1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,400 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:36,919 Speaker 2: Terminal and the Bloomberg Business app. We'll begin this out 10 00:00:36,920 --> 00:00:39,920 Speaker 2: with stops Creeping Kiah. Following another AI scare, the latest 11 00:00:39,920 --> 00:00:42,239 Speaker 2: bout of risk aversion helping to drive bond yields down 12 00:00:42,240 --> 00:00:44,519 Speaker 2: towards new lows for the year. Bob Michael of JP 13 00:00:44,640 --> 00:00:47,199 Speaker 2: Morgan Acid Management, Right in the US economy continues to 14 00:00:47,240 --> 00:00:51,440 Speaker 2: operate at trend with continuing disinflation, tanks refunds and AI 15 00:00:51,560 --> 00:00:54,840 Speaker 2: capex and nice tail wins. All of this is good 16 00:00:54,840 --> 00:00:56,880 Speaker 2: for the bond market. Bob joined us now for Mob 17 00:00:56,880 --> 00:00:57,880 Speaker 2: Bob good Mornic. 18 00:00:57,720 --> 00:00:58,480 Speaker 3: Happy to be here. 19 00:00:58,560 --> 00:01:01,960 Speaker 2: Bon yields's for the year very close to those levels 20 00:01:02,080 --> 00:01:04,280 Speaker 2: right now. What's driving yields that much lower. 21 00:01:04,680 --> 00:01:07,560 Speaker 3: I feel that the bond market is sitting here with 22 00:01:07,680 --> 00:01:10,560 Speaker 3: a growing stack of chips. We're getting all the chips 23 00:01:10,920 --> 00:01:14,040 Speaker 3: from private capital and from equities, where a lot of 24 00:01:14,200 --> 00:01:17,720 Speaker 3: investment by clients has gone. As I talk to our clients, 25 00:01:17,720 --> 00:01:21,880 Speaker 3: they still feel under allocated to fixed income. Our message is, 26 00:01:22,000 --> 00:01:25,520 Speaker 3: come on in, we're great. We're the perfectly priced market. 27 00:01:25,720 --> 00:01:27,760 Speaker 3: If I think about the Fed funds rate at three 28 00:01:27,840 --> 00:01:30,920 Speaker 3: and five eights, I like it. Even if inflation runs 29 00:01:30,959 --> 00:01:34,480 Speaker 3: at about three percent this year, you're talking about positive 30 00:01:34,520 --> 00:01:37,440 Speaker 3: real yields on Fed funds of five eighths of a percent. 31 00:01:37,760 --> 00:01:40,600 Speaker 3: You look at the two year Treasury, it's near the 32 00:01:40,600 --> 00:01:43,639 Speaker 3: Fed funds rate. That looks pretty good. At three forty 33 00:01:43,760 --> 00:01:47,080 Speaker 3: or so, you've got about sixty basis points of steepness 34 00:01:47,120 --> 00:01:50,080 Speaker 3: out to the ten year. That looks reasonable to us. 35 00:01:50,120 --> 00:01:53,320 Speaker 3: You're just over four percent. You look at credit spreads 36 00:01:53,560 --> 00:01:57,200 Speaker 3: for an economy that continues to expand with some talents, 37 00:01:57,240 --> 00:01:58,200 Speaker 3: they look fair to us. 38 00:01:58,360 --> 00:02:00,320 Speaker 2: There's been some doubt, as you know, about how bonds 39 00:02:00,320 --> 00:02:03,760 Speaker 2: would perform in an equity correction. We're beginning to prove 40 00:02:03,760 --> 00:02:05,320 Speaker 2: the dances wrong with recent price section. 41 00:02:06,440 --> 00:02:09,000 Speaker 3: I think so and I think we've long talked about 42 00:02:09,160 --> 00:02:13,360 Speaker 3: the long end becoming unanchored. Seem to have gotten overdone 43 00:02:13,400 --> 00:02:16,000 Speaker 3: that the pain trade for this year was going to 44 00:02:16,000 --> 00:02:18,760 Speaker 3: be a bullish flattening of the yield curve. We're starting 45 00:02:18,800 --> 00:02:22,120 Speaker 3: to see that now investors are recognizing they can go 46 00:02:22,240 --> 00:02:25,760 Speaker 3: into bonds. There is yield there. It is the counterbalance 47 00:02:25,840 --> 00:02:26,200 Speaker 3: to risk. 48 00:02:26,560 --> 00:02:29,080 Speaker 4: When you say going to bonds, you're talking about treasuries, 49 00:02:29,160 --> 00:02:31,480 Speaker 4: you're talking about long end, and you're talking about short end. 50 00:02:31,880 --> 00:02:34,760 Speaker 4: Does this kind of rally in the government bond space 51 00:02:35,240 --> 00:02:37,480 Speaker 4: mean something bad for the risk your space? 