Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. We begin this hour
Speaker 2: with stock steady ahead of fresh inflation data at eight
Speaker 2: thirty Eastern time. Victoria Fanadez a Crossmark, writing, we have
Speaker 2: witnessed a definite shift from the animal spirits driving markets
Speaker 2: to a new all time hire just a few weeks
Speaker 2: ago to now an increased probability of recession becoming the
Speaker 2: topic of conversation. Victoria joined us now for more. Victoria,
Speaker 2: welcome back. A week away from Liberation Day early next week.
Speaker 2: That's going to be the big focus for this market.
Speaker 2: It feels like you've changed you a few on things.
Speaker 2: What's changed?
Speaker 3: Well, I think it's actually kind of what you guys
Speaker 3: were talking about it's that sentiment of the consumer.
Speaker 4: When we look over the past year.
Speaker 3: You know, we kept saying, there's so many red flags
Speaker 3: that tell us we should be in a pullback, we
Speaker 3: should be in a recession, but the consumer.
Speaker 4: Was always there.
Speaker 3: We talk about a FED put or a Trump put,
Speaker 3: but really it was the consumer put for the longest.
Speaker 4: Period of time. That's what has changed.
Speaker 3: Now we see the consumer and you guys have already
Speaker 3: talked about it this morning, all those companies coming out
Speaker 3: on their earnings on their conference calls talking about the
Speaker 3: concern that they're seeing.
Speaker 4: Lulu Women being the late latest example.
Speaker 3: I mean, I thought my kids alone would help support
Speaker 3: the numbers at Lulu Women with their purchases, but apparently
Speaker 3: it is not enough, and the consumers are starting to
Speaker 3: pull back, and you get in that negative feedback loop.
Speaker 4: As the consumers start to.
Speaker 3: Pull back, revenues come down, margins start to get affected.
Speaker 3: What happens nine months after margins get affected, companies start
Speaker 3: laying off. And we've seen that with the Challenger layoffs
Speaker 3: in the last month. And so I think it's that
Speaker 3: consumer element that has changed that's giving us more concern,
Speaker 3: especially with potentially more tariffs coming.
Speaker 5: How much is this company's kitchen sinking it? Though you
Speaker 5: mentioned Lululemon and your kids would single handedly cause this
Speaker 5: shared to go up, But a lot of the kids
Speaker 5: are actually getting baggy stuff right now, and that was
Speaker 5: something they address that actually the styles are moving past
Speaker 5: that sort of trademark legging spandex Look, I'm just wondering
Speaker 5: how do you parse through how significant the hit is
Speaker 5: and how big of a slowdown you have to price
Speaker 5: into market expectations.
Speaker 3: Yeah, I mean it's going to be different for every company,
Speaker 3: and the companies that have been out there talking about
Speaker 3: the slowdown have been along a wide range. It's not
Speaker 3: just apparel, right We saw Best Buy as one of those. Yes,
Speaker 3: there was Nike and Lululemon, but you see Walmart, which
Speaker 3: is a different cohort of a consumer. And I think
Speaker 3: part of the issue, Lisa, is that it's not just
Speaker 3: the low incoming middle income consumer anymore. We've talked for
Speaker 3: the last year year and a half on that high
Speaker 3: income consumer really supporting that economy and continuing to spend.
Speaker 3: Even if they shifted their spending habits they went maybe
Speaker 3: from a higher element kind of store now shopping at Walmart.
Speaker 4: We saw Walmart gain a lot of.
Speaker 3: Share, but now they're talking about even the high end
Speaker 3: income consumer pulling back. So I think you have to
Speaker 3: take that longer term approach and say, as we go
Speaker 3: through this year and consumer start to pull back as
Speaker 3: they're worried about their jobs, and we see that in
Speaker 3: the quits rate coming down, we see it with hiring
Speaker 3: rates slowing. That's the element you have to look at
Speaker 3: to determine what does growth look like if that consumer
Speaker 3: engine is not there driving it.
Speaker 1: Peter Cheer earlier told Bloomberg TV that the US is
Speaker 1: trading kap trade flows for capital flows and the rest
Speaker 1: of the world is going to outperform.
Speaker 4: Do you look to the rest of.
Speaker 1: The world ahead of Liberation Day because you're really unsure
Speaker 1: about what is going to happen here in the United States.
Speaker 4: Yeah, I think the rest of the world.
Speaker 3: We've heard from plenty of leaders around the globe talking
Speaker 3: about the concerns and already trying to make steps beforehand.
Speaker 3: We've seen it come out of India, We've seen it
Speaker 3: come out of some of the European countries, where what
Speaker 3: can we do and before the idea of reciprocal tariffs
Speaker 3: come to lower that rate.
Speaker 4: What can we do to help our consumers. We saw
Speaker 4: inflation this morning.
