WEBVTT - Trump Tariff Plans Expected to Deliver High Drama, Bumpy Rollout 0:00:02.920 --> 0:00:10.959 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg BusinessWeek 0:00:11.320 --> 0:00:14.560 Inside from the reporters and editors who bring you America's 0:00:14.560 --> 0:00:19.160 most trusted business magazine, plus global business, finance and tech news. 0:00:19.360 --> 0:00:23.479 The Bloomberg Business Week Podcast with Carol Messer and Tim 0:00:23.520 --> 0:00:25.800 Stenebek from Bloomberg Radio. 0:00:27.480 --> 0:00:31.840 He's dubbed himself tariff man, tariff, tariff, tariff. I am 0:00:31.920 --> 0:00:32.840 a tariff man. 0:00:32.920 --> 0:00:33.159 To me. 0:00:33.280 --> 0:00:36.600 The most beautiful word in the dictionary is tariff. Build 0:00:36.640 --> 0:00:38.559 your plant in the United States and you don't have 0:00:38.600 --> 0:00:39.360 any tariffs. 0:00:39.680 --> 0:00:41.960 That is, of course President elect Donald Trump. On the 0:00:42.000 --> 0:00:44.720 campaign trail, he's pledged to impose extra large tariffs on 0:00:44.720 --> 0:00:48.160 imports from China and medium sized ones for the rest 0:00:48.159 --> 0:00:50.240 of the world. If he had his way, the US 0:00:50.240 --> 0:00:53.520 would hark back to a nineteenth century Gilded Age model 0:00:53.520 --> 0:00:57.200 of small government funded largely by tariffs instead of income taxes, 0:00:57.520 --> 0:01:00.600 in which American barons of industry think about the people. 0:01:00.600 --> 0:01:03.600 Like Elon Musk during that time, built vast well thanks 0:01:03.600 --> 0:01:07.520 to protectionism and the privilege of limited competition. That rollout, 0:01:07.520 --> 0:01:10.560 though may be dramatic and bumpy. Sean Don and his 0:01:10.560 --> 0:01:13.440 Bloomberg New Senior economics writer. He writes about what a 0:01:13.440 --> 0:01:16.080 tariff rollout could look like for Business Week. Check it 0:01:16.120 --> 0:01:19.919 out at Bloomberg dot com and also on the Bloomberg terminal. 0:01:19.920 --> 0:01:22.880 He joins us from our Washington, DC bureau. So, Sean, 0:01:22.920 --> 0:01:25.080 if we go back to the first Trump administration, what 0:01:25.120 --> 0:01:28.720 can we learn about how Trump could roll out tariffs 0:01:28.800 --> 0:01:31.679 when it comes when he gets an office on January twentieth. 0:01:32.480 --> 0:01:34.640 Yeah, so, I think the first thing we learned from 0:01:34.640 --> 0:01:37.559 the first Trump administration is that yes, he does deliver 0:01:37.600 --> 0:01:40.200 on his promises, and yes there will be tariffs, but 0:01:40.240 --> 0:01:42.600 it's all the details that matter. And to get to 0:01:42.640 --> 0:01:44.800 those details, you're going to go through a period of 0:01:45.160 --> 0:01:48.000 chaotic policy making where you're going to see have some 0:01:48.040 --> 0:01:52.680 pretty heated debates between his advisors who often come from 0:01:52.880 --> 0:01:56.840 pretty different philosophical camps. And we are starting to see, 0:01:57.000 --> 0:01:58.840 we're less than a week out from the election, or 0:01:58.880 --> 0:02:02.520 just a week out from the election, a similar dynamic 0:02:02.840 --> 0:02:03.920 start to materialize. 0:02:04.600 --> 0:02:06.520 We'll talk to us two about the people that Trump 0:02:06.560 --> 0:02:10.079 is surrounding himself with. He by his own description, is 0:02:10.200 --> 0:02:14.200 tariff man, but he's also appointing and considering people who 0:02:14.240 --> 0:02:17.760 seem to share his views. You think about Robert Lighthouser Lightheiser, 0:02:17.800 --> 0:02:20.480 for example, potentially returning to his post. 0:02:21.400 --> 0:02:25.120 Right, So if Trump is tariff man, then his ideological 0:02:25.120 --> 0:02:26.720 advisor is Robert Litthheiser. 0:02:26.840 --> 0:02:27.000 Right. 0:02:27.040 --> 0:02:29.640 He is the guy who actually has the plan to 0:02:29.720 --> 0:02:33.360 deliver tariffs. He is a trade lawyer with decades in 0:02:33.400 --> 0:02:37.720 the business, decades of being a contrarian in Washington and 0:02:37.840 --> 0:02:41.520 acting as a protectionist, calling for a rebalancing of US 0:02:41.560 --> 0:02:44.880 tariffs with the world and for a crackdown on China. 