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Speaker 2: Lurid Calvisina said, you wouldn't come on if I didn't
Speaker 2: do bear market bull market calls. I got to do
Speaker 2: standard deviation calls, and we're out at three point three
Speaker 2: standard deviations down Standard Iporus five hundred, one step down,
Speaker 2: two steps down, and this morning, three steps down. We
Speaker 2: are honored the Lori Calvisina would join us here in
Speaker 2: this hour again commercial free nationwide. Lord, your observation as
Speaker 2: you speak to your clients this morning.
Speaker 3: Look, I think people are trying to make sense of
Speaker 3: what's going on, how far we could go down. You know,
Speaker 3: just a few minutes ago, I had an email with
Speaker 3: someone who was talking to me about my four tiers
Speaker 3: of fear framework, and so there's a lot of sympathy
Speaker 3: among my clients for your thirty one hundred, which is
Speaker 3: the fourth tier where you have a major crisis and
Speaker 3: lose half the market value. I'm not going to sit here,
Speaker 3: Tom and tell you everybody saying that, but that was
Speaker 3: one email that came across, whereas other people have sort
Speaker 3: of resonated to the idea that we said, you know,
Speaker 3: we've been in a growth scare. Of the risk now
Speaker 3: is we're pricing in recession and it sounds to me
Speaker 3: like just based on where we open, we're headed straight
Speaker 3: for that. So I think that people are doing what
Speaker 3: we do when we have these events in markets where
Speaker 3: there is a fear that is cascading very rapidly.
Speaker 2: What we're going to do here now with an equity
Speaker 2: strategist is take all over wonderful abilities, particularly with less
Speaker 2: profitable non Apple, non Microsoft companies, and bring it over
Speaker 2: to what people are talking about with the Dow negative
Speaker 2: fourteen hundred. Laurie Calvicina. Take the equity market and what
Speaker 2: it will bounce off in a credit market that deteriorates.
Speaker 2: The jargon that Paul Sweeney uses is spreads deteriorate. That's
Speaker 2: the yield of a garbage bond versus a full faith
Speaker 2: in credit, and the yield goes higher. Are we to
Speaker 2: tipping point in credit that affects the equity market.
Speaker 3: It's a great question I'm certainly not an expert on
Speaker 3: the credit market, tom, so I'm gonna deflect on that one.
Speaker 3: But what I will say is that, you know, maybe
Speaker 3: up until about a week ago, and it was a
Speaker 3: little bit before the Rose Garden ceremony, to be honest,
Speaker 3: but we had actually been seeing small caps starting to
Speaker 3: outperform large caps, and like on the big down days
Speaker 3: in the market, small caps weren't doing quite as bad.
Speaker 3: And I thought that was interesting. That was making me
Speaker 3: feel a little bit better because they had already been
Speaker 3: so de risk, they were so cheap, and we felt
Speaker 3: like there was this rotation going on that was hitting
Speaker 3: the bigger caps harder than the small caps. But that's
Speaker 3: all changed. So we've seen that attempt that small caps
Speaker 3: were making the bottom now fail posts the Rose Garden,
Speaker 3: and that's going to be very you know, similar right
Speaker 3: to that high high yield cohort of the market. And
Speaker 3: what that's been telling me over the past few days
Speaker 3: is that those recession risks are getting priced in rapidly
Speaker 3: because as cheap as they are, and honestly, tom my
Speaker 3: valuation pe for the my valuation model, the market cap
Speaker 3: way to pe for the Russell two thousand was it
Speaker 3: thirteen and a half times on the Thursday close In recession,
Speaker 3: it tends to go to eleven to thirteen times even
Speaker 3: before you clean up the excess earning's optimism. So these
Speaker 3: things have been acting pretty pretty bad. But I do
Speaker 3: think that credit markets holding off, not deteriorating. You know,
Speaker 3: that's been sort of the thing that's kind of kept
Speaker 3: people out. And I hate to use the word panic
Speaker 3: in markets like these, but that's been kind of the
Speaker 3: thing that's kept people calm. But there can be a
Speaker 3: necessary part of the bondming process we have to go
Speaker 3: through in here.
Speaker 2: Let me uncom you right now, Paul the Vick's fifty
Speaker 2: two point zero.
Speaker 4: Seven exactly, Laurie, what's the earnings risk still out there
Speaker 4: in the marketplace do you think, I mean, is it
Speaker 4: a flat earnings year in twenty five or maybe something
Speaker 4: more than that.
Speaker 5: You know, what we've.
