1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,360 Speaker 2: Terminal and the Bloomberg Business App. Let's turn to tariffs. 10 00:00:37,400 --> 00:00:40,479 Speaker 2: Ocean First Financial CEO Chris Mars saying, while the direct 11 00:00:40,520 --> 00:00:44,080 Speaker 2: impact on businesses isn't concerning at present, the volatility and 12 00:00:44,200 --> 00:00:47,360 Speaker 2: uncertainty is clearly evident. The longer the period of uncertainty, 13 00:00:47,520 --> 00:00:51,640 Speaker 2: the more likely the perceptions translate into reality. Chris joins 14 00:00:51,720 --> 00:00:53,599 Speaker 2: us now for more. Chris can morning, Marian, John, been 15 00:00:53,600 --> 00:00:55,240 Speaker 2: so long, It's going to see you again, sir. Let's 16 00:00:55,240 --> 00:00:57,600 Speaker 2: start with the reality, your reality and your business at 17 00:00:57,640 --> 00:00:58,920 Speaker 2: the moment. What do you see there? 18 00:00:58,920 --> 00:01:01,960 Speaker 3: It is interesting because we'll read about taris, tarist tariffs. 19 00:01:02,240 --> 00:01:05,720 Speaker 3: Our clients are not particularly concerned about them. And I 20 00:01:05,720 --> 00:01:07,720 Speaker 3: think you have to look from their perspective. They've been 21 00:01:07,760 --> 00:01:11,280 Speaker 3: through the first Trump administration and they have been through COVID. 22 00:01:11,360 --> 00:01:14,160 Speaker 3: So I like to say, our folks got a PhD 23 00:01:14,240 --> 00:01:17,640 Speaker 3: In supply chains during COVID. They figured out I have 24 00:01:17,760 --> 00:01:20,720 Speaker 3: remarkably small businesses at bank with US. We cover clients 25 00:01:20,720 --> 00:01:24,440 Speaker 3: between Boston and Washington. I have a pet foods business. 26 00:01:24,760 --> 00:01:28,640 Speaker 3: This guy can explain to you the supply chains in China, Cambodia, Vietnam. 27 00:01:28,680 --> 00:01:31,319 Speaker 3: He understands the tariffs, he knows where he's going to 28 00:01:31,360 --> 00:01:33,920 Speaker 3: get his stuff, and it is not looming large in 29 00:01:33,920 --> 00:01:36,360 Speaker 3: their minds. So it's more the perception than the reality. 30 00:01:36,400 --> 00:01:38,280 Speaker 2: It's her sentiment, we say in the survey. At a 31 00:01:38,280 --> 00:01:41,280 Speaker 2: consumer level, we're having this debate about whether it's hurting activity. 32 00:01:41,400 --> 00:01:43,440 Speaker 2: So these companies that came into the new year with 33 00:01:43,520 --> 00:01:46,720 Speaker 2: investment plans, with hiring plans, are they on hold or 34 00:01:46,720 --> 00:01:47,760 Speaker 2: they go on forward with them? 35 00:01:48,080 --> 00:01:48,960 Speaker 4: They're on hold. 36 00:01:48,960 --> 00:01:51,880 Speaker 3: They're a little bit cautious and concerned. They want to 37 00:01:51,880 --> 00:01:53,720 Speaker 3: make sure they see how things going to pan out. 38 00:01:54,000 --> 00:01:56,320 Speaker 3: You talked about the continuation of the tax cuts earlier. 39 00:01:56,400 --> 00:02:00,360 Speaker 3: Right for those customers, these are higher income house that 40 00:02:00,440 --> 00:02:03,400 Speaker 3: own these businesses. They're trying to figure out the whole puzzle. 41 00:02:03,480 --> 00:02:05,880 Speaker 3: So it'll be okay for a little while. You know, 42 00:02:05,920 --> 00:02:07,920 Speaker 3: we have we have days, we probably have weeks, but 43 00:02:08,000 --> 00:02:10,359 Speaker 3: I don't think we have months before that confidence starts 44 00:02:10,360 --> 00:02:11,280 Speaker 3: to impact the economy. 45 00:02:11,360 --> 00:02:13,280 Speaker 1: I want just to elaborate a little bit further on 46 00:02:13,280 --> 00:02:16,360 Speaker 1: the point that John was making. There was an estimate 47 00:02:16,520 --> 00:02:19,560 Speaker 1: of some of the small business confidence, a survey that 48 00:02:19,600 --> 00:02:22,520 Speaker 1: showed just nineteen percent of small business owners in February. 49 00:02:22,520 --> 00:02:25,800 Speaker 1: We're planning the capital outlies in the sixth next six months, 50 00:02:25,800 --> 00:02:29,560 Speaker 1: which matches the lowest level since April twenty twenty. How 51 00:02:29,560 --> 00:02:32,400 Speaker 1: do you match that with what you're telling us that 52 00:02:32,520 --> 00:02:35,840 Speaker 1: actually they're okay, they're taking it in stride. Is there 53 00:02:35,880 --> 00:02:38,639 Speaker 1: a sense that they really are going to re engage 54 00:02:38,639 --> 00:02:41,720 Speaker 1: with all of those capital outlays immediately within the next 55 00:02:41,760 --> 00:02:43,359 Speaker 1: six months, as soon as there is some. 56 00:02:43,360 --> 00:02:45,000 Speaker 5: Clarity, Well, you know, we so. 57 00:02:45,160 --> 00:02:48,800 Speaker 3: I think that these small business owners, right the company 58 00:02:48,880 --> 00:02:51,640 Speaker 3: and their own personal financials are really closely tied, so 59 00:02:51,840 --> 00:02:54,520 Speaker 3: they tend to be more cautious. They've built up liquidity 60 00:02:54,600 --> 00:02:57,720 Speaker 3: since the since kind of COVID happened, understood the uncertainty, 61 00:02:58,360 --> 00:03:02,000 Speaker 3: they have plans. We're talking about loan pipelines are improving 62 00:03:02,000 --> 00:03:06,160 Speaker 3: and increasing, but there is a range of hesitancy around 63 00:03:06,200 --> 00:03:09,800 Speaker 3: some kind of the edge con like a residential construction 64 00:03:09,960 --> 00:03:12,160 Speaker 3: is an area where people are kind of holding back. 65 00:03:12,160 --> 00:03:13,639 Speaker 3: They want to make sure that we don't kind of 66 00:03:13,639 --> 00:03:15,680 Speaker 3: head into a recession. There isn't a demand issue down 67 00:03:15,680 --> 00:03:16,000 Speaker 3: the road. 68 00:03:16,040 --> 00:03:18,840 Speaker 1: So are they concerned about the competitive advantage that they 69 00:03:18,880 --> 00:03:22,920 Speaker 1: have versus large companies given their a negotiating position with 70 00:03:23,000 --> 00:03:27,480 Speaker 1: potential contractors, with potential supply chains dealers. We hear about 71 00:03:27,480 --> 00:03:31,120 Speaker 1: Walmart going to China and saying, guys, lower your prices, 72 00:03:31,160 --> 00:03:32,360 Speaker 1: and they can do it because they are an eight 73 00:03:32,440 --> 00:03:34,240 Speaker 1: hundred pound grilla and even they are getting pushed back. 74 00:03:34,320 --> 00:03:36,480 Speaker 1: I mean, how much does that really issue for your clients? 