Speaker 3: Out of Europe actually come in lower than expected and
Speaker 3: ECB rate cuts moving higher, So you have to, you know,
Speaker 3: look at it and see what are rates going to
Speaker 3: do between the two What does it look like on
Speaker 3: exchange rates? International has done much better because of the
Speaker 3: concept of growth continuing, especially in Europe with the steps
Speaker 3: that Germany has making in defense.
Speaker 4: But has some of that already run out?
Speaker 3: Is that already priced in to the European market? So
Speaker 3: I might wait for a little bit of a pullback
Speaker 3: on international before putting my toe on the water if
Speaker 3: I haven't already, and let that consolidate a little bit
Speaker 3: before going there.
Speaker 2: Victoria. This is not only headwind for markets. In fact,
Speaker 2: that dominant headwind has been the pain trade, and the
Speaker 2: pain trade's been TechEd so far in twenty twenty five. Stayside,
Speaker 2: Let's think about the shots that's been fired at tech
Speaker 2: over the last week or so. Reports that Microsoft is
Speaker 2: pulling back on data cent to spending, Ali Bamba firing
Speaker 2: shots about over capacity and bubbles, and then overnight a
Speaker 2: heavily downsized IPO from core Weave. How constrained is the
Speaker 2: AI trade at the moment?
Speaker 3: Yeah, I mean no one likes that word bubble, but
Speaker 3: there is a lot of questions now going into hearing
Speaker 3: all of the money the KAPEC spends that people that
Speaker 3: companies are going to do in regards to AI. Seeing
Speaker 3: some of that pull back you mentioned Microsoft is a
Speaker 3: perfect example of it, and what does that mean going forward?
Speaker 4: I think, you know, look tech, as we went.
Speaker 3: Into this correction, Tech had already pulled back. They haven't
Speaker 3: become leadership during this correction period that we're in, So
Speaker 3: I don't think we should look to tech to be
Speaker 3: the leaders coming out of this correction. I think they're
Speaker 3: going to continue to struggle because of some of the
Speaker 3: headlines that you've mentioned. Maybe you start to look at
Speaker 3: some of the secondary companies that will benefit from productivity
Speaker 3: enhancements from AI and not necessarily the tech names, the
Speaker 3: data warehouse components of it that people were really looking at.
Speaker 3: We've seen utility sector pull back a little bit as
Speaker 3: well because of the headlines that you're mentioning. So I
Speaker 3: think we continue to see some struggles in tech and
Speaker 3: you're probably going to have to look at places like healthcare,
Speaker 3: maybe certain types of materials, financials. These are the sectors
Speaker 3: I think that will lead us coming out of the
Speaker 3: correction that we're in.
Speaker 4: That's where you should probably focus.
Speaker 5: Can you walk us through how all of these prongs
Speaker 5: of sentiment hits have translated into your view shift over
Speaker 5: how you should allocate your assets? And I ask this
Speaker 5: at a time when gold is at recordize and people
Speaker 5: aren't sure whether to go into bonds or whether to
Speaker 5: go into healthcare.
Speaker 4: Yeah.
Speaker 3: Well, I mean, look, you know you're talking to the
Speaker 3: bond girl here, So I would always recommend having some
Speaker 3: bonds in your portfolio. People want to hedge what they're seeing,
Speaker 3: and when there's concerns around growth, gold is the hedge
Speaker 3: that people go into when that's not the concern. When
Speaker 3: growth is actually looking like it might pick up, then
Speaker 3: you see people go more into industrial metals or things
Speaker 3: like copper. Copper's actually down this morning after having a
Speaker 3: pretty good run, gold continues to move higher, so you
Speaker 3: see there's that concern around growth. We look at centiment
Speaker 3: and it's always important to break cinniment down and say
Speaker 3: what's driving that number? Is it the more volatile component
Speaker 3: of centiment that's the expectations part, or is it the
Speaker 3: present situation that's driving it. That's usually more focused on
Speaker 3: jobs and fundamentals. We saw both elements come down in
Speaker 3: the last sentiment numbers, so there is maybe a little
Speaker 3: bit of support to that stagflation argument that people are
Speaker 3: talking about as we have concerns around the growth component
Speaker 3: which supports gold, and still have concerns around inflation and
Speaker 3: how sticky that's going to be. Obviously we have pa
Speaker 3: later today, but I think you have to look at
Speaker 3: sentiment and say this feeds into the story of a
Speaker 3: pullback of the consumer, pulling back of growth concerns, of
Speaker 3: GDP concerns at least in the first half of this year.
Speaker 5: Since you're a bond girl, could you really say that
Speaker 5: bonds are going to have the same kind of a
Speaker 5: buffering effect that they have traditionally at a time where
Speaker 5: inflation expectations are actually rising.
Speaker 6: Yeah.