52 00:02:38,720 --> 00:02:41,800 Speaker 3: I'm talking about the entire bond market. I think most 53 00:02:41,840 --> 00:02:44,960 Speaker 3: of the client base that's coming into the bond market 54 00:02:45,360 --> 00:02:49,520 Speaker 3: isn't surgically thinking about treasuries versus credit. They want to 55 00:02:49,560 --> 00:02:52,760 Speaker 3: buy an aggregate bond fund, a core plus bond fund, 56 00:02:52,800 --> 00:02:56,919 Speaker 3: an income fund, a bond opportunities fund. In those benchmarks, 57 00:02:56,960 --> 00:02:58,840 Speaker 3: there are going to be a lot of treasuries, but 58 00:02:58,880 --> 00:03:01,560 Speaker 3: there's a lot of credit. That money is coming in 59 00:03:01,639 --> 00:03:04,160 Speaker 3: and it's buying all sectors of the market. I'm not 60 00:03:04,280 --> 00:03:07,960 Speaker 3: worried about credit here as long as recession isn't on 61 00:03:08,080 --> 00:03:11,440 Speaker 3: the horizon, and right now recession seems a long way off. 62 00:03:11,639 --> 00:03:14,520 Speaker 4: Your CEO is talking about how there are some problems 63 00:03:14,560 --> 00:03:16,920 Speaker 4: brewing and there are people acting in irresponsible ways in 64 00:03:17,040 --> 00:03:20,240 Speaker 4: order to get extra net intra interest income. There's this 65 00:03:20,280 --> 00:03:22,680 Speaker 4: feeling that maybe there is a canary in the coal 66 00:03:22,720 --> 00:03:25,320 Speaker 4: mine that is mounting in private credit. We did see 67 00:03:25,360 --> 00:03:28,520 Speaker 4: HYO bond spreads blow out a little bit yesterday. Do 68 00:03:28,560 --> 00:03:30,079 Speaker 4: you see any issues percolating there? 69 00:03:30,560 --> 00:03:34,320 Speaker 3: Your producer promised me no hard questions today. 70 00:03:34,639 --> 00:03:36,560 Speaker 1: You did. No one told me so. I think of 71 00:03:36,640 --> 00:03:38,280 Speaker 1: the mess over look. 72 00:03:38,400 --> 00:03:40,640 Speaker 3: I have a lot of sympathy for Jamie's few. One 73 00:03:40,720 --> 00:03:44,440 Speaker 3: of the things that we've been looking at is CLO 74 00:03:44,720 --> 00:03:48,480 Speaker 3: equity prices and how those have dropped. For those of 75 00:03:48,560 --> 00:03:50,920 Speaker 3: us who have been around for a long time, it's 76 00:03:51,040 --> 00:03:54,840 Speaker 3: reminiscent of what we were watching in the five to 77 00:03:55,240 --> 00:03:59,440 Speaker 3: seven period. Going into OA. There were things called asset 78 00:03:59,520 --> 00:04:03,880 Speaker 3: backscure CDXO in disease, and if you track the triple 79 00:04:03,880 --> 00:04:06,800 Speaker 3: B minus portion of that which held in for a 80 00:04:06,840 --> 00:04:10,560 Speaker 3: long time, they also plunge. So it's looking like the 81 00:04:10,600 --> 00:04:15,080 Speaker 3: first loss pieces of structured credit, much like that five 82 00:04:15,120 --> 00:04:19,000 Speaker 3: to seven period, are starting to crack. Now history doesn't 83 00:04:19,040 --> 00:04:22,159 Speaker 3: perfectly repeat, but it rhymes it's something to keep an 84 00:04:22,200 --> 00:04:22,520 Speaker 3: eye on. 85 00:04:22,680 --> 00:04:26,000 Speaker 2: Do you see them as liquidity issues or acid quality problems? 86 00:04:26,240 --> 00:04:26,960 Speaker 2: Is it one or the other? 