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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is Bloomberg Intelligence with Alex Steele and Paul Sweeney.

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Speaker 3: The real ap performance has been the US corporate high yield.

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Speaker 4: Are the companies lean enough? Have they trimmed all the fats?

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Speaker 3: The semiconductor business is a really cyclical.

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Speaker 2: Business, breaking market headlines and corporate news from across the globe.

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Speaker 4: Do investors like the M and A that we've seen?

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Speaker 3: These are two big time blue chip companies.

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Speaker 4: The window between the peak and cunt changing super fast.

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Speaker 2: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.

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Speaker 3: Today's Bloomberg Intelligence Show, we dig inside the big business

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Speaker 3: stories impacting Wall Street and the global markets.

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Speaker 4: Each and every week we provide in depth research and

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Speaker 4: data on some of the two thousand companies and one

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Speaker 4: hundred and thirty industries our analysts cover worldwide.

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Speaker 3: Today, we'll look at what comes next for Wall Street

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Speaker 3: Banks in twenty twenty.

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Speaker 4: Five, plus we'll discuss the potential global impact of future

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Speaker 4: you A tariffs.

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Speaker 3: But first we begin in the automotive industry.

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Speaker 4: This week we heard the Tesla's annual vehicle sales dropped

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Speaker 4: for the first time in over a decade for more.

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Speaker 3: Alex and I were joined by Steve Man Bloomberg Intelligence

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Speaker 3: Global Autos and Industrials Research Channels. We first asked Steve

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Speaker 3: about what testless numbers mean for the automaker.

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Speaker 5: If you look at the fourth quarter, it's actually up

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Speaker 5: slightly by two percent, but you know they've done a

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Speaker 5: lot throughout the quarter to drive that number, mainly on incentives.

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Speaker 5: So we're likely to see that to continue. But if

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Speaker 5: you look out in twenty twenty five, we expect the

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Speaker 5: company that actually give you rosier guidance. They do have

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Speaker 5: new vehicles coming out, the refresh of the model Why,

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Speaker 5: the popular model Why. And then there's a new affordable

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Speaker 5: vehicle being launched in the first half that should drive

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Speaker 5: sales in twenty twenty five.

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Speaker 3: So how important are incentives these days, Steve? For the

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Speaker 3: average EV buyer, it.

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Speaker 5: Is very important. It's not just EV. We're seeing that

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Speaker 5: throughout the auto industry, including gasoline cars. Affordability continue to

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Speaker 5: be an issue. You know, if you look at delinquency

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Speaker 5: rates on loans are there rising, So the the automakers

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Speaker 5: have to come in and actually support demand. So we'll

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Speaker 5: probably see that in twenty twenty five. But you know,

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Speaker 5: there's there's reports out there that we, you know, including ourselves,

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Speaker 5: we think that battery costs will continue to come down

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Speaker 5: and then we'll see probably a better an upturn, likely

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Speaker 5: in twenty twenty six, not so much in this year.

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Speaker 4: When you mentioned that there'll be some product refreshes this

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Speaker 4: year as well as an affordable Tesla, yeah, I've been

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Speaker 4: hearing that for a while. What do we mean by

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Speaker 4: affordable and do we trust this timeline?

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Speaker 6: Yeah?

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Speaker 5: So, you know, I think there's been a lot of

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Speaker 5: questions out there in terms of how, you know, if

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Speaker 5: Elon must will actually meet his his own projection. I

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Speaker 5: think that he will launch the affordable EV and that's

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Speaker 5: likely to be under thirty thousand, including the that the

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Speaker 5: includes the seventy five hundred credit incentive by the federal government. Oh,

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Speaker 5: it includes it.

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Speaker 4: So if that goes away, it no longer becomes affordable.

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Speaker 5: It still is. It's still one of the cheapest EV's

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Speaker 5: out there. I think the new EV's that they're launching

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Speaker 5: coming going forward will actually be much lower costs than

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Speaker 5: the current model three Model Y, So there's still some

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Speaker 5: room for them to cut prices and also, you know,

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Speaker 5: help maintain the automative gross margin around the you know,

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Speaker 5: eighteen to twenty percent.

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Speaker 3: Steve, twenty twenty four feels like a year where the

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Speaker 3: evolution towards electric vehicleles hit kind of a speed bump

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Speaker 3: out there. A, Is that in fact the case? And

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Speaker 3: b how do you think about the industry's continued evolution

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Speaker 3: to EV over the twenty twenty.

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Speaker 5: Five Yeah, I think twenty twenty five EV sales will

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Speaker 5: probably be grown at a single digit and you know,

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Speaker 5: incentives still going to be a bigger part of the story.

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Speaker 5: But I think long term, you know, beyond twenty twenty five,

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Speaker 5: that means twenty twenty six and beyond, I think EV

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Speaker 5: sales will recover, Battery costs will continue to come down.

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Speaker 5: More automakers, not just Tesla, GM and Stillentis are launching

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Speaker 5: newer and cheaper evs. That's going to be that's going

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Speaker 5: to resonate with the with the mass market. You know,

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Speaker 5: a lot of the early adopters have bought evs, and

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Speaker 5: I think the next leg up is really to get

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Speaker 5: the general population to buy evs and make it more

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Speaker 5: affordable for them.

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Speaker 4: I guess I just wonder, like without the tax credit,

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Speaker 4: if that goes away. I appreciate that Tesla's still the

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Speaker 4: cheapest one out there, but that's not going to be Like,

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Speaker 4: there's no way Paul's buying a thirty eight thousand dollars Tesla, right, Like,

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Speaker 4: that's not happening. So what has to happen for that

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Speaker 4: price to get even lower? And I know that it's

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Speaker 4: a chicken and an egg thing, right because you need

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Speaker 4: the demand in order to trigger the production, which then

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Speaker 4: releases lower prices. But that's just not materializing, particularly without

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Speaker 4: that tax credit.

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Speaker 3: Right.

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Speaker 5: You know, I think we talked about battery costs is

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Speaker 5: being one of them. The other thing is really the

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Speaker 5: charging infrastructure. You know, I don't think the charging infrastructures

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Speaker 5: has been expanded to a point where it's convenient for

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Speaker 5: a lot of the for owners or potential owners of evs,

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Speaker 5: but there's a lot of money being poured into it.

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Speaker 5: There's one company called EVgo. They just got a huge

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Speaker 5: loan from the federal government to expand. We got a

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Speaker 5: lot of automakers, major ones, GM, Ford and Hyundai and

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Speaker 5: the likes are actually joining forces together, pulling capital together

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Speaker 5: to expand the infrastructure. So that's why, you know, I

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Speaker 5: think you know beyond twenty twenty six to beyond twenty

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Speaker 5: twenty five, we're going to see improved uptick EV demand

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Speaker 5: because of not only cheaper EV's, but an expanded charging infrastructure.

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Speaker 4: Our Thanks to Steve Mann Bloomberg Intelligence Global Anos, an

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Speaker 4: industrial research analyst, we.

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Speaker 3: Moved next to luxury this week. Guest host Matt Miller,

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Speaker 3: Shanala Basik and I were joined by Deborah aichin Bloomberg

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Speaker 3: Intelligence Luxury Goods analysts.

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Speaker 4: She discussed her outlook for luxury goods in twenty twenty

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Speaker 4: five and my twenty twenty four was so disappointing for

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Speaker 4: some luxury companies.

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Speaker 3: I began by asking Deborah what happened to luxury in

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Speaker 3: twenty twenty four.

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Speaker 7: I think if we stepped back to the beginning of

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Speaker 7: the year January February, we had some of those the

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Speaker 7: biggest company CEOs focusing on a normalized year of growth.

