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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at

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Speaker 1: noon and five pm. E's Dern on Apple, Cocklay and

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Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: Hayley lines alongside Joe Matthew, who was back in Washington,

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Speaker 2: but yesterday our focus here in Washington was actually in

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Speaker 2: what was happening in Argentina where the Treasury Secretary Scott

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Speaker 2: Bessett was and sat down for an exclusive interview with

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Speaker 2: our colleague Anne Marie hor Dern. And a really interesting

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Speaker 2: part of their conversation Joe was when he was talking

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Speaker 2: about the ongoing negotiations and what he really thought the

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Speaker 2: hardest part of them would be. He suggested tariffs might

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Speaker 2: actually be the easy thing to address. It is what

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Speaker 2: he described as the insidious non tariff barriers that he

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Speaker 2: said is the demon that needed to be exercised. And

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Speaker 2: I wonder if that's what's factoring into are understanding Bloomberg's

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Speaker 2: reporting today that Europe is not really getting clarity on

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Speaker 2: the administration's aims here as non tariff barriers with Europe

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Speaker 2: when it comes to the value added tax and regulation

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Speaker 2: or things this administration has been graping about.

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Speaker 3: How true really something to find a story on the

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Speaker 3: terminal as well, that with this lack of progress when

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Speaker 3: it comes to the VAT or whatever it is we're

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Speaker 3: talking about, the EU is essentially suggesting that these tariffs

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Speaker 3: are going to be in place for some time, maybe indefinitely,

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Speaker 3: preparing for the worst. That's where we start right now

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Speaker 3: with Bloomberg's Tyler Kendall, who joins us live from the

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Speaker 3: White House.

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Speaker 4: Tyler, Yeah, Hey, Joe, welcome back. Well. Bloomberg News reporting

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Speaker 4: that the European Union the US have made very little

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Speaker 4: progress when it comes to trade talks. The EU's trade

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Speaker 4: chief was here in Washington just yesterday. We know that

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Speaker 4: he met with the USTR Jamison Greer, as well as

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Speaker 4: the Commerce Secretary Howard Lutnik, and people familiar with that

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Speaker 4: meeting telling Bloomberg News EU officials left with very little

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Speaker 4: clarity on exactly what the US needs to see in

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Speaker 4: order for a deal to get done. We know that

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Speaker 4: the EU had paused its plan retaliation actually slated to

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Speaker 4: go into effect this week in concert with the White

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Speaker 4: House's ninety day pause on that so called reciprocal tariff plan.

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Speaker 4: But the sense per our sources is that the EU

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Speaker 4: is bracing for very little reprieved when it comes to

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Speaker 4: the so called reciprocal teriffs as well as those sector

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Speaker 4: specific tariffs that are already in place, including on steel

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Speaker 4: and aluminum as well as autos.

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Speaker 2: The European Union.

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Speaker 4: Has put forward at least some proposals that we know of,

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Speaker 4: including that both sides should drop their trade barriers when

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Speaker 4: it comes to industrial goods, as well as pledging that

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Speaker 4: the EU will boost its imports of US L ANDNG,

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Speaker 4: but at this point, we haven't seen any indications that

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Speaker 4: the US is taking those proposals seriously, even though we

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Speaker 4: do know that President Trump has previously signaled that he

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Speaker 4: would like to see energy potentially rolled in to a

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Speaker 4: deal with the EU. We know last week, according to

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Speaker 4: Bloomberg News reporting that the European Union was putting together

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Speaker 4: a so called term sheet with some things that they

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Speaker 4: might be willing to concede in these negotiations that include

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Speaker 4: those non tariff barriers that you were talking about, like

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Speaker 4: standards and regulation. It remains to be seen, though, if

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Speaker 4: they would go as far to include the that or

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Speaker 4: the digital services taxes that this White House often points to, because,

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Speaker 4: as Kaylene mentioned at the top there Scott Bessen saying yesterday,

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Speaker 4: tariffs aren't the difficult part of the negotiations. It's those

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Speaker 4: non tariff barriers that can prove more insidious.

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Speaker 5: As he said, well.

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Speaker 2: And I guess there's at the very least the idea

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Speaker 2: that the EU's Trade chief Tyler did get to sit

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Speaker 2: down with the Commerce Secretary in USTR yesterday. Those conversations

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Speaker 2: at least seem to be happening. I'm not sure the

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Speaker 2: same can be said about conversations with China, as no

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Speaker 2: one has yet to pick up the phone in Beijing

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Speaker 2: as far as we understand. And now President Trump's obviously

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Speaker 2: upset with the latest from China the halting of Boeing deliveries.

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Speaker 2: He says on True Social Today that they're were nagging

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Speaker 2: on a deal.

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Speaker 4: Right, just the latest tip for TAD and what is

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Speaker 4: an escalating trade war. Our statistics show us that China's

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Speaker 4: forecaster to make up to twenty percent of global aircraft

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Speaker 4: demand over the next two decades, so this really will

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Speaker 4: have a significant impact in the marketplace going forward as

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Speaker 4: we watch both of them, these sides escalate. Scott Bessent

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Speaker 4: in his interview yesterday saying that the US's planned tariffs

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Speaker 4: are not a joke, even though that's how it's been

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Speaker 4: characterized by Beijing. With that now one hundred and forty

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Speaker 4: five percent total tariff in place, and when we're talking

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Speaker 4: about who's not engaging, it's interesting to see who these

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Speaker 4: countries are engaging with. This White House has repeatedly said

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Speaker 4: that it is prioritizing those countries that are geographically close

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Speaker 4: to China, like Japan, South Korea, Vietnam, India, these countries

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Speaker 4: that Scott bessen continues to reiterate that they are engaging with.

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Speaker 4: But then Joe and Kelly look at the other side.

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Speaker 4: Jijingping currently on a Southeast Asia tour visiting countries like

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Speaker 4: Malaysia and Vietnam, as he tries to show up his

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Speaker 4: own support to counter this White House.

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Speaker 2: All right, bloombergs Tyler Kendall live at the White House

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Speaker 2: for us on this Tuesday, thank you so much. And

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Speaker 2: of course not just any Tuesday. It's also tax Day

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Speaker 2: in the US, and as we consider what kind of

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Speaker 2: actual revenue razor tariffs will be in terms of import

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Speaker 2: taxes that are charged. We have to consider as well

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Speaker 2: all of the other tax revenue that is or is

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Speaker 2: not coming into the Treasury's coffers as we wait for

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Speaker 2: clarity on what the receipts this.

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Speaker 3: Tax season actually, Well, the administration has been telling a

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Speaker 3: pretty good story about that, pushing back on ideas, on

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Speaker 3: the idea that revenue will be lower. In fact, we're

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Speaker 3: up three percent in the fiscal year through March according

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Speaker 3: to the latest That doesn't tell us what's going to

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Speaker 3: happen the rest of the year though, because we just

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Speaker 3: found out twenty thousand more workers these are not probationaries

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Speaker 3: this time, have taken the buyout offered by the administration

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Speaker 3: that follows more than seven thousand probationary workers being cut.

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Speaker 6: Hard to quantify the impact.

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Speaker 2: Well, yeah, does that mean that there will be fewer audits,

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Speaker 2: for example, maybe encouraging some who are on higher income

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Speaker 2: brackets not necessarily to pay all the taxes that are

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Speaker 2: do These are the questions that we have in the

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Speaker 2: kind that we'll pose now to Erica Yorke, who is

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Speaker 2: joining us here on Bloomberg TV and Radio. She's vice

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Speaker 2: president of federal tax policy at the Tax Foundation, Erica,

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Speaker 2: welcome back to balance of power. When we just consider

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Speaker 2: what Joe was just speaking to, the reduction and the

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Speaker 2: actual force of labor at the IRS that will be

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Speaker 2: processing everyone's returns as they come in. Do you expect

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Speaker 2: it's going to make a real difference in what the

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Speaker 2: end receipt figure looks like.

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Speaker 7: We haven't seen that so far in the data. If

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Speaker 7: you look at the filing season statistics, so far, we're

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Speaker 7: pretty much on pace with last year's tax year. The question,

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Speaker 7: of course, will be what happens with all of the

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Speaker 7: returns that people submit last minute before midnight tonight.

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Speaker 5: Several of those several million of those.

