1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,159 Speaker 2: Terminal and the Bloomberg Business app. We begin this out 10 00:00:37,200 --> 00:00:40,360 Speaker 2: with Stock's looking to recover after sliding into correction territory. 11 00:00:40,560 --> 00:00:43,600 Speaker 2: Chris Frown of stratigas a bad company writing equities are 12 00:00:43,640 --> 00:00:46,440 Speaker 2: attempting to stabilize in the fifty five to fifty zone. 13 00:00:46,560 --> 00:00:49,239 Speaker 2: The sentiment conditions are coming together for a rally, but 14 00:00:49,320 --> 00:00:52,040 Speaker 2: it's usually a day of very strong breadth of screams. 15 00:00:52,400 --> 00:00:52,720 Speaker 1: Game on. 16 00:00:53,040 --> 00:00:56,160 Speaker 2: Chris joins us now for more. Chris cammonnin let's be here. 17 00:00:56,280 --> 00:00:56,800 Speaker 2: What a week? 18 00:00:57,040 --> 00:00:57,640 Speaker 3: What a week? 19 00:00:57,760 --> 00:00:59,560 Speaker 2: Let's start with that. Are we screaming game on? 20 00:00:59,680 --> 00:00:59,920 Speaker 3: Yet? 21 00:01:00,160 --> 00:01:02,000 Speaker 4: I don't think quite yet. I think we're in the 22 00:01:02,000 --> 00:01:04,640 Speaker 4: ballpark of kind of the conditions that we like to 23 00:01:04,680 --> 00:01:08,319 Speaker 4: see to mark at least some tactical low. And this 24 00:01:08,440 --> 00:01:10,639 Speaker 4: last week again as a reminder of what I believe 25 00:01:10,720 --> 00:01:14,680 Speaker 4: is the undefeated rule of Wall Street. It's that attitudes 26 00:01:14,760 --> 00:01:16,280 Speaker 4: are shaped by price action. 27 00:01:16,240 --> 00:01:17,600 Speaker 3: Not the other way around. 28 00:01:18,120 --> 00:01:20,319 Speaker 4: And I think, in particular, as we entered the year, 29 00:01:20,319 --> 00:01:21,960 Speaker 4: and we talked about it on this show, the hurdle 30 00:01:22,000 --> 00:01:25,360 Speaker 4: for twenty five would be the game of expectations. 31 00:01:25,480 --> 00:01:27,679 Speaker 3: The bar was high, and all. 32 00:01:27,640 --> 00:01:29,800 Speaker 4: Year we thought the challenge would be chipping away at 33 00:01:29,800 --> 00:01:32,800 Speaker 4: that bar of expectations. I think we're much closer in 34 00:01:32,840 --> 00:01:33,680 Speaker 4: that regard today. 35 00:01:33,760 --> 00:01:34,440 Speaker 3: We've seen just. 36 00:01:34,400 --> 00:01:37,160 Speaker 4: This week a lot of the surveys flip upside down 37 00:01:37,160 --> 00:01:38,880 Speaker 4: where you have more bears than bulls, and a lot 38 00:01:38,880 --> 00:01:41,880 Speaker 4: of the investors surveys, you've seen this big swelling and 39 00:01:42,040 --> 00:01:45,440 Speaker 4: inverse ETF volume, so people buying the short cues or 40 00:01:45,480 --> 00:01:49,080 Speaker 4: the short SMP funds. You've seen the VIX curve invert 41 00:01:49,080 --> 00:01:53,320 Speaker 4: to a pretty meaningful degree. So spot vix, how you've evolved. 42 00:01:53,320 --> 00:01:56,880 Speaker 4: The future should never be above where you'vee evolve down 43 00:01:56,920 --> 00:01:59,160 Speaker 4: the road, yet it is right now. So you have 44 00:01:59,240 --> 00:02:01,760 Speaker 4: these conditions that I think are starting to come together, 45 00:02:01,800 --> 00:02:04,280 Speaker 4: whether it's fifty five to fifty or fifty four to fifty, 46 00:02:04,320 --> 00:02:06,880 Speaker 4: I don't know, but I suspect we're in the ballpark 47 00:02:07,520 --> 00:02:09,120 Speaker 4: of some type of a good trading love. 48 00:02:09,320 --> 00:02:11,120 Speaker 2: Things are a lot worse than that ten percent, seems 49 00:02:11,160 --> 00:02:13,320 Speaker 2: to imply because beneath the surface. I was gone through 50 00:02:13,400 --> 00:02:15,320 Speaker 2: some of the tank nights this morning. METSA down twenty 51 00:02:15,360 --> 00:02:18,040 Speaker 2: percent from a record last month, and Vidia down twenty 52 00:02:18,120 --> 00:02:20,640 Speaker 2: two from the highs of this year. Apple down nineteen 53 00:02:20,639 --> 00:02:23,120 Speaker 2: percent from the highs of ascent, but Amazon down twenty 54 00:02:23,360 --> 00:02:25,639 Speaker 2: Since it's not a February, what gives for big tech? 55 00:02:26,080 --> 00:02:28,440 Speaker 3: Not fun? Right? Well, I think let's remember a couple things. 56 00:02:29,960 --> 00:02:33,120 Speaker 4: It's not like deep seak happened six weeks ago and 57 00:02:33,320 --> 00:02:35,600 Speaker 4: suddenly tech began to express weakness. 58 00:02:35,960 --> 00:02:38,920 Speaker 3: Tech relative to the SMP peaked on July tenth of 59 00:02:38,919 --> 00:02:41,440 Speaker 3: twenty twenty four. You know, it also peaked on July 60 00:02:41,600 --> 00:02:42,639 Speaker 3: tenth of last year. 61 00:02:42,840 --> 00:02:46,640 Speaker 4: Dollar yet so we've talked about this at nauseum in 62 00:02:46,680 --> 00:02:49,639 Speaker 4: our work. I think it would be silly to underestimate 63 00:02:49,880 --> 00:02:52,800 Speaker 4: the impact of the degree to which yen carry for 64 00:02:52,880 --> 00:02:55,600 Speaker 4: so many years, dictated how money moved around the world. 65 00:02:55,680 --> 00:02:56,280 Speaker 3: And I think in. 66 00:02:56,200 --> 00:02:59,799 Speaker 4: Particular the very large stocks in our index are beginning 67 00:02:59,800 --> 00:03:01,240 Speaker 4: to see kind of the waight of that. 68 00:03:01,360 --> 00:03:01,600 Speaker 3: Now. 69 00:03:02,000 --> 00:03:05,120 Speaker 4: I don't want to forget kind of another undefeated rule 70 00:03:05,240 --> 00:03:08,440 Speaker 4: of Wall Street. It's that corrections end on bad news. 71 00:03:08,480 --> 00:03:10,040 Speaker 4: They don't end on good news. If they ended on 72 00:03:10,080 --> 00:03:11,280 Speaker 4: good news, this game would be easy. 73 00:03:11,440 --> 00:03:11,600 Speaker 3: Right. 74 00:03:11,760 --> 00:03:15,480 Speaker 4: Market's top on great news and they bottom on bad news. So, 75 00:03:16,080 --> 00:03:17,760 Speaker 4: you know, as we kind of work through this growth 76 00:03:17,760 --> 00:03:21,480 Speaker 4: scare underlying the word scare, but I still think it's 77 00:03:21,520 --> 00:03:24,120 Speaker 4: in the context of a bull market. And one main 78 00:03:24,160 --> 00:03:27,000 Speaker 4: reason I still feel that way is despite these kind 79 00:03:27,000 --> 00:03:29,280 Speaker 4: of very big declines in some of the equities, you 80 00:03:29,440 --> 00:03:32,600 Speaker 4: really haven't seen an equal response from credit conditions. 81 00:03:32,720 --> 00:03:33,720 Speaker 3: We did a study this week. 82 00:03:33,760 --> 00:03:36,160 Speaker 4: We looked at how big is the move in double 83 00:03:36,160 --> 00:03:39,160 Speaker 4: B spreads off the lows relative to the decline in stock. 84 00:03:39,240 --> 00:03:41,720 Speaker 3: So double B spreads right now are up about thirty. 85 00:03:41,480 --> 00:03:44,360 Speaker 4: Basis points off their lows, pretty modest for a ten 86 00:03:44,440 --> 00:03:48,000 Speaker 4: percent decline in equities. You actually historically would expect double 87 00:03:48,000 --> 00:03:49,960 Speaker 4: B spreads to be about one hundred basis points wider. 88 00:03:50,000 --> 00:03:53,320 Speaker 4: So you've actually seen some relative resilience there in credit 89 00:03:53,400 --> 00:03:53,960 Speaker 4: verse equity. 90 00:03:54,120 --> 00:03:57,160 Speaker 5: Oh does that signal broken? Is that signal broken because 91 00:03:57,200 --> 00:04:00,880 Speaker 5: we have a now buffer of private credit has really 92 00:04:01,000 --> 00:04:05,200 Speaker 5: shifted some of the credit incoming information from public markets. 93 00:04:05,600 --> 00:04:08,080 Speaker 4: So I think no, but let's assume yes for a moment. 94 00:04:08,280 --> 00:04:14,000 Speaker 4: Let's assume I'm wrong and you're right, and the explosion 95 00:04:14,040 --> 00:04:16,120 Speaker 4: of private credit over the last number of years is 96 00:04:16,200 --> 00:04:17,320 Speaker 4: really where the threat of. 97 00:04:17,240 --> 00:04:18,200 Speaker 3: The warning may be. 98 00:04:18,400 --> 00:04:21,280 Speaker 4: So therefore, I think we ought to look at what 99 00:04:21,400 --> 00:04:24,960 Speaker 4: these black holders in the public markets of private credit 100 00:04:24,960 --> 00:04:25,560 Speaker 4: are telling us. 101 00:04:25,560 --> 00:04:27,479 Speaker 3: You know, it's Apollo, it's Blue Alo. 102 00:04:27,760 --> 00:04:30,960 Speaker 4: It's Blackstone, its areas, and you've had good correction in 103 00:04:31,000 --> 00:04:34,239 Speaker 4: those stocks, but in uptrends. I think if we're sitting 104 00:04:34,279 --> 00:04:36,400 Speaker 4: here in three or four months from now and these 105 00:04:36,440 --> 00:04:38,400 Speaker 4: stocks which are over sold have tried to rally and 106 00:04:38,480 --> 00:04:41,360 Speaker 4: rally tepidly and don't rally the leaders and roll back over, 107 00:04:41,839 --> 00:04:44,560 Speaker 4: then I think we can kind of begin to move 108 00:04:44,600 --> 00:04:47,400 Speaker 4: more towards your view, Lisa, But I thought my view. 109 00:04:47,400 --> 00:04:50,119 Speaker 5: I'm just presenting the hypothetical, just throwing it out there. 110 00:04:50,560 --> 00:04:54,839 Speaker 4: I just think it's interesting, though, are we really going 111 00:04:54,920 --> 00:04:59,160 Speaker 4: to get the R word without credit in mass public 112 00:04:59,160 --> 00:05:00,480 Speaker 4: credit really deating? 