75 00:03:36,840 --> 00:03:39,600 Speaker 3: It is an issue, we said in a very different way, 76 00:03:39,680 --> 00:03:41,880 Speaker 3: so we have I used the home building example, so 77 00:03:41,920 --> 00:03:44,000 Speaker 3: we work with some of the largest home builders in 78 00:03:44,000 --> 00:03:47,400 Speaker 3: the country. They can stock warehouses full of appliances, so 79 00:03:47,400 --> 00:03:49,520 Speaker 3: they just kind of immune to where the appliance has 80 00:03:49,560 --> 00:03:52,800 Speaker 3: come from. But in a different way, the small builders 81 00:03:53,520 --> 00:03:55,640 Speaker 3: just move where they're buying stuff from. So, you know, 82 00:03:55,720 --> 00:03:59,320 Speaker 3: ge appliances has a pretty strong US domestic manufacturing base, 83 00:03:59,560 --> 00:04:01,840 Speaker 3: so they're going to buy Ge instead of some other brands. 84 00:04:01,840 --> 00:04:03,720 Speaker 3: Some of the other brands have a bigger base in 85 00:04:03,760 --> 00:04:08,120 Speaker 3: say Canada, So the small businesses are more nimble. The 86 00:04:08,200 --> 00:04:10,440 Speaker 3: big businesses are able to do kind of more bold 87 00:04:10,440 --> 00:04:14,160 Speaker 3: supply chain things, stocking up inventories and kind of planning ahead. 88 00:04:14,240 --> 00:04:17,040 Speaker 6: Our materials going up. Are they already seeing this price effects? 89 00:04:17,240 --> 00:04:20,159 Speaker 3: Sure, avery they've gone up. Lumber's gone up three different 90 00:04:20,160 --> 00:04:22,400 Speaker 3: price hikes in the last couple of months, so lumber's 91 00:04:22,400 --> 00:04:26,960 Speaker 3: certainly up. You're seeing anything with steel or aluminum. Although 92 00:04:27,080 --> 00:04:29,119 Speaker 3: I'd make the comment that we tend to talk about 93 00:04:29,160 --> 00:04:32,800 Speaker 3: steel for our clients, there's like fifty different kinds of steel. 94 00:04:33,279 --> 00:04:35,599 Speaker 3: Some steel is going to be an issue, other kinds 95 00:04:35,600 --> 00:04:38,559 Speaker 3: of steel are not. And although we're talking with many 96 00:04:38,880 --> 00:04:42,559 Speaker 3: international parties, your steel can be sourced from South Korea, 97 00:04:42,640 --> 00:04:46,279 Speaker 3: can be stores from Latin America. So there's very interesting 98 00:04:46,400 --> 00:04:48,320 Speaker 3: kind of subset as you get under the covers and 99 00:04:48,400 --> 00:04:52,200 Speaker 3: look for one company, steel may matter, for another company, 100 00:04:52,200 --> 00:04:52,599 Speaker 3: it doesn't. 101 00:04:52,720 --> 00:04:55,840 Speaker 1: I was speaking to the head of a toy manufacturer 102 00:04:56,080 --> 00:04:57,600 Speaker 1: and he was saying, well, it's not that big of 103 00:04:57,600 --> 00:04:59,320 Speaker 1: a deeal because we can kick up prices and if 104 00:04:59,360 --> 00:05:01,200 Speaker 1: people are buying a doll they can pay an extra 105 00:05:01,240 --> 00:05:04,039 Speaker 1: two dollars and they don't really care. Do your business 106 00:05:04,040 --> 00:05:06,240 Speaker 1: clients feel the same way that they can really pass 107 00:05:06,279 --> 00:05:07,480 Speaker 1: it mostly along to clients? 108 00:05:08,160 --> 00:05:11,160 Speaker 3: Generally, no, they're very concerned about passing it along, although 109 00:05:11,440 --> 00:05:14,680 Speaker 3: we're starting to see contracts now have a language in 110 00:05:14,720 --> 00:05:16,880 Speaker 3: the contract that would say, you know, we're going to 111 00:05:16,880 --> 00:05:19,520 Speaker 3: pass along the price increases. So generally know, there are 112 00:05:19,560 --> 00:05:23,600 Speaker 3: some cases that we have a special metal manufacturer. Their 113 00:05:23,640 --> 00:05:28,000 Speaker 3: products going to jet engine turbines. We need them, so yes, 114 00:05:28,000 --> 00:05:29,640 Speaker 3: the price is going to go up. It'll be a 115 00:05:29,680 --> 00:05:32,360 Speaker 3: small increase to a bigger part of a larger engine. 116 00:05:32,480 --> 00:05:33,800 Speaker 3: So they're just going to have to raise prices. 117 00:05:33,800 --> 00:05:35,360 Speaker 6: So this is where the rubber meets the road. They 118 00:05:35,360 --> 00:05:39,280 Speaker 6: increase prices. Are you hearing direct feedback that consumers are 119 00:05:39,400 --> 00:05:42,279 Speaker 6: unwilling to absorb those higher prices. 120 00:05:42,360 --> 00:05:44,920 Speaker 3: I think in consumer products you're seeing substitution, so people 121 00:05:44,960 --> 00:05:47,680 Speaker 3: are choosing one thing versus another thing. We have a 122 00:05:47,880 --> 00:05:51,040 Speaker 3: seafood supplier. They get snow crabs, right, so they get 123 00:05:51,080 --> 00:05:53,279 Speaker 3: them from Canada. They have already told us if the 124 00:05:53,320 --> 00:05:55,920 Speaker 3: tariffs go in, they're not going to sell snow crabs. 125 00:05:55,920 --> 00:05:58,360 Speaker 3: You'll be eating something else, so you won't notice that 126 00:05:58,440 --> 00:06:01,200 Speaker 3: your menu has changed. The snow crabs won't be on 127 00:06:01,279 --> 00:06:02,880 Speaker 3: it because they're just going to go up to a 128 00:06:02,960 --> 00:06:05,240 Speaker 3: price that restaurant tours we're not going to want to buy. 129 00:06:05,279 --> 00:06:07,360 Speaker 2: Hey, Chris, this was an important conversation. Let's do it 130 00:06:07,360 --> 00:06:20,359 Speaker 2: again soon. Richard Chris ma ev Ocean First Bank shift 131 00:06:20,360 --> 00:06:23,680 Speaker 2: the focus bank to commodities. Oil edging high following an 132 00:06:23,720 --> 00:06:27,360 Speaker 2: industry report which signaled a large decline in US crewed stockpiles. 133 00:06:27,400 --> 00:06:30,800 Speaker 2: Traders also weighed the prospect of a Russian Ukraine ceasefire 134 00:06:31,000 --> 00:06:33,680 Speaker 2: in the Black Sea, and readercent of Energy Aspects joined 135 00:06:33,720 --> 00:06:35,760 Speaker 2: us Now for more and Resa, welcome to the program. 136 00:06:35,839 --> 00:06:38,159 Speaker 2: Let's get to that potential ceasefire that we could see 137 00:06:38,160 --> 00:06:41,400 Speaker 2: between Ukraine and Russia on a much larger scale. What 138 00:06:41,440 --> 00:06:43,800 Speaker 2: would that do to energy prices? What would that do 139 00:06:43,920 --> 00:06:44,839 Speaker 2: to the flow of energy? 140 00:06:46,240 --> 00:06:48,839 Speaker 7: Firstly, I don't think we're going to get a seas 141 00:06:48,920 --> 00:06:51,159 Speaker 7: far anytime soon in the true sense of the world, 142 00:06:51,279 --> 00:06:52,840 Speaker 7: like you guys were discussing. I think there'll be a 143 00:06:52,880 --> 00:06:55,479 Speaker 7: lot of noise, and I think we have to remember 144 00:06:55,520 --> 00:06:59,599 Speaker 7: that both sides, Russia and Ukraine are going to tread 145 00:06:59,640 --> 00:07:02,760 Speaker 7: this kind of line where they are all appear very 146 00:07:02,800 --> 00:07:05,400 Speaker 7: positive and you know that all the outcomes are very positive, 147 00:07:05,400 --> 00:07:08,280 Speaker 7: but if you actually look at it, nothing has moved. 148 00:07:09,279 --> 00:07:12,160 Speaker 7: I think the positive spin we are seeing out of 149 00:07:12,240 --> 00:07:17,480 Speaker 7: DC on very very minimal gains has been impressive, no doubt, 150 00:07:18,080 --> 00:07:21,160 Speaker 7: But if you actually read through the details, there has 151 00:07:21,360 --> 00:07:24,600 Speaker 7: been no shift from either side on their red lines. 