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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: We're gonna rip up the script and we do this

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Speaker 2: with great respect for Blackrock because they took the mathematician

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Speaker 2: of China and elevated her to fame. She's driving, of course,

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Speaker 2: all of investment strategy for Blackrock. We've spoken many times

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Speaker 2: about Wayee's accomplishments in her China, and in this hugely

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Speaker 2: turmoil time, we rip up the script with Wayey Way.

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Speaker 2: I do want to get to the market coverage here.

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Speaker 2: We've got an extended time with you on surveillance this morning,

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Speaker 2: but I need to ask you to describe, and Zen,

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Speaker 2: I want you to describe. You went to Cambridge, fine,

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Speaker 2: but please describe the word respect that the Chinese government

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Speaker 2: speaks about overnight. I'm sorry, Wyley, It's like Bill Murray

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Speaker 2: in Tokyo. For Americans, it's lost in translation. Please translate.

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Speaker 3: Well, actually, what is happening right now is that nobody

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Speaker 3: wants to call first, Nobody wants to call first, and

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Speaker 3: each is apping the pressure. So there's a lot of

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Speaker 3: postering happening on both sides before negotiation, which is why

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Speaker 3: we think that it actually is not so rewarding to

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Speaker 3: try to predict what is the next step of policy

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Speaker 3: making or the next rhetoric. It's more rewarding to try

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Speaker 3: to understand what are the rules governing negotiation, governing policy

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Speaker 3: making that will ultimately shape the destination of where heading

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Speaker 3: towards Where.

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Speaker 2: We're heading is on a different timeline. You know that

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Speaker 2: I love the XXSWAYI I'm very delta what's called in

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Speaker 2: the Greek letters folks, theta driven. I would suggest the

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Speaker 2: timeline of President Trump in America with their linkage into

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Speaker 2: black Rock investment, is radically different than the Chinese timeline.

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Speaker 2: Discuss that is there a huge separation in short term

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Speaker 2: and long term between the two cultures.

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Speaker 3: Well, maybe there is some time pressure because we are

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Speaker 3: heading into a meeton, for example, in the US next year,

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Speaker 3: so things need to happen a bit more quickly. But

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Speaker 3: what I meant by kind of rules that cannot be

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Speaker 3: broken is more on the economic basis.

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Speaker 4: Specifically, you know.

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Speaker 3: We have the US looking to reduce strait deficits that

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Speaker 3: cannot be reduced without reducing foreign lending by the same magnitude.

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Speaker 3: So if you push that in that direction too quickly,

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Speaker 3: it's going to raise interest rate and it's going to

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Speaker 3: raise a future death servicing costs, which is why we

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Speaker 3: saw the bond market route last week, and specifically we

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Speaker 3: did this kind of bag of envelope calculation.

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Speaker 4: Twenty five basis point of long.

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Speaker 3: Term yields translate into roughly fifty to seventy five billion

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Speaker 3: dollars per annon of additional debt servicing costs. And we're

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Speaker 3: already at a point where we're spending more in the

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Speaker 3: US right, like one hundred and fifty billion dollars more

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Speaker 3: than last year this time. So these are the kind

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Speaker 3: of checks and balances and influencing factors that ultimately could

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Speaker 3: drive where we're heading towards now on the On the

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Speaker 3: China side, the impacts on from tarraffs on the growth

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Speaker 3: picture is likely very severe, right, So if everything kind

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Speaker 3: of go according to plan, which is not the expectation,

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Speaker 3: but if that were to happen, we're talking about PEACH

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Speaker 3: to GDP to the magnitude of two percent, which would

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Speaker 3: mean that the government would really risk kind of significantly

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Speaker 3: under shooting the growth target of five percent this year.

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Speaker 3: So both sides have tracks and constraints that they need

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Speaker 3: to balance, and this is what we pay more attention

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Speaker 3: to rather than what they're saying on a single day,

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Speaker 3: because of course they do not want to put everything

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Speaker 3: on the table as they are getting ready for negotiation.

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Speaker 2: You got to love a woman that went to Raffles

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Speaker 2: Junior High School in Singapore. We welcome all of you

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Speaker 2: on the Pacific rim basically in your evening here on

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Speaker 2: YouTube Wayy of black Rock with this son truly in

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Speaker 2: historic Wednesday, Paul Wait.

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Speaker 5: They talked to us about kind of how you think

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Speaker 5: about the tariff backdrop here we did President Trump did

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Speaker 5: talk initiate the ninety day kind of freeze here if

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Speaker 5: you will on many of these reciprocal turfs. How do

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Speaker 5: you just kind of factor all that in here? Because

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Speaker 5: I'm listening to companies conference calls and I don't think

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Speaker 5: corporate America knows what the thing. How are you guys

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Speaker 5: approaching it?

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Speaker 3: I think the fact that you were just talking about,

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Speaker 3: I think United Airline giving out guidance in scenario in

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Speaker 3: a scenario way with two scenarios, that's really really unusual.

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Speaker 3: But that has been how we think about kind of

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Speaker 3: us our location already, So this is an unprecedented word.

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Speaker 4: Already, economic uncertainty.

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Speaker 3: Was at really extremely elevated levels because of mega forces, AI,

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Speaker 3: low pub and transition, and now policy uncertainty is at

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Speaker 3: a record high as well. So compounding economic uncertainty and

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Speaker 3: policy uncertainty means that we cannot do point forecast anymore.

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Speaker 3: We have to think about kind of investing through scenarios.

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Speaker 3: So I see, I'm happy to see the corporates are

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Speaker 3: doing that. But specifically in terms of the tariff backflop

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Speaker 3: that you asked after April second, it was it was

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Speaker 3: very concerning for us. Not so much, yes, indeed yes,

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Speaker 3: also because the magnitude of the tariffs were bigger than expected.

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Speaker 4: But more important than that is the fact that.

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Speaker 3: There didn't seem to be checks, didn't seem to be

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Speaker 3: constrained in terms of how US is setting out to

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Speaker 3: make policies, and that is why we were more concerned

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Speaker 3: after April second. But the fact that they walked back

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Speaker 3: last week, they walked back and they put in place

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Speaker 3: the ninety day polls gave us some comfort that the

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Speaker 3: checks are still in place, even though immediately after April

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Speaker 3: second it didn't look like they were.

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Speaker 4: They still were in place.

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Speaker 3: They will help guide where we are heading towards, and

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Speaker 3: that gives us more comfort to them think.

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Speaker 4: A little bit longer term.

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Speaker 3: Of course, in the Newton there's still going to be

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Speaker 3: a huge amount of uncertainty as negotiations go ahead, both

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Speaker 3: sides of negotiations. Talking about kind of all the bilateral

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Speaker 3: negotiations that are taking place, it's likely going to throughout

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Speaker 3: a lot of headlines drive market volatility. But knowing that

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Speaker 3: there are checks in place that can influence the destination

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Speaker 3: is important for us to be able to focus on fundamentals.

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Speaker 5: So we saw just in this quarter, this first quarter

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Speaker 5: of twenty twenty five way just some reversal funds flows

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Speaker 5: out of the US, selling bond, selling stocks, selling the dollar,

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Speaker 5: and perhaps going into some European markets taking advantage of

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Speaker 5: the more stable markets here. Is that kind of a

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Speaker 5: short term trade or is that a longer term investment thesis?

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Speaker 3: From your perspective, I think it's too early to call

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Speaker 3: this a longer term unwind of multi years of US exceptionalism.

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Speaker 3: I think the reversal that we saw here today very

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Speaker 3: much reflect the stretched positioning in US assets and also

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Speaker 3: the greater gap of valuation between US aquitas and European

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Speaker 3: aquitis for example, and the rest of the world for example.

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Speaker 3: But to say that this is kind of the end

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Speaker 3: of US exceptionalism is premature, I would say, because drivers

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Speaker 3: of US exceptionalism include the depth of capital market, the

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Speaker 3: appetite for risk taking, energy independence, greater spent we see

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Speaker 3: that on the FISCO from today is supported by exopitant

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Speaker 3: privilege of making sure that the rest of the world

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Speaker 3: can found it. I mean, all of those reasons why

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Speaker 3: companies like in Video exist in the US and not elsewhere.

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Speaker 3: So I think it's way too premature to say that

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Speaker 3: this is the end of US exceptionalism. I would also

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Speaker 3: observe after April the second, the drawdown in terms of

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Speaker 3: equities across the world are almost the same. Europe was

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Speaker 3: selling off as much as US was selling off. After

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Speaker 3: April second, I think it's very very early to say

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Speaker 3: that Europe definitely be a winner, but they will be selectable.

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Speaker 2: Bring up the drawdown for you too. We're sub eighteen

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Speaker 2: percent on this it's you know, it's a correction, it's

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Speaker 2: a bear mark. But we've had a recovery. Way Ley

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Speaker 2: in the zeitgeist this morning, and the blur is the

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Speaker 2: basic idea that companies are buying back their shares, that

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Speaker 2: senior executives have an optimism there's a horizon out there

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Speaker 2: somewhere that we're going to get to. Where is Wayley's

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Speaker 2: horizon to solve to get beyond this crisis? Are you

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Speaker 2: looking at it this quarter, this year or is your

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Speaker 2: horizon distressingly out years?