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Speaker 7: Are likely to be sent in via mail with paper checks,

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Speaker 7: So we really won't get the final answer on what

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Speaker 7: the tax season looks like for a while yet. I

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Speaker 7: don't anticipate, though, a huge sudden drop. I think the

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Speaker 7: question of IRS hiring IRS firing is a bit of

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Speaker 7: a medium term question as to what happens going forward

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Speaker 7: with tax their service, with guidance, with enforcement, not this year,

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Speaker 7: but in years to come.

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Speaker 3: Talk to the Deputy Treasury Secretary on Friday on Bloomberg TV.

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Speaker 3: Erica who pointed to the receipts. The actual facts here,

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Speaker 3: gross US budget receipts for the fiscal Europe three percent.

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Speaker 3: This is through March to two point twenty six trillion

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Speaker 3: dollars according to the Treasury. Michael Flokanders says, that's a

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Speaker 3: robust tax filing season.

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Speaker 6: Could that in fact be the story?

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Speaker 5: It very well could be.

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Speaker 7: And if we look at the tax gap over time,

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Speaker 7: and we look at how the US compares to other countries,

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Speaker 7: we're not like a major outlier. Most people pay their taxes,

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Speaker 7: most people pay them on time. Our tax gap averages

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Speaker 7: about fifteen percent. That's the difference between what the IRS

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Speaker 7: estimates should be paid and what ultimately is paid after

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Speaker 7: audits and follow ups. And that's tended to be pretty steady.

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Speaker 7: So I don't think we'll see you sudden, overnight, huge drops,

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Speaker 7: but it may be something that plays out over time.

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Speaker 5: Probably not this year, though, well.

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Speaker 2: In this year, of course, we are facing down a

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Speaker 2: kind of clock here with the debt ceiling that still

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Speaker 2: needs to be raised by Congress. The Congressional Budget Office

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Speaker 2: ERICA obviously has suggested they think the X state will

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Speaker 2: come sometime in August or September. But just how easily

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Speaker 2: could that be moved up, knowing there's only so far

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Speaker 2: the Treasury's extraordinary measures are able to go.

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Speaker 7: Yeah, that could be subject to change, especially as we

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Speaker 7: see timing delays with tax payments related to natural disasters.

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Speaker 7: So several states have extended periods far when they actually

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Speaker 7: have to pay taxes, and some of those go out

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Speaker 7: past that estimated X date into November. So you could

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Speaker 7: see timing issues there where it's not that the taxes

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Speaker 7: aren't being paid, it's just they're delayed because we also

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Speaker 7: have this natural disaster tax relief that we provide through

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Speaker 7: the tax code, So that could be one factor to

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Speaker 7: watch and see how that could potentially move up the

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Speaker 7: X state.

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Speaker 3: We've talked a lot about a wealth tax erica YORKE

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Speaker 3: over the years. Now we've apparently narrowed this down to

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Speaker 3: a millionaires tax is being discussed by Republicans on Capitol

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Speaker 3: Hill and the White House. Our political team reporting that

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Speaker 3: Donald Trump is actively considering these ideas. The House proposal

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Speaker 3: specifically would set the new rate at forty percent for

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Speaker 3: taxpayers earning a million dollars or more a year. What

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Speaker 3: kind of impact would that have?

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Speaker 7: Well, that wouldn't be a huge tax increase relative to

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Speaker 7: where that tax rate is scheduled to go. Recall that

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Speaker 7: after the end of this year, the top tax rate

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Speaker 7: is scheduled to rise already from thirty seven percent to

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Speaker 7: thirty nine point six percent, So going to forty percent isn't.

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Speaker 5: A massive change from there.

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Speaker 7: What it is a massive change from, though, is the

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Speaker 7: way we typically hear Republican lawmakers talk about tax cuts,

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Speaker 7: which is lowering those top marginal rates so we boost

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Speaker 7: incentives to invest into work in the economy. You know,

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Speaker 7: much better ways to raise revenue exist than raising marginal

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Speaker 7: tax rates on work and investment. Things like broadening the

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Speaker 7: tax base, clamping down on itemized deductions, looking at types

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Speaker 7: of income that aren't subject to tax at all, would

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Speaker 7: be much more fruitful than something like raising the top

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Speaker 7: rate even higher.

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Speaker 2: Okay, So, if this is really just a marginal potential

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Speaker 2: increase in the top rate, how far would it realistically

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Speaker 2: go to offset other initiatives we understand Republicans are pursuing, like,

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Speaker 2: for example, raising the cap on the salt deduction or

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Speaker 2: no tax on tips or overtime programs that we understand

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Speaker 2: could add materially to the total cost of this bill.

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Speaker 7: So it really depends how they design those other types

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Speaker 7: of tax cuts. The full proposals that Trump campaigned on

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Speaker 7: would add you know, two to three trillion dollars to

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Speaker 7: that cost when we look at no tax on social security,

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Speaker 7: no tax on tips, no tax on overtime. Depending how

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Speaker 7: lawmakers design those though, they could tailor them. They could

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Speaker 7: put income limitations, they could put total limitations on the

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Speaker 7: amount of the tax benefit available and really narrow down

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Speaker 7: the cost so then you wouldn't have to look too

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Speaker 7: hard to find an offset. And really that's the kind

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Speaker 7: of stuff I wish we would be seeing from Congress already.

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Speaker 7: But so far, you know, we're close to one hundred

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Speaker 7: days into this administration, into this Congress, we've really seen

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Speaker 7: the debate center around procedure and politics and not even

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Speaker 7: delve into policy yet. So those are questions Congress needs

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Speaker 7: to answer and needs to answer quickly because the deadlines

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Speaker 7: are coming for you know, decisions on what to do

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Speaker 7: on the tax bill, decisions on what to do as

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Speaker 7: far as the debt sealing goes, and all of that

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Speaker 7: is wrapped up into one legislative vehicle right now.

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Speaker 3: Talk to us about enforcement Erica. A big part of

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Speaker 3: the narrative today, whether it's true or not, is that

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Speaker 3: tax cheaters will have an easier time, and maybe some

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Speaker 3: tax payers will become cheaters because it's getting easier to

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Speaker 3: pull a fast one on the agency.

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Speaker 6: Is that real or not?

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Speaker 5: Potentially? We don't really We don't really know, you know.

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Speaker 7: I would say one of the best ways to raise

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Speaker 7: tax revenue is to raise the revenue that should.

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Speaker 5: Be paid right now.

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Speaker 7: So rather than lifting rates, rather than creating new types

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Speaker 7: of taxes, making sure that people pay the taxes that

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Speaker 7: is due is a really good way to raise revenue.

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Speaker 7: We we don't really know how this firing at the IRS,

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Speaker 7: this workforce reduction is going to play out, but I

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Speaker 7: would say one of the things that it that it

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Speaker 7: threatens is what you just said.

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Speaker 5: People lose faith in the system.

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Speaker 7: People distrust that you know, their neighbors are paying their taxes,

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Speaker 7: so why should I pay mine. That's not the type

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Speaker 7: of vibe we want to create around taxes. We want

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Speaker 7: trust in the system, we want transparency in the system.

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Speaker 7: And really large workforce reductions without complementary simplifications to the tax.

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Speaker 5: System don't go in the right direction.

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Speaker 7: You shouldn't significantly reduce the IRS workforce if you're still

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Speaker 7: maintaining a really complicated tax code that has all different

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Speaker 7: kinds of programs run through it. The first step should

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Speaker 7: be dramatically simplify the tax system so there are less

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Speaker 7: opportunities for abuse, and then you can shrink the workforce

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Speaker 7: along with that simplification in the tax code.

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Speaker 2: And finally, Erica, what factor will tariffs ultimately play in

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Speaker 2: the overall revenue picture? Knowing that while the higher reciprocal

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Speaker 2: rates are paused for ninety days, there is that ten

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Speaker 2: percent global baseline hundred and forty five percent now effectively

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Speaker 2: on Chinese imports autos, steel, and aluminum. What's the net

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Speaker 2: effect of all of.

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Speaker 5: That right now?

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Speaker 7: We've estimated that it will raise somewhere in the park

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Speaker 7: of one hundred and fifty billion to one hundred and

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Speaker 7: seventy billion dollars this year.

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Speaker 5: In twenty twenty five, that is highly uncertain.

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Speaker 7: It's uncertain because the tariffs are really on again off again.

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Speaker 7: You only get revenue if they're on. If they go

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Speaker 7: off again, you don't get that revenue. They're also subject

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Speaker 7: to other types of uncertainty. If Congress decides to challenge

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Speaker 7: the president's authority. If those authorities get challenged in court

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Speaker 7: and are struck down, that could be another reason that the.

