WEBVTT - Bloomberg Surveillance TV: May 16, 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 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.280 Bloomberg Terminal and the Bloomberg Business App. Lisa Shamadana Morgan 0:00:37.320 --> 0:00:40.120 Stanley writes in this with equities having round tripped back 0:00:40.159 --> 0:00:42.959 towards first quarter ending levels, markets are anxious to move 0:00:43.000 --> 0:00:46.800 on from tariffs and attempts to anticipate FED policy. Lisa 0:00:46.840 --> 0:00:48.960 joins us now for more. Lisa good Mornick, Good morning. 0:00:49.000 --> 0:00:50.600 How many times have we asked this question? Was it 0:00:50.600 --> 0:00:53.400 all just a bad dream? Can we just move on? So? 0:00:53.840 --> 0:00:56.840 Look, I think investors right now are weary and want 0:00:56.840 --> 0:00:59.680 to move on. They want to look through it. But 0:00:59.720 --> 0:01:03.160 I do think that things have fundamentally changed from the 0:01:03.240 --> 0:01:06.320 Nasdaq peak back on December sixteenth. 0:01:06.360 --> 0:01:06.800 I think the. 0:01:06.760 --> 0:01:10.560 First thing that has changed is it's really clear that 0:01:10.640 --> 0:01:14.360 top line growth among the MAG seven is decelerating, and 0:01:14.480 --> 0:01:18.240 growth investors typically don't like to see deceleration. The second 0:01:18.240 --> 0:01:22.440 thing is we're seeing this arms war with regard to 0:01:22.480 --> 0:01:28.120 cap X spending continuing. If we our latest update on 0:01:28.200 --> 0:01:32.240 looking at free cash flow yields shows MAG seven free 0:01:32.240 --> 0:01:37.520 cash flow years shrinking by about eleven percent. Typically these 0:01:37.520 --> 0:01:40.559 stocks don't tend to do particularly well when their free 0:01:40.560 --> 0:01:44.080 cash flow yield is coming down. And look, we can 0:01:44.200 --> 0:01:48.480 pretend that the deep Seek news doesn't mean anything, but 0:01:48.560 --> 0:01:52.240 we fundamentally think it was the wake up call around 0:01:52.360 --> 0:01:56.800 global engineering, global innovation, and the fact that none of 0:01:56.840 --> 0:02:00.360 us know how the movie ends here on jen Ai, 0:02:00.600 --> 0:02:02.680 who the winners are going to be, how it's going 0:02:02.720 --> 0:02:06.600 to evolve, whether or not large language models very quickly 0:02:06.680 --> 0:02:10.560 become commoditized, and the next you know, phase of the 0:02:10.600 --> 0:02:15.000 buildout is actually much lower data center intensity, much lower 0:02:15.120 --> 0:02:20.400 energy intensity because it's very application based. So nobody knows nothing. 0:02:20.840 --> 0:02:24.880 And I think, right now, this is a market where 0:02:24.919 --> 0:02:28.440 we've had you know, a lot of positioning, technical positioning 0:02:28.480 --> 0:02:31.720 where people felt, hey, you know, I was caught off guard. 0:02:32.440 --> 0:02:36.880 This was a massive surprise. You know, the effective China 0:02:36.960 --> 0:02:39.720 tariff rate is much lower than I penciled. I got 0:02:39.720 --> 0:02:42.600 to plow back in. You've got you know, some of 0:02:42.360 --> 0:02:45.720 the private wealth money and retail money coming in from 0:02:45.720 --> 0:02:48.960 the sidelines. But I think we're going to stall out here. 0:02:49.000 --> 0:02:51.920 I think it's just hard to justify the numbers. You know, 0:02:51.960 --> 0:02:56.680 you've round tripped back to January first on market levels, 0:02:56.760 --> 0:02:59.360 and yet your earnings per share are down six percent. 