152 00:07:24,880 --> 00:07:28,280 Speaker 7: And I think that's the critical thing. Remember, the headlines 153 00:07:28,360 --> 00:07:31,400 Speaker 7: will have to put a positive spin so that neither 154 00:07:31,520 --> 00:07:34,440 Speaker 7: side angers the current president. I think we need to 155 00:07:34,600 --> 00:07:37,160 Speaker 7: look at the whole thing through that lens. In terms 156 00:07:37,320 --> 00:07:41,320 Speaker 7: of sanctions lifting, Remember we haven't lost any Russian oil 157 00:07:41,360 --> 00:07:44,320 Speaker 7: because of sanctions. India and China continue to buy that oil. 158 00:07:44,360 --> 00:07:47,280 Speaker 7: Any Russian oil we've lost is because of OPEC plus policy. 159 00:07:47,640 --> 00:07:50,040 Speaker 7: That's not changing. OPEK is going to continue to bring 160 00:07:50,080 --> 00:07:52,920 Speaker 7: back barrels over the summer months. Russia gets a part 161 00:07:52,960 --> 00:07:56,160 Speaker 7: of that. That's fine. Beyond that, nothing one last thing. 162 00:07:56,880 --> 00:08:00,200 Speaker 7: US sanctions on Russia, if they were to be remove 163 00:08:00,640 --> 00:08:04,600 Speaker 7: without europe going ahead, that is actually bullish for oil, 164 00:08:04,680 --> 00:08:08,200 Speaker 7: not bearish, because the original European sanctions were designed so 165 00:08:08,240 --> 00:08:12,280 Speaker 7: that Russian oil couldn't flow at all through Western shipping sanctions. 166 00:08:12,720 --> 00:08:15,840 Speaker 7: The price cap was designed to allow that to flow. 167 00:08:16,120 --> 00:08:19,640 Speaker 7: If you take away the price cap, the European sanctions 168 00:08:19,720 --> 00:08:23,720 Speaker 7: kick in without this caveat, and therefore really no Russian 169 00:08:23,720 --> 00:08:25,360 Speaker 7: oil will be able to move other than in the 170 00:08:25,440 --> 00:08:27,680 Speaker 7: dark fleet. People forget that, Amrita. 171 00:08:27,720 --> 00:08:30,760 Speaker 6: Are they even enforcing the price cap right now though? 172 00:08:31,760 --> 00:08:31,960 Speaker 5: No? 173 00:08:32,200 --> 00:08:34,280 Speaker 7: But the whole point is the price cap gives you 174 00:08:34,360 --> 00:08:37,400 Speaker 7: the ability. You can claim whatever the price it is, 175 00:08:37,640 --> 00:08:39,560 Speaker 7: but you can say, oh, because of the price cap, 176 00:08:39,600 --> 00:08:41,200 Speaker 7: we are able to move it. If you take the 177 00:08:41,240 --> 00:08:45,120 Speaker 7: price cap away, the European sanctions say they cannot use 178 00:08:45,240 --> 00:08:50,800 Speaker 7: any any Western shipping or insurance services. That's the critical thing, 179 00:08:50,840 --> 00:08:52,600 Speaker 7: because at least the price cap gives you a way 180 00:08:52,600 --> 00:08:53,520 Speaker 7: to get away from it. 181 00:08:53,760 --> 00:08:56,760 Speaker 6: When it comes to other potential energy flows, we can 182 00:08:56,800 --> 00:08:59,320 Speaker 6: see if they were to get closer to a ceasefire agreement. 183 00:08:59,400 --> 00:09:03,040 Speaker 6: Certain rav talking to task News Russian state media yesterday 184 00:09:03,320 --> 00:09:06,840 Speaker 6: said that nord Stream there is talk of nord Stream 185 00:09:06,880 --> 00:09:09,760 Speaker 6: coming back online and Rita, what do you make of that? 186 00:09:10,760 --> 00:09:12,800 Speaker 7: I think again there's going to be a lot of noise, 187 00:09:12,920 --> 00:09:16,160 Speaker 7: a lot of headlines in terms of again gas, I 188 00:09:16,160 --> 00:09:17,960 Speaker 7: think it is going to be more important for gas 189 00:09:18,040 --> 00:09:21,439 Speaker 7: than it is for oil, just given the volumes loss. Right, 190 00:09:21,480 --> 00:09:24,280 Speaker 7: Like I said, oil we haven't lost, but we keep forgetting. 191 00:09:24,360 --> 00:09:28,000 Speaker 7: This is Russia also trying to create a wedge between 192 00:09:28,000 --> 00:09:31,280 Speaker 7: Europe and the US, and that's why certain statements like 193 00:09:31,320 --> 00:09:32,760 Speaker 7: that that of course you know, we're going to bring 194 00:09:32,800 --> 00:09:34,920 Speaker 7: north stream and by the way, Europe, you need our gas. 195 00:09:35,120 --> 00:09:37,080 Speaker 7: Europe has a big say in this, and the European 196 00:09:37,120 --> 00:09:40,920 Speaker 7: sanctions are actually the main sanctions on Russia, much more 197 00:09:40,960 --> 00:09:42,920 Speaker 7: than the US. Once it's the opposite for Iran. 198 00:09:43,240 --> 00:09:46,560 Speaker 6: But how much will European gas actually be helpful to Europe? 199 00:09:46,679 --> 00:09:48,920 Speaker 6: I mean, although Europe has a lot of tough rhetoric 200 00:09:48,960 --> 00:09:51,959 Speaker 6: when it comes to Russia, they're still importing Russian gas. 201 00:09:52,480 --> 00:09:55,440 Speaker 7: Oh yeah, And look, I think this is the biggest 202 00:09:55,880 --> 00:09:58,200 Speaker 7: question mark that I don't think anybody will have a 203 00:09:58,920 --> 00:10:01,800 Speaker 7: like true answer to in the sense that we are 204 00:10:01,880 --> 00:10:05,240 Speaker 7: losing so much industrial demand and we have lost I 205 00:10:05,240 --> 00:10:08,000 Speaker 7: would say fifteen percent of gas demand we believe is 206 00:10:08,040 --> 00:10:10,400 Speaker 7: never going to come back in Europe because of the 207 00:10:10,480 --> 00:10:13,600 Speaker 7: high gas prices and the relocation of industry to places 208 00:10:13,600 --> 00:10:16,720 Speaker 7: like the US. So the question then becomes, yes, Europe 209 00:10:16,800 --> 00:10:19,320 Speaker 7: is talking about more renewables and kind of tripling down 210 00:10:19,320 --> 00:10:22,480 Speaker 7: on it. But if it's again not our basis. But 211 00:10:22,520 --> 00:10:25,520 Speaker 7: if you suddenly start to get a ceasefire and sanctions 212 00:10:25,520 --> 00:10:28,640 Speaker 7: get removed, does Europe actually change that. We do think 213 00:10:28,760 --> 00:10:32,000 Speaker 7: some European countries will go back to Russian gas, but 214 00:10:32,040 --> 00:10:34,320 Speaker 7: we're not going to get the volumes back anywhere close 215 00:10:34,360 --> 00:10:35,800 Speaker 7: to where we used to be pre war. 216 00:10:36,080 --> 00:10:37,560 Speaker 1: Are you saying, I'm rita that if there is an 217 00:10:37,760 --> 00:10:40,319 Speaker 1: end to the war between Ukraine and Russia, then it 218 00:10:40,320 --> 00:10:42,760 Speaker 1: will have an immaterial effect on the price of oil. 219 00:10:43,720 --> 00:10:46,520 Speaker 7: What's going to happen is that Russian differentials, which now 220 00:10:46,559 --> 00:10:49,000 Speaker 7: trade at a discount, will go up because Russia no 221 00:10:49,120 --> 00:10:51,720 Speaker 7: needs no longer needs to discount its oil, right because 222 00:10:51,800 --> 00:10:53,920 Speaker 7: right now it's having to discount to clear but on 223 00:10:53,960 --> 00:10:57,840 Speaker 7: a volume metric basis, No, because Russia is already producing 224 00:10:58,000 --> 00:11:00,640 Speaker 7: as much as it can within the the OPEC last 225 00:11:00,640 --> 00:11:04,200 Speaker 7: framework is just sending it to China and India. 