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Speaker 2: Many talk few have to act in. One of them
Speaker 2: is the Governor of Connecticut, and Mettelamont joins us right
Speaker 2: now in our studios this morning. You're wounded. For those
Speaker 2: of you on radio, He's got this sling going in
Speaker 2: that you're on a trade mission to India. How is
Speaker 2: President Trump helping Connecticut with your trade relations with India?
Speaker 3: India was nervous as heck about President Trump. That said,
Speaker 3: we went to Eastern India, which is by far the
Speaker 3: most innovative and entrepreneurial part. We did a trade mission there,
Speaker 3: met with a four your fifty companies, some of which
Speaker 3: you're thinking about getting a foothold in the United States.
Speaker 3: I had to spell Connecticut for them, but now.
Speaker 2: They know you have to spell Connecticut for me as well.
Speaker 2: Governor Laman Blumenthal as well. On this yesterday, you take
Speaker 2: electricity from Canada. If doug Ford of Ontario or Quebec hydro.
Speaker 2: If they pull the plug, what's it mean for Bridgeport.
Speaker 3: We have some very high electric prices throughout New England,
Speaker 3: including Connecticut, and we bring down a lot of hydro
Speaker 3: from Canada. So you put ten percent on there, that
Speaker 3: would add about seventy five million. You put twenty percent
Speaker 3: on there, that'd be one hundred and fifty million additional
Speaker 3: fees paid.
Speaker 4: For by our rate payers.
Speaker 5: Not a great idea, so, Governor, as you've probably seen
Speaker 5: here in the financial markets, which Tom and I and
Speaker 5: deal with every day, a lot of uncertainty in the
Speaker 5: marketplace as it relates to economic policy of this new administration.
Speaker 5: We're seeing that in lower stock prices and weaker dollar.
Speaker 6: How did you see.
Speaker 5: It from Connecticut? How did you and your constituency look
Speaker 5: at this current environment.
Speaker 3: I come out of the business world. The business world
Speaker 3: hates uncertainty. If you know, when I took over Connecticut,
Speaker 3: we were going from boom to bust a bust and
Speaker 3: raising taxes. And we've had six straight balanced budgets trying
Speaker 3: to give people at certainty or unemployment rate is way
Speaker 3: down and job.
Speaker 4: Growth is up.
Speaker 3: But it's just the opposite in Washington, DC, right, now
Speaker 3: all that uncertainty starting with tariffs, are looking at deficits
Speaker 3: a lot of businesses that I think I'm going to
Speaker 3: hold off right now before I make that investment.
Speaker 4: That's not good.
Speaker 5: So in Connecticut, what are the chief issues that you
Speaker 5: guys are dealing with from an economic perspective these days?
Speaker 3: Look, we're going to we're looking at our seventh and
Speaker 3: eighth balance budget. Unless they cut medicaid by a billion dollars,
Speaker 3: you cut Medicaid by a billion dollars, our budget is
Speaker 3: turned upside down. And that's true of forty nine other states.
Speaker 5: What are you hearing from the federal government about some
Speaker 5: of those big ticket items.
Speaker 4: I don't think they know right now. I was down there.
Speaker 3: I met with folks, the secretaries that just come into
Speaker 3: office coming up with their modeling.
Speaker 4: But everything runs through the White House.
Speaker 2: For those of you across the nation in your commune today,
Speaker 2: a Democrat, the governor of Connecticut is with us Ned
Speaker 2: Lamont as he goes through the tiptoes through all this
Speaker 2: different policy changes we're seeing. I'm going to cut to
Speaker 2: the chase. You got to vote of confidence from the people.
Speaker 2: You get forty nine percent of the vote and one
Speaker 2: in twenty eighteen, I'm going to call it barely. You
Speaker 2: improved dramatically in twenty twenty two with fifty seven percent
Speaker 2: of the vote. What do you say, really the polarity
Speaker 2: of the nation on right and left. But what do
Speaker 2: you say to the Democratic Party is they address from
Speaker 2: a left liberal point the reality of a centrist Lamont
Speaker 2: and others as well.
Speaker 3: A centrist Lamont probably is going to disagree with the
Speaker 3: Trump administration on a majority of things. But start with
Speaker 3: areas where we can find some agreement we can work together.
Speaker 3: For me, that starts with energy. The high price of electricity.
Speaker 3: You know, the possibility that we could bring in natural
Speaker 3: gas or expand nuclear in our region would be transformative
Speaker 3: a place where I've been meeting with the secretaries down
Speaker 3: to Washington. Something we can get done together.
Speaker 2: Right, Well, let me let me you know, we're at
Speaker 2: a piece of chalk on our hand at Harvard years ago, Nevlamont.
Speaker 2: Did the Republicans win the election? Did Trump win or
Speaker 2: did the Democrats lose the election because they were too
Speaker 2: far left?
Speaker 3: I think Trump won. He won because it was a
Speaker 3: change election. I look around the world, nobody wanted more
Speaker 3: of the same and I think a little bit Kamala
Speaker 3: got stuck with the Biden legacy, couldn't differentiate herself from there.
Speaker 3: And believe me, Donald Trump represented change.
Speaker 5: When you think about the Democratic Party today, a lot
Speaker 5: of folks are saying, where's the leadership? Because it seems
Speaker 5: like President Trump and his administration taking all the oxygen
Speaker 5: out of the room. Where is the democratic response? Where's
Speaker 5: a democratic policy? Where's the democratic leadership?
Speaker 6: Who do you think is the leader? Does a Democratic
Speaker 6: party have?
Speaker 7: Aly?
Speaker 3: Well, when we're not in power, you tend to have
Speaker 3: a lot of different leaders I start with the governors.
Speaker 3: The governors are not making everything a battle about Donald Trump.
Speaker 3: But when it comes to medicaid, we're gonna hit hard.
