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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: Inflation coming up here in fourmants. Michael Ball on deck.

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Speaker 2: But first Jim Karen joins us from Morgan Stanley. The

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Speaker 2: note is brilliant. We protect the copyright of all of

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Speaker 2: our guests. Get Jim Karen's brilliance from Morgan Stanley. Okay,

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Speaker 2: so you're out of aeronautical engineering at Caltech. And the

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Speaker 2: final trick question on the exam sophomore year Jim Caern

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Speaker 2: is what does it mean if the bond markets worry, worry,

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Speaker 2: handring and worry and Google can do one hundred year

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Speaker 2: bond nine times over subscribed. Jim, I've never seen this. Well.

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Speaker 3: I think it's really a statement on the dispersion that's

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Speaker 3: in the markets right now. So, look, there's a lot

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Speaker 3: of volatility that's happening. Right We understand what's happening in

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Speaker 3: the equity markets, but then when we look at the

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Speaker 3: publicly traded fixed income markets. As you're pointing out, the

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Speaker 3: risk isn't necessarily being evenly distributed across all markets, and Tom,

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Speaker 3: that's good news, okay, because whenever we go into these

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Speaker 3: types of market events where there's a big repricing in

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Speaker 3: a certain sector, in this case in software, the number

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Speaker 3: one question is always about contagent. Is there contagent into

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Speaker 3: other markets? And we're seeing fire breaks between the public

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Speaker 3: markets and the private markets, and certainly equities are taking

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Speaker 3: the brunt of this in some way, but we're not

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Speaker 3: seeing broad based contagent. So I think if there's a

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Speaker 3: silver lining around all of this, I think that's it.

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Speaker 4: Jim, what do you make about this rotation we've seen

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Speaker 4: out of some higher growth areas, most notably software, into

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Speaker 4: more va parts of the market, maybe even a small

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Speaker 4: in mid caps. That spooked a lot of folks who

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Speaker 4: thought software and tech broadly was a good place to be.

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Speaker 3: Well, it's a great example of why you want to

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Speaker 3: have a diversified portfolio.

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Speaker 5: Right.

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Speaker 3: So, we've come off of a market over the past

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Speaker 3: couple of years it's been highly concentrated MAG seven, Mag seven,

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Speaker 3: Mag seven, and people have just forgot about the other

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Speaker 3: four ninety three right in the s and p. Five

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Speaker 3: hundred and the point here is that if we get

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Speaker 3: this rise in economic growth is higher productivity, there should

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Speaker 3: be a cyclical broadening of the markets. Look at the

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Speaker 3: ISM data. Isms are well above fifty right now. Even

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Speaker 3: new orders are around fifty seven. You've got the manufacturing

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Speaker 3: above fifty two. You've got GDP growth which is still

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Speaker 3: pretty reasonable.

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Speaker 2: Jobs.

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Speaker 6: You know, market seems pretty stable.

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Speaker 3: Let's let's keep our eye on the bigger picture in

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Speaker 3: the reality here is that I do think that the

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Speaker 3: cyclical broadening of the markets is actually really a healthy

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Speaker 3: signe you know, for more diversified growth.

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Speaker 2: When you listen to your economics team, is the vector

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Speaker 2: in goods inflation? Usually it's a disinflation, and all of

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Speaker 2: a sudden, in the last six months, Jim Kieren, I

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Speaker 2: got goods inflation and rising inflation. Is that going to

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Speaker 2: reverse and get back to quote unquote normal, No, I

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Speaker 2: don't think it will. I think that we have gone

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Speaker 2: through a period of time. And this goes back to

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Speaker 2: two thousand and one when China joined the wto that

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Speaker 2: goods inflation was relatively flat down and it was all

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Speaker 2: about services inflation and everything else.

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Speaker 3: So therefore, overall inflation was able to stay low. Now

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Speaker 3: we're in a different, different place.

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Speaker 2: Should we get Jim Kieren into trouble this morning? Oh

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Speaker 2: do you do you agree with a Posen or Zeg

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Speaker 2: thesis of four percent inflation?

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Speaker 5: I do not.

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Speaker 3: I think the number is probably around two and a

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Speaker 3: half to three. I think that's likely where we're going

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Speaker 3: to stabilize. I don't think we're going to see below

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Speaker 3: two for a while unless we see a recession.

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Speaker 2: That's brilliant. See how I did that. He's so trained

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Speaker 2: by compliance. I mean he just absolutely Adam post it

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Speaker 2: out on Twitter this morning recapitulating the how we get

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Speaker 2: to that worry of higher inflation, the release will the

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Speaker 2: reaction function is through maybe a higher wage which we

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Speaker 2: really haven't seen yet. Well, that's a bet that's an outlier.

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Speaker 2: As many people have said to it's Jim Karen with us,

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Speaker 2: and we'll stay with us with Morgan Stanley Investment Management.

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Speaker 2: As we go to the nation's inflation report, usually midweek,

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Speaker 2: it's on a Friday because of that brief government shut down.

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Speaker 2: Is well, we'll know. We'll give you the headline data, folks,

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Speaker 2: but then we dive into it and give you the

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Speaker 2: nuance as we can on Bloomberg through the morning, Jim

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Speaker 2: Karen with this, Morgan Stanley, I go to a weeker

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Speaker 2: dollar out there, but some real churn in the market

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Speaker 2: is well. Oh, and we see it in Jim Karen's space,

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Speaker 2: as they say, ye in the bond market. Jim Karen

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Speaker 2: with a ten year yield four point zero seven percent,

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Speaker 2: with a substantial move over the last two three days,

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Speaker 2: can you and Morgan Stanley model a three point nine

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Speaker 2: to nine percent ten year yield?

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Speaker 3: Well, I mean, it's it's certainly lower than what we

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Speaker 3: would have expected it to be. It's really a question

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Speaker 3: in terms of how we think the Fed starts to

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Speaker 3: react to this. Does the Fed now start to see

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Speaker 3: a clear runway to cutting rates maybe more aggressively, because inflation,

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Speaker 3: as we just saw, is maybe coming down a bit,

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Speaker 3: maybe a bit faster than many people are expecting. I'm

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Speaker 3: still in the camp that there's maybe one more cut

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Speaker 3: this year, possibly too so. And I think that's pretty

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Speaker 3: much well in the price at this point as far

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Speaker 3: as where the two year treasury is currently trading, and

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Speaker 3: so I think it's going to be very difficult for

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Speaker 3: the ten year yield to stay below four or percent

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Speaker 3: for any material period of time unless you believe there's

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Speaker 3: going to be a significant flattening, and we don't, and

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Speaker 3: we think the curve's going to stay relatively steep around

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Speaker 3: you know, sixty basis points or so.

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Speaker 2: We welcome all of you across America. Bloomberg Surveillance Commercial

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Speaker 2: free to the nine o'clock our Michael Ball awaiting us

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Speaker 2: as well, and Veronica Clark will join us some city

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Speaker 2: group here in a moment. Paul Sweeney with Morgan Stanley's

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Speaker 2: Jim Karen.

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Speaker 4: Jim, this is a pretty eventful week for the Fed

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Speaker 4: to reserve lots of data. It's a data rich week,

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Speaker 4: and I guess the takeaway is, boy, we've got a

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Speaker 4: pretty solid labor market. We saw that on Wednesday, and

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Speaker 4: now we've got an inflation environment that continues to be

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Speaker 4: pretty reasonable out there. A boy, the Fed could go

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Speaker 4: either way here. They could sit on their hands, or

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Speaker 4: they could cut rates. How do you think they're going

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Speaker 4: to interpret this week's data.

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Speaker 3: I think at the moment that they're probably still leaning

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Speaker 3: towards potentially one more cut this year if the inflation

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Speaker 3: numbers are coming down. But we also to understand that

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Speaker 3: the unemployment rate did tick down from four point four

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Speaker 3: to four point three percent.

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Speaker 6: Now, could that be seasonal? Could that be an aberration?

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Speaker 3: You know, maybe this is maybe we need to see

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Speaker 3: a couple of more numbers, which is why I don't

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Speaker 3: think the Fed's going to do anything, you know, in

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Speaker 3: the first quarter of this year, or probably they're gonna

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Speaker 3: have to wait until the second quarter, maybe late second quarter.

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Speaker 6: So I think the way the FED.

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Speaker 3: Is likely to interpret this is that we have inflation

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Speaker 3: that seems to be stabilizing. That's good news, a labor

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Speaker 3: market that also seems to be stabilizing, but we need

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Speaker 3: a little bit more confidence in that.

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Speaker 6: You brought this point up earlier. What about wages?

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Speaker 3: Right, So you know, I think the big complaint out there,

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Speaker 3: and I did a podcast on this which was to

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Speaker 3: make a twenty dollars hamburger affordable again? And my point

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Speaker 3: was that, you know, the price of that hamburger is

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Speaker 3: not likely coming down. What's going to make it more

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Speaker 3: affordable is that incomes and wages need to start to

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Speaker 3: go up, but they have to go up in a

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Speaker 3: non inflationary way. And the way that happens this is

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Speaker 3: the magic trick that the economy does is through higher productivity.

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Speaker 3: So higher productivity is the non inflationary speed limit on growth,

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Speaker 3: meaning that you can have higher wages better growth, but

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Speaker 3: that higher wages doesn't necessarily increase goods inflation or anything

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Speaker 3: like that. That's what productivity does. Right now, the productivity

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Speaker 3: numbers are accelerating higher, so it is likely if we

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Speaker 3: get a recovery, that these incomes in wages can go

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Speaker 3: up without creating the inflation. And that's what makes the

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Speaker 3: twenty dollars Hamburger more affordable.

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Speaker 2: See how clear he does that?

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Speaker 4: It's not sure.

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Speaker 2: Learned that if you're at the Boden Observatory in physics

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Speaker 2: in February and it's twenty below zero and you get

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Speaker 2: the telescope, it's clearer because it's cold air. That's how

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Speaker 2: you get to think that clearly.

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Speaker 4: And then he said, fuck that bad. And then he says,

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Speaker 4: I got to California. To California, you see technology, smart

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Speaker 4: tech as well?

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Speaker 2: Should Karen go write a report? He is brilliant at

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Speaker 2: Morgan Stanley. Appreciate mister Karen's expertise here. I just can't

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Speaker 2: say enough about his career. Chief Investment Officer, Portfolio Solutions

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Speaker 2: Morgan Stanley Investment Management. So Jim's there and he doesn't

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Speaker 2: have time, folks to look at the terminal and to

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Speaker 2: read this. Veronica Clark's going to join us in a

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Speaker 2: bit with City Group. She's diving into the data and

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Speaker 2: you know, I mean, I mean that's the way this.

