WEBVTT - Concerns over US Growth as US Tariffs Appear More Targeted 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:30.800 Ruining us right now with SNBC Nco Securities Joe Livornia 0:00:31.600 --> 0:00:35.760 for years on Wall Street, always with a vibrant message, 0:00:35.960 --> 0:00:39.519 let's get the let's get the administration work basic. You 0:00:39.560 --> 0:00:42.960 were in the first Trump administration, are you affiliated with 0:00:43.040 --> 0:00:44.080 the second Trump? 0:00:44.400 --> 0:00:44.840 This film? 0:00:44.920 --> 0:00:48.479 I do know the Treasury Secretary. I think he is 0:00:48.520 --> 0:00:49.200 doing a great job. 0:00:49.200 --> 0:00:51.360 And you made a joke. He was perfect. That was 0:00:51.400 --> 0:00:55.960 on any list. But my boss was Larry Kudlow. 0:00:56.120 --> 0:00:58.680 So Larry created a role for me in actually Economic Council. 0:00:58.720 --> 0:00:59.640 That was Trump one point. 0:00:59.680 --> 0:00:59.760 Oh. 0:01:00.080 --> 0:01:01.280 So now I'm in the private sector. 0:01:01.400 --> 0:01:03.920 Larry Cudlow and I are on the same page. Just 0:01:03.920 --> 0:01:07.759 goes back to Wayne Angel. That nominal GDP really matters. 0:01:08.200 --> 0:01:13.400 Top line current GDP is this administration with the chaos, 0:01:13.440 --> 0:01:17.480 whether Republican or Democrat. Have they dampened the animal spirit? 0:01:17.600 --> 0:01:21.000 Have they dampened Cudlow's nominal GDP? No? 0:01:21.160 --> 0:01:24.120 Tom and I would argue that I'm going to give 0:01:24.160 --> 0:01:27.880 a counter narrative, and maybe it's that the chaos and confusion, 0:01:27.880 --> 0:01:30.880 which is the conventional wisdom for now, is actually not 0:01:30.959 --> 0:01:33.040 a bug of the system, but rather as a design 0:01:33.720 --> 0:01:37.600 so as to keep trading partners offside. If it continues, 0:01:37.640 --> 0:01:39.960 obviously the full year, that's a problem. But I would 0:01:39.959 --> 0:01:43.160 say that what worries me much more on the ansertainty 0:01:43.280 --> 0:01:43.759 side is. 0:01:44.000 --> 0:01:45.560 What are we doing with tax policy? 0:01:45.600 --> 0:01:48.280 Because if you look at the uncertainty index, what we 0:01:48.320 --> 0:01:51.640 see is concerns about taxes are sky high. So we 0:01:51.720 --> 0:01:54.360 need the Congress to figure out are these tax cuts 0:01:54.360 --> 0:01:57.800 getting extended, are they not? Are there additional tax cuts? 0:01:58.080 --> 0:02:00.240 How might we pay for them? And that's to me 0:02:00.320 --> 0:02:02.240 is a bigger concern for the economy and what it 0:02:02.280 --> 0:02:05.320 means for capacs ultimately growth and then nominal activity. 0:02:06.120 --> 0:02:09.000 Seems like every company conference call is in to every 0:02:09.040 --> 0:02:10.800 guest we have in here, and we have roughly twenty 0:02:10.800 --> 0:02:15.800 five a day. Don't cite tax policy, they say the 0:02:16.000 --> 0:02:18.240 uncertainty when you do five hours, you get a lot 0:02:19.440 --> 0:02:22.240 just introduced into the system. Has simply been we just 0:02:22.240 --> 0:02:24.359 don't know where the policy is going to be you 0:02:24.400 --> 0:02:27.399 tell us where the roadmap is. Companies will adjust tomics 0:02:27.400 --> 0:02:30.320 to say that companies are just investors, won't just it 0:02:30.520 --> 0:02:32.000 just gives us a little bit of sensor, so we 0:02:32.080 --> 0:02:35.280 understand the chaos from a negotiating perspective. That's fine, that 0:02:35.400 --> 0:02:38.040 is a strategy. But boy, it seems like the market's 0:02:38.080 --> 0:02:38.680 really craving. 