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Speaker 3: Well, I think with the evolution of technology, hopefully we're

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Speaker 3: all living longer, so I hope I have a longer

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Speaker 3: term horizon, and with that longer term horizon, I would

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Speaker 3: observe a lot of the correction drawdown that we have

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Speaker 3: seen in quality quality.

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Speaker 4: Companies may have been over down right. If you think about.

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Speaker 3: Kind of the evaluation metrics for some of the quality

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Speaker 3: TEG names in the US, they are at the lowest

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Speaker 3: level since the beginning of chat GPT. Now you can

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Speaker 3: say that valuations has lost or meaning because analysts are

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Speaker 3: slow to adjust their earnings earnings revision. Maybe, but it

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Speaker 3: still doesn't change the fact that some really good value

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Speaker 3: names out there, and the drivers in terms of AI

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Speaker 3: adoption hasn't changed, so I think there are some really

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Speaker 3: good offenis longer term.

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Speaker 2: One final question, Waly, thank you so much generously you

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Speaker 2: to take this time with us today. So I'm up

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Speaker 2: at like two am or midnight or whatever, you know,

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Speaker 2: I'm you know, Bracton's got me up looking at red

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Speaker 2: SOX highlights. Wayly, I see that the government of China

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Speaker 2: is going to ban the mailing of packages from Hong

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Speaker 2: Kong to America. What does that signal to you?

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Speaker 3: I think this is an example of kind of each

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Speaker 3: side up in pressure as they get ready for negotiation.

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Speaker 3: Nobody wants to go first. They want to increase pressure

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Speaker 3: to bring the other side to the table. This is

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Speaker 3: one of those things I think, you know, like Boeing

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Speaker 3: yesterday the news was another example, and then the H

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Speaker 3: twenty chips another example.

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Speaker 4: I think we're going to see.

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Speaker 3: Quite a few examples of this as we get into negotiation.

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Speaker 3: But then, really not as much attention should be paid

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Speaker 3: to kind of the bit by bitch incremental news, but

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Speaker 3: really pay attention to the laws, the checks that will

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Speaker 3: govern where we're heading towards.

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Speaker 4: Is how I think about investing right now.

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Speaker 2: Really, thank you so much with black Rock this morning,

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Speaker 2: just Brian, thank you so much.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am. He's durn Listen

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Speaker 1: on Applecarplay and Android Otto with the Bloomberg Business up

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Things have changed. There's a crisis in America and Dan

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Speaker 2: Ives has piped it down. There was a color scheme

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Speaker 2: going on back when there was American exceptionalism. And for

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Speaker 2: those of you today, in honor of Louis Vauton the

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Speaker 2: challenges they had yesterday, he's going with the washed pink

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Speaker 2: shade today. Okay, i'lla LVMH. So we have a more

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Speaker 2: subdued Dan Ives with this, Dan, how have you survived

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Speaker 2: the last ten days? You've had to bring some price

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Speaker 2: targets down? What has been the Ives methodology to reset?

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Speaker 6: A lot of coffee, a lot of calculators and look,

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Speaker 6: to me, it's really it's talking to so many people

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Speaker 6: throughout supply chain, customers, companies to understand basically scenarios. And

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Speaker 6: that's how we viewed it, Like what are numbers? Cut's

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Speaker 6: gonna look like, and then what does that mean for prices?

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Speaker 6: And I think you're starting to now see the results

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Speaker 6: of that, in Vidia being the first one in terms

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Speaker 6: of the real effect from this tower.

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Speaker 5: For so, Dan, how do you think about I guess

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Speaker 5: the underlying tech spend globally over the next twelve months.

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Speaker 5: To what extent, if any, does that likely going to

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Speaker 5: come down?

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Speaker 6: Yeah, so, Paul, I view it as let's say, three

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Speaker 6: undred twenty five billion max seven spending on cap backs

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Speaker 6: for AI that's assumed. Let's call that too eighty two ninety.

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Speaker 6: In other words, that's right now what I think is

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Speaker 6: baked in, like you already are gonna have probably ten

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Speaker 6: percent cuts, could be more, but I think most investors

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Speaker 6: are going to basically, you're not gonna have guidance. You're

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Speaker 6: gonna toss out June, You're gonna toss out September quarter.

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Speaker 6: You assume some negotiation gets the cooler heads. And I

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Speaker 6: think right now every investor I talked to you're looking

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Speaker 6: at twenty six numbers to understand what the normalized numbers

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Speaker 6: look like with some sort of base.

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Speaker 2: I mean, let's do it Nvidio quickly.

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Speaker 7: Here.

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Speaker 2: I want to get to Apple, which I think is

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Speaker 2: the attention of our listeners and viewers. Were you surprised

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Speaker 2: by the Nvidio markedown over naight?

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Speaker 6: I mean, I think it's a it's a knee jerk actually,

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Speaker 6: and obviously it's a headline and it's it's negative news.

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Speaker 6: But I mean, to me, Tom, I already assumed ten

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Speaker 6: percent cuts.

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Speaker 2: Right, Okay, let's start with Apple here, and you and

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Speaker 2: I have gone back and forth in this over the

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Speaker 2: years and over the last thirty eight months, Dana and

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Speaker 2: I just looked like a genius on Apple until this crisis.

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Speaker 2: Is there persistency of cash flow that is provided for

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Speaker 2: share buyback and dividend growth? Is it still there? It's that.

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Speaker 6: I mean, look, even you know when you scenario and

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Speaker 6: sort of put pressure on the model and stress test

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Speaker 6: that cash flow comes down five percent, maybe seven percent.

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Speaker 6: The reality is is that a lot of that on Apple,

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Speaker 6: I think starts to now get found in. It comes

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Speaker 6: down to with with China numbers unless these tariffs in

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Speaker 6: their current state stick for ninety days and longer than

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Speaker 6: to me at Apple content right here, I mean, it

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Speaker 6: is a name.

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Speaker 2: Does Jim Cook Dana eives with all of your specific

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Speaker 2: room work, does he have a special relationship with Beijing.

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Speaker 6: Oh, I mean, look, cooks ten percent politician ninety CEO.

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Speaker 6: No one understands Beijing's supply chain better than cook. The

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Speaker 6: reality is, I mean, look, India gives some optionality where

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Speaker 6: you could, you know, call maybe five ten percent, but

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Speaker 6: they have no options outside Easia. I mean, and that's

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Speaker 6: right now with they need to navigate and also make

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Speaker 6: sure China there's no retaliatory toward Apple. There's no retaliatory,

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Speaker 6: and we talked about toward Tesla. I think right now,

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Speaker 6: that's that's front and center what he needs to manage,

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Speaker 6: as well as within the White House to make sure

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Speaker 6: these tariffs don't impact to the extent. Look, you can't

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Speaker 6: have two thousand hours iPhones, that'd be thirty percent demand destruction.

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Speaker 2: Wow.

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Speaker 5: So Dan, I mean, when you talk to the executives

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Speaker 5: in Silicon Valley, do they expect this to be the

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Speaker 5: new normal for at least the next four years?

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Speaker 2: I guess no.

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Speaker 6: I think I mean, look, whatever they'd probably say, I mean,

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Speaker 6: I could tell they're figuring out what when negotiations happen,

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Speaker 6: what the baseline gets to, what they're going to pass through,

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Speaker 6: what they're going to eat what they're going to ultimately

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Speaker 6: pass through to the rest of the spot, and that's

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Speaker 6: what they're trying to figure out in terms of what

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Speaker 6: the new baseline will be once we get through this. Basically,

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Speaker 6: you know, a UFC battle between China and US.

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Speaker 2: Yeah, Dan, answer this folks here with the what bush

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Speaker 2: we continue. We welcome all of you in your commute

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Speaker 2: across the nation. Just a terrific set of conversations today

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Speaker 2: out on YouTube, Fiery chat out on live chat there.

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Speaker 2: Thank you so much for your attention on YouTube. Subscribe

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Speaker 2: to Bloomberg Podcast. Just amazed by the permanence of YouTube

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Speaker 2: and living rooms and offices around the world. Dan, I'm

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Speaker 2: not going to mince words. Reuters did a story out

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Speaker 2: of Paris and Alvarado, Texas the other day on LVMH

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Speaker 2: Louis vuittonm that they're having trouble with American labor manufacturing

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Speaker 2: American bags. When tech people are politicians start spouting off

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Speaker 2: about bringing those manufacturing processes of the Pacific rim over

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Speaker 2: to America. Do we have the labor force with a

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Speaker 2: discipline and the culture to make that stuff.

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Speaker 6: No, And we've talked about it a lot over the

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Speaker 6: last two weeks. That's a fictional tal and the reality

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Speaker 6: is that you could see me in America in terms

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Speaker 6: like the reality in terms of the waver force, the

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Speaker 6: cost inputs, where the raw materials are coming from, and

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Speaker 6: also the ip ME and the supply chain. You have

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Speaker 6: a factory here where the chips made.

