WEBVTT - Bloomberg Surveillance TV: August 11th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.440 Terminal and the Bloomberg Business App. Peter Ropenheimer of Goldman 0:00:37.520 --> 0:00:40.559 Sachs writing, it's possible the terriffs could hurt equity prices 0:00:40.640 --> 0:00:43.680 even if the US agrees on deals with key training partners. 0:00:43.760 --> 0:00:46.279 Peter joins us now for more. Peter, Welcome to the program, sir. 0:00:46.320 --> 0:00:48.440 Before we talk about the risk, let's talk about the price. 0:00:48.680 --> 0:00:50.879 The rally we've seen on both sides of the Atlantic, 0:00:50.920 --> 0:00:53.239 on the S and P and the eurostocks fifty of 0:00:53.320 --> 0:00:55.720 close to something like nine percent. Peter, when you break 0:00:55.760 --> 0:00:58.760 things down, let's just talk about breath. Compare and contrast 0:00:58.800 --> 0:01:02.000 the story in the States to the story you're witnessing 0:01:02.280 --> 0:01:06.399 in Europe. 0:01:04.720 --> 0:01:07.919 Well, very different story. At one level, it looks very similar. 0:01:07.920 --> 0:01:10.320 As you said, both markets are rising, but they're rising 0:01:10.360 --> 0:01:14.080 in different ways. The contributions are quite different. In the US, 0:01:14.760 --> 0:01:18.400 very much driven again by the power of the biggest 0:01:18.400 --> 0:01:21.600 tech stocks, which are really leading the market. As you say, 0:01:21.840 --> 0:01:24.600 smps are an all time high, the median stock is 0:01:24.640 --> 0:01:29.039 around twelve percent below it's fifty two week high, so 0:01:29.280 --> 0:01:33.720 very very concentrated, whereas in Europe, actually there's significant breadth, 0:01:34.360 --> 0:01:39.800 unusual breadth actually in the market, and you're seeing much 0:01:39.880 --> 0:01:44.000 much less concentration, although of course you are seeing and 0:01:44.080 --> 0:01:49.000 have seen stocks that are disappointing being very heavily punished, 0:01:49.000 --> 0:01:50.960 and that's happened on both sides of the Atlantic. 0:01:51.200 --> 0:01:53.279 So let's just pick up on the US TEK story 0:01:53.760 --> 0:01:55.840 and the narrow breadth that I've heard so much of 0:01:55.880 --> 0:01:57.920 that I'm sure you have as well. Whether it is 0:01:57.960 --> 0:02:01.080 necessarily unhealthy. If I think about the dominant risks of 0:02:01.160 --> 0:02:04.360 the moment, they're largely cyclical, they're related to trade, and 0:02:04.400 --> 0:02:06.320 in many ways some people might look at the US 0:02:06.400 --> 0:02:08.920 DOT market and say that's a source of stability, not 0:02:09.000 --> 0:02:13.840 necessarily downside risk. How would you counter that look? 0:02:13.919 --> 0:02:15.919 I think it's right that, you know, if we step 0:02:15.960 --> 0:02:19.240 back and think about economies which are still growing, albeit 0:02:19.760 --> 0:02:22.400 at a slower pace, certainly in the US, but interest 0:02:22.480 --> 0:02:26.959 rates coming down, that's broadly a supportive environment for risk assets. 0:02:27.080 --> 0:02:30.560 And the fact that in the US the tech heavy 0:02:31.639 --> 0:02:35.560 largest companies have been dominating the rally is a function 0:02:35.720 --> 0:02:39.799 of their very very powerful, continued profit growth. It's not 0:02:39.880 --> 0:02:43.519 been about speculation. It's really been about very very strong fundamentals, 0:02:43.520 --> 0:02:46.519 and there's nothing wrong with that. The only problem, of course, 0:02:46.960 --> 0:02:51.240 is that after you get an increasingly concentrated market, it 0:02:51.320 --> 0:02:55.959 becomes harder to diversify risks, at least domestically, and that's 0:02:55.960 --> 0:02:58.519 one of the reasons why we've been arguing that investors 0:02:58.560 --> 0:03:02.160 should take a more open mind mind a view of 0:03:02.280 --> 0:03:06.079 diversification geographically to improve risk adjusted returns. 