1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordert. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,720 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,760 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:38,320 Speaker 2: Terminal and the Bloomberg Business app. President Donald Trump signing 10 00:00:38,320 --> 00:00:41,440 Speaker 2: an executive order putting his trade deal with Japan into place. 11 00:00:41,479 --> 00:00:44,280 Speaker 2: The agreement will apply a baseline fifteen percent off on 12 00:00:44,320 --> 00:00:48,080 Speaker 2: nearly all Japanese imports entering the US, including automobiles. The 13 00:00:48,159 --> 00:00:50,600 Speaker 2: government of Japan has also agreed to invest five hundred 14 00:00:50,640 --> 00:00:53,000 Speaker 2: and fifty billion dollars in the United States. 15 00:00:53,200 --> 00:00:53,640 Speaker 3: Joining us. 16 00:00:53,680 --> 00:00:56,000 Speaker 2: Now, I'm very pleased to say, is the United States 17 00:00:56,000 --> 00:01:00,000 Speaker 2: Secretary of Commas, Howard Lutner. Mister Secretary, Welcome to the programs. 18 00:01:00,400 --> 00:01:02,160 Speaker 2: I know you wanted to talk about Japan, so let's 19 00:01:02,160 --> 00:01:04,080 Speaker 2: do that. I want you to share with us the 20 00:01:04,160 --> 00:01:07,440 Speaker 2: terms of this five hundred and fifty billion dollar investment fund, 21 00:01:07,560 --> 00:01:10,160 Speaker 2: a collpitarive course of the negotiations that you've been helping 22 00:01:10,160 --> 00:01:12,640 Speaker 2: to lead with the Japanese. Can you share with us 23 00:01:12,640 --> 00:01:13,800 Speaker 2: the details this morning, sir. 24 00:01:15,560 --> 00:01:15,840 Speaker 4: Sure. 25 00:01:15,880 --> 00:01:19,199 Speaker 5: So this is a completely different kind of trade deal 26 00:01:19,240 --> 00:01:22,840 Speaker 5: that anyone's ever seen before. So the idea is, the 27 00:01:22,959 --> 00:01:27,840 Speaker 5: Japanese government will give five hundred and fifty billion dollars 28 00:01:28,080 --> 00:01:32,080 Speaker 5: to Donald Trump to invest as the United States and 29 00:01:32,120 --> 00:01:36,200 Speaker 5: Donald Trump sees fit in America. So the Japanese will 30 00:01:36,240 --> 00:01:39,919 Speaker 5: get back their money and ninety percent of the profits 31 00:01:40,360 --> 00:01:44,160 Speaker 5: will go to the American citizens, the American taxpayer. So 32 00:01:44,240 --> 00:01:47,880 Speaker 5: Donald Trump, I'll give you an example. We buy all 33 00:01:47,960 --> 00:01:52,720 Speaker 5: of our antibiotics, generic antibiotics in China. So Donald Trump 34 00:01:52,800 --> 00:01:57,200 Speaker 5: can say, let's go build generic pharmaceuticals in America. Let's 35 00:01:57,200 --> 00:02:01,040 Speaker 5: build those antibiotics in America. The Japanese will fund it, 36 00:02:01,440 --> 00:02:04,960 Speaker 5: and then we will have generic antibiotics in America, will 37 00:02:05,000 --> 00:02:08,240 Speaker 5: no longer be reliant on China. So it's in his 38 00:02:08,360 --> 00:02:13,519 Speaker 5: hands to invest. This is not ordinary foreign companies investing. 39 00:02:13,600 --> 00:02:17,440 Speaker 5: This is not Mitsubishi building a plant in America. This 40 00:02:17,520 --> 00:02:20,920 Speaker 5: is five hundred and fifty billion dollars by the Japanese 41 00:02:20,960 --> 00:02:24,239 Speaker 5: government put in the hands of Donald Trump that he 42 00:02:24,280 --> 00:02:27,560 Speaker 5: can then invest in America. It's amazing. I mean, it's 43 00:02:27,600 --> 00:02:30,120 Speaker 5: the thing I am most proud of it. It's the 44 00:02:30,160 --> 00:02:32,200 Speaker 5: most proud of ever been on a business deal I've 45 00:02:32,200 --> 00:02:32,560 Speaker 5: ever done. 46 00:02:32,639 --> 00:02:35,160 Speaker 2: So it sounds amazing. Do the Japanese think it's amazing? 47 00:02:35,280 --> 00:02:36,840 Speaker 2: And have they codified this agreement? 48 00:02:38,720 --> 00:02:41,120 Speaker 5: They have so yesterday it was all signed. So the 49 00:02:41,160 --> 00:02:45,520 Speaker 5: President signed the EO, I signed the MoU with Minister 50 00:02:45,919 --> 00:02:50,960 Speaker 5: A Kazawa in the Commerce Department. This is signed, it 51 00:02:51,000 --> 00:02:54,960 Speaker 5: is written. So what happens is Donald Trump can select 52 00:02:55,360 --> 00:02:58,200 Speaker 5: the project that he wants. We put a capital call 53 00:02:58,240 --> 00:03:01,480 Speaker 5: into the Japanese, they send in the money, and we 54 00:03:01,560 --> 00:03:03,960 Speaker 5: build the project in America. So if you think about this, 55 00:03:04,520 --> 00:03:08,000 Speaker 5: five hundred and fifty billion dollars invested during Donald Trump's 56 00:03:08,080 --> 00:03:12,200 Speaker 5: term is a half a point of GDP given to 57 00:03:12,320 --> 00:03:16,560 Speaker 5: the United States of America's president by the Japanese government. 58 00:03:16,840 --> 00:03:18,680 Speaker 4: I mean, this is amazing. 59 00:03:18,800 --> 00:03:23,000 Speaker 5: In order to have a fifteen percent tariff and so 60 00:03:23,040 --> 00:03:25,519 Speaker 5: they can keep making their cars in Japan. 61 00:03:25,639 --> 00:03:27,960 Speaker 2: Let's just down the details, mister secretary. So the timeline 62 00:03:28,000 --> 00:03:30,320 Speaker 2: you talked about the rest of the president's term, is 63 00:03:30,360 --> 00:03:33,240 Speaker 2: the reclear timeline here, and what's the enforcement mechanism to 64 00:03:33,240 --> 00:03:34,120 Speaker 2: make sure it happens. 