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Speaker 7: They're main Asia.

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Speaker 6: And that's the reality.

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Speaker 7: Of this situation.

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Speaker 6: And that's why I've said, like this is something where

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Speaker 6: for the first time in thirty years, US is ahead

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Speaker 6: of China when it comes to tech. But if you

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Speaker 6: don't navigate this third rail issue the right way, you'll

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Speaker 6: cut the knees of tech, take it back years and

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Speaker 6: guess who wins in it.

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Speaker 2: It's China tech.

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Speaker 5: Dan, is there a place in your coverage that is

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Speaker 5: a safer place to be, whether it's software with Microsoft

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Speaker 5: or work, I don't know.

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Speaker 2: Yeah, Penn state base play exactly exactly, I'd say, Paul,

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Speaker 2: I'd say it's software and cybersecurity.

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Speaker 6: I mean those are sort of the buckets from IBM

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Speaker 6: to Oracle to Microsoft. Cybersecurity, whether it's pal out or CrowdStrike,

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Speaker 6: cyber arc checkpoint, those are almost the defensive safety blankets

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Speaker 6: in tech. In terms of in soft friend cybersecurity, even

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Speaker 6: though you know you have number cuts there too.

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Speaker 7: But again, no come is going to.

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Speaker 6: Give guidance in earning season and the streets already factoring

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Speaker 6: and beep into this. You have ten percent cuts across

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Speaker 6: the board.

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Speaker 2: Okay, out of the pandemic, Dan ives, I got a

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Speaker 2: fancy standard deviation chart to Apple. It's well behaved, it's

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Speaker 2: the great eyes rally. The people that hate you aren't

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Speaker 2: aware that you nailed that. You know, as a generalization,

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Speaker 2: you nailed to move up is an uber bowl. I'm

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Speaker 2: not that far out of two standard deviations down on Apple.

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Speaker 2: I mean the phrase Apple's cratered is not accurate, right, No,

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Speaker 2: I mean, look, I think.

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Speaker 6: Because the reality is is that unless you assume just

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Speaker 6: a black swan event Army get everyone understands that. Like

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Speaker 6: it's about the friend, it's the free castlow, it's the

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Speaker 6: services business, which is not really that impact from how

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Speaker 6: that gives you massive downside protection in Apple, and that's

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Speaker 6: why that stock is holding up the way it is

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Speaker 6: relative to them being in the eye of this show.

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Speaker 2: So do you have a buy on Apple? Of course,

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Speaker 2: dude to me Apple, upset to me Apple.

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Speaker 6: Over the next twelve to eighteen months.

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Speaker 7: You own Apple, you own a video.

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Speaker 6: I mean, I'd argue you own if.

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Speaker 7: You navigate these storms.

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Speaker 6: You have to navigate the storm over the next three

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Speaker 6: to six months. You do not panic. You're in the

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Speaker 6: You're in a game of high stakes poker that's playing

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Speaker 6: out with opering economy, you know, with it.

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Speaker 2: I mean, Paul wants to get in here, and I'm sorry,

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Speaker 2: I gotta do this. Can Penn State football meet meet

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Speaker 2: Nevada August thirtieth?

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Speaker 5: Oh, that's gonna be a nice tune up game.

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Speaker 3: I mean yeah.

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Speaker 6: Look again, like I said, I for all the SEC

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Speaker 6: fans out there, they had their they had their run.

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Speaker 6: Now it's big Pens run Penn State twenty five Michigan,

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Speaker 6: Ohios and then Penn State three in a row, right

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Speaker 6: for Nanny's.

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Speaker 2: And then then they play FIU. I don't even know

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Speaker 2: what fi you is. Dan, I's go away. I'm sorry, Paul,

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Speaker 2: I know you want to get I just love busting

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Speaker 2: his chops. Danipes, thank you so much. We're something colorful

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Speaker 2: next time. He's the web Bush and serious conversation here, folks.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on applecarp Play and Android

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00:21:25,800 --> 00:21:28,840
Speaker 1: Auto with the Bloomberg Business app. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station.

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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

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Speaker 2: We're going to do this raptor on retail sales here,

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Speaker 2: but not on retail sales. We're gonna get them on

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Speaker 2: for a much much longer conversation here in the coming weeks.

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Speaker 2: In two thousand and seven, the most famous strategist in

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Speaker 2: the world was a guy named Matt King. He was definitive,

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Speaker 2: definitive it trying to figure out the path for Lehman Brothers.

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Speaker 2: And before that did something that I featured in my

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Speaker 2: book with David Goldman of Bank of America, which is,

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Speaker 2: forget about the garbage out there in derivative science, look

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Speaker 2: at the super senior tranches. Matt King over the years

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Speaker 2: has devolved into Satori Insights and joins us now for

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Speaker 2: far too short conversation. This is for Global at Wall Street,

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Speaker 2: Matt King live or Ois is dead. We have so

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Speaker 2: for sofr is compared to the ten year yield of

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Speaker 2: the two year yield that looks at the trust market

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Speaker 2: out there is a trust of the financial plumbing system broken.

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Speaker 7: I think it's closer to breaking than many people make out.

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Speaker 7: For me, what's going on at the moment is this

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Speaker 7: big disconnect between you've heard all your equity and your

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Speaker 7: credit guests focused on tariffs and on earnings and some

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Speaker 7: of the trailing data, and then conversely what we see

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Speaker 7: going on in treasury markets with the rising term premium,

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Speaker 7: this evening of the real yuel curve, what increasingly looks

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Speaker 7: like a run on the dollar, capital flight out of

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Speaker 7: the US, and then most obviously in gold. There's just

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Speaker 7: this big disconnect, and it does remind me of some

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Speaker 7: of those other periods of my career that you're kind

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Speaker 7: enough to mention, where yeah, the people in one market

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Speaker 7: looking at that and thinking, hey, this could come to

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Speaker 7: dominate everything else, and other people need to wake up.

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Speaker 2: We did a seminar with lousy coffee years ago. I

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Speaker 2: can't remember the hotel folks Is in New York, EMMT King.

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Speaker 2: What we talked about was leverage within the system. Is

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Speaker 2: there a leverage out there? Is there a Myron Shaw's

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Speaker 2: lt CM leverage out there?

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Speaker 7: I can't see mostly no, or at least not in

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Speaker 7: the way that people think. So people have been excited

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Speaker 7: about the onlineer basis trades and some of the moves

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Speaker 7: and swap spreads and pointing to hedge funds. And yes,

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Speaker 7: there has been this big pickup in leverage and reproactivity,

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Speaker 7: especially for multistrap funds, but I don't think that's the

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Speaker 7: problem here. If anything, I would say that it's almost

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Speaker 7: a diversifying element relative to all the long only money

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Speaker 7: that is poured in over the last decade or so.

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Speaker 7: And so for me, there is this scary thing that

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Speaker 7: sort of all my career, I focus on the thing

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Speaker 7: that's about to blow up, and each time the crises

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Speaker 7: seem to get bigger and bigger. The debt that's out

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Speaker 7: there now is across non financial sectors as a whole,

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Speaker 7: and more than anything with governments, including the US government.

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Speaker 7: But it's not the financial leverage in quite the same

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Speaker 7: way as it was previously, and on the one hand,

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Speaker 7: that makes it slower burning. But on the other hand,

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Speaker 7: the feedback loop from markets through to the economy is

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Speaker 7: larger ever than it's been in the past.

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Speaker 5: So, Matt, I guess you put into context the sell

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Speaker 5: off in the equity markets. People selling treasuries selling the

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Speaker 5: US dollar buying gold.

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Speaker 2: What does that tell you?

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Speaker 5: Usually you would think the treasuries in the US dollar

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Speaker 5: a safe havens in a time of uncertainty.

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Speaker 7: We heard some of it from Jamie Diamond yesterday, except

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Speaker 7: all the things he said could happen, the erosion of

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Speaker 7: the US's safe haven status and potential exodus from US assets.

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Speaker 7: I would argue that they're underway already. It's difficult to

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Speaker 7: see in the data, but I think it's highly likely

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Speaker 7: that we get more of that because many of the

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Speaker 7: moves that the Trump administration are making, not only with tariffs,

439
00:25:12,920 --> 00:25:16,480
Speaker 7: basically a direct assault on the foundation of rule of law.

440
00:25:16,520 --> 00:25:18,240
Speaker 7: We heard it in the news previously with the direct

441
00:25:18,240 --> 00:25:22,000
Speaker 7: defiance of the Supreme Court ruling. And this is the

442
00:25:22,040 --> 00:25:25,119
Speaker 7: foundation of markets and trust.