0:02:44.960 --> 0:02:47.640 He's written a whole book in the last four years 0:02:47.760 --> 0:02:50.040 laying out a plan for how to tackle China and 0:02:51.160 --> 0:02:54.920 take on trade policy. And he's you're kind of true believer. 0:02:55.320 --> 0:02:58.320 But the kind of dynamic we're watching very carefully now 0:02:58.360 --> 0:03:01.520 is where he actually ends up in Trump's cabinet, or 0:03:01.520 --> 0:03:03.760 if he ends up in the cabinet at all, or 0:03:03.800 --> 0:03:06.120 if he ends up in a kind of advisory role 0:03:06.480 --> 0:03:10.799 that may have less power inside the White House, and 0:03:10.840 --> 0:03:13.280 who else ends up in the cabinet. One of the 0:03:13.320 --> 0:03:16.880 things we saw in the first Trump administration was a 0:03:17.000 --> 0:03:22.239 Wall Street guy in the Treasury in Stephn Minouchin, who 0:03:22.280 --> 0:03:25.480 pushed back against a lot of the tariff policy and 0:03:25.520 --> 0:03:29.080 the protectionist ideas that were being pushed by people like 0:03:29.440 --> 0:03:32.520 Robert Leitheiser. That's one of the reasons Robert Leitheiser has 0:03:32.560 --> 0:03:36.560 spent the last few months quietly trying to position himself 0:03:36.600 --> 0:03:41.000 to move into a post like the Treasury or the 0:03:41.040 --> 0:03:45.080 Commerce Department, which may have more power than the old 0:03:45.160 --> 0:03:50.040 US Trade Representative's office, which he inhabited during the first 0:03:50.080 --> 0:03:50.920 Trump administration. 0:03:51.080 --> 0:03:54.400 Sean, what's pretty incredible. We're already starting to see companies 0:03:54.720 --> 0:03:57.960 make announcements about potential price increases as a result of tariff's. 0:03:57.960 --> 0:03:59.840 One of the most read stories on the Bloomberg terminal 0:04:00.160 --> 0:04:03.560 this afternoon is about Stanley Blackendecker. They make craftsmen into 0:04:03.560 --> 0:04:07.080 walt tools. They're considering raising prices in response to higher 0:04:07.080 --> 0:04:09.680 tariffs that they expect to be imposed by President elect 0:04:09.680 --> 0:04:14.400 Donald Trump's administration. The company's CEO actually said in a 0:04:14.440 --> 0:04:18.080 call last month, it's unlikely that they're going to move 0:04:18.080 --> 0:04:20.039 a lot back to the US because it's not cost 0:04:20.040 --> 0:04:22.239 effective to do so, and there are questions about whether 0:04:22.600 --> 0:04:25.040 we even have the labor to actually do that in 0:04:25.080 --> 0:04:27.839 this country. The idea with some of these tariffs would 0:04:27.839 --> 0:04:29.840 be to move production back to the United States, but 0:04:30.040 --> 0:04:32.920 as we're seeing now that's not necessarily feasible for a 0:04:32.960 --> 0:04:33.800 lot of these companies. 0:04:34.600 --> 0:04:37.479 Yeah, and Stanley Black and Decker in that call, the 0:04:37.520 --> 0:04:40.039 CEO was saying that they started drafting a plan in 0:04:40.080 --> 0:04:45.000 the spring for Trump victory and possible tariffs, and they're 0:04:45.000 --> 0:04:47.400 not alone among companies to do that. We know that 0:04:47.440 --> 0:04:51.159 a lot of CEOs and businesses around the world, not 0:04:51.320 --> 0:04:53.920 just here in the United States, have been planning for 0:04:53.960 --> 0:04:56.600 this for months now, and also have had a lot 0:04:56.600 --> 0:05:00.800 of practice through the first Trump and mist also the 0:05:00.800 --> 0:05:04.560 pandemic and all the supply chain realignment that happened there 0:05:05.080 --> 0:05:08.240 the Biden administration and the push to kind of repatriate 0:05:09.200 --> 0:05:13.800 big production in semiconductors and electric vehicles, and the whole 0:05:13.800 --> 0:05:19.840 industrial policy push to encourage that. CEOs businesses today are 0:05:20.080 --> 0:05:22.200 very good at dealing with these