: going to continue here with professor pad of course help Paul.
Speaker 4: So where do we go from here in terms of
Speaker 4: an economy that is a global economy. Technology has really
Speaker 4: reduced two distances and it just made everything more tangible here,
Speaker 4: how do we go back to something less global?
Speaker 5: And should we go back to something less global?
Speaker 8: So what we are seeing is not a complete retreat
Speaker 8: from globalization, but it's becoming fragmented. So countries are sending
Speaker 8: more trade and financial flows to countries with which they
Speaker 8: are geopolitically aligned. So trade and finance, rather than being
Speaker 8: bridges across the geopolitical drifts, are in fact deepening those rifts.
Speaker 8: And the same is true of technology. That was what,
Speaker 8: in my cheerful version of the book was going to
Speaker 8: be what led us all to a better place, and
Speaker 8: it is creating enormous progress. But at the same time,
Speaker 8: as I point out in my book, it's creating much
Speaker 8: more economic and financial power concentration within countries and between countries,
Speaker 8: which is where the dissension comes from.
Speaker 2: You know how I do this. So I picked up
Speaker 2: the book and I went to the index, and I
Speaker 2: looked for Carnie in Canada. Carneie of Canada stopped Davos
Speaker 2: talking about the middle countries in a new variable geometry.
Speaker 2: Discuss that geomme within the dual loop.
Speaker 8: So when I think about the superpower competition right now,
Speaker 8: you have these two on both sides, and everybody else
Speaker 8: is stuck in the middle. My European friends don't like
Speaker 8: it when I say this, but Europe is sort of
Speaker 8: a middle power because it's not grown up to clear,
Speaker 8: you know, a real power on its own. So everybody
Speaker 8: else is stuck in the middle of these two very
Speaker 8: unsavory alternatives. The US is receding from its leadership role
Speaker 8: in the world economy. China is not seen as a
Speaker 8: trustworthy and reliable ally. So take what India, the archetype
Speaker 8: of middle power does. On issues like cheap oil. It
Speaker 8: aligns with Russia and China, But on the other hand,
Speaker 8: it sees its fundamental values as aligned more closely with
Speaker 8: the West, so it teeters from one side to the other.
Speaker 8: So Mark Connie took a very pragmatic approach. He pointed out,
Speaker 8: as I in my book that Middle powers include rich
Speaker 8: and poor, small and large countries. Their interests are not
Speaker 8: perfectly aligned. But he argued that maybe they should align
Speaker 8: on specific issues, which makes sense. The problem is it
Speaker 8: doesn't create deep trust that is necessary to underpin strong alliances.
Speaker 8: So the middle powers themselves again a chapter of my book,
Speaker 8: rather than being sources of stability, are becoming sources of
Speaker 8: instability themselves.
Speaker 2: Trilogue back. I mean President Trump loves to go back
Speaker 2: to McKinley in the Gilded Age. We'll get the tariffs
Speaker 2: here in a moment with Azar Persad. But to finish
Speaker 2: up on the doom loop here, do you have an
Speaker 2: analog of as Paul mentioned earlier, almost a nostalgia for
Speaker 2: a different time and place, or are we going to
Speaker 2: a new new that we've never seen before.
Speaker 8: The fundamental problem right now is that if you think
Speaker 8: about the competition between the US and Japan in the
Speaker 8: nineteen nineties, the US and the Euro Area in the
Speaker 8: two thousands, it was about economic competition. But now the
Speaker 8: competition between the two powers is completely different. It's about
Speaker 8: the visions of the world about how to organize an economic, political,
Speaker 8: legal system. So I don't think there is going to
Speaker 8: be an easy way at all for these two visions
Speaker 8: to be merged. So I think we are stuck with
Speaker 8: the doom loop for some time to come.
Speaker 5: What is the role of the US in this new
Speaker 5: world order?
Speaker 4: I mean, is this just a Trump issue and if
Speaker 4: we get somebody new in three years, the US will
Speaker 4: try to reassert its leadership position.
Speaker 5: How do you see the US moving forward?
Speaker 8: Well, Paul, I wish that was the case. But I
Speaker 8: should point out that I finished the first draft of
Speaker 8: my book in October of twenty twenty four. I put
Speaker 8: it down and thought, my god, this is too dark.
Speaker 8: Let's wait for the elections and maybe things will settle down.
Speaker 8: But everything that has happened since I finished my first
Speaker 8: draft has only validated or supercharged the thesis of the book,
Speaker 8: which is unfortunate for the world. But I think the
Speaker 8: issue is the US is now receding from its leadership role,
Speaker 8: but it's causing some other countries to stiffen their spines.