0:02:59.560 --> 0:03:02.840 So this move I'm fading. What would you rotate out 0:03:03.040 --> 0:03:04.919 of and what would you rotate into? 0:03:05.680 --> 0:03:09.200 Yeah, so you know, we're continuing to uh, you know, 0:03:09.320 --> 0:03:13.280 recommend that folks take some profits in now the new 0:03:13.360 --> 0:03:17.280 leaders again uh in tech uh, and really focus on 0:03:17.360 --> 0:03:21.880 the beneficiaries of deregulation. And so we see that as 0:03:22.080 --> 0:03:25.119 you know, financials, we see it as energy, we see 0:03:25.160 --> 0:03:27.800 it as you know, some of the healthcare names. I 0:03:27.880 --> 0:03:30.560 know for viewers out there, that's gonna sound like a 0:03:30.600 --> 0:03:34.600 big value style bias, uh, but quite frankly, it is. 0:03:35.760 --> 0:03:38.080 You know, while while we're not saying you've got to 0:03:38.080 --> 0:03:41.760 be overweight value, we do think you want value in 0:03:41.800 --> 0:03:44.600 this market because you want some risk premium. I mean, 0:03:44.640 --> 0:03:46.720 there are risks out there and you want to get 0:03:46.760 --> 0:03:49.040 paid uh to be in this market? 0:03:49.200 --> 0:03:51.920 What risks do you want a premium to be paid for? 0:03:52.200 --> 0:03:54.640 And it sounds sort of existential, but it goes to 0:03:54.640 --> 0:03:57.200 the heart of the question of is it inflation or 0:03:57.280 --> 0:03:59.040 is it recession or is it both? 0:04:00.200 --> 0:04:01.360 I think it's a little bit of both. 0:04:01.400 --> 0:04:05.119 I think we're somewhat less freaked out about inflation than 0:04:05.200 --> 0:04:09.000 perhaps we would have been if the tariff rates would 0:04:09.040 --> 0:04:11.560 have held. I think what we're worried about is that 0:04:11.640 --> 0:04:17.479 we're no longer in a fore castable policy backdrop. Right 0:04:17.520 --> 0:04:20.359 as much as we all want to handwring about the FED, 0:04:21.320 --> 0:04:24.120 you know, for the last fifteen years, FED policy has 0:04:24.200 --> 0:04:29.000 been reasonably stable and reasonably well telegraphed, and there haven't 0:04:29.040 --> 0:04:32.760 been massive surprises. I think when we shift to a 0:04:32.800 --> 0:04:37.760 fiscal policy backdrop with this administration, as we've seen, it's 0:04:38.000 --> 0:04:43.000 very easy to experience both negative and positive surprises on policy. 0:04:43.680 --> 0:04:46.440 And that's what I want to get paid for, is 0:04:46.440 --> 0:04:49.400 that at any point, you know, things can take a 0:04:49.480 --> 0:04:51.240 u turn based on the headline. 0:04:51.440 --> 0:04:53.520 How much do the rest of the universe that you 0:04:53.560 --> 0:04:56.160 didn't mention big tech that you're selling on the margins 0:04:56.400 --> 0:04:58.520 or some of the financials and other value stocks that 0:04:58.560 --> 0:05:01.159 you're looking at that aren't exactly value. As you pointed out, 0:05:01.720 --> 0:05:04.039 how much do you think that it really will require 0:05:04.120 --> 0:05:06.560 FED cuts to get the rest of the universe involved 0:05:06.560 --> 0:05:08.560 in some sort of positive momentum. 0:05:08.800 --> 0:05:13.799 I think the rate cuts are absolutely required for small 0:05:13.839 --> 0:05:18.200 cap mid cap I think that universe has suffered profoundly, 0:05:18.440 --> 0:05:21.119 you know, from the higher cost of capital By and large, 0:05:21.120 --> 0:05:23.960 the S and P five hundred, which is predominantly large 0:05:23.960 --> 0:05:27.599 in megacap companies have been pretty isolated. They have very 0:05:27.640 --> 0:05:30.080 healthy balance sheets and for the most part, they haven't 0:05:30.120 --> 0:05:33.279 been inhibited by rates where they are, which is why 0:05:33.320 --> 0:05:34.920 we have multiples where they are. 0:05:35.200 --> 0:05:35.360 Well. 0:05:35.400 --> 0:05:38.000 It raises this question, especially as the fiscal debate heats 0:05:38.040 --> 0:05:40.000 up in Washington, DC, and you alluded to this, and 0:05:40.040 --> 0:05:42.080 there's a question about as we find out how much 0:05:42.080 --> 0:05:44.200 the defthit is going to increase, how much bond markets 0:05:44.200 --> 0:05:47.919 are going to freak out. To use your sophisticated Carlans, 0:05:48.000 --> 0:05:50.520 but there is this question of at what level in 0:05:50.560 --> 0:05:53.120 a thirty year in a ten year yield it becomes 0:05:53.120 --> 0:05:55.400 prohibitive for stocks to really move higher from here and 0:05:55.560 --> 0:05:57.039 really inject some damage. 