0:03:06.280 --> 0:03:09.400 Well, Peter, where is the opportunities in Europe? Because I'm 0:03:09.400 --> 0:03:11.960 looking at the Bank of America fund manager survey out 0:03:12.000 --> 0:03:14.960 of Europe and they say European investors thirty five percent 0:03:14.960 --> 0:03:17.920 expect stronger European growth over the coming twelve months. But 0:03:17.960 --> 0:03:20.880 it was forty four percent last month. So isn't that 0:03:20.919 --> 0:03:23.440 European story actually starting to dwindle a little bit. 0:03:25.080 --> 0:03:27.120 Yeah, and we've seen that to some extent in the 0:03:27.160 --> 0:03:30.240 relative performance. Very much the first part of the year, 0:03:30.800 --> 0:03:34.800 Europe outperforming both in terms of underlying assets but also 0:03:35.400 --> 0:03:39.240 on a dollar adjusted basis. As the dollar weakened and 0:03:39.360 --> 0:03:43.400 that differences moderated to some extent. But I think it 0:03:43.440 --> 0:03:45.800 is right to say that from a very low base, 0:03:45.960 --> 0:03:49.800 European growth is improving somewhat. An important driver of that 0:03:50.160 --> 0:03:54.400 is the expansion of fiscal policy coming from Germany, and 0:03:54.440 --> 0:03:57.960 we do also have a couple of other themes that 0:03:58.040 --> 0:04:04.000 are encouraging intro particularly increased defense spending which is powering ahead, 0:04:04.400 --> 0:04:08.000 more infrastructure spending across Europe, and also some of the 0:04:08.160 --> 0:04:11.360 value areas of the market which are doing really very well, 0:04:11.400 --> 0:04:14.400 banks being a perfect example. And I would say that 0:04:14.600 --> 0:04:17.719 is another difference between Europe and the US. The US 0:04:18.200 --> 0:04:22.080 is still being driven by growth dominated themes, particularly related 0:04:22.080 --> 0:04:25.880 to technology, whereas in Europe and some other markets, value 0:04:25.920 --> 0:04:26.920 is actually outperforming. 0:04:27.400 --> 0:04:29.960 The risk of tariffs, though still exist, and the team 0:04:30.000 --> 0:04:32.159 at Goldman Sachs had a no doubt about how the 0:04:32.240 --> 0:04:35.400 impact has yet to hit consumer prices. When it comes 0:04:35.440 --> 0:04:38.240 to tariffs, that hit is just getting started, what can 0:04:38.320 --> 0:04:41.400 this mean for Europe and some European corporate names. 0:04:43.960 --> 0:04:46.640 Well, I think that it does complicate the picture because 0:04:46.680 --> 0:04:49.120 we haven't yet seen the full effect of tariffs on 0:04:49.160 --> 0:04:51.359 either side of the Atlantic, and it is likely to 0:04:51.480 --> 0:04:56.720 weigh on consumer confidence to some extent and the ability 0:04:56.720 --> 0:05:00.400 for consumers to continue to drive economic growth, and we're 0:05:00.440 --> 0:05:04.640 already seeing some evidence of that slowing, particularly in the US, 0:05:04.960 --> 0:05:09.120 and alongside it some weakness in the labor market. The offset, 0:05:09.200 --> 0:05:11.320 I think is that you will see lower rates, at 0:05:11.400 --> 0:05:14.240 least in the US. We think for the ECB they're 0:05:14.240 --> 0:05:18.480 done for now. They've already cut rates more aggressively, and 0:05:18.520 --> 0:05:22.159 I think there's less room for that to continue given 0:05:22.200 --> 0:05:24.960 that we're going to see some effect of tariff still 0:05:25.279 --> 0:05:26.120 yet to come through. 0:05:26.640 --> 0:05:29.000 You mentioned the rally we've seen in US tag validated 0:05:29.040 --> 0:05:31.320 by the earnings. The earnings have been really powerful. I 0:05:31.360 --> 0:05:33.719 believe you said the same thing for the banks and 0:05:33.720 --> 0:05:35.640 the run up we've seen in Europe. This rally of 0:05:35.640 --> 0:05:38.760 more than forty percent for European banks so far year today, 0:05:39.000 --> 0:05:41.640 has it been justified also by the earnings we've seen 0:05:41.680 --> 0:05:45.600 so far and the outlook coming from the c suite. 