1 00:00:00,240 --> 00:00:03,240 Speaker 1: Hi. I'm Stephen Carroll, host of Bloomberg's Here's Why podcast. 2 00:00:03,480 --> 00:00:06,280 Speaker 1: I'm dropping into your feed because we borrowed Joe Wisenthal 3 00:00:06,360 --> 00:00:08,720 Speaker 1: for our latest episode while he was in London, so 4 00:00:08,880 --> 00:00:10,799 Speaker 1: we wanted to share it with you. If you like it, 5 00:00:10,880 --> 00:00:13,119 Speaker 1: you can subscribe to us wherever you usually listen. There 6 00:00:13,200 --> 00:00:20,439 Speaker 1: is a link in the show notes Enjoy Bloomberg Audio Studios, podcasts, 7 00:00:20,760 --> 00:00:25,960 Speaker 1: radio news. I'm Stephen Carroll, and this is Here's Why, 8 00:00:26,040 --> 00:00:28,200 Speaker 1: where we take one new story and explain it in 9 00:00:28,280 --> 00:00:30,600 Speaker 1: just a few minutes with our experts. Here at Bloomberg, 10 00:00:35,280 --> 00:00:36,960 Speaker 1: people getting really a bit tired. 11 00:00:37,440 --> 00:00:40,320 Speaker 2: They don't know even if something's announced whether two days 12 00:00:40,400 --> 00:00:43,839 Speaker 2: later it's not changed again. So you really see some 13 00:00:44,080 --> 00:00:46,080 Speaker 2: fatigue of decision makers. 14 00:00:46,120 --> 00:00:49,640 Speaker 1: That's the CEO of Logistics Giant DHL, Tobias Meyer. For 15 00:00:49,720 --> 00:00:53,120 Speaker 1: executives like him navigating the near daily shifts in US 16 00:00:53,159 --> 00:00:56,600 Speaker 1: economic policy, it's like driving through fog with no headlights. 17 00:00:57,000 --> 00:00:59,200 Speaker 1: When the rules are changing so quickly, it's not just 18 00:00:59,280 --> 00:01:02,600 Speaker 1: hard to keep it's almost impossible to make decisions. Should 19 00:01:02,640 --> 00:01:05,759 Speaker 1: a company build a new factory, order more supplies, hor 20 00:01:05,800 --> 00:01:08,360 Speaker 1: or more workers, and where to do any of this? 21 00:01:08,959 --> 00:01:11,520 Speaker 1: And when you don't know what's coming. You hit the brakes. 22 00:01:11,640 --> 00:01:14,200 Speaker 1: But we haven't I don't think spent enough time talking 23 00:01:14,240 --> 00:01:15,920 Speaker 1: about just the uncertainty out there. 24 00:01:16,080 --> 00:01:20,440 Speaker 2: Operating in this highly uncertain environment means go slow. 25 00:01:20,720 --> 00:01:23,959 Speaker 1: The higher uncertainty and greater risk of recession, the fear 26 00:01:24,000 --> 00:01:25,760 Speaker 1: that on a daily basis, you wake up in the 27 00:01:25,800 --> 00:01:28,560 Speaker 1: morning and not wondering whether which sectors again to have 28 00:01:28,600 --> 00:01:31,200 Speaker 1: twenty five percent towers, which country's twerffs again to be 29 00:01:31,200 --> 00:01:34,200 Speaker 1: at one hundred percent. That's where the damage is caused. 30 00:01:34,680 --> 00:01:40,280 Speaker 1: So here's why uncertainty is an economic killer. Joe Wisenthal, 31 00:01:40,360 --> 00:01:42,920 Speaker 1: host of Bloomberg's Odd Lots podcasters with me in London. Joe, 32 00:01:42,959 --> 00:01:43,919 Speaker 1: great to see you, Thank. 