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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Zandy has been on fire out on Twitter writing this up.

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Speaker 2: And you know, like he's got the fam photo on

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Speaker 2: Twitter and you can tell, I mean your youngest daughter,

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Speaker 2: Mark Sandy, Daffodil, your youngest daughter. Just look what is

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Speaker 2: it about the youngest daughter, doctor Sandy.

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Speaker 3: They're true, I hear you, I hear, but all my

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Speaker 3: kids are enchanting Tom.

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Speaker 2: But then there's Daffodil, the youngest daughter. How's the inflation

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Speaker 2: at the Zandy house? Right now? Into this report? What

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Speaker 2: do you see viscerally on inflation?

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Speaker 3: You know, abstracting from the ups and downs in all rounds,

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Speaker 3: it feels like consumer price inflation is three percent year

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Speaker 3: over year, which is, you know, it's back closer to

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Speaker 3: the Fed's target, but not quite there. I mean on

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Speaker 3: the CPI, the Fed's target would be two and a

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Speaker 3: half percent. The thing that you know, obviously is a

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Speaker 3: bit more worrisome is where we're headed. And you know,

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Speaker 3: if we had this conversation three months ago, I said

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Speaker 3: we'll be back to the feed's target by the spring.

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Speaker 3: But you know, with these tariffs, it doesn't feel likely

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Speaker 3: at this point.

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Speaker 4: So Mark, is that a valid concern for this marketplace

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Speaker 4: that these terraffs will result in I don't know, meaningfully

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Speaker 4: higher inflation.

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Speaker 3: Yeah, you know, obviously it depends on how how high

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Speaker 3: the tariffs go, how broad based they are, how persistent

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Speaker 3: the tariffs are put in place. But it feels like

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Speaker 3: we're going to get some real tariffs here for an

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Speaker 3: extended period. And you know, here's a good rule of thumb.

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Speaker 3: For every percentage point increase in the effective tear rate,

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Speaker 3: that adds one tenth of one percent consumer pretemplation over

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Speaker 3: the subsequent year. So we go from three percent effective

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Speaker 3: ter fright where we were before you know, President Trump,

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Speaker 3: to let's say ten percent, and that feels like we'reheaded.

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Speaker 3: That adds seven ten percent to see PI inflation in

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Speaker 3: the coming year. That's you know, that's that's meaningful.

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Speaker 2: Can you calculate where we are and add three percent? Statistic? Now,

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Speaker 2: are we at a zandy four point two percent this

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Speaker 2: morning or on our way to ten percent? Do we

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Speaker 2: know where we are? Uh?

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Speaker 3: You mean Tom with what's already been implemented.

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Speaker 2: What's already been implemented, you know the Yeah, I think

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Speaker 2: we're Yeah, I think we're kind of closer to four

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Speaker 2: four and a half.

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Speaker 3: You're right, four point you know, four point you know,

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Speaker 3: I have to do the calculation, but four point two

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Speaker 3: sounds about right to me. Yeah, so we've gone from

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Speaker 3: three to four point two. Yeah, so we got a

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Speaker 3: ways to go here.

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Speaker 2: You know. The real thing is the reciprocal terrafs.

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Speaker 3: Right, that's if that if that's actually implemented early April,

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Speaker 3: that's the kind of the schedule at the moment. Yep,

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Speaker 3: that's that would get you over ten. That would get

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Speaker 3: you over ten on the effective break.

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Speaker 4: And what was such an environment due to your GP

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Speaker 4: outlook weaker?

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Speaker 3: You know, terriffs do they result in some combination of

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Speaker 3: higher inflation, higher interest rates, or weaker economic growth. Pick

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Speaker 3: your poison. It's you know, if you don't get the inflation,

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Speaker 3: you're going to get the weaker growth. If you don't

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Speaker 3: get the weaker growth, you get the inflation or higher

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Speaker 3: interest rates. Were and all the above is already happening

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Speaker 3: in anticipation of the tariffs, right, I mean you can

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Speaker 3: see inflation expectations are up. The Fed's not moving now,

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Speaker 3: and they're telling us it's because it's economic policy code

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Speaker 3: where or tariffs and growth is slow, and so all

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Speaker 3: the things that we think terifts are going to do,

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Speaker 3: they're doing in the advance of actually the terrft's coming

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Speaker 3: into place, because we're all anticipating it.

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Speaker 2: Pauler, good question here. I'm sorry, it comes down to Granularity.

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Speaker 2: Daffodil needs a new pair of Doc Martin Mary Janes

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Speaker 2: at the Zandi house hold.

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Speaker 3: It sounds scary leopard.

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Speaker 2: I mean, they're ard and their incoming and they're gonna

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Speaker 2: have a terrify them because they're made sure everything. I mean,

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Speaker 2: you know everything. Micro Granular is going to be there.

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Speaker 2: Mark Sandy with Moody's with this. We're gonna talk to

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Speaker 2: him after this inflation report. There's a lift to the

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Speaker 2: market today, Paul might right, it's a tentative lift.

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Speaker 4: We were here the same place yesterday Tom before. Yeah,

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Speaker 4: we'll get some of the tweets started coming out. So Mark,

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Speaker 4: just at the inflation reading the CPI, we got a

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Speaker 4: little bit better than expected in terms of lower inflation.

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Speaker 4: We know it's backward looking, but what do you take

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Speaker 4: away from the CPA print today.

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Speaker 2: Well, that's on the face of it better.

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Speaker 3: You know, it's one of these things where you have

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Speaker 3: to go to the second third significant digit. I mean,

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Speaker 3: I think our estimate was like zero point two five,

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Speaker 3: so it would rounded up two point three. So maybe

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Speaker 3: I don't know what to do the calculation, but you know,

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Speaker 3: that's how much we're parsing the numbers here. But I

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Speaker 3: think bottom line, you know, abstracting from the vague reason

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Speaker 3: the monthly later, we're kind of, as I said earlier,

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Speaker 3: still stuck around three percent, and that's that's where we're

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Speaker 3: going to stay for a while until we get some

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Speaker 3: clarity around and hopefully these tariffs go away, you know,

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Speaker 3: sooner rather than later.

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Speaker 2: Mark, where are you going to FED rate cuts through

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Speaker 2: the year? I mean, everybody seems to be threeish guessing,

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Speaker 2: but don't you don't guess, Mark, so you know what

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Speaker 2: you're doing and what they'll do.

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Speaker 3: Tell you, Tom, I'm confused. I mean the FED, right,

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Speaker 3: because what do you do with the tariffs? I mean,

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Speaker 3: it raises inflation, weakens gross how do you respond and

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Speaker 3: they're saying, well, we don't until we get some clarity,

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Speaker 3: any kind of clarity around what's going on and how

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Speaker 3: it's all going to play out. I mean, in my

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Speaker 3: baseline kind of official forecast, I have two rate cuts

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Speaker 3: towards the end of the year. It's going to take,

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Speaker 3: you know, until the second half of the year before

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Speaker 3: they get enough clarity to start moving again.

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Speaker 2: But ultimately, you know, I do.

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Speaker 3: Think the tariffs are going to be you know, more

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Speaker 3: growth negative than inflation positive. I think at the end

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Speaker 3: of the day, Doctors, and that may mean more rate cuts, Doctors.

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Speaker 2: And thank you so much for joining us today. Mark

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Speaker 2: Sandy writing for Moody's always very strong out on Twitter.

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Speaker 2: Look from there for some very important nos. Futures up

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Speaker 2: seventy four, a lift of the market, not going to

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Speaker 2: make too much about it. Paul and I are waiting

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Speaker 2: for the next headline. Long agoing far away. A wonderful

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Speaker 2: person who was a great supporter of mine in the

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Speaker 2: early years and Stan Freeburg was Fred Burston, and he

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Speaker 2: was at the Peterson what became the Peterson Institute. The

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Speaker 2: toughest job was to pick up from Fred, and that

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Speaker 2: is what Adam Posen has done with grace, to say

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Speaker 2: the least. The only one working harder than Adam Posen

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Speaker 2: at the Peterson Institute is Chad Bone, who hasn't a

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Speaker 2: day off since time began. As we look at this

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Speaker 2: trade mess, we're in bonus round. Adam Posen is expert

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Speaker 2: on the German political economic experiment. Doctor Posen, thank you

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Speaker 2: so much for joining us today. If Doug Ehr went

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Speaker 2: up at Dartmouth was to rewrite his history of the

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Speaker 2: tariffs and all, what would Doug Rwin? What would Adam

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Speaker 2: Posen be writing right now?

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Speaker 5: Thanks Tom for having me back. And everyone should read

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Speaker 5: Chad Bound and Doug Erwin's new piece and Foreign Affairs

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Speaker 5: that just came out on tariffs. Doug has made the

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Speaker 5: point repeatedly there are charts on THEEPIE website that this

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Speaker 5: is historically unprecedented. You really have to go back one

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Speaker 5: hundred years, ninety plus years to Smooth Hollie to see

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Speaker 5: anything like this in terms of the size scope of tariffs.

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Speaker 5: But even more so, this is much more uncertain. As

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Speaker 5: he's pointed out Chad, Mary Lovely and I in various ways,

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Speaker 5: this is an exercise of discretionary presidential power. I'll leave

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Speaker 5: aside the constitutionality or the issues of politics, but just

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Speaker 5: from an economic point of view. In the past, when

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Speaker 5: there's been large moves of tariffs, it's mostly been in

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Speaker 5: the US because Congress has authorized them. This is being

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Speaker 5: done day to day or as justin Wolfer's joked intra

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Speaker 5: day tariff changes on presidential whim, and that creates even

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Speaker 5: more uncertainty.

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Speaker 2: Take them on.

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Speaker 5: Doug would say, we're in new territory and it ain't pretty.

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Speaker 2: Professor Erwin joining us from Dartmouth will do that on

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Speaker 2: Friday here in Bloomberg Surveillance. Doctor Posen, as simple as

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Speaker 2: I can. Krugman with his Nobel speech would look at

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Speaker 2: the microeconomics of the moment and it'd be a lot

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Speaker 2: of fancy Adam Posen talk. Forget about it. What's the

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Speaker 2: dead weight loss for our audience right now, our audience

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Speaker 2: in Winnipeg, our audience in Wisconsin. What's the dead weight

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Speaker 2: loss given all of this.

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Speaker 5: On the order of a thousand plus dollars a year

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Speaker 5: for the average household, higher for lower income households. And

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Speaker 5: that doesn't include the hits to retirement funds or the

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Speaker 5: going forward the lower opportunities because investments getting chilled. Direct

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Speaker 5: hit is on the order of one thousand dollars per household.

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Speaker 5: You could argue if the tariffs get stick or if

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Speaker 5: they put on the across the board tariffs, it gets

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Speaker 5: closer to fifteen hundred to two thousand dollars a household.

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Speaker 4: Adam, I'm hearing the recession word more and more over

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Speaker 4: the last several weeks. Is that in your cacus anywhere?

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Speaker 5: So I've been saying for a while the OW did.

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Speaker 5: I was expecting a large boom and then fed induced

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Speaker 5: bust under Trump. But I always held out that this

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Speaker 5: was a radical enough program that it was bimodal, meaning

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Speaker 5: again simple talk, it wasn't going to end up in

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Speaker 5: the middle. It was going to be one of two outcomes.

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Speaker 5: I have the recession probability only at like fifteen plus percent,

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Speaker 5: so no different than anybody in a normal time. But

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Speaker 5: what I kept saying, and this may have been a

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Speaker 5: hedge but it turns out to be reality, was if

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Speaker 5: Trump administration overdid it on tariffs, on migration, on fiscal follies,

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Speaker 5: that that would swap us into the tariff rem It

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Speaker 5: xues me into the recession camp. So I've up my

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Speaker 5: recession subjective probability to thirty percent. I still think it's

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Speaker 5: more likely than not we get a boombust. But you

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Speaker 5: throw in the geopolitical shock, which is enormous and which

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Speaker 5: really changes the game for Europe and for everybody. And

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Speaker 5: then you throw in the fact that Doge shutting down

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Speaker 5: environment education USAID. I may not like, but I expected

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Speaker 5: that throwing a miasma of similar uncertainty over all government contracting,

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Speaker 5: all government workforce has huge effects. So, yeah, the recession

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Speaker 5: risk has gone way up.

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Speaker 4: From some of President Trump's policy people were starting to

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Speaker 4: hear more and more discussion that what the President is

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Speaker 4: aiming to do is to kind of reshape the US

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Speaker 4: economy to bring more manufacturing back to the US, and

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Speaker 4: some folks are concerned that that's kind of counter intuitive

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Speaker 4: to what we've experienced over the last fifty sixty seventy

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Speaker 4: years of more of a globalization and at least in

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Speaker 4: the US economy, of focus on the services part of

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Speaker 4: the economy. How do you view this potential pology policy

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Speaker 4: shift for the US.

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Speaker 5: I view it as a very mistaken policy shift for

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Speaker 5: two reasons. First, in line with what you said, increasing

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Speaker 5: manufacturing employment or literal production within US borders isn't necessarily

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Speaker 5: a good thing. If they want to force Americans to

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Speaker 5: do rare earth's mining or production of generic pharmaceuticals, those

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Speaker 5: are steps backward for US workers, and so you would

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Speaker 5: either have to vastly overpay, which then makes it totally

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Speaker 5: uncompetitive internationally and totally in inflation for the domestic household,

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Speaker 5: or you're just subjecting American workers to bad jobs that

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Speaker 5: were too well endowed and skilled to do. The second reason, though,

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Speaker 5: is it's just not going to work. My colleague Robert Lawrence,

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Speaker 5: who's at Harvard and Peterson Institute, had a book out

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Speaker 5: last fall called Behind the Curve, which I think established

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Speaker 5: brilliantly that even if you fantasize about going back to

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Speaker 5: nineteen fifty eight and a bunch of guys getting to

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Speaker 5: be big bread owners, breadwinners for their families with no education,

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Speaker 5: which there's reasons you might like that, it's just not

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Speaker 5: going to happen because the total taste of the world

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Speaker 5: and the movement of technology, for me, globalization has made

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Speaker 5: it impossible to create large numbers of manufacturing jobs of

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Speaker 5: that sort. So it's a bad goal and it's not

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Speaker 5: going to work.

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Speaker 2: We continue with that imposing the Peterson Instituting and Doug

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Speaker 2: Arwin with us on Friday from Dartmouth. Breek Rona coming

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Speaker 2: up as well from Wellington. Good morning across the nation.

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Speaker 2: Good morning ninety two to nine FM and Boston, and

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Speaker 2: I'm down to ninety nine one FM in Washington, DC

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Speaker 2: as well. Adam, we got a go to on a

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Speaker 2: time here. I want to slip this in. I think

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Speaker 2: it's so important. Robert Zelik is somebody that I think

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Speaker 2: more than anyone, takes our international economics and our sense

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Speaker 2: of constructive globalization and folds it into American business. He's

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Speaker 2: been on fire recently. What's the message you've taken from

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Speaker 2: one of our trade giants?

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Speaker 5: I agree, Robert is Bob Zeleik is here out of

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Speaker 5: me and is a statesperson of the longtime ideal for

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Speaker 5: the US, and he integrates diplomacy, history, security economics like nobody.

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Speaker 2: Okay, here's a sentence, and here's a sentence. The zero

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Speaker 2: sum logic reverts back to a view in the nineteenth

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Speaker 2: and eighteenth centuries called mercantilism. Is that's from Zelek? Is

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Speaker 2: that where we are this morning?

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Speaker 5: Yeah, that is where we are I mean, when you

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Speaker 5: listen to the president, President Trump gives the rant he

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Speaker 5: gave yesterday about Canada was very unfair. You EU is

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Speaker 5: terribly unfair. On and on and on again. I don't

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Speaker 5: presume the talk psychology, but as a matter of economic facts,

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Speaker 5: it's just a completely self polluted view. It's not true

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Speaker 5: on the facts, but it only makes sense if you

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Speaker 5: have the mercantilist blinders on, which means you see trade

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Speaker 5: as negative some not even zero sum. And you see,

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Speaker 5: again going back to the previous comment that only making

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Speaker 5: physical stuff matters, and this is just not true. You

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Speaker 5: can make national security arguments and Bob would allow for

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Speaker 5: this too that specifically referspect to China or given industry

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Speaker 5: like semiconductors. You don't want to have too much concentration

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Speaker 5: risk dependence on a particular thing. Even there though, you

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Speaker 5: don't want to be putting up barriers around. So you're

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Speaker 5: dependent on some American company that happens to be a

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Speaker 5: friend of the president and is overly protected, too big

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Speaker 5: to fail, and makes claims to drop out of the

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Speaker 5: spy or semiconductors don't really work right, so you know,

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Speaker 5: this is a huge step backward where I think Bob

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Speaker 5: is much more articulate than I'm being is the international

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Speaker 5: systemic part of this, right, there is a feedback loop

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Speaker 5: for the US. And this is what I think Trump

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Speaker 5: and his and Bessentin has it. Whether they know it

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Speaker 5: or not, whether they think it's a means to an

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Speaker 5: end or not, I don't know, but they're ignoring that.

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Speaker 5: The US, as I argued in Foreign Affairs a few

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Speaker 5: years ago, was chairman of the club and therefore got

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Speaker 5: to set the rules, got to self deal, got to

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Speaker 5: determine who was members, but it had to behave within

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Speaker 5: some reasonable set of rules and provide the club some benefits.

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Speaker 5: And once the US just says I'm a member and

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Speaker 5: a member who may even leave the club, the club

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Speaker 5: goes on without you.

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Speaker 2: YouTube live chat, Thank you out on YouTube. Huge audience

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Speaker 2: this morning. Paul Tom you need a beard like Adam posts. Oh,

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Speaker 2: I mean there it is. Adam's not shaven until the

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Speaker 2: Red Sox are in first place. We'll see when that happens.

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Speaker 5: Continued sustainably in first place.

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Speaker 4: Sustainably in first place. Hey, Adam, I think most Americans

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Speaker 4: would agree that this US government, federal government is bloated.

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Speaker 4: It's bureaucratic to wants red tape, all that good stuff.

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Speaker 6: Is Doge the way to address that not so far.

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Speaker 5: I mean, Paul, you're right, most Americans would agree, and

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Speaker 5: there's certainly a point there. I think what I tried

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Speaker 5: to say to people before Doge got started was the

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Speaker 5: issue with government isn't so much waste fraud. It's that

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Speaker 5: because of politics, every task has seventeen key performance indicators,

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Speaker 5: has seventeen different constituencies, and then gets funded to seventy

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Speaker 5: five eighty percent of what it needs to do. That

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Speaker 5: at best, and so what you needed to do, and

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Speaker 5: this is the place where I think announced government reform

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Speaker 5: effort could have been good is saying, let's prioritize. Let's

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Speaker 5: not let the accumulation through the years of individual, little

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Speaker 5: congressional or special interest moves determine our budget, determine our priorities.

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Speaker 5: So again, I'm not in favor of getting rid of education.

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Speaker 5: I'm totally against getting rid of USAID. But in a

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Speaker 5: sense as a process, if they had just come in

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Speaker 5: and said we're taking out this whole department and we're

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Speaker 5: doing this instead, that's okay as a process. It's not

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Speaker 5: okay to create terror across the workforce. It's not okay

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Speaker 5: to make government contractors not get paid for stuff they've

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Speaker 5: already done and not know what they're going to get.

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Speaker 5: It's not okay to blow up whole ecosystems just because

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Speaker 5: they're in government. And most of all, if you did

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Speaker 5: it by priorities things like energy grid, nuclear power experts,

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Speaker 5: air traffic control Noah and NIH directly into world R

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Speaker 5: and D, those things would have been spared because they're

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Speaker 5: directly helpful to the economy.

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Speaker 2: Adam, I got to do an audible here before we

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Speaker 2: let you go. And you know, we all know in

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Speaker 2: academics that you are expert on Germany. Let's go back

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Speaker 2: to June in nineteen sixty three, when time stop President

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Speaker 2: Obama reducts JFK's unbelievable speech in the heart of the

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Speaker 2: Cold War, not ready for my German Paul It. I

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Speaker 2: nailed it, not even close. I got a D minus there,

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Speaker 2: but the professor got hockey tickets, so it worked out.

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Speaker 2: Adam Posen, you are expert on this. Is this a Germany?

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Speaker 2: In this new Germany? With Conrad at an Hour and

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Speaker 2: Villi Brandt, would they recognize it?

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Speaker 5: They'd have trouble, and that's a good thing. They would

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Speaker 5: have trouble imagining a Germany that pursues security without being

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Speaker 5: totally reliant in the US. They would have trouble imagining

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Speaker 5: a Germany that does use its fiscal capabilities more more

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Speaker 5: than not. And they would have trouble with the Germany

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Speaker 5: that explicitly is going to rearm. But I think it's

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Speaker 5: the right move for Germany. I mean, you've seen the

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Speaker 5: meme on Twitter Tom that Chancellor Chancellor Merits incoming. Chancellor

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Speaker 5: Merits is shown with the big smartest face and then

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Speaker 5: the blurb is when you realize you can borrow just

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Speaker 5: like any other European country. You know, this is genuine progress.

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Speaker 5: It's sad that it took the threat to NATO and

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Speaker 5: the threat from Russia in the US to make it happen,

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Speaker 5: But I think this is a genuine leap forward as

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Speaker 5: opposed to previous Chancellor Schultz site and Benda changed changing time.

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Speaker 5: This is the real one right now.

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Speaker 2: Generous conversation, Thank you so much. Folks. Look at Chad

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Speaker 2: Boone and the rest at Peterson Institute for terrific thought

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Speaker 2: provoking essays in the chaos of where we are now,

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Speaker 2: as we've been saying for days, if not weeks, in

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Speaker 2: this chaos, the bomb market matters ball s the stock market. Yeah,

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Speaker 2: that's simple. Yep.

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Speaker 4: We got a pro in here joining us today, Bridge Kurana.

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Speaker 4: He's senior managing director and fixed income portfolio manager at

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Speaker 4: Wellington Asset Management. Joining us here on our Bloomberg and

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Speaker 4: Arrector broker studio.

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Speaker 2: Bridge.

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Speaker 4: It talks about, first of all, what do you think

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Speaker 4: of the CPI print? Came in a little bit lower

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Speaker 4: than expected? What are you sing in the bond market?

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Speaker 7: Yeah, so I'm just going through my notes right now.

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Speaker 7: It was universally positive, I would say, so two things

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Speaker 7: that we're concerning. Last time, core CPI if you take

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Speaker 7: out shelter was almost point five percent month of a month,

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Speaker 7: which was the highest it was in two years. That

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Speaker 7: fell back down to point two percent, so that's good.

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Speaker 7: And then core services, which was what the FED really

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Speaker 7: cares about because that is tied to the labor market,

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Speaker 7: that was point five percent as well. Last month, month

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Speaker 7: of a month print that came down to point three

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Speaker 7: percent month of a month, and that was driven largely

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Speaker 7: by transport and airlines. But point being that, I think

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Speaker 7: this is a welcome sigh of relief for the FED

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Speaker 7: after that very spicy print. I can see why the

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Speaker 7: stock market likes it, because I did think this is

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Speaker 7: coming into this event, this was going to be one

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Speaker 7: of the most impactful CPI prints in the last few years,

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Speaker 7: just because of the equity volatility we've seen. And you know,

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Speaker 7: the market has been somewhat buoyed by the fact that

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Speaker 7: the market's now pricing in almost three cuts for the

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Speaker 7: FED throughout the rest of the year. And so in

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Speaker 7: my mind, it was a very important print, and you know,

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Speaker 7: I'm not surprised stocks like it.

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Speaker 2: That was brilliant except Wednesdays were note free at Bloombert Monday,

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Speaker 2: Monday and Tuesday we got notes. Put the damn notes aside.

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Speaker 4: So what even what have you been seeing in the

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Speaker 4: bond market over the last several weeks of all this volatility,

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Speaker 4: all the increased trade talk, the uncertainty to economic growth,

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Speaker 4: the uncertainty as it relates to potential impacts on inflation,

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Speaker 4: what's a bond market been saying?

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Speaker 7: So you have definitely seen a decline in yields in

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Speaker 7: the US in particular. Actually it's been much higher yields

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Speaker 7: abroad you know, I think the US bond market is

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Speaker 7: really responding to the uncertainty in the economy, the sudden

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Speaker 7: stop you might see from whether or not it's tariff policy,

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Speaker 7: but also immigration as well. And you know, but I

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Speaker 7: think what's interesting to me is that I look at

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Speaker 7: the intersector performance between cyclical stocks and defensive stocks. To me,

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Speaker 7: it's been one of the best leading indicators for bond yields.

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Speaker 7: You know, as the market's worried about the cyclical companies,

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Speaker 7: then bon yields generally generally fall. And you know what's

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Speaker 7: been interesting is is those stocks have been almost thirty

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Speaker 7: five percent off their peaks cycles relative defensives and bond

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Speaker 7: yields are still you know, about forty fifty basis points

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Speaker 7: above where we were in August. And so it has

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Speaker 7: been a notable decline in bond yields. I guess just

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Speaker 7: given the uncertainty in the economic outlook, I would have

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Speaker 7: thought it would have would have been more and particularly

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Speaker 7: at the back end of the curve. Most of the

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Speaker 7: move has been really repricing the FED, which, to be honest,

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Speaker 7: you know, is this is welcome news. But and the

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Speaker 7: market's pricing in three cuts rugh roughly. I think that's

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Speaker 7: pretty fair, But you know, I'm not sure that there's

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Speaker 7: gonna be a lot more than that.

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Speaker 2: From December twenty two off the Bloomberg Fixed Income Corporate

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Speaker 2: Total Return Index. What a recovery and price we have.

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Speaker 2: I don't think it's nearly out there in the zeitgeist

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Speaker 2: now at all that it's been price up, yield down

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Speaker 2: for bonds. But we're not back to the price peaks

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Speaker 2: that we saw COVID pre COVID, and we're certainly not

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Speaker 2: back to the Great Moderation vector of success that bonds lived.

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Speaker 2: Do you visualize out there just getting back to the

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Speaker 2: peak of price that we had years ago, or can

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Speaker 2: heaven forbid, get back to the Wellington Pimco vector that

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Speaker 2: we saw in the Great Modervation? Can we see that

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Speaker 2: much appreciation?

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Speaker 6: You know?

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Speaker 7: Well, I would say this, you know, it's been a

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Speaker 7: really tough you know, returns for bonds over the last decade. Now,

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Speaker 7: I think it's the worst performance for bonds over you know,

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Speaker 7: a few decades, and on a rank.

434
00:23:56,480 --> 00:23:58,560
Speaker 2: And nobody else will say that. I appreciate.

435
00:23:58,680 --> 00:24:01,560
Speaker 7: Yeah, on a real basis, to an inflation adjusted basis,

436
00:24:01,560 --> 00:24:03,560
Speaker 7: it's you know, you're back to the mid two thousands

437
00:24:03,600 --> 00:24:05,480
Speaker 7: in terms of pilt returns for bonds.

438
00:24:05,960 --> 00:24:06,800
Speaker 4: Now, what I.

439
00:24:06,800 --> 00:24:10,399
Speaker 7: Think is is different right now is that, you know,

440
00:24:10,440 --> 00:24:13,680
Speaker 7: we are in an environment where we've had so much

441
00:24:13,720 --> 00:24:16,600
Speaker 7: fiscal stimulus since the pandemic. We got to all time

442
00:24:16,640 --> 00:24:19,520
Speaker 7: low bond yields and now we've had running deficits of

443
00:24:19,560 --> 00:24:22,520
Speaker 7: six to seven percent, and so the economy hasn't been

444
00:24:22,680 --> 00:24:26,480
Speaker 7: very responsive to high interest rates because fiscal stimulus has

445
00:24:26,520 --> 00:24:29,320
Speaker 7: been uncorrelated with the other parts of the economy. And

446
00:24:29,400 --> 00:24:31,199
Speaker 7: so I guess the point I would make is is

447
00:24:31,320 --> 00:24:34,720
Speaker 7: we do seem to be moving into an environment where

448
00:24:34,720 --> 00:24:36,840
Speaker 7: fiscal stimulus is not going to be what it was

449
00:24:36,920 --> 00:24:39,800
Speaker 7: in the last few years. And then you really bring

450
00:24:39,880 --> 00:24:42,120
Speaker 7: up the question of whether or not, you know, our

451
00:24:42,320 --> 00:24:45,600
Speaker 7: real policy rates are are real rates that different than

452
00:24:45,600 --> 00:24:48,520
Speaker 7: they were, you know, before the pandemic, And I would argue,

453
00:24:48,520 --> 00:24:50,959
Speaker 7: we're seeing less labor force growth, we're seeing you know,

454
00:24:51,040 --> 00:24:54,160
Speaker 7: similar productivity growth than we saw pre pandemic. That means

455
00:24:54,160 --> 00:24:56,880
Speaker 7: that the neutral rate for bonds is not that much

456
00:24:56,920 --> 00:25:00,200
Speaker 7: higher than we really saw prior to the pandemic, even

457
00:25:00,200 --> 00:25:01,879
Speaker 7: if we're in a higher inflation regime.

458
00:25:02,320 --> 00:25:04,960
Speaker 2: Did you take notes on that even though note.

459
00:25:04,760 --> 00:25:07,880
Speaker 7: Free, note free, there was no notes involved in that one.

460
00:25:08,960 --> 00:25:11,960
Speaker 4: How much credit risk are you guys taking these station

461
00:25:12,040 --> 00:25:15,280
Speaker 4: your portfolio and has that changed over the last several

462
00:25:15,320 --> 00:25:16,560
Speaker 4: weeks and months.

463
00:25:16,640 --> 00:25:19,560
Speaker 7: Well, you know, since I've come on your show last time,

464
00:25:19,560 --> 00:25:21,439
Speaker 7: I think this is the first time that actually spreads

465
00:25:21,480 --> 00:25:24,520
Speaker 7: are higher. I still think, you know, but they were

466
00:25:24,560 --> 00:25:27,200
Speaker 7: coming off of very very low level. So high yield

467
00:25:27,240 --> 00:25:30,120
Speaker 7: spreads are currently around three hundred and ten basis points.

468
00:25:30,160 --> 00:25:32,600
Speaker 7: I think that's that's getting to be much more fair

469
00:25:32,680 --> 00:25:35,120
Speaker 7: levels than we've seen. But once again, as I said,

470
00:25:35,160 --> 00:25:37,679
Speaker 7: I think that the market's been really focused, and one

471
00:25:37,720 --> 00:25:41,000
Speaker 7: of the reasons credit spreads have been so tight has

472
00:25:41,040 --> 00:25:44,000
Speaker 7: been just this amount of fiscal stimulus. And I also think,

473
00:25:44,240 --> 00:25:47,159
Speaker 7: you know, one you were talking about trade earlier. I

474
00:25:47,200 --> 00:25:50,600
Speaker 7: do think there's this unappreciated aspect to trade and how

475
00:25:50,720 --> 00:25:54,760
Speaker 7: much surpluses have been from abroad have really come into

476
00:25:54,840 --> 00:25:58,520
Speaker 7: US assets, both in US equity markets and US credit markets.

477
00:25:58,560 --> 00:26:00,959
Speaker 7: And so you know, if we're really trying to change

478
00:26:01,000 --> 00:26:05,080
Speaker 7: that paradigm of lower trade deficits globally, that does mean

479
00:26:05,200 --> 00:26:07,080
Speaker 7: it should mean higher risk premium when it comes to

480
00:26:07,119 --> 00:26:10,399
Speaker 7: credit markets and lower equity valuations. As well, which is

481
00:26:10,400 --> 00:26:12,520
Speaker 7: what we've started to see, you know, at least in

482
00:26:12,520 --> 00:26:13,359
Speaker 7: the last month or so.

483
00:26:13,720 --> 00:26:17,359
Speaker 2: Here's Carhana with us. Well, thank you for that fixed

484
00:26:17,400 --> 00:26:21,359
Speaker 2: income discussion. That's really good about the ten year struggle

485
00:26:21,440 --> 00:26:27,880
Speaker 2: that fixed income has had.

486
00:26:29,400 --> 00:26:33,000
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

487
00:26:33,040 --> 00:26:36,199
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

488
00:26:36,280 --> 00:26:39,680
Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,

489
00:26:39,880 --> 00:26:41,600
Speaker 1: or watch us live on YouTube.

490
00:26:41,960 --> 00:26:45,879
Speaker 2: David Sowerby front running Bloomberg Surveillance this morning with the

491
00:26:46,000 --> 00:26:49,960
Speaker 2: Encorey Advisors, And David, you do the math. The average

492
00:26:50,000 --> 00:26:54,400
Speaker 2: stock from its peak down twenty percent? David Sowerby, are

493
00:26:54,400 --> 00:26:55,400
Speaker 2: we in a bear market?

494
00:26:57,160 --> 00:27:01,439
Speaker 6: We're in a correction? For certainly, the market's down ten percent.

495
00:27:01,480 --> 00:27:04,120
Speaker 6: I like to look at the averager median now it's

496
00:27:04,200 --> 00:27:07,560
Speaker 6: coming close to a bear market. And if we throw

497
00:27:07,640 --> 00:27:11,040
Speaker 6: in small and midcaps, the average stock is about twenty

498
00:27:11,080 --> 00:27:14,520
Speaker 6: five percent off its own fifty two week high, and

499
00:27:14,600 --> 00:27:17,119
Speaker 6: if you look at investor sentiment, it probably puts us

500
00:27:17,160 --> 00:27:20,200
Speaker 6: pretty close to a correction slash bear market.

501
00:27:21,160 --> 00:27:23,680
Speaker 4: So David, what are you telling your clients these days?

502
00:27:24,280 --> 00:27:26,639
Speaker 4: Try to find the names you like because now you

503
00:27:26,640 --> 00:27:29,200
Speaker 4: can get them at at a lower price. Or are

504
00:27:29,200 --> 00:27:31,080
Speaker 4: we just kind of sitting on the sidelines here a little.

505
00:27:30,920 --> 00:27:35,520
Speaker 6: Bit, Paul, Maybe this isn't the best CFA term, but

506
00:27:35,600 --> 00:27:40,400
Speaker 6: you grind through it. The average intra year market sell

507
00:27:40,440 --> 00:27:44,720
Speaker 6: off for the last seventy five years is about fourteen percent,

508
00:27:45,359 --> 00:27:48,960
Speaker 6: so or right there or close enough. Now from a

509
00:27:49,000 --> 00:27:53,600
Speaker 6: contrarian perspective, you can't call a market bottom. But when

510
00:27:53,720 --> 00:27:58,159
Speaker 6: sentiment gets unduly bearish, and it's there now. If you

511
00:27:58,280 --> 00:28:01,919
Speaker 6: look twelve months out, eleven out of the last twelve

512
00:28:01,920 --> 00:28:05,199
Speaker 6: times it's gotten this parish, the market's higher, and the

513
00:28:05,240 --> 00:28:09,560
Speaker 6: average return over the next twelve months is twenty percent.

514
00:28:09,640 --> 00:28:11,199
Speaker 6: I don't know if it's going to be twenty percent,

515
00:28:11,480 --> 00:28:14,480
Speaker 6: but I like those odds, knowing I make my most

516
00:28:14,560 --> 00:28:17,920
Speaker 6: money when I run against the herd and I'm a contrarion,

517
00:28:18,440 --> 00:28:20,240
Speaker 6: which is more what you need.

518
00:28:20,080 --> 00:28:20,840
Speaker 2: To be today.

519
00:28:21,880 --> 00:28:26,200
Speaker 4: What types of securities would you maybe dip your toe

520
00:28:26,240 --> 00:28:28,280
Speaker 4: into and start looking at it this stage.

521
00:28:30,160 --> 00:28:33,359
Speaker 6: It's always got to start with free cash flow on

522
00:28:33,400 --> 00:28:37,080
Speaker 6: a valuation basis, free cash flow margin. Who's growing the

523
00:28:37,119 --> 00:28:40,560
Speaker 6: dividend ten percent or better? If you look at the

524
00:28:40,600 --> 00:28:44,400
Speaker 6: filings for the mutual fund I manage a travel name.

525
00:28:44,680 --> 00:28:48,120
Speaker 6: Windom is off twenty percent from its fifty two week highs.

526
00:28:48,400 --> 00:28:51,720
Speaker 6: And we're not talking about five hundred dollars a night

527
00:28:52,360 --> 00:28:56,280
Speaker 6: midtown prices. We're talking about la Quinta's at one hundred

528
00:28:56,320 --> 00:28:59,880
Speaker 6: dollars a night. It favors the middle market traveler when

529
00:29:00,360 --> 00:29:03,880
Speaker 6: has a very strong balance sheet, good recent earnings numbers.

530
00:29:04,280 --> 00:29:07,160
Speaker 6: There's a travel stock that's down twenty percent from it's

531
00:29:07,200 --> 00:29:10,280
Speaker 6: fifty two week high. I think that's an example. But

532
00:29:10,320 --> 00:29:13,680
Speaker 6: if you find the companies that are generating good free

533
00:29:13,680 --> 00:29:18,040
Speaker 6: cash flow margin above twelve percent, that's a good starting point.

534
00:29:18,400 --> 00:29:18,680
Speaker 2: David.

535
00:29:18,720 --> 00:29:22,400
Speaker 4: We got some interesting and maybe troubling earnings news yesterday

536
00:29:22,400 --> 00:29:25,360
Speaker 4: from a couple of industries. Won the airline industry, companies

537
00:29:25,400 --> 00:29:28,840
Speaker 4: across the board cutting their forward outlook. We had a

538
00:29:28,840 --> 00:29:31,920
Speaker 4: broad based retailer like Cohal's do the same.

539
00:29:32,800 --> 00:29:33,520
Speaker 2: What's your view?

540
00:29:33,520 --> 00:29:36,000
Speaker 4: That kind of reflects that maybe the consumer is weakening

541
00:29:36,000 --> 00:29:38,200
Speaker 4: a little bit due to some of the recent uncertainties

542
00:29:38,240 --> 00:29:38,680
Speaker 4: out there.

543
00:29:39,280 --> 00:29:41,840
Speaker 2: How do you view the consumer, Paul?

544
00:29:41,960 --> 00:29:44,560
Speaker 6: I think the addag in my career as an investor

545
00:29:44,680 --> 00:29:48,520
Speaker 6: is that is never underestimate the health of the US consumer.

546
00:29:48,720 --> 00:29:51,840
Speaker 6: That they defy gravity. And if you look at household

547
00:29:51,880 --> 00:29:55,000
Speaker 6: balance sheets, what the average mortgage rate is at around

548
00:29:55,080 --> 00:29:59,200
Speaker 6: four percent consumer free cash flow after they pay their bills,

549
00:30:00,360 --> 00:30:02,560
Speaker 6: I think it's still a better than average time to

550
00:30:02,600 --> 00:30:06,240
Speaker 6: be a consumer. What they don't like, what businesses don't

551
00:30:06,320 --> 00:30:07,880
Speaker 6: like as well, is uncertainty.

552
00:30:08,080 --> 00:30:08,240
Speaker 2: Yep.

553
00:30:08,720 --> 00:30:10,880
Speaker 6: And that's an overused term in the last two weeks.

554
00:30:10,920 --> 00:30:13,640
Speaker 6: But I was at an investment conference last week. Five

555
00:30:13,720 --> 00:30:16,840
Speaker 6: hundred companies presented the ones I say it in on.

556
00:30:17,080 --> 00:30:20,400
Speaker 6: Everybody got asked the tariff question. Eight out of ten

557
00:30:20,760 --> 00:30:23,320
Speaker 6: said it leads to uncertainty and it's probably a hit

558
00:30:23,600 --> 00:30:25,600
Speaker 6: directly or indirectly on earnings.

559
00:30:26,520 --> 00:30:29,200
Speaker 2: David Sorby with us this morning with the enquirs, we

560
00:30:29,280 --> 00:30:32,280
Speaker 2: continue all right now with them. A good conversation here

561
00:30:32,320 --> 00:30:35,440
Speaker 2: and as you mentioned the Wyndham wh down the cap,

562
00:30:35,480 --> 00:30:38,800
Speaker 2: we're not going to do apple with David. David, you

563
00:30:38,880 --> 00:30:42,480
Speaker 2: have a vista like no one we speak to into

564
00:30:42,520 --> 00:30:47,880
Speaker 2: Michigan and over to Windsor, Ontario, up into Ontario and

565
00:30:47,920 --> 00:30:51,640
Speaker 2: then down the Mississippi River down into Kentucky, down the

566
00:30:51,680 --> 00:30:56,480
Speaker 2: interstates as well. Translate the angst you see on our

567
00:30:56,560 --> 00:30:57,720
Speaker 2: auto tariff war.

568
00:31:00,600 --> 00:31:03,920
Speaker 6: The auto companies have been very specific to the administration

569
00:31:04,080 --> 00:31:12,120
Speaker 6: that this is a bad policy. A hit violates the

570
00:31:12,160 --> 00:31:16,040
Speaker 6: free trade agreement, whether it's NAFTA, US Mexico Canada Free

571
00:31:16,040 --> 00:31:20,600
Speaker 6: Trade Agreement. It violates long term strategies for supply chains.

572
00:31:20,960 --> 00:31:23,400
Speaker 6: The car companies are in much better shape today, Tom,

573
00:31:23,480 --> 00:31:27,760
Speaker 6: because they are better capital allogators, better generators, are free cash.

574
00:31:28,080 --> 00:31:31,960
Speaker 6: We're not helping them by instituting tariffs and what ultimately

575
00:31:32,080 --> 00:31:35,000
Speaker 6: gets passed through to the consumer, and the number of

576
00:31:35,040 --> 00:31:38,360
Speaker 6: weeks you'll have to devote income to to pay for

577
00:31:38,440 --> 00:31:41,320
Speaker 6: a new car. It's not good for the manufacturing renaissance

578
00:31:41,680 --> 00:31:44,160
Speaker 6: that's been taking place in my home state of Michigan

579
00:31:44,680 --> 00:31:45,600
Speaker 6: for several years.

580
00:31:47,200 --> 00:31:50,280
Speaker 4: Being in Michigan, David, give us a sense of just

581
00:31:50,360 --> 00:31:51,960
Speaker 4: kind of what the folks up in that part of

582
00:31:51,960 --> 00:31:55,760
Speaker 4: the country, how they're feeling about the trade. I guess

583
00:31:55,760 --> 00:31:57,800
Speaker 4: we have to call it a war skirmish between the

584
00:31:57,920 --> 00:32:01,480
Speaker 4: US and Canada. You guys are right geographically on the

585
00:32:01,480 --> 00:32:02,000
Speaker 4: front lines.

586
00:32:02,040 --> 00:32:05,680
Speaker 6: There may be the only guest in Bloomberg who can

587
00:32:05,720 --> 00:32:10,880
Speaker 6: go south to Canada or Windsor Now. Now, no surprise,

588
00:32:10,960 --> 00:32:15,680
Speaker 6: Michigan is the largest trading state with Canada, particularly Ontario.

589
00:32:16,480 --> 00:32:22,440
Speaker 6: We're building this spectacular Gordy Howbridge from Detroit to Windsor.

590
00:32:23,160 --> 00:32:28,680
Speaker 6: We'll have fewer passengers and freight hauling if we if

591
00:32:28,720 --> 00:32:33,000
Speaker 6: we make these tariffs more permanent. It's just simply bad

592
00:32:33,040 --> 00:32:36,560
Speaker 6: econ one win one. I wish the President would channel

593
00:32:36,600 --> 00:32:40,920
Speaker 6: more Ronald Reagan or Bill Clinton and unfortunately not channel

594
00:32:41,000 --> 00:32:43,520
Speaker 6: his Herbert Hoover when it comes to trade.

595
00:32:44,280 --> 00:32:47,840
Speaker 2: David, give me an auto company or a manufacturing company

596
00:32:47,880 --> 00:32:50,600
Speaker 2: down south of Detroit that you think has been pretty

597
00:32:50,600 --> 00:32:53,400
Speaker 2: beat up right now, you mentioned Windham Okays Hotels. Great,

598
00:32:53,720 --> 00:32:56,080
Speaker 2: but you know I'm thinking borg Warner, except borg Warner

599
00:32:56,080 --> 00:32:58,720
Speaker 2: hasn't done anything for a decade. Give me. Give me

600
00:32:58,760 --> 00:33:02,880
Speaker 2: an auto company gets sour be ready that's been beat

601
00:33:02,920 --> 00:33:03,320
Speaker 2: to death.

602
00:33:04,640 --> 00:33:07,640
Speaker 6: I think, though I don't own it, I think GM

603
00:33:07,760 --> 00:33:12,800
Speaker 6: is interesting. GM had a very good investor day not

604
00:33:12,920 --> 00:33:17,160
Speaker 6: too long ago where they talked about capital allocation, less

605
00:33:17,160 --> 00:33:21,960
Speaker 6: cap x on evs, more growth, returning it to the shareholder,

606
00:33:22,560 --> 00:33:26,360
Speaker 6: better free cash flow for GM. I know it's the

607
00:33:26,400 --> 00:33:29,040
Speaker 6: biggest name of the group, but I think GM is

608
00:33:29,080 --> 00:33:33,160
Speaker 6: doing some very good things from a capital allocation standpoint.

609
00:33:33,400 --> 00:33:35,880
Speaker 2: Okay, that's great, and you know I get it from

610
00:33:35,920 --> 00:33:38,920
Speaker 2: the from COVID. They're doing double digit return, They're up

611
00:33:39,000 --> 00:33:41,920
Speaker 2: nineteen percent off the mat of COVID, but the tenure

612
00:33:42,040 --> 00:33:45,160
Speaker 2: track record single digit. Do you see a new capital

613
00:33:45,200 --> 00:33:49,080
Speaker 2: discipline there where we can look for nominal GD plus

614
00:33:49,320 --> 00:33:54,360
Speaker 2: x beeps out of auto in Canada and America?

615
00:33:54,920 --> 00:33:57,840
Speaker 6: You can if you if you adopt the right policy.

616
00:33:58,680 --> 00:34:02,160
Speaker 6: And I think the car companies are much better at

617
00:34:02,200 --> 00:34:04,560
Speaker 6: spending their free cash than they were when they were

618
00:34:04,600 --> 00:34:10,760
Speaker 6: making silly acquisitions decades ago, and now more importantly returning

619
00:34:10,800 --> 00:34:13,880
Speaker 6: cash to the shareholder, either with buybacks or dividend growth,

620
00:34:13,880 --> 00:34:18,440
Speaker 6: where maybe too much cap X was thrown into autonomous

621
00:34:18,520 --> 00:34:22,319
Speaker 6: vehicles and electric vehicles, which consumers are reluctant to buy.

622
00:34:23,520 --> 00:34:25,479
Speaker 4: Tom. We're getting close to the opening day, which means

623
00:34:25,480 --> 00:34:28,720
Speaker 4: we have to ask David Sowery about the Atlanta Braves

624
00:34:28,760 --> 00:34:31,560
Speaker 4: and investing in the Atlanta Braves top. David, what do

625
00:34:31,600 --> 00:34:31,919
Speaker 4: you think?

626
00:34:32,840 --> 00:34:34,200
Speaker 6: Well, it's a name I gave you a couple of

627
00:34:34,200 --> 00:34:37,520
Speaker 6: weeks ago. We still own it. It's the John Malone

628
00:34:38,600 --> 00:34:41,879
Speaker 6: spin out. Like so many successful John Malone spinouts, he's

629
00:34:41,920 --> 00:34:46,200
Speaker 6: been buying the stock. It's not just the team, it's

630
00:34:46,239 --> 00:34:51,359
Speaker 6: the franchise, it's the stadium, it's mixed use retail. It's

631
00:34:51,400 --> 00:34:54,640
Speaker 6: a small cap under followed stock, and I've always thought

632
00:34:54,680 --> 00:34:58,959
Speaker 6: that you make your best money in under followed, spin out,

633
00:34:59,320 --> 00:35:00,839
Speaker 6: small and campstocks.

634
00:35:01,000 --> 00:35:03,360
Speaker 2: David Sawerby, thank us so much for the enquirps. Appreciate

635
00:35:03,360 --> 00:35:06,399
Speaker 2: that note, particularly earlier this morning that we saw from

636
00:35:06,480 --> 00:35:10,920
Speaker 2: David Sawerby on the average SMP from its individual peak

637
00:35:11,000 --> 00:35:13,480
Speaker 2: is down twenty percent as well.

638
00:35:13,800 --> 00:35:17,720
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

639
00:35:17,719 --> 00:35:20,720
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

640
00:35:20,760 --> 00:35:23,800
Speaker 1: Auto with the Bloomberg Business App. You can also listen

641
00:35:23,880 --> 00:35:27,160
Speaker 1: live on Amazon Alexa from our flagship New York station

642
00:35:27,680 --> 00:35:31,040
Speaker 1: Just Say Alexa Play Bloomberg eleven thirty, joining star.

643
00:35:31,000 --> 00:35:33,000
Speaker 2: Kelly Cox to get the markets open. Here, we'll come

644
00:35:33,000 --> 00:35:35,799
Speaker 2: back with her as well. Chief market strategist Rid OL's

645
00:35:35,840 --> 00:35:39,120
Speaker 2: Wealth Management Kelly. I can't stand you write a research

646
00:35:39,200 --> 00:35:41,520
Speaker 2: note which I'm forced to read. It's so smart, and

647
00:35:41,560 --> 00:35:45,560
Speaker 2: the problem I got is you break down this idiocy

648
00:35:46,120 --> 00:35:49,040
Speaker 2: around the two hundred day moving average, which I don't

649
00:35:49,080 --> 00:35:52,400
Speaker 2: believe in, folks, Just so you got it. What do

650
00:35:52,480 --> 00:35:56,400
Speaker 2: we get wrong about in the media about the certitude

651
00:35:56,480 --> 00:35:59,400
Speaker 2: of analyzing the two hundred day moving average.

652
00:36:00,880 --> 00:36:03,200
Speaker 8: Well, Tom, I'm on the other side. I actually think

653
00:36:03,200 --> 00:36:05,239
Speaker 8: that there is some signal around the two hundred day.

654
00:36:05,280 --> 00:36:07,000
Speaker 8: And I want to be clear, I'm not a technician.

655
00:36:07,080 --> 00:36:09,399
Speaker 8: I don't look at many lines on charts, but when

656
00:36:09,400 --> 00:36:11,759
Speaker 8: you're looking at the major moving averages, there has been

657
00:36:11,760 --> 00:36:14,480
Speaker 8: a lot of resistance and support around the two hundred day,

658
00:36:14,600 --> 00:36:18,120
Speaker 8: especially in selloffs, and unfortunately we broke it. We actually

659
00:36:18,120 --> 00:36:21,040
Speaker 8: broke it on Monday. So I call it the danger zone.

660
00:36:21,120 --> 00:36:23,000
Speaker 8: I think that might be a little dramatic at this

661
00:36:23,080 --> 00:36:25,400
Speaker 8: point because I'm trying. I would love to see the

662
00:36:25,400 --> 00:36:27,960
Speaker 8: stock market or the S and P reclaim that, but

663
00:36:28,040 --> 00:36:29,719
Speaker 8: for the moment, now that we are below the two

664
00:36:29,800 --> 00:36:31,920
Speaker 8: undred day, I'm a little more worried about where.

665
00:36:31,719 --> 00:36:32,160
Speaker 2: This could go.

666
00:36:32,800 --> 00:36:34,880
Speaker 4: Times. You may recall Calli as a proud graduate of

667
00:36:34,920 --> 00:36:37,040
Speaker 4: the University of North Carolina and her tar Heels are

668
00:36:37,040 --> 00:36:39,719
Speaker 4: playing today against Notre Dame in the ACC Tournament at

669
00:36:39,719 --> 00:36:42,040
Speaker 4: two thirty, So if you're planning on getting in touch

670
00:36:42,040 --> 00:36:43,560
Speaker 4: with Callie around that time, she may not be a

671
00:36:43,600 --> 00:36:47,719
Speaker 4: mill Calli.

672
00:36:48,000 --> 00:36:51,200
Speaker 8: Yeah, I knew this was coming. I knew this was coming,

673
00:36:51,200 --> 00:36:52,960
Speaker 8: and these are important games. We got to make it

674
00:36:52,960 --> 00:36:53,279
Speaker 8: to March.

675
00:36:53,320 --> 00:36:55,480
Speaker 4: Madness got to make it so yeah, and I think

676
00:36:55,520 --> 00:36:58,360
Speaker 4: the networks went North Carolina there as well. CALLI the

677
00:36:58,440 --> 00:37:02,040
Speaker 4: last several weeks on this selloff here hasn't seemed orderly

678
00:37:02,160 --> 00:37:05,160
Speaker 4: to you, reasonable to you part of a maybe a

679
00:37:05,200 --> 00:37:08,120
Speaker 4: healthy pullback in a market that maybe wants to work

680
00:37:08,200 --> 00:37:10,239
Speaker 4: higher if earning's come through. How do you think about

681
00:37:10,239 --> 00:37:11,840
Speaker 4: the last couple of weeks of training.

682
00:37:13,840 --> 00:37:17,279
Speaker 8: I think it has been a bit orderly, but in

683
00:37:17,280 --> 00:37:19,960
Speaker 8: a disorderly way. And what I mean by that is

684
00:37:20,000 --> 00:37:22,880
Speaker 8: that we've seen the bulk of losses in tech stocks.

685
00:37:23,239 --> 00:37:25,960
Speaker 8: I mean, tech coming into this year has had an

686
00:37:26,000 --> 00:37:29,279
Speaker 8: extounding two year run, which was great. You know, if

687
00:37:29,320 --> 00:37:31,759
Speaker 8: you're a tech investor, you were happy up until the

688
00:37:31,760 --> 00:37:34,719
Speaker 8: beginning of this year. But we've seen a lot of

689
00:37:34,760 --> 00:37:37,239
Speaker 8: those textures that have done so well roll over in

690
00:37:37,280 --> 00:37:39,600
Speaker 8: the past few weeks. And to me, that says that

691
00:37:39,640 --> 00:37:41,880
Speaker 8: there's a bit of a cooling off here. It's not

692
00:37:41,920 --> 00:37:45,200
Speaker 8: necessarily the sell off we're seeing as a necessarily a

693
00:37:45,200 --> 00:37:48,120
Speaker 8: reflection of fundamentals. But at the same time, what worries

694
00:37:48,160 --> 00:37:50,600
Speaker 8: me is that we are seeing some weakening and some

695
00:37:50,719 --> 00:37:53,439
Speaker 8: cracks widening in the job market. So in a way.

696
00:37:53,600 --> 00:37:56,000
Speaker 8: I like the fact that this has been a little disorderly.

697
00:37:56,120 --> 00:37:59,200
Speaker 8: And again I'm not I don't love a sell off

698
00:37:59,200 --> 00:38:01,960
Speaker 8: where you know, are sore turning and our anxiety is rising.

699
00:38:02,200 --> 00:38:04,799
Speaker 8: But the fact that it's been a little uneven has

700
00:38:04,920 --> 00:38:05,759
Speaker 8: comforted me a bit.

701
00:38:05,880 --> 00:38:09,640
Speaker 2: I remember the comedy of we're in an intermediate bullmarket

702
00:38:09,719 --> 00:38:13,520
Speaker 2: or intermediate trend and all that. Kelly Cox, have we

703
00:38:13,640 --> 00:38:16,560
Speaker 2: broken the bullmarket? I don't you know. I'm not hearing

704
00:38:16,600 --> 00:38:19,040
Speaker 2: that within the zeitgeist is the bullmarket over.

705
00:38:20,600 --> 00:38:22,640
Speaker 8: I don't think you can say that until we see

706
00:38:22,719 --> 00:38:26,600
Speaker 8: layoff surge definitively, Because I mean, Tom, you're an order

707
00:38:26,640 --> 00:38:29,480
Speaker 8: of history like I am. You know that barrel markets

708
00:38:29,480 --> 00:38:32,239
Speaker 8: often overlap with economic recessions, and if you're waiting for

709
00:38:32,280 --> 00:38:34,640
Speaker 8: a recession, you need to watch for signals in the

710
00:38:34,719 --> 00:38:36,839
Speaker 8: job market. And I don't quite I don't think we're

711
00:38:36,880 --> 00:38:39,719
Speaker 8: seeing that yet, even though the trend is turning that way.

712
00:38:40,640 --> 00:38:43,000
Speaker 8: You know, we might be where we were several months ago,

713
00:38:43,040 --> 00:38:46,000
Speaker 8: where hiring is coming down, but companies may hold on

714
00:38:46,200 --> 00:38:48,279
Speaker 8: to workers not necessarily lay them off.

715
00:38:48,280 --> 00:38:51,480
Speaker 4: In mass Kelly, one of the questions is do we

716
00:38:51,520 --> 00:38:54,160
Speaker 4: buy the dip? And I saw a city they're trading

717
00:38:54,239 --> 00:38:56,520
Speaker 4: us out with their note. They're saying, don't buy the dip.

718
00:38:56,560 --> 00:38:59,399
Speaker 4: But it was almost between the lines. Just yet, we're

719
00:38:59,440 --> 00:39:02,279
Speaker 4: not quite there. How do you guys think about it?

720
00:39:03,840 --> 00:39:05,799
Speaker 8: Well, we serve long term clients as at Hold, so

721
00:39:05,840 --> 00:39:07,799
Speaker 8: our job is a little bit easier here. I mean,

722
00:39:07,880 --> 00:39:10,640
Speaker 8: over time, we've seen over and over again that dips

723
00:39:11,160 --> 00:39:13,439
Speaker 8: it's been smart to step in and buy the dips,

724
00:39:13,520 --> 00:39:18,759
Speaker 8: especially around this negative ten percent correction level. But again,

725
00:39:18,800 --> 00:39:21,560
Speaker 8: our clients are looking for over years and years and years,

726
00:39:21,600 --> 00:39:24,160
Speaker 8: and of course we believe that the story for the

727
00:39:24,239 --> 00:39:28,719
Speaker 8: US economy can still thrive because markets ultimately grow on

728
00:39:28,800 --> 00:39:31,600
Speaker 8: earning's economy and innovation. But at this moment, if you're

729
00:39:31,600 --> 00:39:33,960
Speaker 8: looking over the next week or month or so, I

730
00:39:34,000 --> 00:39:35,480
Speaker 8: would get a little more defensive.

731
00:39:35,520 --> 00:39:35,759
Speaker 2: Here.

732
00:39:36,040 --> 00:39:38,920
Speaker 8: We're still trying to figure out what this policy story

733
00:39:38,960 --> 00:39:41,640
Speaker 8: could look like. We're trying to figure out the extent

734
00:39:41,719 --> 00:39:44,120
Speaker 8: of the job market damage. We got data today is

735
00:39:44,200 --> 00:39:47,640
Speaker 8: showing inflation is still quite tame. I just wouldn't try

736
00:39:47,640 --> 00:39:50,279
Speaker 8: to be a hero in this environment. I wouldn't be

737
00:39:50,320 --> 00:39:51,840
Speaker 8: the one trying to make big bull trades.

738
00:39:51,920 --> 00:39:54,879
Speaker 2: You say you've got a long term perspective, Kelly as

739
00:39:55,120 --> 00:39:58,400
Speaker 2: well helping here with the utilization of bonds. We've got

740
00:39:58,440 --> 00:40:01,440
Speaker 2: people saying, finally, bonds here value, do you buy it?

741
00:40:01,560 --> 00:40:05,040
Speaker 2: Or does equities? Is there still enough growthiness inequities?

742
00:40:06,960 --> 00:40:09,200
Speaker 8: Well, I think at this moment again, if you're looking

743
00:40:09,200 --> 00:40:12,239
Speaker 8: over the coming weeks and months, you'll probably find some

744
00:40:12,280 --> 00:40:15,399
Speaker 8: comfort in buying up those quality bonds. Right I'd say

745
00:40:15,400 --> 00:40:17,640
Speaker 8: we're in a classic growth scare right now. We haven't

746
00:40:17,760 --> 00:40:21,319
Speaker 8: seen a full slate of data that proves that. You know,

747
00:40:21,320 --> 00:40:23,600
Speaker 8: we're in a full blown economic crisis, but the trends

748
00:40:23,600 --> 00:40:25,960
Speaker 8: are turning the wrong way. And when you're in an

749
00:40:26,000 --> 00:40:30,319
Speaker 8: economic downturn, treasuries are the classics sanity hedge, and they've

750
00:40:30,360 --> 00:40:33,600
Speaker 8: proven to be that during this growth scare. So within

751
00:40:33,640 --> 00:40:36,200
Speaker 8: the fixed income market, look at quality, maybe look a

752
00:40:36,239 --> 00:40:39,400
Speaker 8: little bit longer term. We haven't seen that hedging activity

753
00:40:39,840 --> 00:40:42,480
Speaker 8: be as strong as it has in past growth scares.

754
00:40:42,680 --> 00:40:45,920
Speaker 8: But at the same time, you know, treasuries have risen

755
00:40:46,280 --> 00:40:47,359
Speaker 8: on the back of the cell off.

756
00:40:48,320 --> 00:40:50,520
Speaker 4: So kell, how do you think about valuation here? Again,

757
00:40:50,560 --> 00:40:52,040
Speaker 4: we've had this a little bit of a correction. You're

758
00:40:52,400 --> 00:40:54,080
Speaker 4: roughly a ten percent pull back in y s and

759
00:40:54,080 --> 00:40:57,840
Speaker 4: P five hundred. Is there a valuation call to be

760
00:40:57,880 --> 00:41:00,000
Speaker 4: made here or you don't even kind of go there again.

761
00:41:00,000 --> 00:41:01,920
Speaker 4: And I know you guys are long term, but a

762
00:41:01,920 --> 00:41:03,640
Speaker 4: lot of folks should. They tend to look for some

763
00:41:03,760 --> 00:41:06,120
Speaker 4: entry points, and evaluation is one of the data points

764
00:41:06,160 --> 00:41:06,640
Speaker 4: they look at.

765
00:41:08,239 --> 00:41:10,600
Speaker 8: Right I think valuation matters a little bit less in

766
00:41:10,640 --> 00:41:13,680
Speaker 8: this environment, and valuation matters, but you have to view

767
00:41:13,680 --> 00:41:15,759
Speaker 8: it in context. I mean, right now, the S and

768
00:41:15,800 --> 00:41:19,319
Speaker 8: P's valuation is still quite high historically, but a lot

769
00:41:19,360 --> 00:41:21,680
Speaker 8: of that is because we've seen TEX shares do so

770
00:41:21,840 --> 00:41:25,239
Speaker 8: well over the past two years, and unsurprisingly they're the

771
00:41:25,360 --> 00:41:27,520
Speaker 8: part of the market that's been selling off the hardest.

772
00:41:27,800 --> 00:41:30,439
Speaker 8: So I think if you're taking any lessons from valuation here,

773
00:41:30,520 --> 00:41:33,719
Speaker 8: it's to, you know, look toward those stocks that are

774
00:41:33,960 --> 00:41:37,279
Speaker 8: a little more fairly valued in this environment, stocks that

775
00:41:37,840 --> 00:41:40,839
Speaker 8: hug their earnings a little bit closer than you know,

776
00:41:40,960 --> 00:41:43,720
Speaker 8: the tech and growth shares of the world. We believe

777
00:41:43,760 --> 00:41:45,640
Speaker 8: in value a lot at rid Holts because we try

778
00:41:45,640 --> 00:41:48,640
Speaker 8: to prioritize stability and consistency. But I think right now,

779
00:41:48,680 --> 00:41:52,200
Speaker 8: the lesson is, you know, not to take valuation at

780
00:41:52,200 --> 00:41:54,960
Speaker 8: its face, but to look within your portfolio and understand

781
00:41:55,000 --> 00:41:56,600
Speaker 8: where there are valuation differences.

782
00:41:56,800 --> 00:41:59,920
Speaker 2: Kelly, thanks so much, Kelly Cox. Rid Holts manages to

783
00:42:00,239 --> 00:42:01,279
Speaker 2: greatly appreciate it.

784
00:42:06,960 --> 00:42:10,880
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

785
00:42:10,920 --> 00:42:13,960
Speaker 1: starting at seven am Eastern on Apple Coarclay, and Android

786
00:42:13,960 --> 00:42:16,959
Speaker 1: Auto with the Bloomberg Business app. You can also watch

787
00:42:17,040 --> 00:42:20,000
Speaker 1: us live every weekday on YouTube and always on the

788
00:42:20,000 --> 00:42:21,080
Speaker 1: Bloomberg terminal.

789
00:42:21,280 --> 00:42:24,200
Speaker 2: This is an important conversation right now. Leland Miller has

790
00:42:24,239 --> 00:42:26,400
Speaker 2: been a little busy. He's a China beaige book and

791
00:42:26,440 --> 00:42:31,839
Speaker 2: he has been advising on China economics to the Trump administration.

792
00:42:32,000 --> 00:42:34,400
Speaker 2: In a broad sense. He's not able to talk about

793
00:42:34,400 --> 00:42:38,120
Speaker 2: those specifics, but we're thrilled he could be with us today. Leland,

794
00:42:38,320 --> 00:42:42,520
Speaker 2: you are adult at guessing China GDP. Is it a

795
00:42:42,640 --> 00:42:48,719
Speaker 2: legit five percent? Absolutely not, But it doesn't matter.

796
00:42:48,760 --> 00:42:50,680
Speaker 9: I mean, you know, they come out with the numbers

797
00:42:50,719 --> 00:42:52,600
Speaker 9: and say it's you know, whatever numbers they have, and

798
00:42:52,600 --> 00:42:55,960
Speaker 9: they say it's five percent. The market buys it. You

799
00:42:56,000 --> 00:42:58,960
Speaker 9: get two op eds from somebody saying we're skeptical. We're skeptical,

800
00:42:59,000 --> 00:43:01,520
Speaker 9: but each and every day time, the market basically buys

801
00:43:01,640 --> 00:43:05,040
Speaker 9: whatever they put out, regardless of the evidence. So we're

802
00:43:05,080 --> 00:43:06,480
Speaker 9: going to see more of that into the future.

803
00:43:06,600 --> 00:43:08,560
Speaker 2: Are we going to see more tip for tat within

804
00:43:08,600 --> 00:43:13,480
Speaker 2: a zero sum economics that we will definitely see.

805
00:43:13,600 --> 00:43:17,080
Speaker 9: I mean, we were entering trade war time. Obviously, there's

806
00:43:17,120 --> 00:43:19,880
Speaker 9: tariffs coming from every direction, and I think it's important

807
00:43:19,920 --> 00:43:23,360
Speaker 9: to to separate what's happening with China from what's happening

808
00:43:23,360 --> 00:43:24,759
Speaker 9: with the rest of the world, because I think there's

809
00:43:24,760 --> 00:43:29,200
Speaker 9: a different discussion around economic imbalances in China, which which

810
00:43:29,200 --> 00:43:31,239
Speaker 9: are not even the focus of the current tariff. So,

811
00:43:31,880 --> 00:43:34,759
Speaker 9: you know, there's a there's a Mexico Canada strategy that

812
00:43:34,800 --> 00:43:37,919
Speaker 9: they're working on, there's a broader world strategy in terms

813
00:43:37,920 --> 00:43:42,120
Speaker 9: of restructuring economic relationships and in figuring out the you know,

814
00:43:43,000 --> 00:43:46,160
Speaker 9: lessening the trade surplus. And then there's China. And I

815
00:43:46,160 --> 00:43:48,080
Speaker 9: think the China discussion is the one that we've yet

816
00:43:48,160 --> 00:43:50,360
Speaker 9: to have, and it's going to go to several different directions.

817
00:43:50,400 --> 00:43:53,080
Speaker 9: Whether it's you know, Trump going to to China at

818
00:43:53,080 --> 00:43:55,560
Speaker 9: first trying to get a trade deal and then going

819
00:43:55,600 --> 00:43:58,319
Speaker 9: another direction. We don't know yet, but that but that's

820
00:43:58,360 --> 00:43:59,520
Speaker 9: what that's the one that's to come.

821
00:44:00,160 --> 00:44:03,520
Speaker 4: Leland, how do you think China views a potential trade

822
00:44:03,960 --> 00:44:06,279
Speaker 4: work with the US. Do they feel like they have

823
00:44:06,960 --> 00:44:09,759
Speaker 4: leverage here? Position of strength? How do you think they

824
00:44:09,840 --> 00:44:10,239
Speaker 4: view it?

825
00:44:11,880 --> 00:44:13,920
Speaker 9: They definitely don't have a position of strength, But I

826
00:44:13,920 --> 00:44:16,680
Speaker 9: think they're in better position than they were last time around.

827
00:44:16,960 --> 00:44:20,600
Speaker 9: I think all the announcements that we've heard for what

828
00:44:20,680 --> 00:44:25,759
Speaker 9: the last six eight months from Beijing about bigger fiscal stimulus,

829
00:44:25,760 --> 00:44:28,640
Speaker 9: more monetary firepower. You know, there's a lot of people

830
00:44:28,640 --> 00:44:30,440
Speaker 9: who said, oh, look, you know, big things are going

831
00:44:30,480 --> 00:44:32,680
Speaker 9: to happen to the Chinese economy because of that. None

832
00:44:32,760 --> 00:44:35,200
Speaker 9: of that has actually happened. You know, if you look

833
00:44:35,200 --> 00:44:37,920
Speaker 9: at what this is all getting ready for a worst

834
00:44:37,960 --> 00:44:41,080
Speaker 9: case scenario with Trump, and so they're ready to do

835
00:44:41,120 --> 00:44:43,920
Speaker 9: bigger fiscal spending. They're ready to use the monetary spigots

836
00:44:43,960 --> 00:44:45,520
Speaker 9: that they need to in a smaller way. We're not

837
00:44:45,600 --> 00:44:48,440
Speaker 9: talking about the Bazuka unless it's a break the glass emergency,

838
00:44:49,480 --> 00:44:52,560
Speaker 9: and so they're getting ready. They haven't done much yet,

839
00:44:52,600 --> 00:44:54,239
Speaker 9: but I think that they're prepared in a way they

840
00:44:54,239 --> 00:44:54,960
Speaker 9: weren't last time.

841
00:44:55,000 --> 00:44:55,640
Speaker 2: If things get.

842
00:44:55,600 --> 00:44:58,360
Speaker 4: Really bad, Leland, I kind of look at some of

843
00:44:58,400 --> 00:45:01,759
Speaker 4: these big Chinese technology I'll use Ali Baba as an

844
00:45:01,800 --> 00:45:03,960
Speaker 4: example of sixty five percent year to eat. I use

845
00:45:04,000 --> 00:45:06,840
Speaker 4: that as kind of a proxy for how Western investors

846
00:45:07,160 --> 00:45:10,600
Speaker 4: look at China. Is there reason to be optimistic here

847
00:45:10,680 --> 00:45:13,560
Speaker 4: about China looking at a stock like Ali Baba.

848
00:45:14,000 --> 00:45:15,640
Speaker 9: Well, I think you're right that that's how a lot

849
00:45:15,680 --> 00:45:18,279
Speaker 9: of people use it. That wouldn't be my lens. I

850
00:45:18,320 --> 00:45:20,840
Speaker 9: think that you could have a couple of companies in

851
00:45:20,880 --> 00:45:23,440
Speaker 9: the tech sector doing really well, the deep seeks, they

852
00:45:23,440 --> 00:45:26,319
Speaker 9: Ali Baba's, you know, the ten cents, whatever it might be,

853
00:45:26,760 --> 00:45:28,880
Speaker 9: and those stocks are going up, and people are excited

854
00:45:28,920 --> 00:45:33,200
Speaker 9: about Ai proliferating around around China. That has absolutely no

855
00:45:33,280 --> 00:45:36,640
Speaker 9: correlation with broader stocks, and the broader stock market has

856
00:45:36,640 --> 00:45:39,520
Speaker 9: no correlation whatsoever with the real economy. So you can

857
00:45:39,600 --> 00:45:41,960
Speaker 9: see some companies doing better. I don't think that has

858
00:45:41,960 --> 00:45:44,160
Speaker 9: anything to do with the Chinese economy red large, even

859
00:45:44,200 --> 00:45:46,239
Speaker 9: if investors want that to be a signal for you.

860
00:45:46,320 --> 00:45:48,880
Speaker 2: On your community. This Morning across this Nation, Good Morning

861
00:45:48,960 --> 00:45:53,360
Speaker 2: Canada as well. Leland Miller China Beige Book, an extended

862
00:45:53,400 --> 00:45:58,480
Speaker 2: conversation you're specifically trans Pacific on YouTube. Good Morning, Good

863
00:45:58,560 --> 00:46:03,319
Speaker 2: Evening across the Pacific. We're out at Bloomberg Podcasts. Subscribe

864
00:46:03,400 --> 00:46:09,520
Speaker 2: to Bloomberg Podcasts Leland Miller educate us on the nonsense

865
00:46:09,680 --> 00:46:15,400
Speaker 2: of bilateral art make a deal negotiations. We are multilateral.

866
00:46:15,840 --> 00:46:18,319
Speaker 2: I studied at the altar of William Klein at the

867
00:46:18,320 --> 00:46:23,800
Speaker 2: Peterson Institute. Let's just take Vietnam. How does Vietnam fold

868
00:46:23,840 --> 00:46:26,880
Speaker 2: into our nonsensical bilateral debates.

869
00:46:28,560 --> 00:46:31,120
Speaker 9: Well, I think by nonsensical what you're referring to is

870
00:46:31,520 --> 00:46:35,560
Speaker 9: the obsession by some over bilateral trade deficits. And the

871
00:46:35,600 --> 00:46:39,160
Speaker 9: problem with that is you can have restrictions against one country,

872
00:46:39,239 --> 00:46:42,680
Speaker 9: but what you're really worried about is what the grands,

873
00:46:42,840 --> 00:46:46,120
Speaker 9: the grand totality of all the trade flows are. So

874
00:46:46,239 --> 00:46:48,360
Speaker 9: if you know if you have if you have restrictions

875
00:46:48,400 --> 00:46:51,520
Speaker 9: on China, and China is setting things to Vietnam and

876
00:46:51,600 --> 00:46:54,359
Speaker 9: Vietnam to the United States and it balances somehow, then

877
00:46:54,480 --> 00:46:57,000
Speaker 9: then that's much less of a worry than if you

878
00:46:57,120 --> 00:47:01,680
Speaker 9: have a situation where you have amounting trade surplus overall. So,

879
00:47:02,080 --> 00:47:04,319
Speaker 9: because this is becoming very important because we're in an

880
00:47:04,320 --> 00:47:06,960
Speaker 9: era of tariffs, We're an era of transhipping around tariffs.

881
00:47:06,960 --> 00:47:09,640
Speaker 9: We're in an issue in which the more we go

882
00:47:09,680 --> 00:47:11,319
Speaker 9: at China, the more they're going to be setting up

883
00:47:11,360 --> 00:47:14,240
Speaker 9: shop in third party countries. So it's it's very important

884
00:47:14,280 --> 00:47:17,040
Speaker 9: people understand that there shouldn't be too much of an

885
00:47:17,040 --> 00:47:20,440
Speaker 9: obsession with bilateral trade flows. You can watch it, but

886
00:47:20,480 --> 00:47:23,640
Speaker 9: it's the multilateral situation's the vitality that's really important.

887
00:47:24,000 --> 00:47:24,400
Speaker 2: Leland.

888
00:47:24,400 --> 00:47:28,319
Speaker 4: Do you think President She would welcome a meeting with

889
00:47:28,440 --> 00:47:33,000
Speaker 4: President Trump face to face to talk about broader trade issues,

890
00:47:33,040 --> 00:47:35,880
Speaker 4: maybe just issues outside of economics. Is that something you

891
00:47:35,880 --> 00:47:37,560
Speaker 4: think could happen in the next I don't know, six

892
00:47:37,600 --> 00:47:38,040
Speaker 4: months or so.

893
00:47:39,640 --> 00:47:39,879
Speaker 2: Yeah.

894
00:47:39,880 --> 00:47:42,640
Speaker 9: I know will welcome it because he's been sending signals

895
00:47:42,640 --> 00:47:44,799
Speaker 9: to many of us in the in the in the

896
00:47:44,840 --> 00:47:47,680
Speaker 9: in the business community here in the United States that

897
00:47:47,680 --> 00:47:50,040
Speaker 9: that that there all systems go. They want to talk.

898
00:47:50,440 --> 00:47:52,560
Speaker 9: So yes, I think they want to talk very badly.

899
00:47:52,600 --> 00:47:55,759
Speaker 9: But the preconditions on that will be you can't bear

900
00:47:55,840 --> 00:47:57,640
Speaker 9: us as you can't surprise us. We need to know

901
00:47:57,640 --> 00:47:59,360
Speaker 9: what's in store for the next six months so that

902
00:47:59,600 --> 00:48:02,319
Speaker 9: President She doesn't walk into a trapt. So there are

903
00:48:02,360 --> 00:48:03,959
Speaker 9: preconditions on the meeting.

904
00:48:04,160 --> 00:48:07,680
Speaker 2: Leila Miller, I want to trades delicately here, but I

905
00:48:07,719 --> 00:48:11,000
Speaker 2: think it's an important conversation for this nation. This morning,

906
00:48:11,880 --> 00:48:16,640
Speaker 2: Trump one was a light heeiser trade made out of

907
00:48:16,680 --> 00:48:22,160
Speaker 2: the crucible of Robert Leittheiser's brutal childhood in Eastern Ohio.

908
00:48:22,640 --> 00:48:28,560
Speaker 2: He saw Eastern Ohio crushed. What is Trump too trade

909
00:48:28,719 --> 00:48:33,000
Speaker 2: theory compared to what it was in Trump won?

910
00:48:34,800 --> 00:48:38,040
Speaker 9: Well, I think Trump trade theory is very similar. I

911
00:48:38,040 --> 00:48:40,920
Speaker 9: think Trump trade practice is diverging a little.

912
00:48:40,680 --> 00:48:42,399
Speaker 2: Bit from the theory so far.

913
00:48:43,120 --> 00:48:46,520
Speaker 9: Look the first term, it's correct, it was very different

914
00:48:46,560 --> 00:48:49,080
Speaker 9: in a lot of ways than this Trump second term.

915
00:48:49,360 --> 00:48:52,360
Speaker 9: And that Trump was constantly looking for victories. You know,

916
00:48:52,400 --> 00:48:57,000
Speaker 9: he renegotiated NAFTA, he renegotiated Chorus, he negotiated a trade

917
00:48:57,040 --> 00:49:00,359
Speaker 9: deal with with China. These were victories. He was using

918
00:49:00,400 --> 00:49:04,000
Speaker 9: tariffs for the most part as negotiating leverage towards an outcome.

919
00:49:04,920 --> 00:49:07,279
Speaker 9: The goal in the second term is very different, and

920
00:49:07,360 --> 00:49:10,640
Speaker 9: markets have refused to believe this. They they've they've you know,

921
00:49:10,760 --> 00:49:13,000
Speaker 9: maybe they do now with the market doing what it's doing.

922
00:49:13,320 --> 00:49:16,239
Speaker 9: But the Trump administration and the President himself, wants to

923
00:49:16,680 --> 00:49:20,680
Speaker 9: restructure economic relationships in a lasting way. He wants to

924
00:49:20,719 --> 00:49:23,919
Speaker 9: shift the whole paradigm and so set up a wall

925
00:49:23,920 --> 00:49:28,120
Speaker 9: around the United States, cut taxes for domestic manufacturers uh

926
00:49:28,840 --> 00:49:32,960
Speaker 9: and incentivize industries to come home. And so because of this,

927
00:49:33,120 --> 00:49:36,279
Speaker 9: there is much more of an intention to go at

928
00:49:36,520 --> 00:49:40,760
Speaker 9: all these different blocks and countries and go after trade

929
00:49:40,840 --> 00:49:44,239
Speaker 9: surplus countries and try to write the economic relationship and

930
00:49:44,280 --> 00:49:46,720
Speaker 9: bring some of these industries back home. So the idea

931
00:49:47,840 --> 00:49:51,239
Speaker 9: is much bigger than than Trump term one. This is

932
00:49:51,320 --> 00:49:53,319
Speaker 9: this is something they want to leave a legacy on

933
00:49:53,840 --> 00:49:56,520
Speaker 9: in terms of just redefining the way America does business

934
00:49:56,520 --> 00:49:57,160
Speaker 9: around the world.

935
00:49:57,560 --> 00:50:00,520
Speaker 4: And Leland, is there a valid concern that someone marketplace

936
00:50:00,560 --> 00:50:04,000
Speaker 4: are reflecting today in asset prices, that that policy that

937
00:50:04,040 --> 00:50:08,440
Speaker 4: you just articulated, uh may result in slower economic growth

938
00:50:08,480 --> 00:50:10,640
Speaker 4: and certainly higher inflation.

939
00:50:13,120 --> 00:50:15,520
Speaker 9: This is something that that that that we've spoken about

940
00:50:15,560 --> 00:50:18,440
Speaker 9: a lot. People are usually binary on this. If you

941
00:50:18,480 --> 00:50:20,680
Speaker 9: put tariffs in place, it's a disaster. If you put

942
00:50:20,719 --> 00:50:24,799
Speaker 9: tariffs in place, it's fantastic, you know, and usually onto extremes.

943
00:50:25,040 --> 00:50:26,000
Speaker 2: Neither of those is right.

944
00:50:26,280 --> 00:50:28,719
Speaker 9: You can you can have tariffs in a certain in

945
00:50:28,800 --> 00:50:32,080
Speaker 9: certain circumstances in different regimes, but you have to seek

946
00:50:32,080 --> 00:50:33,759
Speaker 9: with them right. So you have to make sure that

947
00:50:33,800 --> 00:50:35,839
Speaker 9: you're not going you know, you if you don't want

948
00:50:35,880 --> 00:50:39,160
Speaker 9: prices to rise, you have to have substitutability. If you want.

949
00:50:39,239 --> 00:50:40,920
Speaker 9: If you want things to be gradual and there not

950
00:50:40,920 --> 00:50:42,799
Speaker 9: to be a market reaction, then you can't go at

951
00:50:42,920 --> 00:50:45,680
Speaker 9: rival production centers and hike tariffs, you know, at both

952
00:50:45,680 --> 00:50:47,440
Speaker 9: of them at the same time. You need to have

953
00:50:47,480 --> 00:50:50,000
Speaker 9: an out. I think what's worrying markets right now is

954
00:50:50,440 --> 00:50:54,400
Speaker 9: if Trump is really trying to have a trade policy

955
00:50:54,440 --> 00:50:57,760
Speaker 9: that changes all these economic relationships around the world, especially

956
00:50:57,880 --> 00:50:58,600
Speaker 9: via tariffs.

957
00:50:58,760 --> 00:50:59,600
Speaker 2: There needs to be a.

958
00:50:59,600 --> 00:51:02,640
Speaker 9: Place where it's foundational place to build, and that has

959
00:51:02,760 --> 00:51:06,120
Speaker 9: traditionally been the new U S MCA countries. It hasn't

960
00:51:06,120 --> 00:51:08,920
Speaker 9: just been the United States. I think this antagonism with

961
00:51:08,960 --> 00:51:11,279
Speaker 9: Mexico and Cana has gotten people worried that prices are

962
00:51:11,280 --> 00:51:14,000
Speaker 9: going to rise because there you can't just bring everything

963
00:51:14,000 --> 00:51:14,960
Speaker 9: home to the United States.

964
00:51:15,080 --> 00:51:17,400
Speaker 2: I'm the leakage. I sound like Steve Roach a million

965
00:51:17,440 --> 00:51:23,160
Speaker 2: years ago, the external externalities and the leakage out of

966
00:51:23,200 --> 00:51:28,279
Speaker 2: a constructed Trump system of trade. Leland Miller isn't the

967
00:51:28,360 --> 00:51:33,160
Speaker 2: singular leakage diminished economic growth that one day flips to

968
00:51:33,320 --> 00:51:37,640
Speaker 2: a deflationary or at least disinflationary vector.

969
00:51:39,600 --> 00:51:42,719
Speaker 9: I don't think anything is baked in. I think all

970
00:51:42,760 --> 00:51:45,759
Speaker 9: of it's about having a strategy and then sequencing it right.

971
00:51:45,840 --> 00:51:48,280
Speaker 9: So you know, if you look at the EU, everyone's

972
00:51:48,320 --> 00:51:49,759
Speaker 9: panicked about how we're going to go to war with

973
00:51:49,840 --> 00:51:51,719
Speaker 9: the EU if this was if this is done in

974
00:51:51,800 --> 00:51:56,400
Speaker 9: a very sensible way, and you know the end result

975
00:51:56,520 --> 00:51:59,800
Speaker 9: of this is that Germany is pressured into releasing the

976
00:52:00,400 --> 00:52:04,040
Speaker 9: It's fiscal breaks that use spending more, it's defending itself more,

977
00:52:04,160 --> 00:52:07,000
Speaker 9: it's funding more innovation, it has a broader capital marketing,

978
00:52:07,120 --> 00:52:08,719
Speaker 9: and people are going to be looking back at a

979
00:52:08,760 --> 00:52:10,520
Speaker 9: couple of years and saying this is a net win

980
00:52:10,600 --> 00:52:12,560
Speaker 9: for the United States and a net win for Europe.

981
00:52:12,719 --> 00:52:14,760
Speaker 9: Now that doesn't mean how it's going to be executed.

982
00:52:14,800 --> 00:52:17,239
Speaker 9: It's going to work that way, but in theory there

983
00:52:17,280 --> 00:52:21,040
Speaker 9: you know this, there's no there's no necessarily bad outcome here.

984
00:52:21,160 --> 00:52:24,480
Speaker 2: Leland, thank you. Let's do it tomorrow. L Chavas book

985
00:52:24,520 --> 00:52:25,560
Speaker 2: greatly appreciated.

986
00:52:25,960 --> 00:52:30,799
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987
00:52:30,920 --> 00:52:34,719
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988
00:52:34,760 --> 00:52:38,600
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989
00:52:38,719 --> 00:52:42,520
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990
00:52:42,840 --> 00:52:45,880
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991
00:52:46,239 --> 00:52:48,240
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