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Speaker 2: Michael Balls had a little bit of a chance to

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Speaker 2: look as well, Bloomberg News macro strategist. Can you give

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Speaker 2: us a service sector component yet or goods component?

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Speaker 7: Are You're not there? No, I mean I'm taking a look.

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Speaker 7: It looks nice compared to what we were expected. Obviously,

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Speaker 7: we all know January can often be a shock from

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Speaker 7: prices resetting just normally, and then there's obviously the seasonality

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Speaker 7: factors and taking that aside.

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Speaker 5: We're not seeing a whole lot of.

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Speaker 7: One tariff pass through, which there was this concern that

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Speaker 7: you know, after weed sort of seen the dust settle,

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Speaker 7: you know, businesses would use January or the new year

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Speaker 7: to basically reset higher. And looking at parell, looking at

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Speaker 7: home furniture, some of these things that we know would

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Speaker 7: be in the cross here there I'm moving higher. Auto

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Speaker 7: insurance is down, that's good, obviously, Shelter big lower hit

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Speaker 7: there which is going to drag.

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Speaker 5: The whole thing down, which is very positive.

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Speaker 7: And finally, I think it's coming from hospital services there.

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Speaker 7: I see that as sticking out a little bit. And look,

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Speaker 7: that is not cyclical.

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Speaker 2: Yep.

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Speaker 4: If you're the Fed, I mean, pretty darn good week

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Speaker 4: for you, right, If you're the administration, a good week,

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Speaker 4: you feel like the things are working in the right way.

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Speaker 4: But if you're the Fed with the dual mandate here,

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Speaker 4: I'm pretty good shape here.

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Speaker 7: Markets are pricing in a half a cut, so we're

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Speaker 7: at two and a half cuts for the year now

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Speaker 7: on this two.

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Speaker 4: And a half cuts. Yeah, okay, So what do you

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Speaker 4: think that what are the variables going forward? Do you

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Speaker 4: think for this?

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Speaker 5: Again?

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Speaker 7: I think we have to watch these labor revisions as Yeah.

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Speaker 7: The worry is that one the actual labor for January

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Speaker 7: was not very cyclical. It was all sort of structural.

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Speaker 7: Again with what we're seeing in the CPI. So there

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Speaker 7: is a structural story about the aging demographics of this

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Speaker 7: nation and that itself is not something the FED can

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Speaker 7: really target, but it is going to be a drag

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Speaker 7: on overall growth. So we need to get ahead of that.

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Speaker 7: As far as the conversation. They need to sort of

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Speaker 7: identify how they're thinking about it.

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Speaker 2: Ready green in the screen, we are very negative. Then

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Speaker 2: we had a real recovery to a pop of decent green.

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Speaker 2: Now negative three on futures small caps. Give me a

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Speaker 2: little bit of green love now, but the vix comes in.

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Speaker 2: It was almost a twenty two now twenty point eighty six.

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Speaker 2: A bond market is where we see some action. We

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Speaker 2: had to a four point zero six on a ten

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Speaker 2: year yield, down four point zero eight, bax up a

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Speaker 2: little bit off of it critically. Excuse me, I'm meeting

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Speaker 2: my Greek yogurt.

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Speaker 4: Muffin that thank you.

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Speaker 2: I mean, I'm on my third one le alone. The

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Speaker 2: ten year real yield one point seven to seven percent

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Speaker 2: speaks volumes to me. What's your mystery right now? You're

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Speaker 2: going to write, I mean, I know you don't work

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Speaker 2: the weekend. Do you know we're off Monday? Yeah, I

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Speaker 2: had no idea. This is I have a kid who

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Speaker 2: will be home, the kid it'll be. I mean, I'm sorry.

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Speaker 2: It's February twelfth, It's Lincoln's birthday. Twenty second is Washington's birthday.

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Speaker 2: Sixteenth is a non holiday. I'll be here, Michael, what

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Speaker 2: are you going to write about this weekend?

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Speaker 7: Well, I'm gonna think about how we have to still

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Speaker 7: discuss this price level versus change in price, and I

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Speaker 7: think that's been a big theme where again we're all

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Speaker 7: very conscious of and you guys are speaking today. Earlier

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Speaker 7: you go out, you see it in your face. And

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Speaker 7: again here I'm looking at the Sea FI report. Food

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Speaker 7: away from home barely went up to zero point two. Here,

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Speaker 7: energy we all have bigger bills from the winner barely

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Speaker 7: went up here in this So is there really a

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Speaker 7: disconnect again from this data to what is being experienced

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Speaker 7: by the consumer, And hence we have to be careful

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Speaker 7: saying all right, well, inflation's beaten, but the consumer itself

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Speaker 7: is still feeling it. It's feeling it from the levels,

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Speaker 7: and it's also seeing a little bit different of a

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Speaker 7: basket than what we're officially getting.

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Speaker 2: Don't you take a three month moving average?

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Speaker 7: You can, and I think that's all what's going down,

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Speaker 7: And the six month average is even more encouraging. And

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Speaker 7: I think when you hear from Myrin's of the world

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Speaker 7: and these kind of fed guys that are more dubbish,

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Speaker 7: that's what they're looking at the trend.

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Speaker 4: You know in the labor market, people are concerned that

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Speaker 4: it's really just being focused on healthcare as and it's

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Speaker 4: not a broad growth in them. But Peter Cher of

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Speaker 4: Academy Securities come out the good points saying the good

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Speaker 4: news is, or maybe the silver lining is, it wasn't

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Speaker 4: government payrolls growing. Those actually declined a little bit, thank you, Doge.

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Speaker 4: So any job gains are in the private market, so

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Speaker 4: at least that's better than just adding on to the

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Speaker 4: bloat of the federal government.

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Speaker 5: And you guys were talking about posing earlier.

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Speaker 7: He did a good one on odd Lots speaking to

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Speaker 7: the effects of Doge being sort of uneven.

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Speaker 2: Lee speak to certain demographics.

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Speaker 7: What I would also take comfort in, and this may

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Speaker 7: just be the AI build out, is that the construction

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Speaker 7: worker numbers were positive, although manufacturing itself was relatively flat

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Speaker 7: five thousand, construction had thirty.

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Speaker 5: That's like a good sign. I mean, we obviously know that's.

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Speaker 7: Not going from the residential pulse, and we obviously saw

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Speaker 7: the housing data for January, which was weather effected, being negative.

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Speaker 5: But overall we're not seeing a roll over there.

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Speaker 7: And with what's going on in the immigration story, we

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Speaker 7: still want to see construction jobs being added?

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Speaker 2: Can you stay with us? Yes? I mean you know,

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Speaker 2: did you see what they they've ex Benedic today?

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Speaker 5: The food?

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Speaker 2: Is that right? Yeah? Michael Ball was with Bilberg News

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Speaker 2: and he'll stay with us. Can we talk to someone

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Speaker 2: smarter than you? Veronica Clark Folks home Run nailed the

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Speaker 2: jobs report. Andrew Holland Hurst turned to Veronica Clark and said,

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Speaker 2: younc beat duke. Veronica. What's job's day going to be?

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Speaker 2: She nailed it with one hundred and thirty five thousand estimate.

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Speaker 2: How did you get there? Veronica? How did you guys

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Speaker 2: get to way away from consensus? How did you do that?

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Speaker 7: Yeah?

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Speaker 8: I was just feeling really good after this weekend. Yeah, yeah,

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Speaker 8: it is so it's I wouldn't read too much into

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Speaker 8: that strength. The reason we were expecting that one hundred

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Speaker 8: and thirty five thousand, obviously thought the number very close

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Speaker 8: to that is this really clear residual seasonal pattern that

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Speaker 8: we see in a lot of data, and especially in

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Speaker 8: the jobs data, especially in the inflation data too, that

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Speaker 8: has meant stronger job growth than January. Usually what happens

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Speaker 8: in January is you get this big decline in employment

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Speaker 8: when hiring is already low and firing is already low,

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Speaker 8: that decline is less than usual, and the seasonal adjustment

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Speaker 8: is too positive. So I would take that stronger number

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Speaker 8: with a bit of caution.

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Speaker 2: Okay, that's total NERD patrol. Combine the jobs report Wednesday,

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Speaker 2: the CPI report Friday. What does it mean for Chairman Powell?

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Speaker 2: What does it mean for Chairman.

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Speaker 8: Wash Yeah, in all of this data this week, there's

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Speaker 8: really nothing to change Chair Powell's view. I think that

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Speaker 8: maybe there's some labor market stability. Again, I would be

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Speaker 8: really cautious with this January data. I actually don't think

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Speaker 8: there's a whole lot of labor market stability. But there's

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Speaker 8: nothing really in any of this to change their view

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Speaker 8: of rates on hold for now. But I do think

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Speaker 8: this is, you know, in terms of their dual manday,

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Speaker 8: a labor market that's moving in the wrong direction and

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Speaker 8: inflation that's moving in the right direction. And I do

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Speaker 8: think they'll be cutting later this year. Maybe we do

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Speaker 8: get more of those cuts as we get to the

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Speaker 8: summer with the new chair and that's when the labor

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Speaker 8: market data have weakened again. In the last couple of years,

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Speaker 8: we would expect that again this year.

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Speaker 4: Ron Kay, you put together the data we saw this

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Speaker 4: week in terms of a pretty full employed economy one now,

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Speaker 4: with modest inflation out there, this has got to bode

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Speaker 4: well for the US consumer. How do you view then

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Speaker 4: some of these days.

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Speaker 8: Yeah, we've just had this surprising resilience to consumption for

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Speaker 8: a number of years now. Despite the labor market that

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Speaker 8: you know is very great, is still very gradually weakening.

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Speaker 9: Right.

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Speaker 8: We have had on average a couple tenths of an

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Speaker 8: increase in the unemployment rate each year. But yeah, consumption

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Speaker 8: has just been surprisingly resilient. We did have retail sales

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Speaker 8: data earlier this week that was softer. It's always parked

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Speaker 8: to seasonally adjust that around the holidays. Maybe as we

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Speaker 8: get January data. We have some winter storm disruptions too.

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Speaker 8: But I think the expectation is that if this is

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Speaker 8: just a gradually weakening labor market, yeah, people will probably

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Speaker 8: keep spending.