0:02:39.280 --> 0:02:40.360 Certainly around it does. 0:02:40.480 --> 0:02:42.320 And I remember reading a book way back when by 0:02:42.440 --> 0:02:45.040 Michael Jensen Harvard Business Review. We talked about the short 0:02:45.120 --> 0:02:49.080 termsm of US corporate America, and maybe there's a little 0:02:49.080 --> 0:02:51.040 bit of that now where people want certainty, they're not 0:02:51.080 --> 0:02:54.160 going to get it. But also CEOs tend to be 0:02:54.200 --> 0:02:56.760 pretty opportunistic, and you're buying a free option, so if 0:02:56.760 --> 0:02:58.840 anything goes wrong. And by the way, the economy, we 0:02:58.840 --> 0:03:01.400 could debate about the economic outlook, you could just blame 0:03:01.440 --> 0:03:03.480 whatever is is convenience. 0:03:03.480 --> 0:03:04.520 So it's probably part of that. 0:03:04.600 --> 0:03:07.160 If you look at the small business side that generates 0:03:07.200 --> 0:03:10.520 forty percent of the jobs, their numbers look great. So 0:03:10.600 --> 0:03:12.320 I'm going to push back a little bit on that. 0:03:12.400 --> 0:03:14.400 Let's see how we go after April second, and what 0:03:14.440 --> 0:03:16.600 happens is we moved towards June. 0:03:16.639 --> 0:03:20.079 Are you modeling sub two percent real GDP. We weren't 0:03:20.120 --> 0:03:21.880 doing that pre election, were we. 0:03:22.080 --> 0:03:25.000 So here's the thing, Tom, I don't like the first 0:03:25.080 --> 0:03:25.720 quarter numbers. 0:03:25.720 --> 0:03:29.080 They're going to look soft because the expenditure side happened before. 0:03:29.360 --> 0:03:32.040 It just happened before, slack right unusual. 0:03:32.120 --> 0:03:34.280 But what's really bizarre is that if you look at 0:03:34.360 --> 0:03:37.440 like real income at least through January, it's up almost 0:03:37.480 --> 0:03:38.080 three percent. 0:03:38.160 --> 0:03:40.240 So you have, like the expenditure. 0:03:39.560 --> 0:03:42.520 Side from Atlanta fed down about two percent. You've got 0:03:42.520 --> 0:03:45.520 this huge increase on the real income side because job 0:03:45.520 --> 0:03:47.960 growth is still positive. I'm not sure how to square 0:03:48.000 --> 0:03:50.480 the circle right now. Yes, it does look like GDP 0:03:50.520 --> 0:03:52.680 will be on the lower side than the higher side. 0:03:52.680 --> 0:03:54.720 You're supposed to mark your numbers down for the year, 0:03:54.720 --> 0:03:57.000 but having done this for a while, we also know 0:03:57.080 --> 0:03:58.960 that you could drive a truck through the first and 0:03:59.080 --> 0:03:59.720 last estimates. 0:04:00.440 --> 0:04:04.680 Fair But you know, given trickle down economics, where's the 0:04:04.760 --> 0:04:08.040 genie co official of the United States? I mean, is 0:04:08.080 --> 0:04:12.200 this an administration governing with a presumed tax cut for 0:04:12.320 --> 0:04:16.120 they have have halves against half of America flat on 0:04:16.160 --> 0:04:16.560 their back. 0:04:16.680 --> 0:04:19.520 Yeah, So this is where I would say that where 0:04:19.520 --> 0:04:22.440 the Trump the Tax Cuts and Jobs Act tikcha, which 0:04:22.440 --> 0:04:24.000 by the way, President Trump wanted to call it the 0:04:24.040 --> 0:04:28.000 Cut Cut Cut Act ticchas. I like the former mob 0:04:28.000 --> 0:04:29.960 But anyway, but if you look at the data through 0:04:30.000 --> 0:04:33.360 the pandemic, and Kevin Hassett are current head of NEC, 0:04:33.520 --> 0:04:36.520 Lowry's old job had done some nice work on this 0:04:36.600 --> 0:04:40.280 as well. But if you look at the income by quintile, 0:04:41.080 --> 0:04:43.839 the mid to lower ends and relative terms, that extraordinarily 0:04:43.839 --> 0:04:46.200 well under Trump one point zero and in terms of 0:04:46.240 --> 0:04:49.200 real meeting income was about six thousand dollars in those 0:04:49.240 --> 0:04:51.560 first three years, and that was about five to six 0:04:51.600 --> 0:04:54.120 times what had been in the prior sixteen years with 0:04:54.240 --> 0:04:57.320 both Democrats and Republicans. So if the tax cuts, in 0:04:57.320 --> 0:05:00.640 my opinions, the tax cuts are extended, you'll get that 0:05:00.680 --> 0:05:03.120 blue collar boom that Larry my O boss talked about. 