87 00:04:27,040 --> 00:04:31,560 Speaker 3: Right now, it's a combination of both, right because as 88 00:04:31,760 --> 00:04:36,159 Speaker 3: loans are created, depending where they're created, in the broadly 89 00:04:36,200 --> 00:04:39,359 Speaker 3: syndicated loan space or in the private credit space, there's 90 00:04:39,520 --> 00:04:43,040 Speaker 3: a different specter of liquidity on them and where they go. 91 00:04:43,120 --> 00:04:45,880 Speaker 3: Do they just sit in portfolios and roll over? Do 92 00:04:45,960 --> 00:04:50,080 Speaker 3: they go to create credit enhancement for clos Those are 93 00:04:50,080 --> 00:04:52,880 Speaker 3: also structuring problems. So I think it's a combination of them. 94 00:04:52,880 --> 00:04:54,400 Speaker 2: I'm going to avoid naming the names so you can 95 00:04:54,400 --> 00:04:57,400 Speaker 2: actually talk about it. So if a fund comes out 96 00:04:57,400 --> 00:04:59,760 Speaker 2: and has to send a portfolio of loans, has to 97 00:04:59,760 --> 00:05:02,440 Speaker 2: sound them and they get sold really close to path, 98 00:05:02,720 --> 00:05:05,359 Speaker 2: does that end the idea that these assets are marked 99 00:05:05,360 --> 00:05:07,800 Speaker 2: properly or does it just rank you ask questions about 100 00:05:07,839 --> 00:05:09,000 Speaker 2: what the other assets look like. 101 00:05:09,839 --> 00:05:14,680 Speaker 3: It tells you that things are functioning okay right now 102 00:05:14,720 --> 00:05:18,560 Speaker 3: for the first movers. I think that's good. I think 103 00:05:18,720 --> 00:05:22,120 Speaker 3: as long as the economy continues to move along at 104 00:05:22,120 --> 00:05:25,279 Speaker 3: trend or higher, I always say a rolling loan gathers 105 00:05:25,279 --> 00:05:28,760 Speaker 3: no loss, those loans will be rolling and then the 106 00:05:29,040 --> 00:05:31,919 Speaker 3: amend and extent and the restructurings that are going on 107 00:05:32,440 --> 00:05:36,840 Speaker 3: behind the scenes. They'll continue to go on behind the scenes. 108 00:05:36,880 --> 00:05:39,919 Speaker 3: That's fine. I think what everyone's worried about is we 109 00:05:40,120 --> 00:05:43,440 Speaker 3: haven't had a shakeout in private credit yet, and a 110 00:05:43,520 --> 00:05:45,760 Speaker 3: recession is that ultimate shakeout? 111 00:05:45,960 --> 00:05:48,880 Speaker 4: Do you prefer liquid credit right now to private credit 112 00:05:48,920 --> 00:05:49,760 Speaker 4: as a result. 113 00:05:49,440 --> 00:05:53,000 Speaker 3: Of that dynamic, I think it all just comes down 114 00:05:53,040 --> 00:05:55,120 Speaker 3: to the borrow where I don't mean to evate that, 115 00:05:55,279 --> 00:05:59,240 Speaker 3: but ultimately, if you're a credit picker, you've got to 116 00:05:59,279 --> 00:06:03,159 Speaker 3: examine the bar borrower, and no two borrowers are identical. 117 00:06:03,400 --> 00:06:06,159 Speaker 5: So you're very constructive, unlike maybe other people that we 118 00:06:06,200 --> 00:06:09,080 Speaker 5: heard yesterday from JP Morgan. But you did say in 119 00:06:09,120 --> 00:06:11,760 Speaker 5: your note that there is a new level of geopolitical 120 00:06:11,800 --> 00:06:15,440 Speaker 5: and economic uncertainty given what the administration is doing fighting 121 00:06:15,480 --> 00:06:18,560 Speaker 5: back after IEBA was struck down. Why is that though, 122 00:06:18,600 --> 00:06:21,400 Speaker 5: if they're just filling the hole with another ten percent tariff. 123 00:06:21,160 --> 00:06:26,080 Speaker 3: Level because of all the confusion it creates for corporate America. 124 00:06:26,400 --> 00:06:29,320 Speaker 3: If you've paid the tariffs, you're entitled to get that 125 00:06:29,440 --> 00:06:32,360 Speaker 3: money back if they were i EPA tariffs. So you've 126 00:06:32,400 --> 00:06:35,240 Speaker 3: now got to go through the process of reclaiming that 127 00:06:35,560 --> 00:06:38,400 Speaker 3: it's not quite clear what new tariffs will look like. 128 00:06:39,279 --> 00:06:42,680 Speaker 3: Yesterday the thought was fifteen percent. That was just mooted. 129 00:06:42,720 --> 00:06:45,960 Speaker 3: They're actually ten percent. With the thread of fifteen percent. 