0:05:57.360 --> 0:05:59.640 Yeah, I mean Look, I think for most of the 0:05:59.720 --> 0:06:02.200 last you know, six to twelve months that you know, 0:06:02.320 --> 0:06:05.159 four fifty on the ten year, a four point five 0:06:05.160 --> 0:06:07.320 percent on the ten year, you know, was kind of 0:06:07.320 --> 0:06:10.520 this stall out threshold. You know, the market seems to 0:06:10.520 --> 0:06:13.760 be battling with it a little bit this week. But look, 0:06:13.800 --> 0:06:16.600 I think if we back up, you know, if we 0:06:16.680 --> 0:06:19.800 get big, big, big deficit numbers coming out of this 0:06:19.920 --> 0:06:23.400 tax bill and that ten year moves into that four 0:06:23.400 --> 0:06:25.760 to seventy five range, I don't see how the market 0:06:26.000 --> 0:06:29.520 has how equity valuations hold here. The math just stops 0:06:29.560 --> 0:06:30.320 making sense. 0:06:30.560 --> 0:06:32.360 Lisa, It's going to see you as always. Thanks for 0:06:32.400 --> 0:06:45.720 dropping by, Lisa, said standing Andrew Homeholt of City writing, 0:06:45.760 --> 0:06:48.080 Wait and sy is the right strategy. The FED can 0:06:48.120 --> 0:06:51.279 now more comfortably stay patient, and we're pushing for the 0:06:51.320 --> 0:06:54.000 next rate cut to come in July and not in 0:06:54.120 --> 0:06:56.520 June as previously thought. Andrew joins us now for more. 0:06:56.560 --> 0:06:58.840 Andrew K. Mornic morning, the question is WHYK go from 0:06:58.880 --> 0:07:00.960 June to July? I should line why the summer? 0:07:01.680 --> 0:07:03.640 Well, I think it's just going to take the FED 0:07:03.720 --> 0:07:06.839 seeing something in the data that makes them worried about. 0:07:06.560 --> 0:07:07.680 What's going on with activity. 0:07:07.680 --> 0:07:09.520 What's going on with the labor market. If you look 0:07:09.520 --> 0:07:12.200 at the soft data, the survey data, it's been misleading 0:07:12.240 --> 0:07:13.800 in the past, but I think it's sending the right 0:07:13.840 --> 0:07:16.360 signal now. I think the hard data are going to turn. 0:07:16.640 --> 0:07:18.760 When the hard data turn, we'll have the FED cutting. 0:07:19.000 --> 0:07:22.200 What exactly that happens, I don't know, but it could 0:07:22.240 --> 0:07:24.680 be July, it could be September. One of these upcoming 0:07:24.680 --> 0:07:25.440 meetings I think. 0:07:25.240 --> 0:07:28.160 You'll discuss at the moment is July. Twice the weakening 0:07:28.200 --> 0:07:30.760 comes before July quite clearly, which made you expect to 0:07:30.800 --> 0:07:32.880 see it in the next couple of months. What gives 0:07:32.880 --> 0:07:34.080 you that belief that's going to happen. 0:07:34.240 --> 0:07:35.920 So I think we're going to start to see things 0:07:35.920 --> 0:07:37.800 in the job market, and that's really what's going to 0:07:37.800 --> 0:07:39.920 be important for the FED. Of course, dual mandate. You 0:07:40.000 --> 0:07:42.120 have to worry about inflation, have to worry about employment. 0:07:42.440 --> 0:07:45.560 We're seeing a low hiring rate in the job market. 0:07:45.920 --> 0:07:49.880 We know now from surveys, from anecdotes that firms are 0:07:50.120 --> 0:07:52.800 pulling back further if anything, on their hiring. We know 0:07:52.800 --> 0:07:54.920 we're going to have some government job cuts. We know 0:07:54.960 --> 0:07:57.720 that unemployment picked up last summer, So you kind of 0:07:57.720 --> 0:07:59.360 put all those things together. I think there's a good 0:07:59.440 --> 0:08:01.280 chance that we see that unemployment rate starting to move 0:08:01.360 --> 0:08:01.720 up again. 