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Speaker 7: Now that followed three real years of recovery twenty one,

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Speaker 7: twenty two and twenty three, so normalized growth was set

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Speaker 7: we thought at around four to six percent. It started

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Speaker 7: out okay in the first half, and we were looking

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Speaker 7: for the second half to pick up somewhat. On the

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Speaker 7: back of that, and that's where the disappointment has been

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Speaker 7: so second of twenty twenty four, a real disappointment because

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Speaker 7: of so much going on economically, politically, but with a

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Speaker 7: big drag in China and travel retail not yet recovering,

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Speaker 7: and also just the fact that we kind of got

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Speaker 7: to peak price twenty five percent price increases over a

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Speaker 7: three year period on average across the sector to pass

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Speaker 7: on some of those inflationary costs. It all just became

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Speaker 7: too much, especially at entry level.

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Speaker 8: So what's been the problem Is it just the Chinese

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Speaker 8: economy and the Chinese consumer is so important to this

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Speaker 8: segment because as we look at you know, rich people

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Speaker 8: to have at least the top five hundred in the world,

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Speaker 8: continue to get richer and richer and richer. So I

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Speaker 8: can't imagine there's any kind of upper limit on Burken bags.

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Speaker 7: Yeah. You know, if we look at the companies that

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Speaker 7: have outperformed MS and the types of product that they

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Speaker 7: offer to the market, the waiting list there is still

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Speaker 7: in place. Other high end names like and Elocutionelle. You know,

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Speaker 7: these companies are focused eight to ten percent growth year

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Speaker 7: in year out, and they're achieving that, but really it's

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Speaker 7: been twofold. If we think about the China market, just

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Speaker 7: to put it back into context, Chinese consumers when they

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Speaker 7: traveled twenty nineteen as well as spent at home on

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Speaker 7: the mainland, Macau, Hong Kong and others, were around a

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Speaker 7: third of the luxury market, and we think they're nearer

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Speaker 7: twenty three percent or so. We've basically lost ten percent

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Speaker 7: in the market from there. What's happened, though, is that

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Speaker 7: the US has been particularly robust and has picked up

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Speaker 7: some of that.

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Speaker 1: Europe has picked up.

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Speaker 7: A little bit, and also rest of the world and

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Speaker 7: other parts of Asia. So when we look, you know,

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Speaker 7: look at an Alviumh's absolute revenue twenty nineteen versus twenty

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Speaker 7: twenty four, even taking out the Tiffany acquisition in twenty one,

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Speaker 7: its sales are still over fifty percent higher than they

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Speaker 7: were twenty nineteen in absolute use road terms. But there's

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Speaker 7: been a big shift and we think that will continue

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Speaker 7: twenty twenty five.

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Speaker 9: You know, another question I have is how much of

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Speaker 9: this is the macro. Of course, China is a massive story.

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Speaker 9: Perhaps we'll talk about a little more as well. But

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Speaker 9: another thing I'm fascinated by is the rebranding of some

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Speaker 9: of these large luxury items and brands Jaguars, when Matt

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Speaker 9: and I had covered a little earlier this year. That's

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Speaker 9: a pretty extreme example, but there are others as well.

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Speaker 9: How much of this is just customer taste changing and

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Speaker 9: the company is needing to react to those changing preferences.

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Speaker 7: There are more and more reports coming out because we

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Speaker 7: also need to think about the recycle industry too. If

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Speaker 7: we step back into the China situation, one of the

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Speaker 7: big categories would be watches, and watches are higher indexed

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Speaker 7: in China, so that's been a drag for many companies

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Speaker 7: because most of them will have watches. No jewelry has

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Speaker 7: really stood up well, so that's one side of the equation.

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Speaker 7: If we think about other sides, though, there have been

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Speaker 7: particularly at the low end with the aspirational side failures

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Speaker 7: and different creative directors moving around. So there's been some

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Speaker 7: question on where the identity of some of these brands are.

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Speaker 7: But it therefore tends to be the heritage brands, which

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Speaker 7: don't necessarily depend on a single creative director and more

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Speaker 7: really focus on a team and a real high level

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Speaker 7: of workmanship that continue to do better, and I think

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Speaker 7: we'll see more of that play out also in twenty

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Speaker 7: twenty five. If that kind of answers your question.

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Speaker 3: There, deb of all the luxury companies that you cover

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Speaker 3: from a research perspective for Bloomberg Intelligence, what are the

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Speaker 3: ones that are seem well positioned to you these days

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Speaker 3: as we go into twenty five, And if we're.

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Speaker 7: Looking across modl it's moved around a lot in the

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Speaker 7: last eighteen months and generally a little bit of a delay,

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Speaker 7: but companies are being really more forthright in explaining what

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Speaker 7: is happening where their investment is to back that future growth.

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Speaker 7: So you have the likes of at the top end,

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Speaker 7: which we've mentioned Mares, Brune, Brunellocutionelli. If you look the

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Speaker 7: numbers out there for top line growth and earning's growth,

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Speaker 7: earning growth twenty twenty five must fully repair and come

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Speaker 7: in ahead of sales, so you're looking at double digit

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Speaker 7: sales there. We have arranged nine to twelve percent across

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Speaker 7: Air Mayre's leading Brunellocutionelli in the lead proader.

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Speaker 10: They're doing very very well, but a lot on the

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Speaker 10: me and your brand Richmond doing very well on Cartier

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Speaker 10: van Cleef and our pacids that high find jewelry and

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Speaker 10: that high note worth individual continuing to buy.

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Speaker 7: And there are some of the names out there as

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Speaker 7: well as ELV made should further repair because we think

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Speaker 7: that they will do better in the second half the year.

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Speaker 7: They do have big exposure with DF into travel retail

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Speaker 7: and also a lot of these companies. So mid single

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Speaker 7: digit growth for LVMH for eachmon high single to double

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Speaker 7: digit growth for some of those more niche individual brands

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Speaker 7: with waiting with big lists waiting lists out there still

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Speaker 7: for some of the very much high your end product.

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Speaker 4: All right, thanks to Debic and a Bloomberg Intelligence luxury

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Speaker 4: goods analyst, and coming up, we're going to break down

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Speaker 4: why the number of primary dealers in the US treasury

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Speaker 4: market has decreased.

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Speaker 3: Listening to Bloomberg Intelligence on Bloomberg Radio, providing in research

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Speaker 3: and data on two thousand companies and one hundred and

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Speaker 3: thirty injusries. You can access Bloomberg Intelligence via b I

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Speaker 3: go on the terminal, Paul Sweet.

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Speaker 4: And am Alex Steel and this is Bloomberg.

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Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 2: weekdays at ten am Easter on Apple car Play and

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Speaker 4: We move next to You.

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Speaker 3: This week O host Matt Millo, Shanali Bassega, and I

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Speaker 3: rejoined by Shrinanna rodgen Uberg, senior finance reporter.

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Speaker 4: He discussed his outlook for Wall Street regulation bonuses and

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Speaker 4: how banks are preparing for Donald Trump presidency.

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Speaker 3: I began by actually shre what he thinks about the

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Speaker 3: prospects for next year on Wall Street.

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Speaker 11: If you had to see the best indicator for what

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Speaker 11: people are expecting next year for the banks, just look

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Speaker 11: at what the stocks have done this year, and I

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Speaker 11: will tell you all you need to know about expectations

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Speaker 11: and the outlook going into next year. Coleman, Sacks, JP, Morgan,

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Speaker 11: Morgan Stanley. They're all up forty forty five to fifty percent.

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Speaker 11: Jeffries pure play investment bank up something like ninety five percent.

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Speaker 11: That stock is almost double.

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Speaker 9: You're going to say, none better than Goldman, but Jeffries, yeah.

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Speaker 11: Sure, not in the same league perhaps, but as a

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Speaker 11: pure play investment bank.

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Speaker 9: And the percentage rise in their stack.