Speaker 8: You know, Europe is coming together at one level. The
Speaker 8: question is whether there is a political will not just
Speaker 8: to deal with territorial integrity attacks, but to do what
Speaker 8: is necessary to improve productivity, to come together, to reshape
Speaker 8: institutions within these countries, and for these countries to basically
Speaker 8: get their backs together.
Speaker 2: What do you perceive as a presad to pause? One
Speaker 2: question here about after Trump? I mean, if he's established
Speaker 2: some form of neo mercantilist zero sum structure, where are
Speaker 2: we two years or three years after Trump.
Speaker 7: It's going to be difficult to reverse.
Speaker 8: But as a point out in the book, you know,
Speaker 8: there is a ray of open if we as citizens
Speaker 8: are willing to become much more engaged, not just the
Speaker 8: citizens of our countries, but of our communities in the world,
Speaker 8: if we have more inspiring leaders, and if we can
Speaker 8: repair our institutions, I think there is a way forward.
Speaker 7: But it's going to take a lot of work.
Speaker 2: The book is a doom look, but I've got to
Speaker 2: move on to terrorists. I got as a proside in
Speaker 2: the studio, and he owns the high ground. I'm in
Speaker 2: the camp, as were the tariffs. We've lost sight of,
Speaker 2: and yet they drag on. There's almost an inertial force
Speaker 2: to the effect of tariffs on our listeners and viewers
Speaker 2: is that true.
Speaker 7: It's certainly going to have an effect.
Speaker 8: I mean, it's hard to imagine that tariffs are not
Speaker 8: going to affect both you know, consumer welfare and also prices. Certainly,
Speaker 8: there have been other forces, such as phenomenal productivity growth
Speaker 8: in the US that help tann down inflation. But you know,
Speaker 8: the notion of lean means supply chains that are delivering
Speaker 8: better goods, better choices for consumers, that is sort of gone.
Speaker 8: And I think the bigger issue, which is going to
Speaker 8: last for a while, is the fact that we now
Speaker 8: have this fragmentation of global trade, which again is bad
Speaker 8: from an economic perspective for businesses. Businesses are retreating and
Speaker 8: worrying more about resilience rather than efficiency. This is not
Speaker 8: good for the world economy. And most importantly, as I argued,
Speaker 8: trade is not helping to bridge countries anymore. It is
Speaker 8: creating even deeper rifts. And that I think is the
Speaker 8: fundamental known.
Speaker 2: As work for like a million years, and this is
Speaker 2: just shocking to hear the doom loop from US work.
Speaker 4: Exactly does this fracturing of global trade is that an
Speaker 4: inflationary force? I mean, will prices go up for us?
Speaker 4: Because haven't we gotten used to over the last fifty years,
Speaker 4: seven years. This is just getting the cheapest widget. The
Speaker 4: widget I have to buy. It's a lower cost because
Speaker 4: it's built somewhere where their costs are lower.
Speaker 8: So businesses always face a lot of risks, but now
Speaker 8: they face, you know, supercharge risks in terms of geopolitical risk,
Speaker 8: risks related to climate change and how they're responding. They're
Speaker 8: responding by pulling production back on shore. They're trying to diversify,
Speaker 8: but that creates its own risk because you know, friends
Speaker 8: today might become rivals tomorrow, as we've seen from presidents
Speaker 8: from stariff policies. So that means that you're going to
Speaker 8: lose a lot of efficiency in the name of resilience.
Speaker 8: And certainly resilience is good for businesses, but it is
Speaker 8: going to mean higher costs for businesses and that's going
Speaker 8: to get passed on to consumers. So it means less choice,
Speaker 8: higher costs, and more importantly, all of this behavior by businesses,
Speaker 8: it once again means that they no longer are stabilizing force.
Speaker 8: The geopolitical drifts are going to create even more instability
Speaker 8: and strive almost go to.
Speaker 2: Your claim on currency on China as well. The stealth
Speaker 2: thing here, folks, We've barely covered It is very quietly
Speaker 2: on the rimmenbe is strengthening through a through seven and stronger, stronger.
Speaker 2: I mean, do you perceive a Pacific rim strengthening here
Speaker 2: and a weaker US dollar what President Trump ultimately wants.
Speaker 8: It's worth thinking about exactly what the conjunction is here.
Speaker 8: The US is driving away country straight through tariffs. China
Speaker 8: at the moment has a very unbalanced economy, is growing
Speaker 8: largely through experts. It's got it registered at one point
Speaker 8: to trillion dollar trade surplus last year, and the rest
Speaker 8: of the world is terrified about going too close into
Speaker 8: China's embrace because it would mean being swarmed by Chinese exports.