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Speaker 5: Revenue goes away.

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Speaker 7: But ultimately, even with all of the tariffs that the

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Speaker 7: Trump administration has outlined so far, it doesn't come close

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Speaker 7: to paying for even extension of the Tax Cuts and

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Speaker 7: Jobs Act, not to mention all of the other tax

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Speaker 7: cuts they.

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Speaker 5: Want to add on top.

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Speaker 7: So right now falls short of paying for tax reform

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Speaker 7: is highly uncertain and is very economically harmful. So isn't

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Speaker 7: even a good way to try to offset the cost

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Speaker 7: of tax cuts, because you're probably harming the economy more

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Speaker 7: with a trade war than you're helping it with the

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Speaker 7: tax bill.

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Speaker 5: Congresses, considering it's like.

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Speaker 3: A holiday for you, Eric, is this Christmas morning at

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Speaker 3: the Tax Foundation?

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Speaker 5: I need a holiday after this day?

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Speaker 6: I bet you do.

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Speaker 3: I appreciate your joining us on what must be the

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Speaker 3: busiest day in your world, Erica York Tax Foundation or

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Speaker 3: she is vice president of Federal tax Policy. He's not

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Speaker 3: going to be talking about the irs when he's speaking

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Speaker 3: nationally in Chicago later on, Kaylee. But another agency that

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Speaker 3: we've been talking about today, and that is Social Security

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Speaker 3: the return of Joe Biden, something we'll be talking.

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Speaker 6: About later on.

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Speaker 2: Yeah, he's going to be speaking around the time of

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Speaker 2: the late edition of Balance of Power, his first big

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Speaker 2: speech since leaving office back in January. I guess the

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Speaker 2: question is, while Democrats may like his message, are they

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Speaker 2: happy with him as the messenger?

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Speaker 3: That's true, we'll find out together. That's around five pm.

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Speaker 3: We'll be watching our panels next. On Bloomberg.

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Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

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Speaker 1: us live weekdays at noon and five pm. He's durn

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Speaker 1: on Apple, Cockley and Android Auto with the Bloomberg Business app.

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Speaker 1: You can also listen live on Amazon Alexa from our

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Speaker 1: flagship New York station Just Say Alexa played Bloomberg eleven thirty.

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Speaker 2: This is Balance of Power, the early edition just after

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Speaker 2: one twenty pm Eastern time in Washington. It was roughly

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Speaker 2: around this time yesterday actually, that we got news from

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Speaker 2: Harvard University, which throw the lawyers it's working with rejected

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Speaker 2: a proposal from the Trump administration, which had threatened to

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Speaker 2: revoke up to nine billion dollars in federal funding if

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Speaker 2: the the Harvard administration didn't acquiesce to what the Trump

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Speaker 2: administration would like to see when it comes to DEI

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Speaker 2: hiring practices, admissions practices, anti Semitism efforts as well. And

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Speaker 2: we learned last night how quick the White House was

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Speaker 2: to react to that, with two point two billion dollars

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Speaker 2: in federal funding now polled in the President today Joe

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Speaker 2: threatening to take things even.

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Speaker 3: Further along with a sixty million dollar contract. This is

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Speaker 3: pretty remarkable and maybe not much of a surprise to

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Speaker 3: those who have been following this story. Some of the

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Speaker 3: reporting had suggested that Donald Trump would like to see

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Speaker 3: this happen to any number of Ivy League schools.

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Speaker 6: It's something we've talked to.

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Speaker 3: Our panel about quite a bit, and they're with us now.

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Speaker 3: Rick Davis, partner at Stone Court Capital or Republic and strategist,

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Speaker 3: alongside Gidi Shanzho, Democratic analyst and Senior Democracy Fellow with

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Speaker 3: the Center for the Study of the Presidency and Congress.

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Speaker 6: Did this need to happen, Rick, I think it's something

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Speaker 6: that you saw coming. Yeah.

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Speaker 8: Look, I mean this administration has been after what they

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Speaker 8: call woke universities. They see it as a core culture

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Speaker 8: issue in in their in their agenda, and and they're

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Speaker 8: doing They're going after these universities, both public and private,

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Speaker 8: under the guise of attacking the university's acquiescence to anti Semitism,

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Speaker 8: which I think they think is universally acceptable. But they're

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Speaker 8: really in essence trying to gut the DEI programs and

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Speaker 8: other more liberal efforts on these university parts in their

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Speaker 8: curriculum and in their personnel. So it's a it's a

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Speaker 8: pretty significant war on education. And right now, I would

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Speaker 8: say Harvard has at least struck out to be one

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Speaker 8: of the institutions, one of the few institutions to really

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Speaker 8: decide to pick a fight with the federal government.

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Speaker 2: Well, and we're seeing what the consequences of that fight

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Speaker 2: may turn out to be. Again, Genie, two point two

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Speaker 2: billion dollars of multi year grants frozen as a consequence

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Speaker 2: of this, with the President today on True Socials suggesting

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Speaker 2: that Harvard's tax exempt status may need to be looked

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Speaker 2: at as well. You obviously exist in the higher education universe.

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Speaker 2: Can you just describe for us what the actual consequence

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Speaker 2: of that will be for Harvard, for the research that

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Speaker 2: is done at Harvard in addition to it's an educational mission.

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Speaker 9: Yeah, I mean, ultimately there would be a chilling effect.

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Speaker 9: I mean, we can't forget Harvard gets nine billion, which

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Speaker 9: is a staggering amount from the federal government, and they

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Speaker 9: are the wealthiest university in the country, if not the world.

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Speaker 9: They have a lot of resources. Unlike many universities, they

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Speaker 9: have a huge endowment, so they can take this fight

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Speaker 9: to the administration. The problem is if Harvard doesn't, nobody

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Speaker 9: else can do it. And so you know there are

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Speaker 9: implications for higher ed across the board. But the reality

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Speaker 9: is is that we are either a nation of laws

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Speaker 9: or a nation of one man. If we are a

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Speaker 9: nation of laws, you follow processes and procedures, you follow

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Speaker 9: the law. And that's the problem here. There is a

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Speaker 9: law in place, Title six. It lays out that federal

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Speaker 9: government can give funding to these universities public and private,

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Speaker 9: provided they're not discriminating. So the anti semitic portion of

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Speaker 9: this is exactly right on the part of the administration.

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Speaker 9: The problem is they have gone overboard if you look

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Speaker 9: at their demands on Harvard and other universities where they

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Speaker 9: are trying to decrease freedoms, academic freed of freedom of speech,

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Speaker 9: you know, cancel DEI programs, curriculum and the rest and

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Speaker 9: that is outlawed in this law. So if Donald Trump

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Speaker 9: wants to take this fight on, he needs to do

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Speaker 9: something he doesn't want to do. Follow proper procedures, Go

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Speaker 9: to Congress, get Title six rather rewritten, and past that

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Speaker 9: law with Congress, and then you have the law behind you.

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Speaker 9: But as it stands now, he does not have that

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Speaker 9: behind him, and that is the root of the problem

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Speaker 9: with everything we're seeing in this administration. He doesn't want

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Speaker 9: to follow procedures. He wants to follow Donald Trump's whims.

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Speaker 3: Rick, I know Harvard called this illegal activity, but was

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Speaker 3: there a better way for the university to handle this,

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Speaker 3: Maybe acknowledge some of the points that the White House

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Speaker 3: was asking for, maybe, you know, categorize them differently than

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Speaker 3: the others. There was specifically a request for the university

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Speaker 3: to report foreign students who commit conduct violations to federal authorities.

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Speaker 3: Is there something here that Harvard could have done differently?

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Speaker 6: Yeah?

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Speaker 8: Sure, I mean there are always things these universities can

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Speaker 8: do to fit into this concept that the Trump administration

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Speaker 8: is promoting, and other universities similar to Harvard, Columbia and

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Speaker 8: others have basically worked out arrangements with the Trump administration

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Speaker 8: to continue to get federal grants and federal aid, you know,

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Speaker 8: by adjusting some of their criteria as to how they

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Speaker 8: run their universities. And I don't think there's any doubt

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Speaker 8: that there are questions that have been raised. Is that how

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Speaker 8: these especially these Ivy League universities conducted themselves, how they

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Speaker 8: were managed, how they made decisions, who they hired, were

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Speaker 8: major issues in the summer of last year when you

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Speaker 8: had basically riots on these campuses, promoted by agitators in

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Speaker 8: advance of the Palestinian issues, and I think that it

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Speaker 8: opened the door to this kind of criticism. But there

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Speaker 8: are some people who think Columbia did the right thing

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Speaker 8: by working on a deal maintaining their financial support by

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Speaker 8: the federal government, and at the end of the day,

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Speaker 8: probably did not lose the construct of who Colombia is,

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Speaker 8: what they teach, and how they act. So there are

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Speaker 8: universities that are taking a different route, and it's kind

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Speaker 8: of hard to decide right now whether or not Harvard's

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Speaker 8: taken the right approach or Columbia took the right approach well.