113 00:05:00,640 --> 00:05:02,320 Speaker 5: Well, okay, the R words right. I love that we 114 00:05:02,360 --> 00:05:05,440 Speaker 5: can't even say recession who I mean, there's this question 115 00:05:05,480 --> 00:05:07,839 Speaker 5: of just putting aside a recession. There's a question about 116 00:05:07,839 --> 00:05:11,440 Speaker 5: whether there's been a structural shift in the overall market flows, 117 00:05:11,720 --> 00:05:15,520 Speaker 5: the disadvantages the United States after advantaging the United States 118 00:05:15,560 --> 00:05:18,720 Speaker 5: for so many years. You mentioned the peak in dollar yen, 119 00:05:18,880 --> 00:05:21,200 Speaker 5: and that has sort of preceded some of these big 120 00:05:21,240 --> 00:05:25,000 Speaker 5: moves downward in equities. George Saravellos of Deutsche Bank put 121 00:05:25,000 --> 00:05:28,040 Speaker 5: out or report this morning titled pain, talking about how 122 00:05:28,080 --> 00:05:31,320 Speaker 5: European investors and US equities are down some thirty percent 123 00:05:31,640 --> 00:05:34,240 Speaker 5: simply because the dollar has not rallied in tandem with 124 00:05:34,240 --> 00:05:37,120 Speaker 5: the weakness and equities. Is there a structural shift underway? 125 00:05:37,839 --> 00:05:40,480 Speaker 4: We think so, And again I think that structural shift 126 00:05:40,520 --> 00:05:42,720 Speaker 4: is dated back to when the most important price in 127 00:05:42,720 --> 00:05:44,960 Speaker 4: the world began to change, which was dollar yen. It 128 00:05:45,000 --> 00:05:48,000 Speaker 4: was just congruent with this wholeble market in tech for 129 00:05:48,120 --> 00:05:49,560 Speaker 4: twelve or thirteen years weekend. 130 00:05:49,640 --> 00:05:49,880 Speaker 3: Now. 131 00:05:50,360 --> 00:05:54,799 Speaker 4: I think one of the reasons I'm at least longer 132 00:05:54,880 --> 00:05:57,240 Speaker 4: term a little bit more seguine about a lot of 133 00:05:57,279 --> 00:06:00,200 Speaker 4: this is simply because this weakness in US equities over 134 00:06:00,240 --> 00:06:03,080 Speaker 4: the last month or two has really not been accompandated 135 00:06:03,120 --> 00:06:05,600 Speaker 4: with weakness and global staffs. I mean, Europe has corrected 136 00:06:05,600 --> 00:06:08,680 Speaker 4: here modestly, but it's held up much much better. The 137 00:06:08,760 --> 00:06:11,599 Speaker 4: Chinese market has frankly held up fantastic. 138 00:06:11,160 --> 00:06:11,839 Speaker 3: Throughout all of this. 139 00:06:11,960 --> 00:06:15,159 Speaker 4: So you're not seeing like the global bear market come 140 00:06:15,200 --> 00:06:17,080 Speaker 4: together or the global recession come together. 141 00:06:17,160 --> 00:06:18,640 Speaker 3: Copper is breaking out here. 142 00:06:18,720 --> 00:06:20,360 Speaker 4: So I think maybe one of the most important charges 143 00:06:20,360 --> 00:06:22,240 Speaker 4: in the world for your viewers are Chinese two year 144 00:06:22,240 --> 00:06:23,599 Speaker 4: olds are now going up for the first time in 145 00:06:23,640 --> 00:06:26,920 Speaker 4: two or three years. You've arrested the kind of financial 146 00:06:26,960 --> 00:06:29,839 Speaker 4: crisis message from China, which was just bond yields and 147 00:06:29,839 --> 00:06:30,240 Speaker 4: free fall. 148 00:06:30,320 --> 00:06:31,440 Speaker 3: That has changed if it. 149 00:06:31,360 --> 00:06:33,279 Speaker 2: Was like developments sound swam. We were talking about this 150 00:06:33,320 --> 00:06:36,080 Speaker 2: early this week, particularly in places like Europe, Pentagon in China, 151 00:06:36,560 --> 00:06:40,039 Speaker 2: reducing the so called risk mitigation characteristics of treasuries. It's 152 00:06:40,040 --> 00:06:42,240 Speaker 2: interesting that you mentioned what equities have done and what 153 00:06:42,320 --> 00:06:45,000 Speaker 2: high yield hasn't done. I would look at equities this week, 154 00:06:45,080 --> 00:06:47,719 Speaker 2: we're down again, and bonn Yold's on a ten year maturity, 155 00:06:47,720 --> 00:06:50,680 Speaker 2: you're basically flat. There are days where it provides me comforted. 156 00:06:50,960 --> 00:06:52,760 Speaker 2: There are days where it really doesn't provide me any 157 00:06:52,760 --> 00:06:55,640 Speaker 2: comfort at all. What is the ten year bonio telling 158 00:06:55,640 --> 00:06:57,359 Speaker 2: you at the moment about what it trades on and 159 00:06:57,360 --> 00:06:58,159 Speaker 2: what it doesn't trade on. 160 00:06:58,360 --> 00:07:00,520 Speaker 4: Yeah, it's probably been the hardest call for two years, 161 00:07:00,560 --> 00:07:02,280 Speaker 4: and I think we've all wrestled with it one way 162 00:07:02,400 --> 00:07:02,839 Speaker 4: or another. 163 00:07:02,920 --> 00:07:03,680 Speaker 3: And the reality is. 164 00:07:03,680 --> 00:07:05,400 Speaker 4: For two years we've basically been in a range. There's 165 00:07:05,400 --> 00:07:07,640 Speaker 4: been no right call. We're sitting literally on the two 166 00:07:07,720 --> 00:07:09,400 Speaker 4: year average of ten year yields. It's four twenty one 167 00:07:09,480 --> 00:07:13,160 Speaker 4: is the two year average, and we're basically there this morning. 168 00:07:13,720 --> 00:07:16,480 Speaker 3: I generally have leaned more bullish bonds. 169 00:07:17,160 --> 00:07:19,520 Speaker 4: We wrote, I think in yesterday's work, you know, as 170 00:07:19,840 --> 00:07:21,880 Speaker 4: rates went up on a soft CPI, which is always 171 00:07:21,920 --> 00:07:24,320 Speaker 4: a surprise, right, we thought the best you would do. 172 00:07:24,280 --> 00:07:26,280 Speaker 3: Is maybe four forty four to forty five on tens. 173 00:07:26,360 --> 00:07:28,680 Speaker 4: I ultimately think you will still get a three handle 174 00:07:28,760 --> 00:07:29,800 Speaker 4: on ten year yields. 175 00:07:30,040 --> 00:07:31,680 Speaker 3: But there's a pull on the other side here. 176 00:07:31,680 --> 00:07:33,720 Speaker 4: And the pull on the other side is German tenure 177 00:07:33,760 --> 00:07:35,280 Speaker 4: yields look like they want to go to three fifty, 178 00:07:35,280 --> 00:07:37,040 Speaker 4: and Chinese yield are going up, and we certainly know 179 00:07:37,120 --> 00:07:40,000 Speaker 4: Japanese yields. So I think we're kind of in this 180 00:07:40,560 --> 00:07:45,280 Speaker 4: very unsatisfying moment for global bonds again. I lean generally 181 00:07:45,320 --> 00:07:48,600 Speaker 4: more constructive, particularly on the short end, for yields lower. 182 00:07:48,640 --> 00:07:50,520 Speaker 4: But I just want to make sure I don't get 183 00:07:50,520 --> 00:07:51,680 Speaker 4: too too cute with that call. 184 00:07:51,760 --> 00:07:53,160 Speaker 2: We'll just sit on that coade just for a little 185 00:07:53,160 --> 00:07:56,360 Speaker 2: bit longer. Developments in Germany, how big aunt those developments? 186 00:07:56,520 --> 00:07:58,480 Speaker 2: How could that change? The White tries to yes, Trent, 187 00:07:58,720 --> 00:08:01,640 Speaker 2: because typically we think about striving the global bomb market. 188 00:08:01,880 --> 00:08:03,880 Speaker 2: We don't think about the bomb markets doing that to 189 00:08:03,920 --> 00:08:04,440 Speaker 2: trace race. 190 00:08:04,480 --> 00:08:04,920 Speaker 3: It's funny. 191 00:08:04,960 --> 00:08:08,160 Speaker 4: I was on your set in early January during Davos 192 00:08:08,800 --> 00:08:12,080 Speaker 4: and Christine Leguard was speaking about how she was peak 193 00:08:12,160 --> 00:08:15,320 Speaker 4: pessimistic on Europe, and I remember telling you guys, you know, 194 00:08:15,560 --> 00:08:17,880 Speaker 4: I want to be a buyer of pessimistic central bankers. 195 00:08:17,920 --> 00:08:20,200 Speaker 3: I remember, right, And you think about that. 196 00:08:20,240 --> 00:08:23,880 Speaker 4: Why have European equities or Chinese equities, or particularly the 197 00:08:23,880 --> 00:08:26,840 Speaker 4: cyclicals in those parts of the world held up better 198 00:08:27,000 --> 00:08:29,800 Speaker 4: even as rates have gone up sharply in Germany and 199 00:08:29,840 --> 00:08:32,840 Speaker 4: sharply in China. I think it's because you have much 200 00:08:32,920 --> 00:08:36,520 Speaker 4: more accommodative monetary policy, both in Europe and in China. 201 00:08:36,559 --> 00:08:39,120 Speaker 4: And that's the one difference today with this growth scare 202 00:08:39,120 --> 00:08:41,200 Speaker 4: that we're going through. This is not the first growth 203 00:08:41,200 --> 00:08:43,280 Speaker 4: scare of the last two or three years. It's not 204 00:08:43,320 --> 00:08:45,800 Speaker 4: the first time cyclicals I've corrected, but it's the first 205 00:08:45,800 --> 00:08:47,800 Speaker 4: time it's happened where you don't really have a FED 206 00:08:47,840 --> 00:08:50,360 Speaker 4: that's particularly eager to kind of get back on the 207 00:08:50,360 --> 00:08:53,439 Speaker 4: easy train. So that I think explains a lot of 208 00:08:53,440 --> 00:08:57,280 Speaker 4: the resiliency x US. And still a lot of stress here, 209 00:08:57,280 --> 00:08:59,240 Speaker 4: like who gives first? Is it the administration or is 210 00:08:59,320 --> 00:09:01,920 Speaker 4: the central bank? I lean towards the central bank, and 211 00:09:01,960 --> 00:09:03,960 Speaker 4: I think the two yearield will ultimately get us there. 212 00:09:04,080 --> 00:09:05,840 Speaker 3: But that's the big debate of the day. 213 00:09:05,880 --> 00:09:07,720 Speaker 2: As soon as next week. Let's too early. 