Speaker 3: Got modeled is is you know, kind of a stagflationary
Speaker 3: scenario right now for two fifty eight, which is well
Speaker 3: below the bottom up consensus, which last I checked was
Speaker 3: two sixty nine. Who knows what it is now because
Speaker 3: things are starting to change, but what we have found
Speaker 3: it's an interesting question you asked, Paul, because if you
Speaker 3: kind of go back and look at bad earnings years,
Speaker 3: what we often find is that, you know, in kind
Speaker 3: of big crises, big recessions, you're seeing earnings year, earning's
Speaker 3: growth on a year for a year basis going down
Speaker 3: like thirteen percent or something worse. Right, So, some big,
Speaker 3: ugly numbers, but they're actually a lot of years where
Speaker 3: earnings are just flat year to year, and when we
Speaker 3: see companies, you know, sort of being able to muddle through,
Speaker 3: that's often what's happened. So we when we recently changed
Speaker 3: our earning's number to two fifty eight, we said, you know,
Speaker 3: kind of the downside scenario, if we want to kind
Speaker 3: of put in a barricase, we're thinking a lot about
Speaker 3: kind of that two forty six number for now. That
Speaker 3: could change if we go into a full on recession.
Speaker 3: But outside of that, that's not a bad assumption to
Speaker 3: make just that earnings go nowhere, Laurie, I, I.
Speaker 4: Think most of us listening watching here would say, you
Speaker 4: know what, twelve twenty four to thirty six months from now,
Speaker 4: this market's going to be higher than where we are
Speaker 4: right here, probably meaningfully higher. So I should probably be
Speaker 4: doing some buying here.
Speaker 6: How does that conversition do you?
Speaker 3: Well, look, look, I'll tell you it's it's sort of
Speaker 3: the fly in the ointment for the strategists right now.
Speaker 3: And you know, I see this in my own modeling, Paul.
Speaker 3: We have five different models that we used to come
Speaker 3: up with our price targets. And look, I know everything
Speaker 3: is scary if people are like math, Oh my god,
Speaker 3: you're doing math, But that's what we have to do,
Speaker 3: right to keep ourselves grounded. And when I go through
Speaker 3: and look at my modeling, the one model that's still
Speaker 3: pretty constructive is actually the sentiment model, and it's it's
Speaker 3: basically looking at aaii net bulls that are down around
Speaker 3: GFC lows twenty twenty two lows, nineteen ninety one recession lows.
Speaker 3: And that is a good reminder that as quickly as
Speaker 3: things cascade onto the downside, they come they tend to
Speaker 3: come roaring back when you get some resolution. And so
Speaker 3: I think that's you know, that's something a lot of
Speaker 3: you know, us, for casters, we've had in the back
Speaker 3: of our heads as we've tried to navigate this environment.
Speaker 7: It's hard, so.
Speaker 3: That's impossible, right to say, what is that trigger? But
Speaker 3: it is something we have to watch, and it's a
Speaker 3: necessary condition for a bottom that's already been put in.
Speaker 8: Place, Tesla not to a two hundred and one ninety nine.
Speaker 8: We're not there yet.
Speaker 2: I don't want to be too gloomy, but I'm going
Speaker 2: to go over here, Lourie to something nobody talks about.
Speaker 2: And of course we're on a Canadian border on this
Speaker 2: Ford motor under ten dollars nine dollars eleven cents right
Speaker 2: down on lows for twenty twenty five. And they got
Speaker 2: a pe multiple on Ford of five and maybe the
Speaker 2: forward multiple, which we're going to blow up. We know
Speaker 2: that is seven. Are we in value territory and medium
Speaker 2: and small cap stocks like we clearly are with the
Speaker 2: Ford Motor Company.
Speaker 3: So you know, I was having an argument with someone
Speaker 3: about that this morning.
Speaker 8: Time's your housband.
Speaker 3: Talking about not my husband. I'm I'm on a trip.
Speaker 3: I'm in a hotel room.
Speaker 5: So I believe that he ardus with the marriage survives.
Speaker 3: Yeah, but he's very scared of my tears of fear chart.
Speaker 3: I had to take some passwords away from him. But
Speaker 3: the reality is is that you know, when I highlight
Speaker 3: this small calf chart and that we're at thirteen times,
Speaker 3: or at least we were as a Thursday. People say, well,
Speaker 3: we have to adjust the earnings, and I say, I know,
Speaker 3: we have to adjust the earnings. That's the separate thing though,
Speaker 3: if you look at you know, sort of historically my
Speaker 3: forward pe data eleven to thirteen times is where small
Speaker 3: caps tend to bottom out even when the E is
Speaker 3: too high, and people just can't mentally wrap their heads
Speaker 3: around that. But it is something important you have to
Speaker 3: keep in mind because it's one of those things again
Speaker 3: that you have to see. It's not going to peg
Speaker 3: a bottom on its own, right, but it's still a
Speaker 3: signal even though there's some problems with the E. Now,
Speaker 3: I do think with earnings, we have to get the
Speaker 3: numbers down before anybody is going to have faith to
Speaker 3: come in and buy here. Forty percent of the revisions
Speaker 3: and the growth, the Russell and S and P are
Speaker 3: still to the upside. Nobody's cutting numbers because they don't,
Speaker 3: you know, they I don't know a lot of different reasons,
Speaker 3: but nobody's been cutting the numbers pretty come on.
Speaker 2: Lori back to her clients at RBC Capital, Marcus Lori
Speaker 2: Kelvissenior hugged the children.