443
00:25:25,119 --> 00:25:28,440
Speaker 2: Effectively, Matt King was SATORI with us, we will continue

444
00:25:28,440 --> 00:25:31,119
Speaker 2: with them around this retail sales every port, and I

445
00:25:31,200 --> 00:25:33,520
Speaker 2: promise for Global Wall Street we'll get mister King on

446
00:25:33,680 --> 00:25:37,080
Speaker 2: here for a much much longer conversation. Matt will continue

447
00:25:37,119 --> 00:25:40,720
Speaker 2: with you. Please stay with us. The vics thirty one

448
00:25:40,760 --> 00:25:44,000
Speaker 2: point five to two into these retail sales futures at

449
00:25:44,040 --> 00:25:47,439
Speaker 2: negative forty right now, the ten year yield four point

450
00:25:47,560 --> 00:25:50,720
Speaker 2: three to two percent, the Sweeney yield four point two

451
00:25:50,720 --> 00:25:54,840
Speaker 2: to one percent, and we'll see this important data come out.

452
00:25:54,880 --> 00:25:59,000
Speaker 2: Of course, retail sales is a nominal number. It's before inflation.

453
00:25:59,880 --> 00:26:02,480
Speaker 2: There's a month over month focus on it, and I

454
00:26:02,600 --> 00:26:07,080
Speaker 2: focus on the control group where we're looking for a lessoning,

455
00:26:07,119 --> 00:26:11,719
Speaker 2: a tertiary statistic. The FEDCE Services business activity comes in

456
00:26:11,800 --> 00:26:16,200
Speaker 2: worse than survey in a stark negative nineteen. As well,

457
00:26:16,240 --> 00:26:19,800
Speaker 2: the control group comes in a little light at zero

458
00:26:19,920 --> 00:26:23,000
Speaker 2: point four percent. That's lower than the zero point six

459
00:26:23,040 --> 00:26:27,600
Speaker 2: percent expected. Futures do a little bit better than where

460
00:26:27,640 --> 00:26:30,160
Speaker 2: we were, I mean, Paul, at the end of the day,

461
00:26:30,200 --> 00:26:33,760
Speaker 2: it's it's sort of like where we were. I think, Yeah,

462
00:26:33,800 --> 00:26:34,720
Speaker 2: I mean Jumble. Yeah.

463
00:26:34,720 --> 00:26:36,840
Speaker 5: You saw the retail sales come in at plus one

464
00:26:36,880 --> 00:26:40,119
Speaker 5: point four percent. Last period was a zero point two percent,

465
00:26:40,200 --> 00:26:42,040
Speaker 5: So you know, a little bit of front running the

466
00:26:42,040 --> 00:26:44,120
Speaker 5: tariffs perhaps is what commers are suggesting.

467
00:26:44,359 --> 00:26:47,760
Speaker 2: Er economic coverage. All that we do there on Bloomberg Surveillance,

468
00:26:47,800 --> 00:26:52,240
Speaker 2: it's bunched by Commonwealth. Join over two thousand independent financial

469
00:26:52,320 --> 00:26:55,879
Speaker 2: advisors who are taking control of their growth with advisor

470
00:26:55,920 --> 00:26:59,720
Speaker 2: centric support and future ready technologies, grow on your own

471
00:26:59,800 --> 00:27:03,439
Speaker 2: terms with a partner dedicated to your success. Go to

472
00:27:03,480 --> 00:27:08,280
Speaker 2: Commonwealth dot com to learn how we continue with Matt

473
00:27:08,440 --> 00:27:13,119
Speaker 2: King of SATORI on the basis trade on the shock

474
00:27:13,240 --> 00:27:17,280
Speaker 2: of the leverage the system. How does something as esoteric

475
00:27:17,440 --> 00:27:21,040
Speaker 2: Matt King is a basis trade affecting hedge funds that

476
00:27:21,119 --> 00:27:24,800
Speaker 2: get it wrong. But what's it mean for the general public.

477
00:27:25,480 --> 00:27:27,800
Speaker 7: At the moment? I would say the basis trade in

478
00:27:27,840 --> 00:27:31,480
Speaker 7: itself and the hedge fund positions in themselves not very much.

479
00:27:31,560 --> 00:27:34,360
Speaker 7: Maybe they're the beginning of the inkling that we need

480
00:27:34,400 --> 00:27:36,359
Speaker 7: to look a little bit more at the plumbing and

481
00:27:36,400 --> 00:27:39,240
Speaker 7: at scope for flows, and the volatility may trigger some

482
00:27:39,320 --> 00:27:43,000
Speaker 7: bigger moves, But for me in themselves, there's no real

483
00:27:43,040 --> 00:27:46,240
Speaker 7: sign of stress in repo. It's no worse than it

484
00:27:46,240 --> 00:27:48,160
Speaker 7: would be over a quarter end. There's a little bit

485
00:27:48,160 --> 00:27:49,680
Speaker 7: of on the runoff the run kind of lack of

486
00:27:49,720 --> 00:27:54,040
Speaker 7: liquidity in some markets, but in general that's not where

487
00:27:54,080 --> 00:27:57,720
Speaker 7: the problem is. The problem is this potential for long

488
00:27:57,800 --> 00:28:01,800
Speaker 7: only money around the world to shift from riskirtation away

489
00:28:01,800 --> 00:28:06,520
Speaker 7: from the US to outright risk reduction, and for investors

490
00:28:06,520 --> 00:28:11,320
Speaker 7: in treasuries to take seriously and price seriously, some of

491
00:28:11,359 --> 00:28:13,840
Speaker 7: the threats which increasingly are out there, and we start

492
00:28:13,840 --> 00:28:15,919
Speaker 7: to see it in the dollar. We're just beginning to

493
00:28:15,920 --> 00:28:17,800
Speaker 7: see it in treasuries. But it can easily run much

494
00:28:17,840 --> 00:28:19,800
Speaker 7: further and frankly feed on itself.

495
00:28:20,080 --> 00:28:22,000
Speaker 2: Met King, one more question. We got to go back

496
00:28:22,040 --> 00:28:24,760
Speaker 2: to retail sales. Matt King, as simple as I can,

497
00:28:25,119 --> 00:28:29,919
Speaker 2: with all of your decades of excellence, is American exceptionalism done?

498
00:28:30,320 --> 00:28:33,359
Speaker 7: Even if Trump were to wind back all of the

499
00:28:33,400 --> 00:28:36,800
Speaker 7: tariffs even more than he's done already, I think it

500
00:28:36,840 --> 00:28:40,880
Speaker 7: would be very difficult to recreate the trust which is

501
00:28:40,920 --> 00:28:45,360
Speaker 7: at the heart of the financial system and the financial flows,

502
00:28:45,760 --> 00:28:47,719
Speaker 7: which frankly are at the heart of everything that has

503
00:28:47,760 --> 00:28:50,640
Speaker 7: made America great. That's what's under attack here. That's why

504
00:28:50,720 --> 00:28:52,640
Speaker 7: it's so serious, and that's why I think it's not

505
00:28:52,720 --> 00:28:53,160
Speaker 7: in the price.

506
00:28:53,360 --> 00:28:55,719
Speaker 2: I don't have you with us, Matt King, Iconic A's

507
00:28:55,800 --> 00:28:59,160
Speaker 2: City Group and JP Morgan before that with his story

508
00:28:59,760 --> 00:29:02,760
Speaker 2: and thank you so much, Satori Insights. I should say

509
00:29:02,800 --> 00:29:03,520
Speaker 2: thank you so much.

510
00:29:08,040 --> 00:29:11,960
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

511
00:29:12,000 --> 00:29:15,400
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

512
00:29:15,440 --> 00:29:18,200
Speaker 1: with the Bloomberg business app. You can also watch us

513
00:29:18,280 --> 00:29:22,160
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.

514
00:29:22,560 --> 00:29:25,560
Speaker 2: I was up practicing and a currency knowledge. Yeah, you know.

515
00:29:25,960 --> 00:29:29,560
Speaker 2: For Rebecca Patterson, she's with the Council on Foreign Relations

516
00:29:29,880 --> 00:29:31,800
Speaker 2: as a shingle out at Vanguard as well. We're not

517
00:29:31,800 --> 00:29:34,560
Speaker 2: going to ask her about ETFs bitcoin. I was going

518
00:29:34,600 --> 00:29:36,520
Speaker 2: to ask her about the Swiss frank Maybe we'll get

519
00:29:36,560 --> 00:29:40,240
Speaker 2: to that. But here's the future, folks. Seriously, right now,

520
00:29:40,720 --> 00:29:45,960
Speaker 2: the World Trade Organization lowers their economic growth forecast for

521
00:29:46,040 --> 00:29:50,600
Speaker 2: this year for next year. Some of these numbers are huge,

522
00:29:50,960 --> 00:29:54,640
Speaker 2: huge moves. Rebecca Patterson, you're expert at this. I mean,

523
00:29:54,680 --> 00:29:59,120
Speaker 2: this is the future that we're seeing right now this morning. Yeah,

524
00:29:59,480 --> 00:29:59,680
Speaker 2: you know.

