WEBVTT - Google Partially Loses Advertising Tech Antitrust Case 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.520 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.520 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.840 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.040 us live on YouTube. 0:00:24.239 --> 0:00:27.600 Big news in the world of kind of digital advertising, 0:00:27.640 --> 0:00:32.920 Google partially loses US advertising tech anti trust case. So 0:00:32.960 --> 0:00:36.240 a federal judge found Google guilty of illegally monopolizing online 0:00:36.240 --> 0:00:41.559 advertising technology markets for advertising exchanges and tools used by websites, 0:00:41.680 --> 0:00:43.600 websites to sell ad space. To figure out what all 0:00:43.680 --> 0:00:45.599 that means, We've got some smart people who do this. 0:00:45.640 --> 0:00:49.320 We have people Bloomberg Intelligence that just look at litigation 0:00:50.320 --> 0:00:52.559 and what it means for certain companies because that can 0:00:52.640 --> 0:00:55.640 move stocks in a big, big way. We've got a 0:00:55.640 --> 0:00:57.840 couple of voices. You're the one, you know, Jennifer Ree, 0:00:57.880 --> 0:01:00.880 a Bloomberg Intelligence senior litigation analys Talk to her for 0:01:01.280 --> 0:01:02.760 a long time. She helps us out on a lot 0:01:02.800 --> 0:01:04.840 of these big cases. Now we've got another voice as 0:01:04.840 --> 0:01:08.760 well on Bloomberg Intelligence, Justin Turci, Bloomberg Intelligence Antitrust, Litigation 0:01:08.800 --> 0:01:13.200 and policychanneles. He's down there in d C. Right now, Jen, 0:01:13.240 --> 0:01:15.840 talk to us about Google here. What's the what did 0:01:15.880 --> 0:01:16.839 the court find here? 0:01:17.280 --> 0:01:20.119 Yeah, you know, this is a really complicated case, honestly, Paul. 0:01:20.800 --> 0:01:22.959 Google has these products which you refer to. 0:01:23.040 --> 0:01:25.319 It's called the ad tech stack, and it's not something 0:01:25.400 --> 0:01:28.120 you know, normal consumers know about, but it's a series 0:01:28.160 --> 0:01:31.920 of software from start to finish whereby publishers and advertisers 0:01:31.959 --> 0:01:34.320 can come together to sell and buy space on the Internet. 0:01:34.480 --> 0:01:37.600 Right And it's important because it's moving very quickly and 0:01:37.959 --> 0:01:41.000 lining up the ads properly, you know, with the consumers 0:01:41.040 --> 0:01:44.000 that should see those ads. Google actually has, through a 0:01:44.040 --> 0:01:47.039 series of acquisitions and some of its own products, control 0:01:47.080 --> 0:01:50.520 over that entire stack. It has competitors for certain pieces, 0:01:50.680 --> 0:01:52.400 but it's one of the only ones that has. 0:01:52.240 --> 0:01:52.920 All the pieces. 0:01:52.920 --> 0:01:55.960 And so the allegation here was that Google was manipulating 0:01:56.000 --> 0:01:58.800 its control over some very desirable pieces of the stack 0:01:59.080 --> 0:02:02.240 to force publisher and advertisers to use all of its products, 0:02:02.400 --> 0:02:05.120 taking fees all along the way, and basically naming its 0:02:05.160 --> 0:02:07.800 price because it had these must have products. So what 0:02:07.840 --> 0:02:10.359 this judge found was that for some of those products, 0:02:10.440 --> 0:02:13.120 one on the publisher side, the publisher ad server, and 0:02:13.160 --> 0:02:15.200 then the ad exchange that sits right in the middle 0:02:15.240 --> 0:02:17.919 and does the auction between the advertiser and the publisher. 0:02:18.240 --> 0:02:21.320 That Google was monopolizing both of those products and also 0:02:21.480 --> 0:02:25.280 illegally tying them together. Meaning hey, publishers and advertisers, if 0:02:25.280 --> 0:02:27.400 you want to use our ad exchange where we have 0:02:27.440 --> 0:02:30.600 these really desirable advertisers, you have to use our publisher 0:02:30.600 --> 0:02:32.840 ad server and therefore we keep our ninety percent or 0:02:32.840 --> 0:02:33.639 so market share. 