Speaker 8: Given where China's trade surplus is, certainly the currency should
Speaker 8: be appreciating a lot more than it is right now.
Speaker 2: So between Carnia and Canada and whatever is after President Trump,
Speaker 2: Republican or Democrat. To Paul's question, the bottom line is
Speaker 2: is after Trump, if China's troubled, we just reaffirm what
Speaker 2: Paul was talking about globalization.
Speaker 8: We could, and in fact, the US potentially as the
Speaker 8: ability to re engineer its place on the world stage.
Speaker 8: But I think some notion of trust is being lost.
Speaker 8: You know, this is not the first drump term, this
Speaker 8: is the second drum term. And as I speak to
Speaker 8: you know, policymakers around the world their US. If the
Speaker 8: US can electrum not just once, but twice, how can
Speaker 8: we ever go back and trust the US. You know,
Speaker 8: the US's closest allies, NATO, Canada and so on, are
Speaker 8: feeling the heat from Trump. So no country feels that
Speaker 8: it's going to escape what might be internal political dynamics
Speaker 8: within the US that turn it away. So there is
Speaker 8: a place for the US. It's going to take a
Speaker 8: lot of work to reclaim it.
Speaker 4: So just the European Union, can we expect the European
Speaker 4: Union to finally get its act together and maybe get
Speaker 4: its position on the world stage commensurate with its population,
Speaker 4: commensurately with its GDP.
Speaker 8: Moments of crisis do sometimes Pauls tend to bring out,
Speaker 8: you know, the best in countries, and certainly the European Union.
Speaker 8: The Europe overall came together when its territorial integrity was
Speaker 8: threatened in the context of Ukraine, in the context of Greenland,
Speaker 8: and a big question for Europe is whether it can
Speaker 8: get away from its internal political divisions to do what
Speaker 8: is needed to become a true economic power. This will require,
Speaker 8: you know, deregulating in order to increase productivity growth within
Speaker 8: the zone. You know, true economic union that goes beyond
Speaker 8: this monetary to banking union, to payments union, and a
Speaker 8: more significant political union as well.
Speaker 7: I don't see that happening.
Speaker 2: Yeah, that's going to say we've got to run here.
Speaker 2: But that's a hope of prayer.
Speaker 7: That's exactly right.
Speaker 2: I mean, if le Guard was sitting here, she'd say
Speaker 2: that's all brilliant as were, But there's no indication you're
Speaker 2: going to get their act together.
Speaker 8: Europe could be a great power, it's going to be
Speaker 8: a big challenge for it to get there.
Speaker 2: This book, Paul, Yeah, he's like, what's the response of
Speaker 2: people in the racket when they see the doom loop?
Speaker 7: The response is this is a book for the moment.
Speaker 8: I mean, it tells us exactly why we are ware
Speaker 8: we are because there is a lot of turmoil around us.
Speaker 8: And when I started working on this book, it was
Speaker 8: my objective really to understand what are the forces that
Speaker 8: God is here, because we need to get there first
Speaker 8: before we can think about.
Speaker 2: I'll throw it out on LinkedIn and Twitter. Folks at
Speaker 2: doom Loop Why the World Economic order is spiraling into disorder?
Speaker 2: A shocking book form Persad of Cornell as our prosad
Speaker 2: with this book, and I just can't imagine Mark Kearney
Speaker 2: reading it. Love to see if that happens. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 1: or watch us live on YouTube lessus.
Speaker 2: Christopher's in here to get us started. In the newspapers,
Speaker 2: is it hard? I'm seeing so many Like I'm like,
Speaker 2: I wish Alexis would do this story. Is it like
Speaker 2: too many stories to pick?
Speaker 5: You know?
Speaker 9: So it's feast or famine? Really when you're doing the newspapers.
Speaker 9: Today wasn't bad and I got a good one to
Speaker 9: start us off. So the big game just a few
Speaker 9: days away, right, Patriots, Seahawks, the Super Bowl scams, they're
Speaker 9: all around us. If you're looking for last minute tickets,
Speaker 9: first of all, you better have deep pockets. But you've
Speaker 9: got the fake emails, the fake texts, the social media adds,
Speaker 9: they're everywhere and more and more. The NFL is wanting
Speaker 9: you to come in with a digital ticket, not a
Speaker 9: paper ticket, because now they can track the digital ticket,
Speaker 9: which makes sense. So you want to be wary of
Speaker 9: third party sellers that appear to have a.
Speaker 2: Lot of ticket Thank you for doing this.