130 00:06:46,240 --> 00:06:48,839 Speaker 3: We don't know what the secral tariffs are like. When 131 00:06:48,880 --> 00:06:51,760 Speaker 3: we talk to the businesses that we extend credit to, 132 00:06:52,200 --> 00:06:55,120 Speaker 3: they seem to be frozen again. Just as they were 133 00:06:55,160 --> 00:06:58,719 Speaker 3: starting to understand what the cost of tariffs would be 134 00:06:58,760 --> 00:07:01,640 Speaker 3: and the impact of AI. What happens in the last 135 00:07:01,720 --> 00:07:04,679 Speaker 3: couple of days, both of those become news items again, 136 00:07:05,000 --> 00:07:07,839 Speaker 3: and it kind of freezes them from thinking about capex 137 00:07:07,839 --> 00:07:08,719 Speaker 3: in the coming year. 138 00:07:08,760 --> 00:07:11,120 Speaker 5: Freezes them potentially also from hiring. Is that an issue 139 00:07:11,160 --> 00:07:12,600 Speaker 5: right now you think Corporate America's dealing with. 140 00:07:12,800 --> 00:07:15,200 Speaker 3: Yeah, And when you look at the stasis in hiring, 141 00:07:15,800 --> 00:07:20,520 Speaker 3: it's been that low higher, low fire environment for exactly 142 00:07:20,600 --> 00:07:23,840 Speaker 3: those reasons. You didn't know what your profitability would be 143 00:07:24,480 --> 00:07:27,160 Speaker 3: after TARIS. Just as you were starting to get through 144 00:07:27,160 --> 00:07:29,160 Speaker 3: that we're going to have new round of TARIS, and 145 00:07:29,200 --> 00:07:31,440 Speaker 3: of course there was always AI out there. You didn't 146 00:07:31,480 --> 00:07:33,920 Speaker 3: want to hire a load of people if in eighteen 147 00:07:33,920 --> 00:07:36,200 Speaker 3: months you had to replace them. And just as they 148 00:07:36,240 --> 00:07:39,720 Speaker 3: were starting to understand that there's more noise there, Bob. 149 00:07:39,760 --> 00:07:41,760 Speaker 2: We've known each other a long time. How many times 150 00:07:41,800 --> 00:07:44,240 Speaker 2: have we had ten minute conversations about fixed income without 151 00:07:44,240 --> 00:07:46,640 Speaker 2: talking about the Federal Reserve? How new is that? 152 00:07:48,880 --> 00:07:52,440 Speaker 3: It's a welcome reprieve and talking about that? 153 00:07:52,720 --> 00:07:54,320 Speaker 2: Is that the same with clients at the moment, they're 154 00:07:54,360 --> 00:07:56,040 Speaker 2: not asking about the FED and quite the same way 155 00:07:56,040 --> 00:07:56,960 Speaker 2: as the story shifted. 156 00:07:57,520 --> 00:08:01,960 Speaker 3: They're still concerned about FED independence. They're still concerned about 157 00:08:02,000 --> 00:08:08,000 Speaker 3: the nominated fedchair and what that will look like. They're 158 00:08:08,040 --> 00:08:12,920 Speaker 3: still expecting multiple rate cuts this year. So clients do 159 00:08:13,040 --> 00:08:13,960 Speaker 3: still talk about. 160 00:08:13,760 --> 00:08:15,960 Speaker 2: It a lot, emphasis on nominated. What do you mean 161 00:08:16,000 --> 00:08:17,440 Speaker 2: by that, Well. 162 00:08:17,280 --> 00:08:21,040 Speaker 3: He has to get through the congressional approval process. We'll 163 00:08:21,080 --> 00:08:23,000 Speaker 3: see if it happens. I think it was a pretty 164 00:08:23,040 --> 00:08:26,200 Speaker 3: clean pick. You have someone who was there twelve years ago, 165 00:08:26,440 --> 00:08:29,520 Speaker 3: who has a body of work, looks like a very 166 00:08:29,520 --> 00:08:30,560 Speaker 3: good candidate to us. 167 00:08:30,640 --> 00:08:33,320 Speaker 2: You say, if I would say when, we'll see when 168 00:08:33,320 --> 00:08:35,440 Speaker 2: it happens, But you say, we'll see if it happens. 169 00:08:35,440 --> 00:08:37,440 Speaker 2: If you've got doubts that it happens, until. 170 00:08:38,400 --> 00:08:44,360 Speaker 3: Yeah, Congress, I'm probably in the eighty twenty. It will happen. 171 00:08:44,760 --> 00:08:48,000 Speaker 3: But there's got to be some noise along the way 172 00:08:48,040 --> 00:08:50,719 Speaker 3: when you look at what's going on in Congress, what's 173 00:08:50,760 --> 00:08:54,760 Speaker 3: going on in the administration, the midterms coming up, and 174 00:08:55,320 --> 00:08:59,440 Speaker 3: the new FED chair would take their seat in May. 175 00:08:59,480 --> 00:09:03,200 Speaker 3: That's getting pretty close to electioneering for the midterms. I 176 00:09:03,240 --> 00:09:05,440 Speaker 3: think it could become a political event. 