things, and they've been 0:05:22.279 --> 0:05:24.320 kind of flexing those muscles for a while, and so 0:05:24.360 --> 0:05:27.599 they're in a different position than they were before twenty 0:05:27.680 --> 0:05:31.640 sixteen when Donald Trump was first elected. And there is 0:05:31.680 --> 0:05:36.120 a very real argument that the Stanley blackendecor seed is 0:05:36.160 --> 0:05:39.160 presenting there. In terms of the availability of labor, We've 0:05:39.200 --> 0:05:40.919 just had a couple of years. We're one of the 0:05:40.920 --> 0:05:43.400 big complaints from businesses is they don't have the workers 0:05:43.720 --> 0:05:46.800 to staff the factories that they're building and so on. 0:05:46.839 --> 0:05:50.239 And that's not going to change suddenly if Donald Trump 0:05:50.279 --> 0:05:52.880 moves into the White House, and especially not if he 0:05:53.000 --> 0:05:55.400 starts cracking down on immigration and deporting people. 0:05:55.600 --> 0:05:57.560 Right, well, let's talk a little bit more about that, 0:05:57.680 --> 0:05:59.839 because Tim I don't know if you know, but I 0:05:59.839 --> 0:06:02.640 am kershow called Open Interest nine to eleven am daily 0:06:03.320 --> 0:06:07.080 on Bloomberg Television, and Matt Miller has, to his credit, 0:06:07.160 --> 0:06:09.799 been obsessed with this question what happens to the labor 0:06:09.839 --> 0:06:12.960 market and what happens to inflation if we do see 0:06:13.279 --> 0:06:16.239 those types of mass deportations. Sean, what have you found 0:06:16.240 --> 0:06:18.080 in your research and your reporting so far? 0:06:19.120 --> 0:06:23.640 Yeah, So, Look, there's a lot of agreement among economists 0:06:23.720 --> 0:06:27.400 that tariffs add to costs for consumers and so that 0:06:27.400 --> 0:06:30.200 that will feed into inflation. And there's a lot of 0:06:30.279 --> 0:06:35.520 agreement from economists that if you start deporting people and 0:06:36.040 --> 0:06:38.960 reducing the number of people moving into the country and 0:06:39.000 --> 0:06:42.080 the labor force, that you're going to exacerbate some of 0:06:42.120 --> 0:06:45.919 the demographic challenges that the United States already has with 0:06:46.000 --> 0:06:48.560 all the baby boomers who are moving out of the workforce, 0:06:49.240 --> 0:06:51.560 and so on over the next few years. I think 0:06:51.600 --> 0:06:54.480 of the world today in one of the framings I 0:06:54.520 --> 0:06:57.640 think is the world is now engaging in the people wars. 0:06:57.760 --> 0:06:57.920 Right. 0:06:58.480 --> 0:07:02.480 Population is one of the great economic forces and one 0:07:02.520 --> 0:07:05.520 of the great economic advantages that the United States has 0:07:05.560 --> 0:07:08.640 had for many, many many years as a place that 0:07:08.720 --> 0:07:12.600 attracts immigrants. If you look at China now, it's got 0:07:12.600 --> 0:07:15.800 a declining population, It's got an aging population. Japan for 0:07:15.880 --> 0:07:18.640 years has been dealing with an aging population, Germany's dealing 0:07:18.640 --> 0:07:21.760 with an aging population, and so on. Within the United States, 0:07:21.800 --> 0:07:23.920 the places that are growing fasts are the places that 0:07:24.000 --> 0:07:27.400 are gaining population. The places that are in real trouble 0:07:27.440 --> 0:07:31.040 economically are those aging counties that just can't hang on 0:07:32.200 --> 0:07:35.640 to people. And when investors are looking to put a 0:07:35.720 --> 0:07:38.360 new factory into place, the first question they ask is 0:07:38.400 --> 0:07:41.080 where are the people? Where are my workers going to be? So, 0:07:41.320 --> 0:07:45.360 you know, all of these things coexist and they kind 0:07:45.360 --> 0:07:48.000 of collide, and that means we're going to see potentially 0:07:48.040 --> 0:07:51.520 more inflation. We're also going to see more strain in 0:07:51.560 --> 0:07:55.240 the labor market, and overall, perhaps a big hit to 0:07:55.400 --> 0:07:57.080 American competitiveness in the world. 