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Speaker 11: The percentage rise in their stuff, the fact that the

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Speaker 11: stocks nearly double this year on the back of expectation

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Speaker 11: that there will be a gusher of activity opened up

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Speaker 11: next year. That is where banking expectations are right now.

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Speaker 11: But there are crosswinds and you know, you're never certain

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Speaker 11: how it will pan out. In fact, if you were

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Speaker 11: to look what happened the day after the November election,

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Speaker 11: all the bank stocks rallied up and in the days

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Speaker 11: after that went up even higher. But since then they

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Speaker 11: have given up half their gains. So what the concern

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Speaker 11: there is isn't entirely clear. Are they're not as certain

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Speaker 11: of that outlook as they were on say November fifth

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Speaker 11: or sixth. We're not sure about that. But net I

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Speaker 11: think if you talk to the c suite at all

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Speaker 11: of these banks, the hope and optimism that they exude

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Speaker 11: is very clear and visible.

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Speaker 8: So what kind of deregulation do investors want to see?

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Speaker 6: Specifically, because we.

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Speaker 8: Throw this term around a lot, and for example, we

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Speaker 8: were talking about deregulation. As I think about it, you know,

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Speaker 8: we did see deregulation, but we also have seen for example,

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Speaker 8: Jet Blue was not allowed to buy Spirit right, so

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Speaker 8: you still have intervention from the government that changes the

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Speaker 8: way these businesses work in bank What do investors? What

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Speaker 8: does Jamie Diamond want to see in terms of deregulation.

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Speaker 11: I guess deregulation is the word we'd use if you

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Speaker 11: hare to sort of align where the Overton window is

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Speaker 11: right now. But realistically, what the banks really want is

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Speaker 11: not more regulation, and that is what they were looking

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Speaker 11: at had it been a democratic administration. If you look

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Speaker 11: at the action of the Fed, especially the capital rules,

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Speaker 11: the fact that they were facing big increases on their

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Speaker 11: capital requirements was a big headache for banks for much

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Speaker 11: of this year. Even before the election, the Fed did yield.

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Speaker 11: The banks made an aggressive push. They rolled back some

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Speaker 11: of the proposals. They've not taken effect yet. But with

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Speaker 11: the change in administration and the change in tune banks

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Speaker 11: sends an opportunity to go for the kill and make

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Speaker 11: a bigger ask to make sure that there isn't any

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Speaker 11: increase in capital or wherever they land up is much

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Speaker 11: much better than what it looked like at the start

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Speaker 11: of twenty two.

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Speaker 9: Guys, it's not even just the capital rules, it's the

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Speaker 9: areas that were being cracked down on that might not

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Speaker 9: be in the future. For example, vak Ramaswami who is

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Speaker 9: co leading that DOGE effort, is looking at the CFPB.

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Speaker 9: The CFPB was really a relic of the two thousand

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Speaker 9: and eight reforms. What does it mean for some of

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Speaker 9: that to be rolled back on?

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Speaker 11: And that actually is some of one of the most

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Speaker 11: fascinating aspects right now. If you've been addicted to twitter

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Speaker 11: x through the holiday season, shame on you. But if

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Speaker 11: you have been, you would have noticed a lot of

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Speaker 11: discussion on CFPB. Yes, the chief DOJE officers there, vive Ramaswami,

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Speaker 11: Elon Musk, even Project twenty twenty five, these are names

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Speaker 11: that have come out and said the CFPB needs to

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Speaker 11: be eliminated altogether. Elon Musk and Project twenty twenty five

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Speaker 11: recommendations were very clear. Vivex tweets over the last week

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Speaker 11: or so make it clear that he's not happy with

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Speaker 11: what's happening. And the incoming chair of the Senate Banking Committee,

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Speaker 11: Tim'scott of South Carolina, has also been quite frustrated with

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Speaker 11: what the CFPB has been doing in terms of their rulemaking.

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Speaker 11: Where his point is, it's you're in a lame duck period.

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Speaker 11: The FED, the OCC, the FDIC are not doing anything

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Speaker 11: yet with this CFPP. We've seen the action on overdraft fees,

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Speaker 11: We've seen the lawsuit against Walmart and one of their FinTechs,

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Speaker 11: and some of the other motions that they're foot in place,

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Speaker 11: including the crackdown going after the banks because of the

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Speaker 11: zel fraud. Clearly they've been very active. The banking industry

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Speaker 11: is not very happy about it. Some old school GOP

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Speaker 11: members are not very happy about it. But I also

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Speaker 11: find a very interesting strand here is there really are

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Speaker 11: two different kinds of GOP right now. There is one

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Speaker 11: where the faction of populism has been gaining ground and hole,

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Speaker 11: and you can argue that it's coming straight down from

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Speaker 11: the president. For that group, an agency like the CFPP

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Speaker 11: going after overdraft fees, going after things like zelfraud that

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Speaker 11: you would think would normally be encouraged. But your typical

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Speaker 11: pro banking, anti regulation GOP faction would obviously see something

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Speaker 11: like the CFPB as anathema. So it'll be interesting to

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Speaker 11: see as we get into twenty twenty five and beyond

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Speaker 11: which faction in that administration wins.

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Speaker 3: I had dinner with the high school buddy mine, who

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Speaker 3: is one of the top lawyers in the city, gets

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Speaker 3: paid a King Ransom every year hates his job. He

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Speaker 3: all did was complain about his job. I'm like, then leave, dude.

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Speaker 3: I mean, he said, the biggest change is going to

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Speaker 3: be Lena Khan at the Federal Trade Commission. Getting anybody

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Speaker 3: in there in the FDC other than Lena Khan is

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Speaker 3: going to be a boom to MNA bankers and m

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Speaker 3: and A lawyers.

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Speaker 11: Yeah, but this goes back to my previous point again. Yes,

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Speaker 11: Lina Khan has been a bane for the banking industry,

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Speaker 11: and you would think with the Democrats voted outline, that

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Speaker 11: was even the conversation that even if Kamala Harris, who

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Speaker 11: were to win, Lina Khan might not stay in that

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Speaker 11: position because the pressure being put on that seat and

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Speaker 11: the fear in the tech industry and beyond how much

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Speaker 11: it was crimping deal making. But at the same time,

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Speaker 11: listen to some of the comments made by Vice President

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Speaker 11: leg JD. Vans during the campaigning cycle. He didn't not

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Speaker 11: sound like someone who is the absolute anti Lina Khan type.

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Speaker 11: So again, it remains to be seen which faction of

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Speaker 11: the GOP has the louder voice. But if you didn't

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Speaker 11: have a Lena Khan like figures.

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Speaker 3: Having been guys, having been, you know, voting for Reagan

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Speaker 3: in nineteen eighty, I can tell you there's only one voice.

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Speaker 11: But even that one voice has not been the most

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Speaker 11: predictable voice.

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Speaker 9: So let's admit that I'm never bored of regulation, but

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Speaker 9: I'm bored relative to the other topic that i want

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Speaker 9: to talk about. Money, Right, Yeah, bonus season listen deals

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Speaker 9: did not yet come back, so is there an expectation

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Speaker 9: that bankers are going to get paid? Anyways?

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Speaker 11: Deals did not come back to the extent you would

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Speaker 11: have wanted to see, but they have been up relative

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Speaker 11: to last year. They're still well below their long term averages,

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Speaker 11: and the expectation is that you will get there. So

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Speaker 11: some of the bonus payouts this year will not only

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Speaker 11: be a recognition for the work done this year, but

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Speaker 11: what you need to pay to keep top talent in

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Speaker 11: their seat. And this is visible not just in bonus payouts.

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Speaker 11: Look at the managing director promotion, Look at the Goldman

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Speaker 11: Partner class. Some of these top promotions.

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Speaker 2: They have been.