214 00:09:08,080 --> 00:09:10,320 Speaker 4: I think that's too early. And John, when you talk 215 00:09:10,360 --> 00:09:13,800 Speaker 4: about corrections, right, we're down ten. There's a price and 216 00:09:13,880 --> 00:09:16,480 Speaker 4: a time component to every correction. And when I say that, 217 00:09:16,520 --> 00:09:18,400 Speaker 4: you know, I think we're probably eighty ninety percent of 218 00:09:18,400 --> 00:09:21,440 Speaker 4: the way there on price. I do wonder if the 219 00:09:21,520 --> 00:09:24,000 Speaker 4: time component is almost still in front of us where 220 00:09:24,040 --> 00:09:27,960 Speaker 4: we need to just grind this out, you know, rally retest, 221 00:09:28,080 --> 00:09:28,800 Speaker 4: rally retest. 222 00:09:28,920 --> 00:09:31,400 Speaker 3: That would not surprise me. Kind of given this framework here. 223 00:09:31,400 --> 00:09:33,400 Speaker 2: I could be features this morning. They are positive by 224 00:09:33,400 --> 00:09:35,679 Speaker 2: three quarters of one percent. Special thanks to Christopher on 225 00:09:36,040 --> 00:09:48,439 Speaker 2: of shoutagus. So here's the lass this morning, President Trump 226 00:09:48,520 --> 00:09:51,320 Speaker 2: standing firm behind his tariff agenda re it's writing plans 227 00:09:51,360 --> 00:09:54,000 Speaker 2: to keep still and aluminum teriff in place and move 228 00:09:54,040 --> 00:09:58,959 Speaker 2: forward with fresh tariffs on April second, at any research sciencing, Trump, 229 00:09:59,000 --> 00:10:01,080 Speaker 2: as he count says year s and p target to 230 00:10:01,120 --> 00:10:04,800 Speaker 2: sixty four hundred from seven k, writing quote, we can't 231 00:10:04,800 --> 00:10:08,079 Speaker 2: ignore the potential stagflation re impact of the policies that 232 00:10:08,200 --> 00:10:12,040 Speaker 2: Trump two point zero is currently implementing. Joined just now 233 00:10:12,040 --> 00:10:14,400 Speaker 2: for more and welcome to the program sir. An important 234 00:10:14,400 --> 00:10:16,760 Speaker 2: distinction here. Your revision is off the back of a 235 00:10:16,840 --> 00:10:19,200 Speaker 2: change to the multiple and not to learnings. Can we 236 00:10:19,280 --> 00:10:21,720 Speaker 2: start there? Just explain the difference between the two. 237 00:10:22,720 --> 00:10:25,880 Speaker 6: Well, look, it's pe time z when we try to 238 00:10:25,880 --> 00:10:29,080 Speaker 6: think about where the market's going, and I'm still hanging 239 00:10:29,080 --> 00:10:32,360 Speaker 6: on to the idea that the economy is resilient. Over 240 00:10:32,400 --> 00:10:35,320 Speaker 6: the past three years, we've had a tightening of monetary policy, 241 00:10:35,360 --> 00:10:38,719 Speaker 6: and despite the tightening of monetary policy, the economy has 242 00:10:38,760 --> 00:10:43,920 Speaker 6: continued to grow. So I'm hoping that that experience demonstrates 243 00:10:44,040 --> 00:10:48,080 Speaker 6: that the economy will be able to withstand this mix 244 00:10:48,160 --> 00:10:53,640 Speaker 6: of stagflationary policies. On the one hand, we've got a 245 00:10:53,679 --> 00:11:00,880 Speaker 6: policy that's increasing the tariffs, which could potentially slow the 246 00:11:00,920 --> 00:11:04,080 Speaker 6: economy down. And then of course we've got the Doge 247 00:11:04,080 --> 00:11:08,720 Speaker 6: boys cutting back perils pretty aggressively in the federal government. 248 00:11:09,360 --> 00:11:12,880 Speaker 6: Yet despite all that, initial unemployment claims remain remarkably low. 249 00:11:13,800 --> 00:11:17,480 Speaker 6: And there's lots of articles about how the consumer is 250 00:11:17,520 --> 00:11:20,160 Speaker 6: going to retrench. But I think we're actually going to 251 00:11:20,200 --> 00:11:24,040 Speaker 6: find that once we get marched in April data and 252 00:11:24,120 --> 00:11:26,720 Speaker 6: the spring, that will be growth. As Chauncey Gardner once said, 253 00:11:26,800 --> 00:11:33,000 Speaker 6: Remember Chauncey, the idea is that the consumer will prove resilient. 254 00:11:33,480 --> 00:11:35,760 Speaker 6: There was a lot of weakness in the consumer in 255 00:11:35,840 --> 00:11:40,280 Speaker 6: January and February because both months were actually colder than average, 256 00:11:40,640 --> 00:11:43,240 Speaker 6: and so I'm expecting that the economy will actually hang 257 00:11:43,240 --> 00:11:43,600 Speaker 6: in there. 258 00:11:43,840 --> 00:11:47,120 Speaker 5: Sow much. Is this revision downward to your SMP call 259 00:11:47,160 --> 00:11:49,960 Speaker 5: by year end a bond market call and not really 260 00:11:50,040 --> 00:11:53,200 Speaker 5: a stock market hall, with the expectation that bond deals 261 00:11:53,240 --> 00:11:56,880 Speaker 5: will remain higher in the face of inflationary pressures. 262 00:11:57,240 --> 00:11:59,960 Speaker 6: Yeah, Well, we've been expecting that the bond deal would stay. 263 00:12:00,360 --> 00:12:02,760 Speaker 6: We think that bond yields are kind of normal. They're 264 00:12:02,800 --> 00:12:06,280 Speaker 6: back to basically four and a half percent plus minus 265 00:12:06,280 --> 00:12:08,679 Speaker 6: twenty five basis points is kind of where we think 266 00:12:08,720 --> 00:12:12,800 Speaker 6: bond yield should be. And as we've all noted, notwithstanding 267 00:12:13,760 --> 00:12:16,040 Speaker 6: some of the weak numbers that we've had of late, 268 00:12:16,280 --> 00:12:19,280 Speaker 6: the bond yield has actually gone up. No, it's basically 269 00:12:19,520 --> 00:12:23,200 Speaker 6: a call on the fact that valuation multiples have been 270 00:12:23,280 --> 00:12:28,320 Speaker 6: high historically, and they've been historically justifiably if the economy 271 00:12:28,360 --> 00:12:33,600 Speaker 6: continues to grow and giving us plenty of opportunities for 272 00:12:33,720 --> 00:12:38,080 Speaker 6: earnings to kind of fill in for valuation multiples. But 273 00:12:38,160 --> 00:12:41,280 Speaker 6: clearly there's at least a recession scare. Lots of people 274 00:12:41,280 --> 00:12:43,000 Speaker 6: are talking about a recession. As a matter of fact, 275 00:12:43,080 --> 00:12:45,480 Speaker 6: last week, we raised the odds of a recession from 276 00:12:45,480 --> 00:12:47,679 Speaker 6: twenty five percent to thirty five percent. So we're not 277 00:12:48,400 --> 00:12:51,160 Speaker 6: we're not saying that there's no way the economy is 278 00:12:51,200 --> 00:12:53,520 Speaker 6: going to slow in the face of what's going on, 279 00:12:53,720 --> 00:12:57,720 Speaker 6: but we're still betting on the resilience of the economy 280 00:12:57,720 --> 00:13:01,280 Speaker 6: and earnings where we think valuation multiples have already come 281 00:13:01,320 --> 00:13:03,600 Speaker 6: in and what will stay lower than we thought. 282 00:13:03,600 --> 00:13:05,280 Speaker 5: Just a couple of weeks ago at you were sticking 283 00:13:05,280 --> 00:13:07,200 Speaker 5: with the seven thousand target on the s and p 284 00:13:07,360 --> 00:13:09,960 Speaker 5: for the your end, and you did make this revision 285 00:13:10,440 --> 00:13:12,960 Speaker 5: just now of moving it down to sixty four hundred, 286 00:13:13,000 --> 00:13:15,040 Speaker 5: which is still a sixty percent upside from where we 287 00:13:15,040 --> 00:13:16,040 Speaker 5: closed yesterday. 288 00:13:16,559 --> 00:13:17,600 Speaker 3: What triggered that? 289 00:13:17,840 --> 00:13:20,480 Speaker 5: What made you think, Okay, we need to take action 290 00:13:20,720 --> 00:13:23,800 Speaker 5: because what's going on gives us a sense that maybe 291 00:13:23,800 --> 00:13:25,320 Speaker 5: this isn't going to pass so quickly. 292 00:13:27,000 --> 00:13:30,000 Speaker 6: Well, that's a good point. I think we are going 293 00:13:30,040 --> 00:13:33,679 Speaker 6: to get some teriffs, obviously, but I think there are 294 00:13:33,800 --> 00:13:36,480 Speaker 6: going to be negotiations. Maybe in some areas, as you 295 00:13:36,559 --> 00:13:40,000 Speaker 6: just showed the President's going to be stubborn on aluminum 296 00:13:40,520 --> 00:13:44,040 Speaker 6: and steel, but I think there's a room for negotiations 297 00:13:44,360 --> 00:13:47,760 Speaker 6: on tariffs in lots of other areas. So that's what 298 00:13:47,760 --> 00:13:51,400 Speaker 6: I'm expecting. The April second is going to be kind 299 00:13:51,440 --> 00:13:54,080 Speaker 6: of important because that's when we're going to have the 300 00:13:54,120 --> 00:13:58,920 Speaker 6: reciprocal tariffs across the board, and I think that obviously 301 00:13:59,040 --> 00:14:02,760 Speaker 6: will could trigger more downside in the market in the 302 00:14:02,800 --> 00:14:06,640 Speaker 6: short term, but I think it'll also triggered a lot 303 00:14:06,640 --> 00:14:10,800 Speaker 6: of the negotiations to reciprocally bring those tariffs down. 304 00:14:11,320 --> 00:14:13,160 Speaker 2: I had as a tho full cold and we appreciate 305 00:14:13,160 --> 00:14:16,640 Speaker 2: your time breaking it down. This morning, Attani atty research 306 00:14:16,720 --> 00:14:24,920 Speaker 2: on the LESNS for US secreces. 307 00:14:28,040 --> 00:14:30,800 Speaker 7: Well, the man that was turning down the temperature yesterday 308 00:14:30,840 --> 00:14:34,040 Speaker 7: in the Oval Office was the new Secretary General of NATO, 309 00:14:34,240 --> 00:14:36,120 Speaker 7: Mark Rutta, and we're so excited he's. 310 00:14:35,960 --> 00:14:36,680 Speaker 2: Joining us today. 311 00:14:36,680 --> 00:14:39,800 Speaker 7: His first interview following that meeting with President Trump. So 312 00:14:39,840 --> 00:14:42,520 Speaker 7: this is your first trip to Washington as a secretary 313 00:14:42,600 --> 00:14:44,360 Speaker 7: general sitting down the Oval Office. 