0:05:45.800 --> 0:05:49.000 Yeah, very much so, and we have to emphasize that 0:05:49.040 --> 0:05:51.720 this is a huge turnaround from the trend that we 0:05:51.800 --> 0:05:54.960 saw really for a decade after the financial crisis, where 0:05:55.200 --> 0:05:58.280 banks came under huge pressure, particularly in Europe. They had 0:05:58.279 --> 0:06:02.200 to delever, raise capital, cut dividends, and although they were 0:06:02.360 --> 0:06:06.400 cheap in terms of multiple they kept on underperforming. But 0:06:06.440 --> 0:06:09.560 we've seen a dramatic change in circumstances. Now they have 0:06:09.640 --> 0:06:13.400 strong balance sheets. You mentioned earlier that the credit cycle 0:06:13.480 --> 0:06:17.679 is benign, and more confidence in the economy means less 0:06:17.760 --> 0:06:21.240 risk of loan losses and credit losses and provisionings for 0:06:21.279 --> 0:06:23.640 the banks. And we have steeper yield curves which are 0:06:23.760 --> 0:06:28.840 very supportive of their profits. So in Europe, the very 0:06:28.880 --> 0:06:32.039 powerful returns that we've been seeing in banks is justified 0:06:32.080 --> 0:06:37.240 by very strong fundamentals, just as the technology companies have 0:06:37.320 --> 0:06:39.360 been supported by fundamentals in the US. 0:06:39.480 --> 0:06:41.880 Can we just touch on the rates back drub for Europe? 0:06:41.920 --> 0:06:44.240 For a long long time they complained about negative interest rates. 0:06:44.279 --> 0:06:46.160 We got away from that. Now it feels like rates 0:06:46.200 --> 0:06:48.120 are started to come back down again, Peter. And maybe 0:06:48.160 --> 0:06:50.719 they don't stop at two, perhaps they don't stop at one. 0:06:51.120 --> 0:06:54.159 How important is the rate outlook? For the long story 0:06:54.200 --> 0:06:55.240 on bags. 0:06:56.440 --> 0:06:59.720 I think the most critical factor is going to be growth. 0:07:00.320 --> 0:07:03.200 If we avoid recession, that would be our central view, 0:07:04.120 --> 0:07:07.040 then the risk of a provisioning cycle that could be 0:07:07.080 --> 0:07:10.800 damaging for earnings is moderated. Of course, what's been very 0:07:10.840 --> 0:07:13.080 helpful for the banks, and this has been true in 0:07:13.160 --> 0:07:17.080 many regions, particularly in Europe, is that yel coves have steepened. 0:07:17.320 --> 0:07:20.120 We've seen already a lot of progress on short rate 0:07:20.160 --> 0:07:24.920 cutting by the UCB, but long rates have been edging up, 0:07:25.120 --> 0:07:29.720 partly driven by growing deficits and spending, particularly in Germany, 0:07:29.720 --> 0:07:33.120 and that spread has been very helpful for banks. It 0:07:33.160 --> 0:07:35.520 may moderate a little bit moving forwards, but I think 0:07:35.560 --> 0:07:38.320 if we continue to get economic growth, the outlook is 0:07:38.320 --> 0:07:40.559 still reasonably benign for the banking sector in Europe. 0:07:40.640 --> 0:07:43.120 Peter Rockenheimer of Goma SAX Peter, I appreciate your time 0:07:53.320 --> 0:07:56.080 joining us Now is the former Boston Fed president Eric Rosengrant. 0:07:56.320 --> 0:07:59.040 Welcome back to the program, Sir, some healthy debate at 0:07:59.080 --> 0:08:01.120 the feder Reserve. Let's call it what it is. It 0:08:01.160 --> 0:08:03.880 is healthy. Do you think September is too early to 0:08:03.960 --> 0:08:04.720 settle the debate? 0:08:06.600 --> 0:08:08.520 I think it depends on how the data comes in 0:08:09.400 --> 0:08:12.480 we have two CPI reports, one PCE report, and one 0:08:12.520 --> 0:08:17.200 employment report. Data can be pretty noisy, so I think 0:08:17.200 --> 0:08:19.480 we need to see what things look like as we 0:08:19.520 --> 0:08:23.440 get into September. But I agree that if the CPI 0:08:23.520 --> 0:08:27.840 and PCE are reasonably well restrained and the labor market 0:08:27.840 --> 0:08:31.680 looks sweet, then it would be appropriate to ease rates. However, 0:08:31.720 --> 0:08:35.199 it's also quite possible that we'll see a slowly increasing 0:08:35.280 --> 0:08:39.920 inflation