33 00:01:43,840 --> 00:01:45,320 Speaker 2: You for having me, thrilled to be here. 34 00:01:45,760 --> 00:01:49,240 Speaker 1: Tell me, with your brain and knowledge of these matters, 35 00:01:49,440 --> 00:01:54,120 Speaker 1: how can we define uncertainty in this moment in twenty 36 00:01:54,120 --> 00:01:54,720 Speaker 1: twenty five. 37 00:01:55,240 --> 00:01:57,920 Speaker 2: Yeah, I mean it's a great question, and I think 38 00:01:57,960 --> 00:02:02,040 Speaker 2: there are sort of two different elements, Which is one 39 00:02:02,320 --> 00:02:05,200 Speaker 2: is okay, we know there's going to be a change 40 00:02:05,480 --> 00:02:08,720 Speaker 2: in the trading environment between the rest of the world 41 00:02:09,120 --> 00:02:11,760 Speaker 2: and the US, right, like that's obviously a done deal, 42 00:02:12,280 --> 00:02:15,680 Speaker 2: and nobody knows like what type of arrangements will be 43 00:02:16,040 --> 00:02:19,080 Speaker 2: profitable in those environments and so forth. So that's a 44 00:02:19,080 --> 00:02:21,920 Speaker 2: form of uncertainty, but that there's another, you know, the 45 00:02:22,000 --> 00:02:25,240 Speaker 2: more deeper form of uncertainty is, yes, we know there's 46 00:02:25,280 --> 00:02:27,280 Speaker 2: going to be a change, but we don't know to 47 00:02:27,440 --> 00:02:30,760 Speaker 2: what right. And part of that is I don't think, 48 00:02:30,960 --> 00:02:35,480 Speaker 2: you know, the White House has clearly articulated what it 49 00:02:35,600 --> 00:02:39,639 Speaker 2: wants the new environment to be. There's a message uncertainty 50 00:02:39,760 --> 00:02:43,880 Speaker 2: because various people speak for the White House on behalf 51 00:02:43,960 --> 00:02:46,360 Speaker 2: of the White House, and there's a lot of ambiguity 52 00:02:46,360 --> 00:02:50,280 Speaker 2: about the degree to which anything they say actually reflects 53 00:02:50,360 --> 00:02:53,679 Speaker 2: the thinking of the administration. And when I say the administration, 54 00:02:53,800 --> 00:02:57,480 Speaker 2: I only mean the president because you know, typically one 55 00:02:57,480 --> 00:03:00,639 Speaker 2: would think there is a coherent message, but I don't 56 00:03:00,680 --> 00:03:03,280 Speaker 2: think there is. There's you know, there's rivals within the 57 00:03:03,280 --> 00:03:06,200 Speaker 2: White House that have different priorities. And I think that 58 00:03:06,320 --> 00:03:09,920 Speaker 2: even the President himself, well, he has some intuitions that 59 00:03:10,040 --> 00:03:13,720 Speaker 2: you know, he believes that tariffs are a tool that 60 00:03:13,800 --> 00:03:16,680 Speaker 2: can be used to revive the US manufacturing sector. The 61 00:03:16,800 --> 00:03:19,720 Speaker 2: degree to which that policy has cemented seems still very 62 00:03:19,800 --> 00:03:20,280 Speaker 2: up in the air. 63 00:03:20,680 --> 00:03:23,600 Speaker 1: Can we say that it's more uncertain now that it 64 00:03:23,639 --> 00:03:26,960 Speaker 1: has been in years. Yeah, I'm sure. How do we 65 00:03:27,000 --> 00:03:29,000 Speaker 1: sort of measure uncertainty? I mean, you can look at 66 00:03:29,000 --> 00:03:30,240 Speaker 1: the mats for one example. 67 00:03:30,680 --> 00:03:33,640 Speaker 2: Well, look, I think you know, in the two big 68 00:03:33,880 --> 00:03:39,800 Speaker 2: recent crises that we had, there were clear goals. During COVID, 69 00:03:40,440 --> 00:03:43,000 Speaker 2: the goal was to stop the spread of the disease 70 00:03:43,640 --> 00:03:46,520 Speaker 2: and then from an economic side, to sort of replaced 71 00:03:46,560 --> 00:03:49,200 Speaker 2: all the lost money, you know, all the lost economic 72 00:03:49,240 --> 00:03:52,560 Speaker 2: activity for those months during lockdown in two thousand and 73 00:03:52,560 --> 00:03:55,520 Speaker 2: eight and two thousand and nine. The goal was to 74 00:03:55,520 --> 00:03:57,720 Speaker 2: stop a bank run. And there was a lot that 75 00:03:57,760 --> 00:03:59,960 Speaker 2: they didn't know at the time, and they certainly, you know, 76 00:04:00,120 --> 00:04:03,080 Speaker 2: may have misjudged the speed and scale through which the 77 00:04:03,120 --> 00:04:06,040 Speaker 2: financial system was deteriorating in two thousand and eight and 78 00:04:06,080 --> 00:04:08,760 Speaker 2: two thousand and nine. But the goal is to stop 79 00:04:09,240 --> 00:04:12,800 Speaker 2: a bank run. In this case, you know, as they say, 80 00:04:12,840 --> 00:04:15,920 Speaker 2: the call is coming from inside the house, so you 81 00:04:16,000 --> 00:04:20,200 Speaker 2: don't really know what the goal is. Is the goal 82 00:04:20,360 --> 00:04:25,640 Speaker 2: to improve our ability to manufacture high tech things that 83 00:04:25,680 --> 00:04:29,120 Speaker 2: are important for national security? Maybe is the goal to 84 00:04:29,279 --> 00:04:34,120 Speaker 2: fundamentally restructure the economy such that everyone or a lot 85 00:04:34,160 --> 00:04:37,240 Speaker 2: more people are in what we call production work. Is 86 00:04:37,279 --> 00:04:40,480 Speaker 2: the goal to stop the flow of fentanyl is the 87 00:04:40,600 --> 00:04:45,359 Speaker 2: goal to slow international migration. So whereas in the last 88 00:04:45,360 --> 00:04:47,920 Speaker 2: two crises, there is certainly a lot of uncertainty, and 89 00:04:47,960 --> 00:04:49,719 Speaker 2: there's a lot of debating about, well, what's it going 90 00:04:49,800 --> 00:04:51,719 Speaker 2: to take and how long will it take to stop 91 00:04:51,760 --> 00:04:54,320 Speaker 2: the spread of a pandemic or a bank run, et cetera. 92 00:04:54,839 --> 00:04:57,520 Speaker 2: I don't think we actually even know what the goal 93 00:04:57,680 --> 00:05:00,640 Speaker 2: is here, and so in some sense, I would say, again, 94 00:05:00,920 --> 00:05:03,479 Speaker 2: there are various attempts to measure uncertainty. There are market 95 00:05:03,520 --> 00:05:06,640 Speaker 2: based measures, there are sentiment based measures. But I would 96 00:05:06,680 --> 00:05:10,120 Speaker 2: say there is a degree of uncertainty now that is 97 00:05:10,200 --> 00:05:12,600 Speaker 2: in a way incomparable to any recent crisis. 98 00:05:13,040 --> 00:05:16,680 Speaker 1: What's the macro picture when we have this level of uncertainty, 99 00:05:16,720 --> 00:05:18,440 Speaker 1: given that, as you say, it doesn't really have a 100 00:05:18,440 --> 00:05:19,960 Speaker 1: parallel something we've looked at before. 101 00:05:20,120 --> 00:05:23,640 Speaker 2: Well, look, at a minimum, it's very hard to imagine 102 00:05:23,839 --> 00:05:27,599 Speaker 2: any company in the world committing to like serious investment 103 00:05:27,680 --> 00:05:29,920 Speaker 2: right now. And what I mean by investment obviously is 104 00:05:30,160 --> 00:05:35,520 Speaker 2: opening up new locations, opening up new production facilities, expanding headcount, 105 00:05:35,600 --> 00:05:39,520 Speaker 2: et cetera. Why would anyone do that in this environment? 