314 00:14:44,480 --> 00:14:45,040 Speaker 1: How was your. 315 00:14:44,920 --> 00:14:46,960 Speaker 7: Conversation with the President. We saw the forty minutes or 316 00:14:47,000 --> 00:14:48,800 Speaker 7: so that was out to the public, but then you 317 00:14:48,840 --> 00:14:51,280 Speaker 7: guys had lunch. What did you take away from that meeting? 318 00:14:51,520 --> 00:14:54,600 Speaker 1: It was a very positive meeting. We became friends when 319 00:14:54,640 --> 00:14:57,360 Speaker 1: he was trimp forty five and I was still prem 320 00:14:57,360 --> 00:15:00,640 Speaker 1: minentsaud in thatlands, so we worked fairbell together and it 321 00:15:00,760 --> 00:15:04,720 Speaker 1: was a very friendly lunch and also absolute clear commitments 322 00:15:04,800 --> 00:15:08,200 Speaker 1: to the Alliance, to NATO, to what the alliance stands for. 323 00:15:08,280 --> 00:15:10,240 Speaker 1: So that was very optimistic and very positive. 324 00:15:10,320 --> 00:15:12,600 Speaker 7: So you took away that Trump is one hundred percent 325 00:15:12,640 --> 00:15:15,920 Speaker 7: committed to the alliance, even though individuals in his orbit 326 00:15:16,000 --> 00:15:17,520 Speaker 7: like Elon Musk are calling for the. 327 00:15:17,520 --> 00:15:20,440 Speaker 1: US to leave. He was absolutely clear there was no 328 00:15:20,600 --> 00:15:22,320 Speaker 1: room for doubt there, and he did, by the way, 329 00:15:23,280 --> 00:15:25,880 Speaker 1: stayed the same when he was meeting with Michael, the 330 00:15:25,960 --> 00:15:28,560 Speaker 1: French President, and with Starmer, the Brilateist Prime minister two 331 00:15:28,560 --> 00:15:31,840 Speaker 1: weeks before. So I tell some of my European colleagues 332 00:15:31,840 --> 00:15:34,480 Speaker 1: when they say, well, it's the US still connected and 333 00:15:34,520 --> 00:15:37,120 Speaker 1: committed to NATO, I tell them you might want to 334 00:15:37,360 --> 00:15:39,800 Speaker 1: turn on your television and listen to the President when 335 00:15:39,840 --> 00:15:42,440 Speaker 1: he says this, because he was on the records and 336 00:15:42,480 --> 00:15:44,720 Speaker 1: again yesterday stating this. So I have no doubt and 337 00:15:44,760 --> 00:15:46,680 Speaker 1: there's no reason to doubt that. Did you see Elon 338 00:15:46,760 --> 00:15:47,400 Speaker 1: Musk yesterday? 339 00:15:47,520 --> 00:15:49,840 Speaker 7: Was there any individuals at this table that you had 340 00:15:49,960 --> 00:15:52,440 Speaker 7: convinced for the reasons why the US should be a 341 00:15:52,440 --> 00:15:53,240 Speaker 7: part of the alliance? 342 00:15:53,440 --> 00:15:55,840 Speaker 1: Englan was not there, but in the conversation there was 343 00:15:55,960 --> 00:15:59,400 Speaker 1: nobody there doubting the need for alliance. But of course 344 00:15:59,440 --> 00:16:02,720 Speaker 1: everybody very much pushing for more spending, and particularly on 345 00:16:02,760 --> 00:16:05,800 Speaker 1: the European side, because we are lacking behind. But luckily 346 00:16:05,840 --> 00:16:07,960 Speaker 1: we are now ramping up and we're spending much more 347 00:16:08,000 --> 00:16:10,280 Speaker 1: on the European side of netto look what is happening 348 00:16:10,280 --> 00:16:14,000 Speaker 1: now in Germany. This is staggering, potentially in half jillion 349 00:16:14,800 --> 00:16:17,920 Speaker 1: euro slash dollars extra on defense spending. That's historic. 350 00:16:18,320 --> 00:16:20,960 Speaker 7: So the Germans have reached this morning reporting out of 351 00:16:21,000 --> 00:16:23,640 Speaker 7: Germany on this debt package. As you say, it's going 352 00:16:23,680 --> 00:16:25,520 Speaker 7: to be a lot more money coming out of Germany 353 00:16:25,560 --> 00:16:26,040 Speaker 7: for defense. 354 00:16:26,520 --> 00:16:28,360 Speaker 1: I think they had to deal with the Greens, but 355 00:16:28,360 --> 00:16:29,400 Speaker 1: it seems that they're getting there. 356 00:16:29,440 --> 00:16:30,880 Speaker 7: Yeah, it seems like they're getting there, and then there 357 00:16:30,920 --> 00:16:32,600 Speaker 7: will be an agreement in place. 358 00:16:33,080 --> 00:16:34,200 Speaker 1: There is a debate though. 359 00:16:34,040 --> 00:16:36,560 Speaker 7: When it comes to Europe or whether or not Trump 360 00:16:36,640 --> 00:16:39,280 Speaker 7: is helpful because of things like this. The Germans are 361 00:16:39,280 --> 00:16:41,680 Speaker 7: finally starting to spend on things like defense, not having 362 00:16:41,720 --> 00:16:45,040 Speaker 7: to outsource it to the United States. Or is Trump 363 00:16:45,240 --> 00:16:48,600 Speaker 7: unhelpful because he really is shaking up the global order, 364 00:16:48,720 --> 00:16:51,440 Speaker 7: not just when it comes to militarily, but also things 365 00:16:51,480 --> 00:16:55,440 Speaker 7: like tariffs yesterday two hundred percent on European wine, champagne 366 00:16:55,520 --> 00:16:58,760 Speaker 7: and cheeses. How do you view his impact on the continent. 367 00:16:58,840 --> 00:17:00,560 Speaker 1: I think when it comes to defense spending, he is 368 00:17:00,600 --> 00:17:03,360 Speaker 1: extremely helpful. And I told him yesterday trim forty five 369 00:17:03,440 --> 00:17:07,840 Speaker 1: again his first term. We had pledged in twenty fourteen 370 00:17:07,880 --> 00:17:09,919 Speaker 1: to go to the famous two percent. Nothing happened. He 371 00:17:09,960 --> 00:17:13,680 Speaker 1: came in in sixteen seventeen, and then immediately you see 372 00:17:13,720 --> 00:17:18,000 Speaker 1: the defense spending coming up. Now the aggricate amounts about 373 00:17:18,000 --> 00:17:20,760 Speaker 1: seven hundred billion going into one tillion. Excellent. That was 374 00:17:20,800 --> 00:17:23,639 Speaker 1: Trim forty five. Now the second Trim presidency. He is 375 00:17:23,680 --> 00:17:25,600 Speaker 1: only in his fiftieth days. Now I think of fifty 376 00:17:25,640 --> 00:17:29,760 Speaker 1: first day. We have seen eight hundred billion from the Europeans. 377 00:17:30,000 --> 00:17:31,800 Speaker 1: We have seen this half to impactus from the Germans, 378 00:17:31,800 --> 00:17:35,320 Speaker 1: but also the Bridge, the Suits, the Czechs, the Belgians, 379 00:17:35,440 --> 00:17:38,440 Speaker 1: so many others picked up. And this is because they 380 00:17:38,600 --> 00:17:41,800 Speaker 1: since that with Trimp in the White House, this is necessary, 381 00:17:41,840 --> 00:17:44,280 Speaker 1: but also of course because we all realize in Europe 382 00:17:44,280 --> 00:17:48,000 Speaker 1: and here in the US that Russia and China both 383 00:17:48,160 --> 00:17:51,280 Speaker 1: has read and that we have to rearm ourselves because 384 00:17:51,320 --> 00:17:53,480 Speaker 1: they are doing this at an incredible pace. 385 00:17:53,720 --> 00:17:56,720 Speaker 7: But on trade, he definitely is ratcheting up the tension 386 00:17:56,760 --> 00:17:59,360 Speaker 7: when it comes to trade policy tarfs with the European Union. 387 00:17:59,480 --> 00:18:02,640 Speaker 7: That's in the wrong message to NATO adversaries. 388 00:18:02,680 --> 00:18:04,800 Speaker 1: Well, I would leave that to the EU and the US. 389 00:18:04,840 --> 00:18:06,520 Speaker 1: But when I look at home from a line sport 390 00:18:06,560 --> 00:18:09,800 Speaker 1: of perspective, I would argue that Europeans are buying four 391 00:18:09,840 --> 00:18:12,760 Speaker 1: times more when it comes to defense, industrial products here 392 00:18:12,840 --> 00:18:15,560 Speaker 1: in the US than the US is spending in Europe, 393 00:18:15,600 --> 00:18:17,920 Speaker 1: and I don't mind the difference. So it's a four 394 00:18:17,960 --> 00:18:20,959 Speaker 1: to one. So you guys are getting much more a 395 00:18:20,960 --> 00:18:23,800 Speaker 1: better deal here than the Europeans, and that will only 396 00:18:23,960 --> 00:18:27,399 Speaker 1: become more because if we keep the equation the same 397 00:18:27,480 --> 00:18:29,680 Speaker 1: and spending more, you will have the overall a mouth 398 00:18:29,720 --> 00:18:32,360 Speaker 1: being involved, really getting up. And already it's a couple 399 00:18:32,400 --> 00:18:34,480 Speaker 1: of one hundred billions of the last couple of years, 400 00:18:35,680 --> 00:18:37,800 Speaker 1: the F thirty five s to pay SIA systems and 401 00:18:37,840 --> 00:18:40,320 Speaker 1: all the other great products from the defense industrial base 402 00:18:40,400 --> 00:18:42,920 Speaker 1: here in the US being bolt by the Europeans. And 403 00:18:42,960 --> 00:18:43,600 Speaker 1: that's good news. 404 00:18:43,800 --> 00:18:45,880 Speaker 7: I know you're preparing for the Hague summit this summer. 405 00:18:46,000 --> 00:18:48,560 Speaker 7: Do you think you're going to increase defense spending to 406 00:18:48,640 --> 00:18:51,719 Speaker 7: what the Trump administration is calling for five percent GDP 407 00:18:51,880 --> 00:18:52,879 Speaker 7: for all NATO members. 