0:02:34.040 --> 0:02:36.960 All right, justin let's bring you in here to just 0:02:37.000 --> 0:02:41.040 get your take on the context of Google, because this 0:02:41.080 --> 0:02:43.520 isn't the first time that there's been an ANATRUS case 0:02:43.919 --> 0:02:47.600 against Google. What did you make of this decision? 0:02:48.560 --> 0:02:51.040 Yeah? Absolutely, And I think Jen really hit the nail 0:02:51.040 --> 0:02:53.880 on the head here. You know, this is obviously compounding 0:02:53.919 --> 0:02:56.160 the search ruling that came out last year, and we're 0:02:56.160 --> 0:02:58.880 heading too a remedy's phase on that case this coming Monday. 0:02:59.080 --> 0:03:02.400 But to Jen's point, really this aspect of the ruling 0:03:02.480 --> 0:03:05.040 focusing on the publisher adserver in that exchange that Jen 0:03:05.120 --> 0:03:06.960 said sits in the middle. That is the crux of 0:03:07.000 --> 0:03:09.280 the case here. The government is going to likely ask 0:03:09.360 --> 0:03:12.600 now for divestitures of that publisher adserver and the ad 0:03:12.600 --> 0:03:15.040 exchange in the middle. But I really do question whether 0:03:15.160 --> 0:03:17.080 or not the quarters in a position to order that. 0:03:17.480 --> 0:03:19.519 I think a lot of testimony at the trial which 0:03:19.560 --> 0:03:22.760 I attended, really points to the fact the publishers feel 0:03:22.840 --> 0:03:25.560 reliant on the ad server because the ad exchange in 0:03:25.600 --> 0:03:28.480 the middle then gives them the real time advertising they 0:03:28.520 --> 0:03:30.679 want from Google Ads. So if you sip that court 0:03:30.680 --> 0:03:33.160 in the middle, perhaps you get a remedy that's desirable 0:03:33.200 --> 0:03:37.000 without actually forcing a divestiture either of those properties. 0:03:38.120 --> 0:03:40.560 Justin I just I wonder like at the trial, who 0:03:40.640 --> 0:03:42.680 do they get to get up on the standard say, 0:03:43.120 --> 0:03:46.560 I don't like Google? Doesn't everybody kind of Is anybody 0:03:46.640 --> 0:03:50.360 really complaining about Google and its advertising service? 0:03:51.200 --> 0:03:53.880 Yeah, you know, Paul, I think really who's complaining is 0:03:53.920 --> 0:03:56.680 the publishers who are selling that space on their websites 0:03:56.720 --> 0:03:59.400 through the publisher ad server, right. I think their complaint 0:03:59.480 --> 0:04:01.560 is largely they don't really have a lot of control 0:04:01.600 --> 0:04:03.760 over the kind of ads end up on their website. 0:04:03.840 --> 0:04:06.160 They don't have control over the pricing involved with all 0:04:06.160 --> 0:04:08.080 of that. They don't really like the fees that are 0:04:08.080 --> 0:04:09.880 involved in If they want to use a different add 0:04:09.880 --> 0:04:13.000 ex change in the middle, perhaps and find a lower rate. 0:04:13.160 --> 0:04:14.840 You know that they're paying to get those ads for 0:04:15.000 --> 0:04:17.400 furnish to their website. Don't want to collect a higher fee. 0:04:17.520 --> 0:04:19.640 They're not able to do that if they're really relying 0:04:19.720 --> 0:04:22.320 upon the prices of the policies that Google is using 0:04:22.360 --> 0:04:24.400 to display those ads on their properties. 0:04:27.000 --> 0:04:30.920 What did Google say in response, Well, you know, Google 0:04:30.920 --> 0:04:33.599 would say, look, we have loads of competitors for these products. 0:04:33.640 --> 0:04:35.760 You know, they sort of pick apart the policies that. 0:04:37.040 --> 0:04:39.600 The Department of Justice pointed to, saying that you're forcing 0:04:39.680 --> 0:04:41.960 these companies to use your products, saying no, no, no no, 0:04:42.000 --> 0:04:43.719 based on these policies, they're not forced. 0:04:43.880 --> 0:04:45.960 They have options. They can go to our competitors. 