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Speaker 2: This is Bloomberg business Week, Insight from the reporters and
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Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: It's one day after the latest FED decision, the second
Speaker 3: decision of twenty twenty five. We're President Trump posting on
Speaker 3: social media that the FED should cut interest rates, splitting
Speaker 3: with the US Central Bank as officials way the economic
Speaker 3: cost of his tariff push. As you know, the FED
Speaker 3: did not cut rates as expected yesterday, but they did
Speaker 3: sharply reduce their twenty twenty five growth projections. Meantime, one
Speaker 3: former FED official, former New York FED President Bill Dudley,
Speaker 3: and a Bloomberg opinion columnist telling us right after the
Speaker 3: decision that the FED is in a bit of a
Speaker 3: tough place.
Speaker 4: You know, I think the reality is they're flying blind.
Speaker 4: They don't really know what's going to happen the growth.
Speaker 4: They don't know what it's going to happen to inflation,
Speaker 4: and you know, that increases the risk of making a
Speaker 4: policy mistake or just being late.
Speaker 3: Tough place to be Former New York President Bill Dudley,
Speaker 3: Bloomberg opinion columnist as well yesterday and Bloomberg Surveillance. The
Speaker 3: FED decides all right to talk about the day after
Speaker 3: and also go over some US economic data points that
Speaker 3: we got this morning back with us as Bloomberg News
Speaker 3: Economics editor Molly Smith. She's here joining me and Tim.
Speaker 3: She is here in our New York studio. Molly as
Speaker 3: always so much coming at the economic universe and just
Speaker 3: investors in general. Today's US economic data looks like the
Speaker 3: labor market, okay, housing market bounce back from some weakness.
Speaker 3: What do we need to know?
Speaker 5: Yeah, the job was claims numbers have really just been
Speaker 5: in a bit of like a holding pattern in this
Speaker 5: kind of like no nothing state. You know, they're really
Speaker 5: very much in line with pre COVID levels, like hovering
Speaker 5: in this two twenty thousand area on the initial claims
Speaker 5: and that's nothing really to.
Speaker 6: Worry about, which is great.
Speaker 5: Of course, there are other data that we get later
Speaker 5: today that are referring to federal workers specifically, and those
Speaker 5: have been drifting higher as we would expect to see
Speaker 5: per all of the government firings. That we've been having,
Speaker 5: So that's.
Speaker 3: What is that data that we get later.
Speaker 5: So that's still from the jobless claims data, it's just
Speaker 5: published a little bit later for the federal workers. Specifically
Speaker 5: that the Department Labor also puts this out later on Thursday.
Speaker 5: So we've been starting to pay closer attention for that.
Speaker 5: Not something we used to look at before, but obviously
Speaker 5: makes a lot more sense now. And then on the
Speaker 5: housing front, we saw existing home sales up beat all
Speaker 5: estimates in February.
Speaker 7: I think a lot of this was really due.
Speaker 5: To the weather though that coming back from remember in
Speaker 5: January we had the wildfires in La. We had really
Speaker 5: bad winter weather across a lot of the South. So
Speaker 5: those were the two regions in February that really bounced back,
Speaker 5: whereas the Northeast and the Midwest not as much.
Speaker 8: But why was this such a surprise, Molly, Because we
Speaker 8: actually saw equity markets turn higher as a result of
Speaker 8: this stronger than expected housing data. Why did this surprise analysts?
Speaker 8: They knew about the weather already.
Speaker 5: Yeah, you know, this was above the reading was above
Speaker 5: all estimates in the Bloomberg survey. I think that you know,
Speaker 5: the expectation for the housing market right now is really
Speaker 5: just so grim. Like you know, it's very much like
Speaker 5: we're just going to be in this really steady state
Speaker 5: of like you know, pretty tepid sales. Mortgage rates, yes,
Speaker 5: have come down a bit in recent weeks, but are
Speaker 5: still in that six point seven percent area, and home
Speaker 5: prices are still really high. Even though you're getting more
Speaker 5: inventory coming on the market, it still hasn't really made
Speaker 5: much of a dent in prices. So the outlook for
Speaker 5: housing isn't great right now. That said, we're going into
Speaker 5: this season where home sales do typically pick up in
Speaker 5: the spring, so that's going to be really.
Speaker 7: Key to watch.
Speaker 8: Okay, we have that economic data. We talked about the
Speaker 8: economic data. Now that we've had about a day to
Speaker 8: really digest what we heard from j Powell and the
Speaker 8: Federal Reserve yesterday, what are your thoughts, Molly. I was
Speaker 8: a little surprised to see the market reaction yesterday given
Speaker 8: the uncertainty that Powell express but what it was the
Speaker 8: best fed day market going all the way back to
Speaker 8: July of last year.
Speaker 5: I think what Powell's job a lot of the time
Speaker 5: is to do is understandably not induce panic or to
Speaker 5: downplay where there might be perceptions of panic and the
Speaker 5: SEP or Summary of Economic Projections yesterday that came out
Speaker 5: before Powell spoke, For me, that would have been a
Speaker 5: bit panic inducing. I think you know that sharp cuts
Speaker 5: rvery sharp cuts to growth, you know, marked up unemployment
Speaker 5: pretty noticeably, marked up risks to inflation as well, very much.
Speaker 5: So those are things that all right now, you know,
Speaker 5: add up to what we say is statflation risks, and
Speaker 5: that was really the big word going into the press
Speaker 5: conference yesterday. But then Powell gets up there and seems
Speaker 5: to downplay all of these risks, doesn't seem to phase
Speaker 5: by it. I think something for me that was really
Speaker 5: bizarre was his idea that the marking down of growth
Speaker 5: projections and higher risks to inflation somehow balance each other out.
Speaker 5: That part I still don't really have great understanding on.
Speaker 5: But I think the market rally was really just because
Speaker 5: the Fed still sees two rate cuts this year. And
Speaker 5: I think there was a real case where what if
Speaker 5: you saw the dots price in more than that, because
Speaker 5: normally we would love to see that and that would be,
Speaker 5: you know, a good news rally. But I think in
Speaker 5: this case, if you saw more cuts priced in. That
Speaker 5: would have really clued in to say that the FED
Speaker 5: is very worried about growth and that they would have
Speaker 5: been expecting more cuts even though inflation's going to be
Speaker 5: so high.
Speaker 3: What's the analysis after we kicked it off? Mentioning what
Speaker 3: Bill Dudley, former New York FED President, said on the
Speaker 3: Bloomberg broadcast yesterday following the FED decision, saying, you know,
Speaker 3: I think the reality is that the FED is flying blind.
Speaker 3: They don't really know what's going to happen to growth,
Speaker 3: they don't know what's going to happen to inflation, and
Speaker 3: how that increases the risk of making a policy mistake.
Speaker 3: Do most folks that you talk to in the economic
Speaker 3: community feel like we just don't know what's next. I
Speaker 3: feel like there is a growing chorus of business leaders
Speaker 3: who are kind of saying that, and it's why you're
Speaker 3: seeing maybe m and a pull back, lots of things
Speaker 3: pull back.
Speaker 5: Yeah, it's totally fair.
Speaker 6: I mean, I think it's.
Speaker 5: One of the funny parts of the press conference yesterday too,
Speaker 5: was when Powell had said back to a reporter when.
