Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily 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. We are honored
Speaker 1: to give you the chief Global Economist at Morgan Stanley.
Speaker 1: They have a heritage which is defined by Stephen Roach
Speaker 1: and others over the years. Seth Carpenter joins us this morning. Seth,
Speaker 1: I'm gonna go to the Morgan Stanley way, which is
Speaker 1: you guys under roaches, leadership, codified, a vision, visible argument.
Speaker 1: What is the number one thing your team is arguing
Speaker 1: about as we enter two thousand twenty three. Gosh, what
Speaker 1: sorts of things that were not arguing about. Let me
Speaker 1: say I I heard you all just the where the
Speaker 1: segment talking about the ADP data and the labor market
Speaker 1: and whether or not the economy is slowing in one
Speaker 1: place where we have um tried to hold our ground.
Speaker 1: Ellen Sander, as you know, as our chief US economist,
Speaker 1: she and I have been steadfast and saying we think
Speaker 1: the economy is clearly slowing, but boy, we're not calling
Speaker 1: for a recession in three. We're still there. I don't
Speaker 1: think we're actually in the majority with that view, but
Speaker 1: the fact that the economy is holding up is part
Speaker 1: of our view. There you mentioned the initial jobless claims data. Uh,
Speaker 1: what we're thinking is going to happen, and this is
Speaker 1: consistent with the anecdotes from the minutes, is that businesses
Speaker 1: will try to hoard labor, and so what we're likely
Speaker 1: to see is slower and slower and slower. Non farm
Speaker 1: perils will get tomorrow's data obviously where we're looking for
Speaker 1: about five thousand UM, but we're looking for us slowing
Speaker 1: down and hiring. We're not looking for a wave of
Speaker 1: picking out that territory is going to be is where
Speaker 1: we've been. We've alluded to the seventies. You two on
Speaker 1: to remember the embarrassing Lapel's Michael McKee and I wore
Speaker 1: years ago. What actually happens to our economy, frankly, the
Speaker 1: global economy. If we got a Neil cash cary five
Speaker 1: point four percent, a board six point seven whatever percent,
Speaker 1: do we all fall apart and die? Or I mean
Speaker 1: we we move forward, right, I mean, I do think
Speaker 1: we move forward, but you know, we are looking for
Speaker 1: a soft ish landing, if I can steal that phrase
Speaker 1: from share pol. I do believe that the committee right
Speaker 1: now is feeling their way. They are close to being
Speaker 1: as restrictive as they need to be. It'll be up
Speaker 1: to the next several data points to figure out exactly
Speaker 1: when they call it quits on hiking. But then it's
Speaker 1: going to be a question for them how long to
Speaker 1: stay restrictive like that. And I think that's the part
Speaker 1: that the market really needs to internalize, is that the
Speaker 1: FETE is not trying to trash the economy now to
Speaker 1: bring inflation down next year. They're trying to slow the
Speaker 1: economy down over a multi year process, and that really
Speaker 1: is going to be the difference I think between now
Speaker 1: uh and the seventies. And for the record, I was
Speaker 1: alive for all of thee that there is this issue
Speaker 1: of how much do you actually listen to what FED
Speaker 1: officials say and do what they say, versus take that
Speaker 1: as signaling that's playing some game theory to try to
Speaker 1: get the market to a place so that they can
Speaker 1: then say, look, we're all good and we don't have
Speaker 1: to raise rates as much as we previously thought. I
Speaker 1: say this as Kansas City FEDS esther George speaks and
Speaker 1: start talking about how she raised her forecasts for our
Speaker 1: FEDS rates will ultimately end up. This is kind of
Speaker 1: what Neil Kushkari was talking about a bit yesterday. Does
Speaker 1: that guide you in any capacity? Do you trust them
Speaker 1: or do you push back against them with the rest
Speaker 1: of the market. Uh So I trust them in the
Speaker 1: in the following sense, they are talking about what they
Speaker 1: think they would do based on the availability of information
Speaker 1: right now. Uh. And so then what we have to
Speaker 1: do is overlay well we think is actually going to
Speaker 1: happen with the actual data, what's going to happen with jobs,
Speaker 1: what's going to happen with inflation? And if inflation keeps
Speaker 1: coming off as it has been, and if job creation
Speaker 1: continues to slow, then I think what they're going to
Speaker 1: say is, Wow, we have got the traction that we
Speaker 1: wanted from restrictive policy, and we were seeing this sloan
Speaker 1: that we want, so we'll be able to step back.