0:07:57.560 --> 0:08:00.360 Sean, thanks so much for joining us. Really appreciate taking 0:08:00.360 --> 0:08:02.520 the time This afternoon, Everybody check out Sean's story. It's 0:08:02.520 --> 0:08:05.520 at Bloomberg dot com slash BusinessWeek. You can also read 0:08:05.560 --> 0:08:08.280 it on the Bloomberg terminal, all about the way that 0:08:08.680 --> 0:08:12.600 Donald Trump potentially will roll out tariffs come January when 0:08:12.640 --> 0:08:15.160 he does take office for a second time. 0:08:16.040 --> 0:08:19.560 You're listening to the Bloomberg Business Week podcast. Catch us 0:08:19.600 --> 0:08:22.840 live weekday afternoons from two to five pm Eastern. Listen 0:08:22.880 --> 0:08:26.160 on Applecarplay and and Broud Auto with a Bloomberg Business app, 0:08:26.360 --> 0:08:28.040 or watch US live on YouTube. 0:08:29.040 --> 0:08:32.120 Well, Baguya Technology shares are taking a turn lower today. 0:08:32.120 --> 0:08:34.120 They were down at one point as much as forty percent. 0:08:34.200 --> 0:08:37.160 This after the company's third quarter network volume missed the 0:08:37.240 --> 0:08:40.920 average analyst estimates. Paguy is a fintech company that takes 0:08:40.960 --> 0:08:45.240 loans that lenders rejected, analyzes them using AI. It then 0:08:45.280 --> 0:08:50.679 consolidates them to sell to institutional investors. It counts Visa, Ally, Sofi, 0:08:50.800 --> 0:08:54.120 Us Bank, Klarna among its different partners. We've got with 0:08:54.200 --> 0:08:57.320 us gaul Krubiner, the company CEO. He joins us here 0:08:57.320 --> 0:09:00.480 in the Bloomberg BusinessWeek Studio. I want to talk a 0:09:00.480 --> 0:09:03.440 little bit about your view because you have a great 0:09:03.480 --> 0:09:05.800 idea of what the health of the consumer is, the economy, 0:09:05.840 --> 0:09:08.040 what things are looking like. But before that I got 0:09:08.080 --> 0:09:09.440 to talk about we were Bloomberg. I want to talk 0:09:09.440 --> 0:09:12.960 about the stock price you guys reported earlier today. What's 0:09:12.960 --> 0:09:14.600 going on with the stock today? Do you think investors 0:09:14.640 --> 0:09:15.680 are missing the big picture? 0:09:16.200 --> 0:09:18.360 Definitely, So thank you very much for having me today. 0:09:18.440 --> 0:09:21.040 I think the stock price is a different conversation as 0:09:21.280 --> 0:09:24.600 the stock price valied in and a little bit because 0:09:24.600 --> 0:09:27.679 of what you've just described, maybe took a shakeout. But 0:09:27.679 --> 0:09:30.760 the really interesting pieces were the businesses and the fundamentals 0:09:31.040 --> 0:09:34.880 and from that prospective, Pagay ahead a record record revenues 0:09:34.920 --> 0:09:38.840 and even record network volume and maybe just to drill 0:09:38.920 --> 0:09:41.240 down for one second of what the company does. So 0:09:41.320 --> 0:09:43.880 think about it that we are using an AI to 0:09:44.040 --> 0:09:47.240 help different lendos as the one you just described, Ali 0:09:47.240 --> 0:09:50.480 Bank so far and many others US Bank to help 0:09:50.600 --> 0:09:54.480 them serve their consumers. So so far we have helped 0:09:54.600 --> 0:09:59.240 these different organizations to provide loans to over two million customers, 0:09:59.480 --> 0:10:03.559 customers that, as you mentioned, would have otherwise been declined. 0:10:03.840 --> 0:10:06.600 So think about the fact that we helped two million 0:10:06.640 --> 0:10:12.000 Americans get a twenty four billion dollars of additional loans 0:10:12.000 --> 0:10:14.880 that otherwise would not be able to get it through 0:10:14.920 --> 0:10:17.040 their banks. And all of that with the power of 0:10:17.120 --> 0:10:19.480 AI and machine learning that is driving all of that. 0:10:20.280 --> 0:10:22.480 Just ask a simple question, how many of those loans 0:10:22.559 --> 0:10:23.120 go bad? 0:10:23.160 --> 0:10:23.360 Though? 