106 00:05:39,560 --> 00:05:42,880 Speaker 2: And that's at a minimum. Furthermore, there has been this 107 00:05:43,320 --> 00:05:47,119 Speaker 2: hit to financial markets of financial tightening, as they say, 108 00:05:47,200 --> 00:05:50,960 Speaker 2: and so stock prices have gone down, yields on government 109 00:05:51,000 --> 00:05:54,960 Speaker 2: debt have gone up, credit spreads have gotten wider. So 110 00:05:55,000 --> 00:05:58,240 Speaker 2: there is just an increased cost of doing business already 111 00:05:58,360 --> 00:06:01,600 Speaker 2: on the financial side, and then you layer in the 112 00:06:01,640 --> 00:06:05,800 Speaker 2: actual literal increase cost of doing business because the goods 113 00:06:05,839 --> 00:06:09,200 Speaker 2: that a company imports, whether they're for resale or whether 114 00:06:09,200 --> 00:06:12,200 Speaker 2: their inputs to production, have also gone up. So you 115 00:06:12,279 --> 00:06:15,720 Speaker 2: layer in the inherent policy uncertainty and the fact that 116 00:06:16,120 --> 00:06:18,440 Speaker 2: until there's some policy stability, no one is going to 117 00:06:18,440 --> 00:06:21,159 Speaker 2: do anything new, on top of the fact that the 118 00:06:21,240 --> 00:06:25,000 Speaker 2: existing cost we're on day to day operations for both 119 00:06:25,040 --> 00:06:28,800 Speaker 2: financial and goods have gone up. And this is why 120 00:06:28,839 --> 00:06:32,520 Speaker 2: many people believe we're either going into a recession in 121 00:06:32,560 --> 00:06:34,920 Speaker 2: the US or that we're already in one. 122 00:06:35,320 --> 00:06:40,920 Speaker 1: At what points do businesses, consumers, markets simply get used 123 00:06:40,960 --> 00:06:43,200 Speaker 1: to things being so uncertain. Is there a point at 124 00:06:43,240 --> 00:06:44,960 Speaker 1: which that we all just sort of shrug and move on. 125 00:06:46,279 --> 00:06:50,000 Speaker 2: It's hard to imagine that you can ever fully shrug 126 00:06:50,080 --> 00:06:54,360 Speaker 2: and move on. But the answer to that persistent uncertainty 127 00:06:54,720 --> 00:06:57,799 Speaker 2: is to take fewer risks to shore up your balance sheet. 128 00:06:58,080 --> 00:07:01,839 Speaker 2: To cut everything that you can theoretically cut. You know, 129 00:07:01,880 --> 00:07:04,160 Speaker 2: it's interesting, like in twenty twenty two, when there was 130 00:07:04,240 --> 00:07:07,599 Speaker 2: significant inflation, there were a lot of concerns. Then you know, 131 00:07:07,640 --> 00:07:10,920 Speaker 2: the Federal Reserve was jacking up interest rates and so 132 00:07:10,960 --> 00:07:12,800 Speaker 2: there was a lot of a concern. Then I was like, oh, 133 00:07:12,880 --> 00:07:15,240 Speaker 2: we're going to go into a recession. But one of 134 00:07:15,240 --> 00:07:19,800 Speaker 2: the overriding dynamics of that period was this visceral fear 135 00:07:19,880 --> 00:07:22,679 Speaker 2: of companies to be short of labor. Because twenty twenty, 136 00:07:22,920 --> 00:07:26,640 Speaker 2: twenty twenty one, twenty twenty two, twenty twenty three, it 137 00:07:26,680 --> 00:07:29,679 Speaker 2: was probably the first time in recent corporate history where 138 00:07:29,720 --> 00:07:34,080 Speaker 2: companies realized that there is not an endless supply of 139 00:07:34,160 --> 00:07:36,840 Speaker 2: workers out there. I'd say, you ahead, restaurants like, oh, 140 00:07:36,840 --> 00:07:39,600 Speaker 2: we literally can't operate right because we can't find the 141 00:07:39,720 --> 00:07:42,560 Speaker 2: workers in this environment. And so what that means is 142 00:07:42,600 --> 00:07:46,640 Speaker 2: that there was this real reluctance to fire anyone because 143 00:07:46,920 --> 00:07:49,240 Speaker 2: you might think, well, you know, things are uncertain, but 144 00:07:49,360 --> 00:07:51,640 Speaker 2: I can't fire anyone because the last