65 00:03:36,240 --> 00:03:37,160 Speaker 4: Well, two things. 66 00:03:37,240 --> 00:03:41,320 Speaker 5: Number One, they've committed that they will meet the Capitol call. 67 00:03:41,440 --> 00:03:44,320 Speaker 5: So when we're building a project, they will fund the 68 00:03:44,360 --> 00:03:49,840 Speaker 5: project's building during the term this investment lasts through, meaning 69 00:03:49,880 --> 00:03:52,840 Speaker 5: they will put out the money through the rest of 70 00:03:52,880 --> 00:03:57,080 Speaker 5: Donald Trump's term. So January twenty twenty nine, and let's 71 00:03:57,080 --> 00:03:59,680 Speaker 5: say halfway through and they've invested two hundred and fifty 72 00:03:59,720 --> 00:04:01,920 Speaker 5: billion dollars, they stop. 73 00:04:02,200 --> 00:04:03,880 Speaker 4: Saying, I don't want to send you any more money. 74 00:04:04,120 --> 00:04:07,000 Speaker 4: The tariffs pack, you know, pop right back up. 75 00:04:07,080 --> 00:04:12,560 Speaker 5: And they no longer receive the cash flow from these projects. 76 00:04:12,800 --> 00:04:15,640 Speaker 5: They would all just stay with the United States of America. 77 00:04:15,720 --> 00:04:18,480 Speaker 5: So there is just no way they're going to not 78 00:04:18,880 --> 00:04:22,440 Speaker 5: fund these projects. And Donald Trump is going to deliver 79 00:04:23,160 --> 00:04:24,200 Speaker 5: to the American people. 80 00:04:24,240 --> 00:04:26,240 Speaker 4: And this deal is really it's. 81 00:04:26,279 --> 00:04:28,880 Speaker 5: If you think about it, five hundred and fifty billion 82 00:04:28,920 --> 00:04:33,279 Speaker 5: dollars of Japanese government's money in order to buy down 83 00:04:33,360 --> 00:04:37,680 Speaker 5: their tariff in Donald Trump's hands for his availability to 84 00:04:37,880 --> 00:04:43,040 Speaker 5: invest and build in America. Alaska pipeline scale fifty billion, 85 00:04:43,080 --> 00:04:44,080 Speaker 5: one hundred billion. 86 00:04:44,360 --> 00:04:45,480 Speaker 4: Donald Trump wants. 87 00:04:45,279 --> 00:04:50,040 Speaker 5: To unleash the Alaska pipelines. The Japanese will finance it, 88 00:04:50,160 --> 00:04:51,440 Speaker 5: and it's great for America. 89 00:04:51,920 --> 00:04:52,800 Speaker 4: It's fantastic. 90 00:04:52,960 --> 00:04:54,839 Speaker 2: It's the Secretary to appreciate. We've got a number of 91 00:04:54,839 --> 00:04:56,599 Speaker 2: topics to get through with you in a short amount 92 00:04:56,600 --> 00:04:57,800 Speaker 2: of time, so I wanted to turn to one of 93 00:04:57,800 --> 00:05:00,320 Speaker 2: the issues in India. This came from the present this 94 00:05:00,360 --> 00:05:03,239 Speaker 2: morning on social media. It looks like we've lost India 95 00:05:03,400 --> 00:05:07,080 Speaker 2: and Russia for that matter, to deepest darkest China. May 96 00:05:07,120 --> 00:05:10,839 Speaker 2: they have a long and prosperous future together. This relationship 97 00:05:10,920 --> 00:05:13,200 Speaker 2: between the US and India has clearly soured. 98 00:05:13,279 --> 00:05:13,440 Speaker 5: You. 99 00:05:13,440 --> 00:05:15,640 Speaker 2: Your South said earlier this year that India rubbed the 100 00:05:15,760 --> 00:05:19,840 Speaker 2: US the wrong way. There's an understandable tension that continues 101 00:05:19,880 --> 00:05:22,720 Speaker 2: to build. But they're not the only ones buying Russian energy. 102 00:05:22,960 --> 00:05:25,200 Speaker 2: The Chinese are buying Russian energy, and for that matter, 103 00:05:25,279 --> 00:05:27,480 Speaker 2: the Europeans too. And I think there's a sense from 104 00:05:27,480 --> 00:05:30,080 Speaker 2: the Indian side, mister Secretary, that they feel singled out, 105 00:05:30,120 --> 00:05:33,719 Speaker 2: perhaps unfairly. What's your comment, your message for them this morning? 106 00:05:35,800 --> 00:05:42,279 Speaker 5: Well, remember before the Russian conflict, the Indians bought less 107 00:05:42,320 --> 00:05:47,480 Speaker 5: than two percent of their oil from Russia. Less than 108 00:05:47,480 --> 00:05:51,920 Speaker 5: two percent and now they're buying forty percent. 109 00:05:52,040 --> 00:05:53,280 Speaker 4: Of their oil from Russia. 110 00:05:53,320 --> 00:05:57,640 Speaker 5: What they're doing is because the oil is sanctioned, it's 111 00:05:57,800 --> 00:06:01,000 Speaker 5: really really cheap because the Russia trying to find people 112 00:06:01,040 --> 00:06:04,159 Speaker 5: to buy it, and so the Indians have just decided, ah, 113 00:06:04,240 --> 00:06:07,000 Speaker 5: the heck with it, let's buy cheap and make a 114 00:06:07,040 --> 00:06:07,840 Speaker 5: ton of money. 115 00:06:08,120 --> 00:06:11,960 Speaker 4: But you know what, that is just plain wrong. 116 00:06:12,600 --> 00:06:17,000 Speaker 5: It's ridiculous, and they either need to decide which side they. 117 00:06:16,920 --> 00:06:19,480 Speaker 4: Want to be on. You know what's funny is I 118 00:06:19,600 --> 00:06:21,200 Speaker 4: remember the Chinese. 119 00:06:20,880 --> 00:06:24,400 Speaker 5: Sell the Chinese, Well, we're always willing to talk. The 120 00:06:24,520 --> 00:06:28,440 Speaker 5: Chinese sell to us, the Indians sell to us. They're 121 00:06:28,440 --> 00:06:30,040 Speaker 5: not going to be able to sell to each other. 