0:05:03.200 --> 0:05:05.320 And I'm optimistic we'll have good wage growth, but we'll 0:05:05.320 --> 0:05:05.880 see what happens. 0:05:05.880 --> 0:05:06.760 You need to get this done. 0:05:06.839 --> 0:05:09.159 I mean, judging just from your source of people you 0:05:09.200 --> 0:05:11.600 talked to, do you think that tax will be extended? 0:05:11.800 --> 0:05:13.920 I do think it's extended. So one of the things 0:05:13.960 --> 0:05:16.280 people I thought it was interesting is when Speaker Johnson 0:05:16.360 --> 0:05:18.240 got that budget blueprint throw I thought that was a 0:05:18.240 --> 0:05:19.840 big deal because that told me we're going to get 0:05:19.839 --> 0:05:22.200 the cr So the fact we didn't shut the government, 0:05:22.240 --> 0:05:24.680 I think it was smart that Chuck Schumer kept the 0:05:24.720 --> 0:05:27.320 government open because I would have delayed things another several weeks. 0:05:27.600 --> 0:05:30.640 Depends is can we get a bill in place sometime 0:05:30.720 --> 0:05:33.040 maybe before June that it can be signed by year. 0:05:33.480 --> 0:05:35.839 That would make me more optimistic that we'll get good 0:05:35.839 --> 0:05:37.400 growth if we're waiting, and I think, by the way, 0:05:37.400 --> 0:05:39.560 we'll get the tax bill done, But if it happens 0:05:39.560 --> 0:05:41.640 in December, I'm going to lower my GDP numbers. 0:05:42.080 --> 0:05:43.039 Joelivern, you're with us. 0:05:43.080 --> 0:05:47.839 Joseph flavourna SMBC Nego Security is an extended conversation this morning. 0:05:47.839 --> 0:05:50.920 Good morning on your commune across the nation. Good morning, ninety. 0:05:50.760 --> 0:05:54.279 Ninety one FF in Washington, ninety two nine FM in Boston. 0:05:54.320 --> 0:05:58.480 Of course, good morning on YouTube. Subscribe to Bloomberg Podcast. 0:05:58.640 --> 0:06:00.000 Just stunned at the results there. 0:06:00.160 --> 0:06:01.240 Good morning to all of you. 0:06:01.320 --> 0:06:05.320 Good evening, I should say in the Pacific room, Paul Joe, from. 0:06:05.240 --> 0:06:07.839 Your perspective, what are the long term gains that we 0:06:07.960 --> 0:06:10.919 may see in this economy for what may be some 0:06:11.000 --> 0:06:13.080 short term pain what are the long term gains that 0:06:13.120 --> 0:06:13.720 you're looking for. 0:06:14.160 --> 0:06:17.640 It's clear that we can't sustain six percent budget f 0:06:17.760 --> 0:06:20.240 HISS to GDP ratios, and you know, fortunately it was 0:06:20.240 --> 0:06:22.200 ever party in power always blames the other site for 0:06:22.240 --> 0:06:23.960 not being a fiscal hawk. But it seems like we 0:06:24.000 --> 0:06:26.760 certainly need to do something on the spending side. And 0:06:26.800 --> 0:06:28.840 what I've highlighted to clients is if you look over 0:06:28.880 --> 0:06:31.800 the years, the GAO has done some interesting work about 0:06:32.600 --> 0:06:34.120 how we do have a lot of waste abuse, some 0:06:34.160 --> 0:06:37.239 fraud in the system. The Pentagon's paying six hundred dollars 0:06:37.240 --> 0:06:40.040 for a hammer, the massive coss over runs for the 0:06:40.120 --> 0:06:42.680 F thirty five. By the way, anybody, any politician, typically 0:06:42.760 --> 0:06:44.320 wants something done that can. 0:06:44.279 --> 0:06:45.360 Ever be touched. 0:06:45.560 --> 0:06:47.880 It goes under procurement because we could always argue it's 0:06:47.920 --> 0:06:50.240 national defense, so that spending doesn't get touched. 