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Speaker 6: But I would worry that more and more.

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Speaker 8: If people are worried about their job prospects. We see

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Speaker 8: that in the consumer confidence data, maybe you do cut

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Speaker 8: back on spending a bit more at some point.

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Speaker 2: Veronica Clark City Group with US and Michael Ball of

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Speaker 2: Bloomberg News with his work in macro economics. This tour

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Speaker 2: of duty at the FED, we're going to continue with

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Speaker 2: Veronica Clark and Michael Ball. We said good morning to

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Speaker 2: all of you, commercial free to nine o'clock with the

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Speaker 2: support of Interactive Brokers. Bloomberg's surveillance is brought to you

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Speaker 2: by IBKR. Well, the year over year change in the

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Speaker 2: USCPI will exceed next month two point six percent in February.

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Speaker 2: Turn your view into a trade at ibkr dot com

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Speaker 2: slash forecast. Last trading day leaps out to March eleventh.

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Speaker 2: We think interactive Brokers for their support Michael Ball. David

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Speaker 2: Rosenberg was iconic at Merrill Lynch and saying okay, and

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Speaker 2: I say this, folks, I go beneath the headline data, beloney,

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Speaker 2: guys like you and Veronica Clark Michael Ball are looking

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Speaker 2: at fifty sixty seventy items. The headline here is firmer

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Speaker 2: services costs from our marketing cut. Is that what we saw?

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Speaker 7: Look, I think I'm having a little trouble sometimes now

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Speaker 7: because you have to put everything again to overuse term

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Speaker 7: with the k economy. So when I see airfares here

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Speaker 7: a rising six point five percent. But we're hearing from

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Speaker 7: the airlines that they had this bifurcated experience with upper

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Speaker 7: income people spending. You know, the clubs are doing well,

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Speaker 7: the cards are doing well, but the lower economy class

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Speaker 7: people are struggling and they take cast prices on Like,

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Speaker 7: what does this number really mean then, because again we

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Speaker 7: have twenty percent seem to be doing just fine and

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Speaker 7: pushing the envelope, and then eighty percent who are more

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Speaker 7: price sensitive and value orientated. And this is not really

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Speaker 7: showing up again as cleanly. Because this data can't capture

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Speaker 7: that as clean We.

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Speaker 2: Turned to surveillances Caribbean correspondent Paul Sweeney. Here, how about

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Speaker 2: a Ruba? It was packed right, Aruba.

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Speaker 4: Was packed, The flight down and back was packed, The

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Speaker 4: restaurants were packed. It's one happy island. Everybody was So

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Speaker 4: do we.

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Speaker 2: Thank Paul for that report?

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Speaker 4: Oh? Of course you should always write a call in

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Speaker 4: whenever on vacation anywhere in the world.

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Speaker 2: He was at the gun turret looking at Venezuelva right.

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Speaker 4: There exactly, and I'm just glad my fishing boat wasn't bombed.

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Speaker 4: So they had to say fishing trip Veronica talk to

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Speaker 4: us here about the thirty percent of the economy which

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Speaker 4: is manufacturing. It had been in contraction for such a

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Speaker 4: long period of time. I know, it just doesn't get

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Speaker 4: the love that the consumer does because the consumer is

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Speaker 4: so much bigger. What's going on in Middle America with

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Speaker 4: our manufacturing economy.

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Speaker 8: Yeah, it's been an interesting story. I mean, we've obviously

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Speaker 8: seen apayial job losses and manufacturing for a while. We

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Speaker 8: did see some stronger job growth than in January, but

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Speaker 8: again would caution to read too much into it, but

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Speaker 8: it does predate this year, so you know, there are

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Speaker 8: maybe some headwinds from tariffs, but it started before tariffs.

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Speaker 8: Manufacturing is going to be a more rate sensitive sector.

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Speaker 8: If you were looking for evidence that maybe restrictive rates

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Speaker 8: are are weighing on hiring, that could be evidence of that.

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Speaker 2: Michael Ball out front of Mark Dequette writing this up

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Speaker 2: higher prices for airline fairs, personal care recreation, whatever that is,

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Speaker 2: medical care, et cetera. Veronica Clark, we're all enjoying a

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Speaker 2: new utility bill. How does that fold into next month's report?

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Speaker 2: If I'm going to do with ib k R forecasstraight,

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Speaker 2: how does you utility bill that we're getting coming in.

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Speaker 2: How's that going to affect inflation?

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Speaker 8: Yeah, I mean it certainly should affect to headline inflation.

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Speaker 8: You know, when we had these winter storms end of January,

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Speaker 8: saw natural gas prices spiking, that does tend to feed

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Speaker 8: into consumer costs with about a month lag. So yeah,

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Speaker 8: that February headline inflation reading certainly could look stronger. I

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Speaker 8: mean there have been, yeah, electricity costs, weaker dollar obviously,

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Speaker 8: tariffs and higher commodity prices and everything reasons to think

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Speaker 8: that there's maybe some more goods price pressure in the pipeline.

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Speaker 8: But I think the most important, you know, underlying detail

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Speaker 8: for the FED is going to be various services. And yeah,

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Speaker 8: we still see services that are a bit strong in

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Speaker 8: this report, but that's pretty much expected. That's what we

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Speaker 8: have seen the last few January February months, and this

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Speaker 8: is actually a bit less than what we've seen the

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Speaker 8: last couple of years. We also see substantial slowing and

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Speaker 8: shelter inflation, which is a really important part of the story,

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Speaker 8: I think, And so that underlying pressure and services is

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Speaker 8: not quite there. And if the labor market is weakening

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Speaker 8: loosening still, then you know, if even if you're seeing

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Speaker 8: stronger goods prices. This does not become a pandemic type

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Speaker 8: inflation issue, which also started in goods if you have

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Speaker 8: a weakening labor market.

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Speaker 4: Michael, we've seen rates kind of back up here. I'm

438
00:21:11,520 --> 00:21:13,320
Speaker 4: just looking at the two year, three forty four, the

439
00:21:13,400 --> 00:21:16,040
Speaker 4: ten year at you know, four spot zero eight. Is

440
00:21:16,040 --> 00:21:18,679
Speaker 4: a bond market telling the Fed, we got you covered,

441
00:21:18,760 --> 00:21:21,120
Speaker 4: you don't need to cut. We're bringing rates down here.

442
00:21:21,119 --> 00:21:23,160
Speaker 4: We see what's going on. I mean, I always feel

443
00:21:23,200 --> 00:21:25,200
Speaker 4: like the bond markets ahead of everybody.

444
00:21:25,480 --> 00:21:26,680
Speaker 5: Yeah, I feel like the bond market.

445
00:21:26,680 --> 00:21:28,919
Speaker 7: This week's really been about the equity market and just

446
00:21:29,000 --> 00:21:30,879
Speaker 7: the violence of this factor rotation.

447
00:21:31,040 --> 00:21:33,640
Speaker 5: I mean, yesterday was pivotal, and that thirty year auction

448
00:21:33,800 --> 00:21:36,120
Speaker 5: was the best we've seen in almost a decade.

449
00:21:36,200 --> 00:21:37,000
Speaker 4: Is that right? Wow?

450
00:21:37,560 --> 00:21:39,320
Speaker 7: Just the way it came through in the indirect bid.

451
00:21:39,560 --> 00:21:41,480
Speaker 7: Oh so I think you know, you just had a

452
00:21:41,520 --> 00:21:44,280
Speaker 7: broader de risking yesterday. There was a also crash sort

453
00:21:44,280 --> 00:21:46,760
Speaker 7: of in the commodity space as we thought, Algos sort

454
00:21:46,760 --> 00:21:48,879
Speaker 7: of CTA programs kind of got to sell trigger and

455
00:21:48,920 --> 00:21:50,800
Speaker 7: they all rush for that or so that spooked people

456
00:21:50,840 --> 00:21:53,200
Speaker 7: as well, which supported sort of the thirty year auction

457
00:21:53,200 --> 00:21:56,360
Speaker 7: because it came right before it. It's tough to say

458
00:21:56,359 --> 00:21:59,240
Speaker 7: if the Fed's going to take comfort from financial conditions

459
00:21:59,280 --> 00:22:01,119
Speaker 7: loosening on the law on end here, given that a

460
00:22:01,160 --> 00:22:03,600
Speaker 7: lot of them are happy with where the policy is

461
00:22:04,040 --> 00:22:06,520
Speaker 7: and talking about you know, basically this is where they

462
00:22:06,520 --> 00:22:09,440
Speaker 7: want it. So again, there's a divided camp at the FED,

463
00:22:09,600 --> 00:22:11,080
Speaker 7: and they're all reading things differently.

464
00:22:11,520 --> 00:22:15,119
Speaker 2: Veronica, congratulations on your non farm payroll call. Folks. I

465
00:22:15,240 --> 00:22:19,520
Speaker 2: make jokes about it, but I can't tell you the

466
00:22:19,920 --> 00:22:24,439
Speaker 2: exceptionalism of nailing a non farm payrolls report. How are

467
00:22:24,440 --> 00:22:26,520
Speaker 2: you going to do it again next month? What will

468
00:22:26,560 --> 00:22:27,080
Speaker 2: you study?

469
00:22:27,240 --> 00:22:30,640
Speaker 8: Probably not? Yeah, it is. It is such a shot

470
00:22:30,640 --> 00:22:32,600
Speaker 8: in the dark. Parrels is probably one of the harder

471
00:22:32,680 --> 00:22:34,960
Speaker 8: things to forecast. It's just the first real hard data

472
00:22:35,000 --> 00:22:38,320
Speaker 8: we get for that reference month. I am very conscious

473
00:22:38,359 --> 00:22:41,119
Speaker 8: of this seasonal pattern though in the data it's been

474
00:22:41,160 --> 00:22:44,840
Speaker 8: pretty consistent that really from like September through February we

475
00:22:44,880 --> 00:22:47,200
Speaker 8: get stronger data that's a very low hiring time of year,

476
00:22:47,280 --> 00:22:48,439
Speaker 8: and then it weekends in the summer.

477
00:22:48,520 --> 00:22:53,560
Speaker 2: I don't care Trimble Trimble of UNC, he's been there

478
00:22:53,640 --> 00:22:57,080
Speaker 2: four years. That's the coolest thing in basketball.

479
00:22:57,720 --> 00:22:58,480
Speaker 6: It was amazing.

480
00:22:58,680 --> 00:22:59,080
Speaker 8: Yeah.