226 00:11:04,280 --> 00:11:06,040 Speaker 1: Before I let you go, I did want to get 227 00:11:06,080 --> 00:11:08,560 Speaker 1: your take on copper and what we heard overnight from 228 00:11:08,559 --> 00:11:13,160 Speaker 1: President Trump and the likelihood of pretty aggressive tariffs on copper. 229 00:11:13,440 --> 00:11:15,920 Speaker 1: This goal to bring manufacturing back to the United States. 230 00:11:15,960 --> 00:11:18,080 Speaker 1: Shift building is a big piece of that. It's also 231 00:11:18,160 --> 00:11:20,480 Speaker 1: a part of the steel and aluminum tariffs. How much 232 00:11:20,480 --> 00:11:23,200 Speaker 1: does that shift the cost of copper in the United States. 233 00:11:23,280 --> 00:11:25,840 Speaker 1: We've seen a real departure of what's traded in the 234 00:11:25,960 --> 00:11:28,600 Speaker 1: US and what's traded on the London's Metals Exchange. 235 00:11:28,920 --> 00:11:30,520 Speaker 7: Yeah, and I think this is I mean, it's not 236 00:11:30,559 --> 00:11:33,000 Speaker 7: just copper, like you mentioned steel and aluminum. Look, I'm 237 00:11:33,040 --> 00:11:35,319 Speaker 7: in the Midwest myself. I've been meeting with a lot 238 00:11:35,360 --> 00:11:38,160 Speaker 7: of the producers, including some who were in the meeting 239 00:11:38,240 --> 00:11:41,320 Speaker 7: in the White House just last week, and I think 240 00:11:41,600 --> 00:11:44,880 Speaker 7: the shift in metals prices is becoming a real talking 241 00:11:44,920 --> 00:11:48,760 Speaker 7: point for both upstream and downstream, and ship building is 242 00:11:48,880 --> 00:11:51,720 Speaker 7: I'm including them in the downstream just in terms of 243 00:11:51,880 --> 00:11:54,080 Speaker 7: like certain producers are telling me their costs of got 244 00:11:54,160 --> 00:11:56,920 Speaker 7: raw material costs of have gone up anywhere between fifteen 245 00:11:56,960 --> 00:11:59,400 Speaker 7: and twenty percent. And I think that's why you are 246 00:11:59,440 --> 00:12:02,680 Speaker 7: going to get prize discrepancy between US metals markets and 247 00:12:02,720 --> 00:12:06,360 Speaker 7: the rest of the world, simply to kind of basically 248 00:12:06,440 --> 00:12:09,160 Speaker 7: price that in. And I think metals markets are going 249 00:12:09,200 --> 00:12:11,560 Speaker 7: to go through this huge period of volatility until we 250 00:12:11,600 --> 00:12:13,280 Speaker 7: have more clarity on the second of April. 251 00:12:13,400 --> 00:12:15,560 Speaker 2: I'm Rita. I appreciate your view. Thank you. I'm Rita. 252 00:12:15,640 --> 00:12:28,360 Speaker 2: Send their energy aspects. Jeanette Lodge Tatiga is a bad company, 253 00:12:28,360 --> 00:12:31,120 Speaker 2: writing when we added up what has already been announced 254 00:12:31,160 --> 00:12:33,360 Speaker 2: in terms of tariffs, we found that it would be 255 00:12:33,360 --> 00:12:35,959 Speaker 2: a two hundred and thirty five billion dollar impact over 256 00:12:36,000 --> 00:12:39,320 Speaker 2: twelve months, or zero point seven percent of GDP, which 257 00:12:39,360 --> 00:12:42,520 Speaker 2: is more than many investors we're expecting. Jeanette joined us 258 00:12:42,559 --> 00:12:45,199 Speaker 2: now for more. Janet, welcome to the program. Certainly surprising 259 00:12:45,240 --> 00:12:47,880 Speaker 2: how hard and fast they've moved since they walked into 260 00:12:47,880 --> 00:12:50,000 Speaker 2: the White House. Are you seeing any signs over the 261 00:12:50,040 --> 00:12:53,120 Speaker 2: last couple of days that maybe they're just softening their tone, 262 00:12:53,559 --> 00:12:54,880 Speaker 2: just maybe back in a way of touch. 263 00:12:56,080 --> 00:12:56,320 Speaker 1: Yeah. 264 00:12:56,320 --> 00:12:58,600 Speaker 8: Absolutely, I think they are trying to start to walk 265 00:12:58,640 --> 00:13:01,120 Speaker 8: back a little bit. I think it there hadn't been 266 00:13:01,120 --> 00:13:03,040 Speaker 8: a lot of numbers put out there of what the 267 00:13:03,120 --> 00:13:06,520 Speaker 8: actual impact was, and so we really try to take 268 00:13:06,559 --> 00:13:09,400 Speaker 8: what has actually been levied already on China and Canada 269 00:13:09,440 --> 00:13:12,319 Speaker 8: and Mexico when it's steel and aluminum, and then add 270 00:13:12,400 --> 00:13:15,280 Speaker 8: in reciprocal tariffs and then sectoral tariffs, and I think 271 00:13:15,320 --> 00:13:18,240 Speaker 8: that that number started to surprise some folks, and if 272 00:13:18,240 --> 00:13:20,600 Speaker 8: you see all of that coming in at once, that can. 273 00:13:20,440 --> 00:13:22,880 Speaker 5: Actually be negative for the administration. 274 00:13:23,280 --> 00:13:25,880 Speaker 8: Now, obviously we're still getting mixed signals, so we don't 275 00:13:25,920 --> 00:13:29,720 Speaker 8: necessarily know will some sectoral tariffs and maybe auto still 276 00:13:29,760 --> 00:13:32,960 Speaker 8: be announced. That is kind of up and play. And 277 00:13:33,040 --> 00:13:35,680 Speaker 8: you also have we have reciprocal tariffs that it's just 278 00:13:35,800 --> 00:13:39,240 Speaker 8: focused on higher rates that other countries charge. But then 279 00:13:39,240 --> 00:13:42,480 Speaker 8: the administration also wants to include what those countries charge 280 00:13:42,480 --> 00:13:45,719 Speaker 8: in that taxes and put that into the equation and 281 00:13:45,760 --> 00:13:47,920 Speaker 8: some other non teriff farriers, and that I think is 282 00:13:47,920 --> 00:13:50,400 Speaker 8: the question. So they need to kind of figure out 283 00:13:50,520 --> 00:13:53,360 Speaker 8: what pieces do they actually want to include and then 284 00:13:53,400 --> 00:13:55,720 Speaker 8: how that actually can be structured, because it could be 285 00:13:55,880 --> 00:13:58,400 Speaker 8: quite a shock if we come on April second, depending 286 00:13:58,400 --> 00:14:01,360 Speaker 8: on what is announced. They don't pair some of this back. 287 00:14:01,559 --> 00:14:03,560 Speaker 6: Well, when you mentioned that, I immediately think of the 288 00:14:03,559 --> 00:14:06,559 Speaker 6: European Union and the Commissioner for Trade yesterday is all 289 00:14:06,600 --> 00:14:10,559 Speaker 6: smile standing alongside Howard Lutnik and Jamison Greer Kevin Hassett 290 00:14:10,840 --> 00:14:13,800 Speaker 6: after their intents and negotiations what he's calling it, and 291 00:14:13,840 --> 00:14:16,679 Speaker 6: he says the EUSE priority is a fair balanced deal 292 00:14:17,000 --> 00:14:18,560 Speaker 6: instead of unjustified terriffs. 