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Speaker 11: Bigger sizes than in the past. They are battlefield promotions,

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Speaker 11: recognizing the work that's already been done, but also telling

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Speaker 11: them that there's a lot more opportunity to make a

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Speaker 11: killing in the year ahead.

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Speaker 4: Our thanks to Shrina Rajan Bloomberg Senior Finance reporter, we.

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Speaker 3: Moved next to it Bloomberg Big Takes story we focused

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Speaker 3: on this week, entitled Treasury's fifty trillion dollars day loads

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Speaker 3: will test strained dealer pipes.

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Speaker 4: The story looks at how the number of primary dealers

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Speaker 4: in the US treasury market has now decreased, and it

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Speaker 4: discusses how those remaining are facing mounting pressure is due

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Speaker 4: to post financial crisis regulations and a growing US debtload.

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Speaker 3: For more, guest host Matt Miller, Shanani Basseg and I

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Speaker 3: were joined by Alex Harris, Bloomberg bond reporter. We first

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Speaker 3: asked Alex why being a primary dealer isn't easy these days.

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Speaker 1: You look at Citadel in this case, and they have

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Speaker 1: been vuying to become a primary dealer for years, and

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Speaker 1: finally in September said, you know what, thanks, but no thanks.

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Speaker 1: This is just a losing proposition. And I think that's

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Speaker 1: how people are feeling about it now and why you're

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Speaker 1: not seeing the primary dealer community even growth to keep

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Speaker 1: up with the amount of supply and the amount of

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Speaker 1: debt that the government is issuing. And that's a problem

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Speaker 1: because you need those primary dealers, you need them to

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Speaker 1: facilitate these you know, in these markets from the auctions

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Speaker 1: to secondary market. And remember their balance sheets for these

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Speaker 1: dealers isn't just treasuries. It's a lot of other things.

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Speaker 1: It's equities, it's mortgage backed securities, it's asset back secures.

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Speaker 1: So you're playing with all these things. And as you

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Speaker 1: can see what happened if you look back to March

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Speaker 1: twenty twenty, I mean, that's a really good example of

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Speaker 1: what happened when the treasury market ceased to function and

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Speaker 1: dealer balance sheets just could not handle what it needed

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Speaker 1: to do across all asset classes. And that's the very

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Speaker 1: thing that it's as a regular recurrence.

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Speaker 9: Maybe let's take a large set back for a moment here,

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Speaker 9: because there are a lot of confusing dynamics that are

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Speaker 9: happening in the treasury market. One is the size of

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Speaker 9: the US DOT load alone. Then there comes the plumbing

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Speaker 9: questions why overnight funding seems to hit pockets of stress

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Speaker 9: every so often, the dealer balance sheets being constrained as

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Speaker 9: they are, as you say, and then hedge funds trading

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Speaker 9: with a lot of leverage in this system. What is

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Speaker 9: actually the problem here and the risk in the way

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Speaker 9: the plumbing is working.

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Speaker 1: So right now, what's happening and where the primary dealers

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Speaker 1: are having problems is when you're asked to facilitate and

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Speaker 1: intermediate in this market, but you don't have the balance

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Speaker 1: sheet to do it, you have to charge higher funding costs.

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Speaker 1: So that means if you are looking to borrow treasuries,

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Speaker 1: say in the rebol market, and you're a hedge fund

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Speaker 1: or an asset manager and you need to borrow to

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Speaker 1: finance securities, you're going to have to pay more. And

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Speaker 1: there might be a point where they are not equipped

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Speaker 1: to pay as much as the dealers are asking them,

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Speaker 1: and so that's when you get backstops and you get

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Speaker 1: stopping out of positions, and all of that has to

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Speaker 1: make its way back onto the dealer balance sheets, and

438
00:22:55,320 --> 00:22:58,160
Speaker 1: so that's where they get clogged. And right now there's

439
00:22:58,160 --> 00:23:02,240
Speaker 1: four hundred billion in aggregate treasuries alone sitting on dealer

440
00:23:02,320 --> 00:23:05,800
Speaker 1: balance sheets. And then every time you get a treasury

441
00:23:05,840 --> 00:23:08,000
Speaker 1: settlement cycle, so the middle of the month and the

442
00:23:08,080 --> 00:23:10,840
Speaker 1: end of the month, you're getting a backup in repo rates.

443
00:23:10,880 --> 00:23:13,920
Speaker 1: It's becoming a regular occurrence and we're seeing it quite often.

444
00:23:14,040 --> 00:23:18,359
Speaker 1: This year July dealer balance sheets were stuck. End of

445
00:23:18,400 --> 00:23:22,560
Speaker 1: September was a very volatile quarter end that nobody expected.

446
00:23:23,000 --> 00:23:26,639
Speaker 1: Your end has thankfully been really today it's very mild.

447
00:23:26,680 --> 00:23:29,679
Speaker 1: Repo is under control. But it's because the minute the

448
00:23:29,720 --> 00:23:32,920
Speaker 1: calendar turned to October, everybody said, wait a minute, we

449
00:23:33,080 --> 00:23:35,199
Speaker 1: have to be better prepared for this. And so you

450
00:23:35,320 --> 00:23:37,680
Speaker 1: saw repo rates actually back up to five and a

451
00:23:37,720 --> 00:23:40,560
Speaker 1: half percent in the middle of November because people said,

452
00:23:40,640 --> 00:23:43,240
Speaker 1: I want to get caught. I got to do this now.

453
00:23:43,520 --> 00:23:47,680
Speaker 9: And so Alex another question about this too. We're talking

454
00:23:47,680 --> 00:23:50,360
Speaker 9: about the treasury market here. It's not only the deepest,

455
00:23:50,359 --> 00:23:52,800
Speaker 9: most liquid market in the world, it's one of the largest,

456
00:23:52,920 --> 00:23:55,560
Speaker 9: and it also underpins the cost of every other type

457
00:23:55,560 --> 00:23:59,119
Speaker 9: of borrowing. And if you're talking about the need to

458
00:23:59,480 --> 00:24:02,480
Speaker 9: kind of back up rates as you're talking about in

459
00:24:02,520 --> 00:24:04,879
Speaker 9: certain parts of the market, at what point does this

460
00:24:04,960 --> 00:24:07,679
Speaker 9: become a larger issue, even a taxpayer issue.

461
00:24:07,880 --> 00:24:10,000
Speaker 1: Oh, I mean, well, you can see in some cases

462
00:24:10,040 --> 00:24:12,680
Speaker 1: it already is. I mean, you know, the auctions are

463
00:24:12,720 --> 00:24:15,199
Speaker 1: just going to get more expensive because it's just going

464
00:24:15,240 --> 00:24:17,560
Speaker 1: to get harder and harder for these dealers to continue

465
00:24:17,640 --> 00:24:21,359
Speaker 1: taking down this supply. And what's interesting is remember not

466
00:24:21,640 --> 00:24:24,159
Speaker 1: the dealer balance sheets are not created equals, so you know,

467
00:24:24,280 --> 00:24:27,200
Speaker 1: dealers have the autonomy to decide, you know, where their

468
00:24:27,200 --> 00:24:31,160
Speaker 1: priorities are. And you know, during the treasury refunding one year,

469
00:24:31,359 --> 00:24:33,200
Speaker 1: i think it was last May, you know, they were

470
00:24:33,200 --> 00:24:35,520
Speaker 1: doing something called Blue Sky and they were just kind

471
00:24:35,520 --> 00:24:38,000
Speaker 1: of kicking around ideas, you know, what they could do

472
00:24:38,080 --> 00:24:40,560
Speaker 1: to help improve treasury market functioning. And one of the

473
00:24:40,600 --> 00:24:43,320
Speaker 1: things they proposed is almost doing a table to see

474
00:24:43,320 --> 00:24:46,280
Speaker 1: who the biggest dealers were in the treasury auctions. Is

475
00:24:46,280 --> 00:24:48,119
Speaker 1: a way to sort of light a fire under the

476
00:24:48,160 --> 00:24:50,159
Speaker 1: rest of the dealer community to say, hey, like, if

477
00:24:50,200 --> 00:24:52,280
Speaker 1: you're not doing your part and you're not pulling your weight,

478
00:24:52,600 --> 00:24:55,639
Speaker 1: you have to because there's just too much supply to

479
00:24:55,720 --> 00:24:58,320
Speaker 1: leave it to a handful of dealers to be taking down.