Speaker 3: He broke out into the Grateful Dead song, No.
Speaker 5: Just that part. There was one part where he had
Speaker 5: like put it back to a reporter saying, you know,
Speaker 5: like forecasting is really hard, Like what would you put down?
Speaker 5: It was like, okay, that's more your job than like hours,
Speaker 5: but it's really hard.
Speaker 6: To his credit, it is very hard right now.
Speaker 5: So and you saw that very much in the economic
Speaker 5: projections as well. Yeah, all of the heightened uncertainty around growth,
Speaker 5: around the labor market, around inflation.
Speaker 7: He's not wrong.
Speaker 6: I think none of us really know.
Speaker 5: And you know, to Michael McKee's great question of how
Speaker 5: long are you going to wait to see the totality
Speaker 5: of these policies?
Speaker 6: Who the heck knows right?
Speaker 3: And will it be too late?
Speaker 2: Right?
Speaker 3: Because you have to be so preactive, I got to say,
Speaker 3: I sow, I've you know, put buttons and like, you know,
Speaker 3: things that fall off, and threading a needle can be
Speaker 3: really tough. And I feel like that's where the FED
Speaker 3: is right now. Threading a needle into terms of what
Speaker 3: we need for monetary policy.
Speaker 5: Not easy right now, not at all. I don't want
Speaker 5: their job. We'll just sit here and try to decipher it. Well.
Speaker 8: His job getting a little harder too, with President Trump
Speaker 8: saying last night that the FED should cut interest rates.
Speaker 8: Splitting with the US Central Bank is officials way the
Speaker 8: economic cost of his tariff push. This is a post
Speaker 8: on his social media network. The FED would be much
Speaker 8: better off cutting rates as US tariffs start to transition
Speaker 8: their way to the economy. Do the right thing. April
Speaker 8: second is Liberation Day in America. How does that complicate
Speaker 8: Powell's job?
Speaker 5: Well, Well, one thing, it totally breaks with a long
Speaker 5: standing practice that you know, the FED is an independent
Speaker 5: institution that.
Speaker 8: Yes, going all the way back to d eighteen, right.
Speaker 5: A long time, and Powell has been a very staunch
Speaker 5: supporter as it did this last time, right. Yeah, Like
Speaker 5: presidents don't usually comment on monetary policy, that's not their
Speaker 5: job justice, Powell will often say real comments on fiscal policy.
Speaker 6: So that's one thing.
Speaker 5: The other thing is that if the as I was
Speaker 5: kind of saying before, if the FED was going to
Speaker 5: price in more rate cut ex expectations this year, I
Speaker 5: think it honestly would have the inverse effect of what
Speaker 5: Trump is going for. I think more people would perceive
Speaker 5: that as the FED is really worried about growth and
Speaker 5: that even though inflation's projected to be elevated, we need
Speaker 5: to step in to save the economy, So I don't
Speaker 5: think that would honestly have the effect that Trump is
Speaker 5: going for.
Speaker 3: All Right, lots to keep on our mind, Molly, Thanks
Speaker 3: so much, Bloomberg News Economics editor, Molly Smith. All right,
Speaker 3: that is your economic update on this Thursday. Now what
Speaker 3: it all means for those who have to invest in
Speaker 3: this market where instability seems to be the norm. Volatility
Speaker 3: we see it today due to trade war uncertainties, and
Speaker 3: despite as we just talked about with Molly, a bounce
Speaker 3: back in some housing and certainly job data looking pretty positive,
Speaker 3: we do get a big test tomorrow with the expiration
Speaker 3: of four and a half trillion dollars worth of options contracts.
Speaker 3: So helping make sense of the trade for us here
Speaker 3: at Bloomberg is Bloomberg Opinion columnist Connor Sen. He is
Speaker 3: founder of Peachtree Creek Investments. He joins us from Atlanta. Hey, Connor,
Speaker 3: good to have you back here with Tim and myself.
Speaker 3: You know, there are always buyers and sellers in the market, right,
Speaker 3: and whether there's more or less of one really kind
Speaker 3: of helps develop, you know, or determine the flows, the demand,
Speaker 3: the pricing. But I do think about and with the
Speaker 3: acknowledgement that there's always buyers and sellers. Is today's market
Speaker 3: investable in your view?
Speaker 9: I think so, just that the market we had coming
Speaker 9: into the year was very momentum driven a lot of
Speaker 9: optimism about the Trump administration, and I think we've seen
Speaker 9: over the past month that that momentum has really come
Speaker 9: out of the market. The Trump optimism is more mixed,
Speaker 9: and so that sort of fast money trade, hot money
Speaker 9: trade has really come out of the market, but sort
Speaker 9: of a lot of parts of the market are still
Speaker 9: not really that concerned about recession, and so basically you're
Speaker 9: getting better valuations on stocks than need a month ago
Speaker 9: without yet the kind of recession concern that you've gotten
Speaker 9: over the past two years. A few times.
Speaker 8: Color, what about the rotation that we're seeing out of
Speaker 8: US equities into international equities. I've spoken to two friends.
Speaker 8: They're not in finance. They're normal people who are thinking
Speaker 8: about their own retirement. They have nothing to do with
Speaker 8: investing day to day in the market. But both of
Speaker 8: them have said to me, I'm selling US equities and
Speaker 8: I'm investing outside of the US. I think that it's
Speaker 8: a little turbulent here right now, and I think the
Speaker 8: opportunities outside of the US. What do you make of that?
Speaker 9: I think from a narrative standpoint, I get it in
Speaker 9: that sort of over the past few years, the US
Speaker 9: was seen as the only game in town globally to invest,
Speaker 9: and I think that explains a lot of the valuations
Speaker 9: you saw in US large cap stocks last year, when
Speaker 9: you had Costco at fifty five times earnings and Walmart
Speaker 9: at thirty five times earnings. It wasn't just the tech stocks,
Speaker 9: so sort of a belief that don't bet against America.
Speaker 9: American companies are going to win, and there's no growth
Speaker 9: anywhere else in the world. And so I think now
Speaker 9: you're seeing, well, you know, there is a need for
Speaker 9: capital in Europe and we're seeing the stock market perform
Speaker 9: better there. I'm sure globally a lot of investors who
Speaker 9: were sort of betting on the US or I feel
Speaker 9: kind of just you know, deceived, and so they're looking
Speaker 9: to repatriot capital. And at least for now, I get
Speaker 9: the story of well, Europe's going to grow faster, the
Speaker 9: US is more mixed, So let's rotate money out of
Speaker 9: the US to other parts of the world.
Speaker 3: Hey, one of the things I wanted to ask you
Speaker 3: here we are Connor one day after the FED and
Speaker 3: Tim was kidding or we kid it at the top
Speaker 3: of the broadcast, like, don't look at your four oh
Speaker 3: one k right now. I, however, did And I am
Speaker 3: wondering about you know a column you wrote that gets
Speaker 3: into where the stock market goes, the economy will follow.
Speaker 3: We have seen a pullback in stock so far, certainly
Speaker 3: this year. So based on that, where do you think
Speaker 3: the US economy has had in your view? It sounds
Speaker 3: like you're not talking about recession, but I am curious
Speaker 3: how you kind of tie these together.