0:08:01.800 --> 0:08:03.600 Why do you dismiss all the people who say that 0:08:03.680 --> 0:08:06.040 the job as claims have been low if they haven't 0:08:06.040 --> 0:08:08.360 really ticked up that much. You've seen some of the 0:08:08.400 --> 0:08:11.560 credit card data highlight that people keep sending pretty much 0:08:12.080 --> 0:08:14.440 in a significant amount to the way that they did before. 0:08:15.000 --> 0:08:17.720 Why is that not a leading indicator for you at 0:08:17.720 --> 0:08:19.840 a time where there are very few kind of lynch 0:08:19.880 --> 0:08:21.800 pins to truth along the way. 0:08:21.960 --> 0:08:23.680 Yeah, I mean, I'm not dismissive of the fact that 0:08:23.680 --> 0:08:25.960 the job market has been pretty stable for the last 0:08:25.960 --> 0:08:28.400 six months. Six months plus and four point two percent 0:08:28.480 --> 0:08:30.960 unemployment rate is not about unemployment. 0:08:30.480 --> 0:08:31.280 Rate to be yet. 0:08:31.480 --> 0:08:33.560 I think the issue is that it's been stable, but 0:08:33.600 --> 0:08:37.440 it's been stable in a kind of fragile, uncomfortable way 0:08:37.480 --> 0:08:39.760 with this low hiring rate, with a low layoff rate, 0:08:39.840 --> 0:08:41.840 so you're not likely to lose your job, but if 0:08:41.840 --> 0:08:43.880 you do, it's hard to get hired again. And again 0:08:43.920 --> 0:08:45.439 we have these factors that are probably going to be 0:08:45.440 --> 0:08:48.199 putting people into unemployment, harder for them to get hired again. 0:08:48.320 --> 0:08:50.400 And then you start to see that unemployment rate moving home. 0:08:50.280 --> 0:08:52.760 How do engage how much scarring there has been done 0:08:52.960 --> 0:08:53.880 based in the fact that. 0:08:53.840 --> 0:08:55.320 We are at a higher teriff rate. 0:08:55.240 --> 0:08:57.120 Than we were at the beginning of the year, albeit 0:08:57.360 --> 0:09:01.040 much lower than it was, say on April. Second, do 0:09:01.120 --> 0:09:03.600 you sort of communicate that the scarring is not that 0:09:03.760 --> 0:09:08.920 much less now than it was before the announcement that 0:09:08.920 --> 0:09:10.319 there was going to be a ninety day pause. 0:09:10.640 --> 0:09:12.840 It's all a question about what's the point of comparison. 0:09:12.920 --> 0:09:14.520 I mean, to your point, if we compare this to 0:09:14.559 --> 0:09:16.320 when we had one hundred and forty five percent terrors 0:09:16.400 --> 0:09:18.880 versus China, it was effectively a trade embargo with respect 0:09:18.920 --> 0:09:21.600 to China, and then we were worried about really acute effects. 0:09:21.760 --> 0:09:24.960 Could you actually see less traffic at the ports, less 0:09:25.040 --> 0:09:27.440 jobs at the ports for that reason, less trucking jobs. 0:09:27.720 --> 0:09:30.000 Now it looks like probably that's not going to happen, 0:09:30.080 --> 0:09:34.160 so you kind of take out that extreme acute downside risk, 0:09:34.400 --> 0:09:36.960 but you still have the uncertainty around terrors. We're still 0:09:37.000 --> 0:09:38.640 uncertain about how this is all going to turn out, 0:09:38.840 --> 0:09:40.720 and that we think is leading firms to pull back 0:09:40.760 --> 0:09:41.760 on their hiring decisions. 0:09:41.840 --> 0:09:45.600 The prospective higher prices. Wilmot Basically, Sam, we're close, close 0:09:45.640 --> 0:09:48.440 to passing on higher costs. The Fetter Reserve needs to 0:09:48.480 --> 0:09:51.360 sit there in July be convinced that any kind of 0:09:51.400 --> 0:09:54.000 inflation is not going to be persistent. Is that enough time? 0:09:54.760 --> 0:09:54.960 You know? 0:09:55.040 --> 0:09:58.040 You can't wait until you have total certainty. I think 0:09:58.120 --> 0:10:00.640 that's a very general point that is important to make here. 0:10:01.280 --> 0:10:03.760 If you wait until you see all the data, by definition, 0:10:04.000 --> 0:10:06.840 you've acted too late. So the Federal Reserve is going 0:10:06.880 --> 0:10:08.520 to need to make a decision about where they think 0:10:08.520 --> 0:10:10.320 that trended inflation is STU coun chumpange. 