WEBVTT - Bloomberg Surveillance TV: May 21, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.080 Terminal and the Bloomberg Business app. We begin this out 0:00:37.080 --> 0:00:39.720 with stockslower after snapping a six day winning streak in 0:00:39.800 --> 0:00:42.839 yesterday's session. Sarah Maleck of Neuvine writing markets face a 0:00:42.880 --> 0:00:46.199 reality check due to two macro drivers, Moodies Downgroad of 0:00:46.280 --> 0:00:50.440 US dead and continued tariff negotiations. Sarah joins Ustaff for more. 0:00:50.479 --> 0:00:52.920 Sarah and Mornig, good morning. How important is that tax 0:00:52.960 --> 0:00:54.400 bill to this bond market? 0:00:54.680 --> 0:00:56.520 I think it's very important to this spawn market. What 0:00:56.560 --> 0:00:59.080 the bond market is worried about is that over the 0:00:59.160 --> 0:01:01.640 longer term it will increase the deficit, and the bond 0:01:01.640 --> 0:01:04.280 market doesn't like that. And that's where we're seeing yields 0:01:04.280 --> 0:01:06.240 continue to back up, so we'll see where we end 0:01:06.319 --> 0:01:08.480 up on that and the shorter term though the tax bill, 0:01:08.520 --> 0:01:11.000 of course, will be stimulative for the economy, so it's 0:01:11.000 --> 0:01:13.200 positive for the short term, not so positive for the 0:01:13.240 --> 0:01:13.680 long term. 0:01:13.720 --> 0:01:16.640 Bonios at these levels and not constraining the discussion that 0:01:16.680 --> 0:01:19.119 about down in Washington, when does it start to constrain 0:01:19.160 --> 0:01:20.000 the sanquity market. 0:01:20.480 --> 0:01:22.160 I think at about five percent on the ten year, 0:01:22.200 --> 0:01:24.600 equities will begin to get more nervous. Also, beyond the 0:01:24.600 --> 0:01:27.240 tariff issues and the Moody's downgrade and downgrades of US 0:01:27.280 --> 0:01:29.840 credit has generally not been positive for the markets. We 0:01:29.880 --> 0:01:33.080 have bubbling up geopolitical issues between Iran and Israel, so 0:01:33.120 --> 0:01:35.280 there's a lot of things for the markets to contend with, 0:01:35.360 --> 0:01:38.080 and I think that's why equities are experiencing a hangover 0:01:38.120 --> 0:01:38.480 this week. 0:01:38.600 --> 0:01:40.280 Was there any signal in the fact that you got 0:01:40.280 --> 0:01:43.160 those bubbling up of tensions, the CNN report of Israel 0:01:43.200 --> 0:01:45.640 looking at a strike in Iran, and the only movement 0:01:45.680 --> 0:01:47.600 and change you really saw was in the oil price. 0:01:47.640 --> 0:01:50.600 We were still selling treasuries, we were still selling the dollar. 0:01:50.840 --> 0:01:53.280 Typically you'd expect those types of assets to rally. What 0:01:53.320 --> 0:01:53.960 does that tell you. 0:01:54.120 --> 0:01:55.680 I think it's telling me there is a little bit 0:01:55.680 --> 0:01:58.040 of this nervousness around the US as a safe haven 0:01:58.120 --> 0:02:00.640 because of the tariff issues and the macro folatility that 0:02:00.680 --> 0:02:02.920 we've seen this year. So I think the dollar continues 0:02:02.960 --> 0:02:05.520 to be bearish in the longer term, not only because 0:02:05.720 --> 0:02:09.280 the US economy is slowing, but because foreign investors are 0:02:09.320 --> 0:02:12.000 a little bit concerned about the strength of the dollar 0:02:12.080 --> 0:02:14.119 and the safe haven status, and they're seeing the same 0:02:14.120 --> 0:02:16.680 thing with treasuries in terms of foreign buyers there, and 0:02:16.680 --> 0:02:18.799 that is becoming somewhat of an issue that's been going 0:02:18.800 --> 0:02:19.359 on all year. 0:02:19.520 --> 0:02:21.680 Can that ex sense to the equity market? Serena tang 0:02:21.760 --> 0:02:24.080 Over at Morgan Stanley wrote a note just moments ago 0:02:24.480 --> 0:02:28.200 overweight on US stock saying, still, Tina, there is still 0:02:28.240 --> 0:02:31.519 no alternative? Is there an alternative to American stock markets? 