rate. I'm expecting the CPI will probably be the 0:08:39.920 --> 0:08:44.040 core cpi'll be above three percent when it comes out tomorrow, 0:08:44.200 --> 0:08:46.719 and if we start seeing numbers that look higher than 0:08:46.760 --> 0:08:51.079 the market's expecting, sentiment can change pretty quickly. So I 0:08:51.120 --> 0:08:53.240 think it's a little too soon to call September. I 0:08:53.280 --> 0:08:56.520 think the Fed was acting appropriately when it wanted to 0:08:56.559 --> 0:09:02.160 wait and see, because right now, while the payroll employment 0:09:02.320 --> 0:09:05.040 was week, the unemployment rate was four point two percent, 0:09:06.120 --> 0:09:08.559 and the labor market has had a labor supply shock, 0:09:08.600 --> 0:09:10.680 So you probably want to focus a little bit more 0:09:10.679 --> 0:09:13.840 on the unemployment rate than the payroll employment numbers. 0:09:14.200 --> 0:09:16.240 Eric, as you look at the dual mandate at the moment, 0:09:16.280 --> 0:09:18.520 and this really speaks to the divide of the Federal Reserve, 0:09:18.760 --> 0:09:20.920 there are some individuals who want to focus on the 0:09:20.920 --> 0:09:23.360 employment side of the mandate, others who still want to 0:09:23.360 --> 0:09:25.679 focus on the price stability side of the mandate. Can 0:09:25.720 --> 0:09:28.280 you share with us your experience. Did you prioritize one 0:09:28.320 --> 0:09:30.920 side over the other? Are they created equally. 0:09:32.320 --> 0:09:37.680 So everybody can vote? And way I mean it's you're 0:09:37.720 --> 0:09:40.719 not given the waiting function, so each person can kind 0:09:40.720 --> 0:09:43.120 of choose for themselves what they think is most important 0:09:43.160 --> 0:09:47.199 at the time. But the framework document actually talks about 0:09:47.280 --> 0:09:50.319 what you should do when both elements of the mandate 0:09:50.360 --> 0:09:53.559 are not where you want it. And in that document 0:09:53.600 --> 0:09:55.800 it argues that you should look at how far away 0:09:55.840 --> 0:09:57.400 you are from where you want to be and how 0:09:57.400 --> 0:10:01.240 long it'll take to get there. So on inflation, if 0:10:01.240 --> 0:10:03.840 you look at the core PCE, we're at two point 0:10:03.880 --> 0:10:06.520 eight percent, and most people think it's going to take 0:10:06.600 --> 0:10:08.960 quite some time for us to get back to two percent. 0:10:09.400 --> 0:10:11.679 If you look at the unemployment rate, we're right at 0:10:11.720 --> 0:10:15.720 four point two percent. So despite the weak labor supply 0:10:15.920 --> 0:10:20.320 that's been happening, the labor market doesn't look to be 0:10:20.320 --> 0:10:23.600 in that much trouble. You don't see initial claims rising rapidly. 0:10:24.600 --> 0:10:27.800 So while I know a number of participants at the 0:10:27.920 --> 0:10:32.320 FMC are talking about concern about the employment mandate. It 0:10:32.400 --> 0:10:35.560 actually is exactly where they forecast they want it to be, 0:10:35.760 --> 0:10:37.160 which is at full employment. 0:10:37.640 --> 0:10:40.880 Basically, what you outline there says that the Fed shouldn't 0:10:40.880 --> 0:10:42.920 be cutting just yet. So is there a bias to 0:10:42.960 --> 0:10:44.240 a weakening labor market? 0:10:46.160 --> 0:10:49.880 So it depends on a forecast, and I would say 0:10:49.920 --> 0:10:55.120 private sector economists do not see a rapidly rising unemployment 0:10:55.200 --> 0:10:59.640 rate and do not see an elevated risk of seeing 0:10:59.679 --> 0:11:03.600 a risk session. So I would think the rhetoric around 0:11:03.600 --> 0:11:07.240 the labor market would be more consistent if the private 0:11:07.280 --> 0:11:10.840 sector was seeing more evidence in the data that the 0:11:10.920 --> 0:11:13.240 unemployment rate looked like it was going to rise, that 0:11:13.320 --> 0:11:16.319 initial claims was going to rise. So I think at 0:11:16.320 --> 0:11:19.640 this case, at this time, it's a little bit odd 0:11:19.679 --> 0:11:22.320 to overweight the employment part of the dual mandate. 