0:10:10.440 --> 0:10:12.079 Isn't that what they're communicating to us? 0:10:12.400 --> 0:10:13.479 That is what they're communicating. 0:10:13.480 --> 0:10:14.400 I don't just unbelief. 0:10:14.640 --> 0:10:16.720 I don't believe them. No, I don't think that you 0:10:16.760 --> 0:10:19.160 can wait until you have perfect clarity on the economy, 0:10:19.160 --> 0:10:21.760 because John, you never have perfect clarity on the economy, 0:10:21.760 --> 0:10:23.680 you'd be waiting forever. They're not going to wait forever. 0:10:23.920 --> 0:10:25.959 They're going to look at that balance of risk. Look 0:10:25.960 --> 0:10:28.440 at the last two inflation reports. We have core PCE 0:10:28.679 --> 0:10:30.920 in the month of March zero point zero three percent 0:10:30.960 --> 0:10:33.320 month on month. In the month of April, we think 0:10:33.320 --> 0:10:35.600 it's going to be zero point one three percent month 0:10:35.640 --> 0:10:38.480 on months, and these are two really soft inflation readings. 0:10:38.520 --> 0:10:41.679 They follow two really strong inflation readings in January and February. 0:10:41.960 --> 0:10:44.400 But that cooling and services inflation I think should be 0:10:44.400 --> 0:10:45.520 giving them a lot of confidence. 0:10:45.559 --> 0:10:47.360 It is a question I wish the interviewers would hamm 0:10:47.360 --> 0:10:50.160 a FED officials on the difference between inflation being short 0:10:50.160 --> 0:10:53.440 lived and more persistent. How do you know and how 0:10:53.440 --> 0:10:56.320 long does it take to find out? How do you know? Well, 0:10:56.600 --> 0:10:57.199 I think you have. 0:10:57.160 --> 0:10:59.480 To make a judgment based on where that inflation is 0:10:59.520 --> 0:11:02.440 coming from and what the underlying drivers of inflation are. 0:11:02.640 --> 0:11:04.720 And this is why the current scenario is so different 0:11:04.760 --> 0:11:06.439 from what we experienced after COVID. 0:11:06.640 --> 0:11:07.320 After COVID, we. 0:11:07.320 --> 0:11:10.599 Had a negative supply shock to the economy. Supply was constrained, 0:11:10.840 --> 0:11:13.320 but we had a positive demand shock. At the same time, 0:11:13.360 --> 0:11:15.800 we had lots of fiscal stimulus coming in. People could 0:11:15.800 --> 0:11:18.360 go out and spend. Now we're in a different scenario 0:11:18.400 --> 0:11:20.400 where you're getting the negative supply shock, but there's no 0:11:20.480 --> 0:11:24.040 positive demand shock happening. Wage growth is cooling, house prices 0:11:24.040 --> 0:11:26.880 have cooled, so you don't have that same inflationary backdrop. 0:11:27.440 --> 0:11:29.760 Is there also the lack of belief in Fedshair J. 0:11:29.960 --> 0:11:32.240 Powell when he laid out in his speech yesterday that 0:11:32.360 --> 0:11:35.160 maybe the FED would look back to their previous framework 0:11:35.320 --> 0:11:38.480 where they truly were targeting two percent inflation, not a range, 0:11:38.679 --> 0:11:41.240 not an average over a period of time, talking about 0:11:41.240 --> 0:11:43.800 how higher real interest rates may reflect the possibility that 0:11:43.840 --> 0:11:46.280 inflation could be more volatile going forward, that we. 0:11:46.280 --> 0:11:48.000 Could be in a period of supply shocks. 0:11:48.320 --> 0:11:50.760 Do you just dismiss that as something that they're not 0:11:50.760 --> 0:11:53.360 going to follow through with emphasizing inflation even at the 0:11:53.400 --> 0:11:54.480 expense of the economy. 