293 00:14:18,600 --> 00:14:20,720 Speaker 5: Do you think he's going home to Europe with a deal? 294 00:14:21,760 --> 00:14:23,920 Speaker 8: Yeah? I mean so this is what's interesting because I 295 00:14:23,960 --> 00:14:26,160 Speaker 8: think you know, we did sit here some talk about 296 00:14:26,160 --> 00:14:29,280 Speaker 8: lowering the tariff rate on autos and also trying to 297 00:14:29,320 --> 00:14:31,800 Speaker 8: get the US to lower its tariff rate on pickup trucks. 298 00:14:32,080 --> 00:14:34,040 Speaker 8: That's something that obviously can be done, that has been 299 00:14:34,040 --> 00:14:37,760 Speaker 8: a bonu in contention for a President Trump for some time. 300 00:14:38,120 --> 00:14:40,040 Speaker 8: But I think you also have to really watch this 301 00:14:40,240 --> 00:14:42,960 Speaker 8: that piece because I think overall, if you look at 302 00:14:43,120 --> 00:14:46,280 Speaker 8: just applying higher teriff rates on European goods, it's not 303 00:14:46,320 --> 00:14:48,480 Speaker 8: going to be as much of a significant impact. If 304 00:14:48,520 --> 00:14:51,520 Speaker 8: you start to add in that taxes and that impact, 305 00:14:51,840 --> 00:14:55,040 Speaker 8: that's much higher of an impact on the European Union, 306 00:14:55,320 --> 00:14:58,000 Speaker 8: And it's also more difficult for them to change that. 307 00:14:58,040 --> 00:15:01,000 Speaker 8: They're not going to be able to easily change those 308 00:15:01,040 --> 00:15:04,480 Speaker 8: taxes for the Trump administration, So it's harder to see 309 00:15:04,520 --> 00:15:06,720 Speaker 8: where that negotiation could come into play. And I think 310 00:15:06,840 --> 00:15:09,080 Speaker 8: that's going to be important as we move closer to 311 00:15:09,120 --> 00:15:10,600 Speaker 8: April second and get more details. 312 00:15:10,600 --> 00:15:13,320 Speaker 6: When we get more details in April second, what kind 313 00:15:13,360 --> 00:15:16,120 Speaker 6: of terrorsts do you think we will see immediately, and 314 00:15:16,160 --> 00:15:18,520 Speaker 6: then what other legal measures will they rely on that 315 00:15:18,560 --> 00:15:20,680 Speaker 6: will take weeks or months, say two thirty two or 316 00:15:20,720 --> 00:15:21,280 Speaker 6: three oh one. 317 00:15:22,320 --> 00:15:24,000 Speaker 8: Yeah, I mean I think that they are going to 318 00:15:24,040 --> 00:15:27,479 Speaker 8: try to announce several reciprocal tariffs immediately. 319 00:15:27,960 --> 00:15:30,040 Speaker 5: Now I think the question is is it a. 320 00:15:30,000 --> 00:15:32,600 Speaker 8: Thirty day implementation period, kind of like what we've seen 321 00:15:32,640 --> 00:15:35,440 Speaker 8: for some of the other pieces earlier this year. But 322 00:15:35,480 --> 00:15:37,440 Speaker 8: it might be more on select countries. So they're not 323 00:15:37,480 --> 00:15:39,760 Speaker 8: going to probably go for a universal tariff, which is 324 00:15:39,800 --> 00:15:42,520 Speaker 8: what they were talking about doing earlier this year. We've 325 00:15:42,560 --> 00:15:45,480 Speaker 8: moved much more from that universal tariff to this reciprocal piece. 326 00:15:45,720 --> 00:15:48,240 Speaker 8: If it's reciprocal, it could also be country by country, 327 00:15:48,320 --> 00:15:50,520 Speaker 8: which means maybe you can apply it to a handful 328 00:15:50,520 --> 00:15:53,200 Speaker 8: of countries at one time and then add in other 329 00:15:53,240 --> 00:15:54,320 Speaker 8: countries down the road. 330 00:15:54,560 --> 00:15:55,920 Speaker 5: Allows for more negotiation. 331 00:15:56,160 --> 00:15:59,040 Speaker 8: And that piece Trump has also been talking about, you 332 00:15:59,040 --> 00:16:01,080 Speaker 8: know that he wants to do tariffs on autos, and 333 00:16:01,120 --> 00:16:03,320 Speaker 8: he says that he's going to announce that soon. If 334 00:16:03,360 --> 00:16:06,160 Speaker 8: you add in of that on the EU, that kind 335 00:16:06,160 --> 00:16:10,200 Speaker 8: of also hits the European Union on autos, particularly Germany. 336 00:16:10,880 --> 00:16:13,600 Speaker 8: It would hit Ireland in terms of pharmaceuticals, so that's 337 00:16:13,600 --> 00:16:15,440 Speaker 8: going to be important piece. And I think the other 338 00:16:15,520 --> 00:16:17,720 Speaker 8: thing that's really important too is what happens with Canada 339 00:16:17,720 --> 00:16:20,560 Speaker 8: and Mexico. There are significant tariffs right now, if we're 340 00:16:20,600 --> 00:16:23,560 Speaker 8: talking about whether or not Goods or USA compliant or not, 341 00:16:24,000 --> 00:16:25,880 Speaker 8: and are those changed. 342 00:16:25,560 --> 00:16:27,120 Speaker 5: On April second, engine they go. 343 00:16:27,280 --> 00:16:29,920 Speaker 8: Just to reciprocal tariffs, which is much more manageable, or 344 00:16:29,960 --> 00:16:32,040 Speaker 8: do we have reciprocal on top of what has already 345 00:16:32,080 --> 00:16:34,720 Speaker 8: been announced for Canada and Mexico and that could actually 346 00:16:34,720 --> 00:16:37,440 Speaker 8: be much more burdensome and much more troublesome for the market. 347 00:16:37,560 --> 00:16:39,000 Speaker 1: I feel like we're all trying to put together a 348 00:16:39,040 --> 00:16:41,320 Speaker 1: tariff puzzle and figure out what pieces people are saying 349 00:16:41,320 --> 00:16:43,400 Speaker 1: and then put it in its correct place. And if 350 00:16:43,400 --> 00:16:45,600 Speaker 1: we were creating that kind of puzzle, where would this 351 00:16:45,640 --> 00:16:49,880 Speaker 1: copper tariff piece really get put? Yesterday when President Trump 352 00:16:49,920 --> 00:16:51,840 Speaker 1: announced that he is going to put tariffs on copper 353 00:16:51,880 --> 00:16:55,200 Speaker 1: and has previously discussed something like twenty five percent of 354 00:16:55,240 --> 00:16:56,960 Speaker 1: all incoming copper imports. 355 00:16:58,160 --> 00:16:59,680 Speaker 5: Yeah, I mean, so this is something that they are 356 00:16:59,680 --> 00:17:00,760 Speaker 5: trying to rush, right. 357 00:17:00,800 --> 00:17:02,600 Speaker 8: So usually you have two hundred and seventy days to 358 00:17:02,640 --> 00:17:05,439 Speaker 8: do this kind of investigation, and this is something that 359 00:17:05,480 --> 00:17:08,240 Speaker 8: he did with steel and aluminum, so but they it 360 00:17:08,400 --> 00:17:10,919 Speaker 8: follows at least a little bit more of a process 361 00:17:10,960 --> 00:17:13,920 Speaker 8: with regard to having input from the public and from 362 00:17:13,960 --> 00:17:15,440 Speaker 8: companies that would be impacted. 363 00:17:15,720 --> 00:17:17,200 Speaker 5: But I think this is something that he is. 364 00:17:17,160 --> 00:17:20,520 Speaker 8: Trying to target certain areas and he feels like the 365 00:17:20,680 --> 00:17:23,399 Speaker 8: stealing aluminum tariffs. You saw that we now got rid 366 00:17:23,440 --> 00:17:26,080 Speaker 8: of the exemptions with the copper, that could be a 367 00:17:26,119 --> 00:17:26,960 Speaker 8: similar story. 