Speaker 5: As all can say.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: I had a major industry heavyweight who sent me his
Speaker 2: internal memo for his company, and he said, Tom, can't
Speaker 2: mention my name, you can't mention the note. It's you know,
Speaker 2: compliance and all all that. But his analog was nineteen
Speaker 2: ninety eight. What is Michael Purvis's analog to where we
Speaker 2: are right now?
Speaker 9: That's when Paul and I were working at Alicotas there.
Speaker 9: That was a long time ago there. I'm not sure
Speaker 9: what your friend was referencing in exactly.
Speaker 8: August, you know, the upset of August.
Speaker 9: Okay, okay, yeah, that's part ninety Capital Manage, right. Yeah, Well,
Speaker 9: I'm not sure I completely connect those dots in my
Speaker 9: mind right now. I mean that was a very sort
Speaker 9: of micro thing.
Speaker 6: This is, yeah, we're what's what's the problem.
Speaker 9: You know, if we go back to the last two
Speaker 9: big events uh COVID and the Great Financial Crisis, those
Speaker 9: were giant left tail shocks. The federal government was there
Speaker 9: in whether it's monetary policy or fiscal policy, there to
Speaker 9: to to be the ointment the solve for getting the
Speaker 9: wounds repaired and the economy back on track. In this case,
Speaker 9: the federal government is actually the catalyst for the for
Speaker 9: the volatility.
Speaker 6: So it's a very different I think mindset here there.
Speaker 9: I so, yeah, No, I think it's it's a very
Speaker 9: uncharted orders here. I've been, like, I think, coming in
Speaker 9: before last Wednesday, I've been conditioning clients to think about
Speaker 9: forty eight hundred, not on an economic barcase, not on
Speaker 9: a recept, not on something ugly, just simply normalization of
Speaker 9: valuation and a little bit of earning slippage, which is
Speaker 9: sort of normal course of business. And I think where
Speaker 9: I'm at Tom right now, and this is not like
Speaker 9: an official price target, but I think investors have to
Speaker 9: have their minds open to the fact that four thousand
Speaker 9: is not really that as crazy as it sounds, think
Speaker 9: about it. You could get even three handle less and
Speaker 9: P five like under four thousand, seventeen times flat flat
Speaker 9: earnings rows seventeen times seventeen is not some super distressed
Speaker 9: price and flat earnings growth is not really that big
Speaker 9: a bearcase, right, if you have some margin slippage and
Speaker 9: you have some top line slippage from where analystot. An
Speaker 9: overarching point I was trying to make in my note
Speaker 9: yesterday Tom was was that, you know, the pivot from
Speaker 9: a sentiment, the feeling you have is absolutely shocking, right,
Speaker 9: the reversal there, But the absolute levels of weird things
Speaker 9: have been is still really high compared to where we
Speaker 9: were in March of twenty twenty or during the Lehman
Speaker 9: Brothers saga and so forth. And I think you know,
Speaker 9: you look at credit spreads, Yeah, those were backing up
Speaker 9: part last week.
Speaker 6: Look at a ten.
Speaker 9: Year chart of those credit spreads, right. Look at a
Speaker 9: lot of cross asset volatility metrics, you know, for example,
Speaker 9: the Korean Wan volatilities that Damian's ass hour looks at
Speaker 9: all day long, right, those really weren't moving up at
Speaker 9: all last week. They are starting to now right there.
Speaker 9: If you look at one of the other metrics I
Speaker 9: think was really interesting is that, of course the Vicks
Speaker 9: had soared and it's still soaring there. If you looked
Speaker 9: at other European like European equity Vall, Nike equity VLL
Speaker 9: that had gone up. But the spreads between US equity
Speaker 9: vol and European equity evil or whatever what that record
Speaker 9: wise on.
Speaker 8: A pe basis.
Speaker 2: And I take your point in compression with the earnings
Speaker 2: coming down you mentioned Paul Danines given a Tesla change here,
Speaker 2: is it enough of an erning's compression? You just directly
Speaker 2: link it to a greater economy that's going to be
Speaker 2: destroyed by tariffs. Because if the academics tell me, the
Speaker 2: people from Columbia, if you go to Columbia, you get
Speaker 2: an ear Did you study with Mundel?
Speaker 8: Were you in a classic?
Speaker 6: I was in an architecture major at Columbia.
Speaker 8: Actually took.
Speaker 6: No, not a minute. No, I used to Maybe that's
Speaker 6: why you're so good. Anyways, I did in business school though.
Speaker 6: But yes, the.
Speaker 2: Bottom the bottom line is earning has come in because
Speaker 2: the economy comes in. And the answer is every academic
Speaker 2: note I see, good morning, Maurice sobs felled out at Berkeley.
Speaker 2: Is the GDP is going to come in real or nominal?
Speaker 8: Do you model that?
Speaker 6: Yeah? Look, I think I think you have to it's
Speaker 6: very hard to model direction.