0:10:23.400 --> 0:10:24.800 How much risk do you take on? 0:10:25.720 --> 0:10:29.080 So the reality is that these type of boroels are 0:10:29.080 --> 0:10:32.600 actually good boroels. They are paying and paying well. So 0:10:32.679 --> 0:10:35.480 you think about something in the ranges of four to 0:10:35.480 --> 0:10:39.680 eight percent of an annual loss. And in today's situation 0:10:39.800 --> 0:10:42.760 of the financial situation in the US, if you don't 0:10:42.800 --> 0:10:45.720 have a perfect FICO, you don't get a loan. The 0:10:45.800 --> 0:10:49.200 regulatory environment that exists on the banks is making it 0:10:49.360 --> 0:10:52.680 very hard for them to provide loans to very good 0:10:52.720 --> 0:10:56.480 consumers that would otherwise pay back. And that's where Pagaya 0:10:56.520 --> 0:11:00.120 comes in, helping the banks to provide these credit to 0:11:00.160 --> 0:11:04.000 their customers which they sow needing in these days. 0:11:04.760 --> 0:11:06.360 What are the rates on those loans? 0:11:06.840 --> 0:11:09.360 So usually the rates could vary from a twelve percent 0:11:09.480 --> 0:11:11.560 and up until twenty the way to think about it, 0:11:11.559 --> 0:11:15.000 it's usually two to five percent lower than credit card rates. 0:11:15.200 --> 0:11:17.920 So usually people that are taking personal loans are actually 0:11:17.960 --> 0:11:21.079 refining or reducing the rates when they are moving from 0:11:21.080 --> 0:11:23.719 the very high credit cards into a personal loan, which 0:11:23.760 --> 0:11:26.719 is much more predictable and steady, into they know what 0:11:26.760 --> 0:11:28.120 they are paying over the monthly mails. 0:11:28.160 --> 0:11:30.320 So then who provides the capital to fund those loans? 0:11:30.400 --> 0:11:33.520 That's exactly the interesting point. So have you heard about 0:11:33.600 --> 0:11:34.280 private credit? 0:11:34.840 --> 0:11:37.840 We talked a lot about so much, right talk, So think. 0:11:37.720 --> 0:11:42.199 About Pagaya as the intelconnect between the balance sheets of 0:11:42.240 --> 0:11:46.520 the private credit into the distribution channels of the banks. 0:11:47.160 --> 0:11:49.520 So many of the consumers that are coming to the 0:11:49.559 --> 0:11:52.400 banks and cannot get loan because of the regulatory pressure 0:11:52.640 --> 0:11:56.280 that were just discussed about, these loans could fight home 0:11:56.440 --> 0:12:00.800 in the growing, emerging, booming private credits. We have over 0:12:00.840 --> 0:12:04.520 one hundred and twenty different investors that we are feeding 0:12:05.200 --> 0:12:08.240 to provide home for these loans, which they are happy 0:12:08.280 --> 0:12:12.040 to get access to massive amounts of loans in scale 0:12:12.600 --> 0:12:15.199 that are as good as bank loans, but the regulatory 0:12:15.240 --> 0:12:17.520 capital of the bank is not allowing them to do that. 0:12:17.720 --> 0:12:22.400 So we are the efficancy of this booming type of 0:12:22.480 --> 0:12:25.720 private credit, which is a new form of capital, and 0:12:25.840 --> 0:12:28.920 the need of banks to clear their balance sheet even more. 0:12:30.120 --> 0:12:31.000 That's really interesting. 0:12:31.679 --> 0:12:32.280 No, you go ahead. 0:12:32.320 --> 0:12:35.040 I was going to ask. In an environment where investors 0:12:35.040 --> 0:12:38.160 think rates will go lower, the bond market might not 0:12:38.240 --> 0:12:40.800 agree with that. Right now, how does that private credit 0:12:40.800 --> 0:12:41.720 equation change? 0:12:41.880 --> 0:12:45.480 So the private credit equation is actually becoming bigger and better. 0:12:45.720 --> 0:12:48.520 So the reality is that they are looking to find 0:12:48.720 --> 0:12:52.679 more ways to lock rates and to invest massive amounts 0:12:52.760 --> 0:12:56.280 of capital. So the actually the interest rate going down, 0:12:56.400 --> 0:12:58.800 while very good for the consumers because now they have 0:12:58.800 --> 0:13:01.480 a better relief on the ability to pay their debt, 0:13:02.080 --> 0:13:05.080 is actually being driven by very big amounts of private 0:13:05.120 --> 0:13:08.960 credit that are being injected into the system to help 0:13:09.120 --> 0:13:12.960 these consumers find the ability to find us their debt. 0:13:13.960 --> 0:13:15.839 All right, God, we're gonna have to leave it there. 