thing I want 145 00:07:51,720 --> 00:07:53,680 Speaker 2: to do is to be caught short labor. Again. I 146 00:07:53,720 --> 00:07:56,400 Speaker 2: just had this very visceral experience of being short. We're 147 00:07:56,440 --> 00:07:59,920 Speaker 2: in a very different environment right now. You know, arguably, 148 00:08:00,240 --> 00:08:02,760 Speaker 2: even going into middle of February, which is when the 149 00:08:02,800 --> 00:08:07,800 Speaker 2: turbulence really began, there were signs of economic slow down 150 00:08:07,840 --> 00:08:09,880 Speaker 2: a little bit that may had nothing to do with Trump. 151 00:08:09,920 --> 00:08:11,200 Speaker 2: Maybe you know, it's time for like the fit of 152 00:08:11,240 --> 00:08:14,200 Speaker 2: reserve to cut rates, signs of the housing market, which 153 00:08:14,240 --> 00:08:17,800 Speaker 2: is very important stalling out. So even then there was 154 00:08:17,880 --> 00:08:22,000 Speaker 2: probably already this sort of negative growth impulse emerging in 155 00:08:22,040 --> 00:08:25,280 Speaker 2: the US economy. And so I think this time around 156 00:08:25,880 --> 00:08:31,280 Speaker 2: right now, I suspect that inside many companies the conversations 157 00:08:31,320 --> 00:08:34,000 Speaker 2: are about what can we cut. We want to preserve capital, 158 00:08:34,000 --> 00:08:37,760 Speaker 2: we want to preserve cash, we want to preserve operational flexibility, 159 00:08:38,200 --> 00:08:40,160 Speaker 2: just to survive to the next month, of the next 160 00:08:40,559 --> 00:08:41,600 Speaker 2: half of the next quarter. 161 00:08:41,960 --> 00:08:44,920 Speaker 1: Where do we look for signs that things are calming down, 162 00:08:44,960 --> 00:08:46,560 Speaker 1: that things are becoming more certain. 163 00:08:47,080 --> 00:08:49,040 Speaker 2: I mean, look, I'm a big fan of the stock 164 00:08:49,080 --> 00:08:52,600 Speaker 2: market as an indicator. The stock market is not as 165 00:08:52,720 --> 00:08:57,800 Speaker 2: volatile as it was. The policy environment, I guess, you know, 166 00:08:58,240 --> 00:09:00,400 Speaker 2: is less fluid that it seemed like a we ago, 167 00:09:00,800 --> 00:09:04,560 Speaker 2: right although that could change it change, you know, but 168 00:09:04,800 --> 00:09:07,599 Speaker 2: like the pace of new news that's come out is 169 00:09:07,640 --> 00:09:10,000 Speaker 2: slowed down a little bit. You know, there's only so 170 00:09:10,120 --> 00:09:13,680 Speaker 2: far you can really go with that. So like at 171 00:09:13,720 --> 00:09:18,680 Speaker 2: the margins, things are more certain than they were a 172 00:09:18,720 --> 00:09:22,640 Speaker 2: week ago, but we're just talking marginal changes. 173 00:09:22,400 --> 00:09:24,120 Speaker 1: And we'll have to watch them to see where things 174 00:09:24,160 --> 00:09:26,280 Speaker 1: go next. Joe, great to have you, Thanks for having me. 175 00:09:26,360 --> 00:09:28,880 Speaker 1: Joe Wisenthal Houst is brilliant to Odd Lots podcast and 176 00:09:28,960 --> 00:09:31,880 Speaker 1: author of its newsletter. Thank you. For more explanations like 177 00:09:31,880 --> 00:09:34,240 Speaker 1: this from our team of three thousand journalists and analysts 178 00:09:34,240 --> 00:09:37,400 Speaker 1: around the world, go to Bloomberg dot com slash explainers. 179 00:09:38,640 --> 00:09:41,079 Speaker 1: I'm Stephen Carroll. This is Here's why. I'll be back 180 00:09:41,120 --> 00:09:42,920 Speaker 1: next week with more. Thanks for listening.