0:11:22.720 --> 0:11:24.520 Eric, Can we just sit on the data and I 0:11:24.559 --> 0:11:26.680 want to avoid the politics. Don't worry about that not 0:11:26.720 --> 0:11:29.360 going to include you in any of that whatsoever. We're 0:11:29.400 --> 0:11:31.600 always dependent on the data, and there's been a question 0:11:31.720 --> 0:11:34.400 for a long long time about how dependable the data 0:11:34.520 --> 0:11:37.480 actually is, particularly the labor market data prone to very 0:11:37.559 --> 0:11:40.600 large revisions. We saw that last year, We've seen it 0:11:40.640 --> 0:11:43.000 many times in the past as well. Eric, how did 0:11:43.000 --> 0:11:46.920 you manage that situation? Were you less sensitive to incoming 0:11:46.960 --> 0:11:48.760 monthly reads and knowing that at some point in the 0:11:48.760 --> 0:11:50.880 future they would be revised, How did you approach it? 0:11:52.200 --> 0:11:54.920 So if you focus on a forecast month to month, 0:11:55.000 --> 0:11:57.520 doesn't matter nearly as much as where you expect things 0:11:57.559 --> 0:12:01.160 to go over time. And as you point out, the 0:12:01.240 --> 0:12:04.480 labor market data, particularly the payroll numbers, can be pretty jumpy. 0:12:04.960 --> 0:12:08.080 And the reason for that is not because anybody's manipulating it. 0:12:08.080 --> 0:12:12.040 It's because they do a survey and if people don't 0:12:12.040 --> 0:12:15.800 fill out their survey forms on time, then in the 0:12:15.840 --> 0:12:19.959 revision they pick up the additional surveys and so depending 0:12:20.000 --> 0:12:22.160 on what the response rate is, and the response rate 0:12:22.200 --> 0:12:25.600 has been going down on many US government surveys, it 0:12:25.679 --> 0:12:28.720 becomes less accurate and the revisions can be larger as 0:12:28.760 --> 0:12:32.400 they get additional data. So you never should put too 0:12:32.480 --> 0:12:36.120 much weight on any one data point. You're really looking 0:12:36.160 --> 0:12:39.880 for a trend you're not actually looking for. While Wall 0:12:39.880 --> 0:12:44.880 Street focuses on beating expectations and having a number, comparing 0:12:45.240 --> 0:12:49.160 the current number to what they expected, the central bankers 0:12:49.160 --> 0:12:52.400 should really be worried more about long term trends. So 0:12:52.800 --> 0:12:55.600 long term trends don't get affected as much by a 0:12:55.640 --> 0:12:58.560 single data point, so you should smooth through most of 0:12:58.600 --> 0:13:01.320 that data, and that's what most forecasts end up doing. 0:13:02.040 --> 0:13:04.920 Do you think there's concern though, that now the US 0:13:05.080 --> 0:13:07.520 data is no longer considered the gold standard given the 0:13:07.520 --> 0:13:11.840 fact that the President ousted the commissioner of the BLS. 0:13:12.440 --> 0:13:16.719 Well, it depends on who he gets who replaces at 0:13:16.760 --> 0:13:21.680 the BLS, but it would be very disturbing if you 0:13:21.800 --> 0:13:27.120 didn't have reliance on the data, and the US not 0:13:27.240 --> 0:13:30.920 just the BLS data, but the GDP data, the inflation data. 0:13:31.640 --> 0:13:34.520 All that data is critical to making good policy choices. 0:13:35.000 --> 0:13:38.880 And if that data is manipulated in some way so 0:13:38.920 --> 0:13:41.719 that you can't rely on it, it becomes very problematic 0:13:41.760 --> 0:13:47.679 for policy. And while the initial changes are probably not 0:13:47.720 --> 0:13:51.000 going to be that noticeable, over time it can create 0:13:51.040 --> 0:13:53.360 havoc and I think you see examples of that or 0:13:53.400 --> 0:13:56.280 the Wall Street Journal did an article on what happened 0:13:56.280 --> 0:14:01.120 in Argentina when they started manipulating the data. China has 0:14:01.160 --> 0:14:04.240 been famous for dropping series that didn't work in the 0:14:04.240 --> 0:14:07.120 way they were hoping so. For example, youth unemployment is 0:14:07.160 --> 0:14:12.600 not reported anymore on a consistent basis, but you see 0:14:13.280 --> 0:14:15.199 young people coming to the United States because they can't 0:14:15.240 --> 0:14:18.200 get jobs in China. So you can conceal to some 0:14:18.400 --> 0:14:21.960 extent data and for months to month you can get 0:14:22.000 --> 0:14:25.440 slightly better numbers, but over time, if you're manipulating, the 0:14:25.520 --> 0:14:27.200 data becomes obvious to the public. 