0:04:46.000 --> 0:04:48.479 And by the way, there's this doctrine an antitrust and 0:04:48.520 --> 0:04:51.520 it's called a refusal to deal, and essentially it's a 0:04:51.520 --> 0:04:54.600 big defense that's used by a lot of these companies. Essentially, 0:04:54.600 --> 0:04:56.960 what the refusal to deal doctrine says is that any 0:04:56.960 --> 0:04:59.080 company has the right to deal with who they want 0:04:59.120 --> 0:05:01.560 to and they don't necessarily have to do business with 0:05:01.600 --> 0:05:04.440 their competitors. So, in other words, a competitor ad exchange 0:05:04.480 --> 0:05:08.240 doing working with Google's publisher ad server, and that can 0:05:08.440 --> 0:05:11.919 often work but in certain cases, the conduct of the 0:05:11.920 --> 0:05:14.760 company goes beyond just sort of what's covered by a 0:05:14.800 --> 0:05:18.000 refusal to deal, and it becomes an unreasonable restraint of trade. 0:05:18.080 --> 0:05:19.560 And that's where you sort of get past that. 0:05:19.640 --> 0:05:21.719 So what Google tried to say is, well, this isn't 0:05:21.760 --> 0:05:23.960 unlawful under the intetist laws because we don't have to 0:05:23.960 --> 0:05:25.280 do business with our competitors. 0:05:25.760 --> 0:05:26.080 Folks. 0:05:26.080 --> 0:05:29.880 Here at Bloomberg, we have complete transparency amongst all employees. 0:05:29.920 --> 0:05:31.719 We know where everybody is all the time. It's called 0:05:31.720 --> 0:05:34.880 the outfunction. It's the calendar I look for justin like, 0:05:34.880 --> 0:05:37.400 where is this guy? And he's based in New York, 0:05:37.920 --> 0:05:40.040 but he's down in d C. And I go look 0:05:40.080 --> 0:05:42.960 at his calendar, which is the outfunction, and he's It's 0:05:42.960 --> 0:05:47.680 something called the FIC versus Meta trial, another technology company. 0:05:48.480 --> 0:05:50.520 Why are you down in DC for this trial? What 0:05:50.640 --> 0:05:51.200 is this trial? 0:05:52.040 --> 0:05:52.280 Oh? 0:05:52.360 --> 0:05:54.400 You know, this is a topic of the week. I 0:05:54.440 --> 0:05:57.400 feel like Paul, right, So the f suing Meta right 0:05:57.440 --> 0:05:59.880 now is seeking a divestiture of Instagram. And what's that 0:06:00.400 --> 0:06:03.400 huge for the as the acro actual acquisitions of those 0:06:03.440 --> 0:06:06.120 companies that are arguing with anti competitive but as we 0:06:06.200 --> 0:06:08.600 all know, they've on these properties now for well over 0:06:08.720 --> 0:06:11.960 a decade, and I have to say, seeing Zuckerberg on 0:06:12.000 --> 0:06:13.960 this stand in the last few days at sestimony has 0:06:13.960 --> 0:06:16.880 been really, really strong. He did a great job sending 0:06:16.880 --> 0:06:19.320 off a lot of the criticisms coming from the suc 0:06:19.800 --> 0:06:21.719 whose case. I think we both saw Jenna and I 0:06:22.400 --> 0:06:25.159 was already not necessarily the strongest. There's a lot of 0:06:25.200 --> 0:06:27.880 holes there. I don't think they really defined the marketplace 0:06:27.920 --> 0:06:31.760 the right way in terms of positioning Meta as a monopolist. 0:06:31.880 --> 0:06:35.040 So there's a lot going on. It's big tech on trial. 0:06:35.080 --> 0:06:37.560 I think everywhere you look these days, that's right. 0:06:37.600 --> 0:06:40.640 And now it's not just Jen, We've got a bigger 0:06:40.640 --> 0:06:44.200 team of litigation analysts. Jen, as you sit back here 0:06:44.520 --> 0:06:48.080 in your experience, are these tech companies I've risk? Do 0:06:48.120 --> 0:06:49.840 you think from the courts? 0:06:50.240 --> 0:06:52.599 Absolutely? Look, you know you're at risk? 0:06:52.960 --> 0:06:55.840 He There are liability decisions now, two of them against Google, right, 0:06:55.880 --> 0:06:58.320 and in both cases the Department of Justice is going 0:06:58.360 --> 0:07:00.560 to ask a judge to force it to sell assets. 0:07:01.720 --> 0:07:04.440 As long as that's out there, those companies are at risk. Now, 0:07:04.680 --> 0:07:07.000 would I bet that that's what can happen? No, I 0:07:07.040 --> 0:07:09.159 don't think that. In the Search case, which has a 0:07:09.200 --> 0:07:12.040 remedy hearing starting Monday, Google will be forced to sell Chrome. 