Speaker 3: We're going to work with Republican governors to say, you know,
Speaker 3: unensuring these poor people is just going to drive a
Speaker 3: wedgeendo Era hospitals as well, make a difference, Find areas
Speaker 3: of specific is interest and focus on that, you know,
Speaker 3: rather than just make everything about Trump.
Speaker 5: Congestion pricing, We've got a congestion pricing corresponding right here.
Speaker 7: What is.
Speaker 5: Yes, New Jersey has a particular view of congestion pricing
Speaker 5: against it?
Speaker 6: How does the folks in Connecticut.
Speaker 4: I just think you have.
Speaker 3: To pay your bills, and New York City's got to
Speaker 3: pay their bills. You've got a pretty antiquated subway system.
Speaker 3: Does anybody have a better idea of how to pay
Speaker 3: for things? It's so easy to say no, and right
Speaker 3: now there are a lot of people say no. So
Speaker 3: I'm a little sympathetic to Katy Ohlklum.
Speaker 2: This you represent vantaged America, with the heritage of JP
Speaker 2: Morgan and all that you've done in your life. How
Speaker 2: does America find the center again? We are whatever anybody's
Speaker 2: politics on this show, we can all admit it's a
Speaker 2: fractured America. How do we find the center? Back to
Speaker 2: your family in STSK four years ago and others, how
Speaker 2: do we get back to the center? Governor Lamont, I.
Speaker 3: Think we found in Connecticut Republicans and Democrats find places
Speaker 3: we can agree. Let's say we did the biggest tax
Speaker 3: cut ever last year, but it was middle class people and.
Speaker 4: Beyond, it was not for rich people.
Speaker 3: That was an area where Republicans and Democrats could get together.
Speaker 3: Five hundred million dollar tax cut. What we're doing in
Speaker 3: terms of making sure that we educate people for the
Speaker 3: jobs that are out there right now, there's a disconnect.
Speaker 3: I'm finding pretty good balance between Republicans and Democrats there. Look,
Speaker 3: there's a certain incentive to say no, that's what the
Speaker 3: nature of the opposition party is. I don't think that's
Speaker 3: good for Democrats at the national level, and I don't
Speaker 3: think that's good for Republicans at our state level.
Speaker 5: Foreign policy, it's another area that is front and center
Speaker 5: for better or worse for the United States, both in
Speaker 5: the Middle East and in the Ukraine. Just start with Ukraine.
Speaker 5: There seems to be I guess, a willingness to find
Speaker 5: some solution over there, and then that's question how you
Speaker 5: get there. And President Trump has a certain focus here.
Speaker 5: How would you approach what's happening in Ukraine trying to
Speaker 5: find some type of piece there?
Speaker 3: Not the way Donald Trump is doing it. Look, he
Speaker 3: wrote the Art of the Deal. You go in, you
Speaker 3: negotiate from a position to strength. Instead, Pete Hesa just
Speaker 3: pulled the rug out from under Zelenski, put in place
Speaker 3: a whole list of concessions, a sense that we're not
Speaker 3: going to be there to back them. I think that's
Speaker 3: a terrible way to do it, and our allies around
Speaker 3: the world are watching how we treat Ukraine. I heard
Speaker 3: that when I was in India as well. I'm glad
Speaker 3: they're sitting down. I think they're negotiating. I think that's
Speaker 3: long overdue, but negotiate from a position of strength.
Speaker 2: But I look Governor Laban at Connecticut and I think
Speaker 2: there's so many stereotypes out there, and folks, you can
Speaker 2: come up with your own stereotype. It probably starts with
Speaker 2: the Hinckley picnic voter at Grand Banks. Yeah, but the
Speaker 2: reality is Connecticut's got an incredible polarity, including sixteen seventeen
Speaker 2: percent foreign born migrants. You know, whatever those numbers are.
Speaker 2: Last time we talked, you said you're managing it. It's
Speaker 2: not the crisis of New York State and what Mayor
Speaker 2: Adams is facing. But give us an update, and Connecticut
Speaker 2: is tackling this polarizing issue.
Speaker 3: Connecticut is a diverse state. We represent the diversity of
Speaker 3: the United States of America.
Speaker 4: When I go to India, I.
Speaker 3: Have to say, look, the stereotype of Connecticut is a
Speaker 3: bunch of Fairfield County guys in these voats you're talking about.
Speaker 4: Is not the reality.
Speaker 3: Our biggest percentage of international students are Indian born students
Speaker 3: and that we welcome that. I think that's a great
Speaker 3: strength for our state, and I think is a great
Speaker 3: strength for our country. And I think we're getting away
Speaker 3: from that.
Speaker 5: You come from business, you have a business background. President
Speaker 5: Trump today is addressing the business roundtable.
Speaker 6: What do you think the message should be from.
Speaker 5: Trump to the business leaders and from the business leaders
Speaker 5: to President Trump.
Speaker 3: I think from the business leaders to President Trump, you're
Speaker 3: seeing the incredible anxiety and uncertainty reflected in a collapsing
Speaker 3: stock market and a rising unemployment rates. Look, I agree
Speaker 3: with you in terms of wanting to do big things,
Speaker 3: but you don't have to do them overnight with a chainsaw.
Speaker 4: Give us a direction of where you want to go,
Speaker 4: and we can invest accordingly. I hope the President listens
Speaker 4: to that.
Speaker 2: I'm fascinated with a Supreme Court decision the other day
Speaker 2: with Amy Cony Barrett going over. There seems to be
Speaker 2: a primal scream of the judiciary solving legislative problems. You're
Speaker 2: part of that as an executive in Connecticut, but also
Speaker 2: almost like a legislature to Washington. Anor is a governor
Speaker 2: is a legislatures just giving up the ghost in Washington.