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Speaker 2: And I guess that raises the question, Genie, if you

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Speaker 2: expect more higher educational institutions to follow Harvard's path or Columbia's.

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Speaker 9: You know, it's a really difficult choice because most universities

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Speaker 9: do not have the resources that Harvard has. And you

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Speaker 9: see the two conservative lawyers they have hired, well respected,

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Speaker 9: one of whom Representative Steve Bannon, and many of Donald

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Speaker 9: Trump's friends. So Harvard knows how to fight this fight.

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Speaker 9: But the reality is Columbia is in a problem because

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Speaker 9: when you capitulate to this type of illegal and bullying behavior,

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Speaker 9: then you are left with the kind of chaos that

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Speaker 9: Columbia has been left with at the top of its board.

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Speaker 9: And so Donald Trump can do this, and Congress can

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Speaker 9: do this, but you've got to do it properly. It

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Speaker 9: is funding by Congress. They need to change the title,

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Speaker 9: they need to change the legislation, and then Donald Trump

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Speaker 9: needs to follow proper procedures. But we can't live in

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Speaker 9: a country where you give a grant, which is like

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Speaker 9: signing a contract, and then because somebody new comes into

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Speaker 9: the presidency pull that back if they don't meet demands.

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Speaker 9: Republicans would not like it if Joe Biden or the

441
00:23:37,160 --> 00:23:41,239
Speaker 9: next Democratic president does it, and Democrats don't like it.

442
00:23:41,359 --> 00:23:44,159
Speaker 9: So the reality is you've got to be agnostic. We

443
00:23:44,200 --> 00:23:47,560
Speaker 9: are a country of laws. Follow those laws, and it's

444
00:23:47,600 --> 00:23:51,480
Speaker 9: particularly important when it comes from the president. And that's

445
00:23:51,480 --> 00:23:54,399
Speaker 9: sort of a running theme throughout everything we've been talking about.

446
00:23:54,640 --> 00:23:57,520
Speaker 9: Is a president not want to follow procedures but his

447
00:23:57,640 --> 00:24:01,639
Speaker 9: own whims and interests, and that is not workable in

448
00:24:01,680 --> 00:24:03,800
Speaker 9: the United States if we're going to maintain a rule

449
00:24:03,840 --> 00:24:04,760
Speaker 9: of law society.

450
00:24:05,920 --> 00:24:09,480
Speaker 6: Rick, you know that Harvard is an easy target.

451
00:24:10,040 --> 00:24:12,280
Speaker 3: And as somebody who used to live right across the

452
00:24:12,400 --> 00:24:17,719
Speaker 3: river in Boston, it receives criticism nowhere more than in

453
00:24:17,760 --> 00:24:19,080
Speaker 3: its own backyard.

454
00:24:19,160 --> 00:24:21,280
Speaker 6: Is this good politics in the end for Donald Trump?

455
00:24:22,960 --> 00:24:25,520
Speaker 8: I think it's probably good politics for Donald Trump. I

456
00:24:25,560 --> 00:24:27,879
Speaker 8: mean every day that he gets to go out and

457
00:24:27,920 --> 00:24:34,159
Speaker 8: say that Harvard was receiving nine billion dollars of taxpayer

458
00:24:34,200 --> 00:24:37,320
Speaker 8: assistance when they have an endowment of over fifty billion

459
00:24:38,680 --> 00:24:41,200
Speaker 8: doesn't make sense to most voters. Why in the world

460
00:24:41,240 --> 00:24:45,080
Speaker 8: would we give federal dollars, our taxpayer dollars, our money

461
00:24:45,720 --> 00:24:51,560
Speaker 8: as voters to a private university named Harvard, which is

462
00:24:51,880 --> 00:24:56,919
Speaker 8: beyond exclusive and out of the reach of virtually every

463
00:24:57,200 --> 00:25:01,840
Speaker 8: American citizen across the board. They select few to get

464
00:25:01,840 --> 00:25:05,000
Speaker 8: the benefit of a Harvard education, and so I think

465
00:25:05,040 --> 00:25:07,919
Speaker 8: on the surface it is a very difficult issue for

466
00:25:07,960 --> 00:25:11,639
Speaker 8: Democrats to claim foul because you know, once again they'd

467
00:25:11,680 --> 00:25:15,600
Speaker 8: be out there pitching for the you know, liberal Northeast

468
00:25:15,920 --> 00:25:20,000
Speaker 8: Ivy League institutions, by the way, well represented in the

469
00:25:20,040 --> 00:25:23,159
Speaker 8: Trump Cabinet and White House. There are a lot of

470
00:25:23,200 --> 00:25:27,919
Speaker 8: Harvard grads in Congress and in the White House and so,

471
00:25:29,000 --> 00:25:31,040
Speaker 8: but you don't hear any of them stepping forward and

472
00:25:31,080 --> 00:25:34,240
Speaker 8: complaining about this. So how much of this is legal,

473
00:25:34,280 --> 00:25:37,879
Speaker 8: how much of it is policy, I think is the

474
00:25:37,920 --> 00:25:41,119
Speaker 8: debate that we're into now. But the optics for Republicans

475
00:25:41,960 --> 00:25:44,400
Speaker 8: they can fight with Harvard all day long and they're

476
00:25:44,440 --> 00:25:46,080
Speaker 8: not going to lose any votes, and they may pick

477
00:25:46,160 --> 00:25:46,840
Speaker 8: up a few as.

478
00:25:46,760 --> 00:25:47,359
Speaker 6: They go along.

479
00:25:49,040 --> 00:25:50,959
Speaker 2: Genie, I want to return to the point you were

480
00:25:50,960 --> 00:25:54,239
Speaker 2: making about this president in particular not necessarily being the

481
00:25:54,240 --> 00:25:58,600
Speaker 2: most in keeping with procedure or with the existing legal

482
00:25:58,640 --> 00:26:00,560
Speaker 2: system as we know it, because that is what will

483
00:26:00,600 --> 00:26:02,480
Speaker 2: be in focus today is there's another hearing in the

484
00:26:02,520 --> 00:26:07,920
Speaker 2: Kilmar Obrego Garcia case. Of course, the al Salvadoran who

485
00:26:08,040 --> 00:26:12,600
Speaker 2: was deported to El Salvador, which the administration admitted was accidental.

486
00:26:12,600 --> 00:26:14,720
Speaker 2: We all watched in the Oval Office yesterday when both

487
00:26:14,720 --> 00:26:17,400
Speaker 2: the Trump administration and the President of Al Salvador said

488
00:26:17,400 --> 00:26:19,880
Speaker 2: they neither of them have the power to return him

489
00:26:20,160 --> 00:26:22,320
Speaker 2: back to the US, even though the Supreme Court has

490
00:26:22,320 --> 00:26:25,560
Speaker 2: said that must be facilitated. Do you see this ultimately

491
00:26:25,640 --> 00:26:29,000
Speaker 2: ending and potentially contempt of court proceedings for these officials

492
00:26:29,040 --> 00:26:31,639
Speaker 2: that to this point have been largely stonewalling the judge

493
00:26:31,640 --> 00:26:32,639
Speaker 2: overseeing this case.

494
00:26:33,720 --> 00:26:33,960
Speaker 10: Yeah.

495
00:26:34,240 --> 00:26:36,480
Speaker 9: I don't know if we're going to see that, because

496
00:26:36,520 --> 00:26:39,600
Speaker 9: part of the problem is is the Supreme Court left

497
00:26:39,640 --> 00:26:42,400
Speaker 9: a hole that the administration could drive a truck through.

