Speaker 1: Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg Terminal. Inflation is still hot,
Speaker 1: and so it becomes a question of do we believe
Speaker 1: that the fete is going to stay firm and it's
Speaker 1: resolved to fight those price pressures instead of reacting to
Speaker 1: weak data. The equity market telling you in the last
Speaker 1: couple of days there will be weakness in their resolve.
Speaker 1: Will there though, Is this a vulcar Esque pal or not?
Speaker 1: Joining us now to try and answer some of that
Speaker 1: is Vince Ryan Hot, chief economist that dry us and
Speaker 1: Melod Vince, let's start here. This market believes we're saying
Speaker 1: the first steps potentially towards defen pivot. Do you agree.
Speaker 1: Not particularly central to this is the view that there
Speaker 1: will be this immaculate disinflation. Yes, the news might be
Speaker 1: in a touch worse than expecting this morning, but we
Speaker 1: believe the FED inflation will have over the next year,
Speaker 1: and that will allow them to pivot. Inflation just doesn't
Speaker 1: come down that way. So, Vince, which is it? Is
Speaker 1: the economy doing really well or is it not? In
Speaker 1: other words, I'm trying to parse out the equity move.
Speaker 1: Some people are accusing me of just being parish no
Speaker 1: matter what, which maybe you can, you know, accuse me
Speaker 1: of whatever you want. But if the economy is weakening,
Speaker 1: we have a FED that is willing to potentially curtail
Speaker 1: that if they continue with their rate hikes. Do you
Speaker 1: think that they are going to cause a recession by design?
Speaker 1: As j Pala seemed to be sort of not suggesting
Speaker 1: but hinting that there was a risk if you believe
Speaker 1: j pal that inflation is the number one concern of
Speaker 1: the Federal Reserve. Now they've elevated that in the dual mandate. Uh,
Speaker 1: woke up this morning. Inflation is a problem. Inflation is
Speaker 1: still a problem. Therefore, he's got a slow aggregate demand
Speaker 1: and hope that aggregate supply fills in the way you
Speaker 1: slow aggregate demand is tighten financial conditions. Uh, we don't
Speaker 1: have slow enough aggregate demand, yet it doesn't seem to
Speaker 1: be slowing enough. And trained and we got mixed evidence
Speaker 1: that aggregate supplies filling in, so he needs tighter financial conditions.
Speaker 1: What data is the Federals are going to be looking
Speaker 1: at in their data dependency. I think the answer is
Speaker 1: always all of it. Uh that in particular, he brought
Speaker 1: back his stars in his press conference over on Wednesday,
Speaker 1: I e. The FED look has basically set central guide posts,
Speaker 1: but there are only estimated. They're approximated, and a big
Speaker 1: one is inflation and inflation expectations. That's why you in
Speaker 1: your viewers should be looking forward to the University of
Speaker 1: Michigan survey. Uh. That's why they care about what's happening
Speaker 1: in bond markets right now, because that tells them what
Speaker 1: inflation compensation is uh. Right now inflation job number one.
Speaker 1: So everything that goes into the space to predict inflation
Speaker 1: is what's important. Commodity prices, inflation expectations, exchange value of
Speaker 1: the dollar. Where do you think inflation realistically can get
Speaker 1: down to you by the end of the year. But
Speaker 1: it's what's the figure? Uh, Not as much as the
Speaker 1: FED hopes, and much less. In twenty twenty three, I
Speaker 1: think that uh, we'll get a modest upticking the unemployment rate.
Speaker 1: Demand really is going to be slowly and inflation is
Speaker 1: going to be off off of percentage point and a
Speaker 1: half or even two talking about the PC index, So
Speaker 1: we're in the high fives. FED is forecasting not atlantish.