Speaker 9: But also with earnings, right, if you look at what
Speaker 9: is implied, you look at Bloomberg consensus top line for
Speaker 9: the S and P five hundred and the bottom line
Speaker 9: for this year next year implied our margins that we've
Speaker 9: never seen before, right, really high margins.
Speaker 6: So a little bit of margins.
Speaker 9: Let's say, without without without liberation day should be expected, right,
Speaker 9: a little bit of you know, obviously tech margins have
Speaker 9: been a great story there, but a little bit of
Speaker 9: margin give back I think should happen if nominal GDP
Speaker 9: contracts and if companies are having a harder time selling
Speaker 9: their products and services into perhaps an overstretched consumer.
Speaker 6: Now you have to bring in maybe.
Speaker 9: A bigger story if these tariffs really start denting margins,
Speaker 9: and that's how you can get you don't need a
Speaker 9: you don't need a recession to get flat earning's growth
Speaker 9: in twenty five and twenty six.
Speaker 2: And now folks Surveyllan's audible. Paul, did you ever confront
Speaker 2: this like when you were on a when you were
Speaker 2: writing reports, the macro shifts and you've got to readjust
Speaker 2: your spreadsheets in the two pages you're writing in.
Speaker 8: Front of it.
Speaker 5: Yeah, absolutely, particularly with the media cars.
Speaker 8: Are you're doing it because you're doing it, or your compliance.
Speaker 5: Is to do it?
Speaker 8: Well? Do it.
Speaker 4: My companies were driven by advertising, which is very cyclical,
Speaker 4: so it's easy to model that. But I mean, I'm
Speaker 4: looking at the S and P five hundred the street.
Speaker 4: Michael still got ten percent earners growth this year, twelve
Speaker 4: thirteen percent. Extra numbers got to come down. Do you
Speaker 4: have a recession in your model?
Speaker 10: Is that?
Speaker 5: No?
Speaker 8: I don't. I don't.
Speaker 6: And then and to be clear, I'm look, I'm not
Speaker 6: an economist. I don't.
Speaker 9: I don't look at it, but I do look at
Speaker 9: economic data all day long, and I do look at
Speaker 9: where where, more importantly, where there's sort of the consensus
Speaker 9: estimates are and so forth, and those numbers. I think
Speaker 9: a lot of analysts, whether they're stock analysts or economists,
Speaker 9: the ones that are surveyed by Bloomberg and these surveys,
Speaker 9: they can you know, you have to recognize it.
Speaker 6: Look, it's hard.
Speaker 9: They didn't have inputs until Wednesday, and the inputs that
Speaker 9: they now have are very confusing and very dynamic.
Speaker 8: I would so.
Speaker 2: Paul jump in here, but I would suggest Paul that
Speaker 2: they haven't had time to publish everything Michael's talking about
Speaker 2: so quickly, or it's late this week if you're.
Speaker 4: Lucky, Yeah, exactly. So what do you expect to hear
Speaker 4: from companies this earning?
Speaker 6: Well, boy, I don't know.
Speaker 5: I don't know.
Speaker 6: That's great, Okay.
Speaker 9: So if you were advising the CFO and the CEO
Speaker 9: of one of your former clients, right, what would you do?
Speaker 9: You'd be probably say, let's guide down, we have a
Speaker 9: good you know, like that, and look and and maybe
Speaker 9: if all this thing does. I don't want to sound
Speaker 9: super barisher, but there is a bowl case that that
Speaker 9: that if that, if that, if people if the c
Speaker 9: suite guides down and says, look, there's so much uncertainty,
Speaker 9: we're just going to be very very conservative here and
Speaker 9: we get through this tariff stuff and the good things
Speaker 9: happen in the second half and into twenty six. There'll
Speaker 9: be a lot of the upside there and from the
Speaker 9: consumer as well, right, Like if the consumers are getting conservative,
Speaker 9: that preserves the balance sheet to spend later.
Speaker 8: Right.
Speaker 9: So there is there is a there is a bull
Speaker 9: scenario there that you have to consider. But I think, yeah,
Speaker 9: people are going to die down. Why wouldn't you go
Speaker 9: down nearly right here.
Speaker 2: Thank you so much. On the Pacific Run in their evening.
Speaker 2: This is a lovely lady from Shanghai emailing in mister Purvis.
Speaker 2: When do I buy the dip.
Speaker 9: Well, I look, I would, I think there's more downside coming.
Speaker 9: One thing to think about is, like, you know, look
Speaker 9: at long term momentum signals, right, like I look at
Speaker 9: the monthly mac D on the S and P five
Speaker 9: hundred that is just last week turned a key point,
Speaker 9: and it's exactly like what happened in March of twenty
Speaker 9: two when we went into a bear market there. I
Speaker 9: don't think dip buyers are coming in anytime soon. I
Speaker 9: think the clarity that this uncertainty cloud is not going away.