Speaker 2: I mean, does Congress even part of the debate anymore.
Speaker 3: I'm sort of glad to see the judiciary standing up
Speaker 3: to some of the intrusions from the Trump administration. You
Speaker 3: know that said they haven't passed a darn thing down
Speaker 3: in Congress in the last two exactly. Maybe the judiciary
Speaker 3: is stepping in there, But I think the judiciary right
Speaker 3: now is the guardrails protecting our democracy.
Speaker 2: One of the great themes here, and it's the theme
Speaker 2: of your life, is we've expanded our federal mandate away
Speaker 2: from states like a Connecticut. I mean, there's a swing
Speaker 2: back here where we've said enough on a titlements. When
Speaker 2: you see the policy from your advisors, we're going to
Speaker 2: pull back from agriculture, We're going to pull back from Congress.
Speaker 2: We're going to pull back FAA and all the rest
Speaker 2: of the DOCH stuff and all the rest. It's a
Speaker 2: primal scream of a smaller Washington. Is that feasible right now?
Speaker 3: It's popular because it sounds like Dose is getting rid
Speaker 3: of a bunch of bureaucrats who are just leaning on
Speaker 3: their shovels. But every day in our state level, you're
Speaker 3: seeing how it's hitting people starting with healthcare. I think
Speaker 3: that pushback is going to get louder and louder, and.
Speaker 2: Ded Lebama with us the governor of Connecticut, we continue
Speaker 2: our conversation. We welcome all of you, Paul with the
Speaker 2: Governor of Connecticut.
Speaker 5: Governor, you and the state of Connecticut, as you mentioned,
Speaker 5: have been able to balance your budget. We're coming up
Speaker 5: to some budget discussions then in Washington, d C. What
Speaker 5: is your advice to folks in Congress about these upcoming
Speaker 5: negotiations and trying to balance the budget and trying to.
Speaker 6: Push that part of the policy through.
Speaker 3: Governors are so frustrated with Washington. We all have to
Speaker 3: balance our budget down to Washington. It's an afterthought. I
Speaker 3: understand that deficits are not politically that charged an issue,
Speaker 3: but you got to do the right thing. You don't
Speaker 3: have to solve it overnight, but you've got to directionally
Speaker 3: start showing that you're getting your budget under control. I
Speaker 3: don't see that happening in Washington.
Speaker 5: The price there's not more political pressure to do that
Speaker 5: because I think the message I've taken is that unless
Speaker 5: people force Washington to do that, either to lower expenses,
Speaker 5: raise revenue, whatever they have to do, unless there's political pressure,
Speaker 5: there's no really no incentive to do anything.
Speaker 4: Look here at Bloomberg, we care about that deeply.
Speaker 3: We know if you don't have an honestly balanced budget,
Speaker 3: a bad things happen in the future. I've paid down
Speaker 3: our debt by over ten billion dollars. People don't care
Speaker 3: that much. You know, they have real needs every day.
Speaker 3: How can you not taken care of that?
Speaker 6: So how do you think about that? I mean, is
Speaker 6: this the.
Speaker 5: How do you think if you were to balance the
Speaker 5: US budget? Where would you go expenses, revenue both? How
Speaker 5: would you think about it?
Speaker 3: I don't think I'd have the biggest tax cut in
Speaker 3: history for the wealthiest folks. I think that sends the
Speaker 3: wrong signal, takes us in the wrong direction. I think
Speaker 3: I would be going after efficiency, not the way Doze
Speaker 3: is doing, but in a serious way. And you can
Speaker 3: disregarding titlements.
Speaker 2: I got two questions left. They're both really really important.
Speaker 2: One with im Men's respect to your family, the heritage
Speaker 2: of the Lamont family on all of Wall Street? Is
Speaker 2: this a new gilded age? Have we skewed things so
Speaker 2: far over to billionaire mania that we're really reliving? I mean,
Speaker 2: Trump has this fixation over McKinley and tariffs. Are we
Speaker 2: reliving McKinley as a society.
Speaker 4: I think we are a little bit.
Speaker 3: I think in flighting the money supply and all the
Speaker 3: deficits have made the rich a lot richer, probably the
Speaker 3: richest they've been since nineteen twenty nine.
Speaker 2: I got one final question. It's credible. Paul emails in
Speaker 2: and says it's just simple. Finally Big East basketball is back.
Speaker 2: I mean, I'm looking at Yukon Saint John's. This could
Speaker 2: be a bid.
Speaker 3: Is going to be a great Big East game. Yukon
Speaker 3: is playing better and better than men, and women are
Speaker 3: top flights.
Speaker 2: Women are top flight. But in men's basketball, Yukon's won
Speaker 2: four in a row. Are they saving it for Saint
Speaker 2: John's here?
Speaker 3: Hey, look we're too I'm national championship. We know what
Speaker 3: we're doing.
Speaker 2: Okay, Finally, after four hundred years, we get new Amtrak trains.
Speaker 2: Everybody blames Connecticut for the worst wires. We fixed it.
Speaker 2: You know, forget about the tunnels. We fixed it in
Speaker 2: New York to Washington. Give us an update on your
Speaker 2: unspeakable relationship with Amtrak to give us better, cheaper train service.
Speaker 4: I will tell you.
Speaker 3: We're gonna be able to speed up Amtrak dramatically over
Speaker 3: the next five years. We got significant resources from the
Speaker 3: Biden administration.
Speaker 4: We are a choke point.
Speaker 3: We got a lot of little towns, a lot of
Speaker 3: stops along the way, a lot of twisting turns around
Speaker 3: Missus O'gillicutti's home.
Speaker 4: We're going to speed that up.
Speaker 2: Is the President going to cut your submarine effort?
Speaker 4: I don't think so.
Speaker 3: It's the strategic piece of our triad. It's still undecipherable, folks.