0:13:16.240 --> 0:13:16.920 Thank you so much. 0:13:16.960 --> 0:13:20.520 Paul Krubiner, he is the CEO of Pagaya, joining us 0:13:20.520 --> 0:13:22.960 here in the Bloomberg Business Week Studio. 0:13:25.120 --> 0:13:28.960 You're listening to the Bloomberg Business Week Podcast. Listen live 0:13:29.080 --> 0:13:31.880 each weekday starting at two pm Eastern on Apple car 0:13:32.000 --> 0:13:35.160 Play and Android Auto with the Bloomberg Business You can 0:13:35.200 --> 0:13:38.440 also listen live on Amazon Alexa from our flagship New 0:13:38.480 --> 0:13:45.200 York station, Just Say Alexa Play Bloomberg eleven thirty am 0:13:47.640 --> 0:13:48.320 a journal. 0:13:49.320 --> 0:13:54.040 Now about you let me drive? Oh no, no, no, no, honey, 0:13:54.160 --> 0:13:57.840 please Gravelsten, I want to drive. 0:13:57.880 --> 0:14:01.000 It's a good question. 0:14:04.800 --> 0:14:11.240 This is the drive to the globe on Bloomberg Radio. 0:14:12.200 --> 0:14:13.240 Well, well, well look at that. 0:14:13.600 --> 0:14:14.720 Wow, what do you see? 0:14:14.840 --> 0:14:15.960 It's almost four o'clock. 0:14:16.280 --> 0:14:18.280 That's crazy. Yeah, you've been here all day. 0:14:18.520 --> 0:14:21.080 I know. Well, I live here in the Bloomberg building. 0:14:21.080 --> 0:14:23.760 I don't actually leave, you know, I just row out 0:14:23.760 --> 0:14:24.120 a little. 0:14:24.320 --> 0:14:25.200 You got everything we need? 0:14:25.320 --> 0:14:28.640 Yeah, food, we don't have showers, but who needs that? 0:14:28.720 --> 0:14:29.280 Who needs that? 0:14:30.200 --> 0:14:30.440 Hey? 0:14:30.560 --> 0:14:34.720 We don't. Yeah. Let's see what Paul christopher has to 0:14:34.760 --> 0:14:38.320 say about this rally run up and that breather. You 0:14:38.400 --> 0:14:40.440 keep talking about the pause that we're seeing. 0:14:40.480 --> 0:14:40.840 The pause. 0:14:40.840 --> 0:14:43.240 Paul Christopher's head of Global Investment Strategy at the Wells 0:14:43.240 --> 0:14:47.320 Fargo Investment Institute. He joins us from Saint Louis, a 0:14:47.360 --> 0:14:52.640 collective sigh emerging from the markets today. Finally a little 0:14:52.640 --> 0:14:54.280 bit of a pause in the rally that we've seen 0:14:54.280 --> 0:14:56.600 post election. Paul, how are you thinking about this? 0:14:57.600 --> 0:15:00.000 Yeah, truly a couple of days of pause. Very well, 0:15:00.080 --> 0:15:01.960 come rest, but and we'll have to see what happens 0:15:01.960 --> 0:15:04.960 with that. CPI number tomorrow. A bad number could give 0:15:04.960 --> 0:15:07.160 the market a bad jolt. We'll have to see about that. 0:15:07.200 --> 0:15:09.440 But you know, the real thing to keep in mind 0:15:09.480 --> 0:15:13.240 here is that the trends since the election day are 0:15:13.280 --> 0:15:15.360 really trends that go back to the early part of 0:15:15.400 --> 0:15:19.400 October when Trump started to take momentum, and even back 0:15:19.480 --> 0:15:22.200 earlier than that, to the middle of September. Once we 0:15:22.280 --> 0:15:25.240 started to get a sense that the economy was stronger 0:15:25.240 --> 0:15:28.680 than what we thought the market had thought in early August. 0:15:29.280 --> 0:15:32.520 Then the market started to move okay, higher, yields more 0:15:32.520 --> 0:15:35.640 of a soft landing, maybe no landing, So yields go up, 0:15:35.720 --> 0:15:38.960 right turn, premium goes up, Equity start to march higher, 0:15:39.080 --> 0:15:43.080 Cycnicals get the rotation bid, especially financials, and you get 0:15:43.120 --> 0:15:44.800 a little bit of a breather from tech. And so 0:15:45.280 --> 0:15:48.480 that's kind of the same thing as that Trump rally 0:15:49.080 --> 0:15:52.520 that started in early October. So it just accelerated a 0:15:52.560 --> 0:15:55.880 set of trends that were already in place. When you 0:15:55.920 --> 0:15:59.400 start thinking about, well, okay, tariffs, that's going to raise inflation, 0:15:59.640 --> 0:16:02.080 so yields need to go higher, check that box. They 0:16:02.120 --> 0:16:06.200 were already going higher. Inflation makes the dollars stronger. Sorry, 0:16:06.280 --> 0:16:09.040 tyrorists make the dollars stronger, check another box that was 0:16:09.040 --> 0:16:11.840 already going higher. And then finally the idea that you'd 0:16:11.840 --> 0:16:15.920 have tax cuts and deregulation and stock investors just love that. 0:16:16.040 --> 0:16:20.280 So again another coincidence. And so this rally that we've 0:16:20.280 --> 0:16:22.760 seen here the last week, we should see in a 0:16:22.800 --> 0:16:26.760 little bit longer term context that could continue for a while, 0:16:26.800 --> 0:16:29.560 but maybe not at the same pace we've seen last week. 0:16:29.840 --> 0:16:33.480 Well, Paul, layeron to the corporate fundamentals picture, because you 0:16:33.480 --> 0:16:36.680 think about third quarter earnings, it's still earning season. But 0:16:37.760 --> 0:16:39.840 of the companies that have reported so far, it looks 0:16:39.880 --> 0:16:43.640 like seventy five percent or thereabout have beat their earnings estimates, 0:16:43.680 --> 0:16:46.120 and that is bang in line with the average from 0:16:46.200 --> 0:16:48.800 the past ten years or so. It's below the average 0:16:48.800 --> 0:16:51.720 of the past one year five year look back. And 0:16:52.120 --> 0:16:54.280 in this market, I mean, prior to this big Trump 0:16:54.400 --> 0:16:56.480 rally that we saw, of course, it just felt like 0:16:56.560 --> 0:16:59.000 average wasn't good enough. So when you think about the 0:16:59.040 --> 0:17:02.400 long term and you think about the earnings power, does 0:17:02.480 --> 0:17:03.920 that spell further gains. 0:17:05.680 --> 0:17:07.920 We think it does, but maybe not quite right away. 0:17:07.960 --> 0:17:09.840 That's why we do get a little bit nervous about 0:17:09.840 --> 0:17:11.199 the run up in the last week or so, and 0:17:11.240 --> 0:17:13.879 I mentioned that in terms of the CPI report tomorrow, 0:17:13.920 --> 0:17:17.120 you'd only really need some sort of fundamental disruptor here 0:17:17.200 --> 0:17:20.960 for people to start taking profits. But in terms of earnings, yeah, 0:17:21.000 --> 0:17:24.280 seventy five percent, that's about the longer term average. But 0:17:24.440 --> 0:17:28.320 notice that the guidance was a little bit more negative, 0:17:28.359 --> 0:17:32.000 and earnings growth is slowing, and that's entirely consistent with 0:17:32.040 --> 0:17:35.400 an economy that's slower this year than it was last year. 0:17:35.440 --> 0:17:37.600 Now the question is where's that bottom. We think it 0:17:37.680 --> 0:17:40.680 bottoms in the fourth quarter, and then with the benefit 0:17:40.720 --> 0:17:43.840 of FED raid cuts, starts to improve with the economy 0:17:44.080 --> 0:17:46.520 in twenty twenty five. So we're looking for stronger earnings 0:17:46.520 --> 0:17:48.760 next year. Again, a point I made a moment ago. 0:17:49.080 --> 0:17:51.600 The trends we've seen since mid September are we think, 0:17:51.720 --> 0:17:55.240 solid trends, but they've just accelerated a little bit much here. 0:17:55.520 --> 0:17:58.280 So look for a pullback and then maybe some good 0:17:58.280 --> 0:18:00.840 buying opportunities when that pullback finally arrives. 0:18:01.400 --> 0:18:03.879 Talk to us too about the interaction between the bond 0:18:03.920 --> 0:18:07.399 market and the stock market. It feels like the bond 0:18:07.400 --> 0:18:10.840 market has just been the epicenter of volatility over the 0:18:10.880 --> 0:18:14.000 past week, over the past couple months as well, that 0:18:14.200 --> 0:18:17.359 hasn't slowed down the stock market, but we're starting to 0:18:17.400 --> 0:18:20.640 approach some of these levels out the curve where people's 0:18:21.200 --> 0:18:24.000 it starts to raise some alarm bells. According to some 0:18:24.080 --> 0:18:26.360 of the investors that I've been speaking to, how are 0:18:26.400 --> 0:18:30.080 you thinking about the rise in long duration treasury yields? 