Speaker 9: People talk about the Trump put, and my point back
Speaker 9: to them is that the Trump put is not a
Speaker 9: fed put because the process by which that unfolds, you know,
Speaker 9: you know, at what what's the strike price? When do
Speaker 9: we get there and all that kind of stuff are
Speaker 9: big questions.
Speaker 6: Will we ever get there? Right? Is another broader question, the.
Speaker 9: Question, but if let's assume a bull case here that
Speaker 9: that we get a you know, sometimes later this quarter,
Speaker 9: we got a very clear set of policy.
Speaker 6: That doesn't it's asymmetric.
Speaker 9: That doesn't mean that the certainty comes back as quickly
Speaker 9: as it disappeared. Tariffs are a very it's a weapon
Speaker 9: that Trump is using that is to to realign the
Speaker 9: industrial policy of the United States, but it can create
Speaker 9: a lot of damage. Repairing the damage as a slower process.
Speaker 8: Purpose is a threat to society.
Speaker 2: Get one more question in here, But futures now just
Speaker 2: ticking negative one thousand, negative one thousand and forty seven
Speaker 2: on the now then NASTAQ negative.
Speaker 8: Two point eight percent. This is all Michael Purvis is
Speaker 8: doing exactly.
Speaker 4: The RSI, the relative strength index for the S and
Speaker 4: P five hundred.
Speaker 6: We're now at twenty three.
Speaker 4: That's below that thirty level, which is historically a technical buy.
Speaker 8: Oh yeah no.
Speaker 9: And to this person's question, I mean from a very
Speaker 9: near term training point of view, yeah, I would expect
Speaker 9: it a bounce here this week. Absolutely, twenty three is
Speaker 9: pretty extreme there, and then you gotta watch what kind
Speaker 9: of selling pressure comes into that bounce and so forth,
Speaker 9: and how it reacts to other newslow as well. But
Speaker 9: I think I think valuations and earnings doing buying a
Speaker 9: dip on a strategic basis before the earning season is
Speaker 9: a very tricky thing, and earnings are just going to
Speaker 9: start coming in.
Speaker 8: Michael, Thank you so much, Michael Purvis Tall Backham.
Speaker 1: This morning, you're listening to the Bloomberg Surveillance Podcast. Catch
Speaker 1: us Live weekday afternoons from seven to ten am Eastern
Speaker 1: Listen on Apple Karplay and Android Auto with the Bloomberg
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Speaker 2: Henrieta treys now Veda partners Mia McGuinness later on the
Speaker 2: debt and the deficit. Henrietta, I want to go to
Speaker 2: one of the most interesting politicians, whatever you think of him,
Speaker 2: in Washington, mister Cruz of Texas. He's got a mathematics
Speaker 2: wiz mom out of Rece University. His father is a stereotype,
Speaker 2: came over on a vote from Cuba. Ted Cruz is different.
Speaker 2: He's had it with the tariffs. He wants free trade.
Speaker 2: Does he have any company this morning? In the United
Speaker 2: States Senate, there.
Speaker 11: Are about six Republican senators who are willing to sign
Speaker 11: on to a bill that after sixty days might consider
Speaker 11: thinking about taking back some of President Trump's authority on tariffs.
Speaker 7: So a lot of this is a little bit performative.
Speaker 11: If y'all excuse me, he had an opportunity to vote
Speaker 11: against just the Canada tariffs, our largest trading partner, four.
Speaker 7: Days ago, and he did not support that measure.
Speaker 12: So explain it explained.
Speaker 2: The Republicans, Democrats' independence John Tucker explain, Hanvy it a
Speaker 2: trays how they can mouth off how they're against the president,
Speaker 2: but at the same time they voted against they voted
Speaker 2: against the Toronto maple leafs.
Speaker 8: It's unbelievable. How does this happen.
Speaker 11: It is a full course change for the Republican Party
Speaker 11: from a decade ago. This is not your grandfather's Republican Party.
Speaker 11: These are not free traders. They believe there's no such
Speaker 11: thing as free trade anymore. There's only such thing as
Speaker 11: fair trade, which apparently is the reciprocal tariffs that put
Speaker 11: you know, nearly one hundred percent tariffs on goods coming
Speaker 11: in from China and forty percent plus tariffs on Canada
Speaker 11: and Mexico are largest trading partners, twenty five percent tariffs
Speaker 11: on EU automobiles.
Speaker 7: That is what they consider now free and fair trade.
Speaker 7: And they have an opportunity to if they really want
Speaker 7: to make.
Speaker 11: A slash here get in front of Jamison Greer on
Speaker 11: Tuesday when he's in front of the Senate explaining the
Speaker 11: president's trade agenda. So watch that if you want to
Speaker 11: see something performative instead of you know, just a couple
Speaker 11: of press briefings or tweetings tweets, you got to get
Speaker 11: out there and really do it otherwise they're not going
Speaker 11: to move to the president off of this.
Speaker 4: Okay, So Henrietta, just to be clear here, folks in
Speaker 4: the market should not expect Congress to step in and
Speaker 4: slow down or alter or push back on these tariffs
Speaker 4: going forward.