0:06:50.520 --> 0:06:51.880 But GAO had said that. 0:06:51.880 --> 0:06:55.640 Anywhere from one hundred to three hundred billion we could 0:06:55.640 --> 0:06:58.000 get rid of per adum. Now I've heard people think 0:06:58.000 --> 0:06:59.480 Elon must give a higher number. 0:06:59.600 --> 0:07:01.680 I don't know if that could be the case. 0:07:01.480 --> 0:07:04.000 But at least the older stuff said, look, if here's 0:07:04.000 --> 0:07:06.360 one hundred to three hundred per year, over ten years, 0:07:06.360 --> 0:07:09.080 it's one to three trillion, So that to me is meaningful. 0:07:09.440 --> 0:07:10.000 But we'll see. 0:07:10.040 --> 0:07:12.360 I like to again, this comes back to the budget 0:07:12.400 --> 0:07:15.680 because I want things that are legislated, because if it's legislator, 0:07:15.720 --> 0:07:17.360 you can't undo it every four years. 0:07:17.400 --> 0:07:21.200 Registration is quite a legislature, right, I mean again, the 0:07:21.280 --> 0:07:24.160 legislature's out of play. Well, right now, we got an 0:07:24.200 --> 0:07:27.280 executive branch judiciary chase it after him. 0:07:27.400 --> 0:07:29.560 That's right, Tom, And that's why we kind of need 0:07:29.560 --> 0:07:31.760 to figure out. Okay, what you know, we haven't really 0:07:31.800 --> 0:07:33.960 legislated a lot. We've done a lot of executive order. 0:07:34.000 --> 0:07:36.720 That's why I'm relying. May not be the right word, 0:07:36.720 --> 0:07:39.160 but I'm assuming that there's going to be something codified 0:07:39.200 --> 0:07:40.040 in law in the House. 0:07:40.080 --> 0:07:42.080 Okay, totally totally, Lavarn. 0:07:42.120 --> 0:07:45.400 You're driving the market higher now, Futures up seventy, Joel, 0:07:46.000 --> 0:07:48.160 And this is totally unfair to you because you're not 0:07:48.520 --> 0:07:51.080 it's sixteen hundred Pennsylvania or those environs. 0:07:51.480 --> 0:07:53.920 Right now. You say we need a tax cut. 0:07:54.400 --> 0:07:57.400 Brilliant who listening or watching says we don't need a 0:07:57.480 --> 0:08:03.200 tax cut. The line is tariffs will pay for it. 0:08:03.280 --> 0:08:06.600 Supporting Canada in Mexico explain this. 0:08:06.720 --> 0:08:10.400 Okay, so we I'm making the assumption there will be 0:08:10.440 --> 0:08:15.280 some minimal level of tariff, and I don't know what 0:08:15.320 --> 0:08:16.880 the numbers are going to be. Hopefully we'll know a 0:08:16.920 --> 0:08:17.720 little bit more April. 0:08:17.800 --> 0:08:18.120 Second. 0:08:18.520 --> 0:08:20.480 My gut is that will extend a little bit further 0:08:20.480 --> 0:08:23.920 than there. We'll get some clarity, but not everything we want. Again, 0:08:24.000 --> 0:08:25.800 I don't know what they're doing in terms of the 0:08:25.840 --> 0:08:28.440 tax cuts or sorry, the spending cuts, and I don't 0:08:28.480 --> 0:08:30.440 know what the tariffs will be. I mean, there's roughly 0:08:30.480 --> 0:08:33.559 three trillion of imports, so a ten percent tariff in 0:08:33.640 --> 0:08:36.720 theory could raise three hundred billion at least in the 0:08:36.760 --> 0:08:37.360 early years. 0:08:37.400 --> 0:08:38.760 But I don't know what they're going to do with that. 0:08:38.880 --> 0:08:40.240 Is that going to it's certainly not going to be 0:08:40.320 --> 0:08:43.800 legislated in all likelihood, But is there a tariff? 0:08:43.840 --> 0:08:44.360 What is it? 0:08:44.720 --> 0:08:47.880 How many spending cuts are actually implemented, and how does 0:08:47.920 --> 0:08:48.800 the economy perform? 