122 00:06:30,600 --> 00:06:34,200 Speaker 5: We are the consumer of the world. People have to 123 00:06:34,200 --> 00:06:39,040 Speaker 5: remember it's our thirty trillion dollar economy that is the 124 00:06:39,080 --> 00:06:42,240 Speaker 5: consumer of the world. So eventually they all have to 125 00:06:42,279 --> 00:06:46,080 Speaker 5: come back to the customer, because we all know eventually 126 00:06:46,160 --> 00:06:47,880 Speaker 5: the customer is always right. 127 00:06:48,200 --> 00:06:50,919 Speaker 1: When you are talking with India, mister Secretary, I know 128 00:06:50,920 --> 00:06:53,640 Speaker 1: a lot of companies in the US have shifted manufacturing 129 00:06:53,680 --> 00:06:56,440 Speaker 1: to India from China's there's a real interest in this 130 00:06:57,040 --> 00:07:00,400 Speaker 1: in terms of their costs. How much do you feel 131 00:07:00,440 --> 00:07:02,440 Speaker 1: like you've lost leverage as a result of the court 132 00:07:02,520 --> 00:07:05,240 Speaker 1: case that came out fairly recently. 133 00:07:07,080 --> 00:07:11,840 Speaker 5: We haven't lost any thing with respect to the court case. 134 00:07:11,960 --> 00:07:12,720 Speaker 4: If you look at the. 135 00:07:12,720 --> 00:07:16,400 Speaker 5: Descent right, it was seven to four. Read the descent cheat. 136 00:07:16,440 --> 00:07:20,040 Speaker 5: The current Chief Justice sided with President Trump, the former 137 00:07:20,120 --> 00:07:24,720 Speaker 5: Chief Justice sided with President Trump, and the incoming Chief 138 00:07:24,880 --> 00:07:28,400 Speaker 5: Justice sided with President Trump. And the smartest guy on 139 00:07:28,440 --> 00:07:31,280 Speaker 5: the bench, which is well known who the smartest guy. 140 00:07:31,200 --> 00:07:33,240 Speaker 4: On the bench is, he sided with Donald Trump. 141 00:07:33,280 --> 00:07:35,560 Speaker 5: So I think you are going to see the Supreme 142 00:07:35,600 --> 00:07:38,440 Speaker 5: Court side with Donald Trump. And I don't think we've 143 00:07:38,480 --> 00:07:42,560 Speaker 5: lost leverage. What we've lost is that India doesn't yet 144 00:07:42,640 --> 00:07:47,000 Speaker 5: want to open their market. Stop buying Russian oil, right, 145 00:07:47,280 --> 00:07:50,640 Speaker 5: and stop being a part of bricks right. They're the 146 00:07:50,760 --> 00:07:54,240 Speaker 5: vowel between Russia and China. If that's who you want 147 00:07:54,240 --> 00:07:57,679 Speaker 5: to be, go be it. But either support the dollar, 148 00:07:58,040 --> 00:08:01,960 Speaker 5: support the United States of America, support your biggest client, 149 00:08:02,720 --> 00:08:05,760 Speaker 5: who was the American consumer, or I guess you're going 150 00:08:05,840 --> 00:08:08,120 Speaker 5: to be a fifty percent tariff and let's see how 151 00:08:08,120 --> 00:08:09,040 Speaker 5: long this lasts. 152 00:08:09,080 --> 00:08:10,840 Speaker 1: It seems like there's been a hardening of the line, 153 00:08:10,880 --> 00:08:14,000 Speaker 1: both with President Trump as well as Mody, and a 154 00:08:14,080 --> 00:08:16,559 Speaker 1: sense that there isn't really a coming together. In fact, 155 00:08:16,840 --> 00:08:20,720 Speaker 1: that meeting with Jujenpang and Vladimir Putin and FRIM Minister 156 00:08:20,800 --> 00:08:24,080 Speaker 1: Mody seemed to indicate a coalescing of the bricks. 157 00:08:24,360 --> 00:08:25,760 Speaker 3: Do you see anywhere in. 158 00:08:25,720 --> 00:08:28,240 Speaker 1: The next month two months any type of deal or 159 00:08:28,280 --> 00:08:34,960 Speaker 1: backing down to a lower rate with India. 160 00:08:32,920 --> 00:08:33,600 Speaker 4: I would expect. 161 00:08:33,800 --> 00:08:37,480 Speaker 5: You saw it in Canada, right the Carney got elected 162 00:08:37,480 --> 00:08:41,720 Speaker 5: with this term elbows up, meaning let's fight with America. 163 00:08:41,760 --> 00:08:45,520 Speaker 5: They put on retaliatory tariffs. They were all bravado, and 164 00:08:45,600 --> 00:08:50,760 Speaker 5: what happened? Their GDP negative one point six percent, unemployment 165 00:08:50,960 --> 00:08:54,280 Speaker 5: rocketing towards eight percent, and what did Carney just do? 166 00:08:54,679 --> 00:08:59,400 Speaker 5: He just finally finally dropped his retaliatory tariffs. So I 167 00:08:59,400 --> 00:09:02,760 Speaker 5: think what happens is it's all bravado because you think 168 00:09:02,800 --> 00:09:05,600 Speaker 5: it feels good to fight with the biggest client in 169 00:09:05,640 --> 00:09:09,240 Speaker 5: the world. But eventually your businesses are going to say, 170 00:09:09,559 --> 00:09:11,600 Speaker 5: you've got to stop this and go make your deal 171 00:09:11,679 --> 00:09:14,240 Speaker 5: with America. So I think, yes, in a month or 172 00:09:14,280 --> 00:09:16,320 Speaker 5: two months, I think India is going to be at 173 00:09:16,320 --> 00:09:18,880 Speaker 5: the table and they're going to say they're sorry, and 174 00:09:18,920 --> 00:09:20,960 Speaker 5: they're going to try to make a deal with Donald Trump. 175 00:09:21,200 --> 00:09:23,440 Speaker 5: And it will be on Donald Trump's desk how he 176 00:09:23,480 --> 00:09:26,600 Speaker 5: wants to deal with Mody and we leave that to him. 177 00:09:26,600 --> 00:09:27,960 Speaker 4: That's why he's the president. 