177 00:09:06,440 --> 00:09:09,959 Speaker 2: Stay with us. More Bloomberg surveillance coming up after this. 178 00:09:19,200 --> 00:09:22,000 Speaker 2: President Trump's new ten percent global tariffs are now in effect. 179 00:09:22,200 --> 00:09:24,800 Speaker 2: As part of the effort to preserve the administration's trade agenda, 180 00:09:24,840 --> 00:09:27,040 Speaker 2: the White House is working on a formal order to 181 00:09:27,080 --> 00:09:29,840 Speaker 2: increase the global tariff right to fifteen percent. Joining us 182 00:09:29,880 --> 00:09:31,679 Speaker 2: now to discuss as the chair of the Global Trade 183 00:09:31,679 --> 00:09:35,080 Speaker 2: and National Security Team at Lowenstein Sandler Doreen Edelman, Dorian 184 00:09:35,120 --> 00:09:37,120 Speaker 2: Welcome to the program. Can we just take a step 185 00:09:37,120 --> 00:09:39,600 Speaker 2: back and start on Friday and give us a sense 186 00:09:39,640 --> 00:09:42,000 Speaker 2: of the picture that you're articulated to clients at the moment, 187 00:09:42,000 --> 00:09:44,760 Speaker 2: What the policy sequencing is going to look like from here? 188 00:09:46,240 --> 00:09:49,840 Speaker 1: Great question. So on Friday, it was not unexpected that 189 00:09:49,920 --> 00:09:54,680 Speaker 1: the Supreme Court invalidated the tariffs under AIPA, because under 190 00:09:54,679 --> 00:09:57,680 Speaker 1: the law it was very clear. At least six of 191 00:09:57,720 --> 00:10:02,559 Speaker 1: the nine justices agreed that tariff power is reserved to Congress. 192 00:10:02,800 --> 00:10:05,800 Speaker 1: The president overstepped his authority, and I think we can 193 00:10:05,840 --> 00:10:10,240 Speaker 1: even see that with Trump's reaction. He talked a lot 194 00:10:10,240 --> 00:10:13,960 Speaker 1: about his new tariffs and his suit true social posts 195 00:10:14,120 --> 00:10:18,280 Speaker 1: end on his press conference or during his press conference, 196 00:10:18,440 --> 00:10:21,600 Speaker 1: but he did not say that he was going to 197 00:10:21,720 --> 00:10:25,240 Speaker 1: challenge the Supreme Court decision. He's going to work around 198 00:10:25,400 --> 00:10:28,560 Speaker 1: the Supreme Court decision. So we've got that the tariffs 199 00:10:28,559 --> 00:10:34,920 Speaker 1: are illegal. Therefore any tariffs will no longer be imposed 200 00:10:34,960 --> 00:10:40,360 Speaker 1: going forward, and any tariffs that were paid should be refunded, period. 201 00:10:40,600 --> 00:10:43,640 Speaker 1: That's clear. The court even went on to say that 202 00:10:43,760 --> 00:10:46,600 Speaker 1: you don't have to have filed a lawsuit in the 203 00:10:46,640 --> 00:10:50,080 Speaker 1: Court of International Trade or anywhere else to get the refunds. 204 00:10:50,559 --> 00:10:54,160 Speaker 1: The question comes in, though, is how are the refunds 205 00:10:54,200 --> 00:10:57,120 Speaker 1: going to be administered? What is the process, and what 206 00:10:57,200 --> 00:11:01,120 Speaker 1: is the timeline? And that is what concerns every company 207 00:11:01,200 --> 00:11:01,480 Speaker 1: I know. 208 00:11:02,559 --> 00:11:04,920 Speaker 5: Well, when you speak to companies, what are you telling 209 00:11:04,920 --> 00:11:06,800 Speaker 5: them in terms of how they should think about the 210 00:11:06,840 --> 00:11:08,800 Speaker 5: timeline exactly? 211 00:11:09,440 --> 00:11:13,360 Speaker 1: We're telling them use the procedures that are currently available 212 00:11:14,080 --> 00:11:18,560 Speaker 1: under the customs regime. There are procedures for refunds. There's 213 00:11:18,720 --> 00:11:23,560 Speaker 1: two sets because remember we're waiting. The Supreme Court told 214 00:11:23,559 --> 00:11:27,320 Speaker 1: the Court of International Trade that it needs to put 215 00:11:27,320 --> 00:11:30,960 Speaker 1: a process in place so that Customs and Border Protection 216 00:11:31,120 --> 00:11:35,400 Speaker 1: CBP can issue these refunds. So while we're waiting, the 217 00:11:35,520 --> 00:11:39,600 Speaker 1: existing process is that companies can go ahead and file 218 00:11:40,080 --> 00:11:44,520 Speaker 1: one of two ways if their goods have not liquidated. 