Speaker 7: Yeah, you know, we try to serve the people.
Speaker 2: No, but this is like a huge deal.
Speaker 9: Yeah, I mean the people who look, it's sad because
Speaker 9: you think you're buying a legit ticket. You get to
Speaker 9: the gate and they tell you, guess what.
Speaker 2: Paper? You just got to go digital from a reputable source.
Speaker 9: Exactly. Yeah, so check the source, make sure they are reputable,
Speaker 9: check the ratings, check the reviews before buying. And you
Speaker 9: know what folks buy with your credit card. I think
Speaker 9: we kind of all know this. Don't buy no wire transfer,
Speaker 9: transfer is no direct, that's not deposit.
Speaker 6: No.
Speaker 2: Yeah, I mean the names that we know, Paul, like
Speaker 2: Paul's got a real life Alexis and I don't. But
Speaker 2: like Ticketmaster, stub Hub, those kinds of seat geek, they're legitimate, right.
Speaker 4: And I learned it the hard way, I picked one
Speaker 4: that came at the top of my search, the Eagles tickets. Yeah,
Speaker 4: day of flying out the Vegas found out that those
Speaker 4: Eagle tickets were bogus and they were not cheap.
Speaker 2: Yesterday, folks, I can't tell you the scams. What a
Speaker 2: shock in offspring needed an airplane ticket. I'm shocked. Okay,
Speaker 2: first one in February. I go on, I do a
Speaker 2: search Google, and the people I use there was a
Speaker 2: fake account of them up top geez. And when I
Speaker 2: went to it, I clicked on it because the same name,
Speaker 2: and I could tell it was a scam.
Speaker 7: Good for you.
Speaker 9: Yeah, Well, they're getting smarter and smarter.
Speaker 2: As Cary tell your kids, I'm telling my kids all
Speaker 2: that bill got takes.
Speaker 9: Did you get your money back?
Speaker 5: No? No, really, sorry about that?
Speaker 2: All right?
Speaker 9: Well, as we following that, may have another cup of coffee?
Speaker 8: All right?
Speaker 9: This one from Business Insider. Tailors in New York City
Speaker 9: have noticed a growing trend clients are getting their clothes
Speaker 9: altered thanks to the weight loss drug o Zevich. So
Speaker 9: they're saying that usually people would come in and say, listen,
Speaker 9: take out the pants a couple of inches or two.
Speaker 9: Now they're coming in with their entire wardrobe, saying I
Speaker 9: lost twenty and thirty pounds. You need to bring my
Speaker 9: clothes out. One tailor even said he had to bring
Speaker 9: more people on because he has just too much work
Speaker 9: for him. Right, this is a good problem to have,
Speaker 9: he says. Instead of altering clothing, some are just going out.
Speaker 9: This is what I would do, yes, just going out
Speaker 9: and buying homeless. And when they do, what are they
Speaker 9: looking for? Slim fit, shorter jackets and this I can
Speaker 9: get behind less shoulder pads. I'm talking the nineties jackets
Speaker 9: when I was doing this, coming down like I was
Speaker 9: a football player, all right, So glad to see that
Speaker 9: the tailors are in business. And lastly, okay, this from
Speaker 9: the New York Post a sneaker collab between Nike and
Speaker 9: of all places, Costco. It is sending the sneaker world
Speaker 9: into a tizzy. So the sneaker collab it's called this
Speaker 9: is a mouthful Nike s B dunk Low x Kirkland.
Speaker 9: They're exclusive to Costco. Released in New York, Oregon, California, Washington.
Speaker 9: So they were going for one hundred and thirty five
Speaker 9: dollars in just three days. The resale market skyrocketed two
Speaker 9: hundred percent. In some places, these sneakers are going for
Speaker 9: one thousand bucks on places like eBay and stock x.
Speaker 5: So it's a separate style for Costco. Yes, okay, exactly.
Speaker 2: I saw Lisa Mateo wearing those. I think so.
Speaker 9: I think hopefully she didn't spend a thousand bucks on them,
Speaker 9: but so you know that. Also, the the insol it
Speaker 9: features is kind of cute. It features the Costco Affordable
Speaker 9: hot dogs, those famous hot dogs with the echo for
Speaker 9: a buck fifty. So there's a picture of those on it,
Speaker 9: and I.
Speaker 5: See you cam look at it now.
Speaker 4: Very interesting, all right, Yes, I mean it's not like
Speaker 4: a crazy time, but people are people love it.
Speaker 5: I guess I don't know.
Speaker 2: Thank you so much. The newspapers today just brilliant. Lexus, Christopherus.
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