Speaker 5: Is that the message?
Speaker 11: That is definitely my message, And I would get more
Speaker 11: specific if you don't believe me.
Speaker 7: They have four days.
Speaker 11: They have tonight, Tuesday, Wednesday, and Thursday, and then they're
Speaker 11: gone for the rest of the month.
Speaker 7: So a month in the.
Speaker 11: Markets right now is an eternity, and they will be
Speaker 11: out of town beginning Thursday night.
Speaker 7: So that's your limit.
Speaker 4: Okay, all right, I don't even know why they're out
Speaker 4: of town. The rest of us are working, so I'm
Speaker 4: not even going to ask that question. But what is
Speaker 4: next on the to do list for Congress that the
Speaker 4: markets seem to be focused on.
Speaker 11: Well, the market is very optimistic, I think way overly
Speaker 11: so that we're going to get some sort of stimulus
Speaker 11: to combat the trillions of dollars worth of tariffs that
Speaker 11: have taken hold in the market and are roiling the
Speaker 11: global economy. The bill at the House, excuse me, that
Speaker 11: the Senate has passed. The budget that they've passed authorizes
Speaker 11: five point three trillion dollars in deficit increases, and in
Speaker 11: the stimulative components there, I can count about three hundred
Speaker 11: billion dollars worth of available funds to do maybe a
Speaker 11: little bit of things like eliminating taxes on tip, which
Speaker 11: is one hundred and seventy five billion dollars or half
Speaker 11: of the available basket money that they can spend for
Speaker 11: fresh stimulus. So we're going to spend the rest of
Speaker 11: the summer working on a massive tax bill with substantial
Speaker 11: deficit increases that don't stimulate the economy.
Speaker 2: Folks, I'll just said a touralized I don't know how
Speaker 2: you do a quote unquote massive tax bill with a
Speaker 2: VIX of forty eight.
Speaker 8: Point four to seven, and just that's original.
Speaker 2: Henry had a trace to cut to the chase, and
Speaker 2: I look at Charlie Cook's a Cook Political Report, the
Speaker 2: Cook Partisan Voting Index, four and thirty five congresses in
Speaker 2: the one third of the Senate. Has mister Trump lost
Speaker 2: the Republicans the House and the Senate?
Speaker 7: I would say, certainly the House.
Speaker 11: The average change for this president and other swings of
Speaker 11: this magnitude is a loss in between forty and sixty
Speaker 11: seats in the House. That's, you know, in a state,
Speaker 11: in a situation where the Republican conference only has the
Speaker 11: margin of a couple four sixties, a sea change.
Speaker 10: You know you're going to.
Speaker 11: Who you want to hear from is not Ted Cruz.
Speaker 11: You want to hear from the members who are up
Speaker 11: in the Senate. Lisa Murkowski, excuse me, Susan Collins, Tom
Speaker 11: Tillis and those guys see where they are?
Speaker 8: Okay, Well, where's Tom Tillis on this?
Speaker 2: I mean, you know, the general lady from Maine is
Speaker 2: on a Canadian border.
Speaker 8: I get it. Okay, Tillis is from what the Carolina is. Yeah.
Speaker 7: And Senator Tillis is amazing on this.
Speaker 11: He's actually getting out there in front of some of
Speaker 11: this legislation and signing his name on the dotted line
Speaker 11: saying we.
Speaker 7: Need to claw back some of this authority.
Speaker 11: North Carolina is a purple state and they support the
Speaker 11: Inflation Reduction Act. They have a ton of jobs coming
Speaker 11: in from all those clean energy manufacturing tax credits. This
Speaker 11: is an educated voter base. Senator Tillis has the opportunity
Speaker 11: and I think is taking it to be at the forefront.
Speaker 8: Here is Grassley of Iowa on board with Tillis.
Speaker 5: Yes.
Speaker 11: Senator Grassley is the original sponsor of the legislation, so yes, absolutely.
Speaker 7: Can you be with this enough so to stop this?
Speaker 8: Henrietta, can you be with us tomorrow? Can we do
Speaker 8: a remote from Ben's Chili bowl?
Speaker 2: I can do that, Henrietta Trey's U Street tomorrow, NW.
Speaker 8: Thank you so much for Veda Partners.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
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Speaker 8: What we're really.
Speaker 2: Trying to do here, folks, is lose the punditry. There's
Speaker 2: really well meaning people out there. Their job description is
Speaker 2: to say, catch the falling knife, here's the bottom. We're
Speaker 2: not doing that. We're trying to give you sensible talk.
Speaker 2: This weekend I did Maurice Obsfeldt of Berkeley, working with
Speaker 2: Adam Posen at the Peterson Institute, a terrific balanced essay
Speaker 2: of core economics. We do that now with Keith Lerner
Speaker 2: can say enough about his work with truest a long
Speaker 2: track record of being measured and providing perspective. Keith, what
Speaker 2: do you say to people now who simply say, should
Speaker 2: I go to cash?