Speaker 1: For two. It's going to be more persistent next year
Speaker 1: because we have so much inertia. We saw it this
Speaker 1: morning with with that uh the e c I. Uh,
Speaker 1: the e c I wasn't as much looking forward to
Speaker 1: future inflation. It was trying to catch up to pass
Speaker 1: erosion to purchasing power. Okay, So given all of that,
Speaker 1: stickier higher inflation than the FED really realistically wants it
Speaker 1: to be. That would indicate that the FED is not
Speaker 1: going to be able to blink even if the data deteriorates.
Speaker 1: And yet that is fully what this market expects. And Vince,
Speaker 1: you said a moment ago they need financial conditions to tighten.
Speaker 1: That's not what they've gotten in recent days. How aggressive
Speaker 1: do you expect the pushback to be over the coming weeks.
Speaker 1: I think they're gonna have to push back, to be honest,
Speaker 1: I was a little disappointed and share Pal on Wednesday
Speaker 1: he was he seemed to be accepting of where markets
Speaker 1: were right there, right, right then and there, he said.
Speaker 1: Essentially the some real economic projections is still appropriate both
Speaker 1: in terms of their forecast for the policy rate and
Speaker 1: the macro outcomes to optimistic on inflation. Essentially, right now
Speaker 1: markets believe the ends to what the FED wants lower inflation.
Speaker 1: They don't quite have it right about what the means
Speaker 1: will be. The means will be tighter financial conditions. Uh,
Speaker 1: if you tightened basis points and financial conditions are easier,
Speaker 1: something went wrong and you're gonna have to push back,
Speaker 1: Vincent just quickly here from your perspective, how much would
Speaker 1: inflation have to come down for the Fed to truly pivot?
Speaker 1: I think at that point, UH is going to be
Speaker 1: important about the other part of the dual mandate, where's
Speaker 1: the unemployment rate. If inflation has come down a lot,
Speaker 1: it probably means the unemployment rate is going up. As
Speaker 1: inflation gets closer to their goal, they can put more
Speaker 1: weight to their other goal, maximum employ him. It unemployment
Speaker 1: rate starts rising, they will pivot. In our forecast, we
Speaker 1: think the pit the FED declares victory a little earlier.
Speaker 1: Remember Paul Boker did too. If inflation is notably lower
Speaker 1: in three I e. Still in the three but maybe
Speaker 1: not at goal. The FED will connect dots that says
Speaker 1: it was lower now than it was six months ago
Speaker 1: than six months before that. We're headed in the right direction.
Speaker 1: Now is the time to worry about activity. However, you
Speaker 1: don't get the slowness of activity. You don't get that
Speaker 1: decline and inflation unless you get tighter front nancial conditions. Now.
Speaker 1: Vince run Hunt drive us amount of Vince a clinic
Speaker 1: from US. Oh White, thank you said, a lot of
Speaker 1: people have been talking about complacency, and thank you John. Honestly,
Speaker 1: we're still seeing that rally continue and we're still seeing
Speaker 1: a lot of short positions come out and we are
Speaker 1: poised for the biggest rally going back to of our
Speaker 1: twenty in the S and P. Some people who last
Speaker 1: year we're talking about how there was a faulty call
Speaker 1: in transitory or included among them Barbara and Bernard. She
Speaker 1: came out and she was saying, this is not the case.
Speaker 1: It's stickier, it's more protracted. You need to plan as such.
Speaker 1: She is founder. She is chief executive officer and chief
Speaker 1: investment officer of Windcrest Capital. Joining us right now from
Speaker 1: the Bahamas. Barbara and can you just talk about what
Speaker 1: you make of this rally that we've seen so far
Speaker 1: in July, which might be the biggest going back to
Speaker 1: November of Thanks for the opportunity, Lisa. Yeah. I think
Speaker 1: this is a bear market rally for sure, and it's
Speaker 1: based on hope, not on free cash flow, not on
Speaker 1: the free cash flow of the consumer, and not on
Speaker 1: the free cash flow of the corporate when you have
Speaker 1: we're looking at as negative real wage growth, which is
Speaker 1: why we have the lowest consumer confidence in forty years.