408 00:18:53,200 --> 00:18:55,439 Speaker 1: Well, but what we're doing is we have a process 409 00:18:55,440 --> 00:18:57,960 Speaker 1: in place where we exactly determine what are the gaps, 410 00:18:58,000 --> 00:19:00,159 Speaker 1: and these gaps are big, so we have to do 411 00:19:00,240 --> 00:19:01,679 Speaker 1: a lot more than we are doing now, so it 412 00:19:01,680 --> 00:19:04,520 Speaker 1: will be considerably more than two percent. We first now 413 00:19:04,560 --> 00:19:07,240 Speaker 1: the next couple of weeks will decide on exactly what 414 00:19:07,359 --> 00:19:09,679 Speaker 1: the gaps are in terms of long range missiles, in 415 00:19:09,760 --> 00:19:12,439 Speaker 1: terms of our armies which are depleted, in terms of 416 00:19:12,440 --> 00:19:17,840 Speaker 1: our defense, our defense against ballistic missiles, our command and 417 00:19:17,840 --> 00:19:21,119 Speaker 1: control systems, all that data is a priority now. And 418 00:19:21,160 --> 00:19:23,639 Speaker 1: then you will come to a new number, and that 419 00:19:23,760 --> 00:19:26,040 Speaker 1: will be much more than two percent. I believe it 420 00:19:26,119 --> 00:19:28,080 Speaker 1: will be more than three percent, but I cannot now 421 00:19:28,560 --> 00:19:30,679 Speaker 1: totally and fits its readful end up. And then you 422 00:19:30,680 --> 00:19:32,760 Speaker 1: look at it. One hundreds of billions pouring in now 423 00:19:33,760 --> 00:19:36,120 Speaker 1: basically it is whatrea be happening, and that's the good hus. 424 00:19:36,160 --> 00:19:39,080 Speaker 7: Do you think that's an optimistic goal or will that 425 00:19:39,119 --> 00:19:40,600 Speaker 7: be a red line for this administration? 426 00:19:40,720 --> 00:19:43,600 Speaker 1: Say five percent? I think what we need to do 427 00:19:43,920 --> 00:19:46,400 Speaker 1: collectively is to make sure that we can defend ourselves. 428 00:19:46,440 --> 00:19:49,399 Speaker 1: And at this moment, we cannot defend ourselves going forward. 429 00:19:49,840 --> 00:19:51,600 Speaker 1: Yes now, but not in four or five years. Because 430 00:19:51,600 --> 00:19:54,520 Speaker 1: the Rugussians, for example, ammunition are producing in three months, 431 00:19:54,760 --> 00:19:57,199 Speaker 1: but all of the alliance, including the US and up 432 00:19:57,240 --> 00:20:00,639 Speaker 1: to an including Turkeia, is producing in a year. So 433 00:20:00,680 --> 00:20:04,240 Speaker 1: we have to ramp up defense industrial production, and we 434 00:20:04,320 --> 00:20:06,439 Speaker 1: have to ramp up on the European side, on the 435 00:20:06,440 --> 00:20:09,119 Speaker 1: Canadian side to defense spending and we will decide on 436 00:20:09,200 --> 00:20:11,199 Speaker 1: that over the next couple of months, and it has 437 00:20:11,280 --> 00:20:14,240 Speaker 1: to be content based, but it will be much much more. 438 00:20:14,359 --> 00:20:16,520 Speaker 1: And again when you look at the numbers coming in now, 439 00:20:17,040 --> 00:20:20,920 Speaker 1: the Trump effect of this new triump presidency is clearly there. 440 00:20:21,040 --> 00:20:22,720 Speaker 7: When it comes to the defense of Europe. Did you 441 00:20:22,760 --> 00:20:25,800 Speaker 7: and the President talk about potentially amending where troops are 442 00:20:25,920 --> 00:20:29,080 Speaker 7: American troops on the continent, because there were reports that 443 00:20:29,200 --> 00:20:31,320 Speaker 7: he was thinking maybe pulling out from Germany and putting 444 00:20:31,400 --> 00:20:33,680 Speaker 7: more troops on the eastern flank, maybe to Hungary. 445 00:20:34,200 --> 00:20:36,199 Speaker 1: Well, we didn't go into that detail, but what we 446 00:20:36,320 --> 00:20:40,920 Speaker 1: know when Pete ha said the secutive defense was visiting NATO, 447 00:20:41,320 --> 00:20:43,000 Speaker 1: he was on the record saying, hey, guys, you have 448 00:20:43,040 --> 00:20:46,439 Speaker 1: to understand that as a United States we also have 449 00:20:46,520 --> 00:20:49,479 Speaker 1: to pivot towards the Inner Pacific. So that means that 450 00:20:49,520 --> 00:20:51,879 Speaker 1: we have to take care of more than one theater, 451 00:20:52,080 --> 00:20:55,399 Speaker 1: yes to European theater, also the Middle East, also the 452 00:20:55,400 --> 00:20:58,480 Speaker 1: Inner Pacific. This of course history made you the leader 453 00:20:58,480 --> 00:21:00,080 Speaker 1: as the United States. That means that you have to 454 00:21:00,200 --> 00:21:03,879 Speaker 1: attend these various issues. And that also will mean probably 455 00:21:03,920 --> 00:21:07,440 Speaker 1: over time, the Europeans spending more that you guys will 456 00:21:07,480 --> 00:21:09,160 Speaker 1: have to look at, Okay, where it can you best 457 00:21:09,160 --> 00:21:12,320 Speaker 1: deploy our troops, but that will be a gradual process, 458 00:21:12,359 --> 00:21:14,160 Speaker 1: taking time and not aprupt. 459 00:21:14,480 --> 00:21:17,720 Speaker 7: There was definitely with this administration coming in more troops 460 00:21:17,720 --> 00:21:20,879 Speaker 7: being put on the US southern border. Under the Biden administration, 461 00:21:20,920 --> 00:21:23,080 Speaker 7: though there was a surge of about twenty thousand troops 462 00:21:23,119 --> 00:21:26,480 Speaker 7: to Europe. Is this administration going to pull back that 463 00:21:26,520 --> 00:21:28,960 Speaker 7: Biden surge of twenty thousand troops because they have other 464 00:21:29,000 --> 00:21:31,560 Speaker 7: priorities like the southern border, like the Red Sea, in 465 00:21:31,600 --> 00:21:33,320 Speaker 7: the Middle East, like the Asia Pacific. 466 00:21:34,160 --> 00:21:36,600 Speaker 1: But we didn't discuss those numbers in that detail. 467 00:21:36,320 --> 00:21:38,000 Speaker 3: So would that concern you now? 468 00:21:38,040 --> 00:21:40,440 Speaker 1: But I think it's important is that the US is 469 00:21:40,480 --> 00:21:42,760 Speaker 1: committed to NATO, committed to the whole of the alliance, 470 00:21:42,760 --> 00:21:47,040 Speaker 1: and is also committed to if over time the Europeans 471 00:21:47,040 --> 00:21:49,600 Speaker 1: are doing much and much more, and for the US 472 00:21:49,720 --> 00:21:53,320 Speaker 1: also to attend to other issues like in the Pacific. 473 00:21:53,359 --> 00:21:55,280 Speaker 1: And by the way, as an alliance, as a collector 474 00:21:55,280 --> 00:21:58,399 Speaker 1: of thirty two countries, we can also be helpful in 475 00:21:58,400 --> 00:22:01,160 Speaker 1: a sense of projecting more American power at the world 476 00:22:01,200 --> 00:22:03,879 Speaker 1: stage because the US not being on its own but 477 00:22:04,080 --> 00:22:08,080 Speaker 1: embedded in an organization with thirty one other allies giving that. 478 00:22:08,119 --> 00:22:10,720 Speaker 7: Role that was missing in the past four years. American 479 00:22:10,760 --> 00:22:11,719 Speaker 7: power on the world stage. 480 00:22:11,760 --> 00:22:13,960 Speaker 1: I think it was there, but I think we could 481 00:22:13,960 --> 00:22:15,560 Speaker 1: have done much more. And when it comes to the 482 00:22:15,560 --> 00:22:18,159 Speaker 1: European side of NATO, we were still lacking behind in 483 00:22:18,280 --> 00:22:21,159 Speaker 1: terms of our defense spending. And I get the hot. 484 00:22:21,040 --> 00:22:22,719 Speaker 7: War in Europe right now, and that's what I want 485 00:22:22,760 --> 00:22:23,240 Speaker 7: to talk to you about. 486 00:22:23,240 --> 00:22:24,040 Speaker 3: What's going to the. 487 00:22:24,119 --> 00:22:26,680 Speaker 7: Ukraine While you were in the Oval office. Steve Wikoff, 488 00:22:26,760 --> 00:22:30,280 Speaker 7: the President's longtime friend, his special advisor, second meeting he 489 00:22:30,359 --> 00:22:33,520 Speaker 7: had with President Putin in Moscow. Coming out of that meeting, 490 00:22:33,680 --> 00:22:37,280 Speaker 7: Dmitry Peskov is saying he's cautiously optimistic. When do you 491 00:22:37,320 --> 00:22:39,160 Speaker 7: think we could see a thirty day ceasefire? 492 00:22:39,600 --> 00:22:42,200 Speaker 1: Well, I cannot predict that. What I can say is that. 493 00:22:42,160 --> 00:22:43,639 Speaker 7: I am there are more rooms than I have. 494 00:22:43,760 --> 00:22:47,159 Speaker 1: Yeah, but let me say this, first of all, the 495 00:22:47,160 --> 00:22:50,280 Speaker 1: Trump administration, the President themselves, broke the deadlock on this 496 00:22:50,640 --> 00:22:53,520 Speaker 1: on this war because he started to engage with solutions. 497 00:22:53,560 --> 00:22:56,199 Speaker 1: I think that's positive. With the Ukrainians, that's positive. And 498 00:22:56,200 --> 00:22:58,720 Speaker 1: there was a deal last Tuesday in Saudi Arabia between 499 00:22:58,760 --> 00:23:01,960 Speaker 1: the US and you on pushing for the ceasefire, so 500 00:23:02,000 --> 00:23:05,600 Speaker 1: this is all good. Obviously, the US administration is now 501 00:23:05,640 --> 00:23:08,520 Speaker 1: dialoguing with the Russians to see where there are on this, 502 00:23:08,760 --> 00:23:11,040 Speaker 1: and that will be a step by step approach. But 503 00:23:11,119 --> 00:23:14,600 Speaker 1: this is literally developing over the next couple of hours 504 00:23:14,640 --> 00:23:17,280 Speaker 1: and days, so very hard to predict when that will happen. 505 00:23:17,440 --> 00:23:19,560 Speaker 1: But I think this idea of having a thirty day 506 00:23:19,600 --> 00:23:22,919 Speaker 1: ceasefire is a very wise plan because it gives you 507 00:23:22,960 --> 00:23:26,639 Speaker 1: the room to go into more detail on what next. 508 00:23:26,920 --> 00:23:29,840 Speaker 7: You've heard from the Ukrainians they want security guarantees. Did 509 00:23:29,840 --> 00:23:31,840 Speaker 7: you get a sense from your meetings yesterday the US 510 00:23:31,920 --> 00:23:32,640 Speaker 7: is willing to do that. 511 00:23:33,200 --> 00:23:36,000 Speaker 1: Well, the US is saying this first, we need a 512 00:23:36,040 --> 00:23:38,959 Speaker 1: peace deal, slash the ceasefire, and the person that's very 513 00:23:38,960 --> 00:23:41,720 Speaker 1: clear on this that obviously there will be many issues 514 00:23:41,720 --> 00:23:44,119 Speaker 1: to be discussed and debated when a ceasefire slash a 515 00:23:44,160 --> 00:23:46,800 Speaker 1: peace deal is there, But to discuss how to keep 516 00:23:46,800 --> 00:23:48,640 Speaker 1: a peace deal if there is not yet a peace 517 00:23:48,680 --> 00:23:51,080 Speaker 1: deal is also a bit strange. You of course, you 518 00:23:51,160 --> 00:23:52,640 Speaker 1: have to think aparently. 