0:02:31.560 --> 0:02:33.840 Well, if you look at US stocks, stocks will trade 0:02:33.840 --> 0:02:36.680 on the fundamentals. First quarter earnings very strong, coming in 0:02:36.720 --> 0:02:39.560 at about double the rate of expectations, twelve percent year 0:02:39.600 --> 0:02:42.840 over your earnings growth, about three quarters of companies beating earnings, 0:02:42.840 --> 0:02:45.360 so earning even then positive. And if you look at markets, 0:02:45.360 --> 0:02:47.800 since they were covered off the bottom, you've seen a 0:02:47.800 --> 0:02:49.560 lot of FOMO, a lot of inter a day buying, 0:02:49.639 --> 0:02:52.640 so when you see these dips, retail investors are stepping 0:02:52.680 --> 0:02:54.920 back in to buy. Also a lot of cash on 0:02:54.960 --> 0:02:57.680 the sidelines. People do tend to unfortunately sell at the 0:02:57.680 --> 0:03:00.480 wrong time and then chase their way back into the market. 0:03:00.560 --> 0:03:02.560 So I think there is still more buys to the 0:03:02.639 --> 0:03:05.239 upside for the US led by technology. 0:03:04.680 --> 0:03:07.560 Sucks more buys even though we are back at really 0:03:07.639 --> 0:03:09.760 lofty multiples. Sarah, I thought this was part of the 0:03:09.760 --> 0:03:12.200 problem to start the year, that we were just over exposed. 0:03:12.240 --> 0:03:13.919 The US has not magically gone away. 0:03:14.160 --> 0:03:16.760 I think the US has fundamentally strong reasons for people 0:03:16.800 --> 0:03:19.000 wanting to be exposed to it. It's a thirty percent 0:03:19.000 --> 0:03:20.960 of the S and P five hundred, actually over thirty 0:03:21.000 --> 0:03:24.680 percent is technology related. If you look at historical earnings growth, 0:03:24.760 --> 0:03:26.760 about two thirds of that has been driven by those 0:03:26.800 --> 0:03:29.480 tech earnings. We saw a very strong first quarter. The 0:03:29.560 --> 0:03:31.679 AI boom is alive and well. We heard that from 0:03:31.720 --> 0:03:34.560 companies like Microsoft this quarter, So I think the growth 0:03:34.639 --> 0:03:37.280 legs for the US are still intact in place. I 0:03:37.320 --> 0:03:39.560 totally agree with you. Markets are trading at a premium, 0:03:39.560 --> 0:03:41.200 but a lot of people want to get back into 0:03:41.240 --> 0:03:43.640 this US market, and I think that plus the earnings 0:03:43.640 --> 0:03:44.480 growth gives it legs. 0:03:44.480 --> 0:03:46.440 From here, you'll line you just said it. The II 0:03:46.480 --> 0:03:48.520 boom is alive and well, several months ago, it didn't 0:03:48.520 --> 0:03:51.120 feel that way the original disruption in twenty twenty five 0:03:51.520 --> 0:03:52.920 DAP's sake. Have we ever come that? 0:03:53.520 --> 0:03:55.839 I think we did. I think Deepsek was the big 0:03:55.880 --> 0:03:57.840 story of the year for about a month and then 0:03:57.880 --> 0:04:00.480 we got into tariffs and everybody forgot about Deep Seek. 0:04:00.640 --> 0:04:03.520 It is something to watch. So the incremental spending on 0:04:03.640 --> 0:04:06.600 artificial intelligence and what's going to be the ROI on that, 0:04:06.880 --> 0:04:10.440 and also competing cheaper technologies like deep seak need to 0:04:10.440 --> 0:04:12.320 be watched. But what we see with these companies is 0:04:12.360 --> 0:04:16.320 demand for artificial intelligence. The productivity it can add to 0:04:16.320 --> 0:04:19.680 companies is very strong. And these dominant players like Microsoft 0:04:19.839 --> 0:04:22.320 that have spent tens of billions to get a leadership position, 0:04:22.480 --> 0:04:24.359 they're going to remain in place as a leader. 0:04:24.560 --> 0:04:26.039 Have the win has changed? I think that is the 0:04:26.080 --> 0:04:28.839 ultimate question. Has anything changed post Deepseek? 