Speaker 1: And what businesses are facing is the highest PPI grates
Speaker 1: in forty five years, which is why small business confidence
Speaker 1: is at an altime I'm low. So these businesses are
Speaker 1: facing very little visibility over demand for their goods and
Speaker 1: the cost to produce them, which is not a healthy situation.
Speaker 1: And meanwhile, the market is rallying on, like we said, hope,
Speaker 1: not free cash flow. So I don't think it's sustainable unfortunately, Barbara.
Speaker 1: And let's go to the phrase that John Farrow hates
Speaker 1: the most, which is bad news is good news, which
Speaker 1: is what Jonathan Galab was talking about in his note today.
Speaker 1: That's what it's become that the more people start to
Speaker 1: talk pessimistically the way that you do. They talk about
Speaker 1: possibly some sort of pivot from the FED. Why is
Speaker 1: this not the right way to look at it since
Speaker 1: it has been the right way to look at it
Speaker 1: for the past few decades. Well, let's just break that down.
Speaker 1: Is bad news ever really good news? What you're talking
Speaker 1: about is the FED what will not raise rates? So
Speaker 1: we're talking about MULTIPLE expansion, not EPs expansion, and a
Speaker 1: healthy economy is based on EPs expansion. So yes, you
Speaker 1: don't want to fight the FED, but we also want
Speaker 1: a healthy economy, don't we. Well, in theory, Barbrand, I
Speaker 1: would assume so. But on the subject of the FED
Speaker 1: and how they would likely view what we have seen
Speaker 1: in the equity market a rally, financial conditions getting easier
Speaker 1: and not tighter. At what point will they have to
Speaker 1: push back on this? Well, I feel like they induced
Speaker 1: this rally right. It was the most confusing. Either I
Speaker 1: was on the wrong call or misunderstood the market, But
Speaker 1: what I heard was there's no more guidance. People retired
Speaker 1: of being wrong the number and the number one our
Speaker 1: goal is to bring down inflation for a soft landing.
Speaker 1: But number two, we understand that's challenging and it's got
Speaker 1: more challenging in the recent months. None of that's positive
Speaker 1: to me. And then I think the real error was
Speaker 1: calling to and a quarter to two and a half
Speaker 1: a neutral rate. In my economics techt books, that's not
Speaker 1: the case, particularly not when inflations at nine percent. So
Speaker 1: that is very stimulative and accommodative, and that's what's fueling
Speaker 1: um you know, these forces. At the same time he's
Speaker 1: trying to squash So he also said the dot plot
Speaker 1: is the best indicator. Well, what does the dot plot
Speaker 1: say that we have a hundred basis points of more
Speaker 1: increases this year in fifty next year. So rates are
Speaker 1: still rising and we have consumer and business confidence falling.
Speaker 1: We've never raised rates into falling confidence. And the other
Speaker 1: really interesting experiment is we've never raised rates when the
Speaker 1: US FED debt to GDP ratios are so high. So
Speaker 1: if we do induce a recession, the real risk out
Speaker 1: there is now you have lower tax receipts and higher
Speaker 1: interest expense, which is also not a pretty picture. So
Speaker 1: I'm this is not easy, and I think as an
Speaker 1: active manager, what you want to do is really stay
Speaker 1: nimble and humble, because we're now told were focus on data,
Speaker 1: which is going to be much more volatile. Well, of
Speaker 1: course Chairman Palace said they need to be humble as well.
Speaker 1: As you're doing that. As you're being nimble and humble,
Speaker 1: what does that mean you want to buy in the
Speaker 1: environment you're describing, which, as you say, we've never been
Speaker 1: in before. In theory, higher rates mean you don't necessarily
Speaker 1: want to be owning oath and yet if the economy
Speaker 1: is slowing, maybe you want that cash flow. So what
Speaker 1: do you do? It's a great question. So we actually
Speaker 1: are a net short and we have a mountain of
Speaker 1: cash to buy great opportunities when we see them, we
Speaker 1: don't think we're there yet. Um, we have initiated too
Speaker 1: long new long positions all year and so the barrier
Speaker 1: to entry to get into our fund right now is
Speaker 1: so high. So what does an attractive opportunity look at.