0:11:54.920 --> 0:11:57.679 So I think they do need to think seriously about 0:11:57.720 --> 0:12:00.240 how you operate monetary policy in a world where you 0:12:00.320 --> 0:12:03.840 have these larger, more persistent supply shocks. That is a 0:12:03.880 --> 0:12:05.600 real issue that they have to contend with. 0:12:05.960 --> 0:12:06.160 Now. 0:12:06.280 --> 0:12:08.560 Having said that, that doesn't just mean that you keep 0:12:08.559 --> 0:12:11.320 policy rates at restrictive levels at all time. You assess 0:12:11.320 --> 0:12:13.680 the current situation, and again, I think we're in a 0:12:13.720 --> 0:12:16.920 situation here where we have, yes, a negative supply shock 0:12:17.200 --> 0:12:20.199 that's going to reduce growth, that's going to raise inflation, 0:12:20.559 --> 0:12:23.520 but we don't have that demand shock to make inflation persistent, 0:12:23.520 --> 0:12:24.920 and that's what they should be paying attention to. 0:12:25.040 --> 0:12:27.320 Do you think that they will take an average of 0:12:27.440 --> 0:12:30.720 PPI and CPI, look at that core PCEE metric that 0:12:30.760 --> 0:12:33.640 you've just said is probably going to come in lower, and. 0:12:33.720 --> 0:12:35.120 Just extrapolate that out. 0:12:35.240 --> 0:12:37.160 Do you think that they're going to even without some 0:12:37.200 --> 0:12:39.320 sort of pain in a labor market? 0:12:39.600 --> 0:12:41.800 Yeah, I mean you can't just extrapolate that out forever. 0:12:41.920 --> 0:12:43.600 I mean you need to look at what are the 0:12:43.640 --> 0:12:46.680 details of that inflation reading. Where is inflation really going here? 0:12:46.840 --> 0:12:49.600 I think they're looking at shelter inflation that's slowing. They're 0:12:49.640 --> 0:12:53.400 looking at non shelter services and wage growth that feeds 0:12:53.400 --> 0:12:55.640 into that that have slowed. I think that should all 0:12:55.679 --> 0:12:58.280 be reassuring. The question is what happens with goods. We're 0:12:58.280 --> 0:13:00.959 probably going to see some goods inflation because those terrorf rates. 0:13:01.520 --> 0:13:04.880 But that's where you getting back to John's question. That's 0:13:04.880 --> 0:13:07.439 where you say, if the inflation is confined to goods, 0:13:07.720 --> 0:13:09.480 then we should be less concerned about it. That looks 0:13:09.520 --> 0:13:11.400 more like a one time move in the price level. 0:13:11.520 --> 0:13:13.680 That's what Governor Waller has said. I think he's about 0:13:13.720 --> 0:13:15.520 the only FED official that's come out and said. 0:13:15.600 --> 0:13:16.959 Just the net close to making a mistake. 0:13:17.760 --> 0:13:19.320 I think they could be I think they could be. 0:13:19.400 --> 0:13:21.160 I mean, I think they do have time here. They 0:13:21.240 --> 0:13:23.920 do have the luxury of a labor market that's been stable. 0:13:24.000 --> 0:13:26.679 But you can't wait for total clarity. You'll never have 0:13:26.760 --> 0:13:27.520 total clarity. 0:13:27.679 --> 0:13:30.280 The problem is, you know, these mistakes are often borne 0:13:30.280 --> 0:13:33.079 out of the conditioning from the previous experience, and that's 0:13:33.120 --> 0:13:35.920 why we had to wait last time around, because their 0:13:35.960 --> 0:13:39.560 experience was actually downtime policy too soon, which meant they 0:13:39.559 --> 0:13:41.760 waited and then inflation ripped away from them. They made 0:13:41.800 --> 0:13:44.080 a mistake. This time around, they're going to waite for 0:13:44.120 --> 0:13:45.880 different reasons, and they could make a different kind of 0:13:45.920 --> 0:13:48.559 mistake because they could have moved sooner. The opposite way. 0:13:48.480 --> 0:13:51.920 It could lead to a much faster deterioration in the economy, 0:13:51.920 --> 0:13:54.280 which is the reason why George Coknkalvas earlier was saying 0:13:54.320 --> 0:13:55.680 that they're going to be late and they're going to 0:13:55.679 --> 0:13:57.480 move a lot faster. This is what a lot of 0:13:57.480 --> 0:13:59.880 people think right now in markets. We're baking in two 0:14:00.120 --> 0:14:01.959 rate cuts for the remainder of the year because their 0:14:01.960 --> 0:14:03.800 cuts are going to come on the heels of good 0:14:03.880 --> 0:14:07.640 data of disinflation, not necessarily that pain in the economy 0:14:07.679 --> 0:14:09.400 that some people were worried about Andrew. 