0:04:29.160 --> 0:04:31.280 I think that the winners are going to continue to win, 0:04:31.400 --> 0:04:34.120 Like Microsoft. Other areas that we like are software companies 0:04:34.120 --> 0:04:36.400 which I think people wondered, what is AI going to 0:04:36.400 --> 0:04:39.360 do to software companies? I think for software it makes 0:04:39.360 --> 0:04:42.440 them more productive. Also, it's showing traction in terms of 0:04:42.480 --> 0:04:44.919 capturing clients and crossling with clients. So that's why we 0:04:45.040 --> 0:04:47.880 like not only Microsoft, but companies like Viva, which is 0:04:47.920 --> 0:04:51.000 a vertical industry software play in the life sciences industry. 0:04:51.040 --> 0:04:52.640 I think these are some of the winners over time. 0:04:52.839 --> 0:04:55.520 You need to be selective, but AI and the ones 0:04:55.520 --> 0:04:57.320 that have dominated it for many years are going to 0:04:57.360 --> 0:04:58.920 stay the leaders in the space. 0:04:58.960 --> 0:05:01.479 Honestly, it's remarkable looking at what's improved since the April 0:05:01.560 --> 0:05:03.840 nay dear. First you get the communication services again, those 0:05:03.920 --> 0:05:06.320 kind of big AI names number two and even before 0:05:06.360 --> 0:05:10.960 the infotech sector is utilities again, a very AI exposed 0:05:11.040 --> 0:05:14.359 kind of sector. Is that still the play again? Post 0:05:14.360 --> 0:05:16.200 deep Seek? The thought was is that we won't need 0:05:16.240 --> 0:05:18.960 as much energy that things have become more efficient. Can 0:05:19.000 --> 0:05:20.719 you still bet on the utility players? 0:05:20.800 --> 0:05:23.880 I think you can, especially live in the infrastructure space, 0:05:23.920 --> 0:05:27.520 which a big component of infrastructure is utility, So upgrading 0:05:27.560 --> 0:05:30.520 your grids because of the electrification of the economy, supply 0:05:30.640 --> 0:05:33.040 chains coming back down, coming back to the United States 0:05:33.080 --> 0:05:35.359 and the infrastructure that we need to build. Their utilities 0:05:35.440 --> 0:05:38.120 are going to be very necessary. There the energy needed 0:05:38.160 --> 0:05:40.599 for data centers, which will be more proliferate in the 0:05:40.640 --> 0:05:42.440 in the United States. All of that I think makes 0:05:42.520 --> 0:05:44.920 utilities continue to be a strong play and a nice 0:05:44.920 --> 0:05:45.960 AI derivative play. 0:05:46.040 --> 0:05:48.160 So these are the sectors that haven't been downgrading their 0:05:48.200 --> 0:05:50.760 earnings as much. Where you have seen the downgrades comes 0:05:50.960 --> 0:05:54.280 from the more consumer oriented sectors. You saw from Target 0:05:54.279 --> 0:05:57.160 earnings this morning, some concern there in terms of demand. 0:05:57.279 --> 0:06:00.599 You hear Walmart talking about raising prices. Can you buy 0:06:00.640 --> 0:06:03.719 consumer oriented stocks right now? Or are things just too uncertain? 0:06:03.880 --> 0:06:06.200 Which consumer's in a tough space that it did lead 0:06:06.279 --> 0:06:08.640 us out of the v shape or covery post the 0:06:08.720 --> 0:06:11.640 Liberation Day malaise that we saw soft data on the 0:06:11.640 --> 0:06:15.200 consumer is not strong. Outlooks from companies about the consumer 0:06:15.400 --> 0:06:18.400 we're weak. We have not seen the impact of tariffs yet. 0:06:18.560 --> 0:06:20.400 History tells us we will see that about three to 0:06:20.400 --> 0:06:23.880 four months after tariff implementation. So it's very unclear, not 0:06:23.920 --> 0:06:25.920 only in terms of tariffs, who's going to eat them? 0:06:25.960 --> 0:06:28.360 Is it the consumer? Is it the producers. I think 0:06:28.360 --> 0:06:31.159 it's a combination of both. Margin expansion has been what 0:06:31.200 --> 0:06:33.440 has driven a lot of companies' earnings growth though, So 0:06:33.480 --> 0:06:35.480 if companies are going to eat that cost of tariffs 0:06:35.560 --> 0:06:37.839 and margins get at risk, it is probably some downside 0:06:37.839 --> 0:06:40.160 for earnings growth going forward. Good news, we're at a 0:06:40.240 --> 0:06:42.560 high level, growing at twelve percent year over year. I 0:06:42.560 --> 0:06:44.599 think consumer is going to be challenged from here though, 0:06:45.320 --> 0:06:48.480 high end consumer, low end consumer. Both areas could be challenged. 