219 00:11:44,760 --> 00:11:47,680 Speaker 1: And what that means is, when you bring goods into 220 00:11:47,679 --> 00:11:51,599 Speaker 1: the United States, you pay your tariff, but that process 221 00:11:51,679 --> 00:11:55,400 Speaker 1: is not finalized between you and the government until approximately 222 00:11:55,440 --> 00:11:58,520 Speaker 1: three hundred and fourteen days later, and that is called liquidation. 223 00:11:59,000 --> 00:12:03,120 Speaker 1: So if it comes imported goods but they haven't liquidated yet, 224 00:12:03,240 --> 00:12:06,640 Speaker 1: they can file what is called a post summary correction, 225 00:12:07,160 --> 00:12:11,560 Speaker 1: and that means that we're telling the government we made 226 00:12:11,559 --> 00:12:15,600 Speaker 1: a mistake. Those the AIPA tariffs are illegal. Therefore we 227 00:12:15,679 --> 00:12:17,839 Speaker 1: made a mistake in what we paid you, and we 228 00:12:17,880 --> 00:12:21,040 Speaker 1: want a refund. Pretty simple, sounds pretty simple. It's a 229 00:12:21,080 --> 00:12:25,120 Speaker 1: typical administrative procedure. That is one thing they can do. 230 00:12:26,000 --> 00:12:28,280 Speaker 1: The other thing they can do is if their goods 231 00:12:28,280 --> 00:12:33,000 Speaker 1: have already liquidated. The Court has gone far enough to 232 00:12:33,040 --> 00:12:37,880 Speaker 1: say that we're not going to have that be a 233 00:12:37,960 --> 00:12:40,800 Speaker 1: problem for you to get refunds. So because if your 234 00:12:40,800 --> 00:12:44,520 Speaker 1: goods have liquidated, you can file another document called a protest, 235 00:12:44,920 --> 00:12:47,880 Speaker 1: and again you're going to say that the tariffs are 236 00:12:47,880 --> 00:12:49,960 Speaker 1: illegal and we want a refund, and here are the 237 00:12:50,000 --> 00:12:53,680 Speaker 1: documents showing we deserve it. Now. In theory, that is 238 00:12:53,679 --> 00:12:57,600 Speaker 1: how it's done. The problem is that obviously millions of 239 00:12:57,679 --> 00:13:01,440 Speaker 1: companies are doing it, and there are no time limits 240 00:13:01,760 --> 00:13:06,040 Speaker 1: on a PSC. It could take up to three hundred 241 00:13:06,040 --> 00:13:08,679 Speaker 1: and fourteen days to get you that refund. When you 242 00:13:08,720 --> 00:13:12,840 Speaker 1: file a protest, the government has two years to respond. 243 00:13:13,000 --> 00:13:16,120 Speaker 1: So in this case you have an administration that really 244 00:13:16,160 --> 00:13:19,439 Speaker 1: doesn't want to roll back these tariffs Sina. 245 00:13:19,440 --> 00:13:21,880 Speaker 5: It doesn't sound simple if I could just jump in there. 246 00:13:21,880 --> 00:13:24,760 Speaker 5: It sounds what Justice Brett Kevanaugh said on page sixty 247 00:13:24,760 --> 00:13:27,319 Speaker 5: four in his opinion. This is going to be an 248 00:13:27,360 --> 00:13:31,520 Speaker 5: absolute mess while we deal with that potential mess of refunds. 249 00:13:31,760 --> 00:13:35,360 Speaker 5: And the administration is talking about this bridge to investigations. 250 00:13:35,679 --> 00:13:38,079 Speaker 5: Can you tell us whether or not you think using 251 00:13:38,120 --> 00:13:41,280 Speaker 5: Section one twenty two is also even legal? And if 252 00:13:41,320 --> 00:13:43,800 Speaker 5: we have another Supreme Court decision ahead. 