0:08:48.960 --> 0:08:51.920 You see legit work on this from year budget. Here's 0:08:52.000 --> 0:08:53.840 CBO from the CBO. 0:08:54.320 --> 0:08:55.160 Well, let me say this. 0:08:55.640 --> 0:08:58.320 I don't like the CBO scoring because if you look 0:08:58.360 --> 0:09:00.480 at they assume in the next to give you an 0:09:00.520 --> 0:09:03.680 idea over a ten year scoring period. The difference between 0:09:03.840 --> 0:09:06.960 using their revenue numbers, a difference between a three percent 0:09:07.000 --> 0:09:09.280 economy and a one point eight percent economy over ten 0:09:09.360 --> 0:09:13.520 year period is about four point three trillion of additional revenue. 0:09:13.720 --> 0:09:15.199 So this notion CBO is. 0:09:15.400 --> 0:09:19.640 Going along this current law versus baseline to me is 0:09:19.640 --> 0:09:21.920 a big problem and you can get a huge tax 0:09:21.960 --> 0:09:25.160 hike next year if it's not extended. To assume that 0:09:25.280 --> 0:09:27.240 your revenue share or GDP is going to go up, 0:09:27.280 --> 0:09:27.600 I think. 0:09:27.600 --> 0:09:28.640 Is totally misplaced. 0:09:29.120 --> 0:09:30.959 So there's a lot of things that are going on, 0:09:31.000 --> 0:09:35.280 but I think the scoring has been willfully inadequate. But again, Tom, 0:09:35.360 --> 0:09:37.880 until we see what's in these bills, I'm just speculating. 0:09:37.880 --> 0:09:39.600 I want to see actually what happens, then I'll make 0:09:39.600 --> 0:09:41.080 a judgment call at that point. 0:09:41.400 --> 0:09:44.920 The most recent University in Michigan survey was disappointing to 0:09:44.960 --> 0:09:47.880 the marketplace in the sense that it reflected slower growth 0:09:47.960 --> 0:09:51.400 outlook and higher inflation outlook. How concerned are you about 0:09:51.720 --> 0:09:56.320 inflation moving higher, whether it's driven by tariffs or not. 0:09:56.400 --> 0:09:57.320 What is your inflation call? 0:09:57.520 --> 0:10:00.840 So the inflation is long, What I am optimistic is 0:10:00.880 --> 0:10:03.200 you are seeing money supply and it's hard to measure 0:10:03.400 --> 0:10:04.880 totally broad credit creation. 0:10:04.960 --> 0:10:06.960 A lot of credit now is outside the public. 0:10:06.679 --> 0:10:09.439 Markets or in the private credit markets. M two growth 0:10:09.440 --> 0:10:12.600 has slowed. You are seeing wage growth moderate, although I'm 0:10:12.600 --> 0:10:16.800 not a big proponent that wages drive inflation. Gas prices 0:10:16.880 --> 0:10:19.640 are dropping in some parts of the country. The energy side, 0:10:19.679 --> 0:10:22.600 to me, is going to be very important and if 0:10:22.600 --> 0:10:24.920 the administration is successful, and I think they will be, 0:10:25.000 --> 0:10:27.680 but they need. One of my assumptions, they need gasoline 0:10:27.679 --> 0:10:30.440 and oil prices down because you could lose about a 0:10:30.480 --> 0:10:35.120 point on inflation headline and core if oil goes back 0:10:35.120 --> 0:10:38.480 to sixty or slightly below. So we need that. So 0:10:38.480 --> 0:10:41.400 that's how That's how I thinks see things shaping up. 0:10:41.840 --> 0:10:42.520 Do you what do you. 0:10:42.440 --> 0:10:44.680 Say to people who say tariffs are at tax on 0:10:44.720 --> 0:10:45.240 the consumer? 0:10:45.640 --> 0:10:47.440 So what I would say is, it's so if you 0:10:47.520 --> 0:10:49.360 when you go through just a simple math of what 0:10:49.559 --> 0:10:52.560 President Trumpet said last year, ten percent across the board, 0:10:52.559 --> 0:10:54.720 sixty percent on China, you got like a nine tenths 0:10:54.720 --> 0:10:57.520 increase in the price level, assuming you know everything was 0:10:57.520 --> 0:11:00.400 passed through, which history suggests it's not. Some will be 0:11:00.440 --> 0:11:03.040 absorbed in the margin, some will be absorbed in the 0:11:03.080 --> 0:11:06.400 exchange rate. But I would say to people, Look, if 0:11:06.440 --> 0:11:09.280 you're having to pay a one off higher price for 0:11:09.320 --> 0:11:12.280 a good, but if you're a blue collar worker, you 0:11:12.280 --> 0:11:14.920 have no tax on tips, no tax on overtime, which 0:11:14.960 --> 0:11:17.199 by the way, those are supply side factors, and you're 0:11:17.200 --> 0:11:19.920 getting paying no tax on social Security benefits and also 0:11:19.960 --> 0:11:22.959 having the benefit of low marginal rates and low corpor rates. 