Speaker 9: We've had a negative momentum in the US economy, I
Speaker 9: would say for about a year. I think the soft
Speaker 9: landing ended last spring full employment and the bus spring.
Speaker 9: But the acceleration and growth we're seeing is just very,
Speaker 9: very slow, and it's not fall off a cliff like
Speaker 9: we saw with Lehman Brothers in two thousand and eight
Speaker 9: or with COVID, and so I think that's a case
Speaker 9: where I don't think we're gonna have recession over the
Speaker 9: next six months. For I think housing's already kind of dead,
Speaker 9: so it's hard to kill housing again. And AI is
Speaker 9: the other risk at economy that I see, and that
Speaker 9: seems like more of a twenty twenty six story. With
Speaker 9: all the CAPEX spent, what's going to happen this year?
Speaker 9: And so I do think that high end consumption growth
Speaker 9: could be slower, maybe pretty stagnant this year. But you're
Speaker 9: not really seeing signs of growth falling off a table
Speaker 9: or the kinds of fragilities that would lead to a
Speaker 9: recession at least over the next few months.
Speaker 8: What's the AI risk that you see. I'm here in
Speaker 8: San Francisco right now, everybody's talking about Nvidia GtC. We're
Speaker 8: going to be hearing from ED in just a few minutes.
Speaker 8: What's the AI risk?
Speaker 4: For me?
Speaker 9: It's just sort of the dollars being spent. So if
Speaker 9: tens or hundreds of billion of dollars are being spent
Speaker 9: on chips and data centers and power generation the utilities,
Speaker 9: it's really that going away that would create the recession risk.
Speaker 9: And I think just the lead times to cutting spending
Speaker 9: on that are more than a few months, a few quarters,
Speaker 9: and so it's really companies have committed to spend money
Speaker 9: in twenty twenty five, it's really twenty twenty six that
Speaker 9: the question mark is, and we're just not going to
Speaker 9: know about that for at least six months. So I
Speaker 9: think in twenty five maybe markets don't do well, but
Speaker 9: the economy probably a stagnation is the worst case scenario
Speaker 9: rather than.
Speaker 3: A bad recession, but not stagflation.
Speaker 9: I don't think so. I'm kind of with the that
Speaker 9: the tariffs are likely more of a one time impact,
Speaker 9: and it might be a significant one time impact, depending
Speaker 9: on how sizable they are, but it's just not going
Speaker 9: to be a nineteen seventies thing, even a twenty twenty
Speaker 9: two thing. It'll just be, you know, some prices went
Speaker 9: up for a few months, and then after that one
Speaker 9: time price shock, it sort of happened. And that's even
Speaker 9: if companies feel like they can pass along those prices,
Speaker 9: and that's not clear the moment that they're willing to
Speaker 9: do so.
Speaker 3: All right, So I'm going to get a bunch of
Speaker 3: hate mail, but I'm only, you know, pigging back on
Speaker 3: what fed Jo J. Powell said about tariff's like transitory,
Speaker 3: We never get that wrong. Not a hot word here,
Speaker 3: but I mean, truly, do you believe that the impact
Speaker 3: of tariffs will be transitory even if they stay and
Speaker 3: don't go away, or is it only if they stay
Speaker 3: don't go away, and there is it more piled on
Speaker 3: and we get using regulatory environment and we get tax cuts.
Speaker 9: It kind of depends on the underlying conditions in the economy.
Speaker 9: And when Russia invaded Ukraine in early twenty twenty two,
Speaker 9: we had a very overheated economy, low interest rates. That
Speaker 9: was kind of the perfect dynamic for that inflation to
Speaker 9: stick around and be amplified. Right now, you have an
Speaker 9: economy where the cyclical parts that are pretty weak. The
Speaker 9: hiring last year that was strong was government, healthcare and education.
Speaker 9: That looks to week in this year. There's just not
Speaker 9: a lot of underlying growth momentum in the economy, so
Speaker 9: it's not clear that companies are in a position to
Speaker 9: pass longst price increases. So I think it's the economy
Speaker 9: is weaker and that's why I think it's more likely
Speaker 9: to be transitory.
Speaker 3: Okay, so twenty seconds, don't be worried investors. Is that
Speaker 3: your final line?
Speaker 9: I mean, I think you know, if you were super
Speaker 9: invested heading into the year, that was probably a mistake.
Speaker 9: After this selloff, I think you need sort of more
Speaker 9: bad things to happen this year.
Speaker 6: Than just spooks.
Speaker 9: I think the spook move has already happened.
Speaker 3: All right, we're gonna leave with our Hey, Connor, thanks
Speaker 3: so much. Glad we could check in with you. Bloomberg
Speaker 3: Opinion Columbus Connorson. He's the founder of Peachtree Creek Investments.
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Speaker 3: Well, some big news in the world of sports, and
Speaker 3: no it's not March Madness, although that is also big,
Speaker 3: and we'll get to that in just a moment. But
Speaker 3: among our most read stories on the Bloomberg terminal at
Speaker 3: this hour is a consortium reaching a deal to buy
Speaker 3: the NBA's Boston Celtics for six point one billion dollars.
Speaker 3: Takeover makes it the biggest NBA deal ever, surpassing the
Speaker 3: four billion dollar valuation for the Phoenix Suns back in
Speaker 3: late twenty twenty two. So let's talk about this. Joining
Speaker 3: us is Bloomberg News US sports business reporter Randall Williams.
Speaker 3: He's here in studio along with Bloomberg Originals Chief correspondent
Speaker 3: Jason Kelly. Guys, I want to kick it off, Randall,
Speaker 3: first talk to us about this deal. A lot of money,
Speaker 3: A lot of money.
Speaker 10: It's the most ever paid for a sports franchise. It
Speaker 10: edges out Josh Harris's purchase of the Commanders and NBA
Speaker 10: owners in the league is happy he got the six billion.
Speaker 3: Uh. Jason is shaking his head. Why are you taking Mead?
Speaker 11: It's unbelievable when you think about the last even during
Speaker 11: the period where these guys have owned the Boston Celtics,
Speaker 11: they bought it for three hundred and sixty million dollars
Speaker 11: correct back in.
Speaker 3: Twenty twenty two and two thousand and two. Forget me, yeah,
Speaker 3: two and.
Speaker 11: Two won a couple championships. They put it on the
Speaker 11: market for essentially a state planning on the part of
Speaker 11: the Grouseback family. You know, I don't know what you heard, Randall.
Speaker 11: It wasn't a certainty that they were going to get
Speaker 11: to this price, but they did.
Speaker 7: No.
Speaker 10: I mean when they don't own their own stadium, and
Speaker 10: you know, the stadium is a big part of this
Speaker 10: because basketball in the NBA you fill up the stadium
Speaker 10: forty one times a year. But there's three hundred and
Speaker 10: sixty five days in a year. You want to fill
Speaker 10: that with concerts. You want to fill that with other events, festivals,
Speaker 10: and so when you don't own that, you lose out
Speaker 10: on revenue. For the Celtics to reach six billion dollars
Speaker 10: without owning their own stadium, it sets the precedent for
Speaker 10: the NBA expansion owners who are going to be bidding
Speaker 10: for this, who will own their stadium. And it's like, oh,
Speaker 10: they sold for that without a stadium.