Speaker 1: So I don't think they're going to get to the
Speaker 1: heights with the funds rate that some of the members
Speaker 1: of the Committee have pointed to because I think the
Speaker 1: data will slow enough to give the core of the
Speaker 1: committee that sort of comfort that they can stop. The
Speaker 1: problem is is that the data on the goods inflation
Speaker 1: has slowed, that you are seeing some disinflation there, but
Speaker 1: you're not seeing that in jobs. And this is where
Speaker 1: we go. Let's let's really end where we began here.
Speaker 1: This is the big dilemma. Will the Fed keep hiking
Speaker 1: rates in the face of strong labor market data even
Speaker 1: if there are signs of disinflation elsewhere? Yeah, I think
Speaker 1: if it is continued very strong labor market, then then
Speaker 1: I think they keep going. You know, we're looking for
Speaker 1: another step down tomorrow. The ADP data came in. I
Speaker 1: tend not to look at their numbers, but I do
Speaker 1: spend time looking at the commentary that comes through, and
Speaker 1: they are pointing to a little bit of easing of
Speaker 1: wage pressures as well. So I do think we are
Speaker 1: seeing signs that were going in the right direction, that
Speaker 1: things are slowing. But there's no sense in which right
Speaker 1: now things are weak. If we went back up to
Speaker 1: three hundred thousand jobs per month and stay and then
Speaker 1: there's no question they keep hiking Before we let you go, Seth.
Speaker 1: I want to mark a funeral for negative fielding debt.
Speaker 1: It is gone, it is dead. It is over. The
Speaker 1: last negative field in coupon has gone. Well, the consequences
Speaker 1: of the end of the negative yielding era be born
Speaker 1: out over the next decade, over the next year, or
Speaker 1: have we already seen it in what we experienced last year? Oh?
Speaker 1: I think there's I think there's any number of repercussions
Speaker 1: to come. And if if we're right and the feed
Speaker 1: is able to stick with their strategy of not just
Speaker 1: hiking until they're restrictive, but staying there for at least
Speaker 1: the balance of this year, then then those higher rates
Speaker 1: are going to be have have an effect for some
Speaker 1: time to come. I think the other interesting question that
Speaker 1: will come up and will be a topic of discussion
Speaker 1: is going to be one of fiscal sustainability because as
Speaker 1: those interest rates go open player and governments have increased
Speaker 1: their dead totally entertainment that they're making is going to
Speaker 1: have to go up as well. So I've been nice
Speaker 1: at Ollen Sentner, you know, but just you know, New
Speaker 1: Year's resolution, don't be so argumented like Steve Roach was
Speaker 1: years ago. Seth carpenter of the fractures Margan Stanley team
Speaker 1: as well. Here's the line from Anon Sender right from
Speaker 1: Morgan Stanley, financial conditions aren't too easy, reflecting a misperception
Speaker 1: among investors of the fetes reaction function. Let's get Russ
Speaker 1: cos tricks view on that. The portfolio manager for the
Speaker 1: black Rock Global Allocation Fund Russ. Would you agree with
Speaker 1: that line from Annon Sentmocan Stanley, Well, good morning, Jonathan.
Speaker 1: I think i'd agree with the fact that there's clearly
Speaker 1: this tension right now within the Federal Reserve. This is
Speaker 1: not a new thing. This is what you rail the
Speaker 1: market back in August, where you're concerned about the market
Speaker 1: eating ahead of itself, whether that's a function of the
Speaker 1: stock market going too high, credit markets getting too tight.
Speaker 1: There is that concern that the financial conditions ease off
Speaker 1: too much. Is that going to hamper their fight against inflation?
Speaker 1: And I look for us where we are, and we
Speaker 1: have to piece this together. You have the responsibility to
Speaker 1: piece it together with portfolio allocation. How are you reallocating?