178 00:09:27,800 --> 00:09:29,880 Speaker 2: Speaking of making a deal. I understand the Swiss are 179 00:09:29,880 --> 00:09:32,640 Speaker 2: in town, just tearing that the Swiss Vice president has 180 00:09:32,679 --> 00:09:34,560 Speaker 2: turned up in the Nat of Stice again. Is there 181 00:09:34,559 --> 00:09:37,240 Speaker 2: a meeting on the agenda to today going into the weekend. 182 00:09:39,160 --> 00:09:42,520 Speaker 5: Yes, so I'm going to meet with the Swiss delegation. 183 00:09:42,960 --> 00:09:45,880 Speaker 5: They're coming in to make a new proposal, and the 184 00:09:45,920 --> 00:09:47,440 Speaker 5: Trump administration is. 185 00:09:47,440 --> 00:09:48,680 Speaker 4: Always willing to listen. 186 00:09:49,040 --> 00:09:51,480 Speaker 5: But you have to remember, you know, the Swiss like 187 00:09:51,559 --> 00:09:54,480 Speaker 5: to say they're a small country of only nine million people, 188 00:09:54,720 --> 00:09:56,400 Speaker 5: a small rich country. 189 00:09:56,559 --> 00:09:58,040 Speaker 4: And how do they become so rich? 190 00:09:58,520 --> 00:10:01,640 Speaker 5: They sell us pharmacuit articles like it's going out of style, 191 00:10:01,679 --> 00:10:04,840 Speaker 5: all right. They make so much money off of America. 192 00:10:05,360 --> 00:10:07,880 Speaker 5: That's why they're rich. So let's hear what they have 193 00:10:07,960 --> 00:10:10,560 Speaker 5: to say. We'll discuss it with the president. You know, 194 00:10:10,679 --> 00:10:14,080 Speaker 5: I'm not optimistic, but I'm always willing to listen, and 195 00:10:14,120 --> 00:10:15,280 Speaker 5: Donald Trump is always. 196 00:10:15,040 --> 00:10:18,520 Speaker 2: Why are you not optimistic? Traditionally there's been a decent relationship. 197 00:10:18,559 --> 00:10:21,440 Speaker 2: Then the president's first term relied on the Swiss a 198 00:10:21,440 --> 00:10:23,560 Speaker 2: lot when it came to foreign policy and developments in 199 00:10:23,600 --> 00:10:26,120 Speaker 2: places like Iran. What's happened this time? 200 00:10:27,960 --> 00:10:28,800 Speaker 4: Well, if you. 201 00:10:29,120 --> 00:10:33,559 Speaker 5: Just consider trade, right, you know, the European Union, right, 202 00:10:33,640 --> 00:10:37,440 Speaker 5: they open their market four hundred and fifty million people, 203 00:10:37,880 --> 00:10:41,320 Speaker 5: twenty trillion dollar economy, and they say, well, take our 204 00:10:41,400 --> 00:10:45,680 Speaker 5: tariffs down to zero. You the American exporters can sell 205 00:10:45,800 --> 00:10:47,000 Speaker 5: us everything. 206 00:10:47,160 --> 00:10:48,839 Speaker 4: I mean, how fantastic is that? 207 00:10:49,160 --> 00:10:51,960 Speaker 5: And they say we'll pay you fifteen percent and you 208 00:10:52,120 --> 00:10:55,960 Speaker 5: pay us nothing. I mean, that is really really attractive. 209 00:10:56,000 --> 00:10:59,679 Speaker 5: Now you go to Switzerland, nine million people. I mean, 210 00:11:00,040 --> 00:11:03,240 Speaker 5: they're going to offer the American exporter as compared to 211 00:11:03,840 --> 00:11:07,680 Speaker 5: the size and scale by which they export and earn 212 00:11:07,760 --> 00:11:10,600 Speaker 5: money off of us. So the idea is we need 213 00:11:10,760 --> 00:11:14,160 Speaker 5: balanced in fair trade. And that's a difficult thing. Now 214 00:11:14,200 --> 00:11:18,000 Speaker 5: you saw the Japanese. They decided to take a completely 215 00:11:18,120 --> 00:11:21,720 Speaker 5: different path, and what they said is we will give 216 00:11:22,120 --> 00:11:25,760 Speaker 5: Donald Trump the power to invest five hundred and fifty 217 00:11:25,920 --> 00:11:30,280 Speaker 5: billion dollars as he at his direction, for the benefit 218 00:11:30,320 --> 00:11:31,040 Speaker 5: of America. 219 00:11:31,400 --> 00:11:32,960 Speaker 4: Now that's a different way of thinking. 220 00:11:33,000 --> 00:11:35,000 Speaker 5: Now, if the Swiss come out of the box with 221 00:11:35,120 --> 00:11:37,920 Speaker 5: a whole new way of thinking, I'm open minded. But 222 00:11:37,960 --> 00:11:41,400 Speaker 5: if they just say our rich companies are going to 223 00:11:41,520 --> 00:11:44,640 Speaker 5: buy more of America. I mean, that's what Donald Trump 224 00:11:44,679 --> 00:11:48,640 Speaker 5: is complaining about. You realized in nineteen eighty five, we 225 00:11:49,000 --> 00:11:51,679 Speaker 5: America owned more of the rest of the world. We 226 00:11:51,720 --> 00:11:54,040 Speaker 5: owned one hundred and just about one hundred and fifty 227 00:11:54,080 --> 00:11:55,920 Speaker 5: billion of the rest of the world. And you know, 228 00:11:55,960 --> 00:11:58,760 Speaker 5: in twenty twenty five, when Donald Trump takes office, the 229 00:11:58,800 --> 00:12:00,079 Speaker 5: rest of the world owns. 230 00:12:00,160 --> 00:12:03,400 Speaker 4: Twenty six trillion more. 231 00:12:03,240 --> 00:12:05,400 Speaker 5: Of us because they just use all the money they 232 00:12:05,400 --> 00:12:08,079 Speaker 5: make off of us to buy us, and sooner or 233 00:12:08,120 --> 00:12:10,600 Speaker 5: later they're just going to own us. And Donald Trump 234 00:12:10,600 --> 00:12:13,480 Speaker 5: has said enough of this, We are going to own 235 00:12:13,520 --> 00:12:14,960 Speaker 5: ourselves going forward. 