480
00:24:58,440 --> 00:25:00,760
Speaker 1: There's only twenty four of them down from the peak

481
00:25:00,800 --> 00:25:02,640
Speaker 1: that we saw in terms of the number of dealers

482
00:25:02,680 --> 00:25:04,879
Speaker 1: that wasa on nineteen eighty eight. So this is so

483
00:25:05,040 --> 00:25:08,000
Speaker 1: critical that everybody is playing their partner here, and if

484
00:25:08,040 --> 00:25:10,720
Speaker 1: they're not, there are serious consequences in the terms of

485
00:25:10,800 --> 00:25:14,080
Speaker 1: costs the economy, to the taxpayer, and to those just

486
00:25:14,119 --> 00:25:17,440
Speaker 1: trying to finance their transactions in the financial system.

487
00:25:17,560 --> 00:25:20,199
Speaker 4: Our thanks to Alex Harris, Bloomberg Bond Reporter. All right,

488
00:25:20,200 --> 00:25:21,879
Speaker 4: coming up on the program, we discussed some of the

489
00:25:21,920 --> 00:25:24,920
Speaker 4: successes and failures in the chip industry last year.

490
00:25:25,000 --> 00:25:27,800
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

491
00:25:27,840 --> 00:25:29,959
Speaker 3: depth research and data on two thousand companies and one

492
00:25:30,040 --> 00:25:32,960
Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via

493
00:25:33,000 --> 00:25:34,200
Speaker 3: b I go on the terminal.

494
00:25:34,280 --> 00:25:37,040
Speaker 4: I'm Paul Sweeney and am Malex Steel, and this is Bloomberg.

495
00:25:41,800 --> 00:25:45,399
Speaker 2: You were listening to the Bloomberg Intelligence Podcast. Catch the

496
00:25:45,440 --> 00:25:49,120
Speaker 2: program live weekdays at ten am Eastern on Apple CarPlay

497
00:25:49,200 --> 00:25:52,000
Speaker 2: and Android Auto with the Bloomberg Business app. You can

498
00:25:52,040 --> 00:25:55,199
Speaker 2: also listen live on Amazon Alexa from our flagship New

499
00:25:55,280 --> 00:25:58,720
Speaker 2: York station. Just say Alexa play Bloomberg eleven thirty.

500
00:25:59,680 --> 00:26:01,240
Speaker 4: We move next to the chip sector.

501
00:26:01,520 --> 00:26:03,680
Speaker 3: Of the ten public companies in the world that investors

502
00:26:03,760 --> 00:26:06,240
Speaker 3: value at more than one trillion dollars, a third are

503
00:26:06,240 --> 00:26:07,359
Speaker 3: in the chip industry.

504
00:26:07,560 --> 00:26:11,040
Speaker 4: In twenty twenty four, Broadcom joined TSMC and Nvidia, and

505
00:26:11,080 --> 00:26:13,919
Speaker 4: that exclusive club, but the chip industry also saw some

506
00:26:14,040 --> 00:26:17,320
Speaker 4: failures during the past year as companies like Intel struggled

507
00:26:17,400 --> 00:26:17,720
Speaker 4: for more.

508
00:26:17,760 --> 00:26:20,359
Speaker 3: On these companies, guest hosts Matt Miller, Shanali Basseg and

509
00:26:20,400 --> 00:26:23,359
Speaker 3: I were joined by Kunjohn sub Honey, Bloomberg Intelligence Senior

510
00:26:23,359 --> 00:26:26,560
Speaker 3: telecom analyst. I first asked Kunjohn to break down the

511
00:26:26,600 --> 00:26:28,600
Speaker 3: differences between Broadcom and Intel.

512
00:26:28,960 --> 00:26:31,280
Speaker 6: You really have to look at it as the two companies, right.

513
00:26:31,320 --> 00:26:35,080
Speaker 6: One is your legacy chip company like Nvidia and Broadcom

514
00:26:35,119 --> 00:26:38,000
Speaker 6: for designs their chips and sells them, and the other

515
00:26:38,160 --> 00:26:41,359
Speaker 6: is sort of a semiconductor manufacturing company, similar to something

516
00:26:41,400 --> 00:26:44,960
Speaker 6: like a TSMC or a global foundry. On the product side,

517
00:26:45,000 --> 00:26:47,320
Speaker 6: this is where they have sort of missed out on

518
00:26:47,400 --> 00:26:50,800
Speaker 6: that AI train. It was really you know, them not

519
00:26:51,080 --> 00:26:53,680
Speaker 6: coming to the market with the AI products in time,

520
00:26:53,760 --> 00:26:56,639
Speaker 6: and they are still sort of struggling. We don't have

521
00:26:56,760 --> 00:27:00,679
Speaker 6: a good pipeline for their AI revenue ramp, especially in

522
00:27:00,720 --> 00:27:04,720
Speaker 6: the GPU or the accelerator space. And on the server side,

523
00:27:04,720 --> 00:27:09,119
Speaker 6: they're having challenges with their competitor AMD taking share almost

524
00:27:09,160 --> 00:27:12,600
Speaker 6: every quarter over the last year or so. The contract

525
00:27:12,640 --> 00:27:15,440
Speaker 6: manufacturing that you're talking about that comes from the manufacturing

526
00:27:15,480 --> 00:27:19,000
Speaker 6: side you know, since the XCO now Pat took over

527
00:27:19,040 --> 00:27:22,040
Speaker 6: the helm, they really the north star for the company

528
00:27:22,280 --> 00:27:26,160
Speaker 6: for its turnaround was become the sort of leading edge

529
00:27:26,160 --> 00:27:29,840
Speaker 6: node manufacturer of the vest if I may compare, it

530
00:27:29,920 --> 00:27:32,320
Speaker 6: becomes sort of the TSMC of the West. And that's

531
00:27:32,359 --> 00:27:35,240
Speaker 6: where they're really, you know, have been investing a lot,

532
00:27:35,320 --> 00:27:40,119
Speaker 6: really focusing to get advantage and manufacturing leadership back here

533
00:27:40,160 --> 00:27:42,600
Speaker 6: in the US, and that's where all the grants, your

534
00:27:42,680 --> 00:27:45,320
Speaker 6: chip sack, subsidies, your tax credit, et cetera are designed

535
00:27:45,359 --> 00:27:46,200
Speaker 6: around that business.

536
00:27:46,600 --> 00:27:50,359
Speaker 8: By the way, speaking of tax credits, is Intel just done?

537
00:27:50,400 --> 00:27:52,520
Speaker 8: Do they bring in somebody to break it up and

538
00:27:53,000 --> 00:27:55,879
Speaker 8: sell off the pieces or because they are still looking

539
00:27:55,920 --> 00:27:59,800
Speaker 8: at like twenty billion dollars from Uncle Sam, right, yeah.