Speaker 2: For those that don't know it. You take the train
Speaker 2: up and you're there and there's like a submarine over
Speaker 2: in a window. Explain to people what's going on. It's
Speaker 2: your submarine base in Connecticut. It's top top, top secret.
Speaker 2: They don't even know if they leave her because they
Speaker 2: leave underwater. But explain the commitment of Connecticut to our
Speaker 2: United States Navy.
Speaker 3: Yeah, electric boat part of General Dynamics makes most of
Speaker 3: our submarines here and down in Virginia. It's the last
Speaker 3: piece of our triad that is still undetectable. So it's
Speaker 3: really important in terms of our strategic deterrence. If you
Speaker 3: think the Soviets are coming in from the North Sea.
Speaker 3: You know they're going to come right by New England.
Speaker 3: It's very important what we got there in the Groton,
Speaker 3: New London areas.
Speaker 2: Governor, thank you for joining Bloomberg today, Grant, I appreciate it.
Speaker 2: I'm still a mount of the state of Connecticut.
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Speaker 2: A time of conversation with someone seeing this a few
Speaker 2: times before, Margui Petateel on correction, Mark you Pattel of course,
Speaker 2: offspring Margie, you're going to tell me to find quality,
Speaker 2: free cash flow. You're going to tell me to find
Speaker 2: dividend and dividend growth. Where is it? Well?
Speaker 8: I think really, with this kind of correction we've had,
Speaker 8: you really have to look more at the growthy orient
Speaker 8: rather than so called defensive high dividend kind of stocks
Speaker 8: that a lot of people have said to be popular.
Speaker 8: Simply because you've had such a big correction in many
Speaker 8: of the large cap growth stocks, they actually look rather
Speaker 8: reasonably priced, maybe even about the same price earnings ratio
Speaker 8: as the average stock in the marketplace.
Speaker 5: So how do you when you talk to your clients.
Speaker 5: Is this a we don't want to be catching a
Speaker 5: falling knife scenario, or.
Speaker 6: Hey, we could be selective here in some names we like.
Speaker 4: Well.
Speaker 8: The thing is when you when the market has a
Speaker 8: lot of volatility, short term volatility senseless, it's not really
Speaker 8: related to the fundamentals.
Speaker 9: In fact, I think we.
Speaker 8: Ought to bring back the uptick rule, and that might
Speaker 8: mute some of the volatility that we see. You go,
Speaker 8: but when you look at the economy itself, it's chugging
Speaker 8: along at a low rate. We may have a negative quarter,
Speaker 8: many people are thinking, But we actually had a negative
Speaker 8: quarter when the Fed began to raise short rates a
Speaker 8: couple of years ago, and after that quarter we were
Speaker 8: off to the races again. So I think that after
Speaker 8: we get through this choppy uncertainty, we may have a
Speaker 8: better market for the rest.
Speaker 10: Of the year.
Speaker 2: What is the character of this pullback? I mean, I mean,
Speaker 2: when you're talking, Mark, you telling the uptick rule, we
Speaker 2: could stop the show and go for an hour and
Speaker 2: a half on does piece of legislation? Sure? Ever, Marguie,
Speaker 2: what's the character of this pullback versus in any other
Speaker 2: fourteen vanilla corrections. Is it just all political?
Speaker 8: Well, I think for this cycle, as opposed to say
Speaker 8: seven eight, that you have many, many more short term traders,
Speaker 8: and that's contributed to the extreme volatility that we see,
Speaker 8: short term volatility that we've seen, rather than fundamentals. So
Speaker 8: I think that's really the issue. But as I said,
Speaker 8: when you look at the economy, it looks pretty good.
Speaker 8: The FED is committed to not tightening up financial conditions,
Speaker 8: and this is actually kind of a weak period right
Speaker 8: before people do tax is the uncertainty about the budget.
Speaker 8: So I think we have a little bit to slosh
Speaker 8: through and then the market will stabilize.
Speaker 2: See how she's calming. Sure she should come over for
Speaker 2: dinner tonight. Yeah, everybody Venville's portfolios got of hammered. Mark,
Speaker 2: you should come.
Speaker 6: Over, Margie.
Speaker 5: A lot of folks in President Trump's economic team are
Speaker 5: acknowledging that some of his policies could result in some
Speaker 5: short term pain, whether it's slow in growth or higher inflation,
Speaker 5: but longer term, and I think they define longer term
Speaker 5: as the back half of this year, there should be
Speaker 5: some gains, whether it's from you know, extended tax cuts
Speaker 5: or maybe some other pro pro growth initiatives.
Speaker 6: Are you buying into that?
Speaker 5: Is that short term game, longer term gain?
Speaker 6: Is that something that makes sense?
Speaker 9: Well, yes, I think so.
Speaker 8: I think the big risk with the with the change
Speaker 8: in administration, would the temporary tax cuts expire and then
Speaker 8: tax rates for corporations and individuals would jump up, and
Speaker 8: I think that would have been very, very negative for
Speaker 8: the stock market. So now we have a lot of
Speaker 8: uncertainty about our terrorists good or terrorist's bad. And how
Speaker 8: much can they cut from the government. I think it's
Speaker 8: pretty modest at the margin that they'll actually be able
Speaker 8: to cut. But any improvement and efficiency in the government
Speaker 8: is just what business does every day, so that's pretty good. Mainly,
Speaker 8: I think the tax cut is a number one issue
Speaker 8: that will benefit the economy and the market this year.
Speaker 2: Margaret Patel with us and we will continue with Margui
Speaker 2: Patel of Allspring Global Investments in Boston. Good morning ninety
Speaker 2: two nine FM in Boston. Good morning across the nation
Speaker 2: and community. Thank you Nedlamnt for some real wisdom there
Speaker 2: from Connecticut, the Democrat from Connecticut, particularly on the hydro power,
Speaker 2: if you will. From Canada, Market Patel's with us with
Speaker 2: all spring and we continue market. Do you own bonds
Speaker 2: still or you just gone all divining growth? No?