236 00:12:15,040 --> 00:12:17,400 Speaker 2: Mister Secretary, I know you're your own boss on your 237 00:12:17,440 --> 00:12:19,199 Speaker 2: own time, but your team is telling us we've got 238 00:12:19,200 --> 00:12:20,920 Speaker 2: to go shortly, so I'm gonna squeeze out a few 239 00:12:20,920 --> 00:12:23,400 Speaker 2: more minutes if I can. At a thirty Eastern time. 240 00:12:23,400 --> 00:12:25,400 Speaker 2: We're meant to get a job's number. This is what 241 00:12:25,440 --> 00:12:27,760 Speaker 2: we heard from the BLS just moments ago that the 242 00:12:27,840 --> 00:12:31,280 Speaker 2: Bureau of Labor Statistics says it's experiencing a technical problem 243 00:12:31,559 --> 00:12:35,800 Speaker 2: and data retrieval tools are currently not available on the website. Sir, 244 00:12:36,080 --> 00:12:38,280 Speaker 2: are we going to see a number in ten minutes time. 245 00:12:39,880 --> 00:12:41,120 Speaker 5: I don't know if we're gonna see the number, but 246 00:12:41,200 --> 00:12:43,400 Speaker 5: I tell you it makes it crystal clear. You should 247 00:12:43,400 --> 00:12:45,800 Speaker 5: have fired the person who was running that group right. 248 00:12:45,840 --> 00:12:48,240 Speaker 5: Because it didn't fire them two weeks ago, you sure 249 00:12:48,280 --> 00:12:50,839 Speaker 5: at heck would be firing them today. So they need 250 00:12:50,920 --> 00:12:53,679 Speaker 5: new leadership in BLS, that's for sure. 251 00:12:53,800 --> 00:12:56,600 Speaker 4: They need new tech and BLS, that's for sure. 252 00:12:56,840 --> 00:13:00,520 Speaker 5: And Donald Trump needs to rely upon the numbers. America 253 00:13:00,600 --> 00:13:03,120 Speaker 5: needs to rely upon the numbers. You can't have these 254 00:13:03,200 --> 00:13:07,280 Speaker 5: bent former administration people who have a view and who 255 00:13:07,320 --> 00:13:11,160 Speaker 5: want to harm the president. We need accurate numbers coming 256 00:13:11,160 --> 00:13:14,720 Speaker 5: from BLS and finally we'll have new leadership. 257 00:13:14,280 --> 00:13:14,840 Speaker 4: To deliver it. 258 00:13:14,960 --> 00:13:17,400 Speaker 1: Mister secretary, you're also going to promise new resources for 259 00:13:17,440 --> 00:13:20,400 Speaker 1: them to increase their collection and increase some of their 260 00:13:20,440 --> 00:13:23,320 Speaker 1: staff to go out and make this data accurate. 261 00:13:25,400 --> 00:13:25,600 Speaker 4: Yeah. 262 00:13:25,640 --> 00:13:28,600 Speaker 5: Can you imagine they had people calling around. I mean, 263 00:13:28,679 --> 00:13:33,920 Speaker 5: come on, computers, computers, Wow, it's twenty twenty five and 264 00:13:33,960 --> 00:13:39,960 Speaker 5: a half. Computers, new resources, new technology, wildly better information. 265 00:13:40,400 --> 00:13:43,720 Speaker 5: That's what America demands. That's what Donald Trump's going to 266 00:13:43,720 --> 00:13:46,120 Speaker 5: give them. And you just need to change leadership every 267 00:13:46,160 --> 00:13:48,360 Speaker 5: once in a while and make sure we get it right. 268 00:13:48,480 --> 00:13:52,240 Speaker 5: I'm excited about what's coming. Of course, you fire the person, 269 00:13:52,320 --> 00:13:54,680 Speaker 5: what do you learn? You learn that their technology is 270 00:13:54,840 --> 00:13:55,880 Speaker 5: just voet. 271 00:13:56,520 --> 00:13:58,160 Speaker 4: But we'll fix it. We'll fix it. 272 00:13:59,280 --> 00:14:02,800 Speaker 2: Stay with us. More Bloomberg surveillance coming up after this. 273 00:14:11,960 --> 00:14:14,520 Speaker 2: Payrolls report did drop on time four minutes ago twenty 274 00:14:14,559 --> 00:14:18,320 Speaker 2: two thousand downside surprise seventy five was the estimate. You're 275 00:14:18,320 --> 00:14:21,000 Speaker 2: looking at a three month average now for payrolls of 276 00:14:21,120 --> 00:14:24,480 Speaker 2: just twenty nine thousand captured in the bond market, with 277 00:14:24,520 --> 00:14:26,560 Speaker 2: lower yields in the FX market, with a week of 278 00:14:26,640 --> 00:14:30,480 Speaker 2: dollar inequities, equities still positive on the session by a 279 00:14:30,560 --> 00:14:32,800 Speaker 2: quarter of one percent on the S and P five hundred, 280 00:14:33,040 --> 00:14:36,240 Speaker 2: the NASNAK sell up nicely by zero point seven. The russell, 281 00:14:36,600 --> 00:14:39,960 Speaker 2: after a seven percent surge in August, up again this morning. 282 00:14:40,080 --> 00:14:42,960 Speaker 1: This idea that this could lead to a reignition of 283 00:14:43,000 --> 00:14:44,960 Speaker 1: the cycle, and it goes back to the question that 284 00:14:45,000 --> 00:14:47,520 Speaker 1: you asked yesterday. Is this a FED that will be 285 00:14:47,520 --> 00:14:51,320 Speaker 1: cutting into something of a reacceleration or that will cut 286 00:14:51,360 --> 00:14:54,280 Speaker 1: and spur that reacceleration. Right now, the market, based on 287 00:14:54,320 --> 00:14:56,800 Speaker 1: the market activity, seems to think that raycut could be 288 00:14:56,880 --> 00:15:00,440 Speaker 1: very helpful. In allowing the reignition of cycle. 