Speaker 1: So honestly, you know, Tom, we are pretty much going
Speaker 1: into twenty three the way we left twenty two up.
Speaker 1: We're not making a major change right now. So what
Speaker 1: does the portfolio look like. We're underweight equities, were underweight bonds.
Speaker 1: Were emphasizing carrying the portfolio because in a market that's
Speaker 1: range bound, we want to be able to earn some
Speaker 1: income for our clients. We're focused on quality stocks. Now.
Speaker 1: I do think we're gonna get to a point later
Speaker 1: in the year, probably in the first half, were closer
Speaker 1: to a FED pivot. At that point, evaluations are where
Speaker 1: they are a bit lower. I think you can get
Speaker 1: a very good tradeable bottom. But this is not the
Speaker 1: point where I think you want to load up on risks.
Speaker 1: Are the the cost cutting is going to be efficacious
Speaker 1: as every corporation and every sector goes out and recalibrates.
Speaker 1: Here as we see from tech and all that. I
Speaker 1: don't mean to micro call it, but are thinking to
Speaker 1: be efficacious and helping their margins, are they actually going
Speaker 1: to have impact? Well, let's over a couple of things.
Speaker 1: I mean, tell him, I think you raised a very
Speaker 1: important point. You know, a few minutes ago, you know
Speaker 1: Big check is ridiculously profitable. You know, if you look
Speaker 1: at most of the companies in the NASTAC one hundred,
Speaker 1: particularly the megacap tech names, their cash flow, their profitability
Speaker 1: is enormous. Margins just still close to a record high.
Speaker 1: So yes, companies are gonna trying to manage costs that
Speaker 1: arguably climbed up a little too much during the the
Speaker 1: euphoria post pandemic. But the reality is these are still
Speaker 1: very profitable companies. We're not talking about two thousand when
Speaker 1: you had Banhastic one D and barely any offit ability.
Speaker 1: Ross I can't let you get away with saying the
Speaker 1: word pivot without really pressing into what that means. You
Speaker 1: think that with all of this backdrop and the potential
Speaker 1: pain that we're seeing in terms of layoffs, there will
Speaker 1: be a pivot. What does pivot mean? Does it mean cuts?
Speaker 1: Does it mean a pause? I think it's more of
Speaker 1: a pause. I think the FED has been very clear
Speaker 1: and again conditions can change, and they reserve the right
Speaker 1: to change their minds. But it's not necessarily practical to
Speaker 1: expect cuts this year. The question is where where's the
Speaker 1: turninal FED funds rate? Is it five five and a
Speaker 1: quarter market right now? Is uh? You know, forecasting someone
Speaker 1: in the zip code to five or the conditions force
Speaker 1: them to go much higher than that to five and
Speaker 1: a half five and three quarters. I think that's the
Speaker 1: question the market right now is trying to resolve. Is
Speaker 1: you see signs of deceilration and inflation as you see
Speaker 1: some salt in the labor market, and you get clarity
Speaker 1: around that. That I think is when you get a
Speaker 1: more tradeable bottom in financial markets. Can we get to
Speaker 1: a pivot, Russ if we don't get a significant sell
Speaker 1: off in equities, if we don't get the tightening for
Speaker 1: financial conditions that the FED has been looking for, Yes,
Speaker 1: I think you can. I think the FED is clearly
Speaker 1: financial conditions are are front and center. But at the
Speaker 1: end of the day, they've told us what they're focused on,
Speaker 1: And if I had to focus on one factor, it's
Speaker 1: going to be the labor market. Because we know that
Speaker 1: headline inflation is coming down, goods inflation is coming down.
Speaker 1: What has been remarkably resilient has been the labor market.
Speaker 1: And that's where I think the FED is going to
Speaker 1: focus not necessarily and whether the S and P five
Speaker 1: hundreds at thirty seven hundred or thirty nine, Russ, can
Speaker 1: you help me understand what's going on with the labor market.