498
00:26:42,760 --> 00:26:46,000
Speaker 9: You know, facilitate is a return, but explain to us

499
00:26:46,080 --> 00:26:49,040
Speaker 9: what you mean by effectuate. And oh, by the way,

500
00:26:49,119 --> 00:26:51,960
Speaker 9: defer to the White House on foreign policy. And we've

501
00:26:51,960 --> 00:26:55,800
Speaker 9: seen Steven Miller, the President and others take wild advantage

502
00:26:55,800 --> 00:26:58,560
Speaker 9: of that. And so I don't know that it's going

503
00:26:58,640 --> 00:27:01,639
Speaker 9: to end in contempt. We see some of that, but

504
00:27:01,760 --> 00:27:05,400
Speaker 9: I think the reality is it is disingenuous for both

505
00:27:05,400 --> 00:27:07,679
Speaker 9: Bukelly and Donald Trump to sit there and say we

506
00:27:07,800 --> 00:27:11,720
Speaker 9: can't return this individual. And by the way, if he's returned,

507
00:27:11,800 --> 00:27:14,720
Speaker 9: they can deport him legally following the laws within hours.

508
00:27:15,080 --> 00:27:18,200
Speaker 9: But it's disingenuous for them to make that argument, considering

509
00:27:18,240 --> 00:27:21,840
Speaker 9: we saw them already return nine people. And so once

510
00:27:21,920 --> 00:27:26,560
Speaker 9: again Donald Trump does not want to follow proper procedures.

511
00:27:26,760 --> 00:27:30,879
Speaker 9: You messed up, admit it, Send him back, then deport

512
00:27:30,960 --> 00:27:33,600
Speaker 9: him again, but do it in the proper way. And

513
00:27:33,640 --> 00:27:36,240
Speaker 9: by the way, don't cavalierly in the White House giggle

514
00:27:36,280 --> 00:27:39,000
Speaker 9: as you talk about sending Americans down there as well.

515
00:27:39,320 --> 00:27:41,800
Speaker 9: It is flirting with something we haven't seen in over

516
00:27:41,840 --> 00:27:44,560
Speaker 9: two hundred and fifty years of this country. And it

517
00:27:44,680 --> 00:27:47,960
Speaker 9: is a rule of law country. And he, as the president,

518
00:27:48,080 --> 00:27:48,680
Speaker 9: knows better.

519
00:27:48,880 --> 00:27:49,280
Speaker 5: All right.

520
00:27:49,400 --> 00:27:52,720
Speaker 2: Jeanie Shanzeno and Rick Davis our political panel on this Tuesday,

521
00:27:52,760 --> 00:27:54,920
Speaker 2: Thank you so much for joining us. And we still

522
00:27:54,920 --> 00:27:57,000
Speaker 2: have more ahead here on Balance of powers. We turn

523
00:27:57,080 --> 00:28:00,200
Speaker 2: back to tariff policy and the intersection with markets. It's

524
00:28:00,200 --> 00:28:04,359
Speaker 2: next on Bloomberg TV and radio.

525
00:28:05,160 --> 00:28:08,640
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

526
00:28:08,720 --> 00:28:11,720
Speaker 1: us live weekdays at noon and five pm Eastern on

527
00:28:11,880 --> 00:28:15,119
Speaker 1: Apple Coarclay, and Android Auto with the Bloomberg Business App.

528
00:28:15,280 --> 00:28:18,560
Speaker 1: Listen on demand wherever you get your podcasts, or watch

529
00:28:18,600 --> 00:28:21,119
Speaker 1: us live on YouTube.

530
00:28:21,480 --> 00:28:25,160
Speaker 3: Ballance of Power Live from Washington on Bloomberg TV and radio.

531
00:28:25,200 --> 00:28:27,080
Speaker 3: You can always find us on YouTube as well search

532
00:28:27,080 --> 00:28:29,919
Speaker 3: Bloomberg Business News Live. We're going to have a conversation

533
00:28:30,280 --> 00:28:32,320
Speaker 3: as we stick with the markets here for a moment

534
00:28:32,640 --> 00:28:36,240
Speaker 3: with Eric Friedman, chief investment Officer US Bank Asset Management,

535
00:28:36,240 --> 00:28:39,360
Speaker 3: with Kaylee. The idea of uncertainty driving things for better

536
00:28:39,520 --> 00:28:42,520
Speaker 3: or worse. Here we've apparently flattened things out for the

537
00:28:42,520 --> 00:28:45,080
Speaker 3: most part today. It's not really a session to write

538
00:28:45,080 --> 00:28:47,840
Speaker 3: home about. But when you consider the impact on the

539
00:28:47,840 --> 00:28:49,640
Speaker 3: markets that we've seen over the past couple of weeks

540
00:28:49,640 --> 00:28:54,120
Speaker 3: when it comes to tariffs specifically, it's hard to overstate

541
00:28:54,680 --> 00:28:55,760
Speaker 3: how powerful.

542
00:28:55,360 --> 00:28:59,120
Speaker 2: This has been, well, including the power to change Trump's

543
00:28:59,160 --> 00:29:01,640
Speaker 2: mind about recip tariffs at least to a certain degrees.

544
00:29:01,680 --> 00:29:04,000
Speaker 2: He noted last week wheaziness in the bond market, people

545
00:29:04,040 --> 00:29:07,320
Speaker 2: getting yippie, and then announced the ninety day pause on

546
00:29:07,360 --> 00:29:10,400
Speaker 2: the higher reciprocal rate for most countries. And of course

547
00:29:10,400 --> 00:29:13,000
Speaker 2: we understand that instrumental in helping the President make that

548
00:29:13,040 --> 00:29:16,960
Speaker 2: decision were Wall Street voices within the administration, like the

549
00:29:17,000 --> 00:29:19,840
Speaker 2: Treasury Secretary Scott Bessen, who of course used to run

550
00:29:19,880 --> 00:29:22,120
Speaker 2: a hedge fund, Keys Square Group, And there's those kind

551
00:29:22,160 --> 00:29:26,479
Speaker 2: of voices all throughout Republican politics. Commerce Secretary Howard Lutnik,

552
00:29:26,520 --> 00:29:29,000
Speaker 2: formerly of Canter Fitzgerald. I guess you could include in

553
00:29:29,040 --> 00:29:31,800
Speaker 2: that as well. But another is actually the Governor of Virginia,

554
00:29:31,880 --> 00:29:35,200
Speaker 2: Glenn Youngkin, of course, used to be at Carlisle Group,

555
00:29:35,200 --> 00:29:38,400
Speaker 2: and he joined our colleagues on Bloomberg Surveillance earlier today

556
00:29:38,440 --> 00:29:41,240
Speaker 2: to talk about the policy and financial market bridge and

557
00:29:41,280 --> 00:29:43,320
Speaker 2: the impact of tariff's overall.

558
00:29:43,920 --> 00:29:47,200
Speaker 11: The net of it is that President Trump was clear

559
00:29:47,480 --> 00:29:51,360
Speaker 11: he's continued to be clear that in resetting bad trade

560
00:29:51,360 --> 00:29:56,920
Speaker 11: deals over the last decades and re establishing reciprocal trade opportunities.

561
00:29:57,200 --> 00:30:01,360
Speaker 11: By the way, with nations that are out lies China

562
00:30:01,400 --> 00:30:04,680
Speaker 11: is a whole different topic, but with nations that are

563
00:30:04,680 --> 00:30:07,880
Speaker 11: our allies, we just need fair trade and we haven't

564
00:30:07,880 --> 00:30:10,800
Speaker 11: had it. And so in to reset those trade in

565
00:30:11,280 --> 00:30:13,920
Speaker 11: reset those trade imbalances, you see him do what he

566
00:30:14,040 --> 00:30:17,440
Speaker 11: does well, which just creates space for negotiating. And I

567
00:30:17,480 --> 00:30:21,800
Speaker 11: think that's exactly what's happening when the first weekend after

568
00:30:21,880 --> 00:30:25,680
Speaker 11: April second, you read in every publication that seventy five

569
00:30:25,720 --> 00:30:29,640
Speaker 11: countries had called within a day to start the negotiations,

570
00:30:29,680 --> 00:30:34,560
Speaker 11: and you've already seen those negotiations, at least reported in rumor.

571
00:30:35,080 --> 00:30:37,000
Speaker 11: I think this will be this opportunity to take a

572
00:30:37,000 --> 00:30:38,800
Speaker 11: big step in resetting hold On and I think that's

573
00:30:38,840 --> 00:30:39,800
Speaker 11: what the market needs to see.

574
00:30:39,840 --> 00:30:41,800
Speaker 12: Part of the problem, I think, and you know this

575
00:30:41,960 --> 00:30:45,040
Speaker 12: very well, having invested heavily as a co CEO of

576
00:30:45,080 --> 00:30:49,640
Speaker 12: Carlisle and been investing in infrastructure, which takes a long time.