0:11:23.160 --> 0:11:25.360 That to me is a great trade off because ultimately, 0:11:25.360 --> 0:11:28.120 in my opinion, it will drive long term productivity growth 0:11:28.160 --> 0:11:29.479 through capital expenditure. 0:11:29.920 --> 0:11:32.400 Thank you so much out on YouTube for this idea 0:11:32.400 --> 0:11:35.440 of what our government does. And I adored an Admiral 0:11:35.559 --> 0:11:38.319 Zoomal was one of my heroes a million years ago. 0:11:38.880 --> 0:11:41.880 So we spent twenty four billion or whatever nine billion 0:11:42.080 --> 0:11:45.960 of research costs on the Zoom Wall destroyer. We went 0:11:46.120 --> 0:11:48.680 from x amount down to seven. It costs so much 0:11:48.720 --> 0:11:51.160 it was a failure. Now we're back to urly Bloke. 0:11:51.200 --> 0:11:54.120 I think Stravetis would say that's a good thing. Only 0:11:54.240 --> 0:11:59.040 fourteen percent of the budget is controllable. What would be 0:11:59.120 --> 0:12:03.680 the proper rece responds of the parties against President Trump. 0:12:04.040 --> 0:12:09.679 Do you see a cogent response to the Trump economics. 0:12:09.240 --> 0:12:10.040 So well, I'm not sure. 0:12:10.040 --> 0:12:12.600 I don't ask you a question on the spending. I'm 0:12:12.600 --> 0:12:13.640 confused on the question. 0:12:13.640 --> 0:12:16.080 It can be either. I'm confused on the moment as well. 0:12:16.360 --> 0:12:20.200 The confusion here is I don't see a cogent debate 0:12:21.040 --> 0:12:24.640 about our fiscal policy over into what it means for 0:12:24.720 --> 0:12:27.880 our family's investment policies as well. 0:12:28.160 --> 0:12:29.440 Where's this debate in? 0:12:29.840 --> 0:12:31.480 So I read six months? 0:12:31.920 --> 0:12:34.160 So let me just sidetrack for a minute. Let's just 0:12:34.200 --> 0:12:36.480 talk about Trump and omics. So what I say is 0:12:36.679 --> 0:12:38.800 this isn't exactly what you ask, but at least we'll 0:12:38.920 --> 0:12:41.640 talk about the economic policy is what I see as 0:12:41.640 --> 0:12:45.360 a desire and intent to re engineer, reindustrialized the US 0:12:45.360 --> 0:12:48.320 manufacturing base, and a tariff is a necessary but not 0:12:48.360 --> 0:12:51.600 sufficient criterion to try to do that. In addition to 0:12:51.679 --> 0:12:55.440 low corporate rates on domestic production, cheap and abundant energy 0:12:55.440 --> 0:12:58.760 because it's very key to produce things, Germany is basically 0:12:59.440 --> 0:13:03.160 isn't cost efficient anymore if you exclude the pandemic production there, 0:13:03.160 --> 0:13:05.880 industrial productions back to it was in twenty twenty ten. 0:13:06.280 --> 0:13:10.200 And of course any business friendly regulation permitting process I 0:13:10.200 --> 0:13:12.360 think needs to change a bit. Even I think the 0:13:12.400 --> 0:13:14.480 other side can agree on that. So that would kind 0:13:14.480 --> 0:13:16.960 of encourage capital to come into the US. On the 0:13:16.960 --> 0:13:19.480 fiscal side time, which you raise, which is very interesting. 0:13:19.600 --> 0:13:20.800 We need to have that debate. 0:13:21.080 --> 0:13:23.760 But I don't think we've ever realized how much spending 0:13:23.800 --> 0:13:25.600 we just we just waste. 0:13:25.840 --> 0:13:28.600 And if people talk about, oh, it's all entitlements. 0:13:28.040 --> 0:13:30.959 And that's where the money is a thirty percent discretionary. 0:13:31.120 --> 0:13:33.679 But there is a lot of waste and abuse even 0:13:33.720 --> 0:13:35.440 on some of these titlement programs. 