Speaker 1: So I looked at the quits right yesterday got the
Speaker 1: jobs report. Job openings, quits are up, Quits picked up
Speaker 1: for the first time since February. That screams confidence in
Speaker 1: the labor market. Job opening still about one point seven
Speaker 1: openings for every single unemployed American. Again, that screams a
Speaker 1: tight labor market. Then, Russ, I see this news from Salesforce,
Speaker 1: from Amazon, from others as well. Russ, We're trying to
Speaker 1: work out what should I believe here we the corporations
Speaker 1: in one industry, autnemy or what the official data is
Speaker 1: telling me month a month, weay come weak. Well, I
Speaker 1: think I think you hit it. It's what the its
Speaker 1: industry by industry, and that is why this is such
Speaker 1: a difficult labor market. Absolutely, we're seeing layoffs in tech,
Speaker 1: We're seeing solignated in parts of the professional class. But
Speaker 1: if you look at other parts of the labor market, hospitality, restaurants, healthcare,
Speaker 1: these segments of the economy lost hundreds of thousands of
Speaker 1: workers during the pandemic that have never come back. They're
Speaker 1: still missing workers, which is why the quit rate is
Speaker 1: still high, and that's why the labor market may remain
Speaker 1: somewhat resilient, at least in those parts of the market
Speaker 1: that are playing catch up with all of his dislocations
Speaker 1: that happened during the pandemic. I rush, this was great.
Speaker 1: We appreciate it happen to year to you in the
Speaker 1: same thank you breast constrict typing of black Tom Forte
Speaker 1: with us. He's senior research unlest did d a davidsonboat
Speaker 1: It really is is a guy encyclopedic on what goes
Speaker 1: on at Amazon. The background story we don't hear of.
Speaker 1: I love how you end your note. Tom. You talk
Speaker 1: about revenge travel. Bramo owns that, and you also talk
Speaker 1: about we're all going to see Taylor Swift. You've gotta
Speaker 1: be kidding me. Did Amazon just blow this with a
Speaker 1: blowout growth track to the end of the pandemic? Sure? So,
Speaker 1: e commerce companies in general overestimated demands for the current
Speaker 1: state of the pandemic, not just Amazon. You see it
Speaker 1: at Wayfair, you see it at Shopify. So I think
Speaker 1: that what what happened was initially, when the stores were closed,
Speaker 1: consumers leaned into e commerce to such extensive levels that
Speaker 1: there was an expectation that those levels would hold. And
Speaker 1: first what happened is consumers return to physical stores. Then
Speaker 1: they had inflation, so they had more money spent on
Speaker 1: food and on energy, and then they had Revengie Travel,
Speaker 1: and then they had Taylor Swift. So I think you
Speaker 1: are seeing a return to live events. But from Amazon's
Speaker 1: vanage point, as well as Wayfair and shopifies, people are
Speaker 1: not shopping on e commerce and that's a problem at least.
Speaker 1: So this is just as shattered the A and R
Speaker 1: screen on the Bloomberg there's fifty five buys, three holes
Speaker 1: in one cell the streets, just violently against what Jesse
Speaker 1: is doing. Yeah, clearly they don't see this is being
Speaker 1: a massive downside. In fact, this might just be just
Speaker 1: the medicine the Amazon needs to have the same kind
Speaker 1: of profitability that they're pricing in. I do wander though,
Speaker 1: Tom eighteen tho corporate jobs cut. Does that indicate a
Speaker 1: much broader wave of job cuts among the rank and
Speaker 1: file in the months to come? Yes, So I think
Speaker 1: part of what you're seeing is so if you look
Speaker 1: at Salesforce laying off ten thousand, you look at you know,
Speaker 1: big tech company to your with more layoffs, is that
Speaker 1: to some extent there was some element of bloated headcount.
Speaker 1: So you had a very tight job market, especially in
Speaker 1: the technology area, and you have companies that ramped their
Speaker 1: headcount very significantly. Some of it was a miscalculation of demand,
Speaker 1: but I think some of it is turning out to
Speaker 1: be bloated headcount. So I think that there is a
Speaker 1: possibility that you could see some margin improvement in Amazon
Speaker 1: and some of these other big tech companies from scaling
Speaker 1: back their headcount. But I do think it is worrisome
Speaker 1: again for the current state of demand for e commerce.