Speaker 3: I don't think you're going to go into fixed income
Speaker 3: right now and say, oh wow, spreads are going to tighten.
Speaker 4: I'm going to get, you know, a.
Speaker 3: Lot of a price return coming out of that part
Speaker 3: of the market. I don't think that's what you're going
Speaker 3: into fixed income for right now, I think you're going
Speaker 3: into fixed income to lock in some steady cash flow
Speaker 3: components in your portfolio. Some people may like to do
Speaker 3: that with dividend payers in the equity market, but that's
Speaker 3: a little more volatile. If you can lock in some
Speaker 3: steady cash flow on the short end and the long
Speaker 3: end of the treasury curve, it gives you a little
Speaker 3: bit more buffer in your portfolio, as we think we're
Speaker 3: going to continue to see volatility at least for the
Speaker 3: next six months in the equity side.
Speaker 4: Of the market.
Speaker 2: Victoria, I appreciate your take on things going into the weekend.
Speaker 2: Victoria Fernandez a crossmark Nvidia backed coal Weave, raising one
Speaker 2: point five billion with a starting share price of forty
Speaker 2: The firm initially seeking to raise as much as two
Speaker 2: point seven billion ahead of its first day of trading.
Speaker 2: Later on today, Angela Zino CFI eight joined us Now
Speaker 2: for more. Angela, welcome to the program. What kind of
Speaker 2: signal do you take from this heavily discounted IPO.
Speaker 7: Well, you know, well, first off, thanks for having me.
Speaker 7: But when we kind of look at this, I mean,
Speaker 7: we're not necessarily surprised by the discount here and I
Speaker 7: don't think most of the market are necessarily surprised kind
Speaker 7: of in light of recent events and what we've seen
Speaker 7: over the last couple of weeks from just overall sentiment
Speaker 7: on the tech side of things just you know, really
Speaker 7: kind of going sour overall. You've got these tariff macro
Speaker 7: issues out there and the implications that they're having on
Speaker 7: you know, tech. You've got these you know, obviously the
Speaker 7: Deep Seek concerns out there and the implicated creations on
Speaker 7: the tech side of things there. I think also as
Speaker 7: far as four Weave is concerned, specifically, when you kind
Speaker 7: of look at that business model and kind of, you know,
Speaker 7: how they handle the financing side of things, kind of
Speaker 7: being more of this kind of GPU infrastructure backed lending
Speaker 7: type of company, I think that's a business model that
Speaker 7: really doesn't kind of, you know, bode well with a
Speaker 7: lot of investors out there, especially amidst a period where
Speaker 7: kind of the a, we've got a risk off trade
Speaker 7: for AI right now.
Speaker 2: It's a huge risk off trade and has been ever
Speaker 2: since the Deep Seeks revelations. Angelo, So let's build on that.
Speaker 2: It's not just that Ali Papa out this week. The
Speaker 2: chairman came out and said maybe there's some other capacity,
Speaker 2: perhaps even a bubble. Then we had a report from
Speaker 2: td count that suggested Microsoft was pulling back from projects
Speaker 2: in both the United States and in Europe too. It's
Speaker 2: a question we asked earlier Angelo, just how constrained is
Speaker 2: this trade at the moment?
Speaker 7: Listen. I think when you kind of look at the
Speaker 7: sentiment out there, I mean, it's it's pretty it's pretty negative.
Speaker 7: I mean we kind of look at the hyperscalers out there,
Speaker 7: from the likes of Microsoft, Oracle, Metas out there declining
Speaker 7: anywhere from fifteen to twenty five percent. When you kind
Speaker 7: of look at the AI semi names out there, they've
Speaker 7: kind of declined more notably, kind of in the twenty
Speaker 7: five to fifty percent range out there. So a lot
Speaker 7: of kind of the uncertainty out there whether it's kind
Speaker 7: of what you alluded to as far as the Microsoft
Speaker 7: situation is concerned. And I think that'll be the most
Speaker 7: important event this earning season, is that earning's call from Microsoft.
Speaker 7: We really need to hear from them, find out exactly
Speaker 7: what their intent out there is. I Mean our view
Speaker 7: is it partly has to do with that open AI
Speaker 7: relationship as well, as the fact that hey, listen, maybe
Speaker 7: they're well and they will clearly articulately the fact that
Speaker 7: they are going to shift more towards their server side
Speaker 7: of things and less towards the infrastructure side of things,
Speaker 7: which we think makes a lot of sense. We do
Speaker 7: like the Microsoft's trade at this point time, given the pullback,
Speaker 7: but there's a lot of uncertainty as far as all
Speaker 7: that is concerned out there. We think a little bit
Speaker 7: kind of to an extreme, and we do think a
Speaker 7: lot of those valuations are kind of baking some of
Speaker 7: that stuff into it.