0:13:35.440 --> 0:13:37.240 But people unfortunately. 0:13:37.000 --> 0:13:40.040 Conflate getting rid of the abuse with oh, people are 0:13:40.040 --> 0:13:42.520 losing their service, and that's not the case. But we 0:13:42.559 --> 0:13:43.920 don't have that debate, and we should. 0:13:44.520 --> 0:13:46.360 We have a debate here that we haven't talked about 0:13:46.400 --> 0:13:50.840 basic economics. Where does SMBC and ECO see the unemployment 0:13:50.920 --> 0:13:52.240 rate going given all this. 0:13:52.200 --> 0:13:54.680 We've got the rate essentially in the low force four 0:13:54.720 --> 0:13:55.760 to four and a quarter. 0:13:55.559 --> 0:13:57.720 So we think it'll stay going to stay there? 0:13:57.800 --> 0:13:59.719 Yeah, well it's for one now and I would say 0:14:00.080 --> 0:14:02.880 out or call yes. That means to tell you the 0:14:02.920 --> 0:14:05.280 truth that doesn't surprise us. We tend not to look 0:14:05.280 --> 0:14:07.280 at other economists, in part because we don't want to 0:14:07.320 --> 0:14:10.040 be biased. But to get a higher rate, Tom, we'd 0:14:10.120 --> 0:14:14.440 have to be really pessimistic on growth also too, Oakin's 0:14:14.520 --> 0:14:17.640 law is useful, which is that you know what Oakins laws, 0:14:17.720 --> 0:14:21.400 but it's the relationship between potential GDP and what actually 0:14:21.480 --> 0:14:24.040 happens in the economy. And the other thing is this 0:14:24.440 --> 0:14:26.080 is that even if we had a slow period of 0:14:26.080 --> 0:14:28.560 growth this year, maybe you talked earlier about the pain, Yes, 0:14:28.600 --> 0:14:31.640 we're gonna have somewhat of a pullback on the fiscal side. 0:14:31.880 --> 0:14:35.040 Secretary Besset mentioned detox. But if all of a sudden 0:14:35.080 --> 0:14:38.200 it looks like twenty twenty six is going to accelerate, 0:14:38.480 --> 0:14:41.720 financial conditions will leaves in anticipation of that. Hopefully there'll 0:14:41.720 --> 0:14:44.440 be some clarity on the tax side, and companies wouldn't 0:14:44.520 --> 0:14:46.160 lay people off, so there'd be no reason for the 0:14:46.280 --> 0:14:49.920 unperpoint rate to rise if the twelve month forward was improving. 0:14:50.160 --> 0:14:51.160 Joe, thank you so much. 0:14:51.240 --> 0:14:53.000 Huge, Thank you guys, thank you, thank you. 0:14:53.040 --> 0:14:57.840 Joel, Chief Economists, SNBC and Eco Securities, A swarm and 0:14:57.960 --> 0:15:06.760 formally working with mister Cuddler with the Trump administration version one. 0:15:07.960 --> 0:15:11.520 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:11.600 --> 0:15:14.640 weekday afternoons from seven to ten am. E's durn Listen 0:15:14.680 --> 0:15:18.280 on Applecarplay and Android Otto with the Bloomberg Business app, 0:15:18.440 --> 0:15:21.320 or watch us live on YouTube with that question. 0:15:21.160 --> 0:15:23.840 Our equity discussion of Monday. Maybe dare I say of 0:15:23.840 --> 0:15:26.520 the week as well? Liz Anne Saunders joins us now 0:15:26.560 --> 0:15:29.960 with Charles Schwab. Lizzy Card to rule. I got to 0:15:30.000 --> 0:15:32.600 be in the game even when I'm stressed. Going to 0:15:32.680 --> 0:15:36.680 cash is a tough track record. How do you stay 0:15:36.800 --> 0:15:40.320 in the game given the cross currents of March of 0:15:40.400 --> 0:15:41.680 twenty twenty five. 0:15:42.840 --> 0:15:48.120 So, I think within the equity space, thank factor focused. 