Speaker 1: This is kind of bizarre to me. Tom. Basically, this
Speaker 1: is like Tom going to the bobs and asking for
Speaker 1: a hairdcunt. Someone pulls out of teas. Tom, this is
Speaker 1: even a big problem, and they're not dealing with it,
Speaker 1: or it's not a big problem, and that just doing
Speaker 1: something small. I didn't get it. Tom. If I've got
Speaker 1: one point five median people on the books, then what
Speaker 1: is eighteen thousand? So so think of it as two ways.
Speaker 1: Amazon basically has two workforces, the blue collar workforce that
Speaker 1: employs that the fulfillment center. They had a hundred thousand
Speaker 1: quiet production and headcamp between the March quarter and June
Speaker 1: quarter of last year. As they basically didn't hire back
Speaker 1: on attrition. And then the white collar workforce. And what
Speaker 1: we're talking about here is a white collar workforce eighteen
Speaker 1: thousand jobs and a ten thousand jobs, and I think
Speaker 1: that is an indication of software demand and a greater
Speaker 1: effort for cost controls. So two different labor forces in Amazon.
Speaker 1: Here we're talking more about white collar job layoffs. That's
Speaker 1: impulland climsy tumpson. Can you tell me where the other
Speaker 1: leavers are and whether you think they might have to
Speaker 1: be pulled in the year ahead. The big challenge for
Speaker 1: Amazon in the third quarter wasn't that their e commerce
Speaker 1: was slowing. It was that their higher margin, higher growth
Speaker 1: cloud computing and advertising business. We're starting to feel the
Speaker 1: negative impact of challenging macroeconomic environment environment. So to the
Speaker 1: extent that you consider, you see more weakness than ten
Speaker 1: thousand could become eighteen thousand could become thirty thousand. Will
Speaker 1: see how they continue to manage costs as the demand,
Speaker 1: especially for cloud computing and advertising, remains in flux in
Speaker 1: a challenging macro tom what is Jesse gonna do about
Speaker 1: the ginormous headache the logistics of the last mile for Amazon?
Speaker 1: They got all those boxes piled up, and it just
Speaker 1: seems like getting the last mile, getting the last four miles,
Speaker 1: getting the last four hundred yards in New York City
Speaker 1: is the ultimate battle. Are they going to fix that?
Speaker 1: I think this is their strength. So if you look
Speaker 1: at the duopoly of FedEx in UPS, one of my
Speaker 1: favorite moments in UH tech was within the last three
Speaker 1: months when FedEx said we're about to enter a global recession.
Speaker 1: Second statement, we're raising prices. So I see an opportunity
Speaker 1: for Amazon to use their first party delivery efforts for
Speaker 1: all retailers. They could break the duopoly of FedEx and UPS.
Speaker 1: So I see that as actually an opportunity for Amazon,
Speaker 1: and I think that that's something that seven percent of
Speaker 1: units sold an Amazon were third party that could grow
Speaker 1: to sever time. Leveraging their delivery effort is what will
Speaker 1: enable them to do that. That's fascinating clinic from some
Speaker 1: FOTA at Day, I send him what he thinks it's
Speaker 1: gonna happen with Amazon. We thought we would get some
Speaker 1: perspective on the madness in Washington now. And there's no
Speaker 1: one better than Wendy Schiller, who owns a high ground
Speaker 1: at Brown University on American politics. Wendy, I'm gonna cut
Speaker 1: to the chase. You and I were channeling the great
Speaker 1: Alan Evans on Grover Cleveland and a time from another place,
Speaker 1: and there was a guy from Maine, Tom Reid of
Speaker 1: Bowden College, who changed the rules. What did Zuri do
Speaker 1: in eighteen eighty five or whatever that matters to Mr
Speaker 1: McCarthy today, it's it's very similar. He changed the Rules Committee.