0:14:27.640 --> 0:14:33.320 Eric the President's nomination to fill Governor Coogler seat Stephen Myron, 0:14:33.400 --> 0:14:35.920 is an individual that is already working with him as 0:14:36.000 --> 0:14:38.880 one of his economists the head of the CEA. Less 0:14:38.920 --> 0:14:41.480 than a year ago, Myron was against cuts at the FED. 0:14:42.200 --> 0:14:45.480 Does he look purely political now, potentially to his new 0:14:45.520 --> 0:14:46.600 colleagues at the FOMC. 0:14:48.800 --> 0:14:52.320 I think there is a consistency problem. He has traditionally 0:14:52.360 --> 0:14:55.400 been somebody very concerned about the inflation part of the mandate, 0:14:56.120 --> 0:14:59.640 and so his newfound interest in the labor market and 0:14:59.640 --> 0:15:05.880 the ne to lower interest rates looks somewhat out of 0:15:06.040 --> 0:15:09.280 character from what he was concerned about. Over time, he's 0:15:09.320 --> 0:15:12.880 written about being concerned that there's too much politics of 0:15:12.960 --> 0:15:16.680 the FED. He obviously has been a strong proponent of 0:15:16.720 --> 0:15:20.520 this administration's policies and seems to be a proponent of 0:15:20.640 --> 0:15:23.840 lowering interest rates, which has been advocated by the administration. 0:15:24.840 --> 0:15:27.120 So if what you're looking for is an independent FED, 0:15:27.600 --> 0:15:30.880 he probably is not the perfect choice to ratify an 0:15:30.880 --> 0:15:31.720 independent FED. 0:15:32.160 --> 0:15:34.360 Eric I appreciate your opinion. Thank you, sir, the former 0:15:34.400 --> 0:15:47.280 Poston FED president Eric Riisenkrant Henry to try to fight 0:15:47.320 --> 0:15:49.520 a pound it joined us. Now for more, Henrietta, can 0:15:49.520 --> 0:15:52.040 you think of another example of something like this plank 0:15:52.080 --> 0:15:53.680 out in your lifetime? 0:15:55.240 --> 0:15:56.280 Certainly not at BIS. 0:15:56.360 --> 0:15:59.440 Wendy points it out exactly, there's not another example like this. 0:16:00.040 --> 0:16:02.400 I think the most interesting way to look at this 0:16:02.640 --> 0:16:05.200 is to see the President sort of expanding out beyond 0:16:05.240 --> 0:16:08.840 something that was a very real concern for him on Friday, 0:16:08.880 --> 0:16:10.920 if you followed his truth social posts, it was very 0:16:10.960 --> 0:16:13.400 much about these court cases that are pending around the 0:16:13.400 --> 0:16:16.040 AEPA tariffs. So if the President is going to be 0:16:16.360 --> 0:16:19.880 stripped of his authority to impose taris via EPA, is 0:16:19.920 --> 0:16:23.360 he giving himself some sort of additional leverage point with 0:16:23.440 --> 0:16:28.600 export controls and selling them to effectively the basic way 0:16:28.680 --> 0:16:31.120 of just getting trade flowing and having some sort of 0:16:31.160 --> 0:16:32.640 card to play with China. 0:16:32.640 --> 0:16:34.760 I think that's an interesting angle to think about. 0:16:35.440 --> 0:16:38.000 I think the AIPA court case story is the most 0:16:38.280 --> 0:16:40.920 critical here, and the President obviously was focused on that 0:16:41.000 --> 0:16:44.040 on Friday, and then this announcement makes sense in that context. 0:16:44.120 --> 0:16:46.560 Henrieta, If you're in a C suite of a massive 0:16:46.600 --> 0:16:48.840 American company and you see what's playing out right now 0:16:48.880 --> 0:16:51.320 with Nvidia and AMD, is this a new risk that 0:16:51.400 --> 0:16:54.040 you need to contend with that potentially if you want 0:16:54.080 --> 0:16:57.720 to export your products to outside of the United States, 0:16:57.880 --> 0:16:59.840 you might have to pay the US government. 