577
00:30:49,920 --> 00:30:52,959
Speaker 12: There's a maturity mismatch between when some of this negotiation

578
00:30:53,120 --> 00:30:55,800
Speaker 12: is happening, when these tariffs go on, and how long

579
00:30:55,840 --> 00:30:58,320
Speaker 12: it takes to bring that investment to the United States.

580
00:30:58,480 --> 00:31:00,360
Speaker 12: There is a lack of clarity about what that those

581
00:31:00,360 --> 00:31:03,840
Speaker 12: policies will be continued in perpetuity, and it's leading to

582
00:31:03,920 --> 00:31:06,840
Speaker 12: paralysis at so many companies. What do you tell to

583
00:31:06,920 --> 00:31:10,040
Speaker 12: companies in your jurisdiction who's come to you and say,

584
00:31:10,240 --> 00:31:11,120
Speaker 12: how can I plan?

585
00:31:11,280 --> 00:31:12,120
Speaker 6: How can I hire?

586
00:31:12,200 --> 00:31:14,640
Speaker 12: How can I invest? When this could change? I don't

587
00:31:14,640 --> 00:31:16,600
Speaker 12: even understand the parameters we're talking about.

588
00:31:16,800 --> 00:31:20,280
Speaker 11: Yeah, I have to disagree with you on the long

589
00:31:20,400 --> 00:31:25,720
Speaker 11: term planning, because we're seeing a pipeline of economic investment

590
00:31:26,280 --> 00:31:28,040
Speaker 11: that has been as full as it's ever been, and

591
00:31:28,080 --> 00:31:32,400
Speaker 11: these are long term investments. Fortune fifty companies wanting to

592
00:31:32,760 --> 00:31:36,760
Speaker 11: build in America and in Virginia hopefully if we can

593
00:31:36,800 --> 00:31:40,120
Speaker 11: recruit them there. And these are long term investments. And

594
00:31:40,720 --> 00:31:43,920
Speaker 11: you saw Nvidia yesterday talk about five hundred billion dollars.

595
00:31:43,960 --> 00:31:48,000
Speaker 11: We've seen most of the big pharmaceutical companies commit to

596
00:31:48,040 --> 00:31:51,840
Speaker 11: building in the United States. We're seeing technology investments, advanced

597
00:31:51,880 --> 00:31:55,720
Speaker 11: manufacturing all in the United States. These are long term investments.

598
00:31:56,080 --> 00:31:58,640
Speaker 11: I think the difference in a lot of people's understanding

599
00:31:58,840 --> 00:32:01,560
Speaker 11: is that during mark get ups and downs, well, yes,

600
00:32:01,640 --> 00:32:06,360
Speaker 11: IPOs get postponed, and yes, corporate deals get postponed. But

601
00:32:06,440 --> 00:32:11,120
Speaker 11: these long term commitments are actually coming in very large numbers,

602
00:32:11,360 --> 00:32:13,920
Speaker 11: and that's good for states like Virginia. I mean, listen,

603
00:32:13,920 --> 00:32:16,840
Speaker 11: we're in the sec of economic Development. I compete every

604
00:32:16,920 --> 00:32:21,600
Speaker 11: day with Tennessee and North Carolina, South Carolina, Georgia, Florida, Texas.

605
00:32:21,920 --> 00:32:23,160
Speaker 6: And we've got to compete.

606
00:32:23,480 --> 00:32:26,080
Speaker 11: And I think that much of that investment will come

607
00:32:26,080 --> 00:32:28,480
Speaker 11: to this region, and that is a long term commitment.

608
00:32:29,880 --> 00:32:34,120
Speaker 3: The Governor of Virginia, Glenn Youngkin, speaking on Bloomberg Surveillance

609
00:32:34,160 --> 00:32:38,000
Speaker 3: on Bloomberg TV earlier today, speaking to the veracity of

610
00:32:38,040 --> 00:32:40,800
Speaker 3: long term investment here, there's a big question when it

611
00:32:40,840 --> 00:32:44,440
Speaker 3: comes to what near term investors are doing, whether it's

612
00:32:44,520 --> 00:32:46,440
Speaker 3: stocks or bonds. That's why we wanted to spend some

613
00:32:46,520 --> 00:32:49,400
Speaker 3: time with Eric Friedman with our eyes on the markets

614
00:32:49,440 --> 00:32:50,880
Speaker 3: here on the Politics show.

615
00:32:51,000 --> 00:32:52,560
Speaker 6: As I say, you can't separate them.

616
00:32:52,560 --> 00:32:55,720
Speaker 3: He's the chief investment officer US Bank Asset Management.

617
00:32:55,840 --> 00:32:58,640
Speaker 6: Eric, great to have you. Welcome to Bloomberg TV and Radio.

618
00:32:58,880 --> 00:33:01,240
Speaker 3: You write that we've shifted from a glass half full

619
00:33:01,280 --> 00:33:04,680
Speaker 3: perspective to a glass half spilled perspective.

620
00:33:05,240 --> 00:33:07,040
Speaker 6: So how do we get the water back in the glass?

621
00:33:08,400 --> 00:33:10,920
Speaker 10: Yeah, I think it's an analogy that we're using more

622
00:33:10,920 --> 00:33:12,880
Speaker 10: often than we'd like right now. And really we look

623
00:33:12,920 --> 00:33:17,240
Speaker 10: at this from a very apolitical lens. From an investment standpoint.

624
00:33:17,240 --> 00:33:19,160
Speaker 10: You all do a great job of covering both sides

625
00:33:19,200 --> 00:33:20,600
Speaker 10: of the aisle. We have to think about this in

626
00:33:20,640 --> 00:33:24,040
Speaker 10: terms of buying and selling, and ultimately, we really think

627
00:33:24,080 --> 00:33:27,000
Speaker 10: that getting the water back of the glass really sits

628
00:33:27,000 --> 00:33:30,160
Speaker 10: with the idea of what is the objective function we're

629
00:33:30,160 --> 00:33:32,480
Speaker 10: trying to solve for a here. And I think you've heard,

630
00:33:33,320 --> 00:33:37,520
Speaker 10: including the Governor's comments, that you just played this notion

631
00:33:37,640 --> 00:33:40,680
Speaker 10: of the long term economic plan, and that certainly is

632
00:33:41,000 --> 00:33:44,640
Speaker 10: of interest to us as investors, but we also have

633
00:33:44,720 --> 00:33:47,680
Speaker 10: to invest in something that's open, you know, Seeingneen twenty

634
00:33:47,720 --> 00:33:49,840
Speaker 10: four to seven, which is the global capital markets, which

635
00:33:49,880 --> 00:33:52,960
Speaker 10: aren't necessarily focused too much on the long term. So

636
00:33:53,200 --> 00:33:57,320
Speaker 10: for us, really the key is what is the spectrum

637
00:33:57,440 --> 00:34:00,400
Speaker 10: of choices the administration wants to solve for and is

638
00:34:00,440 --> 00:34:04,200
Speaker 10: it partial restoring, is it more full restoring, is it

639
00:34:04,360 --> 00:34:07,640
Speaker 10: just a more level playing field because there's so much

640
00:34:07,760 --> 00:34:12,520
Speaker 10: nuance in what that objection objective function might be in

641
00:34:12,560 --> 00:34:14,359
Speaker 10: the mean term. In the meantime, we have to really

642
00:34:14,360 --> 00:34:16,719
Speaker 10: focus on what is the actual economy doing, and that

643
00:34:16,880 --> 00:34:19,719
Speaker 10: for us is probably the time difference between where we

644
00:34:19,760 --> 00:34:22,520
Speaker 10: are right now and when some of these longer term

645
00:34:22,920 --> 00:34:24,799
Speaker 10: projections may actually come to play.

646
00:34:26,040 --> 00:34:28,280
Speaker 2: Well, and to your point, on what will the economy

647
00:34:28,400 --> 00:34:31,520
Speaker 2: be doing in the shorter term. As the administration Eric

648
00:34:31,520 --> 00:34:33,960
Speaker 2: has talked about short term pain, We got a take

649
00:34:34,000 --> 00:34:36,040
Speaker 2: on what that pain actually could look like or the

650
00:34:36,080 --> 00:34:39,760
Speaker 2: probability of pain from David Costin, the chief equity strategist

651
00:34:39,800 --> 00:34:41,520
Speaker 2: over at Goldman Sachs. This is what he told our

652
00:34:41,560 --> 00:34:43,400
Speaker 2: colleagues on open interest this morning.