0:18:30.840 --> 0:18:33.320 So we kind of look at the components, like the 0:18:33.400 --> 0:18:37.080 inflation piece of the long term yield, and then what 0:18:37.119 --> 0:18:40.320 we call the term premium, which would be the portion 0:18:40.560 --> 0:18:43.159 of the yield that the investor requires in order to 0:18:43.200 --> 0:18:46.480 be compensated for staying in bonds instead of going over 0:18:46.520 --> 0:18:49.560 to a more attractive looking stock market. And that term 0:18:49.600 --> 0:18:52.840 premium is what's been rising lately. That's kind of a 0:18:52.840 --> 0:18:55.480 good sign. That's what you'd expect to see in an 0:18:55.560 --> 0:18:58.640 economy that's bottoming out, where people aren't worried about recession 0:18:58.680 --> 0:19:02.639 anymore but seeing recovery. So now bond investors demand a 0:19:02.680 --> 0:19:04.600 little bit more term premium. They want to say, hey, 0:19:04.880 --> 0:19:06.320 stocks are going to do well, you're gonna have to 0:19:06.320 --> 0:19:08.840 pay me more borrow or whoever you are, for me 0:19:08.880 --> 0:19:10.959 to lend you your money for ten years in this 0:19:11.040 --> 0:19:14.320 bond and we think that's not necessarily an unhealthy sign. Now, 0:19:14.720 --> 0:19:17.560 if we were to see a strong inflation report tomorrow 0:19:17.920 --> 0:19:20.439 or in the next couple of months, or if we 0:19:20.440 --> 0:19:22.560 were to start to get a sense that the deficits 0:19:22.800 --> 0:19:26.320 under the new administration in Congress will be very much higher, 0:19:26.640 --> 0:19:29.320 then that could pose more of a problem for stocks. 0:19:29.520 --> 0:19:30.880 But that's a little bit down the road. 0:19:31.320 --> 0:19:33.359 What's the signal that the bond market is sending about 0:19:33.359 --> 0:19:35.280 what it thinks the Trump administration is going to do? 0:19:36.840 --> 0:19:40.720 Now hard to tell the You know, as I said earlier, 0:19:40.960 --> 0:19:44.560 if you see the bond yield rising and the tariff 0:19:44.640 --> 0:19:47.920 story remains intact and the dollar is accelerating at the 0:19:47.960 --> 0:19:50.879 same time, that would be those two facts there. A 0:19:50.920 --> 0:19:54.560 stronger dollar and higher bond yields would be consistent with 0:19:54.680 --> 0:19:57.760 tariffs and inflation, except that the bond yield really isn't 0:19:57.800 --> 0:20:01.280 being driven by inflation. It's being driven by fundamentally a 0:20:01.400 --> 0:20:05.720 term premium that's consistent with a reinversion of the yield curve, 0:20:05.760 --> 0:20:07.479 a de inversion of the yield curve, you might say, 0:20:07.480 --> 0:20:11.480 where long term rates rise because the economy is strengthening 0:20:11.680 --> 0:20:14.520 and equities are expected to be stronger. So there's kind 0:20:14.560 --> 0:20:17.920 of a sense in which investors could be could find 0:20:17.960 --> 0:20:21.800 it difficult to disentangle bond yields rising. Yeah, that could 0:20:21.880 --> 0:20:24.359 mean inflation, or could mean tariffs, or or it could 0:20:24.359 --> 0:20:27.080 just mean a health economy coming up. And so these 0:20:27.119 --> 0:20:29.639 two trends running in parallel right now will have to 0:20:29.680 --> 0:20:32.400 wait to see how they sort of separate themselves out. 0:20:32.520 --> 0:20:36.160 Typically they do after an election. Right the weeks after 0:20:36.240 --> 0:20:40.040 an election can sometimes bring trends that are very short 0:20:40.119 --> 0:20:43.160 lived and don't last for very long. So again our 0:20:43.200 --> 0:20:46.520 advice to investors here is is to treat what's going 0:20:46.560 --> 0:20:48.440 on in markets right now is a bit of a reaction, 0:20:49.160 --> 0:20:52.119 not a true fundamental rotation, and stick with stick with 0:20:52.160 --> 0:20:55.440 the plan that we established in August, looking for cyclicals 0:20:55.480 --> 0:20:59.560