Speaker 3: Oh, I'm good, But that begs the question, why did
Speaker 3: they pay so much without the stadium.
Speaker 10: Well, there's a lot of reasons why, I insult, right,
Speaker 10: there's a lot of reasons why. But the first thing
Speaker 10: I would say is that when you're buying a sports team,
Speaker 10: you do want to get to a price. And I
Speaker 10: think that for the league and for the Boston Basketball group,
Speaker 10: they wanted that six billion, they got it. And there's
Speaker 10: someone there's some unhappy people too, like Steve Pagliyuga. He
Speaker 10: put out a statement and said, look, we're gonna pay
Speaker 10: pat We're gonna excuse me, we're going to pay cash
Speaker 10: into this. And he lost and we're seeing that Bill
Speaker 10: Chisholms Group, which has Sixth Street and Rob Hale and
Speaker 10: Bruce A. Beal Junior from relative companies they won Come.
Speaker 8: On, Jason, Yeah yeah, Jason, does does the deal make
Speaker 8: sense to you? I mean somebody who's who's looked at
Speaker 8: these valuations for a long time, does it actually pencil
Speaker 8: out or is it pretty shocking to you? And look,
Speaker 8: we should say something is worth whatever, somebody's going to
Speaker 8: pay for it. So obviously it's worth this much, but
Speaker 8: it's kind of mind blowing.
Speaker 11: Now it's hard to pencil it out. But then again,
Speaker 11: you know Randall and now we're talking about this. Before
Speaker 11: he came on air, people thought Steve Balmer was crazy
Speaker 11: for paying two billion dollars for the LA Clippers. People
Speaker 11: thought Matt Ishbiel was crazy for paying four billion dollars
Speaker 11: for the Phoenix Suns and Mercury. People thought these guys
Speaker 11: were crazy for paying three hundred and sixty million dollars,
Speaker 11: you know, twenty some eighty years ago. So you're exactly right.
Speaker 11: I think one thing that to build on what Randall
Speaker 11: was saying. The other real interesting thing about this is
Speaker 11: this is an expensive team, right. They have a very
Speaker 11: high pay roll, and this is not the sort of
Speaker 11: cash machine that maybe people would think it is right.
Speaker 10: And I'd say, going back to your point about you
Speaker 10: know how crazy it is. You look crazy in the
Speaker 10: moment buying any sports franchise, But as long as valuations
Speaker 10: look good, you look like the wise guy in due time.
Speaker 10: So as long as these valuations keep rising in the
Speaker 10: NBA has a new media deal, everybody looks smart. On
Speaker 10: the Celtics side, no stadium ownership, and you have a
Speaker 10: lot of money to pay out to players, So they
Speaker 10: have to definitely go back to the drawing board and
Speaker 10: go back to their books and figure out like how
Speaker 10: do we make this work long term?
Speaker 8: But Randall, as we were talking about it, it wasn't
Speaker 8: just the biggest NBA deal in history. It's the biggest
Speaker 8: sports franchise deal in history. So you got the Washington
Speaker 8: Commanders last year for six billion, Manchester United last year
Speaker 8: for five point four billion, the Broncos for four point
Speaker 8: six billion back in twenty twenty two. It's football, it's soccer,
Speaker 8: it's basketball. What's going on here, redl Is it just
Speaker 8: supply and demand?
Speaker 3: It's a little bit of both.
Speaker 10: I mean you're seeing in the influx of private equity
Speaker 10: in these deals, and so with these franchises rising as
Speaker 10: quickly as they are, the number of people who are
Speaker 10: able to buy these teams outright is diminishing. It's just
Speaker 10: getting so much smaller. That's why you see Sixth Street
Speaker 10: in this deal having a billion dollars to offer up
Speaker 10: and help pay for this. With that in mind, if
Speaker 10: private equity is going to pay a billion dollars for
Speaker 10: this six billion dollar team, then even the number of
Speaker 10: limited partners from individual people is going to be small
Speaker 10: as well. So it all depends on how you're forming
Speaker 10: your ownership group, whether you want private equity, whether you
Speaker 10: want people.
Speaker 3: It just really depends.
Speaker 10: But private equity is a silent partner in this.
Speaker 3: All right, well, lent Man, Whenever we talk about these
Speaker 3: big deals, we could go on forever because it's always
Speaker 3: fascinating in the amount of money and the buyers continue
Speaker 3: to pay up. Radel, thank you so much. We'll look
Speaker 3: for more of your coverage on the ruer. Randall Williams,
Speaker 3: US sports business reporter here at Bloomberg News. We're going
Speaker 3: to stay with sports because didn't know, or maybe did
Speaker 3: you notice, that March Madness is underway. Welten, Kelly, listen.
Speaker 3: We do our own version here at Bloomberg and it's
Speaker 3: now hitting what it's tenth anniversary, So tenth anniversary. This
Speaker 3: is called Brackets for a Cause.
Speaker 11: This is something I've been really excited to be a
Speaker 11: part of along with our chairman Numeritis Peter Grauer. For
Speaker 11: the last ten years, we've raised six million dollars. More
Speaker 11: than six million dollars so far, setting a new record.
Speaker 11: In this year's contest, sixty one participants pledging twenty thousand dollars.
Speaker 11: I'm not as good at math as you are, Carol
Speaker 11: Masser and Tim Cenovic, but that's one point two million
Speaker 11: dollars plus a purse. It's going to be split among
Speaker 11: some really good charities. We couldn't be more excited.
Speaker 8: All right, who's playing this year? I did not do
Speaker 8: my bracket yet, by the way, which means I can't
Speaker 8: do it because the games have started. Yeah, come on, man,
Speaker 8: it's twenty twenty six for me.
Speaker 3: Yeah. Who did get there?
Speaker 8: Who did get there?
Speaker 3: Together?
Speaker 7: Though?
Speaker 11: This year, some really good names, some names very familiar
Speaker 11: to the Bloomberg BusinessWeek audience. We're talking about John Gray,
Speaker 11: We're talking about David Solomon, John Gray, of course, President
Speaker 11: Blackstone David Solomon, the CEO of Goldman Sachs. Jenny Johnson,
Speaker 11: she is of course running Templeton. Carolyn Tish Blodgett. She
Speaker 11: is an owner of her family of the New York
Speaker 11: Football Giants as well as the controlling owner of Gotham FC.
Speaker 3: Katie Cootch of TCW Yes.
Speaker 11: Katie Kotch John Winkle read from TPG. So it is
Speaker 11: a murderer's row.
Speaker 3: Most of these guys are who's been there from like
Speaker 3: day one.
Speaker 11: So Gary Cone has been there from day one. He
Speaker 11: won the very first contest. Of course, now the vice
Speaker 11: chairman of IBM, former president of Goldman Sachs. We actually
Speaker 11: got some of the champions together for a dinner a
Speaker 11: few weeks ago and Gary was there. Of course, he
Speaker 11: served in the first Trump administration. He's been just ride
Speaker 11: or die for this for a long time. John Gray
Speaker 11: has been with this pretty much since the beginning as well.
Speaker 11: He won a couple of years ago. These people show up,
Speaker 11: they get very excited, and you know Cliff Asnist, Dwight Anderson,
Speaker 11: like lots of names.