481
00:22:59,359 --> 00:23:03,840
Speaker 2: Yeah, and he's like an adult. He's been there four years.

482
00:23:03,920 --> 00:23:04,360
Speaker 2: Is that right?

483
00:23:04,359 --> 00:23:04,720
Speaker 5: That was good?

484
00:23:04,840 --> 00:23:07,280
Speaker 4: Yeah, Now fortunate for you and see their best player

485
00:23:07,359 --> 00:23:10,439
Speaker 4: called Foster injured, so they hopefully may get came back.

486
00:23:10,600 --> 00:23:12,520
Speaker 2: Veronica, were you there for four years or did you

487
00:23:12,600 --> 00:23:13,560
Speaker 2: leave after one year?

488
00:23:14,280 --> 00:23:18,040
Speaker 8: I was there for four years.

489
00:23:17,200 --> 00:23:20,000
Speaker 2: Clark, thank you so much. From Chapel Hill and from

490
00:23:20,040 --> 00:23:24,439
Speaker 2: City Groupe. She and Hollinois killing it on non firm payrolls.

491
00:23:26,240 --> 00:23:30,400
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.

492
00:23:37,640 --> 00:23:41,240
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

493
00:23:41,320 --> 00:23:44,439
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

494
00:23:44,560 --> 00:23:47,920
Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,

495
00:23:48,119 --> 00:23:49,840
Speaker 1: or watch us live on YouTube.

496
00:23:50,160 --> 00:23:54,240
Speaker 2: Isabel Mateosi Lago helped court at Black Rock for a

497
00:23:54,280 --> 00:23:57,400
Speaker 2: good amount of time with Philip Hildenbrand, and she is

498
00:23:57,440 --> 00:24:01,160
Speaker 2: now driving the ship at the hugely just Bemp Parry

499
00:24:01,200 --> 00:24:05,840
Speaker 2: by Paris. They are definitive over twenty thirty forty years

500
00:24:05,880 --> 00:24:10,160
Speaker 2: in the calculation of economic growth. She is their group

501
00:24:10,240 --> 00:24:13,239
Speaker 2: chief economist and joins us this morning. Is Well, it's

502
00:24:13,280 --> 00:24:16,640
Speaker 2: been way too long since we've spoken and just wonderful

503
00:24:16,640 --> 00:24:19,880
Speaker 2: to get an update with you. I'm surprising your research

504
00:24:20,040 --> 00:24:25,080
Speaker 2: note it's your optimism and the resilience of economic growth

505
00:24:25,119 --> 00:24:25,720
Speaker 2: discuss that.

506
00:24:27,480 --> 00:24:30,080
Speaker 10: Hi, good morning, Tom, and thanks for the kind of

507
00:24:30,440 --> 00:24:34,280
Speaker 10: words here. I mean, look, it's true across the board.

508
00:24:34,320 --> 00:24:36,960
Speaker 10: You talked about a European perspective, but growth has been

509
00:24:36,960 --> 00:24:42,000
Speaker 10: resilient everywhere in the US, Europe, emerging markets, you name it.

510
00:24:42,200 --> 00:24:44,600
Speaker 10: And our base case is that this is going to

511
00:24:44,600 --> 00:24:50,440
Speaker 10: continue into twenty twenty six. And that's because you're seeing

512
00:24:51,200 --> 00:24:54,800
Speaker 10: an investment search, mostly in AI in the US to

513
00:24:54,840 --> 00:24:59,199
Speaker 10: a great extent in defense, but also in AI in Europe,

514
00:24:59,359 --> 00:25:03,440
Speaker 10: and that's a very global supply chain and that's empowering

515
00:25:03,840 --> 00:25:08,640
Speaker 10: still stronger trade growth around the world. And so yes,

516
00:25:08,680 --> 00:25:10,720
Speaker 10: the outlook is pretty comfortable.

517
00:25:11,119 --> 00:25:13,439
Speaker 2: Your work at the IMN for I mean, you were

518
00:25:13,640 --> 00:25:16,800
Speaker 2: steeped in this. I love this. Ready, the global spillover

519
00:25:16,920 --> 00:25:21,840
Speaker 2: report sounds like my checking account. Isabel, you're so steeped

520
00:25:21,840 --> 00:25:26,000
Speaker 2: in the international economics. How do you take right now

521
00:25:26,480 --> 00:25:31,280
Speaker 2: this tech worry in America? This OMG Isabel Mateos is

522
00:25:31,320 --> 00:25:35,479
Speaker 2: wrong about AI technology? How do you distill that on

523
00:25:35,520 --> 00:25:36,200
Speaker 2: this Friday?

524
00:25:38,280 --> 00:25:42,119
Speaker 10: So I think there are some healthy elements to it,

525
00:25:42,359 --> 00:25:45,760
Speaker 10: in the sense that throughout last year you had a

526
00:25:45,800 --> 00:25:50,520
Speaker 10: sense that there was indiscriminate enthusiasm for everything with AI

527
00:25:50,680 --> 00:25:55,280
Speaker 10: in the name, in whatever part of the supply chain.

528
00:25:55,480 --> 00:25:58,320
Speaker 10: And the question I got the most frequently in any

529
00:25:58,960 --> 00:26:01,800
Speaker 10: meeting was is there an AI bubble? And what you've

530
00:26:01,840 --> 00:26:06,639
Speaker 10: been seeing in recent weeks is markets and investors asking

531
00:26:06,680 --> 00:26:10,080
Speaker 10: themselves more questions before buying, and so there's been a

532
00:26:10,160 --> 00:26:12,919
Speaker 10: bit of a rotation in terms of which part of

533
00:26:12,960 --> 00:26:17,159
Speaker 10: the markets gets questioned the most. But my sense is

534
00:26:17,200 --> 00:26:23,200
Speaker 10: so far that's been orderly and not an unhealthy development,

535
00:26:23,400 --> 00:26:26,000
Speaker 10: because it's becoming very clear there are going to be

536
00:26:26,119 --> 00:26:31,239
Speaker 10: winners and losers from this AI rollout, and continuing like

537
00:26:31,320 --> 00:26:33,480
Speaker 10: we were in twenty twenty five as if there were

538
00:26:33,560 --> 00:26:36,640
Speaker 10: only going to be winners, that that was probably not sustainable.

539
00:26:37,680 --> 00:26:41,879
Speaker 10: So I take the recent market developments as more of

540
00:26:41,920 --> 00:26:47,080
Speaker 10: a pause that refreshes and probably allows the leaning into AI,

541
00:26:47,320 --> 00:26:50,840
Speaker 10: which we're seeing absolutely everywhere, to continue on a more

542
00:26:50,920 --> 00:26:53,240
Speaker 10: healthy and sustainable basis.

543
00:26:53,720 --> 00:26:56,840
Speaker 4: Is about twenty twenty five was characterized in part due

544
00:26:56,920 --> 00:27:02,680
Speaker 4: to tariffs, trade uncertainty throughout the globe, and even today

545
00:27:02,760 --> 00:27:05,720
Speaker 4: we're getting some news or President Trump and the Trade

546
00:27:05,720 --> 00:27:07,919
Speaker 4: team is working to narrow some of the scope of

547
00:27:08,359 --> 00:27:10,439
Speaker 4: the metals tariff. So it just seems to be a

548
00:27:10,520 --> 00:27:15,040
Speaker 4: continued level of uncertainty about global trade. How has that

549
00:27:15,119 --> 00:27:17,720
Speaker 4: impacted your economic outlook? It seems like most of the

550
00:27:17,760 --> 00:27:21,840
Speaker 4: economies have kind of powered through it. That's exactly right.

551
00:27:21,880 --> 00:27:24,840
Speaker 10: And in fact, all the modeling that was done early

552
00:27:24,960 --> 00:27:27,560
Speaker 10: last year around the impact of a global trade war

553
00:27:27,720 --> 00:27:32,800
Speaker 10: or a tariff shock assumed that there would be a

554
00:27:32,840 --> 00:27:35,840
Speaker 10: significant negative impact, and the bulk of that would come

555
00:27:35,880 --> 00:27:40,240
Speaker 10: from uncertainty, leading to people being on hold, not investing,

556
00:27:40,320 --> 00:27:43,880
Speaker 10: not consuming. And in fact, what we found was that

557
00:27:43,960 --> 00:27:49,680
Speaker 10: there were offsetting factors which meant which overrode really that uncertainty.

558
00:27:49,800 --> 00:27:55,720
Speaker 10: One of these offsetting factors was monetary policy easing. Another

559
00:27:55,760 --> 00:28:00,840
Speaker 10: offsetting factor was a big physical boost in Germany and

560
00:28:00,880 --> 00:28:04,320
Speaker 10: in a few other countries as well. And another offset

561
00:28:04,640 --> 00:28:09,200
Speaker 10: was this decision made synchronously by a number of corporates

562
00:28:09,200 --> 00:28:13,359
Speaker 10: to lean in heavily into AI and that really bolstered

563
00:28:13,400 --> 00:28:18,280
Speaker 10: trade and activity around the world. And so when you

564
00:28:18,400 --> 00:28:22,360
Speaker 10: look at again what's going to happen this year, we're

565
00:28:22,400 --> 00:28:26,720
Speaker 10: only talking of further liberalization. Frankly, there's been much less

566
00:28:26,760 --> 00:28:31,880
Speaker 10: talk of putting up new tariffs. There's been a flurry

567
00:28:31,920 --> 00:28:35,480
Speaker 10: of new trade deals being signed, being negotiated that's going

568
00:28:35,520 --> 00:28:38,960
Speaker 10: to continue into twenty twenty six, and now even the

569
00:28:39,560 --> 00:28:42,520
Speaker 10: White House is talking of lowering some of the tariffs

570
00:28:42,520 --> 00:28:45,640
Speaker 10: I posted last year. So I would say, yes, we're

571
00:28:45,640 --> 00:28:48,240
Speaker 10: not out of the uncertainty. Of course, we're also still

572
00:28:48,280 --> 00:28:52,000
Speaker 10: expecting or ruling from the US Supreme Court on the

573
00:28:52,720 --> 00:28:56,080
Speaker 10: iPad tariffs. So by no means has the landscape on

574
00:28:56,320 --> 00:28:57,800
Speaker 10: tariffs settled down.

575
00:28:58,240 --> 00:28:59,520
Speaker 4: But I would say.