Speaker 1: We're talking about companies that are trading for the cash
Speaker 1: on their balance sheet when we're getting the operating business
Speaker 1: for free. So that kind of upside downside skew is
Speaker 1: the margin of safety I'm willing to take. Otherwise we've
Speaker 1: been generating tremendous ALFA on the short side. I think
Speaker 1: we have thirty six. Actually, I know we have thirty
Speaker 1: seven individual short positions. And this is a real stock
Speaker 1: pickers market. You would be very happy if you were
Speaker 1: long Amazon and not Walmart this week, right, that's a
Speaker 1: stock picker's choice. So being tethered to an index that
Speaker 1: I think is further downside is where I see the
Speaker 1: real risk. By brand. Do you see a lot more
Speaker 1: potholes the ones that we have seen in specific names
Speaker 1: and I'm thinking of some of the darlings of the
Speaker 1: pandemic era. Do you see more of that coming or
Speaker 1: is this just an ongoing bleed that the short positions
Speaker 1: will capture. No. Absolutely, I mean, at least if you
Speaker 1: think about this in a rising rate environment, it's crushing
Speaker 1: a whole cohort of companies whose business model was built
Speaker 1: on free money, and so all of that speculative has
Speaker 1: to drain the small and so you're looking at companies
Speaker 1: that are over levered. You know, we're counting on free money,
Speaker 1: um and and and they're they're really gonna be in trouble.
Speaker 1: So we haven't seen the zombies fully deflayed yet. And
Speaker 1: then you're also looking at companies in the pandemic era
Speaker 1: that took on a ton of debt. You know, you
Speaker 1: just look at someone like Carnival Cruises who's just did
Speaker 1: a billion dollar equity raise and still has six times
Speaker 1: net debt to EBITDA And if you go by what
Speaker 1: Royal Caribbean said this week, demands not there that is
Speaker 1: a problem. So now the shorts are very very company specific.
Speaker 1: It's not it's more specific than a macro view. But
Speaker 1: this is a real source of alpha generation in a
Speaker 1: market like this. This final point is so important, not
Speaker 1: just Walmart versus Amazon, but Alphabet versus Facebook as well, Barbara,
Speaker 1: and fantastic to catch up with you, Barbara, and burn
Speaker 1: out there of Wincress Capital. Joanna us Now is Selita Marcelli,
Speaker 1: chief investment officer for the America's at UBS Global Wealth Management.
Speaker 1: So to let's start here. I wonder your view on
Speaker 1: the following Is this something you want to chase or
Speaker 1: something you want to fade. I don't think that this
Speaker 1: is not something I want to chase. Look, I think
Speaker 1: the market is have seen earnings that are not as
Speaker 1: bad as feared and perceived fair to be davish because
Speaker 1: their data dependent and data is coming a little bit softer.
Speaker 1: But I don't think FAT is pivoting here. I don't
Speaker 1: think the market is pivoting. There's a long way to go.