Speaker 8: In my portfolio I have about actually i've raised a
Speaker 8: little over the last month. It's about sixteen seventeen percent
Speaker 8: of the portfolio, which is a bit higher than it's
Speaker 8: been for a while, simply because if you think this
Speaker 8: is going to be a so so year for equities,
Speaker 8: I'm thinking eight to maybe ten percent. High old bonds,
Speaker 8: say yielding six and a half percent, looks like a
Speaker 8: pretty reasonable trade.
Speaker 9: What's as good as a dividend income anyway?
Speaker 2: There you go, what's the duration? You're buying forty year paper?
Speaker 8: Well, that you know, the duration of the high old
Speaker 8: market is shortened up a lot, and it's now about
Speaker 8: a little over three years. My duration is a bit longer,
Speaker 8: maybe three and three quarter years. That's really it's shortened
Speaker 8: up quite a bit in the whole market.
Speaker 2: I think a lot of people listening, Paul, they think
Speaker 2: a high yield is like, seriously, eight year, ten years,
Speaker 2: twelve year duration? There are three and a half years.
Speaker 6: Wow, that's what we've heard, yeap, Margie.
Speaker 5: So as we step back here and if someone were
Speaker 5: to ask you, is this a healthy pullback in an
Speaker 5: otherwise decent equity market or is this something more?
Speaker 6: What do you tell them?
Speaker 9: I don't think it's anything more.
Speaker 8: Even last fall, when we had the market really just
Speaker 8: spike up to really incredible levels, I think most people
Speaker 8: felt the market was a little top, a little overpriced,
Speaker 8: so it was really set up perfectly for all the
Speaker 8: uncertainties and negative things have appeared in this part of
Speaker 8: the year. So you've had a big correction and non
Speaker 8: Nasdaq is down I think about ten percent year to
Speaker 8: day standard and Poor is about five percent, So that's
Speaker 8: not really bargain territory yet yet. But considering that the
Speaker 8: Fed is basically said we'll have stability was likely cups.
Speaker 9: That's really not a bad level to look at the market.
Speaker 8: The average pe is I think about twenty two to
Speaker 8: twenty four times.
Speaker 2: Margie, generous for you to be with us today. Thank
Speaker 2: you so much for Boston with Allspring, Margie Kutel.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: We wanted to nail the math of the moment. You
Speaker 2: do that with Stephanie Ross. She says wolf right now.
Speaker 2: And let's go to partial differentials here. The core equation
Speaker 2: is why well see pluscyplus G plus NX. You told
Speaker 2: me off the mic. The consumer matters, tell me about
Speaker 2: the dynamics of the consumer into a sub two percent
Speaker 2: GDP call.
Speaker 7: So if we think about the drivers of upside growth
Speaker 7: in the past couple of years, it's been on consumption,
Speaker 7: partially driven by the wealth effect. Now that's going the
Speaker 7: other way to some extent. And even though it's not
Speaker 7: all erodent, I mean it's been trillions of dollars, there
Speaker 7: still is that sentiment. And then on top of that,
Speaker 7: we're starting to get hit by tariffs. We basically had
Speaker 7: double the China trade war in the last two months,
Speaker 7: then from the twenty eighteen trade war, and that's kind
Speaker 7: of going unoticed to some extent. And then that doesn't
Speaker 7: confector Canada. Mexico doesn't affector reciprocal tariffs, which are likely.
Speaker 10: Coming next month.
Speaker 7: So this tariff thing is is a big deal likely
Speaker 7: to knock off fifty basis points off GDP this year.
Speaker 6: Yeah.
Speaker 5: We just saw this this morning of the companies's reporting
Speaker 5: earning to day. The consumer facing companies like the sporting
Speaker 5: good stores, Dick's, Cohle's, a big department store, the airlines
Speaker 5: all reporting weaker than expected outlook forecast.
Speaker 6: Is that already reflecting some of.
Speaker 5: The uncertain people we're seeing in the marketplace?
Speaker 7: Yeah, I think it's it's certainly starting to The data
Speaker 7: so far shouldn't have a material impact, but looking ahead,
Speaker 7: that's definitely the case.
Speaker 10: Uncertainty is high.
Speaker 7: It's a problem for consumer facing companies, and it's also
Speaker 7: a problem on the capital spending side of the economy.
Speaker 7: How do you invest you don't know the tariff rates
Speaker 7: and you don't know what the fate of the economy
Speaker 7: is going to be in the next twelve months.
Speaker 2: I want to emphasize when Stephanie Roth, the heavyweight, comes
Speaker 2: in here and she says, we knack half a percentage
Speaker 2: putting off on tariffs. I'm using a lower number out
Speaker 2: of Yale University. But the answer is you take point five, folks,
Speaker 2: and divide it by whatever your guestimate was before so
Speaker 2: point five divided by two point five, this is stan
Speaker 2: Fisher one oh one is a twenty percent marked down
Speaker 2: in the growth rate. That's a lot of angs. Can
Speaker 2: you bring that over to the labor economy. Are you
Speaker 2: willing to give me a five percent unemployment rate?
Speaker 7: No, I'm not willing to give you that. I think
Speaker 7: what we'll see is we will see a bit of
Speaker 7: an uptick in the unemployment rate. I don't think we're
Speaker 7: getting to five percent. I think at that point the
Speaker 7: FED is going to certainly be stepping in. And then
Speaker 7: the dog layoffs are not that big. They add a
Speaker 7: couple of tents at most, so it should be let
Speaker 7: it should be more just a stall speed in terms
Speaker 7: of hiring, which is why we're not forecasting our session.