Speaker 5: To build on that. I'm kind of whipsid here because
Speaker 5: it was just a couple months ago that we had
Speaker 5: people on here who are saying that truly these hyperscalers
Speaker 5: can't invest enough in infrastructure, and that frankly, the energy
Speaker 5: system and the infrastructure currently out there is nowhere near
Speaker 5: what's necessary for the AI build out as people imagine it.
Speaker 5: So which is it? How do you understand how much
Speaker 5: what we're hearing from China is fact versus fiction in
Speaker 5: terms of just how much technological advances transforms that story.
Speaker 7: Yeah, No, I think that's a great question, And I
Speaker 7: don't know if there's an actual way to answer that,
Speaker 7: to be honest with you, But when we kind of
Speaker 7: look at it, right, I think deep Seak did change
Speaker 7: things more than people kind of want to acknowledge out there.
Speaker 7: I think you kind of take a look at China,
Speaker 7: look at the efficiencies that they've kind of accomplished on
Speaker 7: their end of things, and then you kind of look
Speaker 7: at what's happening in the US, and I think kind
Speaker 7: of that's the bigger issue out there, because if you
Speaker 7: kind of look at the pace that these kind of
Speaker 7: hyperscalers are investing at and now at a point in
Speaker 7: time right where we do have these tariff concerns out there,
Speaker 7: we do have those growth concerns out there at a
Speaker 7: point where we could potentially see some pressures on the
Speaker 7: top line, whether you know, come from some deceleration on
Speaker 7: the cloud side of things, whether it be you know,
Speaker 7: some challenges on the digital ads side of things that
Speaker 7: puts pressure kind of on these hyperscalers out there. Not
Speaker 7: to mention, these tariffs out there also increase the cost
Speaker 7: of kind of installing these servers out there, So these
Speaker 7: these hyperscalers are going to have to, you know, look
Speaker 7: to be a little bit more efficient in nature and
Speaker 7: in many cases, what we've seen here over the last
Speaker 7: couple of months is really going to force them to
Speaker 7: do that is core.
Speaker 5: We have a litmus test for other potential companies that
Speaker 5: want to IPO this year in the tech space or
Speaker 5: is it idiosyncratic and I hate to use that word,
Speaker 5: but special because of its connection particularly to some of
Speaker 5: these areas that are part of the peak uncertainty.
Speaker 7: Yeah, I mean we personally wouldn't be using them as
Speaker 7: a benchmark for other potential tech IPOs and other IPOs
Speaker 7: in the market out there. Again, this isn't the name
Speaker 7: that we would potentially or would like to see us
Speaker 7: kind of that first name being thrown out there in
Speaker 7: this tech IPO market kind of you know, since the
Speaker 7: Trump administration has taken over. But that said, this is
Speaker 7: what we've got out there. It is going to be
Speaker 7: somewhat of a test out there. We'll see what the
Speaker 7: sentiment looks like. But in our view, no, it shouldn't
Speaker 7: kind of be used as kind of this test longer
Speaker 7: term or over the next nine to twelve months in
Speaker 7: terms of, you know, what the sentiment looks like for
Speaker 7: tech longer term.
Speaker 2: So Angela for you, right, now to pick what is it.
Speaker 7: It's a great question. We've told investors over the last
Speaker 7: couple of months to continue to shift towards software over semiconductors. Now,
Speaker 7: you know, we'd acknowledge that neither side have really kind
Speaker 7: of worked that well, but we'd say the lesser of
Speaker 7: both evils. Right now, I was still on the software
Speaker 7: side of things. We remain believers kind of on the
Speaker 7: side of things where you are going to see more
Speaker 7: M and A on that side of things. We also
Speaker 7: believe that kind of the fundamentals are also going to
Speaker 7: hold better up better on the software side of things.
Speaker 7: And for us, a name like Microsoft that these levels
Speaker 7: is a name that I feel pretty confident recommending to investors.
Speaker 7: I think Salesforce is another name which has seen a
Speaker 7: notable pick pullback as well, which is a name you
Speaker 7: can kind of be looking at at these levels.
Speaker 2: Angela, I appreciate the input as always, Thank you, sir.
Speaker 2: I have a good weekend, Angela. Zina There of CFL
Speaker 2: Rating Center. Republicans working on changes to the House GOP
Speaker 2: tax plan looking to require few accounts in Medicaid benefits
Speaker 2: for the poor and disabled. The move aiming to appease
Speaker 2: members of the party worried about public backlash, and please
Speaker 2: decide the good friend of this program, a good friend
Speaker 2: of ours. The Congressman from Arkansas French Hill, joins us
Speaker 2: now for more. Congressman, good to see you, Sir.
Speaker 6: Jonathan with you and Lisa and Anne Marie always going
Speaker 6: to be back in New York?