576
00:28:59,280 --> 00:29:02,000
Speaker 10: What we've learned from from last year is that corporates

577
00:29:02,320 --> 00:29:06,360
Speaker 10: can deal with this uncertainty and carry on with their

578
00:29:06,400 --> 00:29:09,720
Speaker 10: investment plans and spending plans regardless.

579
00:29:10,400 --> 00:29:13,040
Speaker 4: It's what we've seen last year with some of the

580
00:29:13,080 --> 00:29:17,239
Speaker 4: trade uncertainty and the tariffs. Europe really step up here,

581
00:29:17,280 --> 00:29:20,160
Speaker 4: particularly Germany as you mentioned, and maybe several other countries

582
00:29:20,960 --> 00:29:24,280
Speaker 4: in terms of spending on defense, infrastructure, those types of things.

583
00:29:24,640 --> 00:29:27,000
Speaker 4: Are we actually seeing that in the numbers yet?

584
00:29:29,040 --> 00:29:32,960
Speaker 10: So that's really interesting because so the German fiscal boost

585
00:29:33,000 --> 00:29:38,000
Speaker 10: was quantitatively the biggest, both in level and in quantum

586
00:29:38,560 --> 00:29:41,480
Speaker 10: of change, but of course that fiscal package only got

587
00:29:41,560 --> 00:29:45,680
Speaker 10: voted in September, and so we are beginning to see

588
00:29:45,720 --> 00:29:47,760
Speaker 10: it in the data. But it's literally in the last

589
00:29:47,840 --> 00:29:51,520
Speaker 10: couple of months of data. But when you look at

590
00:29:51,560 --> 00:29:54,880
Speaker 10: industrial production, the most recent data, and more importantly the

591
00:29:55,040 --> 00:29:59,000
Speaker 10: order books in Germany and around Europe, these are the

592
00:29:59,080 --> 00:30:02,520
Speaker 10: strongest numbers that we've seen a in a very long time. So,

593
00:30:02,920 --> 00:30:04,000
Speaker 10: and it's only the beginning.

594
00:30:04,080 --> 00:30:05,880
Speaker 2: I want to do this, Paulogist, So I can butcher

595
00:30:05,960 --> 00:30:08,719
Speaker 2: my French. Isabelle loves the way I crushed French. Oh,

596
00:30:08,760 --> 00:30:11,080
Speaker 2: she and Leguard used to laugh at me. Don at

597
00:30:11,160 --> 00:30:15,160
Speaker 2: imf She's wasn't inspec It sounds like something out of

598
00:30:15,160 --> 00:30:19,080
Speaker 2: the Pink Panther movie. She was the Inspectores de finance

599
00:30:19,360 --> 00:30:22,680
Speaker 2: boy for the French government. I mean she's got serious,

600
00:30:22,720 --> 00:30:27,320
Speaker 2: serious credibility across France. Isabel an open question here, and

601
00:30:27,880 --> 00:30:31,240
Speaker 2: with great respect for Terry Berton, who was so supportive

602
00:30:31,280 --> 00:30:35,360
Speaker 2: of me years ago, why can't the French get technology right?

603
00:30:35,840 --> 00:30:39,720
Speaker 2: That you have seance Poe, you have the magical call system,

604
00:30:40,000 --> 00:30:43,640
Speaker 2: you have five hundred years of Cartesian mathematics in all

605
00:30:44,000 --> 00:30:47,960
Speaker 2: Why can't Paris or I'll let you decide, Grenoble, Why

606
00:30:48,040 --> 00:30:52,520
Speaker 2: can't it be Silicon Valley. Why can't the French do technology?

607
00:30:54,480 --> 00:30:56,120
Speaker 10: So I'm not sure I would agree with you that

608
00:30:56,200 --> 00:30:59,200
Speaker 10: the French can't do technology. There are some great tech

609
00:30:59,200 --> 00:31:02,240
Speaker 10: companies here in and actually when you look at what's

610
00:31:02,280 --> 00:31:07,000
Speaker 10: been supporting the growth of the manufacturing sector in France

611
00:31:07,040 --> 00:31:09,760
Speaker 10: or you've got aeronautics on one side, but the rest

612
00:31:09,880 --> 00:31:15,640
Speaker 10: is technology is high end technology, and France is actually

613
00:31:15,720 --> 00:31:21,880
Speaker 10: benefiting from the modernization and the leaning into technology investment

614
00:31:21,960 --> 00:31:23,760
Speaker 10: in the rest of Europe. So I think you're being

615
00:31:23,800 --> 00:31:25,840
Speaker 10: a little unfair here, okay.

616
00:31:26,240 --> 00:31:32,160
Speaker 11: Also Paulice hotel reservations right work on that would be appy.

617
00:31:32,200 --> 00:31:36,160
Speaker 11: Payabout well. Isabel Mateosi lago with us, folks. I can't

618
00:31:36,200 --> 00:31:37,600
Speaker 11: say enough about the arc.

619
00:31:37,560 --> 00:31:41,200
Speaker 2: Of her young career driving all of economics at the

620
00:31:41,200 --> 00:31:44,120
Speaker 2: French Bank. B MP perry by Isabel. Thank you so

621
00:31:44,240 --> 00:31:50,160
Speaker 2: much this morning. Stay with us. More from Bloomberg Surveillance

622
00:31:50,240 --> 00:31:51,560
Speaker 2: coming up after this.

623
00:31:58,840 --> 00:32:02,080
Speaker 1: You're listening to the Blue Work Surveillance podcast. Catch us

624
00:32:02,160 --> 00:32:05,480
Speaker 1: live weekday afternoons from seven to ten am Eastern Listen

625
00:32:05,520 --> 00:32:09,080
Speaker 1: on Apple Karplay and Android Auto with the Bloomberg Business up,

626
00:32:09,280 --> 00:32:11,160
Speaker 1: or watch us live on YouTube.

627
00:32:11,440 --> 00:32:14,200
Speaker 2: So my day starts, folks, Wicked early. I read twelve

628
00:32:14,280 --> 00:32:16,520
Speaker 2: newspapers like Wicked early in the morning. It's what you

629
00:32:16,560 --> 00:32:19,040
Speaker 2: need to do to get the zeitchist like the ft

630
00:32:19,240 --> 00:32:22,520
Speaker 2: with this tariffs metal story. Sure, like, folks, it's not

631
00:32:22,560 --> 00:32:24,960
Speaker 2: even on our radar. I'm worried about pictures and catchers

632
00:32:25,280 --> 00:32:28,040
Speaker 2: and I'm sorry the tariff seemed to be coming in

633
00:32:28,560 --> 00:32:31,240
Speaker 2: once again. So I grabbed this at like earlily this

634
00:32:31,240 --> 00:32:34,440
Speaker 2: morning because Robert Teeters with this was silver Crest. This

635
00:32:34,520 --> 00:32:37,640
Speaker 2: is this guy's great Michael Batnik is just wonderful inequity

636
00:32:37,720 --> 00:32:40,240
Speaker 2: markets and you know, invest in all that. He calls

637
00:32:40,240 --> 00:32:43,600
Speaker 2: it a wild market. I'm grabbing this again from mister Batnik.

638
00:32:43,760 --> 00:32:47,080
Speaker 2: Over the last eight sessions, one hundred and fifteen of

639
00:32:47,120 --> 00:32:50,080
Speaker 2: the five hundred s and P five hundred stocks have

640
00:32:50,200 --> 00:32:54,800
Speaker 2: declined seven percent or more. The average draw DROWND is

641
00:32:54,840 --> 00:32:57,880
Speaker 2: typically thirty four percent, and we're only down one and

642
00:32:57,920 --> 00:32:58,760
Speaker 2: a half percent.

643
00:32:59,200 --> 00:33:03,760
Speaker 9: Discuss it's a great observation. I saw that chart as well. Fascinating.

644
00:33:04,040 --> 00:33:05,800
Speaker 9: I think it speaks to where we are with markets.

645
00:33:05,840 --> 00:33:08,400
Speaker 9: You have a solid foundation as far as the economy,

646
00:33:08,680 --> 00:33:11,640
Speaker 9: but with where valuations are, markets are really struggling to

647
00:33:11,640 --> 00:33:14,040
Speaker 9: find a new narrative here. The one thing I take

648
00:33:14,080 --> 00:33:16,160
Speaker 9: a little solace in is that you're getting some rotation.

649
00:33:16,280 --> 00:33:18,360
Speaker 9: You are seeing strength in some parts of the market.

650
00:33:18,400 --> 00:33:21,840
Speaker 9: It's not indiscriminate selling, but it is a very powerful

651
00:33:21,880 --> 00:33:24,800
Speaker 9: and very fast rotation from the winners of the past

652
00:33:24,880 --> 00:33:27,080
Speaker 9: few years into some new areas. And so I think

653
00:33:27,120 --> 00:33:30,000
Speaker 9: that chart really speaks to the point that this rotation

654
00:33:30,120 --> 00:33:32,600
Speaker 9: is happening quickly, and it speaks to the fear that

655
00:33:32,640 --> 00:33:35,600
Speaker 9: comes alongside having high valuations with a change in story.

656
00:33:36,000 --> 00:33:40,280
Speaker 4: Historically, rotations how long do they last? Typically, like here,

657
00:33:40,440 --> 00:33:42,280
Speaker 4: we're rotating out of some high growth, maybe some te

658
00:33:42,720 --> 00:33:45,560
Speaker 4: tech techy names, into some more industrial, maybe small and

659
00:33:45,640 --> 00:33:48,640
Speaker 4: mid cap. Is that a short term trade measured in

660
00:33:48,720 --> 00:33:51,080
Speaker 4: quarters or could it be something longer? I think it

661
00:33:51,120 --> 00:33:52,200
Speaker 4: could be something longer.

662
00:33:52,240 --> 00:33:53,760
Speaker 9: One of the things that I think is making people

663
00:33:53,800 --> 00:33:56,240
Speaker 9: a little legitiary here is that it's happening so fast

664
00:33:56,280 --> 00:33:59,600
Speaker 9: and so powerfully. The counter to that is that it

665
00:33:59,600 --> 00:34:01,680
Speaker 9: doesn't take a lot to move some of these areas

666
00:34:01,680 --> 00:34:04,600
Speaker 9: that have been underloved. So we put together this matrix

667
00:34:04,640 --> 00:34:06,720
Speaker 9: and thought about, you know what happens if AI works

668
00:34:06,760 --> 00:34:09,359
Speaker 9: there doesn't work, and the economy stays stronger weak people

669
00:34:09,400 --> 00:34:11,319
Speaker 9: start to rebalance a little bit. It doesn't take a

670
00:34:11,320 --> 00:34:14,520
Speaker 9: lot of rebalancing doddlers to improve some of those areas

671
00:34:14,560 --> 00:34:16,600
Speaker 9: that have been winning. So I think the part people

672
00:34:16,640 --> 00:34:18,640
Speaker 9: are worried about is the speed with which money is

673
00:34:18,640 --> 00:34:20,960
Speaker 9: coming out of some of the winners. We've looked back

674
00:34:21,000 --> 00:34:23,799
Speaker 9: in the past. First phase is usually short covering. Once

675
00:34:23,800 --> 00:34:26,200
Speaker 9: you get moves like this, as the chart spoke to,

676
00:34:26,400 --> 00:34:29,800
Speaker 9: people start to pay attention, and then the reallocations flow.