Speaker 5: So and that kind of goes to the administration is
Speaker 5: making the points these days when they're challenged on some
Speaker 5: of these economic uncertainties that are in the marketplace near
Speaker 5: term pain for some longer term gain. Are you fact
Speaker 5: whether it's extension of the tax cuts or just some
Speaker 5: other economic policies that are drive growth in the back
Speaker 5: half of twenty twenty five, Are you reflecting that in
Speaker 5: any of your GDP work The.
Speaker 7: Problem is the short term pain doesn't necessarily make obvious
Speaker 7: long term gains in the sense that the tariff policies,
Speaker 7: a lot of the tariffs that are putting put in
Speaker 7: places are not going to bring forward manufacturing into the US.
Speaker 7: We don't really have the capacity nor the desira ability
Speaker 7: to produce low cost goods. Putting tariffs on that, putting
Speaker 7: tariffs on agg it doesn't really produce long term gain,
Speaker 7: and we still feel the near term pain. And then
Speaker 7: when we're talking about the tax cuts, it's not really
Speaker 7: tax cuts.
Speaker 10: We're just extending.
Speaker 7: Current policy with maybe a little bit of tax cuts
Speaker 7: on tips and a couple other things.
Speaker 10: But it's net growth negative.
Speaker 2: Servaining wrong through this on your morning Commune with Wolf
Speaker 2: Research across the Nation on YouTube. Thank you for subscribing
Speaker 2: to Bloomberg Podcast. T RC first time caller out on YouTube.
Speaker 2: We're up to forty two listeners. It's it's amazing. TRC says,
Speaker 2: good morning, all right to Stephanie Wroth.
Speaker 5: So, Stephanie, what do you how do you think the
Speaker 5: Federal Reserve is kind of monitoring these developments here as
Speaker 5: it relates to potential slowing economic growth, potential for higher inflation.
Speaker 6: How do you think they're looking at that?
Speaker 7: Well, certainly this week's CPI print is probably not going
Speaker 7: to be that important for them because it doesn't factor
Speaker 7: in that. They're going to be thinking forward, forward, ahead
Speaker 7: at this point.
Speaker 10: So the things they're going.
Speaker 7: To be looking at are going to be unemployment rate,
Speaker 7: is that starting to rise? Are they going to get
Speaker 7: are they getting uncomfortable with that? The pace of hiring?
Speaker 7: And then inflation expectations is going to be another key one.
Speaker 7: And what's different this time versus the last one trade
Speaker 7: war in twenty eighteen is inflation expectations long term are
Speaker 7: driven mostly by your recent experience with inflation in twenty eighteen,
Speaker 7: recent experience with inflation.
Speaker 10: Was we had none.
Speaker 7: This time people are going to be a lot more
Speaker 7: concerned about inflation because they just experience.
Speaker 2: How do you measure inflation expectations and the anchoring of
Speaker 2: said expectations. Do you do it with Michigan or do
Speaker 2: you look at it another way?
Speaker 10: I mean, the Fed does look at Michigan.
Speaker 7: The survey is not great, but they'll be looking at it, agreed,
Speaker 7: They'll be looking at New York Fed and then market
Speaker 7: based inflation expectations will be important too, so it'll be
Speaker 7: a whole host of inflation expectations measures. I do imagine
Speaker 7: you miss will still get attention, even though perhaps it's
Speaker 7: not the best reflection.
Speaker 10: New York Fed is probably a better one.
Speaker 5: So where do we go from here? In terms of
Speaker 5: thinking about this economy? Here are you forecasting that a
Speaker 5: recession is possible?
Speaker 2: Here?
Speaker 6: What are your odds of that?
Speaker 7: Odds of recession right now is about thirty five percent,
Speaker 7: so certainly not the base case. I think the market
Speaker 7: is just pricing in the more elevated chance of recession.
Speaker 7: I don't think it's it's necessarily going to price in
Speaker 7: a full recession, but right now, wasting our models, we're
Speaker 7: looking at the market pricing in a recession about twenty
Speaker 7: four percent. I think it probably has to get closer
Speaker 7: to our thirty five percent before the cell offs.
Speaker 2: On policy, I mean, your calls, which are brilliant, can
Speaker 2: they all be amended adjusted by one comment from the
Speaker 2: White House? That's sort of where we are, aren't we
Speaker 2: to some extent?
Speaker 7: And that's why we had to have make such big
Speaker 7: changes to our forecast in the first place, Because this
Speaker 7: is all policy related. The thing is what we're hearing,
Speaker 7: and the actions that we've seen so far are that
Speaker 7: they really believe in the tariffs. They're going big on them,
Speaker 7: unlikely for them to reverse in a big way, and
Speaker 7: they don't seem to have much concern about the market
Speaker 7: or near term pain. I mean Trump has said this
Speaker 7: over and over again over the past couple of weeks.
Speaker 6: So it talk to us about the inflation.
Speaker 5: Well, I don't know, like you know when I'm going
Speaker 5: back and forth with Eric right now saying I want
Speaker 5: to get an economist on who really believes and it
Speaker 5: can articulate that Trump policy, because that is there's the
Speaker 5: story is you know, okay, near term pain for some
Speaker 5: longer term again, and that's great.
Speaker 6: I just want to see how it's going to play out.
Speaker 2: Here, brilliantly said Instep, The heart of the matter is
Speaker 2: we've run out of capacity to do growthiness because of
Speaker 2: our debt and deficit. That's the fundamental difference from eighty
Speaker 2: years ago.
Speaker 10: Right, Yeah, we're not able to do tax cuts from
Speaker 10: degrees of freedom exactly.
Speaker 7: I mean Trump was able to do massive tax cuts
Speaker 7: the last time. So the setup is very different. They're
Speaker 7: not good, They're just trying to extend them which is
Speaker 7: costs four trillion dollars to do, just just to prevent
Speaker 7: a large tax increase on the consumer.