Speaker 2: Is it tennangasp be as much fun as you thought
Speaker 2: it would be? Don in Washington every day is a
Speaker 2: joy eight pril Second, how much of a joy is that?
Speaker 2: Can it be?
Speaker 6: I'm just glad it's not April first, because that would
Speaker 6: even increase even more.
Speaker 2: Actually, what are your constituents telling you about what's hanniganaw
Speaker 2: counsaw on the ground.
Speaker 6: Yeah, look on the relations to tariffs. About thirty percent
Speaker 6: of our output in Arkansas goes to Mexico or Canada,
Speaker 6: and that's food and manufactured goods and back and forth.
Speaker 6: And then you have the North American Free Trade Agreement
Speaker 6: now under USMCA that was crafted to make North America
Speaker 6: the destination for manufacturing. So for thirty years it's been
Speaker 6: knitted together. And so I think the first thing that
Speaker 6: I'm hearing is certainty and just lay out the plan
Speaker 6: on how you want to use tariffs to open up
Speaker 6: more markets for Americans, have reciprocity on fairness and certain
Speaker 6: markets that are highly disportionate disportionate treatment like for example.
Speaker 6: But when it comes to North America, let's renegotiate USMCA.
Speaker 6: If you want to limit certain inputs from China into Canada,
Speaker 6: Mexico or the United States, you can do that in
Speaker 6: the agreement. Those countries can do that on an input basis.
Speaker 6: If you want to have the American manufactured content higher,
Speaker 6: you could negotiate to do that, as President Trump successfully
Speaker 6: did last time he was president on the North American
Speaker 6: auto content. He got more American content. So I think
Speaker 6: it's best to tackle this Canadian and Mexican issue inside
Speaker 6: a new and revised USMCA.
Speaker 1: But USMCA was done under Trump. It replaced NAFTA, So
Speaker 1: you want USMCA. Part two is do you think that's
Speaker 1: what he's getting at Donald Trump? Here, the president he's
Speaker 1: getting at the start bringing those twenty twenty six talks
Speaker 1: up into the mid twenty twenty five.
Speaker 6: Yeah, potentially, And I think that's not wrong thinking on
Speaker 6: his part. If you're concerned about Chinese dumping through transshipment
Speaker 6: of steel, for example, or Mexico. Let's deal with that
Speaker 6: inside the agreement. Let's have Mexico deal with that in
Speaker 6: their own trade policy on inputs coming into the country.
Speaker 6: Because at the same that's how I think you have
Speaker 6: a more robust, competitive international system where manufacturing is at
Speaker 6: the heart of America. I think President Trump strategically in
Speaker 6: trade diplomacy, I'd like to see more things made in
Speaker 6: America that takes time to do. It's not overnight. We
Speaker 6: had steal an aluminum terraffs, you know, for the past
Speaker 6: five or six years, and they haven't you been overnight
Speaker 6: changes across the board.
Speaker 1: Walmart is headquartered in your state. They went to China
Speaker 1: and said, look, we're dealing with tariffs. You're going to
Speaker 1: have to eat some of this costs. And the Chinese
Speaker 1: are saying, no, are you concerned about the cost being
Speaker 1: passed on to consumers?
Speaker 6: I am when I don't know what the strategy is.
Speaker 6: This is the whole point. You have trade diplomacy on
Speaker 6: using trade as a sanctioned potential, like you saw the
Speaker 6: President do on Columbia on repatriation of immigrants. You had
Speaker 6: trade used for prosty to bring down actual barriers benefit
Speaker 6: actually both countries potentially over time, and we did that
Speaker 6: successfully for forty years. We did it targeted when I
Speaker 6: was in the White House working during the Bush administration.
Speaker 6: We use Section three oh one to target bad activities
Speaker 6: by the principally then Japan to open those markets doing
Speaker 6: this kind of terriff activity and limitation on imports to
Speaker 6: the US. So you can do that in a classic
Speaker 6: trade diplomacy situation. But when you have across the board
Speaker 6: and not clear on what the timeframe is for the
Speaker 6: increased production of the US, I think that's the challenging part.
Speaker 1: But is it your sense when you speak to the
Speaker 1: White House that April second is the start of negotiations,
Speaker 1: that at the end of the day, the President is
Speaker 1: a deal maker and wants to get deals done.
Speaker 6: Well, I hear from my colleagues on the House they
Speaker 6: want clarity, like the American business once. So you tell
Speaker 6: us what components and what timeframes you want to do
Speaker 6: trade diplomacy. You want to use reciprocity, you want to
Speaker 6: protect certain industries in the US where you want to
Speaker 6: have achievable gains in production here. But when it comes
Speaker 6: to autos, which is the most important topic of the day.
Speaker 6: I think I think that's best done through advancing changes
Speaker 6: to the USMCA that President Trump led successfully with the
Speaker 6: Mexicans and the Canadians in his first term.