Speaker 1: At least in the short term, it's going to be
Speaker 1: much more shoppy. I think we're going to see some
Speaker 1: of these games take can out on the market, so
Speaker 1: I wouldn't necessarily be chasing it at this point. However, Um,
Speaker 1: if you put your long term investor lences on, then
Speaker 1: it is still a great time to invest. There's still
Speaker 1: a lot of opportunity. Just that the next six months
Speaker 1: I think is going to be quite volatile after this
Speaker 1: earning season is over, Selida, what are you looking at
Speaker 1: for the catalyst for the declines that you're talking about. Well,
Speaker 1: first of all, Um, in this earning season, we heard
Speaker 1: a lot of talk of recession, but we haven't seen
Speaker 1: any indication in the results. Right, We're not seeing broad
Speaker 1: based UM layoffs. There's maybe slowing of hiring UM and
Speaker 1: and consumers are still resilient, even though we heard that
Speaker 1: you know, low income households may be seeing some pressures
Speaker 1: from Walmart from a t nt UH, it's still consumers
Speaker 1: are resilient. Visa told told us that credit card spending
Speaker 1: has been very strong um, we're seeing still travel, leisure, Um,
Speaker 1: you know, seeing a lot of great demands. So I
Speaker 1: think what we would be looking at is, first of all,
Speaker 1: what is happening on the um hiring or or or
Speaker 1: or employment side. And in any case, that's what FED
Speaker 1: is looking at as well. Right, more than anything else,
Speaker 1: wage growth is important. And if they can see that
Speaker 1: the vacancies are coming down and that takes some of
Speaker 1: the pressure of the wage growth, that would give us
Speaker 1: success that they maybe they will be able to pivot.
Speaker 1: But if the you know, if we stave otherwise, then um,
Speaker 1: you know, it probably means that the consumers spend, real
Speaker 1: consumer spending that has been flat so far will probably
Speaker 1: tear our negative and there's going to be a higher
Speaker 1: probability of recession coming towards the end of this year. Well, soel,
Speaker 1: you know, we were catching up with Barbara and Bernard
Speaker 1: of Windcraft Capital in the previous hour and she agrees
Speaker 1: that the market got this FED entire FED conversation wrong,
Speaker 1: that the pivot isn't necessarily coming, that it wasn't as
Speaker 1: devilish as the market perceived, and she said for that reason,
Speaker 1: given the environment she's looking at, she is sitting on
Speaker 1: a mountain of cash? Is it right to be sitting
Speaker 1: on a mountain of cash right now? Um? I don't believe. So.
Speaker 1: I mean you as an investor or, as as our clients,
Speaker 1: private world clients or should have enough cash uh you know,
Speaker 1: to get you through the next six months and liquidity
Speaker 1: for the next two to three years for expenses. But
Speaker 1: beyond that, I think there's the benefits of staying on
Speaker 1: the sideline. Staying in cash is limited, but the opportunity
Speaker 1: cost of being out of the market for the long
Speaker 1: term is much much bigger. Um. You know, I think
Speaker 1: what we did so many analysis on this in our team. Um.
Speaker 1: You know, if if if, if you wait for historically
Speaker 1: going back to if you wait for another ten percent
Speaker 1: downside and then get in and then sell at the
Speaker 1: brand new highs, you're most likely to underperform uh eighty
Speaker 1: times versus a buy and hold strategy. So I would
Speaker 1: say this is like I said before, for a long
Speaker 1: term investor, is still a great time to invest because
Speaker 1: we have a low average valuations in the equity market.
Speaker 1: We have seen almost five percent the rating compared to
Speaker 1: the last twelve months. Um. Right, and when you look
Speaker 1: back since nineteen sixty that is sort of consistent with
Speaker 1: return expectations of seven to nine percent annual for the
Speaker 1: next decade. You have bond yields that are UM close
Speaker 1: to highest since two thousand eighteen, and before that the
Speaker 1: highest was two thousand eight So UM, you know starting
Speaker 1: point in buying is actually a good indication of your
Speaker 1: total returns US. And then you have in alternatives. Even
Speaker 1: in the private equity space. Right, you might see for
Speaker 1: existing funds valuation downgrades in the near term UM, but
Speaker 1: data tells us that funds that are launched UM a
Speaker 1: year after the peak or after significant sell off in
Speaker 1: the in the public markets tend to have superior returns
Speaker 1: over the long term. So I think staying in cash
Speaker 1: is not the best strategy if you have long term horizon.