Speaker 2: Remember the exam where you had degrees of freedom and
Speaker 2: Kai squared on the same exam. You did it all
Speaker 2: later and finishing vodka right like titos, Stephanie, that was brilliant.
Speaker 2: Thank you so much. Don't be a changing Stephanie Roth
Speaker 2: driving the market lower here with Wolf Research right now.
Speaker 2: We thank her for that.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: This guy is Frankly, who Doug Ford should talk to
Speaker 2: in Ontario. He is expert on trucks. Paul, why don't
Speaker 2: you bring in our esteemed guests.
Speaker 5: Absolutely, but there's all this talk about trade tariffson, the
Speaker 5: impact on growth and the uncertainty being injected into the
Speaker 5: e comm One of the areas we're likely to see
Speaker 5: it initially will be in just the supply chain. I'm
Speaker 5: thinking about the ships coming over from Asia. I'm thinking
Speaker 5: about the railroads, the trucks, the air freight. What are
Speaker 5: those folks saying, Well, we've got somebody who's an expert
Speaker 5: in all that kind of stuff. Lee Clascal, Senior Transport
Speaker 5: analysts for Bloomberg Intelligence Joints, is here in our Bloomberg
Speaker 5: and Director Brokers studio. Lee, what are you hearing from
Speaker 5: some of your transportation companies as they think about how
Speaker 5: this economy may unfold for the remainder of the year.
Speaker 11: It's really about uncertainty unfortunately. I mean, after the election,
Speaker 11: I think the animal spirits will woke it up. People
Speaker 11: thought that the economy was going to be humming along,
Speaker 11: lower taxes, less regulations. Obviously that's good for the economy,
Speaker 11: good for freight. Fast forward to today, it's Tarris Tarris, Tarris,
Speaker 11: tarrifs on tarras offs, you know, and people don't know
Speaker 11: how to plan and that's really difficult. And we're not
Speaker 11: even talking about you know, like your last guests mentioned
Speaker 11: the inflationary impact on the economy and the consumer, and
Speaker 11: the consumer really appears to be buckling, which really is
Speaker 11: not good for freight to man. And it's kind of
Speaker 11: giving us some concern about the outlook because in the
Speaker 11: beginning of the year. We're pretty optimistic that truckload rates
Speaker 11: could increase by mid single digits.
Speaker 2: You're expert at this, we're not. Paul and I are clueless.
Speaker 2: Tucker's even worse. Okay, we are. Our idea far west
Speaker 2: is the border of Pennsylvania New Jersey. Right, let's go
Speaker 2: to I forty two North Carolina, Goldsboro to Kinston to
Speaker 2: Newbern and then down on south from there. There are
Speaker 2: these manufacturing corridors, and your World Trucks makes them go.
Speaker 2: What do the tariffs mean to the I forty two
Speaker 2: manufacturing corridor in North Carolina?
Speaker 11: Well, interesting enough. Like you know, there is a long
Speaker 11: secular trend of bringing more manufacturing back to the United States,
Speaker 11: and that's obviously a good thing, but it takes time.
Speaker 11: So just because tariffs go on doesn't mean there's going
Speaker 11: to be a light switch and manufacturing is going to start,
Speaker 11: and that's going to just increase demand for trucking. So
Speaker 11: what you're going to have really is not so much
Speaker 11: the industrial sector. The industrial sector is going to be
Speaker 11: impacted because of lack of demand, and we're seeing that
Speaker 11: in flatbed rates. So flatbed rates are usually tied to
Speaker 11: the industrial economy, and they've been pretty weak uh recently.
Speaker 5: So that's what I was I was going to go
Speaker 5: to because in your world, probably the shortest duration stuff
Speaker 5: is trucking rates, right as opposed to long term freight
Speaker 5: type negotiations. So in that spot market, are you seeing
Speaker 5: that yet?
Speaker 6: Are you seeing kind of?
Speaker 11: So spot rates are up, like excluding fuel search charges
Speaker 11: a year of year by like two or three percent,
Speaker 11: So yeah, but you know they're still they've been coming
Speaker 11: down recently and and that is has to do with
Speaker 11: some seasonal weakness, but it's also I think has to
Speaker 11: do with what's going on in the overall economy.
Speaker 2: So I'm Mountain Ariel Tuna, Pennsylvania where there's that big.
Speaker 6: It's like great in there, and.
Speaker 2: There's like two trucks and I'm going to get sandwiched.
Speaker 2: You know, are those trucks profitable now? Are?
Speaker 11: It depends who's running them. So if it's an owner
Speaker 11: operator they got into the business during the pandemic when
Speaker 11: rates were five or six dollars a mile, those people
Speaker 11: aren't making money because they've bought a very expensive truck
Speaker 11: and now rates are two dollars a mile, and that
Speaker 11: is obviously impacts your operating costs. A lot of those
Speaker 11: kind of truckers have been on life support in part
Speaker 11: because of the stimulus that was available to them from
Speaker 11: the government during the pandemic and the savings that they
Speaker 11: were able to create during those boom times. And so
Speaker 11: we're seeing that capacity slowly leave the market. You know,
Speaker 11: the Nights of the world and the JV Hunts of
Speaker 11: the world. Yes, they're making money.
Speaker 5: What are the big the maritime shippers, the global you
Speaker 5: know shippers that you talk to, are they expecting that
Speaker 5: these tariffs are going to be on on for a
Speaker 5: long period of time and in fact will impact global shipping.
Speaker 11: I was at a major Transpacific conference last week. It's
Speaker 11: TPM every it's held every week and every year in
Speaker 11: Long Beach, and I got to speak to a lot
Speaker 11: of shippers and really they don't know.
Speaker 3: Wow.