Speaker 1: The Market's also looking for clarity on all of Trump's proposals,
Speaker 1: especially tax cuts. The Senate, the Republicans Eric Wawson are
Speaker 1: reporter Washington, DC, is talking about how they want fewer
Speaker 1: cuts to medicate health benefits for the poor, disabled, which
Speaker 1: would be different what the House is talking about. Do
Speaker 1: you think House Republicans Senate Republicans can come to an
Speaker 1: agreement on how much can be cut?
Speaker 6: I do. I think we'll come to an agreement. I
Speaker 6: think we can come to an agreement rather quickly on
Speaker 6: a joint House and Senate resolution for reconciliation so the
Speaker 6: committees can get to work. And I just referred to
Speaker 6: the Wall Street Journal story today talking about duplicate payments
Speaker 6: and medicaid across the states and how large that number is.
Speaker 6: House Republicans are looking ways to improve medicaid, focus medicaid
Speaker 6: on the most vulnerable, the young, the poor, the disabled,
Speaker 6: and tried to ring costs out of the systems Democrats.
Speaker 6: I think in a political charge are, Well, you're going
Speaker 6: to cut benefits for Medicaid. That's an assumption by Democrats politically, well, because.
Speaker 1: The math doesn't work when you're talking about eight hundred
Speaker 1: and eighty and also that's.
Speaker 6: The charge for the whole committee, right.
Speaker 1: But most of that money goes to medicare.
Speaker 6: Well, but look at the numbers, and I think that's
Speaker 6: what the House and Senate want to do. Let's get
Speaker 6: to a Senate resolution and let's let these committees work
Speaker 6: to mark those bills up to find the savings that
Speaker 6: we can produce.
Speaker 1: Besides the extension of TCJ, what other tax cuts do
Speaker 1: you think are actually feasible. The President has talked about
Speaker 1: no tax on Social Security, no tax on tips. Just
Speaker 1: this week, no tax on auto loans apparently is being
Speaker 1: thrown out there, and he's flirting with what actually can
Speaker 1: get pasted.
Speaker 6: Well, this is the beauty of the reconciliation process because
Speaker 6: the President puts his plan out there, his best idea
Speaker 6: is what he wants to try to accomplish, and then
Speaker 6: the House and Senate have to come to get there
Speaker 6: and figure out what we can do in the context
Speaker 6: of that budget resolution. Can we find the cuts? Can
Speaker 6: we find the offset. Do we agree in the in
Speaker 6: the House and Senate on the economic forecasts? And so
Speaker 6: I won't pre judge what the possibilities are. I just
Speaker 6: know how hard the work is going to be. I
Speaker 6: want to put an emphasis on things that grow the economy.
Speaker 6: So if we have to narrow the focus on of
Speaker 6: what amount of tax cuts we're going to have, what's
Speaker 6: focus on ones that preserve that produce production, more jobs,
Speaker 6: faster economic growth.
Speaker 5: Do tariffs increase revenues and turbo charge growth?
Speaker 6: Again, this depends on the strategy, Lisa. You know you
Speaker 6: can have an across the board modest tariff that might
Speaker 6: raise revenue and not impact growth economically, But what is
Speaker 6: your goal? Is it reciprocity, is it market opening in
Speaker 6: new countries, is it level of the playing field? Or
Speaker 6: is it increasing production in the US? Those things are
Speaker 6: sometimes in conflict.
Speaker 5: What number are you penciling in for the tariff revenue
Speaker 5: to offset some of their cuts?
Speaker 6: So in Congress we're actually not penciling in tariff revenue
Speaker 6: because it's not accounted by this Congressional Budget Office as
Speaker 6: an offset, which doesn't mean we can't count it. Like
Speaker 6: if there was a strategy and it laid out. The
Speaker 6: two budget committees could agree we will accept some revenue
Speaker 6: from projected tariffs in the revenue estimates and the reconciliation package,
Speaker 6: but we're not as of now counting that where that's
Speaker 6: a hypothetical that we're actually not counting on.
Speaker 2: Right as willmomp in touch, I imagine they must have
Speaker 2: reached out to you and other representatives of anconsas how
Speaker 2: upset are they about this?
Speaker 6: Well, they want I think so many businesses and they
Speaker 6: report on your broadcast on a regular basis. They can
Speaker 6: live with certain things that they know what the plan is.
Speaker 6: And so Walmart's concerned about the number one thing they
Speaker 6: think about every single day, which is the American family
Speaker 6: they serve, and they want to make sure that that
Speaker 6: can be in an affordable way. That's their goal in life.
Speaker 6: So this could interfere with that, but that's we need
Speaker 6: to wait and see what the ultimate goal is.