368 00:17:27,040 --> 00:17:29,960 Speaker 5: It also could be potentially somewhat. 369 00:17:29,560 --> 00:17:32,280 Speaker 8: Of a negotiating tool if you can announce it and 370 00:17:32,320 --> 00:17:34,320 Speaker 8: then it kind of hits certain partners and there's an 371 00:17:34,359 --> 00:17:37,560 Speaker 8: opportunity there. But it seems like with the commodity tariffs 372 00:17:37,600 --> 00:17:40,080 Speaker 8: in particular, Trump looks to be looking to focus on 373 00:17:40,119 --> 00:17:41,720 Speaker 8: putting those into place and. 374 00:17:41,640 --> 00:17:44,119 Speaker 5: Not allowing as many exemptions. So that's something we're definitely 375 00:17:44,119 --> 00:17:45,359 Speaker 5: going to be watching and going forward. 376 00:17:45,560 --> 00:17:48,200 Speaker 1: Jet there has been this shift in tone more generally, 377 00:17:48,240 --> 00:17:50,479 Speaker 1: and John started the show talking about it. We've been 378 00:17:50,520 --> 00:17:53,120 Speaker 1: feeling it in terms of market performance, and we're hearing 379 00:17:53,200 --> 00:17:56,000 Speaker 1: it not just from the White House and Tarifa negotiations, 380 00:17:56,280 --> 00:17:59,639 Speaker 1: but also from the House, with House Speaker Mike Johnson 381 00:17:59,640 --> 00:18:02,280 Speaker 1: coming out yesterday saying we have to bring stability to markets, 382 00:18:02,280 --> 00:18:05,440 Speaker 1: saying that negotiators around the budget not necessarily terriffs, need 383 00:18:05,480 --> 00:18:07,760 Speaker 1: to give people certainty so that they can quote make 384 00:18:07,800 --> 00:18:11,240 Speaker 1: decisions about expanding their businesses and jobs. How much are 385 00:18:11,240 --> 00:18:15,080 Speaker 1: we hearing a kind of around the table feeling of 386 00:18:15,119 --> 00:18:19,040 Speaker 1: concern about the uncertainty in Washington, DC. That is a 387 00:18:19,080 --> 00:18:21,879 Speaker 1: material shift than say, even a couple days ago. 388 00:18:22,520 --> 00:18:24,600 Speaker 8: Absolutely, I definitely think that this is definitely a part 389 00:18:24,600 --> 00:18:27,280 Speaker 8: of the conversation for policy makers. And if you think 390 00:18:27,320 --> 00:18:30,840 Speaker 8: back to the first Trump term, you had them passing 391 00:18:30,840 --> 00:18:34,000 Speaker 8: a tax bill first and then going in and putting 392 00:18:34,040 --> 00:18:36,600 Speaker 8: on tariffs, primarily on China. So there are much more 393 00:18:36,640 --> 00:18:39,320 Speaker 8: modest and scope than they are today, and that created 394 00:18:39,400 --> 00:18:42,120 Speaker 8: a cushion for the market. This time we have the opposite. 395 00:18:42,200 --> 00:18:44,760 Speaker 8: We have tariffs coming into place first. We're not obviously 396 00:18:44,800 --> 00:18:47,280 Speaker 8: going to have a tax bill done by April, so 397 00:18:47,359 --> 00:18:49,920 Speaker 8: you're going to have that more difficult piece coming in 398 00:18:50,040 --> 00:18:51,120 Speaker 8: first before you get some. 399 00:18:51,119 --> 00:18:53,760 Speaker 5: Of that fiscal policy to help balance it out. 400 00:18:54,040 --> 00:18:56,520 Speaker 8: I think you do see members of Congress thinking about 401 00:18:56,560 --> 00:18:59,159 Speaker 8: what will be the tariff impact and thinking about do 402 00:18:59,240 --> 00:19:02,399 Speaker 8: we need to include some more pro growth to tax 403 00:19:02,440 --> 00:19:05,040 Speaker 8: policies within that tax bill, So kind of bringing back 404 00:19:05,080 --> 00:19:09,240 Speaker 8: the R and D immediate expensing, having one hundred percent 405 00:19:09,280 --> 00:19:13,680 Speaker 8: bonus appreciation, doing that potential fifteen percent tax rate for 406 00:19:13,800 --> 00:19:17,040 Speaker 8: domestic manufacturers, potentially even other pieces. So I think they're 407 00:19:17,040 --> 00:19:20,000 Speaker 8: going to have to start being thinking about those proposals, 408 00:19:20,200 --> 00:19:23,240 Speaker 8: and I think they are currently and how they get structured, 409 00:19:23,280 --> 00:19:25,920 Speaker 8: and then as we get the TERRORF announcements, that will 410 00:19:25,920 --> 00:19:27,600 Speaker 8: give them more to know what they need to do 411 00:19:27,720 --> 00:19:29,840 Speaker 8: moving forward as that tax bill actually gets built. 412 00:19:30,000 --> 00:19:32,240 Speaker 2: Jennet, appreciate your time as always to not load that 413 00:19:32,480 --> 00:19:43,920 Speaker 2: I should take us a bad company, joining us around 414 00:19:43,960 --> 00:19:45,800 Speaker 2: the type with adventuy shamp for a self jam, jumping 415 00:19:45,800 --> 00:19:47,480 Speaker 2: into the sea, savantrac. Good to see you, Good to 416 00:19:47,520 --> 00:19:49,320 Speaker 2: see you too. I've been asking this question. We all 417 00:19:49,320 --> 00:19:51,919 Speaker 2: have all morning things really that bad based on what 418 00:19:51,920 --> 00:19:54,280 Speaker 2: we sew and consumer confidence numbers in the past twenty 419 00:19:54,320 --> 00:19:54,760 Speaker 2: four US. 420 00:19:54,920 --> 00:19:57,600 Speaker 4: So the hard data has been relatively good, right. You 421 00:19:57,640 --> 00:20:01,960 Speaker 4: have a strong, relatively strong label market. Inflation is easing 422 00:20:02,080 --> 00:20:04,560 Speaker 4: ever so gradually. Even retail sales, even though it's a 423 00:20:04,600 --> 00:20:07,680 Speaker 4: little bit below consensus, was relatively charged to the consumers 424 00:20:07,680 --> 00:20:11,399 Speaker 4: holding up. But if you look at every soft or 425 00:20:11,440 --> 00:20:16,040 Speaker 4: survey based data that you're getting it's all quite you know, 426 00:20:16,280 --> 00:20:19,639 Speaker 4: points to kind of a souring sentiment. So the question 427 00:20:19,720 --> 00:20:22,000 Speaker 4: is what's the lag between that souring sentiment and when 428 00:20:22,000 --> 00:20:24,720 Speaker 4: that actually feeds through to the economy. If you look 429 00:20:24,760 --> 00:20:28,200 Speaker 4: at say the last go around, the experiences is you know, 430 00:20:28,400 --> 00:20:31,280 Speaker 4: after terrorists, it typically takes about three or four months 431 00:20:31,280 --> 00:20:33,160 Speaker 4: for that to actually show up in the hard data. 432 00:20:33,560 --> 00:20:36,640 Speaker 4: But people are starting to incorporate that into their forecast. 