519 00:23:52,359 --> 00:23:55,680 Speaker 7: Taken off, He's already taken off Ukraine joining NATO off 520 00:23:55,680 --> 00:23:59,160 Speaker 7: the table. So Ukraine is left asking this question, how 521 00:23:59,160 --> 00:24:02,640 Speaker 7: are we going to know, we're going to have proper security. 522 00:24:02,760 --> 00:24:05,840 Speaker 1: But he he was also very clear Pitasett and Brussels, 523 00:24:05,840 --> 00:24:08,080 Speaker 1: but also the President self that when there is a 524 00:24:08,119 --> 00:24:10,439 Speaker 1: deal on Ukraine, it has to be lasting, it has 525 00:24:10,480 --> 00:24:13,920 Speaker 1: to be durable, putting should not have to try this again. 526 00:24:14,000 --> 00:24:16,399 Speaker 1: So the question is then, how how do you do 527 00:24:16,440 --> 00:24:18,919 Speaker 1: this post a piece deal? Then I would side with 528 00:24:18,920 --> 00:24:20,840 Speaker 1: sup Pressident to first need to have a peace deal 529 00:24:20,920 --> 00:24:23,879 Speaker 1: before you can get into these details. Obviously, behind the 530 00:24:23,920 --> 00:24:27,000 Speaker 1: screens there will be discussions on the what if there 531 00:24:27,040 --> 00:24:29,760 Speaker 1: is a peace deal, how then to maintain that? But 532 00:24:29,800 --> 00:24:31,240 Speaker 1: there are many ways to do that, and we know, 533 00:24:31,240 --> 00:24:32,240 Speaker 1: of course the Diffrench. 534 00:24:31,920 --> 00:24:35,560 Speaker 7: Ship be involved Lensky's calling for a monetaring mechanism coming 535 00:24:35,560 --> 00:24:36,840 Speaker 7: from the Alliance itself. 536 00:24:36,920 --> 00:24:38,479 Speaker 1: I mean, there are many ways to do this, but 537 00:24:38,520 --> 00:24:41,440 Speaker 1: I think for NATO to be as NATO involved will 538 00:24:41,440 --> 00:24:45,040 Speaker 1: be difficult. But NATO will maybe always advise and look 539 00:24:45,080 --> 00:24:46,399 Speaker 1: into what is the best way to do this. But 540 00:24:46,480 --> 00:24:48,600 Speaker 1: in the end, what we're seeing now is the French 541 00:24:48,640 --> 00:24:51,359 Speaker 1: and the bridge and the bridge in the Americans discussing 542 00:24:51,600 --> 00:24:55,040 Speaker 1: how could you organize that? But again I would caution 543 00:24:55,119 --> 00:24:57,080 Speaker 1: a little bit and that before you get in too 544 00:24:57,119 --> 00:25:00,639 Speaker 1: much detail in terms of how too many tain the piece. 545 00:25:01,200 --> 00:25:04,159 Speaker 1: You first need to have the deal, and it's a 546 00:25:04,160 --> 00:25:06,600 Speaker 1: step by step approach and one after the other, and 547 00:25:06,600 --> 00:25:08,560 Speaker 1: they're I think trumpet right, Do. 548 00:25:08,520 --> 00:25:10,080 Speaker 7: You think we get a deal this year? Do you 549 00:25:10,119 --> 00:25:11,560 Speaker 7: think the fighting stops this year? 550 00:25:11,840 --> 00:25:13,439 Speaker 1: I'm optimistic, yes, And then. 551 00:25:13,600 --> 00:25:16,720 Speaker 7: Paskof is cautually optimistic. I believe the National Security Advisor 552 00:25:16,800 --> 00:25:19,160 Speaker 7: Mike watterificast. 553 00:25:18,040 --> 00:25:18,320 Speaker 6: So are you. 554 00:25:18,400 --> 00:25:20,600 Speaker 1: I would also be cautiously optivists about this year, but 555 00:25:20,640 --> 00:25:23,280 Speaker 1: I hope it is sooner because the amount of people 556 00:25:23,359 --> 00:25:27,320 Speaker 1: dying there, the destriction of whole cities happening as we speak, 557 00:25:28,160 --> 00:25:33,040 Speaker 1: it is really very very painful, and it is having 558 00:25:33,080 --> 00:25:35,440 Speaker 1: an impact on so many families and so many people 559 00:25:35,480 --> 00:25:37,199 Speaker 1: in Ukraine, but also on the Russian side. We know 560 00:25:37,240 --> 00:25:40,199 Speaker 1: that there were days detruitions. We're losing up to fifteen 561 00:25:40,320 --> 00:25:43,640 Speaker 1: hundred people dying or seriously wounded a day, but also 562 00:25:43,640 --> 00:25:46,240 Speaker 1: in the Ukrainian side, so many people that and so 563 00:25:46,320 --> 00:25:47,560 Speaker 1: many people seriously wounded. 564 00:25:47,680 --> 00:25:50,240 Speaker 7: Before you were Secretary General of NATO, you ran a 565 00:25:50,280 --> 00:25:52,800 Speaker 7: European country. Would you be willing to do business again 566 00:25:52,840 --> 00:25:55,320 Speaker 7: with Russia after this? Because we are hearing reports of 567 00:25:55,320 --> 00:25:58,119 Speaker 7: things like maybe gas deals come back into play. 568 00:25:58,520 --> 00:26:00,719 Speaker 1: Well, I mean, I'm not there because first of all, 569 00:26:00,720 --> 00:26:02,560 Speaker 1: you have to maintain the pressure on Russians to make 570 00:26:02,560 --> 00:26:05,000 Speaker 1: sure that they do whatever is necessary. That's why we 571 00:26:05,040 --> 00:26:07,520 Speaker 1: have the sanctions. And let's not be naive about the Russians. 572 00:26:07,880 --> 00:26:10,679 Speaker 1: But longer term, Russia is there. I mean, Russia will 573 00:26:10,720 --> 00:26:14,240 Speaker 1: not goblebey. And I've had many dealings with President put 574 00:26:14,280 --> 00:26:17,639 Speaker 1: In till twenty fourteen. In my first four years as 575 00:26:17,680 --> 00:26:20,600 Speaker 1: Prime minister, we had many negotiations, and I think it 576 00:26:20,680 --> 00:26:24,119 Speaker 1: is normal if the war would have stopped, for Europe 577 00:26:24,119 --> 00:26:26,440 Speaker 1: to somehow step by step and also for the US 578 00:26:26,520 --> 00:26:29,800 Speaker 1: step by step to restore normal relations with Russians. But 579 00:26:29,800 --> 00:26:32,159 Speaker 1: if you are absolutely not there yet, we have to 580 00:26:32,160 --> 00:26:34,640 Speaker 1: maintain the pressure on them to make sure that they 581 00:26:34,640 --> 00:26:38,680 Speaker 1: are revealing to engage seriously in talks with the American 582 00:26:38,760 --> 00:26:40,840 Speaker 1: administration and of course also with the Ukrainian I. 583 00:26:40,840 --> 00:26:42,760 Speaker 7: Think the markets and business leaders might be a step 584 00:26:42,800 --> 00:26:45,320 Speaker 7: ahead of the leaders in this one. We have to 585 00:26:45,400 --> 00:26:47,600 Speaker 7: end on Greenland because you were in the middle of 586 00:26:47,640 --> 00:26:50,080 Speaker 7: this Oval Office meeting and the President's talking about how 587 00:26:50,080 --> 00:26:53,120 Speaker 7: he wants to go after Greenland. He wants the critical minerals. 588 00:26:53,119 --> 00:26:54,960 Speaker 1: There, are you concerned. 589 00:26:54,600 --> 00:26:58,760 Speaker 7: At any point you'll be mediating between two NATO members. 590 00:26:59,119 --> 00:27:02,360 Speaker 1: No, I know that they are in close dialogue, Denmark 591 00:27:02,640 --> 00:27:05,280 Speaker 1: and the US, so I will leave it. That's the 592 00:27:05,280 --> 00:27:07,119 Speaker 1: discussion between the two of them. But there is a 593 00:27:07,200 --> 00:27:09,480 Speaker 1: bigger issue at stake here, and that is the High North, 594 00:27:09,840 --> 00:27:12,520 Speaker 1: the Arctic, and this includes the US who Alaska, it 595 00:27:12,520 --> 00:27:16,080 Speaker 1: includes Canada, that includes Iceland, norwaysed freedom in Finland and 596 00:27:16,160 --> 00:27:20,040 Speaker 1: Denmark because of Greenland. And I think the President is 597 00:27:20,080 --> 00:27:23,480 Speaker 1: totally right in saying, and others are arguing also the 598 00:27:24,000 --> 00:27:27,879 Speaker 1: Russians rearming there, the Chinese using these zeroes knowing that 599 00:27:27,920 --> 00:27:31,240 Speaker 1: we have a lack of icebreakers. There is a reason 600 00:27:31,320 --> 00:27:34,480 Speaker 1: for these seven countries and NATO would be somehow involved 601 00:27:34,480 --> 00:27:37,520 Speaker 1: here also in terms of advising and bringing the group 602 00:27:37,560 --> 00:27:40,240 Speaker 1: together that we have to take care of our defense 603 00:27:40,280 --> 00:27:42,800 Speaker 1: in the High North. So this general issue he put 604 00:27:42,880 --> 00:27:44,840 Speaker 1: on your GENA. I think that's positive and it's. 605 00:27:44,760 --> 00:27:47,240 Speaker 7: Something data we'll talk about this summer potentially. 606 00:27:46,960 --> 00:27:50,000 Speaker 1: Potentially, and I think the seven countries are coordinating and 607 00:27:50,040 --> 00:27:50,520 Speaker 1: if there is a. 608 00:27:50,560 --> 00:27:53,480 Speaker 7: Role for NATO, we will always be present and we 609 00:27:53,520 --> 00:27:54,919 Speaker 7: hope to see you there at the summit. 610 00:27:55,000 --> 00:27:56,960 Speaker 8: Thank you so much, you so much, thank you so 611 00:27:57,040 --> 00:27:59,320 Speaker 8: much for joining in his first interview of the day 612 00:27:59,359 --> 00:28:02,960 Speaker 8: after his over office meeting with President Trump, and made 613 00:28:03,000 --> 00:28:05,840 Speaker 8: it very clear to me, Jonathan and our audience, President 614 00:28:05,920 --> 00:28:07,640 Speaker 8: Trump is committed to the alliance. 615 00:28:17,960 --> 00:28:20,919 Speaker 2: Towson Stock of Apollo, writing, this is a weight and 616 00:28:21,040 --> 00:28:24,919 Speaker 2: see economy consumers are more reluctant. The bottom line is 617 00:28:25,000 --> 00:28:27,000 Speaker 2: that this eventually leads to a slow down in the 618 00:28:27,000 --> 00:28:30,520 Speaker 2: hard data, and markets should prepare for that scenario. Towson 619 00:28:30,600 --> 00:28:32,240 Speaker 2: joins us now for more tost than good. 620 00:28:32,160 --> 00:28:33,040 Speaker 3: Morning, good morning. 