0:17:00.880 --> 0:17:03.960 I think it's completely stands to reason, and every single 0:17:04.040 --> 0:17:06.200 one of these trade deals has some sort of pay 0:17:06.440 --> 0:17:09.320 mint component. And what happens is we get these original 0:17:09.320 --> 0:17:12.119 announcements and then they get materially walked back. So this 0:17:12.160 --> 0:17:14.920 one's pretty cut and dry fifteen percent in the event 0:17:14.920 --> 0:17:17.480 that that's where it lands. But think about the Japan deal, 0:17:17.520 --> 0:17:19.879 for example, the White House set that's five hundred and 0:17:19.920 --> 0:17:22.400 fifty billion dollars worth of investment that's going to flow 0:17:22.440 --> 0:17:23.240 to the United States. 0:17:23.320 --> 0:17:24.440 We get ninety percent of. 0:17:24.359 --> 0:17:27.320 The returns, But the reality is that only eleven billion 0:17:27.400 --> 0:17:30.679 dollars of that five hundred billion that Japan committed to 0:17:31.119 --> 0:17:34.080 is going to come from the Japan bank. Everything else 0:17:34.200 --> 0:17:36.239 is going to come from private sector that you have 0:17:36.280 --> 0:17:39.280 no control over. So there are these big numbers floated 0:17:39.320 --> 0:17:42.880 and then they're almost always revised. Another example, to give 0:17:42.880 --> 0:17:45.399 you another one down would be the gold tariffs that 0:17:45.480 --> 0:17:49.040 are happening right now. This sort of rampant confusion before 0:17:49.040 --> 0:17:51.879 there's an ultimate clarity is really the prevailing theme of 0:17:51.880 --> 0:17:52.639 this administration. 0:17:53.080 --> 0:17:55.439 Okay, but when you're talking about pay components, when it 0:17:55.440 --> 0:17:59.080 comes to other trade negotiators, it's about investing in the 0:17:59.200 --> 0:18:03.719 United States. That means money and jobs, jobs for Americans 0:18:03.760 --> 0:18:07.000 coming into the United States. This is purely about just 0:18:07.119 --> 0:18:09.480 paying some of your profit streams for chips that at 0:18:09.480 --> 0:18:12.320 one point you are already sending to China to the 0:18:12.440 --> 0:18:14.760 US government. How is this in line what the Trump 0:18:14.800 --> 0:18:17.560 administration and the campaign ran on. 0:18:18.440 --> 0:18:20.680 Well, it's definitely not consistent at all. 0:18:20.720 --> 0:18:23.800 Either there was a national security threat exposed to these 0:18:23.960 --> 0:18:26.120 chip sales, which is something that we've been dealing with 0:18:26.160 --> 0:18:29.080 for at least a decade, or you can just pay 0:18:29.280 --> 0:18:31.760 your way around it and it's no longer a national 0:18:31.840 --> 0:18:35.720 security threat. They are two mutually exclusive developments. And I 0:18:35.760 --> 0:18:38.440 think again it goes back to the president needing more 0:18:38.520 --> 0:18:43.560 chips in the China negotiations, because, for example, the export 0:18:43.760 --> 0:18:47.240 of US soy and agriculture. 0:18:46.600 --> 0:18:49.800 Goods is down fifteen fifty percent. 0:18:49.720 --> 0:18:51.760 In just the last six months, dropped from like eleven 0:18:51.800 --> 0:18:53.800 and a half billion dollars worth of sales to five 0:18:53.840 --> 0:18:56.880 and a half. The president needs more ammunition, and if 0:18:56.880 --> 0:19:00.400 he can somehow create a reliance, which is what we've 0:19:00.400 --> 0:19:03.680 heard from the Nvidia CEO on US chip sales, then 0:19:03.720 --> 0:19:05.919 that gives some additional leverage perhaps down the line, but 0:19:05.960 --> 0:19:09.080 it's definitely mutually exclusive to the national security argument. 