Speaker 1: The Rules Committee is the gateway put legislation on the floor,
Speaker 1: and when you get through the Rules Committee, they determine
Speaker 1: which amendments you can offer and who can offer them,
Speaker 1: and how long you debate the bill. So read basically
Speaker 1: stacked the deck. He took control of Speaker of the
Speaker 1: Rules Committee and then gave the Rules Committee and the
Speaker 1: Steering Committee the opportunity to shape legislation and cut out
Speaker 1: individual members and members gave him the power to do
Speaker 1: that precisely what you just mentioned, Tom. The McKinley Tarift Bill,
Speaker 1: they all wanted to get it past a big industry.
Speaker 1: Republicans were united. They needed to get it through, and
Speaker 1: they needed a uniform process to squelch all the opposition,
Speaker 1: particularly Southern Democrats who want to free trade that's not
Speaker 1: here today. They don't seem to have a kind of
Speaker 1: agreement in the Republican Party singular policy calls. Pelosi had
Speaker 1: Louise slaughter, She went with an iron grip, handled the
Speaker 1: rules committee in a McCarthy house. Does he have a
Speaker 1: rules committee when maybe Greg Valier says he's going to
Speaker 1: give it up to one vote could throw him out
Speaker 1: of office? This isn't This is an even Pelosi slaughter
Speaker 1: of five years ago, is it? No? But you know
Speaker 1: they're clamoring for more open legislative process, you know, and
Speaker 1: in the midst of all the opposition and name calling,
Speaker 1: you know, in the Senate, the same thing. The parties
Speaker 1: have really consolidated leadership. Senators complained they can't do anything
Speaker 1: on the floor of the Cannel far amendments. The legislative
Speaker 1: process isn't really there anymore for for either chamber. So
Speaker 1: they're making a valid point that they want a bigger stay.
Speaker 1: And what happens, the problem is they don't share the
Speaker 1: same ideological viewpoint or policy goals, so they will obstruct
Speaker 1: and with such a slim margin, it really paralyzes the House. Wendy,
Speaker 1: the Democrats are remaining quiet, probably wisely so to allow
Speaker 1: this to play out without their input. I am wondering,
Speaker 1: though we had expected after the holidays to hear from
Speaker 1: President Biden about whether he would run again, he hasn't
Speaker 1: announced and talked about that at all. When is he
Speaker 1: going to discuss that more in full? Do you get
Speaker 1: any scuttle butt about what's going on on that behind
Speaker 1: the scenes? Well at LISTA, that's a great question. It
Speaker 1: seems to me since the State of the Union address
Speaker 1: will be earlier this year than it was last year,
Speaker 1: most likely makes sense to take that unique opportunity do
Speaker 1: it as a neutral, you know, bipartisan leader of the
Speaker 1: country event uh, and then announced you're gonna run. And
Speaker 1: if you do it beforehand, then everything about the State
Speaker 1: of the Union is tainted by that announcement. So my
Speaker 1: guess as he waits till after the State of the
Speaker 1: Union and does announce that he's going to seek the presidency,
Speaker 1: particularly if the Republicans look like they're in disarray, it
Speaker 1: really stomps on whatever momentum some of these challengers like
Speaker 1: Rhonda Scientists, Donald Trump have going into to look ahead
Speaker 1: to twenty four. Some people would argue the opposite that
Speaker 1: President Biden said that he would run again if former
Speaker 1: President Trump was in the running. Sure, he's in the running,
Speaker 1: but he's kind of taken a back seat when it
Speaker 1: comes to leadership, certainly with this latest House speaker nomination
Speaker 1: and vote that we've seen go down in d C.
Speaker 1: At what point does that factor into what President Biden does?
Speaker 1: Where does the leadership go for the future in the
Speaker 1: Democratic Party. Well that's a really great question. But right
Speaker 1: now Biden is like he's got a lead in sports analogy,
Speaker 1: He's got to lead in the game. He's sitting on
Speaker 1: the lead. They out team doesn't have their acting together.
Speaker 1: Why would you step off the field, Why would you
Speaker 1: give up the game? You know, He's gonna go forward.
Speaker 1: He's got some good cabinet members, got some good governors
Speaker 1: in the wings. I think given today's political environment, people
Speaker 1: can ramp up pretty quickly to run for president. So
Speaker 1: I don't think it hurts the Democratic Party. And as
Speaker 1: long as they stay solid and united, that's the message
Speaker 1: they put forward, while the Republicans appeared to be at
Speaker 1: the moment in disarray. You know, and I'm looking at
Speaker 1: Wendy and the Tuesday lunch bunch at Brown University is
Speaker 1: something having to do with pizza and Providence. There's the
Speaker 1: moderates of the Tuesday lunch Bunch, now the Republican Government's
Speaker 1: Committee in Washington. I don't think enough is being said
Speaker 1: here about what I'm gonna call. I know I'm gonna
Speaker 1: get a lot of hate mail on this normal non
Speaker 1: Maga Republicans. How did they move forward? Well, and Tom,
Speaker 1: that's a great point because there's two hundred of them.
Speaker 1: You know, McCarthy can say he's conservative and people sort
Speaker 1: of believe them. But you know, when you're from California,
Speaker 1: it's a tough sell if it's not to be a
Speaker 1: really red Republican. But there are two dred Republicans who
Speaker 1: want McCarthy to be speaker. So how they come to
Speaker 1: the table. Maybe Steve Scalise, you know, second in command.
Speaker 1: Louisiana Republican is different from Midwestern Republican and they all
Speaker 1: one closer racist than they expected, and they want to
Speaker 1: win again. So I think this is a really big
Speaker 1: problem for them. They're not just gonna lie down and
Speaker 1: let these twenty kids, if you want to call them that.
Speaker 1: So I don't mean to interrupt, running out of time,
Speaker 1: if they're not gonna lie down. What do they do
Speaker 1: when this, this this clown show is over, Well, I
Speaker 1: think that they have to stay. What they should do
Speaker 1: right now is stick together. They shouldn't relent. McCarthy shouldn't
Speaker 1: quit too soon, because that's that's their exercise of power.
Speaker 1: The two wonders that want McCarthy shouldn't throw in the
Speaker 1: towel today or tomorrow. Make this go on, make them
Speaker 1: fill a buster this for a longer period of time,
Speaker 1: and certainly go out to contributors and say, listen, don't
Speaker 1: give these people any money anymore, even though that's what
Speaker 1: they complain they want to be protected from. You know,
Speaker 1: make sure that you stay solid, to signal to them
Speaker 1: that you're not going to roll over today, You're not
Speaker 1: going to roll over six months from now. I don't
Speaker 1: know if they can do it, but that's what I
Speaker 1: would recommend to hold their power in the Republican Party
Speaker 1: in the House. Wendy. A lot of investors trying to
Speaker 1: be politically agnostic. I'm not sure if that's achievable or not,
Speaker 1: but they at least try, and I think they're probably
Speaker 1: wondering watching this play out, what is this consequential for me? Wendy,
Speaker 1: how long can this go on for before it's truly consequential.
Speaker 1: I think it can go on for a long time. Actually, unfortunately,
Speaker 1: it's consequential today. You know, when the leader the free
Speaker 1: world of the United States is the leader, and our
Speaker 1: economic and political powers are tied together, and if one
Speaker 1: of our chambers is grossly dysfunctional, then the world starts
Speaker 1: to wonder if they should invest in the United States.
Speaker 1: So if we want to issue new treasuries to fund
Speaker 1: that debt, you know, we have to get more stable.
Speaker 1: So I think it has implications starting today. The rest
Speaker 1: of the world is having some issues too in their legislatures,
Speaker 1: but nonetheless it matters today. Whether that matters to Matt
Speaker 1: Gates or Lawren Boberg or you know, Chip Roy. The
Speaker 1: people who are leading this charge, I'm not sure they're
Speaker 1: not particularly international in their focus. But that's where the
Speaker 1: business community, to me, has stayed too silent. Right now
Speaker 1: they have to weigh in and they have to say, listen,
Speaker 1: we give you a lot of money and we want
Speaker 1: the thing settled, so get it done. Wendy, Thank you, Wendy,
Speaker 1: Si Brand Universty. This is the Bloomberg surveillance podcast. Thanks
Speaker 1: for listening. Join us live weekdays from seven to ten
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Speaker 1: and this is Bloomberg