677
00:34:30,000 --> 00:34:30,920
Speaker 4: It can last a while.

678
00:34:31,040 --> 00:34:33,560
Speaker 2: Paul Switty taught me this, folks. It's a we ice creed.

679
00:34:33,680 --> 00:34:35,840
Speaker 2: First of all, is there a whisper dumber on inflation?

680
00:34:35,960 --> 00:34:37,520
Speaker 4: There might be to check it out.

681
00:34:38,360 --> 00:34:41,400
Speaker 2: Okay, So I'm looking at a wei one year trailing

682
00:34:41,480 --> 00:34:46,000
Speaker 2: Dow up eleven percent, SPX up twelve percent, Nasdaq all

683
00:34:46,000 --> 00:34:49,319
Speaker 2: in composite of thirteen percent. Come on, Paul, it's a

684
00:34:49,360 --> 00:34:49,919
Speaker 2: double digit.

685
00:34:50,040 --> 00:34:52,319
Speaker 4: Look back it is. It's a double And so one

686
00:34:52,360 --> 00:34:56,279
Speaker 4: of the questions Robert has been US versus non US coming.

687
00:34:56,480 --> 00:34:58,200
Speaker 4: You know, if you look at twenty twenty five, US

688
00:34:58,239 --> 00:35:00,759
Speaker 4: equity markets had a very good return, but a lot

689
00:35:00,800 --> 00:35:03,200
Speaker 4: of international markets did a lot better than the US.

690
00:35:03,280 --> 00:35:06,399
Speaker 4: And that's continuing into this year, So maybe another little

691
00:35:06,440 --> 00:35:08,800
Speaker 4: part of that rotation is geographic rotation. How do you

692
00:35:08,800 --> 00:35:09,359
Speaker 4: think about that?

693
00:35:09,440 --> 00:35:09,680
Speaker 2: Yeah?

694
00:35:09,719 --> 00:35:10,319
Speaker 5: Absolutely.

695
00:35:10,400 --> 00:35:13,080
Speaker 9: You know, initially I had thought that the move at

696
00:35:13,120 --> 00:35:15,160
Speaker 9: the beginning of last year was sort of a one off,

697
00:35:15,160 --> 00:35:16,759
Speaker 9: but there's been a lot of follow through on that,

698
00:35:16,800 --> 00:35:19,560
Speaker 9: and I think it really speaks to this reallocation trend.

699
00:35:19,760 --> 00:35:21,360
Speaker 9: You know, if you look back at the big returns

700
00:35:21,360 --> 00:35:23,880
Speaker 9: and how much the US exceeded returns of non US,

701
00:35:23,880 --> 00:35:26,920
Speaker 9: and how much large cap exceeded small cap, there is

702
00:35:27,000 --> 00:35:29,719
Speaker 9: room for rebalancing here. So I don't think it's necessarily

703
00:35:29,800 --> 00:35:31,879
Speaker 9: something to get overly concerned about. A lot of these

704
00:35:31,880 --> 00:35:34,400
Speaker 9: moves can be supported by people just getting back to

705
00:35:34,480 --> 00:35:37,840
Speaker 9: target and offsetting and rebalancing some of those dispersion and

706
00:35:37,880 --> 00:35:39,600
Speaker 9: gains that we've seen in the past few years.

707
00:35:40,200 --> 00:35:42,399
Speaker 4: So what's screens weall for you guys these days? Because

708
00:35:42,400 --> 00:35:44,640
Speaker 4: the world's a lot different. I mean, it's in terms

709
00:35:44,640 --> 00:35:46,799
Speaker 4: of just in the last several months, some of the

710
00:35:46,840 --> 00:35:49,160
Speaker 4: growthy names not rewarded as much as they have been

711
00:35:49,200 --> 00:35:51,080
Speaker 4: in the past. So how what's screens weall for you?

712
00:35:51,120 --> 00:35:54,279
Speaker 4: Either industry, sector factor? How do you guy think about that?

713
00:35:54,360 --> 00:35:54,520
Speaker 8: Yeah?

714
00:35:54,520 --> 00:35:55,000
Speaker 2: Absolutely?

715
00:35:55,120 --> 00:35:57,840
Speaker 9: Our mega theme really has been the shift from the

716
00:35:57,840 --> 00:36:00,360
Speaker 9: builders of AI to the users of AI, and just

717
00:36:00,440 --> 00:36:03,880
Speaker 9: generically speaking, that tends to lend itself towards smaller companies.

718
00:36:04,520 --> 00:36:06,840
Speaker 9: Very careful stock selection, paying a lot of attention to

719
00:36:06,880 --> 00:36:10,640
Speaker 9: who's increasing profit margins versus who's decreasing profit margins, and

720
00:36:10,680 --> 00:36:13,240
Speaker 9: going where people are using that technology to cut costs

721
00:36:13,239 --> 00:36:15,720
Speaker 9: and boost gains. Some of that's in the small cap space,

722
00:36:15,800 --> 00:36:17,680
Speaker 9: some of it's outside large cap mega tech.

723
00:36:18,160 --> 00:36:22,759
Speaker 2: Do you assume large cap meg tech rebounds and not

724
00:36:22,960 --> 00:36:26,160
Speaker 2: giving this two week one week thing, I mean over

725
00:36:26,239 --> 00:36:30,040
Speaker 2: a year, over three years, don't they just keep on going?

726
00:36:30,719 --> 00:36:33,640
Speaker 9: The underlying fundamentals are so strong that it's hard for

727
00:36:33,680 --> 00:36:36,359
Speaker 9: me to believe that you have this decline continuing. So

728
00:36:36,480 --> 00:36:39,960
Speaker 9: I expect sometime between now and perhaps next quarter earnings

729
00:36:39,960 --> 00:36:43,200
Speaker 9: you start to get some stabilization around fundamentals. The thing

730
00:36:43,200 --> 00:36:45,000
Speaker 9: that made me a little bit worried was last quarter

731
00:36:45,040 --> 00:36:47,920
Speaker 9: and this quarter you have great earnings announcements. Mark it

732
00:36:47,920 --> 00:36:50,680
Speaker 9: overall kind of flat and you get that reabication away.

733
00:36:50,800 --> 00:36:56,280
Speaker 2: They just issued one hundred year Google piece ten nine

734
00:36:56,320 --> 00:37:00,480
Speaker 2: times ten times over subscribed. You and I we've never

735
00:37:00,560 --> 00:37:01,040
Speaker 2: seen that.

736
00:37:01,320 --> 00:37:04,360
Speaker 9: Yeah, very rare and picking up on your point from earlier.

737
00:37:04,360 --> 00:37:06,360
Speaker 9: It probably speaks to the fact that the part of

738
00:37:06,400 --> 00:37:08,680
Speaker 9: the season we're in is not spring training, but a

739
00:37:08,719 --> 00:37:09,840
Speaker 9: little later into the fall.

740
00:37:11,080 --> 00:37:13,560
Speaker 4: So when you do see some of these tech companies

741
00:37:14,520 --> 00:37:17,080
Speaker 4: come to the market in much greater size than we've

742
00:37:17,080 --> 00:37:19,960
Speaker 4: ever seen in the past, does that Can you pause

743
00:37:20,000 --> 00:37:21,799
Speaker 4: here or are you all in on this AI thing

744
00:37:21,880 --> 00:37:23,200
Speaker 4: and said bring it?

745
00:37:23,480 --> 00:37:23,719
Speaker 2: Yeah?

746
00:37:23,760 --> 00:37:26,960
Speaker 9: So we've been trying to really encourage people to move

747
00:37:27,040 --> 00:37:29,680
Speaker 9: to risk neutral versus benchmark. We do think there's going

748
00:37:29,760 --> 00:37:35,839
Speaker 9: to be a lot of volatility speak speaking better terms.

749
00:37:36,239 --> 00:37:38,440
Speaker 9: So you know, if your long term target is sixty

750
00:37:38,480 --> 00:37:41,879
Speaker 9: percent equities, okay, we moved to sixty percent last fall.

751
00:37:41,960 --> 00:37:44,400
Speaker 9: Before that we were overweight equities. We thought there was

752
00:37:44,600 --> 00:37:46,600
Speaker 9: a long runway. We do think there will still be

753
00:37:46,640 --> 00:37:49,279
Speaker 9: some growth here, but this rotation is keeping top line

754
00:37:49,360 --> 00:37:51,440
Speaker 9: s and p returns down and we think some of

755
00:37:51,480 --> 00:37:52,319
Speaker 9: that continues.

756
00:37:52,560 --> 00:37:54,120
Speaker 4: So I'm not you know, I don't.

757
00:37:53,920 --> 00:37:56,880
Speaker 9: Think there's any reason to be dramatically underweight large captech.

758
00:37:56,920 --> 00:37:59,840
Speaker 9: The fundamentals are there, but with where valuations are, people

759
00:37:59,840 --> 00:38:03,120
Speaker 9: are really calling into question that the narrative and you know,

760
00:38:03,120 --> 00:38:05,600
Speaker 9: the second derivative on growth and the fact that if

761
00:38:05,640 --> 00:38:08,920
Speaker 9: you have kep act increasing and profit margins decreasing. You

762
00:38:09,000 --> 00:38:11,560
Speaker 9: do want to diversify, So for years people were punished

763
00:38:11,560 --> 00:38:13,799
Speaker 9: for being diversified. I think now you get rewarded for

764
00:38:13,840 --> 00:38:16,520
Speaker 9: being diversified. Doesn't mean you abandon large cap tech.

765
00:38:16,800 --> 00:38:21,080
Speaker 4: Diversified more into fixed income? Is that and also an area?

766
00:38:21,120 --> 00:38:22,200
Speaker 4: How do you think about fixed income?