0:07:12.080 --> 0:07:14.240 And I don't actually believe in this ad tech case 0:07:14.400 --> 0:07:17.120 that they'll be forced to sell off the publisher, ad. 0:07:17.760 --> 0:07:19.160 Server or the ad exchange. 0:07:19.320 --> 0:07:21.480 But they're at risk of course, because you have no 0:07:21.600 --> 0:07:24.200 idea what a judge is going to do. I should 0:07:24.240 --> 0:07:28.320 say that the remedy hearings will take place, decision will 0:07:28.320 --> 0:07:29.920 be made, and at that point Google will appeal. 0:07:30.160 --> 0:07:33.920 All right, Jen Fantastic, I tell you, folks, Bloomberg Intelligence, 0:07:33.920 --> 0:07:39.120 it's not just stocks bonds. We've got litigation antitrust research 0:07:39.160 --> 0:07:43.320 at bi go. This stuff moves stocks. If you're a 0:07:43.400 --> 0:07:47.000 technology investor, you have to have an opinion on what 0:07:47.160 --> 0:07:50.280 the antitrust risk is for some of these big tech names, 0:07:50.280 --> 0:07:54.200 whether it's Amazon, Meta, Google, And we've got experience anti 0:07:54.200 --> 0:07:58.040 trust attorneys writing this research for our Bloomberg customers on 0:07:58.200 --> 0:08:02.400 b I go. It is awesome, some stuff justin terracy. Jenniferree. 0:08:02.440 --> 0:08:05.400 They are Bloomberg anti trust analyts for Bloomberg Intelligence. We 0:08:05.520 --> 0:08:07.520 got them and we had them in studio today giving 0:08:07.560 --> 0:08:10.880 us some opinions on Google and METI can't get it 0:08:10.920 --> 0:08:11.520 anywhere else. 0:08:13.240 --> 0:08:16.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:17.040 --> 0:08:20.400 weekdays at ten am Eastern on Applecarclay, and Android Auto 0:08:20.520 --> 0:08:23.600 with the Bloomberg Business App. Listen on demand wherever you 0:08:23.640 --> 0:08:26.600 get your podcasts, or watch us live on YouTube. 0:08:27.320 --> 0:08:30.320 Well, the stock story of the day to the downside 0:08:30.400 --> 0:08:33.680 is United Healthcare. This stock is down twenty two percent. 0:08:33.760 --> 0:08:37.160 That's the most in twenty five years after they cut 0:08:37.200 --> 0:08:41.480 their forecast, and you know it's their first earnings missing 0:08:41.720 --> 0:08:46.360 over a decade, so really shocking the investors in that stock, 0:08:46.360 --> 0:08:49.319 as well as the insurance space overall. So let's get 0:08:49.360 --> 0:08:52.079 some clear analysis on this. Glenn Losaf joins us Bloomberg 0:08:52.120 --> 0:08:55.920 Intelligence senior equity analysts covering these insurance companies. Glenn talk 0:08:55.960 --> 0:08:59.840 to us about United Healthcare. What happened today? 0:09:00.240 --> 0:09:05.199 High So United reported one Q results which were largely 0:09:05.240 --> 0:09:08.959 expected to be in line by the consensus inputting us, 0:09:09.040 --> 0:09:13.560 and the company basically cut guidance by twelve percent. 0:09:13.640 --> 0:09:14.480 I believe. 0:09:15.960 --> 0:09:19.959 Initial guidance was also the sort of seem conservative relative 0:09:20.000 --> 0:09:25.320 to their long term target, and now the new updated 0:09:25.520 --> 0:09:29.200 adjusted guidance is showing a decline of about five percent 0:09:29.360 --> 0:09:32.280 year over year. The main reason for it is the 0:09:32.360 --> 0:09:40.680 company highlighted that Medicare members are seeking twice as much 0:09:40.840 --> 0:09:44.680 here as they did the same period last year, which 0:09:44.760 --> 0:09:47.400 obviously drives costs and so on so forth. 0:09:47.880 --> 0:09:51.240 Yeah, they said at least. John Tozy of Bloomberg News 0:09:51.240 --> 0:09:54.319 his reporting says that the company said it was blindsided 0:09:54.520 --> 0:09:59.800 by rising medical costs. Is that surprising that a medical 0:09:59.800 --> 0:10:03.960 and sure would be blindsided by these costs? Isn't this 0:10:04.040 --> 0:10:05.000 the business that they're in. 0:10:06.720 --> 0:10:09.800 Well, it's not surprising. 