Speaker 3: Bill Ackman, I always kid you when I used to
Speaker 3: sit next to you, and it would be like Jason
Speaker 3: would come in the morning and they would be like
Speaker 3: messaging him like did you see what?
Speaker 5: Like how I?
Speaker 11: Well I did, and I mean, honestly, this will come again.
Speaker 11: Is no surprise these guys, these men and women very competitive.
Speaker 11: I'll get emails all weekend about you know, where they are,
Speaker 11: and they're gaming it out, especially as it gets towards
Speaker 11: the finals. And keep in mind we're looking at the
Speaker 11: men's bracket and the women's bracket. It's split evenly between
Speaker 11: the two. So six hundred thousand will go for the men's,
Speaker 11: six hundred thousand will go for the women's.
Speaker 8: Yeah, Jason, I can still do my women's bracket right.
Speaker 11: Yes, you should be able to do your bracket on
Speaker 11: the terminal. Yes, yeah, jeets.
Speaker 8: Until tomorrow at eleven thirty, so that one is still open.
Speaker 11: Yeah, get in there, Get in there, Tim Sten.
Speaker 3: He go on the Bloomberg terminal. You know it will
Speaker 3: never get Tim on Jason's feet are bracket sneakers. Yes,
Speaker 3: we will never get them our limited edition we needed
Speaker 3: edition sneakers. Bracket sneakers.
Speaker 11: I'm gonna you can take a picture and put them
Speaker 11: out on your social well.
Speaker 3: Yeah, Jason, I know what size is your shoe?
Speaker 8: Jason, maybe you can share?
Speaker 11: Yeah, no, not for sharing. Tim, All right, have fun
Speaker 11: in San Franciscoy.
Speaker 3: Jason Kelly, thank you so much.
Speaker 2: This is the Bloomberg Business Week podcast. Listen live each
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Speaker 3: Do we want to talk a little bit about cars.
Speaker 3: Gotta say one of the best known global auto brands.
Speaker 3: Great read on the global auto economy and the luxury
Speaker 3: global consumer. We're talking about Mercedes Benz and our Hannah
Speaker 3: Elliott recently catching up with the company's CEO for more
Speaker 3: on wear and why because there was a hilltop villa
Speaker 3: involved and we want to know the details. Hannah, of course,
Speaker 3: is Bloomberg Pursued Autocolumnists. She's also co host of the
Speaker 3: Hot Pursuit podcast that she does with Matt Miller. You
Speaker 3: can find that at Bloomberg dot Com or wherever you
Speaker 3: get your podcast. Hannah, so good to check in with
Speaker 3: you. You are on the West Coast, as you often are.
Speaker 3: You're in Irvine, California today at Karma Automotive, the headquarters.
Speaker 3: First of all, let's start there. Where are you? Why
Speaker 3: are you? Who are they?
Speaker 7: Well, it's a funny thing. You should bring it up.
Speaker 7: I can't actually tell you too much because I'm embargo.
Speaker 7: But okay, the good news is I am at the
Speaker 7: headquarters of Karma Automotive and they are bringing forth a
Speaker 7: new vehicle that should be hitting the streets in twenty
Speaker 7: twenty six. So I can't say much more than that.
Speaker 7: It's going to be electric, of course, And of course
Speaker 7: we remember Karma they had There was a Karma Fisker.
Speaker 7: There have been multiple iterations of this company. They've struggled,
Speaker 7: but they're going to They're going to fight again. So
Speaker 7: I'm here to report about it.
Speaker 8: Can they Well, okay, I was gonna ask ask you
Speaker 8: more questions. I'm so scared of Yeah, I'm so scared.
Speaker 8: I'm so scared.
Speaker 7: I'll tell you if I can answer or not. I mean,
Speaker 7: it's fascinating.
Speaker 8: Well, okay, but before we get to Mercedes, I do
Speaker 8: you want to It's really really hard for an American
Speaker 8: car company to start and pull this off. I mean,
Speaker 8: look at Tesla, look at Rivian. Yes, but the road
Speaker 8: of you know of that is paved with like the
Speaker 8: bodies of so many car companies.
Speaker 3: Can they pull it off?
Speaker 7: I don't know. It's going to take a lot of money.
Speaker 7: It's going to take a lot of money. And at
Speaker 7: this point, and this is a great segue into Mercedes,
Speaker 7: I don't know if they can catch up enough in
Speaker 7: the technology world to compete with Mercedes. And I say
Speaker 7: that having just driven the third generation Carma Rivero from
Speaker 7: La down here, and the technology is moving so fast
Speaker 7: these days for a small startup to now compete with Mercedes,
Speaker 7: and I've just spent a week in Rome with Mercedes
Speaker 7: with their new CLA said Anne, It's going to be
Speaker 7: extremely difficult. And one thing I always said about the
Speaker 7: startups were, you know, the big OEMs did not produce
Speaker 7: electric cars at first because they didn't have to. It
Speaker 7: didn't mean they couldn't, It just means they didn't have to. Now,
Speaker 7: as OEMs realized, they're going to have to and they
Speaker 7: need to to offer options for everybody, the market is
Speaker 7: even more competitive. So I don't know, it's really a
Speaker 7: tough challenge.
Speaker 3: Kind it feels like I don't know. Is just so
Speaker 3: you know the word of the era right now, because
Speaker 3: there's just so much coming out people. I want to
Speaker 3: ask you about your conversation. I mean, take us to
Speaker 3: the hilltop villa and what you saw, but who you
Speaker 3: talked to. And I am curious about the global environment,
Speaker 3: the global business environment, especially with you know, tariffs coming
Speaker 3: out of the United States, global supply chains being maybe
Speaker 3: potentially rethought. What did you have to say?
Speaker 7: So I spoke with Ola Collinius, who is the chief
Speaker 7: executive officer and chairman of Mercedes Benz Group. This is
Speaker 7: the guy where the buck stops. And he also is
Speaker 7: saying he doesn't know the future. This is a common
Speaker 7: thread that we've seen. When I ask him about tariffs,
Speaker 7: when I ask him about China, when I ask him
Speaker 7: about EV sales in the US, he is very open
Speaker 7: saying nobody knows the future. What is important is to
Speaker 7: be very quick and to be very flexible. And so
Speaker 7: Mercedes is working to speed up everything and to be
Speaker 7: incredibly flexible so they can pivot and turn if they
Speaker 7: need to to satisfy the market. What they're hearing and
Speaker 7: what the CLA sedan really provides is that some people
Speaker 7: do want evs, but a lot of people still want
Speaker 7: a combustion option. So this CLA sedan is really interesting
Speaker 7: because it's very affordable. It should be around fifty thousand euros.
Speaker 7: US prizing hasn't been announced, but for Mercedes that's considered
Speaker 7: entry level. But it also is very advanced and it
Speaker 7: will be offered in a hybrid version in the US
Speaker 7: next year. So it's debuting as an electric vehicle, but
Speaker 7: there will be a hybrid version coming next year. Again,
Speaker 7: it's all about options, and it's also about going against Tesla,
Speaker 7: the kind of original startup that made good. This is
Speaker 7: this is Mercedes now going directly to Tesla.