621 00:28:33,240 --> 00:28:35,280 Speaker 2: We've seen the shift and the soft data. The last 622 00:28:35,280 --> 00:28:38,320 Speaker 2: time we spoke, you raise the issue our believe. Lisa 623 00:28:38,400 --> 00:28:41,280 Speaker 2: asked to the question, with that soft data bleed into 624 00:28:41,280 --> 00:28:44,560 Speaker 2: the hard data, do you sense a inevitability now towards 625 00:28:44,680 --> 00:28:45,320 Speaker 2: that We. 626 00:28:45,320 --> 00:28:46,800 Speaker 9: Are beginning to see that if you look at the 627 00:28:46,840 --> 00:28:49,280 Speaker 9: high frequency data, so over the last several weeks, we 628 00:28:49,320 --> 00:28:51,160 Speaker 9: have seen and I know some of these indicators are a 629 00:28:51,160 --> 00:28:53,520 Speaker 9: little bit special, but we've seen the number of people 630 00:28:53,520 --> 00:28:56,520 Speaker 9: who are going to movie theaters, number of people going 631 00:28:56,560 --> 00:28:57,600 Speaker 9: to Broadway shows. 632 00:28:57,760 --> 00:28:59,040 Speaker 1: If you look at the TSA. 633 00:28:58,800 --> 00:29:01,120 Speaker 9: Data for how many people flying airplanes, even if you 634 00:29:01,160 --> 00:29:03,400 Speaker 9: look at how many people visiting the statue of living 635 00:29:03,480 --> 00:29:05,800 Speaker 9: here in New York City, all that has actually started 636 00:29:05,840 --> 00:29:08,200 Speaker 9: to weaken. And now we get another soft data print 637 00:29:08,200 --> 00:29:11,040 Speaker 9: here at ten with the Michigan centiment for consumers. So 638 00:29:11,240 --> 00:29:14,200 Speaker 9: overall it is still a little bit too early, but 639 00:29:14,360 --> 00:29:17,000 Speaker 9: given that we have this weight and see situation both 640 00:29:17,000 --> 00:29:20,200 Speaker 9: for consumers and for corporates, it does make sense that 641 00:29:20,240 --> 00:29:22,600 Speaker 9: the soft data should eventually begin to spill over to 642 00:29:22,640 --> 00:29:25,080 Speaker 9: at least some weakening in the hot data. 643 00:29:25,160 --> 00:29:27,040 Speaker 2: One feture of this cycle that I think a lot 644 00:29:27,080 --> 00:29:30,800 Speaker 2: of people underestimated, you not included is the resilience of 645 00:29:30,800 --> 00:29:34,040 Speaker 2: this economy. What is our capacity to absorb sharks now 646 00:29:34,040 --> 00:29:34,960 Speaker 2: has that been reduced? 647 00:29:35,280 --> 00:29:37,400 Speaker 9: Well, that's a very important question because that depends on 648 00:29:37,400 --> 00:29:39,560 Speaker 9: the nature of the sharks, and we're facing two sharks 649 00:29:39,560 --> 00:29:42,760 Speaker 9: at the moment, namely DOGE, which is laying off government workers. 650 00:29:42,960 --> 00:29:45,520 Speaker 9: Estimate suggests that that will be around three hundred thousands 651 00:29:45,720 --> 00:29:48,080 Speaker 9: workers that might be losing their jobs. Remember that for 652 00:29:48,120 --> 00:29:51,400 Speaker 9: every federal worker, there are two contractors, according to Brookings. 653 00:29:51,880 --> 00:29:54,920 Speaker 9: So Brooking start to show that in total, true employment 654 00:29:55,080 --> 00:29:58,400 Speaker 9: in the federal government is roughly around nine ten million people. 655 00:29:58,640 --> 00:30:00,760 Speaker 9: So if you now think about number of households is 656 00:30:00,800 --> 00:30:03,200 Speaker 9: one hundred and thirty million, and someone in the federal 657 00:30:03,240 --> 00:30:05,680 Speaker 9: work or contractor lives together with someone in the private sector, 658 00:30:05,840 --> 00:30:08,200 Speaker 9: you get that as much as ten fifteen percent of 659 00:30:08,240 --> 00:30:11,200 Speaker 9: all households in some way or another is being impacted 660 00:30:11,320 --> 00:30:14,560 Speaker 9: from a sentiment perspective by DOJA loon and tariffs of 661 00:30:14,560 --> 00:30:17,800 Speaker 9: course also in particular impacts anyone who is associated with 662 00:30:17,800 --> 00:30:19,960 Speaker 9: trade with Canada and Mexico, and you have that that 663 00:30:20,160 --> 00:30:22,320 Speaker 9: is also a particular of course across the border to 664 00:30:22,360 --> 00:30:25,000 Speaker 9: the north and to the south, playing a significant role in. 665 00:30:24,920 --> 00:30:25,840 Speaker 1: A number of states. 666 00:30:25,920 --> 00:30:28,760 Speaker 9: So the bottom line is is not only terriffs and 667 00:30:28,800 --> 00:30:31,520 Speaker 9: trade war, it's also the combination of the risk that 668 00:30:31,600 --> 00:30:35,080 Speaker 9: government workers and contractors potentially losing their jobs. That are 669 00:30:35,120 --> 00:30:37,920 Speaker 9: the main reasons why the soft data is weakening the 670 00:30:37,920 --> 00:30:39,840 Speaker 9: way it is. And it's not only consumer soft data 671 00:30:40,040 --> 00:30:42,160 Speaker 9: is also corporate. If you look at the CAPEX planning 672 00:30:42,360 --> 00:30:45,000 Speaker 9: from the regional feds Dallas Fed, Field Deelpha Fed, New 673 00:30:45,080 --> 00:30:47,920 Speaker 9: York Fed, that's showing that businesses in those districts are 674 00:30:47,920 --> 00:30:51,400 Speaker 9: saying we're beginning to cut back CAPICS plans. Likewise, NFIB 675 00:30:51,720 --> 00:30:54,760 Speaker 9: also roundtable surveys CAPEX planning is also moving lower, So 676 00:30:54,840 --> 00:30:58,240 Speaker 9: both consumer confidence moving lower corporate confidence moving lower. It 677 00:30:58,320 --> 00:31:00,800 Speaker 9: is a precursor for slowdown coming in the hot data. 678 00:31:00,960 --> 00:31:04,000 Speaker 5: There's an argument being made that if what was propping 679 00:31:04,040 --> 00:31:06,880 Speaker 5: up the United States economy was government spending, it wasn't 680 00:31:06,880 --> 00:31:09,440 Speaker 5: that strong to begin with, and this is actually somewhat 681 00:31:09,480 --> 00:31:11,880 Speaker 5: of a withdrawal from a sugar high from an incredible 682 00:31:11,920 --> 00:31:15,560 Speaker 5: amount of fiscal spend in the direct aftermath of the pandemic. 683 00:31:15,920 --> 00:31:18,640 Speaker 9: Do you buy that there is some truth to the 684 00:31:18,760 --> 00:31:21,440 Speaker 9: detox argument in the sense that if you look at 685 00:31:21,560 --> 00:31:24,680 Speaker 9: hiring in nonfound payrolls over the last two years, twenty 686 00:31:24,680 --> 00:31:26,920 Speaker 9: five percent of jobs created in twenty twenty three and 687 00:31:26,960 --> 00:31:30,120 Speaker 9: twenty four where government jobs. The previous years it was 688 00:31:30,160 --> 00:31:32,360 Speaker 9: like five ten percent much month or less, So a 689 00:31:32,520 --> 00:31:35,400 Speaker 9: very significant part of jobs in the last two years had. 690 00:31:35,280 --> 00:31:36,920 Speaker 1: Been coming from the government sector. 691 00:31:37,080 --> 00:31:39,920 Speaker 9: So it is true that job growth has been slowing 692 00:31:39,960 --> 00:31:42,880 Speaker 9: in the private sector, even going into these shocks that 693 00:31:42,880 --> 00:31:44,120 Speaker 9: we're looking at the moment. 694 00:31:43,880 --> 00:31:46,400 Speaker 5: Heading into twenty twenty five, you are pretty clear that 695 00:31:46,440 --> 00:31:48,640 Speaker 5: you think that the inflationary shock was going to be 696 00:31:48,720 --> 00:31:50,520 Speaker 5: maintained and that it was going to create a real 697 00:31:50,600 --> 00:31:52,880 Speaker 5: problem for the FED to actually offer response to that 698 00:31:53,000 --> 00:31:56,160 Speaker 5: kind of weakness in the economy. Do you continue to 699 00:31:56,200 --> 00:31:59,520 Speaker 5: see that even though the shocks that we're seeing right now, 700 00:31:59,560 --> 00:32:02,720 Speaker 5: to see might have a bigger ramification on growth than 701 00:32:02,720 --> 00:32:03,880 Speaker 5: you'd previously expect it. 702 00:32:04,000 --> 00:32:07,160 Speaker 9: Well, the real challenge is that going into tariffs, we 703 00:32:07,240 --> 00:32:10,280 Speaker 9: had that inflation unfortunately was still too high at around 704 00:32:10,320 --> 00:32:13,520 Speaker 9: three percent, and most calculations suggest that you will add 705 00:32:13,640 --> 00:32:16,240 Speaker 9: roughly half a percentis point to core PCE as a 706 00:32:16,280 --> 00:32:17,120 Speaker 9: result of teriffs. 707 00:32:17,160 --> 00:32:19,600 Speaker 1: So it makes a huge difference where you start. If 708 00:32:19,600 --> 00:32:22,120 Speaker 1: you start with inflation at three and you add half 709 00:32:22,160 --> 00:32:22,960 Speaker 1: a percent. 710 00:32:22,800 --> 00:32:24,360 Speaker 9: Of course, the risk is that you will have too 711 00:32:24,400 --> 00:32:27,240 Speaker 9: much upside and we're way above the feeds target. Whereas 712 00:32:27,240 --> 00:32:29,400 Speaker 9: if inflation had started at one and a half, which 713 00:32:29,440 --> 00:32:31,680 Speaker 9: is where we were in twenty sixteen, and you add 714 00:32:31,760 --> 00:32:34,080 Speaker 9: half a percent, then inflation will move up towards the 715 00:32:34,080 --> 00:32:36,480 Speaker 9: feed target. So the problem was really that the starting 716 00:32:36,560 --> 00:32:39,840 Speaker 9: point for inflation when these policies came along was that 717 00:32:39,920 --> 00:32:42,760 Speaker 9: it was, unfortunately well and above the FETs target. So 718 00:32:42,800 --> 00:32:45,120 Speaker 9: the risk is in this situation that you have inflation 719 00:32:45,200 --> 00:32:47,600 Speaker 9: moving higher and growth flowing down, which of course is 720 00:32:47,600 --> 00:32:49,480 Speaker 9: a definition of a steflationary shock. 