Speaker 1: So later, I've got twenty seconds, I'll give you a
Speaker 1: five year buying hold. You gotta pick one. Think what
Speaker 1: would it be? As boring it may sound, it's a wild, diverse,
Speaker 1: fied portfolio. I think that's stilled in only Why did
Speaker 1: I ask Selta? Thank you Selta Massetti? There have you
Speaker 1: BS Global westh Management Joint US now is Isaac Boltanski,
Speaker 1: Policy Research director of bt I, g Isaac, this feels
Speaker 1: like lose lose. I now you think it feels like
Speaker 1: lose lose? Which loss is she going to take? It
Speaker 1: feels incredibly difficult for her to pull back at this stage.
Speaker 1: My sense is that she's going to have to go
Speaker 1: to Taiwan. I think that the optics would be absolutely
Speaker 1: atrocious if she skips out on it now, and it
Speaker 1: would be a terrible signal given given our relations with Taiwan. So, Isaac,
Speaker 1: how does President Biden deal with this and what does
Speaker 1: this due to his agenda when he's focused on this
Speaker 1: and he spent two hours and twenty minutes speaking about
Speaker 1: that with jjim ping rather than everything else at a
Speaker 1: time when he's losing support rapidly. Yeah, look, I think
Speaker 1: that from a practical perspective, whether she goes or not,
Speaker 1: I'm not sure if there's much impact for the market.
Speaker 1: But I'll tell you this, most of my contacts and
Speaker 1: DC now believe that we're not going to have a
Speaker 1: massive pull back on the China tariffs. There's a sense
Speaker 1: that we will have some targeted and narrow relaxation of
Speaker 1: certain tariffs with a real focus on the consumer side.
Speaker 1: But beyond that, We're not going to have the sweeping
Speaker 1: pull back on the tariffs at summit. Hope. There was
Speaker 1: some chatter not that long ago that we would relax
Speaker 1: all of the tariffs on Chinese goods. That's just not happening.
Speaker 1: I think as we see geopolitical tensions UM continue to
Speaker 1: mount with China over Taiwan and over other issues UM,
Speaker 1: the most that we're going to see are these targeted,
Speaker 1: narrow set of teriff relaxations focused on consumer goods and
Speaker 1: other inputs. Which raises a question, Isaac, of how this
Speaker 1: administration is going to continue putting pressure on bringing inflation
Speaker 1: down aside from just pointing the finger at the FED.
Speaker 1: And they do talk about the recent legislation that they're
Speaker 1: lining up that Joe Manchon did get up word with.
Speaker 1: Do you think that actually could, in the near term
Speaker 1: do anything to reduce inflation? Simple answer is no, I
Speaker 1: don't think that this bill, even though it's called the
Speaker 1: Inflation Reduction Act of two, is really going to do
Speaker 1: all that much for inflation. There's definitely some components of
Speaker 1: it that we can point to that are going to
Speaker 1: have an impact over time. Right, the drug pricing dynamics
Speaker 1: can have an impact, but a lot of that is
Speaker 1: backloaded into a longer period. I think that the minimum
Speaker 1: tax can have some impact over time, but again that's limited, right,
Speaker 1: It's only companies over a billion dollars in income um.
Speaker 1: So there are definitely certain elements that we're going to
Speaker 1: see Democrats point to and say, look, we're actually trying
Speaker 1: to tackle inflation. But in reality it's going to have
Speaker 1: a marginal impact at most. Well, and that's if it
Speaker 1: gets over the finish line. Where do you put the
Speaker 1: odds of Carson Cinema giving it a thumbs up and
Speaker 1: it actually becoming a reality. So there are three essays
Speaker 1: that we're all trying to figure out. Right, it's Cinema, mum,
Speaker 1: It's the Salt Crew, and it's sickness. Right, let's just
Speaker 1: run through each one of them quickly. Sickness. We don't
Speaker 1: know which senator is going to get COVID next, right,
Speaker 1: and that's something that matters when you need literally every
Speaker 1: single vote to get it through. On the Salt Crew,
Speaker 1: we've got to watch Senator Menendez and Congressman Goottenheimer, both
Speaker 1: from New Jersey, to see if they're gonna blow up
Speaker 1: this whole deal over the fact that the salt cap
Speaker 1: has not been lifted or eliminated in this proposal, and
Speaker 1: then it's all lies on Senator Cinema. And at the moment,
Speaker 1: I think that she's going to be a yes. Most
Speaker 1: of my contacts believe that she will get to yes,
Speaker 1: and that it's exceedingly difficult to see her blowing up
Speaker 1: this deal over things like the carried interest treatment, which
Speaker 1: is something that has mattered to her in the past.