Speaker 8: Well, speaking of that, Tesla is at least in the
Speaker 8: ones that are sold in the US are made in
Speaker 8: the US. Concern about and closely aligned now with President Trump,
Speaker 8: with Elon Musk, how closely aligned he is. What is
Speaker 8: the concern that Mercedes has about tariffs? About President Trump
Speaker 8: given the comments that he's made about German car companies.
Speaker 7: It's a huge, huge concern. I asked Ola about it.
Speaker 7: He used the word reciprocity. He of course is following
Speaker 7: very closely, but he really made the point that Mercedes
Speaker 7: has been in the US for decades. They've got two
Speaker 7: factories in the US. They are one of the nation's
Speaker 7: largest exporters, and he really emphasized, we feel a mare American.
Speaker 7: We're part of the American fabric. We hope there's a
Speaker 7: sense of reciprocity as we're talking about these tariffs.
Speaker 3: All right, great stuff as always, So glad we could
Speaker 3: check in with you. Hannah. Thank you, thank you, Thank you.
Speaker 3: Hannah Elliott. She is Bloomberg Pursuit's auto columnist out there
Speaker 3: in Irvine, California. Highly recommend you check out her story.
Speaker 3: It's on the Bloomberg and at Bloomberg dot com. You
Speaker 3: and find out a little bit more too, about the
Speaker 3: cla from the Mercedes from Mercedes, I should say, and
Speaker 3: her experience doing a test drive.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Applecarplay and the Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube. Well, the NASTAC one
Speaker 2: hundred is in correction. It's down about eleven percent from
Speaker 2: its January highs. The S and P five hundred, Carol,
Speaker 2: it's down by eight percent. Look, corrections happen, stocks go down.
Speaker 2: Yet the volatility that we're seeing right now stemming from
Speaker 2: a back and forth trade war, uncertainty over future economic conditions.
Speaker 2: That's something Carol, that investors in this market may.
Speaker 3: Not be used to, that's for sure. And the question
Speaker 3: that Peter Atwater has for investors is do they stay
Speaker 3: buckled in in the passenger seat with President Trump behind
Speaker 3: the wheel or do they chump from the car. It
Speaker 3: is great to have back with us on Bloomberg Business
Speaker 3: Swee Peter Atwater. He's President of Financial Insights and adjunct
Speaker 3: Professor of Economics at William and Mary. He's also author
Speaker 3: of the twenty twenty three book The Confidence mapp, charting
Speaker 3: a path from chaos to Clarity. He also coined the
Speaker 3: term K shaped recovery. He joins us from Williamsburg, Virginia. Peter,
Speaker 3: so glued to be talking with you again. I feel
Speaker 3: like I'm not even quite sure where to start because
Speaker 3: there's so much coming at us. The volatility, you know,
Speaker 3: you get into investors feeling vulnerable, uncertain, powerless sentiment is
Speaker 3: a big factor. I don't know this market environment like
Speaker 3: where do we go from here? Do we even know?
Speaker 3: Bill Dudley of the New York Fed said, you know,
Speaker 3: really that the Fed doesn't even really kind to know
Speaker 3: where to go next.
Speaker 6: Yeah, we never really know where to go.
Speaker 12: But what's so interesting to meet about where we are
Speaker 12: today is that there has been this huge mind shift
Speaker 12: from inauguration day to today. So coming into inauguration, people
Speaker 12: were fantasizing wildly about where the markets were going, where
Speaker 12: the new administration was going to take the economy in
Speaker 12: the markets, And since then investors have had to come
Speaker 12: to grips with the fact that there is without question
Speaker 12: a shift in behavior out of Washington where President Trump
Speaker 12: is behind the wheel. And so investors are used to
Speaker 12: being in the passenger seat with specific companies with you know,
Speaker 12: next to CEOs.
Speaker 6: For good and for ill.
Speaker 12: But now they're having to look at their entire portfolio
Speaker 12: and decide are the investment I'm involved in going to
Speaker 12: be beneficiaries of the new administration or victims of them.
Speaker 8: It's just so interesting to hear this because I think
Speaker 8: there's this narrative that emerged following the first Trump administration
Speaker 8: that this is a guy who looks to the Dow
Speaker 8: in the s and P five hundred as a scorecard,
Speaker 8: as a sort of report card, and indeed, during his
Speaker 8: first administration he touted numbers there. Yet we've heard a
Speaker 8: different narrative emerge this time, Peter. Do you buy it
Speaker 8: that he's not paying attention to the stock market.
Speaker 12: One of the things we know about President Trump is
Speaker 12: he loves to cite metrics that work in his favor.
Speaker 12: So I'm not surprised with the markets dropping that he's
Speaker 12: looking for alternative measures of consumer and satisfaction in the economy.
Speaker 6: But I think at the end of the day, what
Speaker 6: he is trying.
Speaker 12: To demonstrate, more than anything else is that he and
Speaker 12: he alone is going to dictate economic policy, American diplomatic policy,
Speaker 12: and that everyone else needs to come to grips with that.
Speaker 3: But is there a point like, yeah, No, It's interesting, Peter,
Speaker 3: because how many conversations I've had with folks and they're like, oh,
Speaker 3: you know how this is going to play out. It's
Speaker 3: just like you know, you reported on at the first
Speaker 3: go round, and it feels so different, and I think
Speaker 3: so many people are realizing this is different this time around.
Speaker 3: Having said that, is there a point a breaking point
Speaker 3: where the team around the president somehow has a bigger
Speaker 3: say like they did in the first administration, because right
Speaker 3: now it does feel like absolutely, like you lay it out,
Speaker 3: the president's in the driver's seat and everyone is there
Speaker 3: in the back seat to back them up.
Speaker 6: Yeah.
Speaker 12: One of the things that I say to my students
Speaker 12: is falling confidence individuals grow spines. And so what we're
Speaker 12: likely to see is that should the markets continue to drop,
Speaker 12: should consumer confidence continue to fall, those around him will
Speaker 12: feel compelled to react. Whether that's sufficient or not, we
Speaker 12: don't know. And to be fair, Carol, there are a
Speaker 12: number of organizations and individuals who feel wildly empowered now,
Speaker 12: and so we're in this interesting moment where individuals and
Speaker 12: organizations are having to decide in which camp do they
Speaker 12: expect to fall because one of the things we see
Speaker 12: with dominant leaders such as Trump is there are clear
Speaker 12: benefits and there are also clear punishment.
Speaker 8: Well, how do you advise people to weather this storm
Speaker 8: if you indeed think it is a storm? Because there
Speaker 8: are a lot of people we talk to Peter who say, okay,
Speaker 8: wait a second, once he gets tax cuts figured out,
Speaker 8: once we get to April, and there's more clarity when
Speaker 8: it comes to trade, things will become less valid ale
Speaker 8: what do you say to that?
Speaker 12: So I think that investors have to be thinking, I
Speaker 12: say a lot. You know, plan for what you can imagine,
Speaker 12: but be prepared for what you can't. In this environment,
Speaker 12: investors and corporate executives need to have two playbooks at once.
Speaker 12: One is in anticipation of things going in their favor,
Speaker 12: but also a very clear playbook for if this goes
Speaker 12: against me, what do I do? What is my what
Speaker 12: are my preparations planned ahead in anticipation of that?