525
00:29:59,760 --> 00:30:02,040
Speaker 8: I I've been trying to find when is the last

526
00:30:02,080 --> 00:30:06,200
Speaker 8: time we saw a dollar bond and stock sell off

527
00:30:06,240 --> 00:30:08,520
Speaker 8: in tantum that lasted for more than a few days,

528
00:30:09,000 --> 00:30:11,280
Speaker 8: And I had to go back to my friend Mark Sobel,

529
00:30:11,360 --> 00:30:14,480
Speaker 8: who is a longtime Treasury guy now the chair of

530
00:30:14,520 --> 00:30:18,160
Speaker 8: the US at omfif at Think Tank nineteen seventy seven

531
00:30:18,280 --> 00:30:21,640
Speaker 8: seventy eight. So we haven't seen what we're living through

532
00:30:21,720 --> 00:30:24,760
Speaker 8: right now in a very very long time. And back

533
00:30:24,800 --> 00:30:30,240
Speaker 8: then What caused it was inflation expectations, lack of confidence

534
00:30:30,280 --> 00:30:33,040
Speaker 8: in the FED, lack of confidence in policy.

535
00:30:33,240 --> 00:30:36,840
Speaker 2: This is smart people like you taking the cacophony of

536
00:30:36,920 --> 00:30:42,240
Speaker 2: news in lowering growth in the zeitgeist, Rebecca Patterson, Are

537
00:30:42,240 --> 00:30:47,800
Speaker 2: we underestimating the decline in real GDP and nominal GDP

538
00:30:48,280 --> 00:30:49,560
Speaker 2: from the Trump events?

539
00:30:50,640 --> 00:30:54,000
Speaker 8: The hard thing is you cannot have confidence in any view.

540
00:30:54,120 --> 00:30:58,520
Speaker 8: We saw that with United's dual outlooks. Because we could

541
00:30:58,600 --> 00:31:01,320
Speaker 8: get deals, we could have the whole tariff war go

542
00:31:01,400 --> 00:31:04,520
Speaker 8: away tomorrow, like literally we could, and at the same

543
00:31:04,600 --> 00:31:08,520
Speaker 8: time we probably won't. The ten percent universal tariff probably

544
00:31:08,560 --> 00:31:11,480
Speaker 8: stays at a minimum something on China. At a minimum,

545
00:31:11,600 --> 00:31:15,200
Speaker 8: those two things alone would take the tariff level significantly

546
00:31:15,280 --> 00:31:17,760
Speaker 8: higher than what we've seen in many decades. So I

547
00:31:17,800 --> 00:31:20,280
Speaker 8: think looking for a major slow down in growth against

548
00:31:20,360 --> 00:31:23,640
Speaker 8: that backdrop is reasonable. The only good news, and I

549
00:31:23,640 --> 00:31:27,240
Speaker 8: think the people who aren't looking for recessions yet, is

550
00:31:27,280 --> 00:31:29,920
Speaker 8: that we were starting from such a strong place right

551
00:31:30,080 --> 00:31:33,000
Speaker 8: We had record household wealth at the end of last year.

552
00:31:33,120 --> 00:31:36,520
Speaker 8: We had very little leverage on household balance sheets corporate

553
00:31:36,520 --> 00:31:40,400
Speaker 8: balance sheets relatively speaking. So I think people who are

554
00:31:40,400 --> 00:31:43,320
Speaker 8: saying slow down but no recession, are looking at that

555
00:31:43,560 --> 00:31:46,720
Speaker 8: and hopefully lots of deals. I'm a little more bearish.

556
00:31:46,760 --> 00:31:49,760
Speaker 8: I think that we're probably looking at, at a minimum

557
00:31:49,800 --> 00:31:51,400
Speaker 8: a mild recession later this year.

558
00:31:51,720 --> 00:31:53,160
Speaker 5: I'm just reading in a little bit more into this

559
00:31:53,320 --> 00:31:57,520
Speaker 5: WTO news. They slash their global goods trade outlook and

560
00:31:57,560 --> 00:32:00,760
Speaker 5: it's new forecast to The Geneva based WTO expects the

561
00:32:00,840 --> 00:32:04,960
Speaker 5: volume of world merchandise trade to decline by zero point

562
00:32:04,960 --> 00:32:09,080
Speaker 5: two percent in twenty twenty five, almost three percentage points

563
00:32:09,120 --> 00:32:11,280
Speaker 5: lower than it would have been without the US led

564
00:32:11,480 --> 00:32:11,880
Speaker 5: trade war.

565
00:32:11,960 --> 00:32:14,400
Speaker 8: So I mean that's a major hit to global growth.

566
00:32:14,440 --> 00:32:16,640
Speaker 8: I mean basically, what we have between the US and

567
00:32:16,720 --> 00:32:19,400
Speaker 8: China right now is a trade embargo. I mean, with

568
00:32:19,480 --> 00:32:22,520
Speaker 8: a tariff rate at that level, we're effectively saying no trade.

569
00:32:22,560 --> 00:32:26,160
Speaker 8: And the US imports half of its consumer goods from China.

570
00:32:26,640 --> 00:32:29,880
Speaker 8: So right now, inventories are getting built up. We're getting

571
00:32:30,400 --> 00:32:33,680
Speaker 8: front loading, if you will, of inventories and spending. So

572
00:32:33,720 --> 00:32:36,360
Speaker 8: we're going to see decent data for the next few months,

573
00:32:36,600 --> 00:32:38,720
Speaker 8: but then we're going to have a wily coyote moment

574
00:32:39,440 --> 00:32:43,880
Speaker 8: where tariffs come back in the reprieve is over, the

575
00:32:43,920 --> 00:32:46,880
Speaker 8: inventories are used and We're going to be paying a

576
00:32:46,880 --> 00:32:50,160
Speaker 8: lot more for shoes and clothes, and the consumer is

577
00:32:50,200 --> 00:32:51,040
Speaker 8: going to get hit hard.

578
00:32:51,080 --> 00:32:54,920
Speaker 5: I think, so what do we do from an investor standpoint?

579
00:32:54,960 --> 00:32:56,760
Speaker 5: I mean, is it's you know, you look at it

580
00:32:56,800 --> 00:32:58,680
Speaker 5: and I think the only thing I see is gold

581
00:32:58,720 --> 00:33:01,520
Speaker 5: out there is kind of where that the funds are flowing,

582
00:33:01,600 --> 00:33:02,520
Speaker 5: but you know a.

583
00:33:02,440 --> 00:33:03,320
Speaker 2: Lot of it stocks.

584
00:33:03,320 --> 00:33:05,600
Speaker 5: Folks are saying, hey, find the good companies, the good

585
00:33:05,680 --> 00:33:07,680
Speaker 5: names you know, and you can buy them cheaper.

586
00:33:07,720 --> 00:33:11,880
Speaker 8: Here there is an argument for active stock selection right now.

587
00:33:12,120 --> 00:33:15,960
Speaker 8: With all the money in passive index funds, where you're

588
00:33:16,000 --> 00:33:17,719
Speaker 8: just getting in and out of a country or an

589
00:33:17,880 --> 00:33:21,120
Speaker 8: entire sector, you are going to see some stocks that

590
00:33:21,160 --> 00:33:23,320
Speaker 8: have better fundamentals than our price. So I think that

591
00:33:23,480 --> 00:33:26,400
Speaker 8: is one approach to this. I think leaning in on

592
00:33:26,520 --> 00:33:30,840
Speaker 8: large caps and on consumer staples, so defensive areas. I

593
00:33:30,840 --> 00:33:34,640
Speaker 8: think if you want overseas diversification, the UK looks like

594
00:33:34,680 --> 00:33:37,120
Speaker 8: they may get a trade deal with the White House,

595
00:33:37,200 --> 00:33:39,960
Speaker 8: and they tend to be a more defensive market overall.

596
00:33:40,080 --> 00:33:43,480
Speaker 8: That might be another place I'd nibble at. You mentioned Switzerland, Tom.

597
00:33:43,600 --> 00:33:46,920
Speaker 8: Normally that's one of my go tos for downside protection,

598
00:33:47,280 --> 00:33:50,080
Speaker 8: but with the pharmaceutical tariffs. I'm not sure that one

599
00:33:50,120 --> 00:33:50,720
Speaker 8: works as well.

600
00:33:50,720 --> 00:33:51,640
Speaker 5: This time, we're going to.

601
00:33:51,640 --> 00:33:53,760
Speaker 2: Stop the show because this is what she does. She

602
00:33:53,880 --> 00:33:57,640
Speaker 2: triangulates the issues of the moment. Yesterday we started in

603
00:33:57,680 --> 00:34:03,200
Speaker 2: on antibiotics. Pharmaceuticals somewhere between eighty percent or whatever, and

604
00:34:03,360 --> 00:34:05,640
Speaker 2: about it has come from China. There's a whole European

605
00:34:05,720 --> 00:34:09,840
Speaker 2: drug trade as well. The media is way underplaying pharmaceuticals,

606
00:34:09,840 --> 00:34:13,080
Speaker 2: aren't they like Apple, sexy cell phone and all that.

607
00:34:13,560 --> 00:34:17,000
Speaker 2: Those antibiotics we take for granted are really under threat.