721 00:32:49,600 --> 00:32:52,120 Speaker 5: We were talking to Mohammad Olarian earlier this week, and 722 00:32:52,200 --> 00:32:55,480 Speaker 5: he made the point that given these dual shocks, the 723 00:32:55,560 --> 00:32:58,440 Speaker 5: FED should probably allow inflation to run a little bit 724 00:32:58,440 --> 00:33:00,640 Speaker 5: hotter for a longer period of time and address the 725 00:33:00,680 --> 00:33:03,920 Speaker 5: growth issues and cut rates at least once this year. 726 00:33:04,360 --> 00:33:06,640 Speaker 5: Do you agree that that's more prudent at a time 727 00:33:06,680 --> 00:33:09,800 Speaker 5: where there are these stagflationary forces starting to loom? 728 00:33:09,880 --> 00:33:12,480 Speaker 9: Absolutely, because the FED has the dual mandate on on 729 00:33:12,520 --> 00:33:14,640 Speaker 9: the one side, if growth is slowing is saying the 730 00:33:14,720 --> 00:33:17,120 Speaker 9: fat should be cutting. If inflation is going up is 731 00:33:17,120 --> 00:33:19,040 Speaker 9: saying the fetch you should be hiking. I think the 732 00:33:19,080 --> 00:33:21,160 Speaker 9: FED will look at if growth starts to slow and 733 00:33:21,240 --> 00:33:23,320 Speaker 9: if we're with the next several weeks, begin to see 734 00:33:23,480 --> 00:33:25,920 Speaker 9: that unemployment begins to go up. Let's not forget that 735 00:33:26,040 --> 00:33:28,400 Speaker 9: non farm payroll is always done in the week of 736 00:33:28,440 --> 00:33:31,200 Speaker 9: the twelfth means this week, so this is the week 737 00:33:31,200 --> 00:33:33,400 Speaker 9: when they do the survey for the employment report. And 738 00:33:33,480 --> 00:33:36,040 Speaker 9: if we do believe that this week was somewhat intense 739 00:33:36,120 --> 00:33:37,960 Speaker 9: on the policy front, then there is of course a 740 00:33:38,040 --> 00:33:40,120 Speaker 9: change that non farm payrolls for March could. 741 00:33:39,960 --> 00:33:41,000 Speaker 1: Be on the weaker side. 742 00:33:41,080 --> 00:33:42,920 Speaker 9: And if that's the case, then in the next seven weeks, 743 00:33:42,960 --> 00:33:45,440 Speaker 9: and particularly going into April, and with the April second 744 00:33:45,440 --> 00:33:48,760 Speaker 9: deadline also from Trump with a reciprocal tariffs, we come 745 00:33:48,800 --> 00:33:51,160 Speaker 9: to the conclusion that the risk is that we might 746 00:33:51,200 --> 00:33:53,880 Speaker 9: begin to see growth slow down, and the FED will say, well, 747 00:33:53,920 --> 00:33:56,920 Speaker 9: as long as inflation expectations are anchored, yes, actually inflation 748 00:33:57,000 --> 00:33:59,560 Speaker 9: may be higher. But if inflation explctiations are anchored, they 749 00:33:59,600 --> 00:34:01,480 Speaker 9: will be focusing on growth slowing down. 750 00:34:01,480 --> 00:34:04,320 Speaker 1: And therefore the risks are that markets will be pricing 751 00:34:04,360 --> 00:34:05,480 Speaker 1: in more cuts at the time. 752 00:34:05,560 --> 00:34:07,880 Speaker 9: And by the way, it looks like from stock markets 753 00:34:07,880 --> 00:34:10,440 Speaker 9: that they are almost saying, well, thefet should be cutting 754 00:34:10,480 --> 00:34:13,000 Speaker 9: many more times, whereas race markets are saying, no, no, 755 00:34:13,040 --> 00:34:14,759 Speaker 9: we only need two more cuts. So there's almost an 756 00:34:14,800 --> 00:34:17,640 Speaker 9: inconsistency between the messaging from stocks that are now in 757 00:34:17,640 --> 00:34:20,719 Speaker 9: correction territory and race markets saying no, no, we only 758 00:34:20,760 --> 00:34:21,600 Speaker 9: need two more cuts. 759 00:34:21,640 --> 00:34:24,480 Speaker 2: In the news conference on March nineteenth, next Wednesday, how 760 00:34:24,520 --> 00:34:27,239 Speaker 2: does Chairman Pound address those issues? What are you looking for? 761 00:34:27,480 --> 00:34:30,200 Speaker 9: So I'm looking very much for how much he's focusing 762 00:34:30,360 --> 00:34:32,480 Speaker 9: on the soft data slowing down. He did do that 763 00:34:32,560 --> 00:34:35,040 Speaker 9: at the USMPF last Friday. Here in New York City, 764 00:34:35,200 --> 00:34:38,400 Speaker 9: where he was in his prepared remarks saying, ah. 765 00:34:38,120 --> 00:34:39,400 Speaker 1: Everything is generally okay. 766 00:34:39,680 --> 00:34:41,799 Speaker 9: But when he was sitting down with Andrew Kashev and 767 00:34:41,840 --> 00:34:44,239 Speaker 9: asked questions, he was more saying, Hey, something is going 768 00:34:44,280 --> 00:34:46,640 Speaker 9: on that has some downside risks that we maybe should 769 00:34:46,680 --> 00:34:47,480 Speaker 9: be putting more weight on. 770 00:34:47,760 --> 00:34:49,560 Speaker 1: So I do think that he will begin to. 771 00:34:49,800 --> 00:34:52,799 Speaker 9: Talk about, well, there's softness in the soft data, but 772 00:34:52,880 --> 00:34:55,239 Speaker 9: maybe we're also worry about softness in the hot data. 773 00:34:55,320 --> 00:34:58,400 Speaker 2: We have seen this incremental shift from the November meeting 774 00:34:58,600 --> 00:35:02,399 Speaker 2: into December. Assume, we don't guess, we don't speculate. Then 775 00:35:02,440 --> 00:35:05,560 Speaker 2: in December there was some assumption, some guessing, some speculation, 776 00:35:06,000 --> 00:35:07,880 Speaker 2: and then I agree with you the recent address we 777 00:35:07,920 --> 00:35:10,600 Speaker 2: had from Chairman Power, there was another subtle shift. Just 778 00:35:10,640 --> 00:35:13,520 Speaker 2: started to tackle policy issues head on in a way 779 00:35:13,520 --> 00:35:15,520 Speaker 2: he hadn't done in the previous few months. 780 00:35:15,560 --> 00:35:17,760 Speaker 5: And on some level he kind of has to, because 781 00:35:17,800 --> 00:35:20,759 Speaker 5: there is a sort of scenario analysis that has to 782 00:35:20,760 --> 00:35:23,160 Speaker 5: come from the FED for them to even be relevant 783 00:35:23,360 --> 00:35:25,799 Speaker 5: about how they're measuring some of these aspects. And that's 784 00:35:25,880 --> 00:35:28,600 Speaker 5: probably why the statement of economic projections, which could be 785 00:35:28,640 --> 00:35:31,360 Speaker 5: a dartboard, but it is sort of a messaging tool 786 00:35:31,560 --> 00:35:34,480 Speaker 5: about how they're going to potentially respond to what is 787 00:35:34,520 --> 00:35:38,000 Speaker 5: transpiring in policy and how it's transpiring and data, even 788 00:35:38,040 --> 00:35:40,040 Speaker 5: if it doesn't necessarily come to full pass. 789 00:35:40,080 --> 00:35:42,160 Speaker 2: The difference now, I guess is we're actually getting the policy. 790 00:35:42,200 --> 00:35:44,360 Speaker 2: They don't have to speculate about it anymore. But that 791 00:35:44,400 --> 00:35:47,000 Speaker 2: policy comes with a lot of volatility and tolson. They've 792 00:35:47,000 --> 00:35:49,680 Speaker 2: got to manage interest rates through the cycle. Maybe Chairman 793 00:35:49,680 --> 00:35:51,400 Speaker 2: Power steps down in the next couple of years. I 794 00:35:51,400 --> 00:35:53,080 Speaker 2: imagine he will. I don't know for sure, but I 795 00:35:53,080 --> 00:35:55,200 Speaker 2: think we all think he will. I want to understand 796 00:35:55,200 --> 00:35:57,200 Speaker 2: from that perspective. You sit there and you acknowledge the 797 00:35:57,280 --> 00:35:59,040 Speaker 2: risk right now, but also you've got to think about 798 00:35:59,280 --> 00:36:02,120 Speaker 2: tax cuts, the potential for loocid regulation further down the road. 799 00:36:02,520 --> 00:36:04,759 Speaker 2: How do you manage through the cycle with that in mind. 800 00:36:04,880 --> 00:36:08,640 Speaker 9: Well, that's why this debate about is it policy dependent 801 00:36:08,880 --> 00:36:11,759 Speaker 9: is it data dependent becomes really really important, because, of 802 00:36:11,800 --> 00:36:14,839 Speaker 9: course the policy that's in place suggests that well so far, 803 00:36:14,920 --> 00:36:16,840 Speaker 9: the two things that we have seen from the beginning 804 00:36:16,920 --> 00:36:19,560 Speaker 9: is those which is putting the unemployment rate up, and 805 00:36:19,680 --> 00:36:20,799 Speaker 9: also terrorists, which is. 806 00:36:20,760 --> 00:36:21,799 Speaker 1: Putting inflation up. 807 00:36:21,960 --> 00:36:23,920 Speaker 9: So if that's the case, they need to deal with 808 00:36:23,960 --> 00:36:26,160 Speaker 9: that shock as the first thing. Even as you say, 809 00:36:26,360 --> 00:36:29,600 Speaker 9: if there are other policies coming on deregulation, on lower 810 00:36:29,680 --> 00:36:31,840 Speaker 9: taxes and potentially also more energy. 811 00:36:31,600 --> 00:36:34,160 Speaker 2: Production, Tostan Clinic has always got to say you said. 812 00:36:34,960 --> 00:36:38,480 Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best 813 00:36:38,560 --> 00:36:41,640 Speaker 2: in markets, economics, an gio politics. You can watch the 814 00:36:41,640 --> 00:36:44,640 Speaker 2: show live on Bloomberg TV weekday mornings from six am 815 00:36:44,800 --> 00:36:47,920 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 816 00:36:48,239 --> 00:36:51,080 Speaker 2: Spotify or anywhere else you listen, and as always on 817 00:36:51,080 --> 00:36:53,520 Speaker 2: the Bloomberg Terminal and the Bloomberg Business Out