0:10:09.960 --> 0:10:14.559 It happens from time to time, but the impact, based 0:10:14.600 --> 0:10:19.520 on the guidance cut is more than anyone could have expected, 0:10:19.559 --> 0:10:20.400 including them. 0:10:20.679 --> 0:10:22.200 Insurers usually look. 0:10:22.080 --> 0:10:26.000 At the trends of previous years to sort of forecast 0:10:26.080 --> 0:10:30.080 what the medical costs would be in the upcoming year. 0:10:30.640 --> 0:10:35.120 And obviously, if it happens that all of a sudden, 0:10:35.720 --> 0:10:39.400 you know, I need more care this year versus last year, 0:10:39.559 --> 0:10:42.560 you know, people getting older, maybe some people deforted, maybe 0:10:42.600 --> 0:10:44.600 some people changed plans. 0:10:46.200 --> 0:10:48.800 You know, medical costs, care demand goes. 0:10:48.600 --> 0:10:52.840 Up, and with that, costs go up and impacting health 0:10:52.880 --> 0:10:58.000 insurers like United. So it's it's surprising, but it happens, 0:10:58.440 --> 0:11:00.679 maybe not to the degree that we're seeing. 0:11:01.960 --> 0:11:02.720 The time around. 0:11:03.440 --> 0:11:08.080 What drives rising medical costs for somebody like United I 0:11:08.120 --> 0:11:11.040 mean they're the eight hundred pound gorilla in this whole industry. 0:11:11.559 --> 0:11:17.160 What's happening, Well, it's basically it's pretty easy. 0:11:17.440 --> 0:11:20.280 You know, more people are seeking more care, that's what's 0:11:20.440 --> 0:11:24.880 driving the costs. People getting sicker, you know, with age, 0:11:25.200 --> 0:11:28.120 are people differing care from last year to this year 0:11:28.160 --> 0:11:33.760 for example, That increases costs on the sort of the 0:11:33.800 --> 0:11:36.959 other side of the care demand. You know, more people 0:11:37.040 --> 0:11:42.080 are getting prescription drugs for example, more people are interested 0:11:42.160 --> 0:11:45.880 in preventive care versus reactive care sort of, you know, 0:11:47.080 --> 0:11:51.320 just going more often for chapobs, stuff like that drives. 0:11:52.520 --> 0:11:53.160 The costs. 0:11:53.200 --> 0:11:57.400 But it is surprising that sort of this significant jump 0:11:58.720 --> 0:12:00.320 relative to expects. 0:12:00.760 --> 0:12:04.600 Where does United Health go from here? I mean just 0:12:04.760 --> 0:12:08.040 on a stock level, I mean, falling in its biggest 0:12:08.320 --> 0:12:13.480 drop since nineteen ninety nine. Does that move look overdone 0:12:13.720 --> 0:12:14.040 to you? 0:12:15.679 --> 0:12:19.760 We're basically we're not supposed to sort of comment down 0:12:19.920 --> 0:12:23.160 price targets, as you will know, but basically the stock 0:12:23.240 --> 0:12:26.160 is down about twenty two percent as of right now. 0:12:26.760 --> 0:12:31.079 If we take a look at the guidance cut, which 0:12:31.200 --> 0:12:34.840 was three dollars and fifty cents from the previous guidance 0:12:34.960 --> 0:12:39.440 and apply sort of historical multiple over the last five years. 0:12:39.480 --> 0:12:43.120 The downside should be about, you know, maybe sixty percent 0:12:43.160 --> 0:12:46.720 of what it is right now, about eighty dollars or so. 0:12:46.720 --> 0:12:50.280 So based on that, it's probably an overreaction just because 0:12:50.679 --> 0:12:54.040 things like this don't usually happen to someone like United, 0:12:54.080 --> 0:12:56.360 as you mentioned, the eight hundred pounds debilla in the 0:12:56.400 --> 0:13:03.960 space and probably the most solid people in the business. 0:13:03.240 --> 0:13:06.240 But it is what it is. 0:13:06.280 --> 0:13:09.520 A market sort of quotes Sis on view on where 0:13:09.559 --> 0:13:11.120 the step should should trade. 0:13:11.240 --> 0:13:13.480 I'm're going at the ANR function for you United Healthcare 0:13:13.520 --> 0:13:16.120 twenty seven buy ratings on the street, one hold rating, 0:13:16.400 --> 0:13:21.280 one sell. No ratings changes today given this move in 0:13:21.360 --> 0:13:26.079 the stock. Great job, guys. Glenlosa, senior equerianos for Bloomberg Intelligence, 0:13:26.520 --> 0:13:27.520 joining us here. 0:13:29.280 --> 0:13:33.