289 00:15:00,480 --> 00:15:02,480 Speaker 2: We've got a fantastic lineup for the next twenty five 290 00:15:02,520 --> 00:15:04,360 Speaker 2: minutes or so. We can kick it off with Stephanie 291 00:15:04,440 --> 00:15:07,320 Speaker 2: Roth of Wolf Research. Stephanie Gimonic. No morning, you've had 292 00:15:07,360 --> 00:15:09,120 Speaker 2: five minutes to go over this, so what's your first take? 293 00:15:09,440 --> 00:15:13,640 Speaker 6: First take is another week summer employment report. Immigration seems 294 00:15:13,680 --> 00:15:15,680 Speaker 6: to be having another impact on the data. When you 295 00:15:15,680 --> 00:15:18,360 Speaker 6: look at the household survey, the foreign worm population was 296 00:15:18,400 --> 00:15:22,040 Speaker 6: again sort of the weaker part of it. Looking ahead, 297 00:15:22,080 --> 00:15:24,880 Speaker 6: we expect that you'll have one more piece of negative news. 298 00:15:24,880 --> 00:15:28,280 Speaker 6: So September ninth, once we get the annual preliminary benchmark revisions, 299 00:15:28,440 --> 00:15:30,360 Speaker 6: that's going to be revised down to the tune of 300 00:15:30,360 --> 00:15:32,480 Speaker 6: something like six hundred thousand. That's going to be another 301 00:15:32,520 --> 00:15:35,000 Speaker 6: really bad negative headline. Then beyond that, we think that 302 00:15:35,960 --> 00:15:38,120 Speaker 6: the signs will look a little bit better. So we 303 00:15:38,160 --> 00:15:39,920 Speaker 6: have another couple of weeks of this. It should be 304 00:15:40,240 --> 00:15:43,360 Speaker 6: a dubbsh September FMC, And then beyond that we think 305 00:15:43,400 --> 00:15:44,920 Speaker 6: that the tides could turn up a little bit, and 306 00:15:44,960 --> 00:15:47,760 Speaker 6: then you'll start to see the economy start to pick 307 00:15:47,840 --> 00:15:50,400 Speaker 6: up cyclically. You'll have a bit of a trough and 308 00:15:50,440 --> 00:15:51,800 Speaker 6: then the dynamics could look. 309 00:15:51,720 --> 00:15:52,200 Speaker 3: A bit different. 310 00:15:52,240 --> 00:15:54,400 Speaker 2: The first thing you went to, though, was population growth. 311 00:15:54,760 --> 00:15:56,920 Speaker 2: Do you think there's still a big supply side story 312 00:15:56,920 --> 00:15:59,000 Speaker 2: that's under appreciated in these numbers. 313 00:15:59,160 --> 00:16:01,600 Speaker 6: Yes, I do. I think that's a large part of 314 00:16:01,640 --> 00:16:03,560 Speaker 6: what's going on. Of course, it's hard to sort of 315 00:16:03,600 --> 00:16:05,120 Speaker 6: decipher months a month, but if you look at the 316 00:16:05,160 --> 00:16:08,240 Speaker 6: household survey, foreign born employment was down three hundred and 317 00:16:08,240 --> 00:16:10,560 Speaker 6: forty two thousand, when native born was up four hundred 318 00:16:10,560 --> 00:16:14,840 Speaker 6: and fifty one thousand. The label force participation rate for 319 00:16:14,840 --> 00:16:18,080 Speaker 6: foreign born take down again, So it does look like 320 00:16:18,440 --> 00:16:21,520 Speaker 6: you're seeing some continued weakness out. 321 00:16:21,360 --> 00:16:21,880 Speaker 3: Of the immigration. 322 00:16:22,000 --> 00:16:24,760 Speaker 6: That's helps explain why PARA growth was negative. In June, 323 00:16:24,800 --> 00:16:27,800 Speaker 6: we had five hundred thousand people from the HNV program 324 00:16:27,840 --> 00:16:30,160 Speaker 6: whose visas got expired overnight from May to June. 325 00:16:30,400 --> 00:16:33,000 Speaker 1: If that's the case, why aren't we seeing faster wage growth? 326 00:16:33,120 --> 00:16:36,120 Speaker 1: Why are we seeing the underemployment rate going up? Why 327 00:16:36,160 --> 00:16:38,600 Speaker 1: are we seeing the average number of hours worked in 328 00:16:38,600 --> 00:16:41,600 Speaker 1: a week kind of stay stagnant or even go down. Right, 329 00:16:41,600 --> 00:16:43,720 Speaker 1: These are the sides of weakness that people look at 330 00:16:44,040 --> 00:16:46,320 Speaker 1: on the corners and say, wait a second, there is 331 00:16:46,360 --> 00:16:49,240 Speaker 1: something here that speaks to the demand side as much 332 00:16:49,280 --> 00:16:51,480 Speaker 1: as there is this also supply side story. 333 00:16:51,600 --> 00:16:56,000 Speaker 6: Yeah, I mean the wages were fine zo point three percent, 334 00:16:56,000 --> 00:16:58,200 Speaker 6: which is an okay number, not a number that you 335 00:16:58,200 --> 00:17:00,680 Speaker 6: would expect if the belid market is really falling apart. 336 00:17:01,040 --> 00:17:03,200 Speaker 6: So what we're seeing is a combination of supplying demand. 337 00:17:03,240 --> 00:17:05,400 Speaker 6: It's certainly not just a supply side story. The band 338 00:17:05,480 --> 00:17:07,439 Speaker 6: is also softened, but when you look at for the 339 00:17:07,480 --> 00:17:10,000 Speaker 6: months ahead, that demand should start to pick up as 340 00:17:10,040 --> 00:17:12,040 Speaker 6: the tarif uncertainty starts to fade. So we had a 341 00:17:12,080 --> 00:17:15,200 Speaker 6: lot of things, largely policy driven, that hit the economy 342 00:17:15,240 --> 00:17:17,640 Speaker 6: over the summer that should go the other way later 343 00:17:17,720 --> 00:17:19,919 Speaker 6: this year. But right now it's a combination of a 344 00:17:19,960 --> 00:17:23,080 Speaker 6: supply side shock and also some significant hits to the 345 00:17:23,080 --> 00:17:23,800 Speaker 6: demand side as well. 346 00:17:23,880 --> 00:17:28,480 Speaker 2: Mam McKay standing by Mike, you've got some moll Yeah. 347 00:17:28,560 --> 00:17:31,360 Speaker 7: John, to the issue you're just talking about now, I'm 348 00:17:31,359 --> 00:17:34,240 Speaker 7: not sure it holds a lot of water. Because the 349 00:17:34,280 --> 00:17:37,560 Speaker 7: civilian labor force grew by four hundred and thirty six 350 00:17:37,640 --> 00:17:40,840 Speaker 7: thousand