767
00:38:22,360 --> 00:38:24,920
Speaker 9: Yeah, fixed income looks pretty attractive here. I think, you know,

768
00:38:25,320 --> 00:38:27,960
Speaker 9: while while there are you know, there is a potential

769
00:38:28,000 --> 00:38:30,320
Speaker 9: today maybe we get a you know, an uptick on CPI,

770
00:38:30,360 --> 00:38:32,440
Speaker 9: and who knows what happens on a daily basis. I

771
00:38:32,440 --> 00:38:35,080
Speaker 9: think the path is lower for rates over time. You

772
00:38:35,160 --> 00:38:37,920
Speaker 9: have a kind of squishy labor market, and you have

773
00:38:37,960 --> 00:38:40,759
Speaker 9: a backdrop where inflation is you know, certainly above two

774
00:38:40,840 --> 00:38:43,080
Speaker 9: but not a major problem. So you'll get some cuts

775
00:38:43,120 --> 00:38:45,319
Speaker 9: this year and that'll that'll lead to ten year lower

776
00:38:45,360 --> 00:38:47,760
Speaker 9: That's a good backdrop for fixed income and those yields

777
00:38:47,760 --> 00:38:48,640
Speaker 9: are still pretty decent.

778
00:38:48,680 --> 00:38:51,080
Speaker 2: But get it back to Bucknell finance one oh one.

779
00:38:51,120 --> 00:38:54,840
Speaker 2: The bottom line is we need a nominal GDP animal spirit.

780
00:38:55,400 --> 00:38:59,160
Speaker 2: With this inflation report in nineteen minutes, I mean it's

781
00:38:59,280 --> 00:39:02,439
Speaker 2: pop and a four percent plus nominal am I wrong

782
00:39:02,480 --> 00:39:02,799
Speaker 2: on that?

783
00:39:03,160 --> 00:39:05,759
Speaker 9: No, GDP has been quite strong and I think will

784
00:39:05,800 --> 00:39:08,640
Speaker 9: continue to be. There's been a lot of fuel thrown

785
00:39:08,640 --> 00:39:10,520
Speaker 9: onto the fire in terms of, you know, juicing the

786
00:39:10,560 --> 00:39:13,640
Speaker 9: economy into this year, and so there's no surprise that

787
00:39:13,680 --> 00:39:14,920
Speaker 9: the GDP's remain strong.

788
00:39:15,000 --> 00:39:17,279
Speaker 2: You know what of the interest they screwed this up

789
00:39:17,719 --> 00:39:21,600
Speaker 2: Isabelle Mchaosi Lagos in Paris and Robert Teeter New York

790
00:39:21,680 --> 00:39:23,879
Speaker 2: given me way too much optimism.

791
00:39:23,320 --> 00:39:24,040
Speaker 5: Way too much.

792
00:39:24,640 --> 00:39:28,120
Speaker 4: Just Robert, how did we hear more and more and

793
00:39:28,200 --> 00:39:31,359
Speaker 4: more about alternative investments, whether it's the stuff we grew

794
00:39:31,440 --> 00:39:34,240
Speaker 4: up with private equity, hedge funds, Now there's private credit.

795
00:39:35,080 --> 00:39:37,400
Speaker 4: Some people are pitching me Timber. I don't know what's

796
00:39:37,440 --> 00:39:38,759
Speaker 4: going on at there. So how do you guys think

797
00:39:38,760 --> 00:39:39,560
Speaker 4: about alternatives?

798
00:39:39,640 --> 00:39:39,879
Speaker 2: Yeah?

799
00:39:40,000 --> 00:39:42,440
Speaker 9: Generally speaking, you know, we think it makes sense for

800
00:39:42,480 --> 00:39:45,399
Speaker 9: certain clients that can tolerate the illiquidity. I would say,

801
00:39:45,440 --> 00:39:48,600
Speaker 9: in this environment, this is not an environment necessarily to

802
00:39:48,680 --> 00:39:50,920
Speaker 9: be adding to those sorts of things. For me, this

803
00:39:51,000 --> 00:39:53,839
Speaker 9: is very much a keep it simple environment. Get back

804
00:39:53,840 --> 00:39:56,640
Speaker 9: to your target on risks, stay liquid, stay diversified.

805
00:39:56,640 --> 00:39:58,400
Speaker 2: Can I give you vignette on this? Yes?

806
00:39:58,440 --> 00:39:59,040
Speaker 9: Absolutely.

807
00:39:59,120 --> 00:40:01,640
Speaker 2: This is one of my great memories with all my

808
00:40:01,800 --> 00:40:05,760
Speaker 2: respect for mister Karay and the Pioneer Group. Sixty State Street, Boston,

809
00:40:06,120 --> 00:40:09,680
Speaker 2: Good morning, ninety two nine f in Boston. I'm standing

810
00:40:09,800 --> 00:40:13,240
Speaker 2: with John Cogan at Logan. We're getting our bags from

811
00:40:13,520 --> 00:40:16,680
Speaker 2: some place that needed you know, a beach and you know,

812
00:40:17,080 --> 00:40:21,280
Speaker 2: the Caribbean whatever. And he and I were talking about

813
00:40:21,280 --> 00:40:25,759
Speaker 2: the lumber investment that Pioneer Group made. I think it

814
00:40:25,840 --> 00:40:28,760
Speaker 2: was in Russia, like they owned half a Siberia or something.

815
00:40:29,440 --> 00:40:32,280
Speaker 2: Should that be in my ira? Robert Teeter, I don't

816
00:40:32,320 --> 00:40:32,719
Speaker 2: think so.

817
00:40:33,000 --> 00:40:35,520
Speaker 9: I think for most people the answer is now again,

818
00:40:35,680 --> 00:40:37,840
Speaker 9: especially in this environment endowments.

819
00:40:37,880 --> 00:40:42,040
Speaker 2: Would you tell Bucknell's endowment to buy lumber in Siberia?

820
00:40:42,239 --> 00:40:45,000
Speaker 9: You know, we are big believers in eliminating some of

821
00:40:45,040 --> 00:40:47,040
Speaker 9: the complexity. A lot of people do these things, they

822
00:40:47,040 --> 00:40:48,960
Speaker 9: put them in in small size. You spend half the

823
00:40:49,000 --> 00:40:51,719
Speaker 9: meeting talking about one, you know, a five basis point

824
00:40:51,719 --> 00:40:54,879
Speaker 9: out exactly what's the point. Yeah, we're just very big

825
00:40:54,880 --> 00:40:57,239
Speaker 9: believers in keep it right now.

826
00:40:57,280 --> 00:41:00,719
Speaker 2: In private credit, Paul mentions private credit, private do you

827
00:41:00,760 --> 00:41:03,600
Speaker 2: have in your head a markdown on private credit?

828
00:41:03,680 --> 00:41:06,160
Speaker 9: Well, we've seen some numbers, and you know they've they've

829
00:41:06,200 --> 00:41:09,080
Speaker 9: been not pretty in terms of the markedowns. You know,

830
00:41:09,160 --> 00:41:11,759
Speaker 9: for a lot of the private client base. You know,

831
00:41:11,880 --> 00:41:14,880
Speaker 9: things that are just simple old school MUNI bonds, et

832
00:41:14,960 --> 00:41:16,560
Speaker 9: cetera compare pretty well.

833
00:41:16,600 --> 00:41:18,160
Speaker 4: Yeah, you know a few years ago, Yeah.

834
00:41:18,040 --> 00:41:19,960
Speaker 9: There was a there was a big divergence and there

835
00:41:20,000 --> 00:41:21,600
Speaker 9: was a lot of opportunity set but a lot of

836
00:41:21,640 --> 00:41:22,960
Speaker 9: money's flown into that space.

837
00:41:23,239 --> 00:41:26,000
Speaker 2: Returns of compress, correct me, Paul. We saw that to

838
00:41:26,880 --> 00:41:29,200
Speaker 2: in the last two three days. Somebody said it used

839
00:41:29,200 --> 00:41:32,319
Speaker 2: to be a double digit gross on private credit and

840
00:41:32,360 --> 00:41:35,000
Speaker 2: it's now single digit returns. Yeah, I mean, and they're

841
00:41:35,040 --> 00:41:36,399
Speaker 2: not selling what they used to sell.

842
00:41:36,520 --> 00:41:39,280
Speaker 4: No, it's interesting. We are going to get the CPI

843
00:41:39,440 --> 00:41:44,920
Speaker 4: data in, you know, seventeen minutes here the FED. Are

844
00:41:44,960 --> 00:41:48,080
Speaker 4: you kind of baking in one two rate cuts this year?

845
00:41:48,160 --> 00:41:49,680
Speaker 4: Is that kind of in your background.

846
00:41:49,239 --> 00:41:51,040
Speaker 9: I'm baking into And you know, we have a lot

847
00:41:51,040 --> 00:41:53,080
Speaker 9: of conversations with clients who look at the FED and

848
00:41:53,480 --> 00:41:56,759
Speaker 9: they immediately gravitate toward the political side of it. But

849
00:41:56,840 --> 00:41:59,359
Speaker 9: I really think the more interesting point is you're if

850
00:41:59,360 --> 00:42:00,960
Speaker 9: you're on the FED, you can make a pretty good

851
00:42:01,000 --> 00:42:04,040
Speaker 9: case for either outcome, either staying put for a long

852
00:42:04,120 --> 00:42:06,520
Speaker 9: time or cuts. And so I think we will get

853
00:42:06,560 --> 00:42:08,799
Speaker 9: a couple of cuts. They'll probably coincide with if we

854
00:42:08,840 --> 00:42:11,799
Speaker 9: get a weak labor print along the way, a.

855
00:42:11,800 --> 00:42:14,720
Speaker 2: Week labor print. I'm thinking Neil sauce the giant credit

856
00:42:14,760 --> 00:42:17,719
Speaker 2: sueeze and get a basic core minmet what's called min

857
00:42:17,840 --> 00:42:22,799
Speaker 2: max theory. What's the labor data point you follow where

858
00:42:22,840 --> 00:42:24,960
Speaker 2: you go to chairman warsh Oops.

859
00:42:25,840 --> 00:42:27,279
Speaker 9: Yeah, I think if you get if you get a

860
00:42:27,320 --> 00:42:30,799
Speaker 9: negative payroll number, if you get a decline in the

861
00:42:31,000 --> 00:42:33,920
Speaker 9: hire's rate, which is the expansion of payrolls that's been

862
00:42:33,920 --> 00:42:36,719
Speaker 9: hovering around three percent, if that starts to dip, if

863
00:42:36,719 --> 00:42:39,440
Speaker 9: you start to see weakness in wages not keeping up

864
00:42:39,480 --> 00:42:41,239
Speaker 9: with inflation, you might get some support there.