0:06:48.480 --> 0:06:51.440 But the tax cuts in that bill could be somewhat 0:06:51.480 --> 0:06:53.479 of a support form. But it's not our top pick 0:06:53.480 --> 0:06:54.320 for a sector this year. 0:06:54.440 --> 0:06:56.800 You mentioned the self data, typically considered to be a 0:06:56.880 --> 0:06:59.440 leading indicator. Do you believe it's a leading indicator or 0:06:59.480 --> 0:07:02.040 a mislead in the kits at the moment, I think. 0:07:01.880 --> 0:07:04.560 It's mixed because it's tough with the consumer. Consumers tend 0:07:04.560 --> 0:07:07.360 to be grumpy spenders, so when you see consumer spending 0:07:07.440 --> 0:07:11.120 consumer sentiment weak, that's not necessarily a sign that consumers 0:07:11.120 --> 0:07:13.160 are going to pull back on their spending. We've seen 0:07:13.160 --> 0:07:16.160 a very resilient consumer during this cycle already in a 0:07:16.160 --> 0:07:19.080 period of high inflation and high interstates, and remember pre 0:07:19.200 --> 0:07:22.200 the tariffs, inflation has been trending in the right direction. 0:07:22.360 --> 0:07:24.840 So if you add in about a ten percent based 0:07:24.880 --> 0:07:27.960 tariff rate that adds about one percent to inflation, takes 0:07:28.000 --> 0:07:30.320 you back to about that three percent level. If the 0:07:30.360 --> 0:07:33.520 Fed sticks to their commitment to view tariff driven inflation 0:07:33.640 --> 0:07:36.240 as transitory, and they get the couple of rate custs 0:07:36.280 --> 0:07:38.680 this year, we think we'll see two, then maybe we 0:07:38.720 --> 0:07:41.040 can get through this and consumer remains okay. 0:07:41.440 --> 0:07:43.600 If if the Fed sticks on a lot of if there 0:07:43.720 --> 0:07:45.640 any resents belief they won't stick to that view. 0:07:46.240 --> 0:07:48.560 I think it really depends if the tariffs and inflation 0:07:48.640 --> 0:07:51.680 driven by tariffs is really transitory, and if the underlying 0:07:51.760 --> 0:07:55.320 base rate of tear of inflation continues to moderate as 0:07:55.320 --> 0:07:57.640 we've been seeing. So that's really you know. I think 0:07:57.680 --> 0:07:59.680 it's hard to say because all of this data from 0:07:59.760 --> 0:08:01.440 Terra so we're not seeing it in the hard data. 0:08:01.520 --> 0:08:04.520 Yet the economy looks pretty strong, earnings have been strong. 0:08:04.520 --> 0:08:06.080 I can I match this question. How will they know? 0:08:06.440 --> 0:08:08.200 How are they not a difference between what's short lift 0:08:08.240 --> 0:08:09.960 and most persistent? And how long is that going to 0:08:10.000 --> 0:08:10.640 take to find out? 0:08:11.000 --> 0:08:13.920 Presumably it'll take a while to find out if inflation 0:08:14.080 --> 0:08:16.720 is transitory. When do you see that? Do not see 0:08:16.720 --> 0:08:18.680 it until next year? And then do you risk the 0:08:18.720 --> 0:08:21.760 scenario where the FED is very reactionary and then they 0:08:21.800 --> 0:08:23.880 only start cutting when you actually look at the whites 0:08:23.880 --> 0:08:25.880 of the eyes of a labor market that's deteriorating. 