0:14:09.400 --> 0:14:11.840 It's going to see us, sir. Thanks dropping by Andrew Honholst. 0:14:11.840 --> 0:14:14.480 The city does not believe FED officials when they speak. 0:14:14.640 --> 0:14:28.920 That's my takeaway. Turning from markets to the nation's capital, 0:14:29.000 --> 0:14:31.960 in fighting between House Republicans threatening to delay a much 0:14:32.000 --> 0:14:35.880 anticipated tax bill, the key issue salt Camp increases. One 0:14:35.960 --> 0:14:38.440 man at the center of all of that, among others, 0:14:38.600 --> 0:14:41.560 Congressman Mike Lawler of New York. The congressman joined us 0:14:41.560 --> 0:14:43.920 now from Capitol Hill for more. Congressman, welcome back to 0:14:43.920 --> 0:14:45.800 Bloomberg Survellan, sir, it's good to see you again. 0:14:46.480 --> 0:14:47.400 Thanks for having me. 0:14:47.680 --> 0:14:50.120 Let's talk about progress made this week. Speak of Johnson 0:14:50.160 --> 0:14:53.080 keeps saying we're getting closer and closer. What's your assessment 0:14:53.080 --> 0:14:55.440 of how much progress we've made so far this week? 0:14:56.840 --> 0:14:59.880 Well, finally this week we had the opportunity to sit 0:15:00.080 --> 0:15:05.480 down and go through real numbers and start to have 0:15:05.720 --> 0:15:09.360 a negotiation. And I think that it was long overdue. 0:15:09.400 --> 0:15:13.120 We had been pushing for months to have that conversation 0:15:13.400 --> 0:15:17.200 with the Ways and Means Chairman, with the Speaker, and 0:15:17.880 --> 0:15:22.520 so we finally began that process. And obviously, you know 0:15:22.600 --> 0:15:25.120 this is something that's going to have to be negotiated 0:15:25.680 --> 0:15:32.040 over the weekend to get to hopefully an agreement. When 0:15:32.080 --> 0:15:34.040 it comes to the issue of salt. 0:15:34.080 --> 0:15:36.960 We understand the proposal a tripling of the deduction to 0:15:37.040 --> 0:15:39.480 thirty thousand. Could you give us a sense on how 0:15:39.560 --> 0:15:41.600 far apart you are right now? 0:15:43.000 --> 0:15:45.280 Well, there's a number of issues. Number one, the marriage 0:15:45.320 --> 0:15:52.520 penalty and eliminating that for those filing jointly. Number two, 0:15:53.480 --> 0:15:57.240 you know, there is real concern about reverting to a 0:15:57.320 --> 0:16:02.240 ten thousand dollars cap, which none of us support. That 0:16:02.400 --> 0:16:07.840 is a real challenge. Number Three, The fact is, these 0:16:07.840 --> 0:16:12.800 income limits are a problem four hundred thousand. While it 0:16:12.840 --> 0:16:16.640 may sound like a lot in some areas, in an 0:16:16.680 --> 0:16:20.400 area like mine, that's you know, a cop and a 0:16:20.480 --> 0:16:25.280 teacher who are married and you know, have a combined income. 0:16:25.440 --> 0:16:30.080 So the fact is, we have high property taxes coupled 0:16:30.120 --> 0:16:33.720 with high income taxes, and you'll blow right past a 0:16:33.840 --> 0:16:38.280 thirty thousand dollars cap without a problem. You look at 0:16:38.400 --> 0:16:41.640 my district, three of the four counties that I represent 0:16:41.840 --> 0:16:45.800 are in the top sixteen highest property tax counties in America, 0:16:45.840 --> 0:16:49.040 And so there's a real issue here in terms of 0:16:49.080 --> 0:16:52.480 the numbers, and so we're working through it. You know, 0:16:52.560 --> 0:16:54.040 I've read the art of the deal. I'm not going 0:16:54.080 --> 0:16:58.240 to negotiate in public, but the fact is that, you know, 0:16:58.640 --> 0:17:02.880 we need to make some significant concessions to get to 0:17:03.560 --> 0:17:04.040 a number. 