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:33.080 --> 0:13:36.160 weekdays at ten am Eastern on Apple Coarclay and Android 0:13:36.200 --> 0:13:39.480 Auto with the Bloomberg Business App. Listen on demand wherever 0:13:39.559 --> 0:13:42.680 you get your podcasts, or watch us live on YouTube. 0:13:43.240 --> 0:13:45.840 All right, this morning, President Trump posted on True Social 0:13:46.000 --> 0:13:50.920 that quote, How's termination cannot come quickly enough? End quote. However, 0:13:51.000 --> 0:13:54.800 yesterday at the Economic Club of Chicago, Federal chair FED 0:13:54.840 --> 0:13:58.360 Reserve Chairman j Pale stressed the importance of the fed's 0:13:58.440 --> 0:14:03.600 independence and it's quote broad support across both political parties 0:14:03.920 --> 0:14:06.240 are So we'll get a little sense here from FED 0:14:06.320 --> 0:14:08.160 Chairman shape Pal. Let's take a listen to his comments. 0:14:08.520 --> 0:14:12.880 Our independence as a matter of law, Congress has in 0:14:12.920 --> 0:14:16.360 our statute we're not removable except for cause we serve 0:14:16.520 --> 0:14:24.320 very long terms, seemingly endless terms. So it's we're protecting 0:14:24.440 --> 0:14:27.000 protected in the law. So you know, Congress could change 0:14:27.040 --> 0:14:29.120 that law, but there's I don't think there's any danger 0:14:29.120 --> 0:14:34.120 of that. FED independence has pretty broad support across both 0:14:34.160 --> 0:14:35.080 political parties. 0:14:35.720 --> 0:14:36.080 All right. 0:14:36.120 --> 0:14:38.840 That was Beedchairman Jpale speaking at the Economic Club of 0:14:38.920 --> 0:14:42.720 Chicago yesterday. Our own Michael McKee was there giving us 0:14:42.720 --> 0:14:46.880 some live reporting there. But certainly President Trump's tweet this 0:14:46.880 --> 0:14:48.640 morning got some attention from a lot of folks that 0:14:48.720 --> 0:14:50.800 look at the FED and look at the treasure market, 0:14:50.800 --> 0:14:53.520 look at interest rates in the US economy. Irid Jersey 0:14:53.560 --> 0:14:56.479 joints as chief US interest rate Strategists for Bloomberg Intelligence. 0:14:57.080 --> 0:14:59.200 I raight, I'm sure you've been talking to a lot 0:14:59.200 --> 0:15:01.840 of your institutional uster clients this morning. What did they 0:15:01.880 --> 0:15:05.640 make of the President's comments there on social media? 0:15:05.960 --> 0:15:08.480 Yeah, I mean a lot of people are just you know, 0:15:09.000 --> 0:15:11.120 I think that there's a scapegoating going on, right, Like 0:15:11.400 --> 0:15:13.680 President Trump might say that, oh, I want to get 0:15:13.760 --> 0:15:15.800 rid of J. Powell because I want to cut interest rates. 0:15:15.840 --> 0:15:18.560 But I think there's also an acknowledgment that in doing 0:15:18.600 --> 0:15:23.640 so creates certain risks to the economy. And I think 0:15:23.640 --> 0:15:27.680 from the administration standpoint, having a scapegoat on the economic 0:15:27.720 --> 0:15:32.000 outcomes is convenient. Right, So if the economy does fall 0:15:32.000 --> 0:15:34.680 into recession later this year, they can say, well, look, 0:15:34.720 --> 0:15:37.200 you know Powell was They can point to this tweet 0:15:37.280 --> 0:15:39.640 and say, well, the President said that he was going 0:15:39.680 --> 0:15:42.760 to be too late, and in fact he was right. 0:15:43.080 --> 0:15:45.160 And then if the economy chugs along, you can take 0:15:45.200 --> 0:15:47.920 credit saying that all of the fiscal policies that you're 0:15:47.960 --> 0:15:51.280 doing is supporting the economy. So I think that there's 0:15:52.040 --> 0:15:56.240 there's a political convenience here potentially that that JA Powell 0:15:56.280 --> 0:16:00.160 remaining in office can support the administration in some some 0:16:00.200 --> 0:16:01.240 way in public opinion. 0:16:01.800 --> 0:16:06.320 So ara does Trump actually have the ability to remove 0:16:06.760 --> 0:16:11.040 Powell from his seat as the chairman of the Federal Reserve. 