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Speaker 2: Everything we do, folks here is about a conversation with
Speaker 2: people with breadth. There are few in the Western world
Speaker 2: with a breadth of finance, like Cuba and Steinas. I'm
Speaker 2: not going to bore you with a resume. He wandered
Speaker 2: by a school named Oxford a few years ago, did
Speaker 2: some serious work with Bank of England and added tour
Speaker 2: duty at Morgan Stanley. He is definitive on our financial system.
Speaker 2: Tim Adams Scott Bessent ten am, what's a question you
Speaker 2: would ask a secretary treasurer?
Speaker 3: Wow, thanks to having me on look.
Speaker 4: One conversation I'm hearing which doesn't come out in the
Speaker 4: press much is about the strain on cash flow for
Speaker 4: small business.
Speaker 3: You know, it's a huge topic for private equity and
Speaker 3: for banks.
Speaker 4: Right, Let's imagine you put in a ten million order
Speaker 4: in for toys. You now have to pay twenty four
Speaker 4: million dollars if they come from China, you simply don't
Speaker 4: have that cash flow. So my question would be, how
Speaker 4: worried are you about small business not being able to
Speaker 4: stock their shelves?
Speaker 2: Okay, folks, you flunk this in a CFA exam. I've
Speaker 2: done and I've enjoyed it. Working capital, and this is
Speaker 2: to go into the way a business runs. There's a
Speaker 2: thing called the cash conversion cycle. Part. Did you memorize
Speaker 2: that that was with the three ratio and the five ratio?
Speaker 2: Do plat formula que Vestin is your expert at this?
Speaker 2: When you see terror of adjustments, I don't understand how
Speaker 2: you go from three percent to ten percent or one
Speaker 2: hundred percent and your world blows up. I mean that's
Speaker 2: where we are right.
Speaker 4: Well, look, I don't think any of us have seen
Speaker 4: anything like this before. I mean I think I wrote
Speaker 4: a bit about the Nixon shock where obviously Nixon did
Speaker 4: impose a ten percent tariff for four months, for four months,
Speaker 4: but I guess the markets can't stand that, you know,
Speaker 4: wouldn't tolerate four months here and that did is you
Speaker 4: know that did lead to product shortages and to price
Speaker 4: bikes because people couldn't forget cash conversion cycle?
Speaker 2: Do at Walmart. That's the heart of the matter.
Speaker 4: That probably Walmart's not my expertise, But if I think
Speaker 4: about the conversations we're having, the focus is predictlarly around
Speaker 4: retailers small businesses who just don't have the cash buffer.
Speaker 4: If your Walmart, clearly you're really large, you're very sophisticated,
Speaker 4: you do have big cash buffers. But if you're a
Speaker 4: small business running from quarter to quarter to month to month,
Speaker 4: how are you going to be able to pay two
Speaker 4: point four times what you expected when you may be
Speaker 4: worried about not a pubby able to pass it on.
Speaker 4: So what we're picking up is people trying to wriggle
Speaker 4: out of their orders if they can, and at least
Speaker 4: not renew those orders. That's the conversation the Finance is having,
Speaker 4: which I don't see enough in the main impress yet.
Speaker 5: To the extent that the President in this team are
Speaker 5: walking back some of this tariff rhetoric. Has some of
Speaker 5: the damage already been done? Do you think are we
Speaker 5: seeing in the system already just because of the rhetoric?
Speaker 4: So this is so I think this is what we
Speaker 4: distinguished between like sort of the growth shock and then
Speaker 4: kind of let's call it the more institutional shock, what
Speaker 4: all the taboo questions which we wouldn't have asked in
Speaker 4: the past, which now opened. I think in terms of growth,
Speaker 4: it clearly has been a bit of a punch in
Speaker 4: the gut for small business, which is the heartlands of America.
Speaker 4: Larger business are clearly ducking and diving through this. If
Speaker 4: I think about my area, thinking about the finance, finance, Look,
Speaker 4: the volatility has actually been quite good for the investment
Speaker 4: banks because I've been trading, yep. But the business confidence
Speaker 4: that one section. But the lack of conder corporate confidence
Speaker 4: is pushing deals to the right and certainly our conversations
Speaker 4: as some firms think, actually the deal pick up now
Speaker 4: is not till twenty twenty seven, not till twenty twenty seven.
Speaker 2: First, wow.
Speaker 5: Interesting. So I mean, I guess if nothing else, you know,
Speaker 5: we've this a million times before. The markets don't like uncertainty.
Speaker 5: But we're starting to see it in the survey data,
Speaker 5: whether it's the University of Michigan data or that you know,
Speaker 5: the pmis it's out there, right, I mean, it's not
Speaker 5: in the hard data. Maybe the FED looks like but
Speaker 5: we certainly see it in some of the other software data.
Speaker 4: Yeah, I mean, look you I'm sure you know my
Speaker 4: good friend Torston's looks great. On's trying to slice andize this.
Speaker 4: But if you look at you know ships coming into
Speaker 4: La or elsewhere about the stocking that they're down by
Speaker 4: a third to a half, that's clearly a sign of
Speaker 4: stress coming into the system. No, look, I mean at
Speaker 4: the data will come through, but the FED will need
Speaker 4: to be very data to well. Could always be data dependent,
Speaker 4: but it will be the historic data. Markets are clearly
Speaker 4: going to move way faster to.
Speaker 2: Von steinas with US folks, Oliver Wyman can't see the
Speaker 2: importance of this for Global Wall Street even more important
Speaker 2: in fifty minutes, Scott besn't with Tim Adams in Washington,
Speaker 2: hugely anticipated. Okay, you mentioned Torsten Slock, your Apollo management.
Speaker 2: You want to go out a choir, you get the
Speaker 2: Deutsche b brain power of doctor Slock. Wonderful. The bottom line,
Speaker 2: and this is Paul's world, is I don't buy for
Speaker 2: a minute. Everything's wonderful and private equity. What does an
Speaker 2: adult like you do? What are the tea leaves, the
Speaker 2: litmus paper, the measurements you're looking for for stresses in
Speaker 2: private equity.
Speaker 3: It's a great question.
Speaker 4: Look, these are unbelievably entrepreneurial folk, and so they're trying
Speaker 4: to sort of weave their way through this. Look, I
Speaker 4: think the first and second line is really about the
Speaker 4: order books. Has the sales come down, whether I've got
Speaker 4: highly leveraged companies trying to forensically work through that. So
Speaker 4: I think it's about cash conservation and it's about getting
Speaker 4: a cost down. So I'm already picking up people saying
Speaker 4: to all their management teams, have you thought about a
Speaker 4: cost round? What are you doing about that? So that's one,
Speaker 4: But on the other side in credit land, they're actually
Speaker 4: people trying to look this as an opportunity and actually
Speaker 4: trying to buy in.
Speaker 3: Some of the credits.
Speaker 4: A wider spreads than we'd see in eight weeks.
Speaker 2: There's somebody selling those spreads totally. Do they book a
Speaker 2: loss now.
Speaker 4: To again, it depends depends we turn about the private
Speaker 4: Let's be clear, about sixty percent of the new influs
Speaker 4: for the private market firms for the last two years
Speaker 4: has been credit and overwhelming. As we've discussed before, that's
Speaker 4: coming from the insurers. These are steady hands they want
Speaker 4: to deploy in size, but obviously on the equity side
Speaker 4: there more stress in the system. Bo was okay, g okay?
Speaker 5: So you have has Wall Street kind of with the
Speaker 5: earning sessments out there? Has was Street adjusted to this
Speaker 5: no uncertainty or do you still see downside risk to
Speaker 5: earning sessments out there?
Speaker 3: God?
Speaker 4: Look, I think that Let's be clear. Everyone is struggling
Speaker 4: to comprehend the range of scenarios. So to give you
Speaker 4: a simple answer is just it's just inconceivable. I think
Speaker 4: the like what are them the simpler moves, there's like
Speaker 4: the overwhelming conclusion of this where we to to find
Speaker 4: a better way to diversify your portfolio, and that at
Speaker 4: the moment than one way trade is look more towards
Speaker 4: Europe and Asia and look, European banks is stop twenty
Speaker 4: five percent year today.
Speaker 3: Wow, you know, let's be clear, you.
Speaker 4: Know, and I know that may not be the place
Speaker 4: that's now that's a smaller market for you, but I've
Speaker 4: clearly on this side of the pond there are Look,
Speaker 4: I think it comes back to how corporate confidence plays
Speaker 4: out on the stress and the system and how quickly
Speaker 4: the demonstration blinks. These are you know, complex questions which
Speaker 4: you're dealing with every day.
Speaker 2: Sorry, this is this wheelhouse. Hugh Einstein is folks. You
Speaker 2: know you got to start somewhere, and he started by
Speaker 2: being the required fourteen page read every four or five
Speaker 2: days in the European banks. I mean, I'm don't you, folks,
Speaker 2: But Hugh doesn't understand. He's never used a Bloomberg. Here's
Speaker 2: no clue. And the bottom line is I got JP
Speaker 2: Morgan hitting the ball out of the park with a
Speaker 2: priced book of two times in trading at one third
Speaker 2: even after the twenty five percent rally is BMP Perry
Speaker 2: Bar of Paris. I get the idea that the English,
Speaker 2: the French, whatever, banks are off the mat, but do
Speaker 2: they have the growthiness of America? I don't buy it.
Speaker 3: No.
Speaker 4: I toltally by that. So that's a that's a value trade,
Speaker 4: not a growth trade. Look, I think the challenge here
Speaker 4: is this is a growth shock and then somewhat of
Speaker 4: an institutional shock. And I think all the financials I'm
Speaker 4: talking to are working through reworking their plans, but they're
Speaker 4: struggling to sort of be precise because they just don't
Speaker 4: know how quickly the administration will blink on tariffs and
Speaker 4: there for how how big a shock it is to
Speaker 4: the system. But you're right, Tom, we we're Europe's value trade,
Speaker 4: not a growth trade.
Speaker 5: So but you we have seen I guess as recently
Speaker 5: as kind of late last year, very early this year,
Speaker 5: international money, none US money, was coming into the US
Speaker 5: markets in waves. I was really noticeable people were seeing
Speaker 5: in fund flows. Now that seems to have reversed a
Speaker 5: little bit and we're now seeing funds go back into
Speaker 5: your back into other parts of the world. Is that
Speaker 5: a short term trade or is that something morris able?
Speaker 5: Do you think that those funds back out?
Speaker 4: My sense from the international asset owners is that they
Speaker 4: want to continue to repatriate, and I think that's partly
Speaker 4: a concerned tactical concern about the market situation, but it's
Speaker 4: also about weaker dollar. But also there's institutional pressure to
Speaker 4: deploy at home. So if you're the Maple LX, sorry,
Speaker 4: the largest date Canadian funds, they're looking to try and
Speaker 4: help the home by the home building spree that my
Speaker 4: old boss, Prime Minster Karney is going to be doing,
Speaker 4: alongside many other interatives in Europe. Some of the big
Speaker 4: pension funds are looking to help fund the defense spending
Speaker 4: spree about to happen, So all of them are thinking
Speaker 4: strategically they need to have more money back at home.
Speaker 4: Now that's at the margin, but it's definitely more money
Speaker 4: coming back.
Speaker 2: Well, let's rip up the script and an extended conversation
Speaker 2: with Hugh von Steins of Oliver Wine. You know Dan Tannemba,
Speaker 2: I'm so brilliant and sanctions. They've really put together a
Speaker 2: huge team at Oliver Wyman and we're thrilled he could
Speaker 2: join us in our studios today in New York. So
Speaker 2: then let's rip up the strip on this and go
Speaker 2: sixty thousand feet Mark Kearney. Uh, you know there are
Speaker 2: other worthies that are driving our mister Powell, the others
Speaker 2: that are driving our financial system. The heart of the
Speaker 2: matter is the renominal GDP. Finally, back almost to Conrad
Speaker 2: add in our and Viilli Brandt, we got to have
Speaker 2: a Germany with pop Do you buy it?
Speaker 4: I So I think this is the spending of probably
Speaker 4: up to a trillion euros about rearmament, defense and just
Speaker 4: quite frankly, resilience is a real game change.
Speaker 6: I think they're going to execute.
Speaker 4: But I think there will be slower to execute them.
Speaker 4: And the one era we've chattered back for is it's
Speaker 4: not just about government spending. You need private sector spending.
Speaker 4: And the kind of breadth and depth of capital markets
Speaker 4: in Europe are still not the deep depth you want.
Speaker 4: And we need the plumbers. We need the plumbers to
Speaker 4: try and get the system to work much more effectively.
Speaker 4: The let's say, let's say, oh no, if you look
Speaker 4: at the States, there is four trillion of US insurance
Speaker 4: money is in the market to fund the system. European
Speaker 4: insurers have got straight jacketed about how they can put
Speaker 4: money into equities, into venture capital.
Speaker 3: Private equity is the heart of the.
Speaker 2: Matter, folks with he framed far smarter than me, or
Speaker 2: the absolute heart of the matter. Can Europe can the
Speaker 2: old world? Can Rubinian Taileeb's Old world equitize? That's the
Speaker 2: heart of the matter.
Speaker 3: I think it's right.
Speaker 4: Well, it's equitized and providing risk capital because it's really
Speaker 4: about its venture capital.
Speaker 3: It's growing small businesses.
Speaker 4: It's how do you do all these you know, defense
Speaker 4: tech startups. We need a range of risk capital, I mean,
Speaker 4: and the way we the markets it's improving, but we
Speaker 4: need to turbo charge it from here.
Speaker 2: I had a conversation with leguard Is, Trade Minister of
Speaker 2: France ready twenty one years ago, and we were talking
Speaker 2: the same thing we're talking to human.
Speaker 6: Steve's exactly right now.
Speaker 5: So Hugh, in terms of Europe kind of reinvesting in
Speaker 5: their infrastructure, maybe in their military, there's I guess what
Speaker 5: I've heard is Okay, Germany can do it. Poland probably
Speaker 5: could do it just because they had been doing it
Speaker 5: for a while because given their geographic location relative the Russia.
Speaker 5: But can Spain do it? Can Italy do it? Can
Speaker 5: Portugal do it? I mean did they have the wherewithal
Speaker 5: to do that?
Speaker 4: So there's a fiscal question, and then it's kind of
Speaker 4: like do they have the right ecosystem, the skills, the expertise.
Speaker 4: And you can see that actually, because Europe hasn't been
Speaker 4: investing in defense, there's been a real aerospace is good
Speaker 4: because there's a whole cluster around in the south of France.
Speaker 4: Actually you should go and visit to what one time
Speaker 4: around you know where you know the aerospace industry is
Speaker 4: coming from. But elsewhere in terms of drones and some
Speaker 4: of the other areas it's going to come. Look, the
Speaker 4: fiscal challenges are huge, and that's the But in a way,
Speaker 4: what we've seen here is that the fiscal spending has
Speaker 4: been part of the US exceptionalism. The real booster to
Speaker 4: spending here has come also from the government perse right now, wrongly.
Speaker 4: I think we're getting to get some of that in
Speaker 4: cour Europe. Whether we're going to go enough to justify
Speaker 4: the evaluations, it is a bit tougher question un seen us.
Speaker 2: Thank you so much.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
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Speaker 2: Joining us now the fun for lunch Bunch crew Lisa
Speaker 2: Matteo and Daniel Lives of of Red Bush. Here and
Speaker 2: a bright pink for those of you on radio. You're
Speaker 2: lucky wearing bright pink today? Comment down, Dan, is this
Speaker 2: a corduroy? Look you're way it is?
Speaker 6: It's it's corduroy. Will I mean a little? It could
Speaker 6: be a little even Sweeney influenced. It's it's Lisa.
Speaker 5: You can't see me wearing that, can you?
Speaker 2: I could see him walking into a showroom at Tesla's showroom. Yes,
Speaker 2: and I'll take one of those.
Speaker 6: I'll take Paul.
Speaker 2: Why don't you leave it up with his worship Dan.
Speaker 5: We had Tesla report earnings last night. We had mister
Speaker 5: Elon Musk on the earnings call. The earnings were very disappointing.
Speaker 3: You have to stock is trading hired? Why is the
Speaker 3: stock trading hired?
Speaker 2: Here?
Speaker 7: I mean numbers were basically took a back seat. We
Speaker 7: already knew was a disaster recorder the reality. This was
Speaker 7: the moment of truth from Musk.
Speaker 6: To basically what I've used.
Speaker 7: It's an off ram to Trump Whitehouse and doage, and
Speaker 7: that's essentially what he did. And he took a major
Speaker 7: step back on doage, says one two days a week.
Speaker 7: I think there's the beginning of the end there and
Speaker 7: going to recommit.
Speaker 6: His CEO of Tessa.
Speaker 7: Look, the reality is, and we've talked about on the show,
Speaker 7: brand damage was at a point he had to read
Speaker 7: the room and if he didn't make this decision now,
Speaker 7: it would have been dark days ahead. And that's why
Speaker 7: the stock's going to be up because now Tessa got
Speaker 7: back at CEO.
Speaker 5: Now Tesla's in a new world of competition. It just
Speaker 5: looks to me as a you know, a lay person.
Speaker 5: Here China is taking over the evy market globally with
Speaker 5: the exception of the United States.
Speaker 3: How does Tessa.
Speaker 5: Deal with by D and others?
Speaker 7: Look, I don't at first, I don't view as you
Speaker 7: know that it's you know, you can't have success from
Speaker 7: Tesla as well as Boyd. I don't have view as
Speaker 7: zero some gunn. But look, Tessa has work cut out
Speaker 7: for them. I mean they they have to have a
Speaker 7: new vehicle that comes out. You have to have the
Speaker 7: refresh in terms of model why and the reality is
Speaker 7: China's forty five percent of out So that is the
Speaker 7: hearts and lungs of Tesla.
Speaker 6: But that's also why it's so important.
Speaker 7: There's only one person that could engineer this turnaround in China.
Speaker 5: It's Musk and I think Elon is probably the best
Speaker 5: I've ever seen of kind of maybe Jeff Bezos as well,
Speaker 5: kind of redirecting investor sentiment where he wants it to go.
Speaker 5: And I think he's saying, don't look at me as
Speaker 5: a metal bender car company, look at me as an
Speaker 5: AI company, robotics company.
Speaker 6: Is that valid?
Speaker 7: I mean, we believe the core value of the future
Speaker 7: of Tesla is autonomous and robotics. And obviously Keen will
Speaker 7: being there on supervised fist in Austin in June. I
Speaker 7: know he's getting ready. And look, I think this is
Speaker 7: just the beginning of what we're going to see in
Speaker 7: terms of autonomous. That to me is a core value.
Speaker 2: You're not gonna do autonomous on fifty eighth Street in
Speaker 2: New York City. I mean, it's just not gonna happen.
Speaker 7: Look, I truly believe over the next three, four or
Speaker 7: five years that autonomous is going to start to represent five, ten,
Speaker 7: fifteen percent on Really.
Speaker 2: Do I say, I don't agree, but he's wearing pink
Speaker 2: I don't agree. Okay, let's go to Intel. We got
Speaker 2: a major story out this morning. This has gone worldwide
Speaker 2: instantly on Bloomberg. This is Intel down sixty six percent
Speaker 2: from the peak, and it's just simple, brilliant reporting by
Speaker 2: Jane Lenny Lee and Ian King. They're Gonnaly have twenty
Speaker 2: percent of their staff the annual report of twenty nineteen.
Speaker 2: We are a world leader, our vision, our commitment to
Speaker 2: corporate responsibility and sustainability. What happened this thing was iconic
Speaker 2: Dunda da du.
Speaker 7: I mean, just think about it. Go back to where
Speaker 7: Nvidio was twenty nineteen, twenty twenty May. If you look
Speaker 7: from gals Singer, it's just the whole corporate structure there,
Speaker 7: the red tape. I mean Intel, it's really a business
Speaker 7: case study for what happens when you go as.
Speaker 2: A CFA business case study it is.
Speaker 7: It's what happened when you're on the treadmill.
Speaker 6: You think no one's going.
Speaker 7: To catch you, Okay, Apple, Apple makes their own chips
Speaker 7: because ultimately that they box out Intel.
Speaker 2: I am a Codec brattfo from Rochester. I lived this
Speaker 2: with Codec. The marketing guys take over, the slick guys
Speaker 2: take over, and the company goes down the tank until
Speaker 2: you're bringing culp from ge or Danaher to ballot out
Speaker 2: their gross strategy. Is they got to get back to
Speaker 2: basics in an engineer driven company. Is that a legitimate
Speaker 2: model or is that just blah blah blah.
Speaker 7: I think it's a model. But I think those days
Speaker 7: have past. I think, I mean, I know that they're
Speaker 7: doing this huge cut that was reported you know Bloomberg,
Speaker 7: but I think the reality is that this is going
Speaker 7: to have to be a breakup. They're going to have
Speaker 7: to restructure the company. You're gonna have to ultimately sunset
Speaker 7: different products, focus on some of the growth areas because
Speaker 7: the reality is for Intel it look, you know about
Speaker 7: dark days. I mean, if you look up disaster in
Speaker 7: the dictionary, you'd see Intel's.
Speaker 2: Okay, my book of the Summer. I think maybe it's
Speaker 2: book of the Year. I can't remember. It was chip war.
Speaker 2: Is Intel competing against Taiwan's cell conductor? Are they competing
Speaker 2: against some amorphous Chinese blob? We don't know who beat them?
Speaker 2: Who defeated Intel?
Speaker 7: I mean AMD in video in video TSMC. I mean
Speaker 7: when you think about Intel had the opportunity and just
Speaker 7: go back to AI, the opportunity to go after AI,
Speaker 7: go back to next generationships. And what they essentially did
Speaker 7: was look, it's in different like they're like a typewriter
Speaker 7: company mid nineties being like this internet window. This is
Speaker 7: ridiculous that people and what happens to years later that
Speaker 7: comings bankrupt.
Speaker 2: So I got yelled at it for that, look and
Speaker 2: dog piles for real.
Speaker 7: But but that but that's really that's the sad thing
Speaker 7: that's happened Intel. And look, yeah, obviously have a new CEO.
Speaker 7: But this is a very you know, it's really the
Speaker 7: collapse of a of a U S iicon.
Speaker 2: Ask a question, Mike Robinson. Cones are hurting, My eyes
Speaker 2: are hurting folks.
Speaker 5: Hey, just a red headline crossing the tape there, Tom,
Speaker 5: I want to get that out. Boeing first quarter negative
Speaker 5: just a free cash flow two point two nine billion
Speaker 5: and the estimate was three point four billion. So better
Speaker 5: on the free cash lit story for our friends at
Speaker 5: Boweing and stock us up about five percent here free
Speaker 5: market to.
Speaker 7: Iron and talking Boeing and I and but Boeing and
Speaker 7: Intel in the same.
Speaker 6: Sense exactly exactly.
Speaker 5: We got Apple, We've got Amazon, we got Microsoft out
Speaker 5: with erning nels a week.
Speaker 3: What are you looking for? Is it driven by tariffs?
Speaker 6: Is an AI?
Speaker 5: What's the the what's driving tech these days?
Speaker 7: Look, the reality is that I expect basically new guide
Speaker 7: into some crazy.
Speaker 6: Cowy odd guy.
Speaker 7: But when you look at a Apple, it comes down
Speaker 7: like if these tariffs get them de escalation, the story
Speaker 7: massively changes, as we've talked about, because then iPhone seventeen
Speaker 7: comes out the AI store. You think about from a
Speaker 7: hyperscale perspective in terms of capacs. Everyone's waiting, but this
Speaker 7: book today, it's a pivotal moment, whether the walls are
Speaker 7: caving in or whatever. And for attack a huge bullshit.
Speaker 2: I got forty two seconds. You've been on the floor
Speaker 2: in China where they make apple stuff. Can Americans do that?
Speaker 2: We got funny videos, snarky videos out on Twitter of
Speaker 2: people Americans sitting there making iPhones and people are laughing.
Speaker 2: This is not funny. You're an expert at this. Can
Speaker 2: you transfer that manufacturing discipline to Illinois?
Speaker 7: I've said from the beginning it's impossible, because of the
Speaker 7: nature of the IP in the supply chain, the nature
Speaker 7: of the web force there when you're in Taiwan, when
Speaker 7: you're China. And that's why I've said from the beginning.
Speaker 7: We've told me on the show last three weeks, fairy
Speaker 7: tale that that's going to happen again.
Speaker 6: If you want a.
Speaker 7: Thirty five hundred dollar iPhone, let's build them in the
Speaker 7: Jersey of Manhattan. But the reality is, we see no
Speaker 7: way that that happens. I'm not saying onshoin King happen,
Speaker 7: but that is a fairy tale. And that's why the
Speaker 7: market has just reacted.
Speaker 6: The way it has.
Speaker 2: Yeah, after thought, just woke up and she emailed and
Speaker 2: she said, can you ask mister Ives if you can
Speaker 2: get us Taylor. She thinks I'd look good.
Speaker 7: In a I've told you pinks your color. But and
Speaker 7: I'm glad there.
Speaker 2: Is a New York Taylor.
Speaker 7: This is actually Taiwan. But the point is like what,
Speaker 7: but I'm glad. Keenes finally on the train did a
Speaker 7: clear customs.
Speaker 2: Thank you so much, particularly the comments there on Intel.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: We're pointing direct now with one of our favorite people,
Speaker 2: Christopher Criscenti is with the MAI Capital Management. Someone that's
Speaker 2: looking I would say, all in all for the growthiness
Speaker 2: in value and his world has turned upside down. What's
Speaker 2: the value of cash now? You say in your research
Speaker 2: note you were trained on this to go from equities. Oh,
Speaker 2: I think I'll buy bonds, but it's priced down, yield up,
Speaker 2: so where do you.
Speaker 8: Hide, tom That's a great question for this particular market,
Speaker 8: that there really has been no place to hide. We
Speaker 8: were glad to have the cash that we had. The
Speaker 8: interesting thing about that this, though, is with the market
Speaker 8: down fifteen percent, we're actually not buying the dips. You know,
Speaker 8: we love value opportunities, and typically this would be one.
Speaker 8: We just can't do the math because we just can't
Speaker 8: build models because the future is so uncertain. If you're
Speaker 8: Mary Bara, are you going to build a fact, You're
Speaker 8: gonna wait. Are're gonna hire people?
Speaker 7: You're gonna wait.
Speaker 8: And so even if the tariffs went away tomorrow, I
Speaker 8: think there's been enough of this paralysis in the system
Speaker 8: that I'm relatively confident will be in a recession by
Speaker 8: the end of the year.
Speaker 5: So, I mean a lot of folks are suggesting kind
Speaker 5: of where you are that even if they pull back
Speaker 5: tariffs to some degree, which it appears to the rhetoric
Speaker 5: is moving that way at least today. I guess so
Speaker 5: at this hour that some fundamental damage has been done,
Speaker 5: whether it's supply chains, confidence in US economy, confidence on
Speaker 5: a part of the consumer executives.
Speaker 8: Well, you know, we've taken eighty years to build a
Speaker 8: system which were we screwed a little bit? Yeah, we were,
Speaker 8: but did we benefit from it? Look Paul, thirty five
Speaker 8: years ago, twelve of the top twenty five companies in
Speaker 8: the world were American. Now twenty two of them are.
Speaker 8: It's hard to argue that this terribly skewed against us.
Speaker 8: So when you monkey with that, it causes uncertainty. But
Speaker 8: uncertainty is a nice vague war. What you're gonna see
Speaker 8: you within the next two months is a pause in
Speaker 8: corporate earnings growth. And that's what's really going to hurt
Speaker 8: the market because it's time is you know, Ben Graham said,
Speaker 8: like in the short term, it's a voting booth, but
Speaker 8: in a long term, the market is a weighing machine,
Speaker 8: and what it weighs is corporate earnings, and corporate earnings
Speaker 8: are going to start to face that the estimates have
Speaker 8: already come down a bunch.
Speaker 3: And I think that's just the beginning.
Speaker 2: You come into this with a whole twisted resume of
Speaker 2: an actual legit, massive corporate law career, and one day
Speaker 2: you decided that you like the four accounting statements better
Speaker 2: and you need to see it and all that, But
Speaker 2: the heart of the matter is Cris CASANTI, should we
Speaker 2: change our retirement plans, our allocation, or even our hopes
Speaker 2: of a time worn.
Speaker 3: Not not at all time.
Speaker 6: Not at all times.
Speaker 8: And as any good financial advisor will tell you, you prepare
Speaker 8: for this moment years before. You have a diversified portfolio.
Speaker 8: And by the way, if I'm right and there is
Speaker 8: a recession, generally the market falls twenty five to thirty
Speaker 8: five percent in those case. It's very broad range, but
Speaker 8: just generally. And we're more than halfway there already. So now,
Speaker 8: pretty soon, if this gets worse, as I suspect it will,
Speaker 8: we'll start looking for the opportunities and then as things
Speaker 8: get more certain, we'll be able to do the math.
Speaker 8: I think the math will be worse than we thought
Speaker 8: it was going to be, but then we'll be able
Speaker 8: to step in. So you know, the cycle completes itself again.
Speaker 2: You know, Chris, I look at this in value in growthiness?
Speaker 2: Is the mag seven growthness broken?
Speaker 8: I don't think so, Tom, I mean, the mag seven
Speaker 8: isn't monolithic. I would I thought the Tesla numbers were
Speaker 8: terrible yesterday, so that may be broken. We'll see.
Speaker 6: They need to do some new models.
Speaker 8: But the Amazon model's not broken, the Apple models not broken.
Speaker 8: They clearly have head winds, but the storm will pass
Speaker 8: one way or another. These are very dynamic companies that
Speaker 8: can adapt to this stuff. It's just you know, we
Speaker 8: got to redo the math, and the math isn't going
Speaker 8: to look as good as we thought it would two
Speaker 8: months ago.
Speaker 5: So, I mean, it's it seems like this market wants
Speaker 5: to move higher. I mean, lack of tweets or anything
Speaker 5: positive on the Twitter verse seems to move this market
Speaker 5: materially higher.
Speaker 8: And Paul, that's not a surprise. I mean, it was
Speaker 8: so over sold, and I would expect over the next
Speaker 8: couple of weeks we may get a trade dealer two
Speaker 8: and then that will be a catalyst for movement higher.
Speaker 8: But I again, in the long term, it's a weighing machine.
Speaker 8: What's going to happen to earning That's what we can't
Speaker 8: take our eye off the ball.
Speaker 5: Yeah, we still have eight or nine percent earnings growth
Speaker 5: this year, maybe eleven or twelve percent earnings growth next year.
Speaker 5: You think there's downside to those numbers?
Speaker 8: Oh yeah, because a month ago you would have said
Speaker 8: we've got thirteen percent earnings growth. Because you're now it's
Speaker 8: down to eight, and I will just about guarantee you
Speaker 8: if we have this conversation in June, it'll be considerably
Speaker 8: lower than that.
Speaker 2: We'll see. How will corporations a depth you.
Speaker 6: Know, Tom the way they usually do.
Speaker 8: They'll lay people off, they'll postpone capital expenditures.
Speaker 6: Bring good forward.
Speaker 2: An along's got us with a five percent unemployment rate
Speaker 2: out there somewhere. I haven't hit anybody model six percent yet,
Speaker 2: but you get claims what Paul three hundred thousand, Yeah,
Speaker 2: to eighty thousand whatever. You get the unemployment rate to go,
Speaker 2: the Fed does what the what mister Trump wants them
Speaker 2: to do. They begin a rate cutting cycle. The system
Speaker 2: heals or is it just broken?
Speaker 8: Well's how the problem is that tariff news has kind
Speaker 8: of pulled forward. Well, first we have some strong sales
Speaker 8: up front, but we haven't gotten to the earnings downturn yet,
Speaker 8: so we can't fast forward this recession. It's going to happen.
Speaker 8: The market will drop what it's going to drop. I mean,
Speaker 8: it's going to happen more probably than not. So yeah,
Speaker 8: there's ways to come out of it. But I suspect
Speaker 8: equity prices will be lower, when when those ways you
Speaker 8: have to be employed.
Speaker 2: Chris CONSENTI thank you for them, coup.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 2: NCK morroy Is is truly we got a huge response
Speaker 2: when he's on. He's with a Lobo Institute.
Speaker 6: He has public.
Speaker 2: Service to the nation, an extended career with the United
Speaker 2: States Marines. You know, he's a former coach at USA Boxing.
Speaker 6: Really he does it all.
Speaker 2: Joining us now from Montana. Mcnallwy mcka. I want to
Speaker 2: pause for a moment here. You're in Montana, and you know,
Speaker 2: the East Coast view of the military maybe goes distant
Speaker 2: to Virginia Beach to talk about the Navy. Maybe they
Speaker 2: get up to Army Navy at Philadelphia. The hallmark of
Speaker 2: my ute was a Strategic Air Command at the three
Speaker 2: hundred thirty Forest Wing in the middle of nowhere in Montana.
Speaker 2: That's the backbone, not a bunch of offices at the
Speaker 2: Pentagon and your Defense department now is under not complete collapse,
Speaker 2: but huge controversy with the Secretary of Defense.
Speaker 6: How does that affect the Air.
Speaker 2: Force in Montana or the Navy in San Diego with.
Speaker 9: You guys, I mean, ultimately, the military is going to
Speaker 9: carry on regardless of the issues with this civilian leadership
Speaker 9: and the Pentagon. That said, it really does reflect on
Speaker 9: who is in charge when you have this level of
Speaker 9: resignations and terminations. I haven't seen it. I don't think
Speaker 9: anybody has seen it in this state, and that does
Speaker 9: I think have when it comes to the line, you know, soldier,
Speaker 9: sail or airman, marine, confidence in the leadership to see
Speaker 9: that is not a good thing. But I do think
Speaker 9: we are still in good hands. The chain of command
Speaker 9: is strong, That's why they have it that way in
Speaker 9: the military, and we can certainly amend all the important
Speaker 9: positions that.
Speaker 2: We have mcmulroy. Then if it hasn't filtered down to
Speaker 2: the troops, are we ready to defend the nation? Now?
Speaker 2: I mean, is this a properly budgeted defense department, a
Speaker 2: budgeted Pentagon?
Speaker 9: So I do think it is. There us talk about
Speaker 9: increasing the actual overall expense of the Defense Department, probably
Speaker 9: to try to make these giant leaps and technology that
Speaker 9: we really need to to stay far above what we
Speaker 9: call it the offset of our adversaries, and I think
Speaker 9: the military is adjusting to that. So I don't want
Speaker 9: to give people the false, in my opinion, the false
Speaker 9: impression that somehow the military itself is in disarray. I
Speaker 9: do think it's important to have a solid chain of
Speaker 9: command it and the Secretary of Defense, of course, is
Speaker 9: in that chain of command. So there needs to be
Speaker 9: a lot of changes at the top, certainly the way
Speaker 9: we handle classified information. But I think it's important for
Speaker 9: Americans to understand that the military is fully capable of
Speaker 9: defending the United States here and abroad, even with this
Speaker 9: level of what's being described as chaos.
Speaker 5: So Mick, I mean, I guess the latest news for
Speaker 5: Defense Secretary of Pete Hegseth has been the disclosure that
Speaker 5: he has I guess, shared sensitive details about impending US
Speaker 5: attacks on houthy militants on an unsecured commercial chat platform.
Speaker 7: Is that a big deal?
Speaker 5: Is this warranted this concern?
Speaker 9: It is a big deal. The reason why it's called
Speaker 9: unauthorized is because you're not allowed legally to share classified information,
Speaker 9: and if the reports are correct, these are specific attack plans, time, place,
Speaker 9: and manner of how. In this case, the US Navy
Speaker 9: was going to carry out aerial strikes against the Houthies.
Speaker 9: So this is very sensitive information. I think anybody can
Speaker 9: understand that if this were somehow to get to our
Speaker 9: adversaries like Russia, they could give it to Iran, they
Speaker 9: could give it to the Houthis, and then they would
Speaker 9: know essentially how to defend themselves against incoming attacks. So
Speaker 9: it's super sensitive. In addition to that, using the wrong platform,
Speaker 9: at least reportedly, people that were in this dat did
Speaker 9: not have all of the necessary security requirements and a
Speaker 9: need to know. Essentially that you could just look at
Speaker 9: who's listed. They had no reason to know this, So
Speaker 9: this would be something that if you were a private,
Speaker 9: seaman and airman, you would likely be removed immediately, an
Speaker 9: investigation investigated under the Uniform Code of Military Justice.
Speaker 2: Mister mulroy's with a Lobo Institute and we thank him
Speaker 2: for being with us.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2: We're going to walk forward, stagger forward to the newspapers
Speaker 2: would do this with Lisa, Alisa, what do you have?
Speaker 10: Okay, so we all know professional baseball players, right, it's
Speaker 10: all about the swagger, the style. But the Wall Street
Speaker 10: Journal says it's actually trickling down to Little league. So parents,
Speaker 10: moms and dads are spending bidden bucks talking about sliding mits.
Speaker 10: You know the professional pros wear. Yeah, I don't know
Speaker 10: about the sliding mets, but they start around fifty bucks.
Speaker 10: But now parents are buying them for the cake.
Speaker 2: Mom.
Speaker 3: Yes, you know this stuff.
Speaker 10: We don't do the sliding mits. We do like the
Speaker 10: elbow guards. We'll do those like that kind of thing.
Speaker 10: But what they're also doing is these crazy colored batting
Speaker 10: gloves hello Bruce Bolt, arm sleeves that we do, the
Speaker 10: crazy colors, expensive sunglasses, hello Oakley. Yes, fancy helmets too,
Speaker 10: on showers.
Speaker 2: We come like ice hockey where you have to sell
Speaker 2: the third child, Dude, you do, and.
Speaker 10: It's it's all for these fancy things.
Speaker 5: You can go with regular Well, well they have to
Speaker 5: upset watch SEC softball sometimes because I love the pictures.
Speaker 3: I can't believe how Yes, but they all were.
Speaker 5: Amazing makeup and the hair, and it's about the hair,
Speaker 5: the hair, and it's unbelievable.
Speaker 10: I mean, but that's what it's about.
Speaker 2: The look.
Speaker 5: Yeah, okay, two, So that's what it is.
Speaker 10: Custom fielding gloves. I mean, I know my daughter has
Speaker 10: a pink and white one with the putter. You can
Speaker 10: flag on it like it's itit's crazy, but you do.
Speaker 2: I think she's taken over the Is there something else
Speaker 2: you'd like to mention about the third summer camp you're
Speaker 2: going to?
Speaker 10: You can't flight plates and.
Speaker 6: Thank you?
Speaker 7: Okay, but that's what it is.
Speaker 10: They're actually they're blaming the pros because they're saying the
Speaker 10: MLB switch their will so now they're allowed to wear
Speaker 10: the colorful things.
Speaker 2: It's a jackocracy. It's the mother's fault.
Speaker 7: It's the mom's fault.
Speaker 2: It's the mom's fault. Next.
Speaker 10: Okay, Oh, here you go, Tom, this one's for you.
Speaker 10: Some Gen z ers and millennials are still opting to
Speaker 10: live with mom and dad, so a lot of more
Speaker 10: the kids are are living with the parents for longer,
Speaker 10: so gen Z, you know, thirteen to twenty eight, so
Speaker 10: twenty eight, and then you have millennials twenty eight to
Speaker 10: forty three. So just to give you an idea of
Speaker 10: who we're talking about, they're starting to live with mom
Speaker 10: and dad longer. It's a Pew research, you know, center analysis,
Speaker 10: and they say the biggest place places where this is
Speaker 10: happening Texas, Florida, California, where jobs are kind of hard
Speaker 10: wages or maybe not enough in some areas, and there's
Speaker 10: a gender gap too. So it turns out that the
Speaker 10: boat well men are living with mom and dad longer
Speaker 10: twenty percent a paired to compare with fifteen percent for
Speaker 10: the females who go off on their own.
Speaker 2: Epidemic in Europe, it's completely preponderant in Europe. Yeah, like
Speaker 2: I would say it's a majority. I don't get it.
Speaker 2: I have varies. I got to be careful what they
Speaker 2: say here on radio.
Speaker 10: But you know, I just it's there, right, it is
Speaker 10: it is, And they say it is getting better, like
Speaker 10: it's dropped in recent years, but it's still above like
Speaker 10: the historic clothes.
Speaker 2: That way, we go to Paul Sweeney, who is the
Speaker 2: only person I know in the surveillance universe whose children
Speaker 2: are all employed.
Speaker 6: Yeah, what's the bixis want? I went from six bedrooms
Speaker 6: to two.
Speaker 10: Making sure they're not coming exactly right.
Speaker 6: The governor of New Jersey, you know, so you can
Speaker 6: exactly right.
Speaker 10: So one more quickly quickly, Yes, if you've been to
Speaker 10: the airport lately, the latest thing now are rooftop decks.
Speaker 10: This is happening at a lot. Yeah, they're doing these
Speaker 10: outdoor spaces. So a lot of airports are stepping up
Speaker 10: their game.
Speaker 6: Loa Guardia's Terminal B.
Speaker 10: They're gonna have that new Capital one landing lounge is
Speaker 10: gonna have the outdoor terrace. But we're talking about not
Speaker 10: even the lounges, but regular airport like four green terraces
Speaker 10: at Pittsburgh International Airport are coming.
Speaker 5: Well to get one at the outdoors California and my
Speaker 5: kids when they're little, we can get like lunch and
Speaker 5: watch the planes. But that's Parmeult, California.
Speaker 3: It's not LaGuardia.
Speaker 2: Correct.
Speaker 10: They do have the heaters and everything kind of set
Speaker 10: up for that, but it's just like the new thing,
Speaker 10: like they're upping their game.
Speaker 2: Lisa, thank you so much, Lisa Matteo. There are the newspapers.
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