Speaker 6: Because the outcome.
Speaker 12: Here is going to be very binary. And that's what
Speaker 12: we see over and over is that when you create
Speaker 12: beneficiaries and victims, the vulnerability that comes from the victims
Speaker 12: sets things in motion. We're seeing that in Europe right now,
Speaker 12: where the geopolitical vulnerability has leaders on edge and they're
Speaker 12: mobilizing in response.
Speaker 8: I'm going to ask you something crazy, Peter. Is one
Speaker 8: of the outcomes here on an investor perspective, that the
Speaker 8: US becomes uninvestable.
Speaker 12: In your view, I think that is a clear possibility.
Speaker 12: I think that investors have to be made comfortable that
Speaker 12: the United States is interested in foreign capital, in retaining
Speaker 12: domestic capital and appreciate tim If you look at labor,
Speaker 12: goods and capital, we're seeing We've already seen restrictions and
Speaker 12: walls go up on the immigration front, We're seeing tariffs
Speaker 12: creating friction in terms of the mobility of goods. It
Speaker 12: is to me only a question of time when capital
Speaker 12: falls into that same playing field where public policy begins
Speaker 12: to intervene, and not just in the United States, but
Speaker 12: globally in terms of wanting it, not wanting it, courting it,
Speaker 12: pushing it away. Those are completely in sync with what
Speaker 12: we're seeing with labor and goods.
Speaker 3: All right, So playing this out, Peter, what kind of
Speaker 3: economy then is the US economy? How different might it become?
Speaker 12: I think one of the things that is so unusual
Speaker 12: about where we are is that we were coming off
Speaker 12: of extraordinary in vulnerability, invincibility, particularly in tech and so
Speaker 12: this to me is a very different setup than we
Speaker 12: saw in twenty sixteen in the valuations and the economic
Speaker 12: growth may already be peaking, may already have peaked, and
Speaker 12: so the administration i think needs to be very sensitive
Speaker 12: to the risk that they're pouring water on a fire
Speaker 12: that was already poised to go out.
Speaker 2: Peter.
Speaker 3: One thing I do think about too, and I think
Speaker 3: we talk about it is God. It always happens whenever
Speaker 3: there's a new administration. Okay, in two years we have,
Speaker 3: or less than two years we've mid terms, in another
Speaker 3: four years we have another presidential election, or less than
Speaker 3: four years. Is the world though, moving on in many ways?
Speaker 3: Because it just feels like no matter what changes politically again,
Speaker 3: it just can't count the US like it has.
Speaker 12: Yeah, I think that trust, when broken, is incredibly difficult
Speaker 12: to rebuild. And as I talk to folks from Europe,
Speaker 12: it is unquestionable that they feel that trust of the
Speaker 12: United States has been broken. And so the likelihood that
Speaker 12: the midterms or even the twenty twenty eight election for
Speaker 12: your will bring back what has been isn't the case.
Speaker 12: Extreme vulnerability changes us and we will not endure it again.
Speaker 12: And as I look at what we're seeing, particularly in
Speaker 12: Europe right now, they are poised to make sure that
Speaker 12: the vulnerability they've just experienced doesn't come back to bite them.
Speaker 3: All right, So just to stress again because Tim asked about,
Speaker 3: you know, is the US, you know, not really a
Speaker 3: market you want to invest in? Then perhaps in the future,
Speaker 3: what's your advice to investors. I mean, we've seen Europe
Speaker 3: certainly outperform. It came from a lower base and valuations
Speaker 3: were different. Just got about thirty seconds. Should investors be
Speaker 3: looking in Europe or elsewhere?
Speaker 12: I think investors have to be more diversified globally than
Speaker 12: they are. Most American investors are far too concentrated in
Speaker 12: the US right now to begin with. But I think
Speaker 12: that the administration needs to demonstrate that as a place
Speaker 12: to put capital, America remains the preferred choice globally, and
Speaker 12: that is now I think very much in question.
Speaker 3: All right, Peter, we got to run. Thank you so much.
Speaker 3: But another really big thing conversation, so important to the
Speaker 3: environment today, Peter, Thank you again. Peter Atwater, President of
Speaker 3: Financial Insights, adjunct professor over at William and Mary of Economics,
Speaker 3: and author of the book The Confidence. Matt ro'out you
Speaker 3: let me drive.
Speaker 2: Oh no, no, no, no, this is not a toy.
Speaker 3: Alright, please gravel, I want to drive.
Speaker 6: It's a good question.
Speaker 3: This is the drive to the clothes.
Speaker 2: Plus communic Well juled it on on Bloomberg Radio.
Speaker 8: All right, look at that. We got less than twenty minutes.
Speaker 8: Do you all into the close of US trading here
Speaker 8: in San Francisco. Carol Masser is in New York. That's
Speaker 8: where the equity markets are, at least for now, until
Speaker 8: everything moves to Texas.
Speaker 3: Carrol, Right, it isn't amazing.
Speaker 8: Yeah, I know we're talking about the Nasdaq. Was it
Speaker 8: the Nasdaq this week that said they might be opening
Speaker 8: up a little shop in Texas?
Speaker 6: Everything? Everything's going to Texas?
Speaker 8: Yeah, it is. Hey, let's stay in California though, and
Speaker 8: talk to Paisley Nardini, portfolio manager at the Simplify Asset Management.
Speaker 8: They've got about even billion dollars in assets under management.
Speaker 8: Paisley joins us from Newport Beach, California, where I imagine
Speaker 8: it is sunny and warm, like it is every single day.
Speaker 3: Paisley.
Speaker 8: Good to have you with us this afternoon. We're looking
Speaker 8: at a market right now that earlier in the day
Speaker 8: was searching for direction, but now solidly in the red,
Speaker 8: down the S and P five hundred by about three
Speaker 8: tenths of one percent. We just spoke to Peter Atwater
Speaker 8: all about the uncertainty playing out right now. What are
Speaker 8: you hearing from clients given the uncertainty in the environment.
Speaker 6: Yeah, well, thanks for having me exciting day.
Speaker 1: It's opening day of March Madness as well, so I'm
Speaker 1: sure many people are multitasking as they're listening in and
Speaker 1: looking at their brackets. But I would concur with what
Speaker 1: Peter had shared around market uncertainty.
Speaker 6: I mean, coming into.
Speaker 1: This year, one of my kind of theories is around
Speaker 1: this chaos theory. And really what this means is a
Speaker 1: dynamic balance between order and disorder, and how.
Speaker 6: Does this relate to markets.
Speaker 1: Well, it means that small change can have these disproportionate
Speaker 1: large effects, which ultimately just provides a greater backdrop of
Speaker 1: uncertainty and risk. I think the positive note coming out
Speaker 1: of that, though, is that there is also opportunity where
Speaker 1: there is uncertainty. So as we're chatting with clients, as
Speaker 1: we're hearing concerns, I think for the most part, although
Speaker 1: markets have entered an official correction or they had, it
Speaker 1: seems like we may have found a floor.
Speaker 6: How can clients think about navigating this?
Speaker 1: I mean, we've seen so much interest as clients are
Speaker 1: looking for diversifiers.
Speaker 6: It's really been.