540
00:27:59,440 --> 00:28:02,600
Speaker 6: I mean, look, they haven't said anything specifically, but from

541
00:28:02,680 --> 00:28:06,280
Speaker 6: our analysis of the company, including valuation and how the

542
00:28:06,280 --> 00:28:08,840
Speaker 6: stock is trading right now, we think there's likely going

543
00:28:08,840 --> 00:28:12,320
Speaker 6: to be definitely some kind of divestitures, some kind of

544
00:28:12,320 --> 00:28:16,560
Speaker 6: investors brought in. We think the more likely portions of

545
00:28:16,600 --> 00:28:19,000
Speaker 6: the business are going to be the PSG or the

546
00:28:19,040 --> 00:28:22,280
Speaker 6: Altra business that they had acquired. There's also a lot

547
00:28:22,359 --> 00:28:24,560
Speaker 6: of equity stake they have in mobile eye, which they

548
00:28:24,600 --> 00:28:27,840
Speaker 6: have a wave to diversify and raise some cash. These

549
00:28:27,920 --> 00:28:30,640
Speaker 6: two would be I would say the most highest probability

550
00:28:30,680 --> 00:28:35,280
Speaker 6: exits the discussions around breaking up the foundry business other

551
00:28:35,320 --> 00:28:37,600
Speaker 6: than the product business. That's something really odd to do,

552
00:28:37,920 --> 00:28:42,120
Speaker 6: especially how important strategically Intel's manufacturing plans are.

553
00:28:42,040 --> 00:28:43,120
Speaker 12: For the US.

554
00:28:43,480 --> 00:28:47,160
Speaker 9: Well, speaking of how important the manufacturing plans are for

555
00:28:47,200 --> 00:28:50,080
Speaker 9: the US, there's a new presidential administration. How do we

556
00:28:50,280 --> 00:28:54,840
Speaker 9: expect President Trump to approach the industry and would they

557
00:28:54,880 --> 00:28:58,720
Speaker 9: get any support above and beyond what we've seen under

558
00:28:58,760 --> 00:29:00,560
Speaker 9: the Biden administration and the Ships Act.

559
00:29:01,000 --> 00:29:03,480
Speaker 6: Yeah, I mean there's that's a great question, and there's

560
00:29:03,560 --> 00:29:06,760
Speaker 6: there's multiple sort of angles to look at it. Just

561
00:29:06,840 --> 00:29:10,560
Speaker 6: looking at from a manufacturing and subsidy perspective, we don't

562
00:29:10,600 --> 00:29:15,360
Speaker 6: expect anything to change here. The government has been, you know,

563
00:29:15,520 --> 00:29:19,600
Speaker 6: very supportive of bringing back manufacturing here, especially leading edge

564
00:29:19,760 --> 00:29:23,120
Speaker 6: node and advanced manufacturing when it comes to semiconductors. So

565
00:29:23,160 --> 00:29:25,440
Speaker 6: we don't think we don't think this will be this

566
00:29:25,840 --> 00:29:28,040
Speaker 6: tailwind will continue to be a tailwind even in the

567
00:29:28,040 --> 00:29:31,080
Speaker 6: new administration. However, there are different angles now. One is

568
00:29:31,080 --> 00:29:33,840
Speaker 6: the MLA and landscape. Will it the new administration be

569
00:29:33,960 --> 00:29:37,160
Speaker 6: more easier on MNA, which really has not happened in

570
00:29:37,200 --> 00:29:41,400
Speaker 6: semiconductors because of again government regulation being primary getting factor.

571
00:29:42,000 --> 00:29:44,760
Speaker 6: Again this area, when you look at the data versus

572
00:29:44,760 --> 00:29:47,960
Speaker 6: the sentiment, the data doesn't show that the Trump administration

573
00:29:48,120 --> 00:29:51,520
Speaker 6: would be significantly a booster for M and A. If

574
00:29:51,600 --> 00:29:54,440
Speaker 6: you looked at the deals that were sort of blocked

575
00:29:54,600 --> 00:29:58,240
Speaker 6: or went into a lot of sort of regulatory concerns

576
00:29:58,360 --> 00:30:01,080
Speaker 6: during his prior term, that data shows that it was

577
00:30:01,160 --> 00:30:04,400
Speaker 6: similar to you know, what we saw in by then administration.

578
00:30:04,640 --> 00:30:07,240
Speaker 6: So from that angle, we don't expect, at least from

579
00:30:07,280 --> 00:30:11,240
Speaker 6: the data, significant things to change. There are different angles here,

580
00:30:11,320 --> 00:30:14,120
Speaker 6: especially pertaining to China. We do expect, you know, the

581
00:30:14,160 --> 00:30:17,440
Speaker 6: scrutinity against China to increase, and that could result into

582
00:30:17,680 --> 00:30:21,200
Speaker 6: multiple different aspects. One is sanctions on Chinese based companies,

583
00:30:21,480 --> 00:30:25,160
Speaker 6: and most of the US semiconductor big your giants have

584
00:30:25,280 --> 00:30:28,280
Speaker 6: significantly high exposure to China anywhere from forty to sixty

585
00:30:28,320 --> 00:30:30,800
Speaker 6: percent of the revenue, so that could come at risk.

586
00:30:31,040 --> 00:30:34,720
Speaker 6: The second could be retaliatory measures by China on US

587
00:30:34,800 --> 00:30:38,640
Speaker 6: companies who have significantly higher revenues in China. One example

588
00:30:38,680 --> 00:30:43,360
Speaker 6: recently was China initiating a probe on in media, so

589
00:30:43,360 --> 00:30:46,480
Speaker 6: we expect something in those in terms of the tariffs

590
00:30:46,600 --> 00:30:49,240
Speaker 6: or the sanctions to play a larger role on the

591
00:30:49,320 --> 00:30:50,960
Speaker 6: US semi connector companies.

592
00:30:50,640 --> 00:30:53,040
Speaker 3: Kun, John, I'm looking at the real winners in your space,

593
00:30:53,120 --> 00:30:56,440
Speaker 3: the chip space. Obviously in Vidia, Broadcom, those are the

594
00:30:56,440 --> 00:31:00,520
Speaker 3: clear winners. What do tech investors feel like twenty twenty

595
00:31:00,600 --> 00:31:03,520
Speaker 3: five holds for some of those names that have really

596
00:31:03,520 --> 00:31:05,840
Speaker 3: been propelled by AI? Is there more to go? Is

597
00:31:05,880 --> 00:31:08,200
Speaker 3: this a market? Is this an earning's growth story that

598
00:31:08,240 --> 00:31:10,640
Speaker 3: can support more performance out of these names.

599
00:31:10,920 --> 00:31:15,080
Speaker 6: Yeah, fundamentally, we expect twenty twenty five to be another

600
00:31:15,200 --> 00:31:18,640
Speaker 6: really strong year for AI chip names, with a one

601
00:31:18,720 --> 00:31:22,080
Speaker 6: key caveat that we expect this year not just one

602
00:31:22,240 --> 00:31:24,440
Speaker 6: name to take all the glory and take all the winnings.

603
00:31:24,440 --> 00:31:27,600
Speaker 6: We expect a much more broad based growth going into

604
00:31:27,960 --> 00:31:31,560
Speaker 6: ASIK names, AI networking names, the one like you said, Broadcom,

605
00:31:31,600 --> 00:31:34,160
Speaker 6: but there's even others that we expect to continue and

606
00:31:34,240 --> 00:31:37,520
Speaker 6: take small share of the bigger and growing and growing

607
00:31:37,560 --> 00:31:41,080
Speaker 6: AI wallet because the hyperscale spending is expected to grow

608
00:31:41,120 --> 00:31:43,960
Speaker 6: again twenty percent this year, so we think there will

609
00:31:43,960 --> 00:31:45,680
Speaker 6: be more names than just a handful of them.