0:15:48.200 --> 0:15:51.320 As you know, Tom, we have been very factor biased 0:15:51.360 --> 0:15:54.360 and oriented over the last couple of years, feeling like 0:15:54.440 --> 0:15:57.960 the monolithic sector calls are much more difficult to do. 0:15:58.000 --> 0:16:00.600 There's much more volatility on a weekly week basis at 0:16:00.600 --> 0:16:03.400 the sector level, a little more consistency in terms of 0:16:03.440 --> 0:16:05.600 performance at the factor level, and one of the factors 0:16:05.600 --> 0:16:08.240 that we added to our focus list as we headed 0:16:08.280 --> 0:16:12.400 into this year was a low volatility For obvious reasons, 0:16:12.480 --> 0:16:14.600 you wanted to have a little bit of that protection 0:16:15.120 --> 0:16:18.840 with that low volatility factor, and that's been the best 0:16:18.840 --> 0:16:22.560 performing factor you guys track it at Bloomberg over the 0:16:22.600 --> 0:16:25.240 past three months or so. So I think the best 0:16:25.240 --> 0:16:27.760 way to navigate is a little bit more defense, but 0:16:27.880 --> 0:16:31.440 not in the traditional defensive sectors, doing it via the 0:16:31.440 --> 0:16:32.120 factor level. 0:16:33.200 --> 0:16:35.880 Lizane, I think one of the concerns out there in 0:16:35.880 --> 0:16:38.800 the marketplace is people are starting the question this economy. 0:16:38.840 --> 0:16:41.680 If in fact some of these tariffs come in, it 0:16:41.760 --> 0:16:45.720 could spell economic growth concerns, it could spell inflation concerns, 0:16:45.760 --> 0:16:48.160 and that calls into question kind of the overall health 0:16:48.240 --> 0:16:48.880 of the economy. 0:16:49.480 --> 0:16:51.520 How material is that risk, because that would go to 0:16:51.600 --> 0:16:53.080 the earning story. 0:16:53.640 --> 0:16:56.120 Oh absolutely, I think right now, if you look at 0:16:56.200 --> 0:16:58.200 if you look at betting odds, if you look at 0:16:58.200 --> 0:17:02.200 a consensus of economists, you're somewhere in the thirty ish 0:17:02.240 --> 0:17:06.520 percent probability of recession. But that's a completely moving target 0:17:06.520 --> 0:17:10.000 as a result of the nature of this uncertainty and 0:17:10.040 --> 0:17:13.760 the way we get tariff announcements, not to mention back 0:17:13.800 --> 0:17:17.639 and forth pauses retaliations. But I think if we go 0:17:17.760 --> 0:17:21.560 to the extreme on the tariff front, it raises recession risks, 0:17:21.560 --> 0:17:25.080 not just in the United States, everywhere, and even if 0:17:25.600 --> 0:17:28.200 we were to have more resilience from a trade perspective, 0:17:28.200 --> 0:17:30.840 but as a country with less trade dependent, if you 0:17:30.920 --> 0:17:34.000 started to see more weakness show up globally. That obviously 0:17:34.040 --> 0:17:37.160 filters through in the United States, So not a better 0:17:37.200 --> 0:17:39.439 than even bet at this point for recession. But I 0:17:39.480 --> 0:17:44.040 think we all need to be dusting off recession watch 0:17:44.119 --> 0:17:49.159 list to reflect this incredible amount of uncertainty. We're not 0:17:49.280 --> 0:17:51.960 seeing a huge impact yet on the hard data. We're 0:17:51.960 --> 0:17:55.400 seeing it obviously in the soft data. But at this point, 0:17:55.520 --> 0:17:58.800 unless we get a reprieve on tariffs, what's more likely 0:17:58.840 --> 0:18:01.480 to happen, like a couple of years ago, is the 0:18:01.520 --> 0:18:03.600 hard data is more likely to catch down to the 0:18:03.640 --> 0:18:05.760 soft data versus the other way around. 0:18:06.440 --> 0:18:09.720 We've at the peak the trough. We did have a 0:18:09.800 --> 0:18:11.760 ten percent pullback in the S and P five hundred. 0:18:11.760 --> 0:18:14.520 We've rallied a few percentage points here, including the futures 0:18:14.520 --> 0:18:17.600 market today. How does that market moved with a little 0:18:17.600 --> 0:18:19.960 bit of hindsight here, was that a reasonable response to 0:18:20.720 --> 0:18:23.440 this uncertainty that's been brought into the discussion. 0:18:24.800 --> 0:18:27.320