653
00:34:44,239 --> 00:34:48,120
Speaker 13: Well, certainly there's a high degree of uncertainty, largely that's

654
00:34:48,239 --> 00:34:53,440
Speaker 13: around the policy of the exact nature of the tariff

655
00:34:54,200 --> 00:34:58,000
Speaker 13: and the likelihood or not whether there'll be a recession.

656
00:34:58,280 --> 00:35:02,040
Speaker 13: And our economists here ascribe around a forty five percent

657
00:35:02,120 --> 00:35:04,160
Speaker 13: probability of recession in the next twelve months. So the

658
00:35:04,200 --> 00:35:06,480
Speaker 13: base case is in fact not a recession. The economy

659
00:35:06,480 --> 00:35:07,239
Speaker 13: continues to grow.

660
00:35:09,160 --> 00:35:10,560
Speaker 2: Is the recession in your base case?

661
00:35:10,680 --> 00:35:14,200
Speaker 14: Eric, it's not, Kale. I think it's a great clip

662
00:35:14,239 --> 00:35:14,640
Speaker 14: to play.

663
00:35:14,680 --> 00:35:17,200
Speaker 10: And if you think about the you know what I'm

664
00:35:17,200 --> 00:35:19,359
Speaker 10: going to call to bring in your your colleague Tom

665
00:35:19,440 --> 00:35:21,799
Speaker 10: Keane for a second. This is now becomes a why

666
00:35:22,000 --> 00:35:25,800
Speaker 10: access problem for investors like us, meaning what is the

667
00:35:26,239 --> 00:35:30,520
Speaker 10: time difference between you know, right now and resolution. So

668
00:35:31,160 --> 00:35:34,080
Speaker 10: we felt coming into you know, the pre April second

669
00:35:34,160 --> 00:35:37,319
Speaker 10: period that the economy was certainly slowing but still in

670
00:35:37,320 --> 00:35:39,759
Speaker 10: a good spot. We had estimates when we were about

671
00:35:40,520 --> 00:35:43,359
Speaker 10: nine ten estimate growth for the S and B five

672
00:35:43,400 --> 00:35:45,920
Speaker 10: hundred in terms of earnings for this year, that's probably

673
00:35:45,920 --> 00:35:48,239
Speaker 10: going to come down to something more flatish, if even

674
00:35:48,320 --> 00:35:51,239
Speaker 10: you know, potentially negative. So you know, as you have

675
00:35:51,360 --> 00:35:54,799
Speaker 10: more time that goes on, we actually have more vulnerability,

676
00:35:54,840 --> 00:35:58,960
Speaker 10: particularly with middle income consumers that was the most vulnerable

677
00:35:58,960 --> 00:36:02,640
Speaker 10: consumer set heading into the April second news, this was

678
00:36:02,680 --> 00:36:05,799
Speaker 10: a group that's done okay from an employment standpoint, has

679
00:36:05,800 --> 00:36:09,160
Speaker 10: done okay with respect to wages. But we think we

680
00:36:09,280 --> 00:36:13,040
Speaker 10: avoid recession as long as we get that objective function clarity.

681
00:36:13,480 --> 00:36:17,480
Speaker 14: Let's call it in a matter of sixty to ninety days.

682
00:36:17,520 --> 00:36:21,759
Speaker 10: If this goes past the current pause to tariff deadlines,

683
00:36:22,120 --> 00:36:24,880
Speaker 10: that's where we could see consumers really starting to question

684
00:36:25,480 --> 00:36:28,920
Speaker 10: the endgame here. So I think that again, this notion

685
00:36:29,040 --> 00:36:31,600
Speaker 10: of the economy will likely be able to endure this

686
00:36:32,239 --> 00:36:34,560
Speaker 10: uncertainty for a period of let's call it sixty to

687
00:36:34,680 --> 00:36:37,360
Speaker 10: ninety days. More than that, that's when you have both

688
00:36:37,400 --> 00:36:40,520
Speaker 10: businesses and consumers really questioning what they should do. And

689
00:36:40,520 --> 00:36:43,600
Speaker 10: when when business and investors think about questioning if you will,

690
00:36:43,840 --> 00:36:46,359
Speaker 10: they pull back. They don't double down if you will.

691
00:36:46,440 --> 00:36:49,400
Speaker 10: So that's why we think we'll avoid recession. But again,

692
00:36:49,480 --> 00:36:53,400
Speaker 10: this why access problem is an administration's.

693
00:36:52,800 --> 00:36:53,399
Speaker 14: End right now.

694
00:36:54,400 --> 00:36:58,319
Speaker 3: Well, without getting into Tom Keane's triple leverage cash, I

695
00:36:58,360 --> 00:37:01,839
Speaker 3: do wonder if you're waiting with your own money, here,

696
00:37:01,960 --> 00:37:04,000
Speaker 3: is it sixty to ninety days before you put new

697
00:37:04,000 --> 00:37:04,600
Speaker 3: money to work.

698
00:37:05,760 --> 00:37:07,759
Speaker 10: You know, we've been saying our clients really fall in

699
00:37:07,840 --> 00:37:10,439
Speaker 10: three buckets. Bucket one would be those clients who are

700
00:37:10,440 --> 00:37:13,160
Speaker 10: in let's call it the right asset allocation for their

701
00:37:13,480 --> 00:37:15,920
Speaker 10: time horizon. They're they're fine, They're in a good spot.

702
00:37:15,960 --> 00:37:18,680
Speaker 10: We have a ton of global exposures that go beyond

703
00:37:18,680 --> 00:37:20,960
Speaker 10: the bond in stock market, so they're in a good spot.

704
00:37:21,239 --> 00:37:24,440
Speaker 10: Those clients that have an excess of cash for whatever reason,

705
00:37:24,840 --> 00:37:27,680
Speaker 10: those clients we've been saying, hey, use this volatility as

706
00:37:27,719 --> 00:37:30,959
Speaker 10: your friend, be more incremental peace in But for those

707
00:37:30,960 --> 00:37:34,759
Speaker 10: clients that are probably overweight domestic equity exposure, that they've

708
00:37:34,800 --> 00:37:37,000
Speaker 10: really been riding that wave, if you will, which has

709
00:37:37,040 --> 00:37:39,040
Speaker 10: not been our advice, but they've been sort of sticking

710
00:37:39,080 --> 00:37:41,480
Speaker 10: with it. We've been saying, hey, this is an opportunity

711
00:37:41,520 --> 00:37:44,520
Speaker 10: on big up days to reduce and broaden out. So

712
00:37:44,920 --> 00:37:46,960
Speaker 10: we don't think we have to wait sixty to ninety

713
00:37:47,000 --> 00:37:49,840
Speaker 10: days for, you know, just to be fully resolved.

714
00:37:50,360 --> 00:37:52,760
Speaker 14: But some inkland. Again, you did a great job reporting

715
00:37:52,760 --> 00:37:53,360
Speaker 14: on this earlier.

716
00:37:53,400 --> 00:37:57,440
Speaker 10: You know, the European Trade union lead negotiator is also

717
00:37:57,520 --> 00:38:00,920
Speaker 10: unclear about what the endgame is. We need more concrete

718
00:38:01,000 --> 00:38:04,600
Speaker 10: messaging about hey, we're on a path towards resolution here.

719
00:38:04,680 --> 00:38:07,200
Speaker 10: Until we get that we think this back and forth

720
00:38:07,280 --> 00:38:09,960
Speaker 10: like the continues. We'd be concerned if the s and

721
00:38:10,000 --> 00:38:12,520
Speaker 10: P retested that forty eight hundred level, which again we

722
00:38:12,560 --> 00:38:15,200
Speaker 10: saw on Monday of last week. We think, you know,

723
00:38:15,239 --> 00:38:17,239
Speaker 10: we're going to grind it out between forty eight hundred

724
00:38:17,280 --> 00:38:19,400
Speaker 10: and probably fifty six hundred and the SMP for some

725
00:38:19,480 --> 00:38:22,279
Speaker 10: time the ten year. You know, again, north of four

726
00:38:22,480 --> 00:38:25,239
Speaker 10: fifty four sixty, that becomes a little more of a

727
00:38:25,239 --> 00:38:27,880
Speaker 10: concern on our radar screen, But we think we probably

728
00:38:27,920 --> 00:38:30,960
Speaker 10: live in those ranges in the immediate term. But again,

729
00:38:31,160 --> 00:38:34,640
Speaker 10: that resolution and a path towards outcomes is what we're

730
00:38:34,680 --> 00:38:37,680
Speaker 10: looking for to get more comfortable with putting fresh money

731
00:38:37,680 --> 00:38:38,160
Speaker 10: to work here.