Speaker 2: Do you think the White House appreciates that because we
Speaker 2: hear this every single day and we've said on this
Speaker 2: program confidence coming into twenty five with sky high, we
Speaker 2: wanted to see that sky high confidence translate into hiring,
Speaker 2: into investment, and the lack of currency the lack of
Speaker 2: certainty is really how things back, and you see that
Speaker 2: in the sentiment surveys. Now just the White House, in
Speaker 2: your opinion, sort of understand that the lack of certainty,
Speaker 2: the lack of clarency, is holding this economy back.
Speaker 6: That's worry. I think Treasure secretary percent in a National
Speaker 6: Economic Council leader has to know that they're very experienced
Speaker 6: in economic policy making. And my view is you've got
Speaker 6: a I think clarity about right sizing regulatory costs and
Speaker 6: the economy. You've got clarity about trying to reduce the
Speaker 6: bureaucracy in the government. You've got clarity on where we
Speaker 6: want to go on tax policy. We need an equal
Speaker 6: amount of clarity on the strategy in and around tearos
Speaker 6: and increasing manufacturing. Here, President Trump's a big picture point
Speaker 6: is a good one, but you've got to develop a
Speaker 6: workable strategy to do that. And I think that's what
Speaker 6: the role of the treasure Secretary, of the Commerce Secretary
Speaker 6: and the National Economic Advisor, that's their principal mission.
Speaker 1: Congress'man at Leastahonic is going to be staying put in Washington,
Speaker 1: d C. Not coming to New York to work at
Speaker 1: the UN And do you think that's an admission by
Speaker 1: the White House that they're nervous about getting this tax
Speaker 1: bill done through Congress they have the votes.
Speaker 6: Well, it surprised me. I'll be candidate. I think Elise
Speaker 6: as an outstanding member of our leadership team. We welcome
Speaker 6: her back to the Congress. But I also thought she
Speaker 6: was going to be an exceptionally well trained and qualified
Speaker 6: ambassador for the President at the United Nations. It could
Speaker 6: signal that. I think President Trump's own quote says, we
Speaker 6: need to make sure we have the votes in the House.
Speaker 6: So if you consider that an admission we welcome her back.
Speaker 6: I think it says that maybe replacing her with a
Speaker 6: Republican they think might be tough in New York as
Speaker 6: a political strategy, which is that's been a red district,
Speaker 6: but you know that may be indicate that and we
Speaker 6: need every vote we have. We have the most narrow margin,
Speaker 6: Mike Johnson has the most narrow margin since World War One,
Speaker 6: and so we don't want to have a gap there.
Speaker 6: And when we pass tax cuts and jobs back in
Speaker 6: President Trump's first term, I think some twenty Republicans voted no,
Speaker 6: so we don't have the luxury of that this time.
Speaker 2: Congressman, we always appreciate your time. It's going to see it.
Speaker 2: Thank you, sir. Congressman French Show and also the chair
Speaker 2: of the House Financial Services Committee. To build on this conversation,
Speaker 2: I'm pleased to say that joining us now is the
Speaker 2: former Sen. Lewis FED President Jim Pullott. Jim, welcome back
Speaker 2: to the program, sir. It's been a while. We haven't
Speaker 2: spoken to you, I believe since Chairman Pal spoke in
Speaker 2: the news conference. So we've got to watch you. We
Speaker 2: need your reaction. The T word making a comeback the
Speaker 2: Federal serve. What did you make of that?
Speaker 8: It's now making it come back with me. I'm now
Speaker 8: using that word.
Speaker 9: So I think that the I do think that the
Speaker 9: Committee has, you know, a good reason to stick with
Speaker 9: the policy rate where it is. Inflation expectations for the
Speaker 9: next two years and the tips market they've been rising.
Speaker 8: They're about three and a quarter today.
Speaker 9: That's a CPI based measure, but if you put that
Speaker 9: over to PCE based measure, it be you know, around
Speaker 9: three percent pc inflation over the next two years.
Speaker 8: That's what the market is thinking. That's too high for
Speaker 8: the committee.
Speaker 9: The Committee's trying to get you know, especially core PC inflation,
Speaker 9: which came.
Speaker 8: In a little bit hot here.
Speaker 9: You're trying to get core PC inflation down to two percent,
Speaker 9: so they're going to have to be higher for longer,
Speaker 9: and if it goes too much farther, they're going to
Speaker 9: have to raise the policy rate.
Speaker 5: Wait, hold on a second, because Jim, this is exactly
Speaker 5: what people thought that Fetcher Powell did last week when
Speaker 5: he said transitory the word that you will not go
Speaker 5: so far as to say is that you would be
Speaker 5: willing on some level to look past here related it
Speaker 5: boosts to inflation in the short term, especially of growth
Speaker 5: was sagging, and that the said would have to or
Speaker 5: be open to responding to slow in growth. Are you
Speaker 5: saying that inflation should it be above expectations because.