during the month, which is the biggest since April, 351 00:17:41,160 --> 00:17:44,080 Speaker 7: and April was when the month that we saw the 352 00:17:44,200 --> 00:17:48,480 Speaker 7: market the labor data start to weaken. The participation rate 353 00:17:48,600 --> 00:17:52,120 Speaker 7: actually ticked up, and at this point it doesn't look 354 00:17:52,200 --> 00:17:53,920 Speaker 7: like immigration played a big role. 355 00:17:54,000 --> 00:17:55,280 Speaker 3: I have to mention here. 356 00:17:55,160 --> 00:17:58,400 Speaker 7: That the BLS cautions on its website and in its 357 00:17:58,640 --> 00:18:02,960 Speaker 7: literature not to use the foreign board native born population 358 00:18:03,080 --> 00:18:06,359 Speaker 7: statistics to just tell you what happened this month, because 359 00:18:06,359 --> 00:18:10,399 Speaker 7: there are statistical reasons that they don't. It's complicated. I 360 00:18:10,400 --> 00:18:12,000 Speaker 7: won't go into it on the air, but I'm not 361 00:18:12,040 --> 00:18:14,880 Speaker 7: sure that gives us a whole lot of information. It's 362 00:18:14,920 --> 00:18:19,439 Speaker 7: been a talking point used by administrations from both parties, 363 00:18:19,480 --> 00:18:21,879 Speaker 7: but I'm not sure that that makes a lot of difference. 364 00:18:21,880 --> 00:18:24,640 Speaker 7: The biggest thing that we saw in the numbers here 365 00:18:24,720 --> 00:18:29,080 Speaker 7: quickly is that leisure and hospitality, and also education and 366 00:18:29,160 --> 00:18:32,240 Speaker 7: health are the only two categories that really show any 367 00:18:32,280 --> 00:18:35,919 Speaker 7: growth at all. Education and health about forty six thousand, 368 00:18:36,000 --> 00:18:40,080 Speaker 7: leisure hospitality twenty eight thousand. There are an awful lot 369 00:18:40,160 --> 00:18:42,320 Speaker 7: of categories that lost jobs. 370 00:18:42,000 --> 00:18:42,800 Speaker 3: During the month. 371 00:18:43,080 --> 00:18:45,760 Speaker 7: I will point out that construction jobs were down by 372 00:18:45,760 --> 00:18:48,840 Speaker 7: seven thousand, ADP had them up by sixteen thousand. And 373 00:18:48,880 --> 00:18:52,080 Speaker 7: in that strange comment the President made last night about 374 00:18:52,119 --> 00:18:56,199 Speaker 7: the payroll report, which suggested he already knew what the 375 00:18:56,240 --> 00:18:58,840 Speaker 7: numbers were He said, it's all construction now, but it 376 00:18:58,840 --> 00:18:59,560 Speaker 7: doesn't seem. 377 00:18:59,320 --> 00:18:59,880 Speaker 3: To be construction. 378 00:19:00,440 --> 00:19:03,119 Speaker 2: Mike McKay with Elysis might thank you, Stephanie. You were 379 00:19:03,119 --> 00:19:05,359 Speaker 2: following that explanation. Please I want to give you some 380 00:19:05,400 --> 00:19:06,040 Speaker 2: time to respond. 381 00:19:06,280 --> 00:19:08,000 Speaker 3: Yeah, so, I mean, I think it's fair. 382 00:19:08,040 --> 00:19:09,720 Speaker 6: The data are certainly volid a month a month, but 383 00:19:09,720 --> 00:19:12,920 Speaker 6: if you look at the foreign born statistics out of 384 00:19:12,960 --> 00:19:16,080 Speaker 6: the household survey, it's been fairly weak for the past 385 00:19:16,080 --> 00:19:18,720 Speaker 6: couple of months. So it to the extent that, of 386 00:19:18,760 --> 00:19:20,600 Speaker 6: course it's not a perfect picture, but we do know 387 00:19:20,840 --> 00:19:24,480 Speaker 6: that there's significant crackdown from an immigration perspective that is 388 00:19:24,560 --> 00:19:27,520 Speaker 6: likely having some impact. Although it's very difficult to get 389 00:19:27,560 --> 00:19:29,520 Speaker 6: a clean read out of the data. You saw the 390 00:19:29,520 --> 00:19:32,080 Speaker 6: foreign born employment fall threeinge of forty two thousand in 391 00:19:32,119 --> 00:19:35,560 Speaker 6: August four and sixteen in July. It's hard to say 392 00:19:35,560 --> 00:19:37,720 Speaker 6: that there's no impact from an immigration perspective. Of course, 393 00:19:37,760 --> 00:19:40,159 Speaker 6: it's difficult to get the exact precise numbers out of 394 00:19:40,160 --> 00:19:42,479 Speaker 6: the household survey because it is notoriously validile as might 395 00:19:42,560 --> 00:19:44,200 Speaker 6: just mention, yeah, but it's hard to say that there's 396 00:19:44,200 --> 00:19:45,840 Speaker 6: no impact from immigrate Getting a range. 397 00:19:45,640 --> 00:19:48,720 Speaker 2: Of responses already this morning. This from nil Data of Renmak. 398 00:19:48,800 --> 00:19:51,760 Speaker 2: The Hawks have lost on their own terms. Employment growth 399 00:19:51,800 --> 00:19:54,919 Speaker 2: is still calling and the unemployment rate is rising. 400 00:19:55,200 --> 00:19:57,199 Speaker 1: You have right now one hundred percent chance of a 401 00:19:57,280 --> 00:20:00,760 Speaker 1: rate cut baked in for later this month. So it 402 00:20:00,800 --> 00:20:04,199 Speaker 1: seems like they are agreeing with his assessment and that 403 00:20:04,359 --> 00:20:07,160 Speaker 1: on their own terms this would warrant a rate cut. 404 00:20:07,359 --> 00:20:09,719 Speaker 1: Key question to me is what is the depth of 405 00:20:09,760 --> 00:20:11,760 Speaker 1: the weakness. And I keep going to, yes, the bond 406 00:20:11,800 --> 00:20:14,600 Speaker 1: market response, but that's actually less interesting to me than 407 00:20:14,640 --> 00:20:16,879 Speaker 1: the stock market response to the fact that there is 408 00:20:16,880 --> 00:20:20,680 Speaker 1: this belief that this is not great, but it's not 409 00:20:20,760 --> 00:20:23,760 Speaker 1: so bad that our curtails the cyclical tilt that we've seen, 410 00:20:23,840 --> 00:20:26,080 Speaker 1: and that to me is really the big question. 