253 00:13:43,520 --> 00:13:46,800 Speaker 1: Of us, I think there will be challenges. But again 254 00:13:47,000 --> 00:13:49,880 Speaker 1: that is going to take time, and those one twenty 255 00:13:49,880 --> 00:13:52,280 Speaker 1: two tariffs are only good for one hundred and fifty 256 00:13:52,360 --> 00:13:56,000 Speaker 1: days July twenty six, and then they need congressional approval 257 00:13:56,400 --> 00:14:00,640 Speaker 1: so they can be challenged on the legality, but that 258 00:14:00,800 --> 00:14:03,240 Speaker 1: is not going to change the fact that any importer 259 00:14:03,400 --> 00:14:06,720 Speaker 1: is going to have to pay them starting today and 260 00:14:06,800 --> 00:14:08,200 Speaker 1: through July twenty six. 261 00:14:08,960 --> 00:14:12,480 Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this. 262 00:14:21,800 --> 00:14:24,440 Speaker 2: In Vidia results coming out after the closing bout tomorrow. 263 00:14:24,640 --> 00:14:28,520 Speaker 2: Bethkindick of io Fund, a tech focused stop portfolio, writing 264 00:14:28,600 --> 00:14:31,600 Speaker 2: in Vidia delivered its strongest sequential growth since Q four 265 00:14:31,680 --> 00:14:35,680 Speaker 2: twenty three. Last quarter, Blackwell Ultra will likely continue this 266 00:14:35,840 --> 00:14:39,000 Speaker 2: strong momentum. Beth joins us now for more, Beth, welcome back. 267 00:14:39,120 --> 00:14:42,280 Speaker 2: Let's just start with in video and why this ballmarket. 268 00:14:42,280 --> 00:14:45,720 Speaker 2: This rally has stalled even though these big tech names 269 00:14:45,760 --> 00:14:48,120 Speaker 2: are putting up some major CAPEX intentions. 270 00:14:50,000 --> 00:14:52,280 Speaker 6: Yeah, I guess I would counter and just say typically 271 00:14:52,320 --> 00:14:56,240 Speaker 6: the market all along has misjudged in Vidia and many 272 00:14:56,280 --> 00:15:00,800 Speaker 6: other AI semiiconductors and AI hardware players. Ever really been 273 00:15:00,840 --> 00:15:03,720 Speaker 6: a moment in the last three years where the market 274 00:15:03,800 --> 00:15:06,760 Speaker 6: got it, except for maybe that one big blowout report 275 00:15:06,760 --> 00:15:10,200 Speaker 6: with Nvidia. What they're missing now is that the way 276 00:15:10,200 --> 00:15:14,200 Speaker 6: these GPU Generations work is that they ship in volume production, 277 00:15:14,640 --> 00:15:18,840 Speaker 6: which means this strong quarter we saw you last quarter, 278 00:15:19,000 --> 00:15:21,280 Speaker 6: which was one of the highest in two years. 279 00:15:21,600 --> 00:15:22,440 Speaker 1: It's saying a lot. 280 00:15:22,560 --> 00:15:28,240 Speaker 6: This company easily comfortably beats basically every quarter. So saying 281 00:15:28,240 --> 00:15:30,080 Speaker 6: a lot that it's the biggest beat in two years 282 00:15:30,880 --> 00:15:33,240 Speaker 6: is likely to continue to flow. That momentum is likely 283 00:15:33,280 --> 00:15:37,440 Speaker 6: to continue because Gpu Generations are it's shipping in volume, 284 00:15:37,520 --> 00:15:41,040 Speaker 6: it's in production volume right now. So what the market 285 00:15:41,080 --> 00:15:44,320 Speaker 6: is missing is by keeping this stock rangebound, it's now 286 00:15:44,920 --> 00:15:50,040 Speaker 6: a valuation story. We're no longer at thes Blackwell ultra shipping. 287 00:15:50,200 --> 00:15:52,920 Speaker 6: Is how big of a deal is ver Rubin, We're 288 00:15:52,960 --> 00:15:55,720 Speaker 6: at this stock is dirt cheap because it continued to 289 00:15:55,760 --> 00:15:58,560 Speaker 6: be it continued to put up strong quarters, and now 290 00:15:58,800 --> 00:16:01,440 Speaker 6: the market kept arrangebound. So personally, the way I look 291 00:16:01,480 --> 00:16:05,440 Speaker 6: at this is it's a valuation story going into tomorrow night. 292 00:16:05,720 --> 00:16:08,120 Speaker 4: Calling it dirt cheap after it rose to be a 293 00:16:08,240 --> 00:16:09,200 Speaker 4: four trillion. 294 00:16:08,880 --> 00:16:10,920 Speaker 5: And then nearly five trillion dollars of valuation is. 295 00:16:10,920 --> 00:16:13,240 Speaker 4: Definitely a bold called up. I just wonder to make 296 00:16:13,240 --> 00:16:14,880 Speaker 4: it simple, how low is the bar right now for 297 00:16:15,000 --> 00:16:17,440 Speaker 4: Nvidia to just sort of step over tomorrow afternoon. 