433 00:20:36,720 --> 00:20:39,480 Speaker 4: We saw that from the fat They're lowering their growth forecasts, 434 00:20:39,920 --> 00:20:43,960 Speaker 4: they're increasing their the unemployment rate, and they have inflation 435 00:20:44,119 --> 00:20:46,399 Speaker 4: higher for the year. So all of that points to 436 00:20:46,600 --> 00:20:50,840 Speaker 4: kind of a stagnating environment and that's not really great, 437 00:20:51,840 --> 00:20:53,600 Speaker 4: you know for the markets, which is. 438 00:20:53,600 --> 00:20:56,000 Speaker 1: The reason why I think people are struggling to understand 439 00:20:56,000 --> 00:20:58,199 Speaker 1: the role of bonds with all of this. Are they 440 00:20:58,240 --> 00:21:00,480 Speaker 1: an offset or aren't they If you have a slow 441 00:21:00,520 --> 00:21:02,439 Speaker 1: down in growth, usually the knew jerk reaction is to 442 00:21:02,440 --> 00:21:05,440 Speaker 1: go into duration. This time around, is it? 443 00:21:06,000 --> 00:21:06,360 Speaker 2: I think? 444 00:21:06,400 --> 00:21:06,480 Speaker 8: So? 445 00:21:06,920 --> 00:21:10,320 Speaker 4: I think that when you see the equity markets start 446 00:21:10,320 --> 00:21:12,760 Speaker 4: to correct, you are going to see bonds perform. 447 00:21:12,840 --> 00:21:13,040 Speaker 7: Well. 448 00:21:13,080 --> 00:21:16,480 Speaker 4: That negative correlation, I think is very much in play. 449 00:21:16,520 --> 00:21:18,359 Speaker 4: And you saw that You've seen that sort of price 450 00:21:18,400 --> 00:21:20,919 Speaker 4: action over even the last couple of months. I mean, 451 00:21:20,960 --> 00:21:24,800 Speaker 4: equities have sold off quite strongly and you've seen, you know, 452 00:21:24,880 --> 00:21:27,280 Speaker 4: bonds benefit from that. So I think that that's what 453 00:21:27,400 --> 00:21:30,480 Speaker 4: dynamic is here to stay. There's also a lot of 454 00:21:30,560 --> 00:21:33,760 Speaker 4: other reasons why I think I'm somewhat bullish on bonds. 455 00:21:33,760 --> 00:21:37,040 Speaker 4: We actually have teny yells going to three seventy five 456 00:21:37,200 --> 00:21:39,600 Speaker 4: by the end of the year. In an environment where 457 00:21:39,640 --> 00:21:41,359 Speaker 4: the Fed is going to keep policy on hold and 458 00:21:41,400 --> 00:21:42,919 Speaker 4: the front end is going to be pegged, you're going 459 00:21:42,960 --> 00:21:45,240 Speaker 4: to see that rally come in the long and you're 460 00:21:45,240 --> 00:21:49,280 Speaker 4: actually going to see flatter yield curves for the remainder 461 00:21:49,280 --> 00:21:52,199 Speaker 4: of the year. There's also sort of demand dynamics that 462 00:21:52,240 --> 00:21:55,200 Speaker 4: could favor treasures. For instance, if you see a change 463 00:21:55,200 --> 00:21:58,399 Speaker 4: in the regulatory framework and there's changes to the supplementary 464 00:21:58,480 --> 00:22:00,800 Speaker 4: leveragation requirements, I think you're going to see more demand 465 00:22:01,480 --> 00:22:04,119 Speaker 4: from banks and primary dealers for treasure. So in that 466 00:22:04,200 --> 00:22:07,080 Speaker 4: sort of environment, I can see tenyre treasure yelds actually 467 00:22:07,119 --> 00:22:09,840 Speaker 4: heading towards three seventy five by the end of the year. 468 00:22:09,960 --> 00:22:11,840 Speaker 1: So this actually flies in the face of what a 469 00:22:11,880 --> 00:22:13,480 Speaker 1: lot of people come on the show and talk about. 470 00:22:13,600 --> 00:22:16,200 Speaker 1: They say, what's going on in Germany. This fiscal expansion 471 00:22:16,560 --> 00:22:19,600 Speaker 1: increases the amount of develop market debt. Globally, you have 472 00:22:20,200 --> 00:22:23,439 Speaker 1: sticky inflation that is going to remain persistently so and 473 00:22:23,440 --> 00:22:26,080 Speaker 1: then on top of that, you have budget concerns, especially 474 00:22:26,080 --> 00:22:28,280 Speaker 1: given the fact that the deficit is likely to expand 475 00:22:28,320 --> 00:22:30,800 Speaker 1: by three trillion dollars over the next ten years on 476 00:22:30,880 --> 00:22:33,920 Speaker 1: the base case for what right now the GOP is 477 00:22:33,960 --> 00:22:36,919 Speaker 1: proposing in Washington, d C. How do you just shrug 478 00:22:36,920 --> 00:22:37,480 Speaker 1: that all off. 479 00:22:38,280 --> 00:22:41,040 Speaker 4: So there is I would say, for the first time 480 00:22:41,440 --> 00:22:45,920 Speaker 4: in the last decade decoupling. If you were between TENNY 481 00:22:46,040 --> 00:22:48,720 Speaker 4: treasure yields, for instance, in bone yields and JGB eiels, 482 00:22:49,080 --> 00:22:50,960 Speaker 4: I think bone yieos are actually going to go higher 483 00:22:50,960 --> 00:22:54,159 Speaker 4: because of more deficit spending coming from Germany and all 484 00:22:54,200 --> 00:22:56,760 Speaker 4: the other countries in Europe, and in the US it's 485 00:22:56,800 --> 00:22:58,640 Speaker 4: going to be the other way around, where I think 486 00:22:58,720 --> 00:23:01,240 Speaker 4: Treasury Secretary Vestin is going want to issue more bills 487 00:23:01,640 --> 00:23:04,480 Speaker 4: and not as much in coupon issue in sizes. So 488 00:23:04,520 --> 00:23:07,960 Speaker 4: we actually have the ten yure treasury boom spread going 489 00:23:08,080 --> 00:23:11,199 Speaker 4: to forty five basis points by the end of the year. 490 00:23:11,240 --> 00:23:14,560 Speaker 4: So that's a pretty dramatic narrowing of that spread, and 491 00:23:14,600 --> 00:23:16,960 Speaker 4: the decoupling is not just between treasures and booms, but 492 00:23:17,000 --> 00:23:20,199 Speaker 4: it's also between treasurees and jgb's, So that is I 493 00:23:20,240 --> 00:23:22,520 Speaker 4: think is going to be a paradigm shift for this year. 494 00:23:22,600 --> 00:23:24,199 Speaker 6: When do you think he wants to change that issuance 495 00:23:24,240 --> 00:23:27,239 Speaker 6: because so far we haven't seen any changes to what 496 00:23:27,480 --> 00:23:30,280 Speaker 6: Secretary Yellen was doing prior to him walking in the door. 497 00:23:31,000 --> 00:23:33,720 Speaker 4: So I think that they probably keep coupon issuan size 498 00:23:33,760 --> 00:23:35,800 Speaker 4: is stable for the remainder of the year, perhaps even 499 00:23:35,880 --> 00:23:38,320 Speaker 4: to the first quarter of next year, and they probably 500 00:23:38,320 --> 00:23:39,760 Speaker 4: issue a lot more by. 501 00:23:39,640 --> 00:23:40,480 Speaker 5: Way of bills. 502 00:23:40,800 --> 00:23:43,480 Speaker 4: And what's interesting to me from the last fm C 503 00:23:43,640 --> 00:23:48,800 Speaker 4: meeting is the fact that the Fed is basically ended 504 00:23:48,960 --> 00:23:53,200 Speaker 4: its quantitative tightening programs, so they're only reducing their boundariet 505 00:23:53,200 --> 00:23:57,160 Speaker 4: by five billion roughly and mortgages of course every month, 506 00:23:57,280 --> 00:23:59,560 Speaker 4: which means that they're going to be buying more at 507 00:23:59,560 --> 00:24:04,480 Speaker 4: some point. The maturing mortgages probably get reinvested into into 508 00:24:04,480 --> 00:24:08,440 Speaker 4: into treasury bills, so that gives the treasuring more room 509 00:24:08,480 --> 00:24:10,680 Speaker 4: to issue in the very front end as opposed to 510 00:24:10,720 --> 00:24:12,119 Speaker 4: increase in COO bunishment sizes. 