0:17:04.320 --> 0:17:07.680 Congressman, what would you like to see cut to offset 0:17:07.920 --> 0:17:11.280 some of the increases to the salt tax deduction because 0:17:11.359 --> 0:17:14.120 ultimately cell cap, because that's a real concern right now 0:17:14.160 --> 0:17:17.920 for markets is how much does that alone increase the deficit? 0:17:19.600 --> 0:17:23.480 Well, a few things. Number One, any cap is a 0:17:23.560 --> 0:17:27.440 savings okay, because the fact is that the cap on 0:17:27.560 --> 0:17:30.359 salt expires at the end of the year, so we 0:17:30.400 --> 0:17:34.159 are actually giving them a pay for by agreeing to 0:17:34.240 --> 0:17:37.840 a cap. That's number one, and people should recognize that 0:17:38.040 --> 0:17:42.400 as part of these negotiations. Number Two, there's a number 0:17:42.400 --> 0:17:44.919 of levers that can be dealt with here in terms 0:17:44.920 --> 0:17:49.679 of savings versus adjustments within the tax code. That's what 0:17:49.680 --> 0:17:51.760 we're talking about. We're waiting to hear back from the 0:17:51.800 --> 0:17:57.160 Speaker and then be able to make a honest determination 0:17:57.400 --> 0:17:59.000 as to what we can. 0:17:58.880 --> 0:18:00.600 Get to this issue. 0:18:00.640 --> 0:18:04.159 Congressman that as this debate has raged on, there's been 0:18:04.160 --> 0:18:07.800 an argument that you have pioneered saying that moderates make 0:18:07.880 --> 0:18:10.639 the majority for Republicans, and that you need to be 0:18:10.640 --> 0:18:12.800 able to punch above your weight because without you, they 0:18:12.800 --> 0:18:16.160 wouldn't have the position that they actually have. How much 0:18:16.240 --> 0:18:18.280 is this sort of setting the stage for what's to come? 0:18:18.320 --> 0:18:19.919 How much do you see this as a theme that 0:18:19.920 --> 0:18:21.720 we're going to hear about quite a bit as we 0:18:21.760 --> 0:18:22.639 had to the midterms. 0:18:24.000 --> 0:18:26.600 Well, listen, we have a two hundred and twenty seat 0:18:26.800 --> 0:18:33.600 majority and three of us one districts that Kamala Harris won. 0:18:34.520 --> 0:18:36.600 You lose the three of us and you're in the 0:18:36.640 --> 0:18:41.040 minority very quickly. So you know, look, I think the 0:18:41.160 --> 0:18:46.800 reality of this is math. And I certainly respect all 0:18:46.840 --> 0:18:50.600 of my colleagues. They're all here to represent their districts 0:18:50.680 --> 0:18:54.560 as am I and my district has different needs than 0:18:54.600 --> 0:18:57.760 some of my colleagues who are in safer seats, who 0:18:57.760 --> 0:19:01.639 are in a more Republican seats. That's just a reality 0:19:01.680 --> 0:19:05.920 of life. And so to me, this is about a compromise. 0:19:06.320 --> 0:19:08.359 None of us are going to get everything we want 0:19:08.920 --> 0:19:12.760 in this bill or any bill, but all of us 0:19:12.800 --> 0:19:15.960 have to find a way to work together to keep 0:19:15.960 --> 0:19:19.359 the majority and make sure that we're delivering for the 0:19:19.400 --> 0:19:22.520 American people. And our districts, and that's what I'm doing 0:19:22.640 --> 0:19:27.560 in fighting for this issue, fighting to protect Medicaid. I 0:19:27.600 --> 0:19:31.119 have one of the highest district with one of the 0:19:31.200 --> 0:19:35.600 highest number of recipients of Medicaid. There are people who 0:19:35.640 --> 0:19:38.560 rely on these critical programs, and I'm doing everything I 0:19:38.640 --> 0:19:43.480 can throughout this process to protect that, including blocking any 0:19:43.600 --> 0:19:47.320 changes to f MAP, per capita caps, block grants, dish cuts. 0:19:47.960 --> 0:19:51.480 We've been able to do that throughout this process and 0:19:51.600 --> 0:19:56.359 make sure that those who rely on these programs receive 0:19:56.440 --> 0:20:00.679 the benefits that they need, while making sure that we 0:20:00.760 --> 0:20:05.440