Speaker 1: The thorn and the side of a balanced portfolio for
Speaker 1: the last decade or so. So it's really healthy to
Speaker 1: see some of these tides shifting, and I think a
Speaker 1: lot of what we've seen year to date so far
Speaker 1: has been more of a rotation trade than an all
Speaker 1: out recession flag.
Speaker 6: I mean, if we were expecting a recession, I think.
Speaker 1: We would see the ten year break below this kind
Speaker 1: of arbitrary kind of floor of four and a quarter.
Speaker 1: We're kind of hovering around that for whatever reas and
Speaker 1: markets don't want to break below that.
Speaker 6: Even today, as we talk.
Speaker 1: About being in the red here at the close, not
Speaker 1: all areas of the equity market are in the red.
Speaker 1: I think we've seen again this rotation into international markets.
Speaker 6: We've seen a rotation into.
Speaker 1: More outside the top five or seven names in the
Speaker 1: S and P five hundred. So as we're looking out,
Speaker 1: I think we're going to continue to see more of
Speaker 1: this uncertainty, which provides a backdrop of risk. But if
Speaker 1: clients are prepared and they have their portfolios positioned to
Speaker 1: whether this uncertainty take advantage of these opportunities through diversifiers
Speaker 1: and alternatives. I think people are kind of looking out
Speaker 1: and maybe optimistic of what the next couple months can provide.
Speaker 3: How are you thinking about the factor that is the
Speaker 3: president of the United States and the policies and as
Speaker 3: we just talked with Peter.
Speaker 6: At order, his.
Speaker 3: Seeming to not kind of care about the equity markets,
Speaker 3: which everybody was so certain he would, and the policies
Speaker 3: that are being put in place, be it geopolitically tariffs,
Speaker 3: you know, alienating allies. You know, whether or not this
Speaker 3: is a significant shift, certainly as a shift from what
Speaker 3: we've seen from past presidents in terms of policy, But
Speaker 3: is it something that is much more lasting that makes
Speaker 3: the US economy a very different economy and the US
Speaker 3: investment market a very different market. Are you having those
Speaker 3: kinds of conversations in and around the office our clients
Speaker 3: wondering whether you know, what is the US market that
Speaker 3: they've known for so long? Is it different going forward?
Speaker 6: Yeah?
Speaker 1: Absolutely so, I would say, first and foremost, when we
Speaker 1: when we found out Trump was going to be the
Speaker 1: president again, markets became euphoric. We were focused on deregulation,
Speaker 1: we were focused on tax cuts. We saw a massive
Speaker 1: spike and small business optimism. Consumers were excited, and I
Speaker 1: think we had too much euphoria. We weren't We weren't
Speaker 1: really looking through the noise at the time, And so now.
Speaker 6: What we're faced with is this.
Speaker 1: This kind of negative kickoff to the year, and really
Speaker 1: this focus on tariffs and the implications of that.
Speaker 6: I think that's going to be short lived.
Speaker 1: I think tariffs are really being seen as a negotiation tactic,
Speaker 1: and as we all know, whether you love him or
Speaker 1: hate him, wonderful negotiator, able to kind of pull strings
Speaker 1: get what he wants. And so I think as we
Speaker 1: look out, really Trump's focused on how to get what
Speaker 1: he wants out of this, and the tariffs, of course,
Speaker 1: are just noise in the interim, and so as we're
Speaker 1: speaking with clients, I think coming into this year, a
Speaker 1: lot of that euphoria was quickly kind of eroded, and
Speaker 1: I think that's what we're experiencing right now with just
Speaker 1: the digestion of what this uncertainty.
Speaker 6: And this noise might mean.
Speaker 1: I think as it relates to the administration, they've also
Speaker 1: been quite explicit that they're not concerned about the stock market.
Speaker 1: At the end of the day, stock market drives a
Speaker 1: lot of activity in the economy and vice versa. So
Speaker 1: I think that's maybe just kind of a narrative that
Speaker 1: they're putting out there. But I do think we need
Speaker 1: to take that at face value, because we haven't really
Speaker 1: seen kind of the administration or politicians jump in to
Speaker 1: put kind of a put.
Speaker 6: Or a floor on the markets.
Speaker 1: And I think that's a divergence than what we've seen
Speaker 1: in the past. I think historically we've seen, you know,
Speaker 1: whether it was not the President explicitly, but a lot
Speaker 1: of people in power and even at the FED coming
Speaker 1: through and ensuring the markets that everything was going to
Speaker 1: be fine. And as Scott Bessent shared last week or
Speaker 1: the week prior, we're in a detox period, and I
Speaker 1: think it's rare to actually hear them come out and
Speaker 1: say that, because they're essentially alerting us all that we
Speaker 1: should be prepared for volatility. And so as we focus
Speaker 1: on what it may look like as markets detox, we're
Speaker 1: focused on diversification as a response to how to get
Speaker 1: through that.
Speaker 8: Okay, well that's where I want to go, Paisley, because
Speaker 8: you're also your portfolio manager and asset allocation strategists, So
Speaker 8: how are you diversifying client portfolios right now? And look,
Speaker 8: I know one size doesn't fit all and eighty year
Speaker 8: old's not going to have the same portfolio as a
Speaker 8: forty year old, but in general, what could you say.
Speaker 1: Yeah, in general say, we're really focused on unique sources
Speaker 1: of risk and return. We're looking at, you know, from
Speaker 1: a correlation perspective, asset classes or strategies that are not
Speaker 1: going to move in tandem as.
Speaker 6: Or if equities sell off.
Speaker 1: And I think with that backdrop as well, investors has
Speaker 1: become really comfortable over the last ten to fifteen years
Speaker 1: that all you need in a portfolio of stocks.
Speaker 6: And bonds, Bonds have been that ballast.
Speaker 1: Bonds show up for your portfolio when we see equity volatility,
Speaker 1: and really since mid twenty twenty two, bonds haven't been
Speaker 1: that ballast.
Speaker 6: We've seen a bit of a rally year to date.
Speaker 6: I think there's a little bit of kind of short lived.
Speaker 1: Are we going to see rates continue to rally as
Speaker 1: equities sell off? Perhaps not, just given kind of where
Speaker 1: we are from a deficit perspective, there's obviously some pressure
Speaker 1: on rates also just given inflation. So how can investors
Speaker 1: think beyond just the stock bond portfolio?
Speaker 6: And a command I.
Speaker 1: Had shared last week is really thinking beyond like what
Speaker 1: we call this two legged stool and really thinking about
Speaker 1: incorporating that third leg of the stool for stability, and
Speaker 1: that third leg is all alternative, its diversifiers. So whether
Speaker 1: we're talking about commodities, obviously we've seen significant tailwinds you're
Speaker 1: to date in gold just given the uncertainty, but we
Speaker 1: think there's a broader opportunity in commodities beyond just gold,
Speaker 1: and especially if you're a dynamic in your commodity allocations,
Speaker 1: being able to go long and short. Beyond commodities, we're
Speaker 1: also looking at divergence and policy. Got it from interest rates,
Speaker 1: which might support currencies as well.
Speaker 3: Got to run, Paisley, Thank you so much. Paisley Nardini,
Speaker 3: portfolio manager at Simplify Asset Management, joining us there from
Speaker 3: Newport Beach, California.
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Speaker 12: I say idea, how a bo