Speaker 4: Of care for somewhere else?
Speaker 9: It's going to be interesting that committee should be hitting
Speaker 9: their inflation target two years from them, and what the
Speaker 9: market is saying is no, you're not going to hit it.
Speaker 8: You're going to hit three percent.
Speaker 9: That was my story here, So that doesn't sound very
Speaker 9: good to the committee.
Speaker 8: Now maybe the market's wrong.
Speaker 9: They often have you know, and I'm talking about two
Speaker 9: year tips here, and they can move around, yes, but.
Speaker 8: It's a good reason for the Committee to stay where
Speaker 8: it is. I have argued that the Committe is in
Speaker 8: good shape here.
Speaker 9: They didn't go as far as was previu that previously
Speaker 9: expected on cutting the policy rate, so they stayed a
Speaker 9: little bit higher.
Speaker 8: I think that's turned out to be wise.
Speaker 10: The tariffs, I mean when I say tariffs don't cause inflation,
Speaker 10: what I mean is that inflation's of product monetary policy
Speaker 10: over the medium term, and it's not up.
Speaker 8: To the trade representative to control inflation.
Speaker 9: It's up to the policy makers to control inflation, and
Speaker 9: they have to adjust policy appropriately given everything else.
Speaker 8: That's going on in the economune so and over a.
Speaker 9: Two year horizon, that's something you should be able to influence.
Speaker 9: But right now markets are saying that the Committee doesn't
Speaker 9: look tight enough to get down to two percent at
Speaker 9: the end of two years.
Speaker 5: Jim, do you think that the Fed should open the
Speaker 5: possibility of hiking rates again?
Speaker 9: Well, it's not my base case, but I think the
Speaker 9: probability on that is rising slightly here.
Speaker 8: And this wasn't that radical of a.
Speaker 9: Data release here, but I do think that possibility is rising.
Speaker 9: We really haven't made any progress on getting core PC
Speaker 9: inflation down, let's say over the last year.
Speaker 8: You know, I think the man on the street.
Speaker 9: Would look at those numbers and say, now has basically
Speaker 9: been flat for the last year.
Speaker 6: Jim.
Speaker 2: One thing we've heard repeatedly from some economists, and this
Speaker 2: labor market is just not as tight as it was.
Speaker 2: And because it's not, that dampens down the potential for
Speaker 2: second round effects from the inflationary kick up that you
Speaker 2: get from tariffs. What would you say back to that,
Speaker 2: How fertile do you think this environment is for second
Speaker 2: round effects?
Speaker 8: I don't know.
Speaker 9: Come on, unemployment insurance claims ridiculously low, and that's your
Speaker 9: best week to week indicator. Unemployment rates, if anything, is
Speaker 9: probably below the natural rate for the US economy, but
Speaker 9: certainly low by historical standards.
Speaker 8: I just don't see it right now. Now there's fear
Speaker 8: of the future and what might happen. And we know
Speaker 8: that the last era of war.
Speaker 9: In twenty eighteen twenty nineteen did cause to slow down
Speaker 9: in the economy, and if that did react to that
Speaker 9: by lowering the policy rate.
Speaker 8: So we'll see if history repeats itself here. So it's
Speaker 8: the expectation that people might be thinking about. But as
Speaker 8: far as where.
Speaker 9: The labor market is right now and whether that's disinflationary
Speaker 9: pressure coming from there.
Speaker 8: I don't think so.
Speaker 6: Jim.
Speaker 2: Can we have a best guest from you? Next move
Speaker 2: cuttle Hike, what would your best guest be?
Speaker 7: Right now?
Speaker 9: I still think the committee can stick to its baseline
Speaker 9: that there will be further cuts, but they're being pushed
Speaker 9: farther and farther out into the future.
Speaker 11: And now with a hotter core PCE, you're over year number,
Speaker 11: you might start pushing those out into twenty twenty six
Speaker 11: instead of the twenty twenty five.
Speaker 8: We'll suit the market does in the days I had.
Speaker 2: Jim before you go. Boiler Makers played tonight on nine
Speaker 2: Sweet sixteen.
Speaker 7: Yes, and a little bit about.
Speaker 8: That victory for the Boilers. Here we're playing in Indianapolis.
Speaker 8: They don't lose at home very often, so I think
Speaker 8: they've got a good.
Speaker 2: Shot Boiler up.
Speaker 7: I'll do that, BOI.
Speaker 2: You know the manager who does my reviews, Purdue appreciate it.
Speaker 2: Thank you, sir, Former Sen Lewis Ben President Jim for Jim,
Speaker 2: thank you.
Speaker 5: That's why I picked Perdue as well.
Speaker 2: Right, this is the Bloomberg Surveillance Podcast, bringing you the
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