298 00:16:18,520 --> 00:16:20,080 Speaker 6: Yeah, I would just counter and say I did not 299 00:16:20,160 --> 00:16:22,200 Speaker 6: say the market cap was cheap. I said the valuation 300 00:16:22,320 --> 00:16:25,240 Speaker 6: is cheap, which means on a sales ratio, in an 301 00:16:25,240 --> 00:16:28,120 Speaker 6: earnings ratio, we're looking at April lows. So I do 302 00:16:28,160 --> 00:16:30,720 Speaker 6: want to make sure I clarify that understood. 303 00:16:30,720 --> 00:16:32,920 Speaker 4: I'm just wondering though, going forward, given the fact that 304 00:16:32,920 --> 00:16:35,240 Speaker 4: they have increased their revenues to such a big degree, 305 00:16:35,280 --> 00:16:38,240 Speaker 4: and frankly there will be more coming with respect to 306 00:16:38,640 --> 00:16:41,760 Speaker 4: Meta and with respect to Microsoft and Google and the others, 307 00:16:42,000 --> 00:16:43,800 Speaker 4: I'm just wondering how low the bar is. I mean, 308 00:16:43,840 --> 00:16:46,360 Speaker 4: I do think that essentially, if they show what they've 309 00:16:46,400 --> 00:16:48,160 Speaker 4: been spending, even if they do have a big tap 310 00:16:48,360 --> 00:16:51,160 Speaker 4: X plan that they announced, that it will be well received. 311 00:16:52,880 --> 00:16:55,480 Speaker 6: I think, going back to your point that this is 312 00:16:55,520 --> 00:16:57,640 Speaker 6: the world's most valuable company, that there is not a 313 00:16:57,680 --> 00:16:58,800 Speaker 6: low bar for Nvidia. 314 00:16:58,880 --> 00:17:01,160 Speaker 1: I think is always very high. 315 00:17:01,160 --> 00:17:03,400 Speaker 6: And what I'm saying is that because the way these 316 00:17:03,440 --> 00:17:07,440 Speaker 6: GP generations ship, we're in volume production on Blackwell Ultra, 317 00:17:07,800 --> 00:17:12,600 Speaker 6: that bar will likely be cleared this quarter. Where I 318 00:17:12,640 --> 00:17:14,600 Speaker 6: look at this forward and backward, of course, I'm very 319 00:17:14,600 --> 00:17:18,600 Speaker 6: close to the stock. What we want moving forward is 320 00:17:18,640 --> 00:17:21,840 Speaker 6: a smooth handoff to Vera Rubin. We want to make 321 00:17:21,840 --> 00:17:25,360 Speaker 6: sure that that generation ships on time. That is where 322 00:17:25,400 --> 00:17:28,040 Speaker 6: I'm focused at this point. Because black Well Ultra is 323 00:17:28,080 --> 00:17:29,520 Speaker 6: pretty much priced in Beth. 324 00:17:29,560 --> 00:17:31,080 Speaker 2: Do you think there are some doubts around that? 325 00:17:31,119 --> 00:17:34,920 Speaker 6: Then there are only doubts because there was a little 326 00:17:34,920 --> 00:17:38,160 Speaker 6: bit of a rough handoff to Blackwell. We had about 327 00:17:38,160 --> 00:17:41,080 Speaker 6: a six month delay on Blackwell, and that is actually 328 00:17:41,119 --> 00:17:43,600 Speaker 6: showing up a lot in this range bound price action 329 00:17:43,720 --> 00:17:47,080 Speaker 6: we've seen over the last year. The market has gotten 330 00:17:47,200 --> 00:17:51,440 Speaker 6: complacent over the fact that there were these shipping delays, 331 00:17:52,000 --> 00:17:56,520 Speaker 6: and it's simply because Nvidia continues to challenge what is 332 00:17:56,600 --> 00:18:01,480 Speaker 6: possible with compute, so there can often moments where while 333 00:18:01,560 --> 00:18:05,920 Speaker 6: doing that, you know the way that it's belt qualified 334 00:18:06,440 --> 00:18:09,600 Speaker 6: and shipped, there can sometimes be some delays. 335 00:18:09,680 --> 00:18:10,320 Speaker 2: I don't know that. 336 00:18:10,680 --> 00:18:13,439 Speaker 6: I think Vara Rubin's on time, but it's still something 337 00:18:13,440 --> 00:18:16,359 Speaker 6: that you have to watch because they're doing basically the impossible. 338 00:18:17,280 --> 00:18:20,800 Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best 339 00:18:20,840 --> 00:18:24,160 Speaker 2: in markets, economics, antient politics. 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