511 00:24:12,320 --> 00:24:14,359 Speaker 6: Since we're a week away from tariff day. I wanted 512 00:24:14,359 --> 00:24:16,960 Speaker 6: to get your thoughts and what you thought the FED 513 00:24:17,400 --> 00:24:19,960 Speaker 6: thinking about tariff's being transitory. 514 00:24:20,280 --> 00:24:21,320 Speaker 5: Do you think that's accurate? 515 00:24:21,840 --> 00:24:24,320 Speaker 4: You know, I'm actually starting to hate the tea word 516 00:24:24,400 --> 00:24:29,760 Speaker 4: because it's really really starting. It's really really, you know, 517 00:24:29,840 --> 00:24:32,680 Speaker 4: difficult to know what's going to happen. I mean, yes, 518 00:24:33,760 --> 00:24:37,119 Speaker 4: logically speaking, if you see a one time you know, 519 00:24:37,200 --> 00:24:40,160 Speaker 4: increase in prices, that has to be somewhat you know, transitor, 520 00:24:40,200 --> 00:24:42,720 Speaker 4: and you're seeing that play out in front of inflation 521 00:24:42,760 --> 00:24:45,320 Speaker 4: break evens. You see two year inflation break evens. You're 522 00:24:45,320 --> 00:24:47,400 Speaker 4: seeing a lot of that getting priced into the very front. 523 00:24:47,400 --> 00:24:50,000 Speaker 4: And as supposed to look at say ten yure break evens, 524 00:24:50,000 --> 00:24:52,480 Speaker 4: so five or forward five year break evens, those are 525 00:24:52,520 --> 00:24:56,240 Speaker 4: actually quite low. So the market is also thinking that 526 00:24:56,280 --> 00:24:57,840 Speaker 4: it's going to be sort of a somewhat of a 527 00:24:57,880 --> 00:25:00,920 Speaker 4: one year two year inflation is as opposed to something 528 00:25:00,920 --> 00:25:04,120 Speaker 4: that's more longer term. But I'm not willing to kind 529 00:25:04,160 --> 00:25:07,000 Speaker 4: of bind into that transitory narrative because that transitory narrative 530 00:25:07,000 --> 00:25:07,960 Speaker 4: could be a couple of years. 531 00:25:08,080 --> 00:25:11,080 Speaker 2: Just finally, did you say forty five forty five basis points? 532 00:25:11,160 --> 00:25:13,320 Speaker 4: Yes, it's a little dramatic we're at. 533 00:25:13,200 --> 00:25:15,240 Speaker 2: One fifty five right now. We haven't seen anything like 534 00:25:15,280 --> 00:25:18,080 Speaker 2: that since twenty thirteen. It's been a long long time, yep. 535 00:25:18,520 --> 00:25:20,720 Speaker 4: And that's the that's the dead break rule, right And 536 00:25:21,280 --> 00:25:24,399 Speaker 4: what's also interesting to me is that as sentiments hours 537 00:25:24,400 --> 00:25:28,280 Speaker 4: in the US, sentiment's actually improving in Europe because of 538 00:25:28,320 --> 00:25:31,600 Speaker 4: the fact that you look at the zwzifos, the service 539 00:25:31,720 --> 00:25:35,359 Speaker 4: all point to more optimism in Europe and pessimism in 540 00:25:35,400 --> 00:25:38,479 Speaker 4: the US. So I can see them issuing a lot, 541 00:25:38,800 --> 00:25:40,800 Speaker 4: you know, more debt and then that kind of pushing 542 00:25:41,040 --> 00:25:41,800 Speaker 4: bon yos. 543 00:25:41,760 --> 00:25:43,199 Speaker 2: Just to help us understand this a little bit more. 544 00:25:43,200 --> 00:25:44,680 Speaker 2: So you've got the spread. I use my hands will 545 00:25:44,680 --> 00:25:46,760 Speaker 2: make this work, all right. So we're like this right now. 546 00:25:47,040 --> 00:25:48,920 Speaker 2: Is that Germany coming up to the US, the US 547 00:25:48,960 --> 00:25:50,920 Speaker 2: coming down to Germany? Or is it both? It's both 548 00:25:51,400 --> 00:25:53,280 Speaker 2: and it's equal parts equal measures. 549 00:25:53,359 --> 00:25:55,320 Speaker 4: So we have tenny years going to about three seventy 550 00:25:55,320 --> 00:25:57,320 Speaker 4: five at the end of the year, and bonn Yo's 551 00:25:57,359 --> 00:25:59,040 Speaker 4: going perhaps towards you know. 552 00:25:59,000 --> 00:26:02,200 Speaker 2: Three Germany, and most of the work here we're. 553 00:26:02,000 --> 00:26:05,000 Speaker 4: Just I mean here we're just showing just the treagies 554 00:26:05,040 --> 00:26:07,240 Speaker 4: versus bones. But you're going to see all of Europe 555 00:26:07,280 --> 00:26:07,840 Speaker 4: doing a lot more. 556 00:26:07,920 --> 00:26:11,480 Speaker 2: The periphery comes along for the ride. I guess to 557 00:26:11,520 --> 00:26:14,000 Speaker 2: some extent you think they can handle that. I We'll 558 00:26:14,040 --> 00:26:16,359 Speaker 2: have to see. That's the big question, isn't it whether 559 00:26:16,359 --> 00:26:19,480 Speaker 2: the periphery can actually handle that adjustment in borrowing costs 560 00:26:19,520 --> 00:26:21,240 Speaker 2: they're about to see off the back of the additional 561 00:26:21,280 --> 00:26:22,600 Speaker 2: supply from Germany. 562 00:26:22,680 --> 00:26:24,920 Speaker 1: I'm guessing that this is going to create a lot 563 00:26:24,960 --> 00:26:27,639 Speaker 1: of friction I can imagine among the EU if you 564 00:26:27,680 --> 00:26:29,879 Speaker 1: think about the fact that the periphery has been doing 565 00:26:29,920 --> 00:26:32,080 Speaker 1: the heavy lifting with growth, and now they're going to 566 00:26:32,080 --> 00:26:34,919 Speaker 1: get penalized by the fact that now Germany decides to 567 00:26:34,960 --> 00:26:37,680 Speaker 1: borrow after they've been doing it, and then penalized for borrowing. 568 00:26:37,760 --> 00:26:38,800 Speaker 2: So it creates a. 569 00:26:38,760 --> 00:26:42,320 Speaker 1: Real interesting question mark here. I don't know the answer 570 00:26:42,320 --> 00:26:43,879 Speaker 1: to this, because they can't engage in that kind of 571 00:26:43,880 --> 00:26:44,960 Speaker 1: fiscal behavior as well. 572 00:26:45,080 --> 00:26:46,639 Speaker 2: For Give me for the rapid five because it's a 573 00:26:46,640 --> 00:26:49,200 Speaker 2: phenomenal call. What's the timeline for that call to get 574 00:26:49,200 --> 00:26:50,360 Speaker 2: back to that forty five. 575 00:26:50,880 --> 00:26:52,600 Speaker 4: By the end of the year. A lot of the 576 00:26:52,800 --> 00:26:55,520 Speaker 4: lead pricing is going to happen, especially in bones, probably 577 00:26:55,520 --> 00:26:56,320 Speaker 4: towards the end of the year. 578 00:26:56,400 --> 00:26:59,040 Speaker 2: That's one to watch that's for sure, Sabater a phenomenal call. 579 00:26:59,080 --> 00:27:00,680 Speaker 2: It's going to see you as a thanks for catching 580 00:27:00,720 --> 00:27:02,720 Speaker 2: up with a sabatich Ouf for there of SoC gen. 581 00:27:03,440 --> 00:27:07,000 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 582 00:27:07,000 --> 00:27:10,080 Speaker 2: in markets, economics, an gior politics. You can watch the 583 00:27:10,119 --> 00:27:13,119 Speaker 2: show live on Bloomberg TV weekday mornings from six am 584 00:27:13,240 --> 00:27:17,240 Speaker 2: to nine am Eastern. 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