0:19:09.160 --> 0:19:11.280 How much leverage do they have right now Handwritter, I 0:19:11.320 --> 0:19:13.400 think that's worth exploring. If you look at the Chinese 0:19:13.400 --> 0:19:17.000 export numbers, they seem to be doing okay. The export 0:19:17.160 --> 0:19:20.520 numbers are up, the exports to just go into other places. 0:19:20.720 --> 0:19:22.359 Is this important to them in the same way it 0:19:22.480 --> 0:19:25.399 was maybe six months ago, maybe several years ago, four 0:19:25.480 --> 0:19:26.320 or five years ago. 0:19:27.040 --> 0:19:27.320 Yeah. 0:19:27.320 --> 0:19:29.720 Absolutely, And this is what you always have heard from 0:19:29.800 --> 0:19:30.760 China very consistently. 0:19:30.800 --> 0:19:33.040 The United States is a bully, come do business with us. 0:19:33.240 --> 0:19:36.399 We're seeing it operate in Africa right now and the 0:19:36.440 --> 0:19:39.199 EU and other nations in the Southeast Asian region. 0:19:39.640 --> 0:19:41.000 And one of the things to. 0:19:41.000 --> 0:19:42.879 Be mindful of as we get into this is that 0:19:42.920 --> 0:19:45.719 the president has threatened one hundred and forty five percent 0:19:45.760 --> 0:19:48.600 tires eighty percent would be the rate that goes into 0:19:48.640 --> 0:19:50.960 effect on August twelfth, that they don't reach a detant. 0:19:51.280 --> 0:19:56.160 But China plainly has the president in a corner around 0:19:56.320 --> 0:20:01.320 magnets and rare earths that debilitate the automate and defense. 0:20:00.960 --> 0:20:02.600 Sectors win one fell swoop. 0:20:02.920 --> 0:20:05.720 So the reason that the ninety day pause is the 0:20:05.760 --> 0:20:08.119 base case on the street is because the president threatened 0:20:08.119 --> 0:20:09.720 too much and he's not going to get it. 0:20:09.720 --> 0:20:10.959 We don't have the capacity for that. 0:20:11.000 --> 0:20:13.600 Goldman's coming out with you sixty seven percent inflation hike 0:20:13.880 --> 0:20:16.800 to the US consumer and prime prices being passed on. 0:20:17.080 --> 0:20:18.800 We do not have that ability right now. 0:20:18.840 --> 0:20:20.800 It's the same reason not to go to too many places, 0:20:20.920 --> 0:20:22.800 the same reason you're not saying the Russia sanctions go 0:20:22.840 --> 0:20:25.520 into effect. You cannot mess with oil and gas prices 0:20:25.520 --> 0:20:27.280 when we have this risk of inflation coming. 0:20:27.520 --> 0:20:29.960 What would be helpful is if the Europeans another trade 0:20:29.960 --> 0:20:32.280 pound has gone on side with the United States to 0:20:32.280 --> 0:20:34.440 put the pressure on China's for the pressure on another 0:20:34.520 --> 0:20:37.080 trade pond. And do you see those pieces coming together 0:20:37.359 --> 0:20:39.320 anytime soon, I. 0:20:39.400 --> 0:20:41.719 Don't, And think about what we have pending. 0:20:41.840 --> 0:20:46.040 You've got Section two thirty two, pharmaceutical tires, automobiles, automobile parts, 0:20:46.080 --> 0:20:50.320 semiconductor chips, all those outstanding components. And the EU is 0:20:50.359 --> 0:20:52.680 not at all thrilled with the deal that was reached 0:20:52.680 --> 0:20:54.439 a couple weeks back with the United States. 0:20:54.480 --> 0:20:56.840 So that block is fractured to. 0:20:56.800 --> 0:20:58.680 The point where we don't even have legally binding texts, 0:20:58.720 --> 0:21:00.600 and we might not for months now. I don't see 0:21:00.640 --> 0:21:04.439 that coming around. We don't have Canada even, you know, 0:21:04.480 --> 0:21:05.840 so I think we're quite a ways away. 0:21:06.040 --> 0:21:07.800 What kind of way does the US have when it 0:21:07.800 --> 0:21:10.320 goes to Brussels and say, really put the screws to China, 0:21:10.400 --> 0:21:12.920 given the fact that now the United States is saying, well, 0:21:13.080 --> 0:21:15.600 actually we'll send some chips that we thought were national 0:21:15.600 --> 0:21:17.520 security concerned, but you just have to give us some 0:21:17.560 --> 0:21:18.040 of the profit. 0:21:19.000 --> 0:21:22.040 You know, this is really the underlining issue that all 0:21:22.080 --> 0:21:25.680