Speaker 11: And that's what that's the problem. No one knows because
Speaker 11: you know, in the morning there's a tariff, and then
Speaker 11: the afternoon it's there's no tariff.
Speaker 2: If your journey I saw across the nation in your
Speaker 2: morning career, Lee Clasgow, where this is absolutely definitive for
Speaker 2: Bloomberg Intelligence and all this infrastructure stuff led by trucking.
Speaker 2: I think it was I'm going to say Prudential or
Speaker 2: Biche or both, I can't remember. It would publish and
Speaker 2: I would just look at it and just stop, and
Speaker 2: you'd read every word of Classgo. This is a few
Speaker 2: years ago, folks. What would you say to Doug Ford
Speaker 2: of Toronto, Ontario, the leader of Ontario. He holds the
Speaker 2: electrical switch for I think three states? Do they have powered?
Speaker 2: When you when you look forget about you Carne and
Speaker 2: the election and all that, when you look at the
Speaker 2: provinces what are they called? The states? The provinces, the
Speaker 2: provinces of Canada, Do they have a lot of strings.
Speaker 4: So much this morning?
Speaker 11: Yes, in relation to the President Trump and tariffs, that's
Speaker 11: that's that's way above my pay grade. I have no
Speaker 11: idea about that. I mean, obviously, you know, if you're
Speaker 11: if you're willing to charge a lot more for electricity,
Speaker 11: it's going to annoy a lot of your voters. So
Speaker 11: I think they do have some power.
Speaker 5: Warren Buffet owns a railroad, he does, and his railroad
Speaker 5: is really predicated upon that trade from Canada through the
Speaker 5: US down in New Mexico.
Speaker 6: What are we hearing from that company.
Speaker 11: Burlington Northern Santa Fe. They are more exposed to the
Speaker 11: Transpacific trade, so they're big with stuff coming into the
Speaker 11: Port of La and Long Beach bringing that stuff across
Speaker 11: the country. Also, they're obviously big in coal an ag.
Speaker 11: You know, the rails have been doing okay. We've seen
Speaker 11: some volume growth of low single digits.
Speaker 6: Which is which is good.
Speaker 11: The railroads, whether it's you know, Bien or the other
Speaker 11: class ones, they have pricing power still, so that's good.
Speaker 6: The one that's most exposed to the.
Speaker 11: Tower noise is really Canadian Pacific, Kansas City, that's the one.
Speaker 11: They have a network that spans Canada into Mexico. It's
Speaker 11: an incredible network. They have a lot of growth opportunities
Speaker 11: relative to their peers. But that's really going to depend
Speaker 11: on tariffs. And you know, I personally think that tariffs
Speaker 11: will be more transitory. I think I said that in
Speaker 11: that inflation a couple of years ago. But yeah, so
Speaker 11: don't quote me on that, but you know, it just
Speaker 11: feels like they're not going.
Speaker 6: To be here forever.
Speaker 11: It's more or of a negotiating tactic that is to
Speaker 11: create noise and havoc within the supply chain.
Speaker 2: So Canadian National with that wonderful acquisition down the Mississippi River. Yeah,
Speaker 2: it's a big t folks, it's across Canada and it's
Speaker 2: down the Mississippi River. How are they affected by tariffs?
Speaker 2: And for you is not. I don't want to buy hotel,
Speaker 2: but there is there an opportunity there.
Speaker 11: Well, you know, whether it's CP or CN, you know,
Speaker 11: they are exposed to cross border business. I would say
Speaker 11: roughly thirty percent percent of their businesses cross border. So
Speaker 11: you know, it has a big impact on where trade goes.
Speaker 11: You know, obviously if we're if if we're if Canada
Speaker 11: is importing less Jack Daniels, Uh, and we're and we're
Speaker 11: we're importing less maple syrup, then that's going to impact
Speaker 11: freight flows.
Speaker 3: You know.
Speaker 10: The thing that.
Speaker 11: Concerns me the most, uh, from from my coverage is
Speaker 11: is the forest products. You know, those tariffs on on
Speaker 11: forest products are not are really going to impact the
Speaker 11: cost of housing. And if houses are more expensive, less
Speaker 11: people are going to be able to afford them. That
Speaker 11: means they're going to be building less.
Speaker 6: That means they're going to be less freight.
Speaker 11: So this is really you know, obviously, I know you
Speaker 11: guys know this. But tariffs are taxes. They're there and
Speaker 11: somebody has to pay for it, and eventually it's the
Speaker 11: consumer and that's going to eat up on what they.
Speaker 2: Set for John Tucker, sheet of plywood in home depot
Speaker 2: is going to cost more.
Speaker 6: Probably. See there you go ce d X, I don't know.
Speaker 2: I only use c d X if I pick up
Speaker 2: a hammer, people run, that's what I do.
Speaker 12: Do you want to do? Trucking terms, Bob have all
Speaker 12: these questions, reefer, bobtail, deadhead. Yeah, all the trucking terms.
Speaker 11: Refer a refrigerated truck so that will haul produce or
Speaker 11: maybe even pharmaceuticals and sometimes even electronics. It doesn't have
Speaker 11: to be cold, it just needs to be a certain temperature,
Speaker 11: so you know, So that's reefer. It's also I guess
Speaker 11: you can.
Speaker 6: Well we know, yeah, and then deadhead. You know that
Speaker 6: has a good segue.
Speaker 12: Refer to deadhead what an empty truck?
Speaker 11: I guess right, yeah, yes, the deadhead. The dead head
Speaker 11: is how the distance that a truck travels without freight.
Speaker 12: And then a bobtail is are you done?
Speaker 2: No?
Speaker 12: This is what we go on forever. Bobtail is without
Speaker 12: a trailer, just a cab itself.
Speaker 2: Okay, there you go. Thank you. That's the most important,
Speaker 2: so much.
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