610
00:31:45,680 --> 00:31:48,040
Speaker 9: This year. What's the risk to that twenty percent growth

611
00:31:48,080 --> 00:31:50,320
Speaker 9: story for hyperscaler is spending because at the end of

612
00:31:50,360 --> 00:31:54,200
Speaker 9: the day, we've seen tremendously ambition from big tech companies

613
00:31:54,280 --> 00:31:57,800
Speaker 9: to be working with Nvideo of course and others. But

614
00:31:57,920 --> 00:32:00,400
Speaker 9: do you think that that could face over wall of

615
00:32:00,480 --> 00:32:03,160
Speaker 9: investors also get fatigued.

616
00:32:03,920 --> 00:32:06,240
Speaker 6: Yeah, I mean you are seeing that concerns come in.

617
00:32:06,280 --> 00:32:08,880
Speaker 6: So when you look at from a growth rate perspective,

618
00:32:09,040 --> 00:32:11,840
Speaker 6: the growth rate is normalizing right when you look at

619
00:32:11,920 --> 00:32:14,280
Speaker 6: last year, it was somewhere between the mid forties and

620
00:32:14,360 --> 00:32:17,800
Speaker 6: now sort of half twenties. But you know, we so

621
00:32:17,920 --> 00:32:21,520
Speaker 6: far have not seen any data showing that at least

622
00:32:21,520 --> 00:32:23,680
Speaker 6: in twenty twenty five you could see a shock with

623
00:32:23,720 --> 00:32:26,560
Speaker 6: this number. The second point is, so far since the

624
00:32:26,640 --> 00:32:30,320
Speaker 6: advent of gen Ai, these estimates have proven to be conservative.

625
00:32:30,400 --> 00:32:32,880
Speaker 6: So as we end the year, we have typically for

626
00:32:32,960 --> 00:32:36,120
Speaker 6: the most companies seen the numbers of the CAPEX numbers

627
00:32:36,240 --> 00:32:38,520
Speaker 6: come higher than what we had expected at the beginning

628
00:32:38,560 --> 00:32:39,160
Speaker 6: of the year.

629
00:32:39,520 --> 00:32:42,720
Speaker 4: Thanks to Kujan Sobanni Bloomberg Intelligence in your semi analyst.

630
00:32:42,960 --> 00:32:45,719
Speaker 3: We move next to trade. Polishmakers around the world are

631
00:32:45,760 --> 00:32:49,040
Speaker 3: watching the US for potential trade tars when President elect

632
00:32:49,080 --> 00:32:51,320
Speaker 3: Donald Trump returns to the White House in January.

633
00:32:51,440 --> 00:32:53,840
Speaker 4: A trade war triggered by US tarriffs could be extremely

634
00:32:53,840 --> 00:32:56,440
Speaker 4: negative for the global economy. And this week we heard

635
00:32:56,480 --> 00:32:59,200
Speaker 4: that China may sell products to Europe but discounted rates

636
00:32:59,200 --> 00:33:01,200
Speaker 4: if the US and post is new tariffs. And that's

637
00:33:01,200 --> 00:33:03,600
Speaker 4: according to ECB Governing Council member Class Not.

638
00:33:04,000 --> 00:33:06,840
Speaker 3: For More guest host Matt Miller Shanalibasse again I were

639
00:33:06,920 --> 00:33:10,120
Speaker 3: joined by Brendan Murray, Bloomberg Global Trade Editor. We first

640
00:33:10,120 --> 00:33:13,080
Speaker 3: asked Brendan if he knew anything concrete in terms of

641
00:33:13,080 --> 00:33:14,240
Speaker 3: Trump's TWERFF plans.

642
00:33:14,800 --> 00:33:17,800
Speaker 12: Nothing concrete. In fact, the word that I keep hearing

643
00:33:17,920 --> 00:33:21,600
Speaker 12: is uncertainty around tariffs. If if, if, If tariffs are

644
00:33:21,600 --> 00:33:24,960
Speaker 12: Trump's favorite word, then business's least favorite word is uncertainty.

645
00:33:25,200 --> 00:33:27,400
Speaker 12: And that's what they're getting. What we heard from the

646
00:33:27,440 --> 00:33:32,600
Speaker 12: ECB official that was fear about disinflation from China. We

647
00:33:32,640 --> 00:33:36,320
Speaker 12: often hear about tariffs causing inflation from the US. If

648
00:33:36,360 --> 00:33:38,600
Speaker 12: if Trump were to were to put tariffs on on

649
00:33:38,720 --> 00:33:41,880
Speaker 12: Chinese imports, Uh, the flip side of that is deflation,

650
00:33:42,040 --> 00:33:44,320
Speaker 12: and China, you know, has has a couple of tools

651
00:33:44,320 --> 00:33:46,280
Speaker 12: at its disposal. If it wants to use in a

652
00:33:46,320 --> 00:33:50,000
Speaker 12: trade war, it could subsidize its exporters uh and reduce

653
00:33:50,040 --> 00:33:53,280
Speaker 12: the costs of the of their production and and and

654
00:33:53,400 --> 00:33:55,640
Speaker 12: make the make the cost of their exports go down.

655
00:33:55,720 --> 00:33:58,120
Speaker 12: It could also let its currency weaken.

656
00:33:58,600 --> 00:33:58,840
Speaker 4: Uh.

657
00:33:58,960 --> 00:34:01,840
Speaker 12: Now the economists are are, you know, kind of mixed

658
00:34:01,880 --> 00:34:04,320
Speaker 12: on whether the degree to which they think those things

659
00:34:04,320 --> 00:34:07,920
Speaker 12: will happen. But this ECB official we heard is clearly

660
00:34:07,960 --> 00:34:10,960
Speaker 12: putting his finger on something that that you that the

661
00:34:11,000 --> 00:34:13,640
Speaker 12: Europeans are worried about. They have, you know, a much

662
00:34:13,760 --> 00:34:16,520
Speaker 12: slower growth outlook than the US, and so you know,

663
00:34:16,760 --> 00:34:18,360
Speaker 12: there's some there's some talk that he has right to

664
00:34:18,360 --> 00:34:18,960
Speaker 12: be concerned.

665
00:34:19,239 --> 00:34:21,160
Speaker 9: You know, it's interesting, Paul, You're you're looking at an

666
00:34:21,200 --> 00:34:23,359
Speaker 9: interesting function on the terminal. I know that can show

667
00:34:23,400 --> 00:34:27,399
Speaker 9: you pretty pretty granularly how the US trade partners are

668
00:34:27,440 --> 00:34:28,040
Speaker 9: planning out.

669
00:34:28,200 --> 00:34:30,440
Speaker 3: The CT are fun with it right now. That's why

670
00:34:30,680 --> 00:34:32,719
Speaker 3: you guys can have a conversation. I'm just clicking on

671
00:34:32,920 --> 00:34:34,960
Speaker 3: seeing who all the trade partners we have and everybody

672
00:34:34,960 --> 00:34:35,359
Speaker 3: else has.

673
00:34:35,680 --> 00:34:39,239
Speaker 9: But one thing interesting about this is if you kind

674
00:34:39,239 --> 00:34:43,480
Speaker 9: of change the main bar to China, you can see

675
00:34:43,520 --> 00:34:48,360
Speaker 9: also just how much China is ingrained into the global economy.

676
00:34:48,680 --> 00:34:50,880
Speaker 9: And so it's not just China that would be concerned

677
00:34:50,920 --> 00:34:53,400
Speaker 9: about that kind of slowdown or the ECB. Is it, Brendan.

678
00:34:53,600 --> 00:34:57,400
Speaker 9: Aren't there many other countries that would share that same concern?

679
00:34:58,000 --> 00:34:58,160
Speaker 1: Oh?