732
00:38:39,480 --> 00:38:41,359
Speaker 2: Well, and it's interesting to hear your comments and kind

733
00:38:41,400 --> 00:38:43,640
Speaker 2: of cash allocation knowing we got the latest Bank of

734
00:38:43,640 --> 00:38:47,120
Speaker 2: America fund manager survey today and the strategist led by

735
00:38:47,160 --> 00:38:49,719
Speaker 2: Michael Hartnett there said they do not see peak fear

736
00:38:49,800 --> 00:38:53,000
Speaker 2: yet reflected in the market or in cash allocation, which

737
00:38:53,000 --> 00:38:56,000
Speaker 2: currently stands at about four point eight percent of assets.

738
00:38:56,080 --> 00:38:59,200
Speaker 2: They say there are they see max bearishness on the

739
00:38:59,239 --> 00:39:03,360
Speaker 2: macro without actually investor sentiment around economic prospects the lowest

740
00:39:03,400 --> 00:39:07,680
Speaker 2: in thirty years. But not quite max bearishness on the market,

741
00:39:07,719 --> 00:39:12,640
Speaker 2: and Eric, if we haven't reached mac bearishment max bearishness yet,

742
00:39:12,760 --> 00:39:15,360
Speaker 2: words can be difficult at times like these. Does that

743
00:39:15,400 --> 00:39:18,000
Speaker 2: suggest we might actually see a retesting of those lows

744
00:39:18,000 --> 00:39:18,880
Speaker 2: you were talking about?

745
00:39:19,880 --> 00:39:22,440
Speaker 10: Yeah, I think that we haven't seen what I'm going

746
00:39:22,520 --> 00:39:26,040
Speaker 10: to call that that capitulatory action, if you will, Kayley,

747
00:39:26,120 --> 00:39:28,480
Speaker 10: And so what would that mean? That would mean a

748
00:39:28,640 --> 00:39:30,880
Speaker 10: really sharp spike in the vix. That would mean that

749
00:39:30,960 --> 00:39:34,600
Speaker 10: put call ratios get highly skewed towards puts and we

750
00:39:34,719 --> 00:39:37,839
Speaker 10: see the you know, hey, let's let's sell not not

751
00:39:37,880 --> 00:39:39,880
Speaker 10: what I want to, but what I what I have to.

752
00:39:40,360 --> 00:39:42,520
Speaker 10: We haven't seen that moment. We got close to it

753
00:39:43,280 --> 00:39:45,920
Speaker 10: a week from a week ago yesterday, just with respect

754
00:39:46,000 --> 00:39:47,839
Speaker 10: to the Monday print, just given a lot of back

755
00:39:47,840 --> 00:39:51,120
Speaker 10: and forth over over that that preceding weekend, but we

756
00:39:51,160 --> 00:39:51,960
Speaker 10: didn't see.

757
00:39:51,760 --> 00:39:54,359
Speaker 14: It, and so that doesn't mean we have to see

758
00:39:54,360 --> 00:39:54,799
Speaker 14: it again.

759
00:39:54,840 --> 00:39:56,719
Speaker 10: Our viewpoint is that if we can live within this

760
00:39:56,920 --> 00:39:59,720
Speaker 10: range and the ten year between let's call it four

761
00:39:59,840 --> 00:40:02,160
Speaker 10: to four seventy five and again S and P forty

762
00:40:02,200 --> 00:40:05,359
Speaker 10: eight hundred to fifty four hundred and ultimately fifty six

763
00:40:05,440 --> 00:40:09,839
Speaker 10: hundred that to us would be a level of let's

764
00:40:10,040 --> 00:40:13,360
Speaker 10: not called complacency, but that says that the market is

765
00:40:13,480 --> 00:40:18,360
Speaker 10: okay with these negotiations pressing. We get concerned if we

766
00:40:18,400 --> 00:40:21,239
Speaker 10: get closer to that ninety days and there aren't signs

767
00:40:21,360 --> 00:40:24,120
Speaker 10: of more concrete resolutions occurring, and that's going to happen

768
00:40:24,160 --> 00:40:26,560
Speaker 10: more on the ground. That's why we'll be certainly focused

769
00:40:26,560 --> 00:40:28,799
Speaker 10: and on what you're reporting, because again, for all the

770
00:40:28,800 --> 00:40:30,640
Speaker 10: things we look at in terms of data, we're bringing

771
00:40:30,680 --> 00:40:33,400
Speaker 10: a lot of attention on high frequency data, but in

772
00:40:33,480 --> 00:40:36,640
Speaker 10: terms of how those negotiations acture are going on the ground,

773
00:40:37,040 --> 00:40:40,000
Speaker 10: that for us is certainly sitting front seat for markets

774
00:40:40,040 --> 00:40:40,439
Speaker 10: right now.

775
00:40:41,760 --> 00:40:43,680
Speaker 6: Just one minute left here, Eric.

776
00:40:43,719 --> 00:40:47,120
Speaker 3: This has been fascinating and we appreciate your insights here

777
00:40:47,160 --> 00:40:49,799
Speaker 3: with what you're saying, if I'm reading you correctly, as

778
00:40:49,840 --> 00:40:53,960
Speaker 3: Wall Street will be dependent upon Washington and specifically tariff

779
00:40:53,960 --> 00:40:56,359
Speaker 3: policy maybe for the rest of the year.

780
00:40:56,600 --> 00:40:59,239
Speaker 6: Do tariffs impact your year end target? Will you even

781
00:40:59,320 --> 00:40:59,680
Speaker 6: go there?

782
00:41:00,760 --> 00:41:02,759
Speaker 10: Yeah, I mean we think that that this is going

783
00:41:02,840 --> 00:41:04,919
Speaker 10: to be a case where you just to talk about

784
00:41:04,960 --> 00:41:07,160
Speaker 10: our earnings vestments. You know, we felt that coming into

785
00:41:07,200 --> 00:41:09,240
Speaker 10: this year, we thought that you know, up ten percent

786
00:41:09,320 --> 00:41:12,680
Speaker 10: from a growth standpoint on earnings was more likely, and

787
00:41:13,040 --> 00:41:15,400
Speaker 10: that put a number on the S and P that

788
00:41:15,600 --> 00:41:17,400
Speaker 10: was you know, had a six in front of it.

789
00:41:17,440 --> 00:41:19,399
Speaker 10: We think that probably something with the filing from it's

790
00:41:19,440 --> 00:41:21,640
Speaker 10: more important, you know, for this year. I would say

791
00:41:21,680 --> 00:41:25,640
Speaker 10: this just really quickly. You know, ultimately this is uh,

792
00:41:25,840 --> 00:41:30,120
Speaker 10: you know, a resolvable issue, but we need to see again,

793
00:41:30,840 --> 00:41:33,720
Speaker 10: you know, the the end game. Is this about isolating China?

794
00:41:33,920 --> 00:41:35,920
Speaker 10: Is this about you know, gaining a broader you know,

795
00:41:35,960 --> 00:41:37,759
Speaker 10: consortium of non China countries.

796
00:41:38,120 --> 00:41:39,600
Speaker 14: And there's lots of spots in between.

797
00:41:39,640 --> 00:41:41,520
Speaker 10: But again, we think that the markets are not going

798
00:41:41,600 --> 00:41:43,759
Speaker 10: to wait for tax reform to kick in, which of

799
00:41:43,800 --> 00:41:46,000
Speaker 10: course you've done a great job of covering. There needs

800
00:41:46,000 --> 00:41:48,239
Speaker 10: to be some more guidance before we before we start

801
00:41:48,280 --> 00:41:50,319
Speaker 10: focusing on fact reform.

802
00:41:50,520 --> 00:41:52,880
Speaker 2: All right, we appreciate your kind words and your insight.

803
00:41:53,080 --> 00:42:00,759
Speaker 2: Eric Friedman, chief investment officer for US Bank Asset Management, thanks.

804
00:42:00,480 --> 00:42:02,640
Speaker 6: For listening to the Balance of Power podcast.

805
00:42:03,239 --> 00:42:06,360
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806
00:42:06,520 --> 00:42:09,040
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807
00:42:09,120 --> 00:42:11,920
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808
00:42:12,000 --> 00:42:14,080
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