865
00:42:41,320 --> 00:42:44,839
Speaker 2: Okay. Isabel Monteosi Lago just emailed. She says you can

866
00:42:44,880 --> 00:42:46,719
Speaker 2: go to Paris and she'll come to New York.

867
00:42:46,840 --> 00:42:50,160
Speaker 4: All right, Robert Teeter, thank you so much.

868
00:42:50,200 --> 00:42:54,759
Speaker 2: Appreciated it. With Silver Crests Asset Management. Stay with us.

869
00:42:55,040 --> 00:42:58,279
Speaker 2: More from Bloomberg Surveillance coming up after this.

870
00:43:05,520 --> 00:43:09,080
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871
00:43:09,160 --> 00:43:12,319
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872
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873
00:43:16,200 --> 00:43:17,719
Speaker 1: watch us live on YouTube.

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00:43:18,000 --> 00:43:21,239
Speaker 2: Joining us to Heidi Crabo Redick, or senior fellow at

875
00:43:21,239 --> 00:43:24,360
Speaker 2: Geoeconomics at the Consult Foreign Relations. Heidi, we have a

876
00:43:24,400 --> 00:43:28,760
Speaker 2: heartbreaking story, Christiana Kara Stephen Wickery on Cuba is struggling

877
00:43:28,840 --> 00:43:32,080
Speaker 2: to keep the lights on? Is I mean Amory Horten's

878
00:43:32,120 --> 00:43:34,840
Speaker 2: down in Venezuela right now. I'm worried about her, Heidi

879
00:43:34,920 --> 00:43:37,880
Speaker 2: Crabo Rediker. Can Venezuela keep the lights on?

880
00:43:39,840 --> 00:43:41,680
Speaker 12: So I'm worried about Amory too.

881
00:43:42,680 --> 00:43:43,120
Speaker 4: Good morning.

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00:43:43,160 --> 00:43:45,200
Speaker 12: Thanks for having me on. I think a lot about

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00:43:45,320 --> 00:43:47,160
Speaker 12: I mean, we all have to think a lot about

884
00:43:47,200 --> 00:43:50,680
Speaker 12: Venezuela these days. But what I'm paying attention to is

885
00:43:50,800 --> 00:43:54,240
Speaker 12: really how the US has put itself in the middle

886
00:43:54,360 --> 00:44:01,320
Speaker 12: of Venezuela and China's trade with Venezuela. China was, obviously, China,

887
00:44:01,400 --> 00:44:07,240
Speaker 12: Russia Iran were the key supporters of Venezuela, and Venezuela

888
00:44:07,280 --> 00:44:10,200
Speaker 12: was one of the key supporters of Cuba. So you know,

889
00:44:10,640 --> 00:44:13,000
Speaker 12: when you look at the relationship between the US and China,

890
00:44:13,040 --> 00:44:16,960
Speaker 12: it's interesting that China is now feeling the chokehold of

891
00:44:17,080 --> 00:44:21,120
Speaker 12: its oil its oil deals with Venezuela because we don't

892
00:44:21,160 --> 00:44:24,000
Speaker 12: really have a lot of cards to play with China,

893
00:44:24,640 --> 00:44:28,680
Speaker 12: and so the fact that we're actually restricting their you know,

894
00:44:28,760 --> 00:44:31,560
Speaker 12: any any access to Venezuelan oil kind of like a

895
00:44:31,600 --> 00:44:35,160
Speaker 12: giant and a conda around this economy and taking over

896
00:44:35,200 --> 00:44:38,719
Speaker 12: the taking over the control of energy assets. It's it's

897
00:44:38,800 --> 00:44:41,000
Speaker 12: very interesting to see what China's response is going to be.

898
00:44:41,280 --> 00:44:44,200
Speaker 4: I like how you kind of say in your notes here, Heidi,

899
00:44:44,320 --> 00:44:47,560
Speaker 4: China's real problem isn't oil, it's debt as it relates

900
00:44:47,560 --> 00:44:49,120
Speaker 4: to Venezuela. What do you mean by that?

901
00:44:50,080 --> 00:44:53,440
Speaker 12: So, I mean Beijing has about a ten to twenty

902
00:44:53,680 --> 00:45:00,239
Speaker 12: billion dollar venezuela debt problem, debt, debt, debt exposure, sure,

903
00:45:00,360 --> 00:45:02,600
Speaker 12: and most of it structured as oil for loans. So,

904
00:45:03,600 --> 00:45:07,600
Speaker 12: you know, I think in terms of how it's not

905
00:45:07,680 --> 00:45:11,880
Speaker 12: a major source of China's oil, it's about four percent.

906
00:45:12,360 --> 00:45:14,759
Speaker 12: So this is painful but not existential. But the debt,

907
00:45:15,120 --> 00:45:17,400
Speaker 12: I think, you know, they had, given that they have

908
00:45:17,480 --> 00:45:20,319
Speaker 12: this long term, these long term contracts, then they do

909
00:45:20,400 --> 00:45:22,600
Speaker 12: have this debt exposure. They're going to have to figure

910
00:45:22,600 --> 00:45:24,680
Speaker 12: that out with the Trump administration. Because I don't think

911
00:45:24,719 --> 00:45:26,880
Speaker 12: that the Chinese are really looking to lose ten to

912
00:45:26,920 --> 00:45:29,200
Speaker 12: twenty billion in revenues.

913
00:45:29,840 --> 00:45:33,200
Speaker 4: And I know when President Trump when initiated the operation

914
00:45:33,280 --> 00:45:36,080
Speaker 4: to take mister Murdureau and perhaps put in a more

915
00:45:36,080 --> 00:45:39,120
Speaker 4: friendly government, it was mister Trump and the administration said

916
00:45:39,640 --> 00:45:41,279
Speaker 4: US oil companies are going to go in there and

917
00:45:41,320 --> 00:45:43,920
Speaker 4: invest and really make a lot of money in Venezuela.

918
00:45:44,000 --> 00:45:46,640
Speaker 4: I'm not sure we heard that type of enthusiasm from

919
00:45:46,680 --> 00:45:49,279
Speaker 4: the energy CEOs because they've had some bad history in

920
00:45:49,280 --> 00:45:51,600
Speaker 4: the past in Venezuela. How do you think US oil

921
00:45:51,640 --> 00:45:54,160
Speaker 4: companies or Western europe oil companies are going to deal

922
00:45:54,200 --> 00:45:55,920
Speaker 4: with Venezuela.

923
00:45:56,160 --> 00:45:58,040
Speaker 12: So, I mean, it's one thing to do in oil

924
00:45:58,120 --> 00:46:01,160
Speaker 12: export quarantine and bring the the full bearing of the

925
00:46:01,280 --> 00:46:05,719
Speaker 12: US military around you know that choke hold on exports.

926
00:46:05,760 --> 00:46:08,640
Speaker 12: But I think you know, you have governance that's really unresolved.

927
00:46:09,040 --> 00:46:12,800
Speaker 12: You have Delsea Rodriguez who's claiming legitimacy, but she's still

928
00:46:12,840 --> 00:46:15,920
Speaker 12: you know, insisting Medoro as a real president. They don't have.

929
00:46:16,440 --> 00:46:18,960
Speaker 12: I mean, I think for short term kind of wildcatters,

930
00:46:19,360 --> 00:46:22,399
Speaker 12: it's going to be it's going to be an opportunity.

931
00:46:22,840 --> 00:46:25,480
Speaker 12: But I think you need you need stable rules, you

932
00:46:25,560 --> 00:46:29,720
Speaker 12: need long term capital for the to repair the infrastructure.

933
00:46:29,120 --> 00:46:30,600
Speaker 4: And you need you need security.

934
00:46:30,719 --> 00:46:32,520
Speaker 12: I think it's it's just not a secure place right now.

935
00:46:32,520 --> 00:46:34,160
Speaker 2: All right, we're going to talk about this in a minute.

936
00:46:34,239 --> 00:46:38,880
Speaker 2: Let me squeeze this in our margin. Our tariff percentages

937
00:46:39,000 --> 00:46:42,719
Speaker 2: coming down. The zeitgeist this morning from the ft from

938
00:46:42,760 --> 00:46:45,839
Speaker 2: our Genning Leonard is metal tariffs are going to come in.

939
00:46:46,080 --> 00:46:48,120
Speaker 2: Do you just presume that tariffs are going to be

940
00:46:48,160 --> 00:46:49,719
Speaker 2: lower than we expect?

941
00:46:51,360 --> 00:46:53,759
Speaker 12: So, I mean the tariff The tariff question is a

942
00:46:53,840 --> 00:46:57,400
Speaker 12: moving it's sort of a moving puzzle because you have

943
00:46:57,480 --> 00:47:02,719
Speaker 12: these AEPA rulings out standing. You have different agreements that

944
00:47:02,760 --> 00:47:07,560
Speaker 12: are being renegotiated. For example, with India, you have a

945
00:47:07,560 --> 00:47:11,640
Speaker 12: lot of exemptions that are being given for things that

946
00:47:11,680 --> 00:47:14,200
Speaker 12: we actually need in the United States that we don't

947
00:47:14,239 --> 00:47:17,600
Speaker 12: produce that could be inflationary if we don't have the

948
00:47:17,880 --> 00:47:20,080
Speaker 12: if you have the tariffs remaining in place. So I

949
00:47:20,160 --> 00:47:23,239
Speaker 12: think you will see tariffs come down, but I think

950
00:47:23,239 --> 00:47:26,120
Speaker 12: it's still going to be a very bumper ride to

951
00:47:26,239 --> 00:47:28,560
Speaker 12: where we get to a landing zone where we have

952
00:47:28,600 --> 00:47:29,759
Speaker 12: some some stability.

953
00:47:30,400 --> 00:47:32,120
Speaker 2: Hi do you thank you so much? How do you red?

954
00:47:32,520 --> 00:47:37,279
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple Spotify,

955
00:47:37,400 --> 00:47:41,680
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956
00:47:41,800 --> 00:47:45,279
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957
00:47:45,360 --> 00:47:49,400
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958
00:47:49,440 --> 00:47:52,799
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959
00:47:53,000 --> 00:47:54,720
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