680
00:34:58,200 --> 00:35:01,480
Speaker 12: Absolutely. You know, China is not just the largest trading

681
00:35:01,520 --> 00:35:06,520
Speaker 12: partner to you know, countries like you know, Germany and

682
00:35:06,600 --> 00:35:09,960
Speaker 12: others in Europe, but it's the number one trading partner

683
00:35:10,000 --> 00:35:12,560
Speaker 12: to a lot of countries. And you know, a full

684
00:35:12,560 --> 00:35:17,480
Speaker 12: blown trade war would not just take place between the US, China,

685
00:35:17,680 --> 00:35:20,920
Speaker 12: Europe and China. It would hit lots of different countries.

686
00:35:21,200 --> 00:35:24,279
Speaker 8: You know what during Trump one point, Oh we heard

687
00:35:24,400 --> 00:35:27,839
Speaker 8: China so much about China, big tariffs on China. Trump

688
00:35:27,920 --> 00:35:30,960
Speaker 8: didn't want TikTok because obviously the Chinese can spy on.

689
00:35:30,960 --> 00:35:31,400
Speaker 6: Us with that.

690
00:35:31,880 --> 00:35:34,880
Speaker 8: Now he's happy to have them spy on us through TikTok.

691
00:35:35,040 --> 00:35:36,640
Speaker 8: In fact, he's going to push at the Supreme Court

692
00:35:36,760 --> 00:35:41,640
Speaker 8: level to try and get the TikTok ban extended or lifted.

693
00:35:42,480 --> 00:35:46,320
Speaker 8: And the first buddy, Elon Musk does so much business

694
00:35:46,320 --> 00:35:49,879
Speaker 8: in China that speculation I hear is that he could

695
00:35:49,920 --> 00:35:52,799
Speaker 8: be much softer on them as a trading partner in

696
00:35:52,880 --> 00:35:54,799
Speaker 8: this Trump two point zero administration.

697
00:35:54,840 --> 00:35:55,719
Speaker 4: What's your take on that.

698
00:35:56,040 --> 00:35:58,160
Speaker 12: Yeah, it's something we've reported on quite a bit over

699
00:35:58,200 --> 00:36:01,160
Speaker 12: the last couple of weeks and point to how how

700
00:36:01,200 --> 00:36:04,719
Speaker 12: transactional Trump is as a as an executive and and

701
00:36:04,800 --> 00:36:08,040
Speaker 12: as as as he was during his first presidency. And

702
00:36:08,320 --> 00:36:11,360
Speaker 12: he will take things, uh, you know, case by case

703
00:36:11,840 --> 00:36:14,480
Speaker 12: based on what the people who we talk to and

704
00:36:14,560 --> 00:36:17,600
Speaker 12: something like TikTok or you know, sort of other things

705
00:36:17,640 --> 00:36:19,879
Speaker 12: that come along. Uh, you know, he's going to take

706
00:36:19,920 --> 00:36:21,640
Speaker 12: case by case and and you know he's going to

707
00:36:21,719 --> 00:36:24,440
Speaker 12: hear these here, hear out the arguments on both sides,

708
00:36:24,760 --> 00:36:28,200
Speaker 12: presumably and make his decision based on what he thinks

709
00:36:28,239 --> 00:36:31,560
Speaker 12: is best for him politically and for the economy. So yeah,

710
00:36:31,560 --> 00:36:33,920
Speaker 12: we'll we'll see it's not a it's not a you know,

711
00:36:34,080 --> 00:36:36,440
Speaker 12: a black or white issue. It's you know, there's some

712
00:36:36,520 --> 00:36:39,640
Speaker 12: gray area in there, and and things like TikTok, you know,

713
00:36:39,640 --> 00:36:40,600
Speaker 12: are a good example of that.

714
00:36:41,000 --> 00:36:42,920
Speaker 3: Brandon, do we have any idea how much of this

715
00:36:43,000 --> 00:36:47,600
Speaker 3: tire stuff is just negotiating ploy versus real economic policy?

716
00:36:47,640 --> 00:36:50,800
Speaker 3: As anybody kind of weighede in who may have the

717
00:36:50,840 --> 00:36:52,320
Speaker 3: president ear on this stuff?

718
00:36:52,840 --> 00:36:55,520
Speaker 12: Scott Besen, Yeah, I you know, I don't you know,

719
00:36:55,640 --> 00:36:57,760
Speaker 12: is the poker player sitting across from you bluffering?

720
00:36:57,760 --> 00:36:57,880
Speaker 3: Ear?

721
00:36:58,000 --> 00:37:00,080
Speaker 12: Is he not bluffing? You know, it's it's any but

722
00:37:00,160 --> 00:37:03,440
Speaker 12: he's guessed. Really, I think that the answer really is

723
00:37:04,320 --> 00:37:08,960
Speaker 12: that he will, you know, take things based on what

724
00:37:09,000 --> 00:37:12,880
Speaker 12: he thinks are threats to national security. Even if he

725
00:37:13,080 --> 00:37:17,120
Speaker 12: is just putting a negotiating tool out there, it's still

726
00:37:17,160 --> 00:37:21,279
Speaker 12: having an effect. Companies are still stockpiling, So whether whether

727
00:37:21,320 --> 00:37:24,120
Speaker 12: it's a bluff or a negotiating tool or not, it's

728
00:37:24,160 --> 00:37:26,560
Speaker 12: still having an economic effect. We were looking at the

729
00:37:27,120 --> 00:37:30,640
Speaker 12: state of volumes through the ports of Los Angeles and

730
00:37:30,680 --> 00:37:33,359
Speaker 12: Long Beach. They're going through the roof right now. It's

731
00:37:33,440 --> 00:37:37,440
Speaker 12: normally a quiet time of year. So this may be

732
00:37:37,480 --> 00:37:42,560
Speaker 12: a tactic, but it's actually affecting the inventory building of companies.

733
00:37:42,760 --> 00:37:46,360
Speaker 8: But Brendan, I mean, what's the thinking on TikTok? Not

734
00:37:46,440 --> 00:37:49,000
Speaker 8: to focus too much on that, but isn't it generally

735
00:37:49,040 --> 00:37:52,480
Speaker 8: accepted that it is a threat to national security? And

736
00:37:52,520 --> 00:37:54,480
Speaker 8: the Trump administration now is okay with that?

737
00:37:55,200 --> 00:37:57,799
Speaker 12: Look, I think this is getting to the heart of

738
00:37:57,880 --> 00:38:01,479
Speaker 12: the different kind of presidency we're going to see coming

739
00:38:01,960 --> 00:38:06,479
Speaker 12: up starting on January twentieth, with advisors like Elon Musk.

740
00:38:06,520 --> 00:38:10,520
Speaker 12: You know, Elon Musk has has, you know, every motivation

741
00:38:10,680 --> 00:38:12,920
Speaker 12: to make sure that the US and China still do

742
00:38:13,000 --> 00:38:16,480
Speaker 12: business together. You know, he's got a two billion dollar

743
00:38:16,680 --> 00:38:18,960
Speaker 12: you know, megafactory there. You know he wants to he

744
00:38:19,000 --> 00:38:21,719
Speaker 12: wants to sell cars to Chinese consumers. So I think

745
00:38:21,760 --> 00:38:23,160
Speaker 12: this is what you're going to see as kind of

746
00:38:23,160 --> 00:38:25,720
Speaker 12: a softening of some of these positions like the one

747
00:38:26,120 --> 00:38:26,879
Speaker 12: TikTok that you.

748
00:38:26,880 --> 00:38:30,160
Speaker 4: Raise a right Thanks to Brendan Murray, Bloomberg Global Trade Editor.

749
00:38:30,440 --> 00:38:34,880
Speaker 2: This is a Bloomberg Intelligence podcast, available on Apple, Spotify,

750
00:38:34,960 --> 00:38:38,279
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751
00:38:38,280 --> 00:38:41,440
Speaker 2: weekday ten am to noon Eastern on Bloomberg dot com,

752
00:38:41,440 --> 00:38:44,880
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753
00:38:45,040 --> 00:38:48,040
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754
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