WEBVTT - Markets, Earnings and a Ceasefire 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:12.560 --> 0:00:13.240 This is the. 0:00:13.200 --> 0:00:17.440 Bloomberg Surveillance Podcast. Catch us live weekdays at seven am 0:00:17.480 --> 0:00:21.240 Eastern on Apple CarPlay or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business app. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.040 or watch us live on YouTube. 0:00:27.120 --> 0:00:30.600 This is a joy in exceptionally well timed. Waylee is 0:00:30.640 --> 0:00:34.000 prodigious in mathematics out of her China and of course 0:00:34.360 --> 0:00:36.760 out of University of Cambridge as well. She was a 0:00:36.800 --> 0:00:39.800 former trader in equity derives at City Group. You've seen 0:00:39.840 --> 0:00:42.760 her on the show Industry, joining us now from Blackrock 0:00:42.840 --> 0:00:47.120 chief investment strategist way Lee. Waylee, what a tour de 0:00:47.280 --> 0:00:54.480 force out on LinkedIn. On the cash path of the 0:00:54.560 --> 0:00:58.440 risk premium, I can't say enough, folks, how the partition 0:00:58.640 --> 0:01:03.320 between the short term cash path and the longer duration 0:01:03.600 --> 0:01:08.200 focus of the media, the fed parlor game is app Wayley. 0:01:08.360 --> 0:01:12.039 Why should we focus on cash and the cash path? 0:01:13.640 --> 0:01:15.840 Absolutely? Good morning, thanks for having me. 0:01:16.120 --> 0:01:19.959 So as we think about the increase of ten year yields, 0:01:20.280 --> 0:01:23.319 it can be broken down into the increase of cash 0:01:23.360 --> 0:01:27.400 paths and the increase of time premier ten premier increase 0:01:27.600 --> 0:01:28.240 doesn't have. 0:01:28.240 --> 0:01:30.080 To be negative for equities. 0:01:30.120 --> 0:01:33.759 But the miss understood fact is that markets look at 0:01:34.120 --> 0:01:40.039 tens increasing and automatically expecting ten expecting aqulities to come 0:01:40.120 --> 0:01:43.679 under pressure. So what I really care about in terms 0:01:43.680 --> 0:01:48.200 of translating rate moves into its impact on equity is 0:01:48.320 --> 0:01:51.000 how much of that increase in ten year yields is 0:01:51.080 --> 0:01:55.000 driven by cash paths, and so far not a huge amount, 0:01:55.080 --> 0:01:56.480 some of them, but not a huge amount. 0:01:57.520 --> 0:01:58.240 More than eighty. 0:01:58.080 --> 0:02:01.400 Percent of the increase since the September lows in ten 0:02:01.480 --> 0:02:04.640 year yields has been driven by time premier, which means 0:02:04.640 --> 0:02:08.600 that equities can still hold up, especially in the face 0:02:08.680 --> 0:02:09.840 of strong growth. 0:02:10.280 --> 0:02:13.400 What do we see way lee in terms of flows 0:02:13.840 --> 0:02:18.040 into money market funds? We go six trillion, seven trillion. 0:02:18.320 --> 0:02:22.000 Do I need to prepare for ten trillion dollars of 0:02:22.080 --> 0:02:26.320 money market funds to buttress the cash and the cash path? 0:02:27.680 --> 0:02:32.200 Well, right now, there is value to seek income in 0:02:32.240 --> 0:02:34.920 the front end of the curve. You get income, you 0:02:34.960 --> 0:02:37.600 don't take a huge amount of duration risk. I can 0:02:37.720 --> 0:02:42.320 absolutely see why flows are going into money market funds now. 0:02:42.440 --> 0:02:45.160 Having said that, so far this year we got a 0:02:45.360 --> 0:02:50.920 flavor of how long end repricing can quickly deepen the 0:02:51.000 --> 0:02:56.720 curve and potentially make duration attractives down the line. We 0:02:56.840 --> 0:02:59.959 expect youths to push higher still, but at some point 0:03:00.000 --> 0:03:02.840 and it will get to a level that even we 0:03:03.440 --> 0:03:06.960 would find it attractive. You know, we think terminal rates 0:03:07.040 --> 0:03:10.920 set a round about four percent to premiere fair value 0:03:11.200 --> 0:03:13.960 round about one hundred basis point you added two together, 0:03:14.240 --> 0:03:17.640 five percent ten year yearths could look attractive. We're not 0:03:17.680 --> 0:03:20.600 there yet, but which is why we're currently under way 0:03:20.600 --> 0:03:21.560 to US treasuries. 0:03:21.840 --> 0:03:22.040 Wait. 0:03:22.080 --> 0:03:24.000 Thanks so much for joining us this morning. I am 0:03:24.040 --> 0:03:25.959 such a huge fan, and we're both believers in the 0:03:26.000 --> 0:03:28.880 higher for longer narrative. With everyone so focused on rising 0:03:28.919 --> 0:03:31.200 real yields and stable break evens in fives and tens, 0:03:31.440 --> 0:03:32.799 I have to say I think they lost a little 0:03:32.800 --> 0:03:34.840 bit of track of the inflationary pressures emanating from the 0:03:34.840 --> 0:03:36.560 front end. And I'd like to hear your thoughts about 0:03:36.880 --> 0:03:40.280 this week's sharp turn lower in realields in real yields, 0:03:40.320 --> 0:03:42.800 not just in the front end, but along the whole curve. 0:03:42.880 --> 0:03:44.480 Is it durable and where do you see US growth 0:03:44.480 --> 0:03:45.680 expectations settling here? 0:03:46.720 --> 0:03:50.520 We expect US growth to be in the mit kind 0:03:50.520 --> 0:03:55.440 of one point five percent real growth for twenty twenty five, 0:03:55.480 --> 0:03:59.920 which is slightly lower than consensus, but resilient, certainly, certainly strong, 0:04:00.120 --> 0:04:04.040 with potential to the upside depending on the fiscal side 0:04:04.080 --> 0:04:07.040 of things. Not having said that, yes, we have seen 0:04:07.240 --> 0:04:10.400 wild swings in inflation expectations so. 0:04:10.400 --> 0:04:11.280 Far this year. 0:04:11.320 --> 0:04:14.360 You talked about the inflation prend this a week and 0:04:14.400 --> 0:04:18.360 its impact on break even pricing. But let's extend slightly 0:04:18.400 --> 0:04:20.440 further back to last Friday. 0:04:20.560 --> 0:04:22.760 We had NFP headline. 0:04:22.839 --> 0:04:27.600 Job creation was slightly stronger than expected, wage was well behaving, 0:04:27.760 --> 0:04:32.799 and yet markets were immediately reading into greater job creation, 0:04:33.080 --> 0:04:34.320 higher inflationary pressure. 0:04:34.480 --> 0:04:35.799 So even I, even though. 0:04:35.600 --> 0:04:38.400 I had the view of five for longer, for a while, 0:04:38.480 --> 0:04:41.520 I didn't think that that represented additional inflationary pressure. And 0:04:41.600 --> 0:04:44.719 yet markets are very very quick to swing wildly in 0:04:44.839 --> 0:04:47.280 between narratives. And I think this is going to be 0:04:47.320 --> 0:04:51.040 a hallmark of twenty twenty five. Because we don't have 0:04:51.160 --> 0:04:55.279 a firm anchor, and markets are trying to fit structural forces, 0:04:55.320 --> 0:04:59.159 structural patterns into a cyclical lens, we're going to have 0:04:59.200 --> 0:05:01.599 a lot of the macro volatility way. 0:05:01.640 --> 0:05:03.919 I know you're an advocate of staying underweight duration in 0:05:03.960 --> 0:05:06.599 the current environment, and I loved, loved your chart on 0:05:06.640 --> 0:05:09.240 LinkedIn where you compare index US versus duration. But let's 0:05:09.279 --> 0:05:10.960 be I wonder if you could spand on that a bit, 0:05:10.960 --> 0:05:14.120 because look, staying underweight duration in US treasuries, well that's cute, 0:05:14.160 --> 0:05:17.160 not John Tucker cute, but cute. Nevertheless, building short duration 0:05:17.200 --> 0:05:20.400 exposure and high beta asset classes like credit or mortgages 0:05:20.800 --> 0:05:22.800 that could prove interestings as well. No, so I'm just 0:05:22.880 --> 0:05:24.840 asking from your clients what are you seeing. I mean, 0:05:24.839 --> 0:05:27.479 where's the best risk reward for hawks like me who 0:05:27.560 --> 0:05:29.240 prefer to remain duration. 0:05:29.080 --> 0:05:34.479 Light front end of the curve right now with favor. 0:05:34.560 --> 0:05:39.400 And we also like investment grades, but short duration investment grade. 0:05:39.480 --> 0:05:42.000 The spread of hyyot is a little bit more interesting 0:05:42.080 --> 0:05:45.320 than an IG, so we can turn out a little 0:05:45.320 --> 0:05:48.680 bit in hygyot space, and value can be found in 0:05:48.720 --> 0:05:52.640 European credits since their US counterpart. So this is where 0:05:52.640 --> 0:05:55.719 we like for kind of the income within the fixed 0:05:55.720 --> 0:06:00.680 income space. But we are two out of three overweight 0:06:00.760 --> 0:06:03.719 in US equities on a scale of minus three two 0:06:03.920 --> 0:06:07.800 plus three, so that's quite overweight in US equities despite 0:06:07.880 --> 0:06:10.240 the volatility that we have seen so far this year. 0:06:10.400 --> 0:06:13.080 You look at the drivers of Ernie's Magnificent seven. The 0:06:13.680 --> 0:06:17.960 negative in terms of debt. They are negative in terms 0:06:17.960 --> 0:06:20.240 of net debt, so they're quite resilient in a face 0:06:20.279 --> 0:06:23.799 of rate volatility. So we continue to see us corporate 0:06:23.839 --> 0:06:25.480 strength carrying us through. 0:06:26.800 --> 0:06:30.159 We continue with Wayley of Blackrock, Ian Bremer to be 0:06:30.200 --> 0:06:33.559 with us in the nine o'clock Our Katie Kaminski, Jim Carren, 0:06:33.680 --> 0:06:37.280 Carl Weinberg in the eight o'clock are an extraordinary surveillance. 0:06:37.320 --> 0:06:41.160 This morning. Good morning on your commute across the nation, particular, 0:06:41.240 --> 0:06:44.640 good morning to ninety nine one FM preparing for an 0:06:44.640 --> 0:06:48.320 inauguration Monday. I'll give you details on our commitment to that. 0:06:48.480 --> 0:06:52.839 You'll see that Monday from Joe Matthew and Kaylee Lines. 0:06:52.880 --> 0:06:55.440 Good morning on YouTube. It is the best way to 0:06:55.480 --> 0:06:59.240 get us, particularly across the nation and internationally. After your 0:06:59.279 --> 0:07:03.640 commute in the Blackrock office, consider you too. We continue 0:07:04.000 --> 0:07:06.480 with way Lee. Wait. One of your great themes, which 0:07:06.520 --> 0:07:09.200 frankly I endorse, is that we're not going to do 0:07:09.240 --> 0:07:12.320 a simplistic revert to the mean attitude. There's a feeling, 0:07:12.840 --> 0:07:15.520 you know, to give John Williams just do that. We 0:07:15.560 --> 0:07:18.280 go back to two percent, We go back to trend. 0:07:18.600 --> 0:07:23.000 Everything is pre pandemic. Nice you forcefully push against that 0:07:23.560 --> 0:07:28.800 and look for a reset higher. How to equities reset 0:07:29.120 --> 0:07:32.880 off the fixed income new reversion to the mean. 0:07:35.480 --> 0:07:39.280 Well, one way to look at it is in these 0:07:39.400 --> 0:07:42.600 rates are resetting back to the high for longer than 0:07:42.640 --> 0:07:49.080 equities need to reflect that that reality, that new rate reality. 0:07:49.600 --> 0:07:53.400 One measure, so to your point, Tom around me revert 0:07:53.520 --> 0:07:57.520 one measure that I get quoted back to me. Constantine 0:07:57.640 --> 0:08:01.200 is shiner key that it is at the third highest 0:08:01.440 --> 0:08:05.400 level ever on history, just after global financial crisis, just 0:08:05.520 --> 0:08:09.960 after the end of nineteen twenties, Roaring twenties. Right now 0:08:10.000 --> 0:08:14.960 shirape is thirty seven times, and that is indeed quite stretched. 0:08:15.160 --> 0:08:20.080 But if we were to put a consensus podcasts for 0:08:20.160 --> 0:08:26.280 earnings as backward realized earnings for the next ten years, 0:08:26.400 --> 0:08:30.160 then shirape becomes seventeen times instead of thirty seven times. 0:08:30.200 --> 0:08:32.120 So all of that just to say, in the face 0:08:32.160 --> 0:08:40.040 of transformative forces driving economies forward, driving earnings forward, especially tech, 0:08:40.240 --> 0:08:44.120 and as that broadens out to the rest of the economy. 0:08:43.760 --> 0:08:46.319 As well, the earnings wouldn't look as stretched. 0:08:46.400 --> 0:08:49.520 So I cannot agree with you more agreeing with me 0:08:49.760 --> 0:08:53.040 that me reverit is not the playbook. 0:08:53.160 --> 0:08:55.360 I think it's too simplistic. And folks, this goes back 0:08:55.400 --> 0:08:58.240 to a paper by John Campbell and Professor Schuller of 0:08:58.280 --> 0:09:01.840 Yale University. Everyone knows, Ziadore, this is back. You know, 0:09:01.840 --> 0:09:04.880 I'm pushing forty years now before Whaley was born. And 0:09:04.920 --> 0:09:07.840 the answer, Waylee is if you look at Campbell's Schiller, 0:09:08.640 --> 0:09:15.800 they don't really model in a technological shift, a productivity shift. 0:09:16.240 --> 0:09:20.560 Are we pricing in the present productivity and our present 0:09:20.640 --> 0:09:23.440 new technology? Is that our great misjudgment. 0:09:24.880 --> 0:09:28.360 I think there is starting to be priced in, But 0:09:28.600 --> 0:09:33.960 depending on the ultimate magnitude of productivity boost, there can 0:09:34.000 --> 0:09:37.800 still be further for the upside, especially because right now 0:09:37.880 --> 0:09:40.520 in terms of the economic data, yes we see sector 0:09:40.840 --> 0:09:44.439 specific productivity gain, but we have yet to see economy 0:09:44.520 --> 0:09:48.240 wide productivity gain being definitively driven by AI. 0:09:48.320 --> 0:09:49.880 So the upside it's still there. 0:09:50.040 --> 0:09:54.520 And currently Literature Review has a wide range of productivity 0:09:54.559 --> 0:09:57.480 boosts somewhere between zero point one percent per ANON to 0:09:57.600 --> 0:10:01.160 one point five percent per and so that's a wide range. 0:10:01.200 --> 0:10:04.640 There is certainly more room to surprise to the upset. 0:10:04.720 --> 0:10:07.880 In our assessment was still in phase one of the 0:10:08.040 --> 0:10:12.400 AI AI revolution, Phase one being a built out pace 0:10:12.520 --> 0:10:16.360 than we have. Phase two being the adoption phase where 0:10:16.400 --> 0:10:20.160 we're expecting use cases to really broaden out across sectors, 0:10:20.160 --> 0:10:22.960 and phase three being the productive the boost, which will 0:10:23.040 --> 0:10:24.240 take time. Way. 0:10:24.320 --> 0:10:27.120 We're three days away from Trump's inauguration and everyone knows 0:10:27.200 --> 0:10:29.160 that the US channel relationship is front and center. We 0:10:29.240 --> 0:10:31.160 saw some activity data overnight. We saw them hit their 0:10:31.200 --> 0:10:34.120 five percent bogie for full year twenty four. Talk to 0:10:34.240 --> 0:10:37.680 us about sixty percent tariffs on China? How does dollar 0:10:37.840 --> 0:10:41.160 quan react? And more importantly for me as the emerging 0:10:41.240 --> 0:10:44.320 market strategist here at Bloomberg Intelligence, what does it mean 0:10:44.360 --> 0:10:47.000 for the broader Asian dollar block? I mean, can we 0:10:47.120 --> 0:10:49.960 expect Asian currencies to appreciate over the next quarter? 0:10:50.040 --> 0:10:51.720 Let's say I. 0:10:51.720 --> 0:10:52.800 Think all else equal. 0:10:53.000 --> 0:10:57.160 Greater tariffs leads to weaker currencies, which is why the 0:10:57.440 --> 0:11:01.480 M has been under pressure so much so far this year. 0:11:01.679 --> 0:11:06.280 And more broadly, Taraff's concern is why, even though data 0:11:06.360 --> 0:11:12.400 from China is stabilizing and overnight data particularly was reasonably resilient, 0:11:12.600 --> 0:11:16.199 markets don't seem to care. Markets don't seem to care, 0:11:16.280 --> 0:11:19.080 and investors don't seem to care one little known fact. 0:11:19.160 --> 0:11:20.600 I was looking at it at the end. 0:11:20.559 --> 0:11:25.560 Of last year, just reviewing year yearly performance in dollar terms, 0:11:26.080 --> 0:11:30.679 Chinese aarqulities and Chinese government bonds all performed their US 0:11:30.880 --> 0:11:33.960 equivalent for the year of twenty twenty four, but investors 0:11:34.040 --> 0:11:37.439 don't care. Plummeting bond US in China shows that, you know, 0:11:37.559 --> 0:11:41.200 investors are really worried about decades of deflation doom loops. 0:11:41.280 --> 0:11:43.640 So I think this is really a sentiment and confidence 0:11:43.760 --> 0:11:44.720 game at this point. 0:11:45.240 --> 0:11:46.760 I mean, I mean, this is great. We could go 0:11:46.840 --> 0:11:49.120 for four hours. Are you're going to give her a 0:11:49.240 --> 0:11:50.640 code write on your morning note? 0:11:50.760 --> 0:11:53.600 Well me, I mean, look, I'm not going to write 0:11:53.600 --> 0:11:55.520 my note until this weekend. But way you're going to 0:11:55.520 --> 0:11:56.080 be front and center. 0:11:56.120 --> 0:11:56.599 I mean, I have to. 0:11:56.800 --> 0:11:58.160 I have to keep going here. I mean, for me, 0:11:58.760 --> 0:12:00.719 how do you not ignore the fact that you know, 0:12:00.840 --> 0:12:03.839 once the once the PBOC starts allowing the yuan to 0:12:03.920 --> 0:12:05.600 kind of float up to seven forty seven to fifty, 0:12:05.679 --> 0:12:07.400 that you're not going to see some spillover. We just 0:12:07.440 --> 0:12:10.360 saw the Bank of Indonesia cut rates in the FILD, 0:12:10.360 --> 0:12:11.840 and look what happened to its currency. We're at an 0:12:11.880 --> 0:12:13.880 all time low relative to the dollar. I mean, can 0:12:13.960 --> 0:12:16.280 we expect the Korean one, the Indonesian rupee at the 0:12:16.280 --> 0:12:18.960 Philippine pace? Are they all going to start testing lows 0:12:19.080 --> 0:12:20.760 versus the dollar? Is this going to be a regular 0:12:20.760 --> 0:12:22.959 occurrence for the next year plus. 0:12:24.840 --> 0:12:28.560 Well, what we have seen so far after the election 0:12:28.880 --> 0:12:30.800 is that dollar has been very, very strong. But I 0:12:30.880 --> 0:12:35.319 would say though for the entirety of the first Trump term, 0:12:35.400 --> 0:12:39.520 dollar actually hasn't been that strong. So it rallied into 0:12:39.720 --> 0:12:43.360 inauguration and starts to kind of go sideways, right, So 0:12:43.400 --> 0:12:48.480 I wouldn't necessarily extrapolate the dollar strength in definitely from 0:12:48.600 --> 0:12:48.959 here on. 0:12:49.280 --> 0:12:52.400 And also as we think about the goals of the. 0:12:53.679 --> 0:12:58.720 Trump administration around kind of stronger growth, lower inflation, lower deficits, 0:12:59.360 --> 0:13:03.079 and low immigration, there is a market friendly way of 0:13:03.160 --> 0:13:05.360 getting there and there is a market less friendly way 0:13:05.400 --> 0:13:08.040 of getting there. So depending on which way we are 0:13:08.200 --> 0:13:11.520 gravitating towards, it has significant read across to the dollar 0:13:11.600 --> 0:13:15.079 for sure, to US acquity sentiment to Treasury. 0:13:15.520 --> 0:13:19.320 Waley, thank you so much across the nation on YouTube worldwide, 0:13:19.440 --> 0:13:22.959 Wayley of Blackrock greatly appreciated. This morning. 0:13:28.760 --> 0:13:32.280 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:13:32.400 --> 0:13:35.520 weekday afternoons from seven to ten am Eastern Listen on 0:13:35.640 --> 0:13:39.040 Applecarplay and Android Otto with the Bloomberg Business. 0:13:38.760 --> 0:13:40.920 App, or watch us live on YouTube. 0:13:41.240 --> 0:13:46.160 There will not be at Davos. And if doctor Klaus 0:13:46.240 --> 0:13:48.880 Schwabs people came to me and said do a panel, 0:13:49.679 --> 0:13:51.880 this is the year where I would say, I want 0:13:51.920 --> 0:13:53.280 to do a panel, but I want it to be 0:13:53.480 --> 0:13:57.400 just one person, and it would be Ian Bremer. Every 0:13:57.520 --> 0:14:02.199 year he and his team, among others, put out a 0:14:02.320 --> 0:14:05.040 thing called the Top Risks, and it's not funny. It's 0:14:05.080 --> 0:14:08.720 a really serious look at where we are going into 0:14:08.760 --> 0:14:11.800 a giving year, and it's remarkably pressient. Some things he 0:14:11.840 --> 0:14:14.960 gets wrong, but huge amount of OMG, how'd. 0:14:14.760 --> 0:14:15.079 You do that? 0:14:15.240 --> 0:14:18.760 Like Miracle and Germany years ago. But he's really outdone 0:14:18.840 --> 0:14:22.840 himself this year. Hearkening back to his classic G zero 0:14:23.520 --> 0:14:27.560 of twenty twelve, Doctor Bremer joins us this morning, Ian, 0:14:27.640 --> 0:14:30.080 I'm just going to cut right to the chase. The 0:14:30.280 --> 0:14:34.080 summation of your Top Risk twenty twenty five is a 0:14:34.200 --> 0:14:39.040 reversion to the nineteen thirties. How close are we to 0:14:39.120 --> 0:14:43.080 the nineteen thirty five of Hermann Vauch's Wins of War? 0:14:44.680 --> 0:14:48.360 Well, we're close to the thirties, and we're close to 0:14:48.480 --> 0:14:54.480 the fifties. So in other words, the trajectory is not sustainable. 0:14:55.560 --> 0:14:59.440 And the question is whether the crisis that's coming is 0:15:00.480 --> 0:15:04.560 big enough to make us pay attention, but not so 0:15:04.760 --> 0:15:07.200 big that we all end up fighting each other, right, 0:15:07.360 --> 0:15:11.000 I mean, in the early Cold War, we had this 0:15:11.440 --> 0:15:15.520 unfettered decoupling and arms race between the Americans and the 0:15:15.600 --> 0:15:18.800 Soviets culminated in the Cuban missile crisis. We almost blew 0:15:18.840 --> 0:15:22.680 it ourselves up, and then we started recognizing we needed, 0:15:22.800 --> 0:15:26.880 like actually to have some institutions that would create more 0:15:26.920 --> 0:15:27.920 stability between the. 0:15:27.920 --> 0:15:30.160 Two countries, arms control, hotline and the rest. 0:15:31.280 --> 0:15:34.360 You see shades of that, and you also see shades 0:15:34.400 --> 0:15:39.040 of the thirties with a United States that's incredibly powerful 0:15:39.160 --> 0:15:45.000 but is unwinding its own global order, its own institutions. 0:15:45.160 --> 0:15:46.040 I mean, you look. 0:15:46.120 --> 0:15:50.840 Things like the United Nations and the WTO, and these 0:15:50.880 --> 0:15:55.080 are organizations the Americans put in place to coordinate global 0:15:55.200 --> 0:15:58.880 governance and that now Americans don't believe in. So it's 0:15:59.000 --> 0:16:02.000 it's not clear, but it's clearly as you say, Tom, 0:16:02.400 --> 0:16:03.960 this is a definitive moment. 0:16:04.120 --> 0:16:05.360 Ian what's so important here? 0:16:05.400 --> 0:16:05.960 And I live this. 0:16:06.320 --> 0:16:12.119 My grandfather was a textbook Chicago Tribune isolationist of Middle America. 0:16:12.560 --> 0:16:14.680 And you go back to Lindbergh and the rest of them. 0:16:14.920 --> 0:16:18.760 What is the character of President Trump's isolationism. 0:16:19.720 --> 0:16:23.680 I don't think it's isolationist. I think it is strongly unilateralist. 0:16:25.040 --> 0:16:27.840 And so it's not that the United States is saying 0:16:27.920 --> 0:16:30.720 we're only going to focus at home. I mean, you know, 0:16:30.920 --> 0:16:37.240 the Panama Canal and Greenland and Canada. Comments don't feel 0:16:37.320 --> 0:16:42.040 isolationists to me, but they're deeply transactional and in many ways, 0:16:42.320 --> 0:16:46.240 Tom what we have is that the Americans are embracing 0:16:46.760 --> 0:16:50.640 the Chinese worldview that has served China so well over 0:16:50.720 --> 0:16:52.160 the last thirty five years. 0:16:52.680 --> 0:16:55.360 It's transactional. It's not about rule of law. 0:16:55.440 --> 0:16:58.360 They don't care what your political system or economic system 0:16:58.480 --> 0:17:01.680 is like. They will engage with you bilaterally with the 0:17:01.840 --> 0:17:04.639 intention of being more powerful than you, and therefore you 0:17:04.760 --> 0:17:05.960 have to play by their rules. 0:17:06.160 --> 0:17:08.520 And what the Americans are saying is, actually. 0:17:08.320 --> 0:17:10.159 China, we can do that, and we can do it 0:17:10.200 --> 0:17:12.160 a lot better than you can, because we're a lot 0:17:12.200 --> 0:17:15.720 stronger than you, by the way, And that's really what 0:17:15.880 --> 0:17:18.960 Trump is saying, and it does come at a time 0:17:19.520 --> 0:17:24.119 when America's adversaries Russia in deep decline, Iran having lost 0:17:24.200 --> 0:17:27.760 their empire by proxy, the Chinese and the worst economic 0:17:27.840 --> 0:17:31.440 condition since the nineties, maybe the seventies are particularly weak. 0:17:32.000 --> 0:17:35.560 So it's an interesting moment to try this experiment. A 0:17:35.640 --> 0:17:39.119 lot of things are probably going to break as a consequence. 0:17:39.320 --> 0:17:43.560 Doctor Bremer. Eurasia Group's Top ten Risks are required reading 0:17:43.600 --> 0:17:45.720 at the beginning of every year, and this year is 0:17:45.920 --> 0:17:48.520 no different. US, China, Russia, around Mexico, I mean, you 0:17:48.640 --> 0:17:49.560 name it, they're all in there. 0:17:49.640 --> 0:17:49.760 You know. 0:17:49.840 --> 0:17:52.800 The one country that I didn't see in there, well, Syria. 0:17:52.840 --> 0:17:54.399 And I'm curious to hear your thoughts on what the 0:17:54.440 --> 0:17:56.320 fall of the Asad regime means for the Middle East 0:17:56.359 --> 0:17:58.360 and the rest of the world more broadly. I mean, seriously, 0:17:58.400 --> 0:18:01.480 what role America and restoring order to a nation where 0:18:01.560 --> 0:18:05.560 fourteen million refugees were fourth were forced to flee their 0:18:05.600 --> 0:18:08.160 homes in the last you know, call it fifteen years. 0:18:08.240 --> 0:18:11.800 I mean, a nation who's geo strategic position is so 0:18:12.080 --> 0:18:14.040 very important to health in Central Asia. 0:18:14.240 --> 0:18:15.440 You know, what are your thoughts there? 0:18:16.359 --> 0:18:21.480 So Syria's there, but it's underneath the number nine risk, 0:18:21.960 --> 0:18:26.760 which is called ungoverned spaces, and we include Syria and 0:18:27.000 --> 0:18:31.200 Yemen and Libya and Haiti and Mianmar. 0:18:30.880 --> 0:18:33.920 Western Sahara Dan by the way, which is a lot 0:18:34.080 --> 0:18:36.520 more important in terms of numbers of lives than what 0:18:36.640 --> 0:18:39.800 you just mentioned in Syria, and yet no journalists on 0:18:40.000 --> 0:18:43.600 the ground, and they're fleeing mostly to neighboring African countries 0:18:43.600 --> 0:18:45.800 as opposed to Syrians who go to Turkey and go 0:18:45.920 --> 0:18:48.359 to Europe, so we don't pay as much attention to them. 0:18:48.720 --> 0:18:50.879 And that's kind of the point, right is that. 0:18:51.160 --> 0:18:53.680 I mean the danger in Syria, where the Americans had 0:18:53.840 --> 0:18:57.159 slightly more than two thousand troops on the ground and 0:18:57.280 --> 0:19:00.560 under Trump are likely to remove them, and a Turkey 0:19:01.040 --> 0:19:05.560 you mop it up, is that if AHTS is incapable 0:19:06.280 --> 0:19:11.359 of running a unifying government in Syria, which is a 0:19:11.520 --> 0:19:15.120 reasonably plausible outcome, then you can easily have a big 0:19:15.240 --> 0:19:18.639 part of Syria that's ungoverned and would be fodder for 0:19:18.840 --> 0:19:23.160 a new Isis caliphate. And over time, not twenty twenty five, 0:19:23.680 --> 0:19:26.560 and this reports for the year. Over time, of course, 0:19:27.000 --> 0:19:29.239 that's something that will wash up on our shores too. 0:19:29.560 --> 0:19:31.560 Ian Bremer with us here We're thrilled to have of 0:19:31.640 --> 0:19:34.159 here to celebrate his top risk. It's a team effort 0:19:34.200 --> 0:19:36.720 from erase your group each and every year. It'll be 0:19:36.800 --> 0:19:38.520 with us for a good amount of time. Jim Grasso 0:19:38.640 --> 0:19:41.160 to join us here in a bit on this important 0:19:41.320 --> 0:19:45.959 Chinese social media thing which I don't understand, Doctor Bremer. 0:19:46.040 --> 0:19:48.320 One of the moments it stands in time for me 0:19:48.560 --> 0:19:51.200 is Ian Bremer and Robert T. Kaplan with me together 0:19:51.880 --> 0:19:58.200 talking about a zero world within Keplan's Revenge of geography. 0:19:58.880 --> 0:20:03.600 What is the most conc destructive path for moderates in 0:20:03.720 --> 0:20:07.800 America to get out four years or dare I say 0:20:07.960 --> 0:20:11.200 eight years out? What is the initiative that needs to 0:20:11.280 --> 0:20:15.240 be taken? Do we need to take kaplain realist policy? 0:20:16.560 --> 0:20:20.080 Well, it's not. It's not about foreign policy so much. 0:20:20.320 --> 0:20:23.680 Although it is true that a lot of people that 0:20:23.800 --> 0:20:27.000 decided not to vote, that had voted for Biden last 0:20:27.119 --> 0:20:34.080 time around, report that Biden's position on Gaza slash Israel 0:20:34.640 --> 0:20:36.240 was a significant. 0:20:35.640 --> 0:20:37.879 Thing that turned them away from the polls. And that's a. 0:20:37.880 --> 0:20:43.400 Place where Elon Musk and his targeting of very specific 0:20:43.480 --> 0:20:46.440 and important districts that were swinging in the United States 0:20:47.240 --> 0:20:51.080 could have made a difference. But leaving that one piece aside, 0:20:51.119 --> 0:20:54.720 and it's not unimportant, of course, I would say most 0:20:54.800 --> 0:20:57.920 Americans are not going to the polls on the basis 0:20:58.480 --> 0:21:03.880 of Biden or Trump's worldview. It's more about what they're 0:21:03.960 --> 0:21:08.960 doing and what they're rejecting at home. And the fact 0:21:09.040 --> 0:21:15.080 that Trump has become a leader that attracts more working 0:21:15.400 --> 0:21:18.720 and middle class Americans because they feel like he's more 0:21:18.800 --> 0:21:21.520 interested in their well being. 0:21:21.920 --> 0:21:25.119 The fact that he was able to get a significant. 0:21:24.560 --> 0:21:28.880 Majority of labor union voters in the United States, while 0:21:29.000 --> 0:21:35.280 Harris was, you know, the candidate for urban, well educated elites, 0:21:35.840 --> 0:21:39.280 and that's not a sustainable path for the Democrats in 0:21:39.440 --> 0:21:43.320 my view. So they clearly have to reassess a lot 0:21:43.520 --> 0:21:47.640 of their platform that did not appeal to the average 0:21:47.720 --> 0:21:50.840 American that did not feel taken care of. More billionaires 0:21:51.400 --> 0:21:55.560 put money into Harris's campaign than did Trump's. 0:21:56.119 --> 0:21:58.080 That again, that tells you something. 0:21:58.240 --> 0:22:01.320 Doctor Breber, the US chinne of relationships at forefront geopolitical 0:22:01.400 --> 0:22:02.960 risk in the current Vita regime. Yet, if we do 0:22:03.080 --> 0:22:05.640 see something like sixty percent tariffs, do you really think 0:22:05.720 --> 0:22:09.119 that China's going to allow the yuan to debase itself again? 0:22:09.320 --> 0:22:11.640 And if that does indeed occur, do we feel there's 0:22:11.680 --> 0:22:13.720 a I don't know, a clearing price and dollar you 0:22:13.840 --> 0:22:15.440 on where the market can go to that can still 0:22:15.480 --> 0:22:17.720 allow China to grow at five percent per year. 0:22:19.160 --> 0:22:21.639 I don't expect China's going to grow at five percent 0:22:21.760 --> 0:22:24.280 per year over the coming several years. 0:22:24.520 --> 0:22:28.160 I think They've got deep structural problems that are being made. 0:22:28.000 --> 0:22:29.840 Worse by the fact that the only part of their 0:22:29.880 --> 0:22:35.280 economy that is overperforming is their manufacturing export, which feels 0:22:35.359 --> 0:22:40.600 like dumping. It's a trillion dollar surplus, and it's upsetting lots. 0:22:40.359 --> 0:22:42.480 Of countries around the world, not just the US. 0:22:42.960 --> 0:22:45.560 The US is leaning into hitting back, which will occur 0:22:45.680 --> 0:22:48.160 with tariffs, though it won't be a sixty percent number. 0:22:48.280 --> 0:22:51.879 I mean, you know the top line election campaign numbers, 0:22:51.880 --> 0:22:54.320 and never the numbers we see. But even if it's 0:22:54.359 --> 0:22:56.960