Speaker 1: And so I'm telling clients that we have to now
Speaker 1: expect this bill to become law. Um, I think the
Speaker 1: odds are are a little bit better than three and
Speaker 1: four that that this bill becomes law by the end
Speaker 1: of the year. Cinema sell sickness. I'm not sure it's
Speaker 1: gonna ring to it, but I'll got with it. Can
Speaker 1: I throw an nextra s Sacrecy Isaac? We didn't know
Speaker 1: about this. I found that pretty interesting. I just wonder
Speaker 1: what asked We don't know how did they get this
Speaker 1: one through Schuma Mansion without anybody knowing den In Washington
Speaker 1: they say that this was coming on. But I've taken
Speaker 1: great comfort in the fact that no one in DC
Speaker 1: can keep a secret. That has given me comfort on
Speaker 1: numerous issues, and so it's a little bit scary that
Speaker 1: two U. S. Senators were actually able to keep a
Speaker 1: secret for this long. And my view on this is
Speaker 1: that it's it's pretty extraordinary in these times in general.
Speaker 1: But we've got to now think about the next iterative dynamic,
Speaker 1: and to me, that's gonna be political retribution from Republicans.
Speaker 1: And you know, we've got to go back and realize
Speaker 1: that the same day that they've passed the Chips plus
Speaker 1: bill out of the Senate, Mansion announced this deal with Schumer,
Speaker 1: and Republicans feel as though they were hoodwinned because they
Speaker 1: passed Chips Plus through the Senate on an understanding that
Speaker 1: we would not have a reconciliation bill. And so there's
Speaker 1: going to be some degree of political retribution from Republicans
Speaker 1: over the next few months, which could make funding the
Speaker 1: government a little bit more difficult. It could make getting
Speaker 1: an end of your tax agreement for stenders and retirement
Speaker 1: change is a little bit more difficult. We're gonna have
Speaker 1: to wait to see, but that's what I'm hearing so
Speaker 1: far from Republicans. What's retribution looks like When the game's
Speaker 1: all my stop mid sense just around the Culinariz sick.
Speaker 1: Isn't that why they make this play at this time?
Speaker 1: Exactly right? And so look, we I think can have
Speaker 1: some degree of comfort in the fact that the mid
Speaker 1: terms are largely baked, at least for the House, highly
Speaker 1: likely that the House is going to flip. The Senate
Speaker 1: will wait and see. And I do think the Republicans
Speaker 1: probably have some good attack points that are going to
Speaker 1: come from this mansion deal, saying that you're raising taxes
Speaker 1: in a time of economic slowdown. So I think that
Speaker 1: the Senate dynamics are perhaps a little bit more in play.
Speaker 1: My two cents on this is that the lane duck
Speaker 1: session is where things go to get done. That's usually
Speaker 1: where we see big bills and small provisions all come
Speaker 1: together and and past because no one wants to be
Speaker 1: in d C during that period, right, They smell the
Speaker 1: jet fumes that want to get out of town. And
Speaker 1: so my point here is that some of the things
Speaker 1: that Congress has waited for um until the lame duck
Speaker 1: can get more complicated now that there is this dynamic
Speaker 1: and political retribution. I said. Also to catch up, I said,
Speaker 1: both Tansky Deaf great c I j this is the
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays
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Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg