1 00:00:02,560 --> 00:00:10,039 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carroll, and 2 00:00:10,080 --> 00:00:12,280 Speaker 1: this is Here's Why, where we take one new story 3 00:00:12,360 --> 00:00:14,640 Speaker 1: and explain it in just a few minutes with our experts. 4 00:00:14,680 --> 00:00:15,600 Speaker 1: Here at Bloomberg. 5 00:00:20,320 --> 00:00:23,560 Speaker 2: People getting really a bit tired. They don't know even 6 00:00:23,600 --> 00:00:27,240 Speaker 2: if something's announced, whether two days later it's not changed again. 7 00:00:27,640 --> 00:00:31,120 Speaker 2: So you really see some fatigue of decision makers. 8 00:00:31,120 --> 00:00:34,680 Speaker 1: That's the CEO of Logistics Giant DHL, Tobias Meyer. For 9 00:00:34,720 --> 00:00:38,120 Speaker 1: executives like him navigating the near daily shifts in US 10 00:00:38,159 --> 00:00:41,600 Speaker 1: economic policy, it's like driving through fog with no headlights. 11 00:00:42,000 --> 00:00:44,199 Speaker 1: When the rules are changing so quickly, it's not just 12 00:00:44,280 --> 00:00:47,280 Speaker 1: hard to keep up, it's almost impossible to make decisions. 13 00:00:47,360 --> 00:00:50,559 Speaker 1: Should a company build a new factory, order more supplies, 14 00:00:50,640 --> 00:00:53,400 Speaker 1: hor or more workers, and where to do any of this? 15 00:00:54,000 --> 00:00:56,520 Speaker 1: And when you don't know what's coming, you hit the brakes. 16 00:00:56,640 --> 00:00:59,200 Speaker 2: But we haven't I don't think spent enough time talking 17 00:00:59,240 --> 00:01:00,920 Speaker 2: about just the un certainty out there. 18 00:01:01,120 --> 00:01:05,440 Speaker 3: Operating in this highly uncertain environment means go slow. 19 00:01:05,760 --> 00:01:08,759 Speaker 2: The higher uncertainty and greater risk of recession, the. 20 00:01:08,720 --> 00:01:10,679 Speaker 4: Fear that on a daily basis, you wake up in 21 00:01:10,720 --> 00:01:13,480 Speaker 4: the morning and not wondering whether which sectors again to 22 00:01:13,480 --> 00:01:16,120 Speaker 4: have twenty five percent towers, which country's tariffs again to 23 00:01:16,160 --> 00:01:19,200 Speaker 4: be at one hundred percent. That's where the damage is caused. 24 00:01:19,720 --> 00:01:25,280 Speaker 1: So here's why uncertainty is an economic killer. Joe Wisenthal, 25 00:01:25,360 --> 00:01:27,959 Speaker 1: host of Bloomberg's Odd Lots podcaster, is with me in London. Joe, 26 00:01:28,000 --> 00:01:28,959 Speaker 1: great to see you, Thank. 27 00:01:28,840 --> 00:01:30,360 Speaker 3: You for having me. Thrilled to be here. 28 00:01:30,800 --> 00:01:34,880 Speaker 1: Tell me, with your brain and knowledge these matters, how 29 00:01:34,959 --> 00:01:39,720 Speaker 1: can we define uncertainty in this moment in twenty twenty five. 30 00:01:40,240 --> 00:01:42,880 Speaker 3: Yeah, I mean it's a great question, and I think 31 00:01:42,959 --> 00:01:48,280 Speaker 3: there are sort of two different elements, which is, one is, Okay, 32 00:01:48,280 --> 00:01:50,960 Speaker 3: we know there's going to be a change in the 33 00:01:51,120 --> 00:01:54,840 Speaker 3: trading environment between the rest of the world in the US, right, 34 00:01:54,880 --> 00:01:58,560 Speaker 3: Like that's obviously a done deal, and nobody knows like 35 00:01:58,600 --> 00:02:03,080 Speaker 3: what type of arrange will be profitable in those environments 36 00:02:03,120 --> 00:02:05,560 Speaker 3: and so forth. So that's a form of uncertainty. But 37 00:02:05,600 --> 00:02:08,040 Speaker 3: that there's another, you know, the more deeper form of 38 00:02:08,120 --> 00:02:11,079 Speaker 3: uncertainty is, yes, we know there's going to be a change, 39 00:02:11,120 --> 00:02:14,600 Speaker 3: but we don't know to what right. And part of 40 00:02:14,600 --> 00:02:17,040 Speaker 3: that is I don't think you know, the White House 41 00:02:17,280 --> 00:02:22,480 Speaker 3: has clearly articulated what it wants the new environment to be. 42 00:02:22,919 --> 00:02:27,680 Speaker 3: There's a message uncertainty because various people speak for the 43 00:02:27,720 --> 00:02:30,280 Speaker 3: White House on behalf of the White House, and there's 44 00:02:30,280 --> 00:02:33,040 Speaker 3: a lot of ambiguity about the degree to which anything 45 00:02:33,120 --> 00:02:37,480 Speaker 3: they say actually reflects the thinking of the administration. And 46 00:02:37,520 --> 00:02:40,040 Speaker 3: when I say the administration, I only mean the President 47 00:02:40,200 --> 00:02:43,320 Speaker 3: because you know, typically one would think there is a 48 00:02:43,360 --> 00:02:47,120 Speaker 3: coherent message, but I don't think there is. There's you know, 49 00:02:47,160 --> 00:02:50,280 Speaker 3: there's rivals within the White House that have different priorities, 50 00:02:50,480 --> 00:02:53,520 Speaker 3: and I think that even the President himself, well, he 51 00:02:53,560 --> 00:02:57,600 Speaker 3: has some intuitions that you know, he believes that tariffs 52 00:02:57,720 --> 00:02:59,840 Speaker 3: are a tool that can be used to revive the 53 00:03:00,160 --> 00:03:04,000 Speaker 3: manufacturing sector. The degree to which that policy is cemented 54 00:03:04,000 --> 00:03:05,280 Speaker 3: seems still very up in the air. 55 00:03:05,680 --> 00:03:08,600 Speaker 1: Can we say that it's more uncertain now that it 56 00:03:08,639 --> 00:03:10,400 Speaker 1: has been in years? 57 00:03:10,720 --> 00:03:10,960 Speaker 4: Yeah? 58 00:03:11,200 --> 00:03:11,440 Speaker 2: Sure. 59 00:03:11,560 --> 00:03:13,640 Speaker 1: How do we sort of measure uncertainty? I mean you 60 00:03:13,639 --> 00:03:15,240 Speaker 1: can look at the mats for one example. 61 00:03:15,680 --> 00:03:18,640 Speaker 3: Well, look, I think you know, in the two big 62 00:03:18,919 --> 00:03:24,840 Speaker 3: recent crises that we had, there were clear goals. During COVID, 63 00:03:25,440 --> 00:03:28,000 Speaker 3: the goal was to stop the spread of the disease 64 00:03:28,639 --> 00:03:31,560 Speaker 3: and then from an economic side, to sort of replaced 65 00:03:31,560 --> 00:03:34,200 Speaker 3: all the lost money, you know, all the lost economic 66 00:03:34,240 --> 00:03:37,520 Speaker 3: activity for those months during lockdown in two thousand and 67 00:03:37,560 --> 00:03:40,520 Speaker 3: eight and two thousand and nine. The goal was to 68 00:03:40,560 --> 00:03:42,720 Speaker 3: stop a bank run, and there was a lot that 69 00:03:42,760 --> 00:03:45,000 Speaker 3: they didn't know at the time, and they certainly, you know, 70 00:03:45,080 --> 00:03:48,120 Speaker 3: may have misjudged the speed and scale through which the 71 00:03:48,120 --> 00:03:51,040 Speaker 3: financial system was deteriorating in two thousand and eight and 72 00:03:51,120 --> 00:03:53,800 Speaker 3: two thousand and nine, But the goal was to stop 73 00:03:54,240 --> 00:03:57,800 Speaker 3: a bank run. In this case, you know, as they say, 74 00:03:57,880 --> 00:04:00,920 Speaker 3: the call is coming from inside the house, so you 75 00:04:01,000 --> 00:04:05,240 Speaker 3: don't really know what the goal is. Is the goal 76 00:04:05,360 --> 00:04:10,680 Speaker 3: to improve our ability to manufacture high tech things that 77 00:04:10,720 --> 00:04:12,240 Speaker 3: are important for national security? 78 00:04:12,560 --> 00:04:13,000 Speaker 4: Maybe? 79 00:04:13,400 --> 00:04:17,760 Speaker 3: Is the goal to fundamentally restructure the economy such that 80 00:04:17,960 --> 00:04:20,440 Speaker 3: everyone or a lot more people are in what we 81 00:04:20,600 --> 00:04:24,360 Speaker 3: call production work. Is the goal to stop the flow 82 00:04:24,440 --> 00:04:29,320 Speaker 3: of fentanyl? Is the goal to slow international migration. So 83 00:04:29,360 --> 00:04:31,920 Speaker 3: whereas in the last two crises, there is certainly a 84 00:04:31,960 --> 00:04:34,320 Speaker 3: lot of uncertainty, and there's a lot of debate about, well, 85 00:04:34,320 --> 00:04:35,880 Speaker 3: what's it going to take and how long will it 86 00:04:35,920 --> 00:04:38,320 Speaker 3: take to stop the spread of a pandemic or a 87 00:04:38,360 --> 00:04:41,360 Speaker 3: bank run, et cetera. I don't think we actually even 88 00:04:41,440 --> 00:04:44,239 Speaker 3: know what the goal is here, and so in some sense, 89 00:04:44,240 --> 00:04:47,320 Speaker 3: I would say, again, there are various attempts to measure 90 00:04:47,400 --> 00:04:50,880 Speaker 3: uncertainty that our market based measures, our sentiment based measures. 91 00:04:51,240 --> 00:04:53,800 Speaker 3: But I would say there is a degree of uncertainty 92 00:04:53,920 --> 00:04:57,640 Speaker 3: now that is in a way incomparable to any recent crisis. 93 00:04:58,040 --> 00:05:01,680 Speaker 1: What's the macro picture when we have this level of uncertainty, 94 00:05:01,720 --> 00:05:03,440 Speaker 1: given that, as you say, it doesn't really have a 95 00:05:03,480 --> 00:05:04,960 Speaker 1: parallel something we've looked at before. 96 00:05:05,120 --> 00:05:08,800 Speaker 3: Well, look, at a minimum, it's very hard to imagine 97 00:05:08,839 --> 00:05:12,599 Speaker 3: any company in the world committing to like serious investment 98 00:05:12,680 --> 00:05:14,919 Speaker 3: right now. And what I mean by investment obviously is 99 00:05:15,200 --> 00:05:20,520 Speaker 3: opening up new locations, opening up new production facilities, expanding headcount, 100 00:05:20,640 --> 00:05:24,520 Speaker 3: et cetera. Why would anyone do that in this environment? 101 00:05:24,560 --> 00:05:27,839 Speaker 3: And that's at a minimum. Furthermore, there has been this 102 00:05:28,320 --> 00:05:32,120 Speaker 3: hit to financial markets of financial tightening, as they say, 103 00:05:32,200 --> 00:05:35,960 Speaker 3: and so stock prices have gone down, yields on government 104 00:05:36,000 --> 00:05:39,960 Speaker 3: debt have gone up, credit spreads have gotten wider. So 105 00:05:40,000 --> 00:05:43,240 Speaker 3: there is just an increased cost of doing business already 106 00:05:43,360 --> 00:05:46,640 Speaker 3: on the financial side, and then you layer in the 107 00:05:46,680 --> 00:05:50,800 Speaker 3: actual literal increased cost of doing business because the goods 108 00:05:50,839 --> 00:05:54,200 Speaker 3: that a company imports, whether they're for resale or whether 109 00:05:54,240 --> 00:05:57,200 Speaker 3: their inputs to production have also gone up. So you 110 00:05:57,279 --> 00:06:00,760 Speaker 3: layer in the inherent policy uncertain and the fact that 111 00:06:01,120 --> 00:06:03,440 Speaker 3: until there's some policy stability, no one is going to 112 00:06:03,480 --> 00:06:06,159 Speaker 3: do anything new, on top of the fact that the 113 00:06:06,240 --> 00:06:09,960 Speaker 3: existing costs we're on day to day operations for both 114 00:06:10,040 --> 00:06:13,760 Speaker 3: financial and goods have gone up. And this is why 115 00:06:13,839 --> 00:06:17,560 Speaker 3: many people believe we're either going into a recession in 116 00:06:17,600 --> 00:06:19,920 Speaker 3: the US or that we're already in one. 117 00:06:20,360 --> 00:06:25,960 Speaker 1: At what points do businesses, consumers, markets simply got used 118 00:06:25,960 --> 00:06:28,240 Speaker 1: to things being so uncertain. Is there a point at 119 00:06:28,240 --> 00:06:30,000 Speaker 1: which that we all just sort of shrug and move on. 120 00:06:31,279 --> 00:06:35,040 Speaker 3: It's hard to imagine that you can ever fully shrug 121 00:06:35,080 --> 00:06:39,360 Speaker 3: and move on. But the answer to that persistent uncertainty 122 00:06:39,720 --> 00:06:42,799 Speaker 3: is to take fewer risks, to shore up your balance sheet, 123 00:06:43,120 --> 00:06:46,840 Speaker 3: to cut everything that you can theoretically cut. You know, 124 00:06:46,880 --> 00:06:49,160 Speaker 3: it's interesting, like in twenty twenty two, when there was 125 00:06:49,240 --> 00:06:52,599 Speaker 3: significant inflation, there were a lot of concerns. Then you know, 126 00:06:52,680 --> 00:06:55,960 Speaker 3: the Federal Reserve was jacking up interest rates and so 127 00:06:56,000 --> 00:06:57,839 Speaker 3: there was a lot of a concern. Then I was like, oh, 128 00:06:57,920 --> 00:07:00,240 Speaker 3: we're going to go into a recession. But one of 129 00:07:00,279 --> 00:07:04,799 Speaker 3: the overriding dynamics of that period was this visceral fear 130 00:07:04,880 --> 00:07:07,679 Speaker 3: of companies to be short of labor, because twenty twenty, 131 00:07:07,920 --> 00:07:11,640 Speaker 3: twenty twenty one, twenty twenty two, twenty twenty three, it 132 00:07:11,680 --> 00:07:14,680 Speaker 3: was probably the first time in recent corporate history where 133 00:07:14,720 --> 00:07:19,120 Speaker 3: companies realized that there is not an endless supply of 134 00:07:19,160 --> 00:07:21,840 Speaker 3: workers out there. I'd say, you had restaurants like, oh, 135 00:07:21,840 --> 00:07:24,640 Speaker 3: we literally can't operate right because we can't find the 136 00:07:24,720 --> 00:07:27,560 Speaker 3: workers in this environment. And so what that means is 137 00:07:27,600 --> 00:07:31,640 Speaker 3: that there was this real reluctance to fire anyone because 138 00:07:31,960 --> 00:07:34,240 Speaker 3: you might think, well, you know, things are uncertain, but 139 00:07:34,400 --> 00:07:36,640 Speaker 3: I can't fire anyone because the last thing I want 140 00:07:36,720 --> 00:07:38,720 Speaker 3: to do is to be caught short labor. Again, I 141 00:07:38,720 --> 00:07:41,400 Speaker 3: just had this very visceral experience of being short. We're 142 00:07:41,440 --> 00:07:43,560 Speaker 3: in a very different environment right now. 143 00:07:43,920 --> 00:07:44,120 Speaker 4: You know. 144 00:07:44,360 --> 00:07:47,640 Speaker 3: Arguably, even going into middle of February, which is when 145 00:07:47,680 --> 00:07:52,559 Speaker 3: the turbulence really began, there were signs of economics slow 146 00:07:52,640 --> 00:07:54,440 Speaker 3: down a little bit that may had nothing to do 147 00:07:54,480 --> 00:07:55,960 Speaker 3: with Trump. Maybe you know, it's time for like the 148 00:07:56,000 --> 00:07:58,960 Speaker 3: fit A Reserve to cut rates. Signs of the housing market, 149 00:07:59,000 --> 00:08:02,640 Speaker 3: which is very important stalling out. So even then there 150 00:08:02,760 --> 00:08:06,800 Speaker 3: was probably already this sort of negative growth impulse emerging 151 00:08:06,920 --> 00:08:09,720 Speaker 3: in the US economy, and so I think this time 152 00:08:09,800 --> 00:08:15,440 Speaker 3: around right now, I suspect that inside many companies, the 153 00:08:15,520 --> 00:08:18,240 Speaker 3: conversations are about what can we cut. We want to 154 00:08:18,240 --> 00:08:20,400 Speaker 3: preserve capital, we want to preserve cash, we want to 155 00:08:20,400 --> 00:08:24,679 Speaker 3: preserve operational flexibility, just to survive to the next month 156 00:08:24,760 --> 00:08:26,600 Speaker 3: or the next half of the next quarter. 157 00:08:26,960 --> 00:08:29,920 Speaker 1: Where do we look for signs that things are calming down, 158 00:08:29,960 --> 00:08:31,600 Speaker 1: that things are becoming more certain. 159 00:08:32,080 --> 00:08:34,040 Speaker 3: I mean, look, I'm a big fan of the stock 160 00:08:34,080 --> 00:08:37,600 Speaker 3: market as an indicator. The stock market is not as 161 00:08:37,720 --> 00:08:42,800 Speaker 3: volatile as it was. The policy environment, I guess, you know, 162 00:08:43,240 --> 00:08:45,400 Speaker 3: is less fluid that it seemed like a week ago, 163 00:08:45,800 --> 00:08:50,400 Speaker 3: right change, It could change, you know, but like the 164 00:08:50,480 --> 00:08:53,240 Speaker 3: pace of new news that's come out is slowed down 165 00:08:53,280 --> 00:08:55,720 Speaker 3: a little bit. You know, there's only so far you 166 00:08:55,760 --> 00:08:59,600 Speaker 3: can really go with that. So like at the margins, 167 00:09:00,520 --> 00:09:04,280 Speaker 3: things are more certain than they were a week ago, 168 00:09:05,240 --> 00:09:07,600 Speaker 3: but we're just talking marginal changes and. 169 00:09:07,559 --> 00:09:09,880 Speaker 1: We'll have to watch them to see more things go next. Joe, 170 00:09:09,920 --> 00:09:12,079 Speaker 1: great to have you here, Thanks for having me. Joe Wisenthal, 171 00:09:12,080 --> 00:09:14,280 Speaker 1: host was brilliant to Odd Lots podcast and author of 172 00:09:14,280 --> 00:09:17,240 Speaker 1: its newsletter. Thank you. For more explanations like this from 173 00:09:17,240 --> 00:09:19,760 Speaker 1: our team of three thousand journalists and analysts around the world, 174 00:09:19,880 --> 00:09:24,480 Speaker 1: go to Bloomberg dot com slash explainers. I'm Stephen Carol. 175 00:09:24,600 --> 00:09:26,960 Speaker 1: This is here's why. I'll be back next week with more. 176 00:09:27,160 --> 00:09:27,920 Speaker 1: Thanks for listening.