0:16:11.400 --> 0:16:13.880 And well, I'm not how much longer is Powell there. 0:16:14.720 --> 0:16:17.680 I'm not a constitutional lawyer, so J. Powell probably knows 0:16:17.720 --> 0:16:20.280 better because he is an attorney. But there are some 0:16:20.520 --> 0:16:22.800 I would suggest that folks maybe go look at some 0:16:22.880 --> 0:16:25.960 of Elliott Stein's work here at Bloomberg Intelligence, because he's 0:16:26.000 --> 0:16:30.600 been following this very closely as to the different court 0:16:30.680 --> 0:16:35.240 decisions that will lead to independent chairs and directors of 0:16:35.840 --> 0:16:39.440 independent agencies, whether or not the president can can actually 0:16:39.440 --> 0:16:42.040 fire them, and what cause means, like how is caused 0:16:42.080 --> 0:16:45.440 to fined? That's something that's the Supreme Court is probably 0:16:45.480 --> 0:16:48.240 is going to be taking up and depending on how 0:16:48.280 --> 0:16:50.440 that goes will depend on whether or not the President 0:16:50.440 --> 0:16:53.640 Trump does. Now, let me say, from an economist standpoint, 0:16:53.640 --> 0:16:56.200 and you know I'm an economist by training, not an attorney. 0:16:56.960 --> 0:17:02.400 There's a vast literature on why central bank independence tends 0:17:02.440 --> 0:17:05.840 to have better inflation outcomes. Doesn't necessarily a better growth outcomes, 0:17:05.840 --> 0:17:08.800 but has better inflation outcomes. So the idea that you 0:17:09.080 --> 0:17:11.320 are going to take away the FEDS independence and have 0:17:12.119 --> 0:17:16.360 an executive branch. The executive branch ultimately run monetary policy 0:17:16.440 --> 0:17:19.080 probably means that you're going to have monetary policy that's 0:17:19.119 --> 0:17:22.359 easier than it should be at certain times, and that 0:17:22.400 --> 0:17:25.679 means that overall you could wind up having inflation and 0:17:25.720 --> 0:17:28.960 prices running a little bit hotter than it would if 0:17:29.000 --> 0:17:31.160 you had an independent central bank. Now does that mean 0:17:31.160 --> 0:17:34.159 that you get the nineteen seventy style inflation. Probably not. 0:17:34.400 --> 0:17:36.480 But at the same time, you can have inflation running 0:17:36.480 --> 0:17:38.520 a three and a half percent or four percent instead 0:17:38.560 --> 0:17:41.439 of a two And I think that's that's kind of 0:17:41.440 --> 0:17:44.280 a choice that both the courts, the American people, and 0:17:44.320 --> 0:17:46.800 the administration are ultimately going to have to make, even 0:17:46.840 --> 0:17:50.280 if even if Chair Powell can be removed by for. 0:17:50.400 --> 0:17:54.520 Cause, I got about thirty seconds left, the ECB cut 0:17:54.560 --> 0:17:56.800 rates against today. If I'm President Trump, I'm saying, where's 0:17:56.800 --> 0:17:58.720 my fedsherman? Why is he not cutting rates? 0:17:58.800 --> 0:17:59.399 Is that valid? 0:18:00.160 --> 0:18:01.919 Well, a little bit and a little bit not. 0:18:02.080 --> 0:18:04.040 I mean, I think J. Powell laid it out yesterday. 0:18:04.200 --> 0:18:08.160 And look, the FED has two mandates. The ECB has won. 0:18:08.200 --> 0:18:10.399 The ECB's job is to make sure that you have 0:18:10.440 --> 0:18:12.920 stable prices, and if prices are falling, and if there's 0:18:13.240 --> 0:18:16.520 other problems and growth is slipping, you cut interest rates. 0:18:17.520 --> 0:18:19.360 And if you look at the US economy right now. 0:18:19.359 --> 0:18:22.760 We still have one hundred and fifty thousand jobs per month, 0:18:22.800 --> 0:18:26.760 we still have rising wages. Retail sales weren't great, but 0:18:26.800 --> 0:18:30.080 they were fine, and so it's not obvious that the 0:18:30.160 --> 0:18:33.080 United States is slipping into a recession imminently. And I 0:18:33.080 --> 0:18:35.080 think that's the reason why the Fed is sitting on 0:18:35.119 --> 0:18:38.200 its hands, because it also doesn't know what inflation is 0:18:38.200 --> 0:18:41.639 going to do because of tariffs and inflation expectations have 0:18:41.720 --> 0:18:43.560 been rising. If you just look at the University of 0:18:43.600 --> 0:18:47.919 Michigan Sentiment survey, it shows, hey, maybe inflation expectations are 0:18:48.000 --> 0:18:50.159 way too high. So if you're the Fed, you have 0:18:50.240 --> 0:18:51.640 to balance those two mandates. 