0:08:25.920 --> 0:08:27.800 Are they too late that you mentioned Mike Key Pinalia 0:08:27.840 --> 0:08:31.440 from Mulke and Stanley. No cuts for twenty twenty five, hey, places, 0:08:31.440 --> 0:08:32.840 They're going to have to wipe that long get to 0:08:32.880 --> 0:08:33.440 twenty six. 0:08:33.679 --> 0:08:35.400 I think the FED would run the risk of falling 0:08:35.440 --> 0:08:37.800 behind the curve if they wait for the employment market 0:08:37.840 --> 0:08:40.880 to crack. Looking at history, employment markets tend to crack 0:08:40.960 --> 0:08:43.080 at the beginning of a recession. That's going to be 0:08:43.120 --> 0:08:45.319 too late. I think they need to step in. If 0:08:45.320 --> 0:08:48.520 inflation is trending in the right direction outside of teriff, 0:08:48.559 --> 0:08:49.959 I think the FED needs to step in and get 0:08:50.000 --> 0:08:52.319 that first cut going sometime this summer or in the 0:08:52.400 --> 0:08:52.960 latest fall. 0:08:53.080 --> 0:08:56.200 Sarah, fiscal stamulus is good for mal kits, fiscal recklessness 0:08:56.280 --> 0:08:58.440 is not. We've been asking this question or way on 0:08:58.480 --> 0:09:01.240 this program. Do you think this is fisk stimulus or 0:09:01.280 --> 0:09:02.479 fiscal recklessness. 0:09:02.760 --> 0:09:04.520 Well, the answer is it could be both, depending on 0:09:04.559 --> 0:09:08.920 your timeframe. Shorter term fiscal stimulus longer term. Your risk 0:09:09.000 --> 0:09:11.640 is that if you can continue to increase this deficit, 0:09:11.920 --> 0:09:14.360 and we go into a recession, the deficit as a 0:09:14.400 --> 0:09:17.880 percent of GDP will basically blow out because tax rects 0:09:17.920 --> 0:09:20.360 will be down significantly when you're in a recession. So 0:09:20.600 --> 0:09:22.199 that's the question for the markets. Do you want to 0:09:22.200 --> 0:09:24.160 focus on the shorter term or the longer term. I 0:09:24.160 --> 0:09:26.160 think right now markets are focused on the shorter term. 0:09:26.160 --> 0:09:28.600 They're saying earning's growth is in the double digits. Hard 0:09:28.679 --> 0:09:31.680 economic data looks fine. We like the stimulus that's coming 0:09:31.720 --> 0:09:33.240 to the markets. Equities like that. 0:09:33.600 --> 0:09:36.360 What is the mechanism for us to concentrate on the 0:09:36.400 --> 0:09:38.640 longer term? What changes need to happen, What do we 0:09:38.679 --> 0:09:41.800 need to see that makes us concerned about rising deficits 0:09:41.840 --> 0:09:43.400 and the potential recklessness of it. 0:09:43.640 --> 0:09:45.440 I think bond markets are the ones that are giving 0:09:45.480 --> 0:09:48.360 you the yellow flag and saying, you know, something perhaps 0:09:48.400 --> 0:09:50.520 isn't right here. Over the longer term, I think the 0:09:50.559 --> 0:09:53.920 equity markets will pay attention. If yield to continue to rise, 0:09:54.240 --> 0:09:57.000 if borrowing becomes even much more expensive, we're living in 0:09:57.040 --> 0:10:00.000 a period of higher for longer inflation and interest rates, 0:10:00.040 --> 0:10:03.240 equities will become more nervous. So it's the degree of 0:10:03.440 --> 0:10:05.360 the rate of change in yields that's going to impact 0:10:05.400 --> 0:10:07.680 equity markets, but we're not seeing that yet at this point. 0:10:07.720 --> 0:10:09.480 I mean, this deficit has been something I feel like 0:10:09.480 --> 0:10:12.440 we've discussed for so long. It's been an issue for years, 0:10:12.520 --> 0:10:15.240 and really equities have somewhat ignored it, and I don't 0:10:15.240 --> 0:10:17.400 think that can go on forever. But at this point, 0:10:17.440 --> 0:10:18.960 I think we need to see a little more damage 0:10:19.000 --> 0:10:21.200 done by the bond markets before it becomes front center 0:10:21.280 --> 0:10:21.880 for equities. 0:10:22.000 --> 0:10:24.840 Is it also then distracting for what has been the 0:10:25.040 --> 0:10:28.679 concern for the equity market until very recently, which is terras. 0:10:28.920 --> 0:10:31.640 Sure you have ninety day pauses going on all around, 0:10:32.000 --> 0:10:34.160 but teriff freights are still set to be much higher. 0:10:34.400 --> 0:10:36.599 Are we getting distracted by taxes right now? Does the 0:10:36.640 --> 0:10:39.200 equity market at some point come around to the concerns 0:10:39.200 --> 0:10:42.160 of the damage done by higher prices coming in for importers. 0:10:42.480 --> 0:10:45.320 I mean, taxes are definitely the story of right now. 0:10:45.360 --> 0:10:46.880 But in a couple of months we're going to see 0:10:46.920 --> 0:10:49.719 the impacts on the economy from terras. If you look 0:10:49.760 --> 0:10:52.080 at that baseline of about ten percent terrists for the 0:10:52.080 --> 0:10:54.960 rest of the world, you actually skirt a recession. It 0:10:55.000 --> 0:10:57.440 impacts GDP by about one and a half percent, and 0:10:57.480 --> 0:10:59.679 you don't go into a deepercession. Of course, a lot 0:10:59.679 --> 0:11:02.079 of their reability around these numbers and the level of 0:11:02.160 --> 0:11:03.880 terrorists that we eventually end up with. But I think 0:11:03.920 --> 0:11:05.920 the markets right now we're seeing we have a little 0:11:05.960 --> 0:11:08.400 bit of visibility on where terrass fed end up and 0:11:08.440 --> 0:11:10.240 what that might do for the economy. And we have 0:11:10.320 --> 0:11:12.440 some reassurances from the Fed in terms of how they're 0:11:12.480 --> 0:11:14.200 going to think about terrorists. And that's what I mean 0:11:14.280 --> 0:11:16.320 markets are counting on. It's a fine line. It's a 0:11:16.320 --> 0:11:19.559 tightrope that they're walking in this sense with premium multiples. 0:11:19.679 --> 0:11:20.439 But I do think that. 0:11:20.480 --> 0:11:22.880 US tech is where the earnings growth is. That's what 0:11:22.960 --> 0:11:25.080 can continue to lead. But let's not forget the other 0:11:25.160 --> 0:11:27.719 surprise of the year, which is international markets. I don't 0:11:27.760 --> 0:11:30.640 think anyone expected them to outperform US markets to the 0:11:30.679 --> 0:11:31.600 degree that they have. 0:11:31.600 --> 0:11:35.200 European banks to stand. The year just absolutely phenomenal ceremonic 0:11:35.200 --> 0:11:37.040 ofneving Sarah go to see you ye decide. I always 0:11:37.040 --> 0:11:37.679 appreciate it. 0:11:47.520 --> 0:11:50.480 Lawmakers on Capitol Hill, they're working through the night through 0:11:50.520 --> 0:11:53.600 this Rules Committee, this hearing, the first panel. This hearing 0:11:53.640 --> 0:11:56.200 wrapped up at four point thirty in the morning, so 0:11:56.280 --> 0:11:59.000 you can just expect how long this may drag out 0:11:59.080 --> 0:12:00.880 is going to be a slog But we do know 0:12:01.000 --> 0:12:03.400 behind the scenes there were some deals cut and for 0:12:03.440 --> 0:12:04.800 some more insight on that, we want to bring in 0:12:04.880 --> 0:12:08.320 Terry Haynes and Penji a policy. Terry, you've seen the reporting, 0:12:08.320 --> 0:12:09.480 I'm sure, and I'm sure you have a little bit 0:12:09.480 --> 0:12:12.080 more insight. What do you make of the deal cut 0:12:12.080 --> 0:12:15.600 when it comes to salt as well as pulling back 0:12:15.960 --> 0:12:20.160 some of those clean energy investment? Is that going to 0:12:20.160 --> 0:12:23.079 be enough to satisfy some of the naysayers? 0:12:24.280 --> 0:12:26.920 Good morning, and I think I think it probably is. Yeah. 0:12:27.000 --> 0:12:29.560 The you know, the salt deduction, of course, has been 0:12:30.160 --> 0:12:32.800 has been talked about quite a bit, so I won't reiterate, 0:12:33.320 --> 0:12:35.839 but it sounds like that deal is going to be enough, 0:12:36.000 --> 0:12:38.960 and as you pointed out earlier, we haven't seen it 0:12:39.000 --> 0:12:42.120 papered yet, so so that may take a little bit 0:12:42.160 --> 0:12:42.559 of time. 0:12:42.960 --> 0:12:43.360 And the. 0:12:45.120 --> 0:12:49.000 Green energy phase outs also are things that Republicans have 0:12:49.040 --> 0:12:52.239 been interested in for quite some time, and so I imagine 0:12:52.120 --> 0:12:54.400 the combination of that is going to be is going 0:12:54.440 --> 0:12:59.480 to be enough. But Johnson will use the Memorial Day recess. 0:13:00.120 --> 0:13:03.199 Kind of a hard backstop. This is kind of standard 0:13:03.200 --> 0:13:06.400 procedure on the Hill and in the House particularly, a 0:13:06.440 --> 0:13:09.640 hard backstop to get people to put up or shut up. 0:13:09.679 --> 0:13:11.960 And I expect he'll have enough votes at the end 0:13:12.000 --> 0:13:12.400 of the day. 0:13:13.559 --> 0:13:16.360 Of course, Congress needs a deadline in order to really 0:13:16.400 --> 0:13:19.840 get something done. Terry, But even if Johnson is able 0:13:19.880 --> 0:13:22.840 to get this through the House floor, give our audience 0:13:22.840 --> 0:13:25.360 a sense of how difficult this is going to be. 0:13:25.760 --> 0:13:27.839 When this bill goes to the Senate. Does it even 0:13:28.000 --> 0:13:29.400 look recognizable when it. 0:13:29.360 --> 0:13:32.199 Comes back to the House, Well, it's going to look 0:13:32.480 --> 0:13:33.520 different than the House. 0:13:33.559 --> 0:13:34.040 Certainly. 0:13:34.400 --> 0:13:37.920 Speaker Johnson went to the Senate yesterday and begged them 0:13:37.920 --> 0:13:40.280 to keep it as close to the House version as possible, 0:13:40.320 --> 0:13:43.480 and I'm sure that fell on deaf ears. The thing 0:13:43.480 --> 0:13:46.080 you got to understand is that the Senate is the 0:13:46.120 --> 0:13:49.959 House is a kind of a very majoritarian sort of body. 0:13:50.240 --> 0:13:53.640 The Senate is much more collaborative. Think of these folks 0:13:53.679 --> 0:13:57.200 since they only need Republican votes. Think of those fifty 0:13:57.240 --> 0:14:00.880 three CEOs all negotiating with each other. That's what you're 0:14:00.920 --> 0:14:03.000 going to get. You're going to see a very different 0:14:03.080 --> 0:14:05.680 Senate bill. It's going to take weeks, and at the 0:14:05.760 --> 0:14:08.319 end of that process, I think what you see is, 0:14:08.760 --> 0:14:12.079 in capital pill parlance, you see the Senate trying to 0:14:12.160 --> 0:14:14.920 jam the House. In other words, the Senate will do 0:14:15.080 --> 0:14:18.640 its bill, say take it or leave it, and then 0:14:18.720 --> 0:14:21.240 what's going to happen is the House is going to 0:14:21.280 --> 0:14:25.320 have to be herded again in order to in order 0:14:25.360 --> 0:14:27.720 to make this happen more on the Senate's terms than 0:14:27.760 --> 0:14:30.440 the House. That's really where Trump comes in right at 0:14:30.440 --> 0:14:30.800 the end. 0:14:32.040 --> 0:14:34.000 So what happens on the Senate terms when it comes 0:14:34.040 --> 0:14:38.840 to salt, medicaid, and the clean energy tax cuts, I. 0:14:38.760 --> 0:14:42.280 Think I imagine that salt will be will still be 0:14:42.320 --> 0:14:46.160 fairly generous. I imagine Medicaid gets softened at the edges. 0:14:46.200 --> 0:14:49.400 You know, they're hardening up work requirements and some other 0:14:49.440 --> 0:14:52.160 things in order to get House conservative votes. On Medicaid, 0:14:52.400 --> 0:14:56.280 I imagine that gets softened again. And on green energy, 0:14:56.360 --> 0:15:00.720 I imagine again it probably gets extend that a little bit. 0:15:00.760 --> 0:15:03.160 The net effect of all three of those, frankly is, 0:15:04.480 --> 0:15:08.640 are things that are politically more palatable but may have 0:15:08.720 --> 0:15:12.440 the effect of, you know, nudging around the debt and 0:15:12.480 --> 0:15:14.280 deficit problem even further. 0:15:15.920 --> 0:15:18.440 And you think this can get done by July fourth. 0:15:18.920 --> 0:15:24.480 How I think it's certainly possible. Firstly, you need you 0:15:24.560 --> 0:15:27.200 need a political imperative, which is a fancy way of 0:15:27.240 --> 0:15:31.840 saying that you need you need Trump the executive branch 0:15:31.920 --> 0:15:34.160 to kind of light a fire under the Senate, not 0:15:34.320 --> 0:15:38.160 let the momentum that's been built up by the House dissipate. Uh. Secondly, 0:15:38.200 --> 0:15:40.560 you need that that to happen in the lead in 0:15:40.600 --> 0:15:42.840 the Senate leadership as well, and I think it probably 0:15:42.880 --> 0:15:47.200 does h Thirdly, Uh, you know now that the now 0:15:47.240 --> 0:15:50.440 that the Senate's got a template from which to work, 0:15:51.520 --> 0:15:54.240 what you will see is you will see senators the 0:15:54.320 --> 0:15:57.640 law stripes on the Republican side, the only side that 0:15:57.680 --> 0:16:02.160 matters in this unique process, coming out and actually you know, 0:16:02.240 --> 0:16:04.960 giving their own red lines. So you begin to assemble 0:16:05.000 --> 0:16:12.440 a coalition of fifty three Republican senatorslike not unlike the 0:16:12.760 --> 0:16:14.520 herding that you've seen in the House. 0:16:15.880 --> 0:16:18.280 Terry, if this doesn't get done, what kind of tax 0:16:18.400 --> 0:16:20.760 increases could we see going into next year? 0:16:21.440 --> 0:16:25.280 Well, if it doesn't get done, then you've got your bumper. 0:16:25.560 --> 0:16:28.160 You got Trump on the bumper. They're saying, you're going 0:16:28.200 --> 0:16:30.200 to have a you know, essentially a snapback to pre 0:16:30.360 --> 0:16:34.320 seventeen tax law. So that's a you know, for people 0:16:34.320 --> 0:16:37.480 that are used to the current situation, that's a huge increase. 0:16:37.520 --> 0:16:40.960 I have sixty eight percent in my head because that's 0:16:41.000 --> 0:16:43.880 what the President said. It may not be exactly that, 0:16:44.040 --> 0:16:47.560 but it'd be something something fairly large. So, you know, 0:16:47.640 --> 0:16:51.120 the kind of the looming economic undertow here is worth 0:16:51.480 --> 0:16:54.400 remembering as well, and that creates its own its own 0:16:54.440 --> 0:16:58.840 sort of urgency. The other thing about the July fourth 0:16:58.880 --> 0:17:01.800 deadline that I want to make is there are basically 0:17:01.800 --> 0:17:05.520 three kinds of things coming together. It's not just the 0:17:05.560 --> 0:17:11.040 tax bill. It's also that reciprocal tariffs are being studied 0:17:11.119 --> 0:17:13.240 and there will be a report out on that, and 0:17:13.359 --> 0:17:15.639 I would look at that as a as a deadline 0:17:15.840 --> 0:17:17.680 for a lot of these trade deals that are being 0:17:17.720 --> 0:17:21.000 negotiated as well. So you have the opportunity to either 0:17:21.040 --> 0:17:24.600 have a substantial lift coming out of Washington economically or 0:17:24.640 --> 0:17:29.600 you know, or substantial downturn either way, frankly politically. 0:17:30.680 --> 0:17:30.960 Terry. 0:17:31.000 --> 0:17:32.679 The bond market this morning, on the long end, we 0:17:32.680 --> 0:17:35.800 do see yields once again higher. You know, interest on 0:17:35.840 --> 0:17:38.280 the debt is currently the fastest growing part of the 0:17:38.400 --> 0:17:41.040 US budget. If they get this deal done, how are 0:17:41.040 --> 0:17:42.760 they going to deal with the deficit after this? 0:17:43.480 --> 0:17:45.920 Well, they're not going to deal with it in this bill, 0:17:46.440 --> 0:17:50.879 as you know. And there's an expectation by some who 0:17:51.080 --> 0:17:56.000 who who don't understand the process, and people shouldn't necessarily 0:17:56.040 --> 0:18:00.000 but that you know, this bill will wrap up all problems, 0:18:00.080 --> 0:18:01.359 that will be the end of it, and that's not 0:18:01.480 --> 0:18:04.399 the case. I think what you'll hear going forward is 0:18:04.440 --> 0:18:08.520 a lot more from Secretary Besson's about his three three 0:18:08.640 --> 0:18:12.080 three idea, the idea that now what we're going to 0:18:12.160 --> 0:18:16.280 do is we've dealt with the taxes, we've dealt with manufacturing, 0:18:16.600 --> 0:18:19.200