608
00:34:17,160 --> 00:34:19,600
Speaker 8: I mean, my hope is that, just with some of

609
00:34:19,640 --> 00:34:22,840
Speaker 8: the exceptions we've seen in the last week, if supply

610
00:34:23,000 --> 00:34:26,040
Speaker 8: chains become truly threatened later this year, we will see

611
00:34:26,080 --> 00:34:30,880
Speaker 8: exceptions for pharmaceutical ingredients and actual pharmaceuticals, because there's no

612
00:34:30,960 --> 00:34:33,520
Speaker 8: way the voting public is going to be okay if

613
00:34:33,520 --> 00:34:35,520
Speaker 8: they can't get their meds on your commute.

614
00:34:35,560 --> 00:34:38,200
Speaker 2: This morning, Good morning, Bloomberg eleven three or the entire

615
00:34:38,280 --> 00:34:41,359
Speaker 2: Patterson families listening in. We say good morning on your

616
00:34:41,360 --> 00:34:45,239
Speaker 2: community across the nation on YouTube. Subscribe to YouTube a

617
00:34:45,320 --> 00:34:48,319
Speaker 2: Bloomberg podcast. I should say just thank you so much

618
00:34:48,320 --> 00:34:51,560
Speaker 2: for that interest. Okay, because Rebecca was here, Paul, I

619
00:34:51,640 --> 00:34:55,400
Speaker 2: had to like go adult. Usually I go euroswissy, but

620
00:34:55,480 --> 00:34:59,920
Speaker 2: I did dollars swissy logarithmic noot. You know, you get

621
00:35:00,160 --> 00:35:03,400
Speaker 2: some curve linear move here there. I was on a

622
00:35:03,440 --> 00:35:07,319
Speaker 2: street in lais And Switzerland, Brady fifteen year old, and

623
00:35:07,360 --> 00:35:10,800
Speaker 2: I was doing the math four point three Swiss franks

624
00:35:10,800 --> 00:35:13,960
Speaker 2: to a dollar. I can't, I can't figure it out,

625
00:35:14,400 --> 00:35:18,200
Speaker 2: and I'm sorry. It's a linear decline. But with a

626
00:35:18,239 --> 00:35:22,959
Speaker 2: new Trump acceleration to ever ever stronger Swiss, I got

627
00:35:23,000 --> 00:35:26,160
Speaker 2: gold at thirty two hundred dollars per else What is

628
00:35:26,200 --> 00:35:30,640
Speaker 2: that signal to you on the JP Morgan desk years ago?

629
00:35:31,560 --> 00:35:35,000
Speaker 8: I think there is a flight to safety, and the

630
00:35:35,080 --> 00:35:38,600
Speaker 8: dollar right now is not seen as that, I think,

631
00:35:38,960 --> 00:35:41,080
Speaker 8: or bonds for that matter, to the same degree they

632
00:35:41,120 --> 00:35:43,600
Speaker 8: are normally. And then I think there also is an

633
00:35:43,680 --> 00:35:47,440
Speaker 8: element of repatriation of foreign investors who had been loading

634
00:35:47,440 --> 00:35:49,840
Speaker 8: the boat with US assets for the last eighteen or

635
00:35:49,880 --> 00:35:54,480
Speaker 8: so years, taking some money home for economic concerns, political concerns,

636
00:35:54,480 --> 00:35:54,920
Speaker 8: et cetera.

637
00:35:55,719 --> 00:35:59,520
Speaker 5: All right, so can central banks have an impact here

638
00:35:59,640 --> 00:36:04,160
Speaker 5: on this global trade issue, a global economic issue? I

639
00:36:04,280 --> 00:36:06,480
Speaker 5: think that's central banks in general, and we'll hear from

640
00:36:06,480 --> 00:36:07,040
Speaker 5: the Fed soon.

641
00:36:07,239 --> 00:36:09,839
Speaker 8: Yeah, so we're going to write we have power coming up.

642
00:36:11,360 --> 00:36:14,640
Speaker 8: Cutting rates is hard if inflation rises or is sticky,

643
00:36:15,040 --> 00:36:18,880
Speaker 8: so central banks, especially in that situation, will move slowly

644
00:36:19,000 --> 00:36:20,920
Speaker 8: so they won't come to the rescue that way. If

645
00:36:20,960 --> 00:36:24,400
Speaker 8: the bond market freezes up, we could see stabilization measures

646
00:36:24,440 --> 00:36:27,480
Speaker 8: like we saw in March twenty twenty or around SVB,

647
00:36:27,719 --> 00:36:30,120
Speaker 8: So we could get financial stability help, but we might

648
00:36:30,160 --> 00:36:33,200
Speaker 8: not get growth help as quickly quickly.

649
00:36:32,920 --> 00:36:33,360
Speaker 2: As we like.

650
00:36:33,400 --> 00:36:36,680
Speaker 8: One thing I'm watching today, guys, is the meeting between

651
00:36:36,719 --> 00:36:41,040
Speaker 8: Trump and the Japanese Trade delegation. Bonds are coming up.

652
00:36:41,200 --> 00:36:44,839
Speaker 8: Japan owns one point one trillion dollars of US treasuries.

653
00:36:45,400 --> 00:36:47,080
Speaker 8: I just have to think they're going to have a

654
00:36:47,080 --> 00:36:50,480
Speaker 8: little discussion about that. What can Japan do to help

655
00:36:50,560 --> 00:36:53,680
Speaker 8: lower US financing costs? I don't know what Japan would

656
00:36:53,760 --> 00:36:56,520
Speaker 8: want to do, but it wouldn't surprise me if that's

657
00:36:56,520 --> 00:36:57,000
Speaker 8: a topic.

658
00:36:57,160 --> 00:37:00,799
Speaker 2: Rebecca Person with the consopt formulations in the website, folks,

659
00:37:00,840 --> 00:37:04,360
Speaker 2: I can't say enough about it. And Foreign Affairs Magazine

660
00:37:04,719 --> 00:37:07,440
Speaker 2: just lights out Lawrence Friedman and the new issue on

661
00:37:07,560 --> 00:37:11,120
Speaker 2: war truly an expert at one time with him years

662
00:37:11,160 --> 00:37:14,280
Speaker 2: ago and Adam Poe's and everybody talking about his article

663
00:37:14,320 --> 00:37:17,080
Speaker 2: of the last three, four or five days. So you

664
00:37:17,120 --> 00:37:19,880
Speaker 2: don't know this, folks, But the cafeteria for the consol

665
00:37:19,920 --> 00:37:24,319
Speaker 2: on Formulations is match on sixty fifth Street. Everybody goes

666
00:37:24,360 --> 00:37:26,800
Speaker 2: in there, you can sit there. It's like the number

667
00:37:26,800 --> 00:37:29,919
Speaker 2: of PhDs at a lunch at match. And excuse me, Paul,

668
00:37:30,239 --> 00:37:34,200
Speaker 2: lunch at the CFR is not twelve noon. We're talking

669
00:37:34,360 --> 00:37:37,279
Speaker 2: one ish one point fifteen. And they're in there at

670
00:37:37,280 --> 00:37:40,200
Speaker 2: the wonderful match on sixty fifth Street, there's like eighteen

671
00:37:40,239 --> 00:37:44,160
Speaker 2: PhDs around a table. What are you and Froman talking

672
00:37:44,200 --> 00:37:47,080
Speaker 2: about about negotiation? She's laughing at me.

673
00:37:47,400 --> 00:37:48,440
Speaker 7: I haven't negotiation, I know.

674
00:37:48,480 --> 00:37:50,520
Speaker 8: I'm just saying I haven't been invited to match. I'm like,

675
00:37:50,600 --> 00:37:54,080
Speaker 8: I need to talk to Froman tonight over.

676
00:37:53,920 --> 00:37:57,280
Speaker 2: There and go to match. But the Rebecca, the issue

677
00:37:57,400 --> 00:38:02,200
Speaker 2: here is there's this word negotiation and the president is

678
00:38:02,239 --> 00:38:04,440
Speaker 2: of you know, I'm not being a critic of Trump.

679
00:38:04,480 --> 00:38:07,239
Speaker 2: Don't give me a grief, folks, but he's got in

680
00:38:07,320 --> 00:38:11,640
Speaker 2: his mind his negotiation and the Chinese are talking respect.

681
00:38:11,920 --> 00:38:14,480
Speaker 2: I have no idea what the Japanese are talking about.

682
00:38:14,920 --> 00:38:17,759
Speaker 2: To find the word negotiation, at CFR.

683
00:38:18,840 --> 00:38:21,359
Speaker 8: Well, there's what we've seen traditionally, and then there's what

684
00:38:21,360 --> 00:38:24,200
Speaker 8: we're living through now. I think what we're living through now,

685
00:38:24,880 --> 00:38:27,320
Speaker 8: you know, who knows what the number is, seventy seventy

686
00:38:27,360 --> 00:38:30,120
Speaker 8: five countries in ninety days. You have to do a

687
00:38:30,160 --> 00:38:32,880
Speaker 8: deal every thirty hours or something, so that's not going

688
00:38:32,960 --> 00:38:36,200
Speaker 8: to happen when they normally take quarters or years. I

689
00:38:36,239 --> 00:38:39,279
Speaker 8: think our best hope is that we get a number

690
00:38:39,360 --> 00:38:44,000
Speaker 8: of countries to sign, you know, understandings of what will

691
00:38:44,080 --> 00:38:48,120
Speaker 8: happen the beginning of a trade deal, and it's enough

692
00:38:48,160 --> 00:38:51,840
Speaker 8: of global GDP, enough of US trade to calm the

693
00:38:51,920 --> 00:38:55,400
Speaker 8: markets at least somewhat that the worst case scenario is

694
00:38:55,440 --> 00:38:58,160
Speaker 8: off the table. Japan would be a huge win, and

695
00:38:58,200 --> 00:39:00,680
Speaker 8: I think from what we're hearing from the Japanese they

696
00:39:00,680 --> 00:39:03,919
Speaker 8: are hoping to do a deal. If we could see

697
00:39:03,920 --> 00:39:06,480
Speaker 8: that come out later today, we'll have another relief rally.

698
00:39:06,600 --> 00:39:09,840
Speaker 8: I don't know if it'll last. They want Japan to

699
00:39:09,880 --> 00:39:13,440
Speaker 8: help pay more for the defense umbrella from the United States.

700
00:39:13,480 --> 00:39:16,000
Speaker 8: They want a stronger en. Well, the n already strengthen

701
00:39:16,040 --> 00:39:18,600
Speaker 8: ten percent this year against the dollar, so I don't

702
00:39:18,600 --> 00:39:20,759
Speaker 8: know what else they want. They want Japan to keep

703
00:39:20,840 --> 00:39:24,880
Speaker 8: raising rates. They want something with bonds. What will that

704
00:39:24,920 --> 00:39:28,200
Speaker 8: package look like? More access for US farmers to Japanese

705
00:39:28,280 --> 00:39:33,880
Speaker 8: markets cars. But I do think Japan, Korea, Vietnam, there

706
00:39:33,920 --> 00:39:36,200
Speaker 8: are a handful of countries that I think are relatively

707
00:39:36,239 --> 00:39:38,520
Speaker 8: more likely to want deals. If the US can get

708
00:39:38,520 --> 00:39:41,839
Speaker 8: that done quickly, that will help, again for the short term,

709
00:39:41,880 --> 00:39:43,120
Speaker 8: at least stabilize things.

710
00:39:43,640 --> 00:39:45,880
Speaker 5: Would that be enough to keep the US economy out

711
00:39:45,920 --> 00:39:46,640
Speaker 5: of a recession?

712
00:39:47,760 --> 00:39:51,120
Speaker 8: I don't think so, honestly. The ten percent universal tariff,

713
00:39:51,200 --> 00:39:53,719
Speaker 8: and even if Chinese tariffs don't stay where they are,

714
00:39:53,760 --> 00:39:56,960
Speaker 8: if they stay high, we're still looking at an average

715
00:39:57,000 --> 00:39:59,279
Speaker 8: tariff rate in the United States that's going to be

716
00:39:59,280 --> 00:40:04,600
Speaker 8: the equivalent of a one two thousand dollars tax hike

717
00:40:04,840 --> 00:40:08,319
Speaker 8: per each US household. So I still think you have

718
00:40:08,320 --> 00:40:09,480
Speaker 8: a pretty material hit.

719
00:40:09,680 --> 00:40:10,759
Speaker 7: Brilliant question, Paul.

720
00:40:10,880 --> 00:40:14,000
Speaker 2: Headline just out amd SE's up to eight hundred million

721
00:40:14,160 --> 00:40:19,719
Speaker 2: charges from US export controls on m I three h eight.

722
00:40:20,080 --> 00:40:23,400
Speaker 2: A stockdown seven percent seems to be a trend. We

723
00:40:23,520 --> 00:40:27,000
Speaker 2: got to frame this. You failed there, Rebecca. If we

724
00:40:27,040 --> 00:40:30,880
Speaker 2: have a ten percent tariff, that's only five times bigger

725
00:40:30,880 --> 00:40:35,480
Speaker 2: than what it was before, four times but we need

726
00:40:35,520 --> 00:40:40,120
Speaker 2: to explain to people, even if we get the best outcome,

727
00:40:41,239 --> 00:40:45,880
Speaker 2: what it does to the real GDP spirit and confidence

728
00:40:45,920 --> 00:40:48,120
Speaker 2: of America is I'm going to use this is a

729
00:40:48,280 --> 00:40:51,200
Speaker 2: this is a word best. I gave a speech once

730
00:40:51,200 --> 00:40:53,560
Speaker 2: at Best. Yeah, sheried to use it. I got one

731
00:40:53,560 --> 00:40:56,160
Speaker 2: in the time out here. It's a ginormous move up

732
00:40:56,239 --> 00:40:57,000
Speaker 2: to ten percent.

733
00:40:57,160 --> 00:41:00,279
Speaker 8: It is, it is, and we're seeing the uncertain and

734
00:41:00,320 --> 00:41:04,360
Speaker 8: the surveys now we're seeing the uncertainty coming from corporations.

735
00:41:04,760 --> 00:41:07,880
Speaker 8: I think earning's guidance has to get pulled lower, growth

736
00:41:07,920 --> 00:41:10,800
Speaker 8: expectations pulled lower. We're going to see it. We're starting

737
00:41:10,800 --> 00:41:12,920
Speaker 8: to see it now. Bub blah blah credit markets.

738
00:41:13,080 --> 00:41:14,759
Speaker 7: So that's coming well to Paul's question.

739
00:41:14,800 --> 00:41:17,160
Speaker 2: On Paul today, take it over to the monetary space.

740
00:41:17,960 --> 00:41:20,080
Speaker 2: We talked about a Jay curve with Rashudo. Do you

741
00:41:20,719 --> 00:41:24,480
Speaker 2: suggest that this is yes inflation but then it reverts

742
00:41:24,520 --> 00:41:27,840
Speaker 2: on a real GDP slowdown or nominal GDP slow down

743
00:41:28,400 --> 00:41:30,640
Speaker 2: to some form of disinflation.

744
00:41:31,400 --> 00:41:34,040
Speaker 8: And that was Waller's comments right a few days ago.

745
00:41:34,200 --> 00:41:37,880
Speaker 8: Governor Waller from the FED said that he had two scenarios.

746
00:41:37,920 --> 00:41:39,839
Speaker 8: Of course, we all have more than one scenario. Now,

747
00:41:40,160 --> 00:41:43,880
Speaker 8: but he believes that the shock to demand from the

748
00:41:43,920 --> 00:41:47,759
Speaker 8: tariffs could overwhelm the inflation and eventually lead us to

749
00:41:47,840 --> 00:41:49,880
Speaker 8: enough disinflation that you can cut rates.

750
00:41:50,360 --> 00:41:51,200
Speaker 2: That's possible.

751
00:41:51,560 --> 00:41:53,799
Speaker 8: I think that's if I get something wrong with my view.

752
00:41:53,840 --> 00:41:56,879
Speaker 8: It's that that the hit to demand pulls inflation down.

753
00:41:57,520 --> 00:42:01,239
Speaker 2: Bronze that, folks, because what's important there as miss Patterson

754
00:42:01,640 --> 00:42:05,840
Speaker 2: has a more inflationary view and demand won't crush.

755
00:42:06,160 --> 00:42:10,080
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

756
00:42:10,120 --> 00:42:13,120
Speaker 1: starting at seven am Eastern on Apple, Corplay and Android

757
00:42:13,160 --> 00:42:16,120
Speaker 1: Auto with the Bloomberg Business app. You can also watch

758
00:42:16,239 --> 00:42:19,160
Speaker 1: us live every weekday on YouTube and always on the

759
00:42:19,200 --> 00:42:20,280
Speaker 1: Bloomberg terminal.

760
00:42:20,840 --> 00:42:24,640
Speaker 2: The newspapers. Maybe she'll be terriff free. What do you think?

761
00:42:24,719 --> 00:42:25,040
Speaker 3: I don't know.

762
00:42:26,600 --> 00:42:27,120
Speaker 2: What do you got?

763
00:42:27,280 --> 00:42:29,920
Speaker 9: I'll break a little tariff in there maybe, Okay. I'm

764
00:42:29,960 --> 00:42:33,959
Speaker 9: starting with this big boom in ultra luxury cruises. Okay,

765
00:42:33,960 --> 00:42:36,759
Speaker 9: the big ship, yes, Charlie Ballad. I don't know if

766
00:42:36,760 --> 00:42:37,279
Speaker 9: he does these.

767
00:42:37,200 --> 00:42:38,839
Speaker 2: Extra luxury on him too.

768
00:42:39,080 --> 00:42:41,080
Speaker 9: Yeah, yeah, I want to know if he goes on

769
00:42:41,120 --> 00:42:43,640
Speaker 9: the big luxury. Okay. So they're growing two and a

770
00:42:43,680 --> 00:42:47,080
Speaker 9: half times faster than the overall industry because of that business,

771
00:42:47,120 --> 00:42:50,719
Speaker 9: Bloomberg BusinessWeek says, and their words, not mine, snobs are

772
00:42:50,800 --> 00:42:54,160
Speaker 9: enjoying cruising now, okay, so look at these amenities. I

773
00:42:54,200 --> 00:42:57,280
Speaker 9: don't know if SI gets these, but amenities like private

774
00:42:57,320 --> 00:43:02,960
Speaker 9: world tool, whirlpool tub, butler service, private pools, Starlet Cinema's

775
00:43:03,320 --> 00:43:06,000
Speaker 9: free flowing sham or there you got me, there you

776
00:43:06,080 --> 00:43:08,840
Speaker 9: got the diamond dust facials. I mean all of this.