Speaker 8: Yeah, we're fir.
Speaker 6: It's great to be with you.
Speaker 8: It's always good to be on with you all.
Speaker 10: So our main simple measures today is it's time to
Speaker 10: start thinking about two A risk, not just the downside risk,
Speaker 10: but also the upside risk. You know, back in February
Speaker 10: when we were at all time highs, there's a lot
Speaker 10: of complacency. We actually downgraded equities back then. We've had
Speaker 10: this sharp moved lower, Tom and we've had a historical
Speaker 10: move lower. So again, time praise matter. Every individual, every
Speaker 10: individual circumstance matters. But our main message is if you
Speaker 10: have a goal and you have you know the wherewithal
Speaker 10: to go through this we would not be selling into
Speaker 10: this weakness, and we can talk about this. We just
Speaker 10: published a paper going through some statistics as a guide
Speaker 10: about how things tend to act after these brutal two
Speaker 10: day de theories that we just.
Speaker 8: Want, do you dollar cost average.
Speaker 10: In Yeah, I think that is a pre and approach
Speaker 10: because there has been some damage, right, things have been broken.
Speaker 10: We are are not going back to new highs anytime soon,
Speaker 10: at least our work suggests that to be the case.
Speaker 10: What also happens after we have these really uh you know,
Speaker 10: sharp two day moves in the market. What's notable in
Speaker 10: our work is the sharp two day up moves tend
Speaker 10: to happen within the next two or three weeks as well.
Speaker 10: So you're going to see these swings back and forth.
Speaker 10: Each headline is going to be over extrapolated and there's
Speaker 10: gonna be a lot of emotions. So to your point,
Speaker 10: I think using a prudent dollar cost average approach into
Speaker 10: the market, Uh, it makes a lot of sense right here.
Speaker 4: Uh, Keith whorder fixing come fit into the discussion these days,
Speaker 4: I'm looking at the two year treasury three spot six
Speaker 4: two percent.
Speaker 10: Yeah, so you know we've been our main focus this
Speaker 10: year was high quality bonds are back, and they they're
Speaker 10: going to start acting like ballast portfolios after they hadn't
Speaker 10: the last few years. That is how happened and what's
Speaker 10: also notable if you're going back to just common sense
Speaker 10: basic diversification, you know, a sixty to forty portfolio is
Speaker 10: down less than forty percent because bonds have acted like
Speaker 10: bonds against as stability and income. That said, on a
Speaker 10: short term basis, we saw bonds move from four to
Speaker 10: eighty down below three seventy five. Now we're back above four.
Speaker 10: I think, you know, a short term we've probably an
Speaker 10: ongoing a lot lower here in the nearer term, but
Speaker 10: again from a portfolio diversification standpoint, plane of fixed income
Speaker 10: still is attractive. And incrementally we've been really negative on credit,
Speaker 10: and incrementally we're going to become a bit more positive
Speaker 10: as those yields or those credit spreads start to blow out.
Speaker 2: I haven't asked this question all morning. I think we
Speaker 2: should inflict Keith schuber By that Keith Lenner is Mag
Speaker 2: seven the same old Meg seven or is it a
Speaker 2: new Meg seven?
Speaker 10: Yeah, you know, it's funny because it was fag A
Speaker 10: couple of years ago, then it's the MAG seven. So
Speaker 10: maybe the MAG seven components change as well. But you know,
Speaker 10: one thing I found interesting is I'm going through, you know,
Speaker 10: hundreds and hundreds of charts over the weekend with my
Speaker 10: team the technology sector as a whole. The valuation levels
Speaker 10: are now back to where they were in October of
Speaker 10: twenty twenty three, and the MAGS seven, you know, stocks
Speaker 10: have moved from well above thirty to somewhere in the
Speaker 10: early twenties.
Speaker 5: Now.
Speaker 10: The big question we all know is the E. We
Speaker 10: don't know what the E is, but I do suspect that,
Speaker 10: you know, in times of Highland certainty where they're still
Speaker 10: going to be a huge demand for AI and productivity.
Speaker 10: But you'll see somebody vote key back into these names
Speaker 10: after this just kind of wild here the last few months.
Speaker 8: The Keith Lerner, thank you so much.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
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Speaker 2: Joining us down Surveillance Right Sizing correspondent hin Aali bassic.
Speaker 2: There's like eight ways to go here. We got James
Speaker 2: Dimer's letter forget about it. What's circlating out there is
Speaker 2: margin calls, and I would add to that the stresses
Speaker 2: of private equity or private credit.
Speaker 13: What can you report, Well, let's do two things on
Speaker 13: the margin call side. Of course, these were the worst
Speaker 13: margin calls since you saw since the COVID pandemic. However,
Speaker 13: wire time's a little different.
Speaker 12: Now.