0:18:52.080 --> 0:18:54.080 A Eric, thanks so much for joining us. Appreciate it. 0:18:54.320 --> 0:18:57.000 Sorry about your aston Villa team not making it. Our 0:18:57.160 --> 0:19:01.280 Jersey chief US Interest Rates Strategies Bloomberg Intelligencies there in Princeton, 0:19:01.359 --> 0:19:01.919 New Jersey. 0:19:03.560 --> 0:19:07.280 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:07.359 --> 0:19:10.440 weekdays at ten am Eastern on Apple Coarclay and Android 0:19:10.440 --> 0:19:13.760 Auto with the Bloomberg Business App. Listen on demand wherever 0:19:13.840 --> 0:19:16.960 you get your podcasts, or watch us live on YouTube. 0:19:17.440 --> 0:19:19.280 We had some movement from the European Central Bank this 0:19:19.320 --> 0:19:21.880 morning cutting rates again. I think the market's even discounting 0:19:21.880 --> 0:19:24.880 another rate cut in June. Hugh Worthington joins us Bloomberg 0:19:24.920 --> 0:19:28.879 Intelligence European rates strategist here what you learn from the 0:19:28.960 --> 0:19:31.320 European Central Bank this morning in their actions? 0:19:32.920 --> 0:19:35.440 Yeah, so we had on the face of it, they 0:19:35.480 --> 0:19:38.800 came out with their statements just what about an hour 0:19:38.880 --> 0:19:41.679 or so ago saying that they'd actually removed the idea 0:19:41.760 --> 0:19:46.399 that after the today's rate cut, the rates were still restrictive, 0:19:46.480 --> 0:19:49.720 which is initially seen by some as being a little 0:19:49.720 --> 0:19:52.640 bit on the hawksh side, But actually the actual press 0:19:52.680 --> 0:19:57.000 statement and then the press conference itself very much focused 0:19:57.040 --> 0:19:59.760 on this whole idea of the huge amount of uncertainty 0:19:59.800 --> 0:20:03.640 that he's facing in particularly in the face of Trump tarifs. 0:20:03.680 --> 0:20:05.840 And you've got to remember, you know, the Eurozone runs 0:20:05.880 --> 0:20:09.880 about about a two hundred billion euro trade surplus with America, 0:20:10.320 --> 0:20:12.439 and the focus was of, you know, very much on 0:20:12.480 --> 0:20:14.240 those They just have no idea what's going on. They 0:20:14.320 --> 0:20:16.480 didn't didn't feel they'd have a strong idea what was 0:20:16.520 --> 0:20:19.679 going on anymore by by the June meeting, and as 0:20:19.720 --> 0:20:22.159 a result, as you say, now we've actually got a 0:20:22.200 --> 0:20:25.280 selves to the point where, yeah, another cut is which 0:20:25.320 --> 0:20:26.879 would be I think the sort of the seventh or 0:20:26.880 --> 0:20:29.160 eighth on the trot now would be be ninety percent 0:20:29.240 --> 0:20:32.399 priced in June, so which which seems pretty reagonal. As 0:20:32.400 --> 0:20:35.960 a result, we had a situation where yields were sort 0:20:35.960 --> 0:20:37.679 of edging up on the day, and now you've got 0:20:37.720 --> 0:20:40.280 the two year yield in Germany down five point seven 0:20:40.280 --> 0:20:42.800 basis points in the day, it's one point seven percent, 0:20:42.960 --> 0:20:45.960 So you know that's a pretty dubbish outcome in the end. 0:20:46.200 --> 0:20:47.960 Yeah, I wanted to ask a little bit more just 0:20:48.040 --> 0:20:52.240 about the reaction in the markets. I mean, US yields 0:20:52.320 --> 0:20:53.840 are a little bit higher. I don't know if you're 0:20:53.840 --> 0:20:57.960 seeing any contagion of this ECB move into the US 0:20:58.080 --> 0:21:00.679 or this looks like a piece of news that's just 0:21:00.840 --> 0:21:03.200 contained inside the EU. 0:21:04.800 --> 0:21:09.280 I think it's the rate. Outlook in the EU VERSUS 0:21:09.359 --> 0:21:14.040