777
00:43:09,480 --> 00:43:11,680
Speaker 9: Fourteen thousand dollars per week per couple.

778
00:43:11,840 --> 00:43:12,799
Speaker 2: You know what SIE doing?

779
00:43:13,239 --> 00:43:16,560
Speaker 10: Not doing that cruises Europe like they start up with

780
00:43:16,600 --> 00:43:19,800
Speaker 10: the Polar Bears, okay, like halfway to Iceland and he

781
00:43:20,000 --> 00:43:23,760
Speaker 10: ends up off crete somewhere, you know, sipping all the drinks.

782
00:43:24,160 --> 00:43:26,600
Speaker 2: I mean the basic I mean, I've never done this,

783
00:43:27,640 --> 00:43:30,239
Speaker 2: but it's like I was in Venice saying, you know,

784
00:43:30,320 --> 00:43:32,680
Speaker 2: the square and all that, and one of the ships

785
00:43:32,719 --> 00:43:35,480
Speaker 2: went by. I couldn't believe it. And it's ginormous, is

786
00:43:35,480 --> 00:43:36,919
Speaker 2: what Bloomberg Business Week is saying.

787
00:43:36,960 --> 00:43:38,799
Speaker 9: Yeah, And they're saying it's like the high end ones,

788
00:43:38,840 --> 00:43:42,280
Speaker 9: like big names like four Seasons, like high in concepts

789
00:43:42,320 --> 00:43:45,000
Speaker 9: from star cirls, like it's getting into this.

790
00:43:46,719 --> 00:43:50,440
Speaker 2: He gets a drink. Their is LVMH bags in it next.

791
00:43:51,320 --> 00:43:53,040
Speaker 9: So Guy Fieri, right, you know him as this one

792
00:43:53,120 --> 00:43:55,040
Speaker 9: hundred million dollar contract with Food Network.

793
00:43:55,200 --> 00:43:55,439
Speaker 7: Wow.

794
00:43:55,440 --> 00:43:57,400
Speaker 9: But one thing he says he's tough with is passing

795
00:43:57,480 --> 00:44:01,400
Speaker 9: his fortune onto his kids. And he tells Business Insider quote,

796
00:44:01,560 --> 00:44:04,560
Speaker 9: if you want this cheese, you gotta get two degrees. Okay,

797
00:44:04,560 --> 00:44:07,080
Speaker 9: And he took that actually from Shaquille O'Neil said, okay.

798
00:44:07,480 --> 00:44:10,520
Speaker 9: But his oldest son Hunter, he graduated the NBA from

799
00:44:10,600 --> 00:44:13,600
Speaker 9: University of Miami in May. Okay. His youngest son, Rider

800
00:44:13,680 --> 00:44:16,879
Speaker 9: who's nineteen, finishing freshman year at San Diego State, and

801
00:44:16,920 --> 00:44:19,560
Speaker 9: he's kind of fighting it, saying, you know what, Dad,

802
00:44:19,719 --> 00:44:21,640
Speaker 9: can we get out of this arrangement? Like I'm kind

803
00:44:21,640 --> 00:44:25,399
Speaker 9: of done at this point right now. So his dad saying,

804
00:44:25,400 --> 00:44:27,000
Speaker 9: you know what, you got it, you gotta go along.

805
00:44:27,320 --> 00:44:31,080
Speaker 2: Two things. Had a wonderful thing with guy you know,

806
00:44:31,120 --> 00:44:33,120
Speaker 2: I don't know, he was coming to Times Square or whatever.

807
00:44:33,360 --> 00:44:35,879
Speaker 2: I literally went down to his restaurant and we did

808
00:44:35,880 --> 00:44:38,520
Speaker 2: the whole meal thing at the bar in that total

809
00:44:38,840 --> 00:44:41,480
Speaker 2: class act. Yeah, I got I got all sorts of grief.

810
00:44:41,680 --> 00:44:44,000
Speaker 2: How can a fancy bow tie like you be dealing

811
00:44:44,360 --> 00:44:46,800
Speaker 2: with this guy? And he was a complete class act.

812
00:44:47,239 --> 00:44:49,919
Speaker 2: And it's interesting. I mean, you know, he's like saying,

813
00:44:49,960 --> 00:44:51,560
Speaker 2: get it done, kids, right he is.

814
00:44:51,520 --> 00:44:53,560
Speaker 9: You know he has he does a huge fortune. And

815
00:44:53,719 --> 00:44:55,839
Speaker 9: you know, if the kids want it, they gotta get

816
00:44:56,000 --> 00:44:58,759
Speaker 9: not one, but two new degrees. That's right, are you

817
00:44:59,120 --> 00:45:01,240
Speaker 9: He's saying that's you know, his dad kind of passed

818
00:45:01,239 --> 00:45:01,719
Speaker 9: down from his.

819
00:45:01,719 --> 00:45:03,920
Speaker 2: Dad, right, Yeah, Okay, thanks you one more?

820
00:45:04,080 --> 00:45:06,319
Speaker 9: Yes, I do. Oh, Citi's with the most affordable rent, right,

821
00:45:06,320 --> 00:45:08,040
Speaker 9: because the cost of rent risen by more than fifty

822
00:45:08,040 --> 00:45:10,000
Speaker 9: percent over the past ten years. We all know that

823
00:45:10,760 --> 00:45:13,239
Speaker 9: who has the most affordable one? We had wallet hub.

824
00:45:13,560 --> 00:45:16,040
Speaker 9: They got the job done. They analyzed a medium annual

825
00:45:16,080 --> 00:45:18,240
Speaker 9: growth rent in more than one hundred and eighty cities.

826
00:45:18,480 --> 00:45:20,600
Speaker 9: They compared it to the medium household income. So if

827
00:45:20,640 --> 00:45:23,719
Speaker 9: you go by the lowest percent of income spent Bismarck,

828
00:45:23,840 --> 00:45:27,560
Speaker 9: North Dakota, then you have Sioux Falls, South Dakota, and

829
00:45:27,600 --> 00:45:30,920
Speaker 9: then Cheyenne, Wyoming. And then you go to that highest

830
00:45:31,000 --> 00:45:36,000
Speaker 9: percent of income spent, right, and you go to Oceanside, California, Jackson, Mississippi,

831
00:45:36,000 --> 00:45:39,560
Speaker 9: and Birmingham, Alabama. It just goes to show you kind

832
00:45:39,560 --> 00:45:40,080
Speaker 9: of bit different.

833
00:45:40,320 --> 00:45:42,920
Speaker 2: And Newark's on the list as well. Right, New Jersey,

834
00:45:42,960 --> 00:45:45,840
Speaker 2: I think snuck into it as being really expensive.

835
00:45:46,440 --> 00:45:48,919
Speaker 9: It's getting their New New Jersey one hundred and eighty one. Yeah,

836
00:45:48,960 --> 00:45:51,680
Speaker 9: highest percent of income spent so in Miami, Florida right

837
00:45:51,719 --> 00:45:52,040
Speaker 9: behind that.

838
00:45:52,160 --> 00:45:54,680
Speaker 2: Yeah, are you doing?

839
00:45:54,719 --> 00:45:55,839
Speaker 9: They crunched the numbers they did.

840
00:45:56,560 --> 00:45:57,040
Speaker 2: Are you doing?

841
00:45:57,320 --> 00:45:59,440
Speaker 9: I see you know I want to go tariff. So

842
00:45:59,440 --> 00:46:02,280
Speaker 9: I'm going to go tariff for you because you requested it. Okay,

843
00:46:02,800 --> 00:46:06,560
Speaker 9: Canada and China tariff chaos hitting Vermont's Maple Syrup business.

844
00:46:06,760 --> 00:46:07,320
Speaker 2: Yeah.

845
00:46:07,360 --> 00:46:10,120
Speaker 9: And the reason why is because all the things dayless

846
00:46:10,120 --> 00:46:13,200
Speaker 9: steel fixtures, like the machines to make it come from Canada,

847
00:46:13,280 --> 00:46:15,800
Speaker 9: like all these different things. So they're saying now because

848
00:46:15,800 --> 00:46:17,160
Speaker 9: of that for Mons Maple Syrup.

849
00:46:17,520 --> 00:46:22,360
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

850
00:46:22,480 --> 00:46:26,760
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

851
00:46:26,880 --> 00:46:30,360
Speaker 1: seven to ten am Eastern on Bloomberg dot Com, the

852
00:46:30,440 --> 00:46:34,480
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

853
00:46:34,480 --> 00:46:37,840
Speaker 1: can also watch us live every weekday on YouTube and

854
00:46:38,080 --> 00:46:39,800
Speaker 1: always on the Bloomberg terminal