Speaker 13: You already had so much pain coming into this year
Speaker 13: that you had a lot of people hedging, You had
Speaker 13: a lot of rotation already cleared out a little bit
Speaker 13: of it. I mean not to say there won't be more,
Speaker 13: but you know, when I talked to the banks, even
Speaker 13: at the highest levels, yes, there's a little bit of
Speaker 13: panic in the sense that they are really screaming hoping
Speaker 13: for the president to roll back, right. I mean, you know,
Speaker 13: hope is not a strategy as we know, but you know,
Speaker 13: hedge funds at this point. I would also say, remember
Speaker 13: there is an element of excitement to tom. Last night
Speaker 13: I had tons of fun saying, you know, the cash
Speaker 13: has been working as a good edge, which means they
Speaker 13: also have cash to deploy when things get really bad.
Speaker 12: So I think there is equally an.
Speaker 13: Element of waiting for that really bad to start to
Speaker 13: step in.
Speaker 8: Will you let us know when that happens.
Speaker 13: Yeah, I will be crying to come on on surveillance
Speaker 13: radio of course.
Speaker 5: Well, actually, just on social media.
Speaker 4: A lot of the big names on Wall Street. Bill Ackman,
Speaker 4: for example, has been very active and capitulated.
Speaker 5: Capitulated.
Speaker 4: I mean, he's been such a supporter of the President
Speaker 4: and the president's economic policies. But I think even he
Speaker 4: has said, all right, we need to we need some clarity.
Speaker 13: Yeah, you know, to Tom's point on the private markets too, Equally,
Speaker 13: people who have been deep into public markets are actually
Speaker 13: more worried about private markets because you can't see how
Speaker 13: much pain is under the surface.
Speaker 12: There have been a little bit.
Speaker 13: Why can you, because on one hand you have a
Speaker 13: sense of sky high more than a decade worth of
Speaker 13: bankruptcies last year. If you can think about how much
Speaker 13: pain you saw coming into this year, then multiply that by.
Speaker 8: A lot of Paul's been on top of this private credit?
Speaker 8: What is to worry about private credit? Describe? Is it
Speaker 8: they're locked in? What's the anks?
Speaker 12: Have you heard of this term? Amended extent yes.
Speaker 5: Of course, lending side, yes, Rich, OK, thank.
Speaker 13: You, extent amend and pretend if you want to call
Speaker 13: it that people have put on so much debt on
Speaker 13: their balance sheet to get through the last couple of years.
Speaker 13: Because the IPO market has been closed, the M and
Speaker 13: A market hasn't been opened to a lot of these
Speaker 13: highly levered companies. The moment was supposed to be now, Tom,
Speaker 13: they were supposed to sell.
Speaker 12: Now they can't sell. They can't sell, They're locked in correct.
Speaker 8: What's it mean?
Speaker 5: I'm going to ask Shanali?
Speaker 4: What are the big I see the big Wall Street
Speaker 4: firms cutting their price targets.
Speaker 5: I mean the Wall streets jumping. And that's just.
Speaker 12: In public markets.
Speaker 13: So if you look at private markets, you're looking at
Speaker 13: values that are declining steeply.
Speaker 12: You're looking at leverage. That is a turn.
Speaker 8: There's leverage there.
Speaker 12: There is leverage there, and as you know, leverage is
Speaker 12: the enemy.
Speaker 2: I got one minute left here, just as simple as
Speaker 2: I can. Mister Diamond's out of the letter in his defense,
Speaker 2: was written before all this idiocy. Are we going to
Speaker 2: write size? I mean, I'm making jokes about and folks,
Speaker 2: I hate the phrase layoffs and finance. Are we going
Speaker 2: to see firings to write size to a new reality.
Speaker 13: It's certainly becoming a discussion because all the deals that
Speaker 13: were expected to happen, it's already April. You can count
Speaker 13: out the month already. How much is actually going to
Speaker 13: happen this year? You're not going to see the activity
Speaker 13: come back in full form and honestly, bank earning start Friday.
Speaker 12: So here weather, thank thank you.
Speaker 2: I didn't, I didn't. I lost my mind on that.
Speaker 2: How are the international banks doing in Manhattan? The Deutsche
Speaker 2: banks that BnB.
Speaker 13: Rast you know, HSPC is one of the most interesting
Speaker 13: to watch. They are on the tail end of a massive,
Speaker 13: you know, maybe historic for the bank restructuring. They got
Speaker 13: rid of a lot of businesses and now they're focusing
Speaker 13: on things like trade financing, which is for this market
Speaker 13: a pretty interesting place to be.
Speaker 8: Okay, what do you want? I got ten? What are
Speaker 8: you watching to day? What's the number one thing?
Speaker 5: Credits?
Speaker 8: Brek credit, well like high yield full faith.
Speaker 13: And high yield investment, great credit default swaps. Remember, credit
Speaker 13: is that canary in the coal mine, and the smart
Speaker 13: money watches a credit go first, it's a canary dead.
Speaker 5: Yeah, gasp for.
Speaker 2: I love Busted and shots should Island Bassak, and I
Speaker 2: really want to do a master shout out to her
Speaker 2: leadership on Bloomberg Investor Shere was a high postage.
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