411 00:20:26,240 --> 00:20:28,439 Speaker 2: Let's turn to Jeff Rosenberg on that he joined us 412 00:20:28,440 --> 00:20:30,760 Speaker 2: from Blackrock. Jeff, welcome to the program, Sir. What do 413 00:20:30,840 --> 00:20:34,000 Speaker 2: we always say the first move isn't always the right move, 414 00:20:34,040 --> 00:20:35,880 Speaker 2: and let's see if this sticks. But the first move 415 00:20:35,920 --> 00:20:37,560 Speaker 2: is stocks higher. What's your take? 416 00:20:38,880 --> 00:20:41,280 Speaker 8: Yeah, the first move is stocks higher, and this is 417 00:20:41,400 --> 00:20:45,439 Speaker 8: bad news. Is good news for the stock market, because 418 00:20:45,480 --> 00:20:47,960 Speaker 8: the Fed's going to ride to the rescue and cut 419 00:20:48,040 --> 00:20:50,240 Speaker 8: rates and the economy is not going to fall off 420 00:20:50,240 --> 00:20:53,880 Speaker 8: a cliff. Financial conditions will help that. It's a little 421 00:20:53,880 --> 00:20:56,680 Speaker 8: bit circular, but if the FED is going to underwrite 422 00:20:56,760 --> 00:21:01,080 Speaker 8: the risk rally, then financial conditions will hold up confidence 423 00:21:01,160 --> 00:21:03,000 Speaker 8: even if you're having a little bit of a slow 424 00:21:03,040 --> 00:21:04,399 Speaker 8: down here on the demand side. 425 00:21:04,440 --> 00:21:06,120 Speaker 3: So look, that's the initial read. 426 00:21:06,440 --> 00:21:10,240 Speaker 8: You know, Russell two thousand, nasdak out performance is really 427 00:21:10,320 --> 00:21:14,080 Speaker 8: quite notable. People piling into what has already been working. 428 00:21:14,440 --> 00:21:16,760 Speaker 3: Because the FED is going to be behind that. 429 00:21:16,840 --> 00:21:18,720 Speaker 8: And I think that, you know, on top of what 430 00:21:18,800 --> 00:21:21,320 Speaker 8: Stephanie and you all were just talking about. Yeah, it's 431 00:21:21,359 --> 00:21:24,560 Speaker 8: a weaker report, but it's a weaker report that solidifies 432 00:21:24,640 --> 00:21:27,080 Speaker 8: twenty five. But it's really about and I think is 433 00:21:27,119 --> 00:21:29,199 Speaker 8: where Lisa was about to go, you know, what's the 434 00:21:29,280 --> 00:21:32,080 Speaker 8: path from here? Does this put October on the table? 435 00:21:32,119 --> 00:21:34,399 Speaker 8: Does this put fifty on the table? But what it 436 00:21:34,440 --> 00:21:36,879 Speaker 8: really puts on the table is a FED that gets 437 00:21:36,920 --> 00:21:40,960 Speaker 8: back in motion for cutting rates. And if the economy 438 00:21:41,000 --> 00:21:43,760 Speaker 8: is not falling off a cliff, that's a pretty good. 439 00:21:43,560 --> 00:21:45,040 Speaker 3: Combination for risk assets. 440 00:21:45,040 --> 00:21:47,120 Speaker 8: And that's why you're seeing, at least in this initial reaction, 441 00:21:47,840 --> 00:21:48,840 Speaker 8: bad news is good news. 442 00:21:48,880 --> 00:21:51,159 Speaker 1: You said something really important there Jeff that this is 443 00:21:51,200 --> 00:21:54,600 Speaker 1: an indication that the FED is going to underwrite risk 444 00:21:54,720 --> 00:21:57,600 Speaker 1: assets at a time when there is enough weakness in 445 00:21:57,720 --> 00:22:01,399 Speaker 1: labor markets to justify that. We'll give you confidence that 446 00:22:01,480 --> 00:22:05,320 Speaker 1: the weakness that we're seeing is fixable or addressable by 447 00:22:05,359 --> 00:22:07,879 Speaker 1: a couple of rate cuts this year by the Federal Reserve. 448 00:22:09,560 --> 00:22:12,640 Speaker 8: Well, I wouldn't overstate that and say that it is. 449 00:22:12,880 --> 00:22:16,439 Speaker 8: But the confidence piece of that is really the primacy 450 00:22:16,480 --> 00:22:20,280 Speaker 8: of financial conditions. And so you know, while we're worried 451 00:22:20,280 --> 00:22:22,120 Speaker 8: about a lot of things, one of the things we're 452 00:22:22,119 --> 00:22:27,040 Speaker 8: not worried about is financial conditions, and they are exceptionally easy. 453 00:22:27,480 --> 00:22:30,080 Speaker 8: And this is what I've said on the program many times. 454 00:22:30,119 --> 00:22:34,040 Speaker 8: You know, we focus on the economy, and it's this 455 00:22:34,320 --> 00:22:37,239 Speaker 8: kind of debate, does the stock market worry about the 456 00:22:37,280 --> 00:22:41,760 Speaker 8: economy or does the economy worry about the stock market? 457 00:22:41,880 --> 00:22:44,560 Speaker 8: And I think it's more the latter, that it's about 458 00:22:44,560 --> 00:22:47,240 Speaker 8: financial conditions, and the stock market is less about the 459 00:22:47,280 --> 00:22:51,760 Speaker 8: economy and much more about AI and technology, and that 460 00:22:51,960 --> 00:22:55,119 Speaker 8: boost to wealth is supporting consumption and that's what drives 461 00:22:55,160 --> 00:22:57,919 Speaker 8: the economy much more than anything else. And so I 462 00:22:57,920 --> 00:23:02,879 Speaker 8: think that's what kind of eases the concern here around 463 00:23:03,200 --> 00:23:05,200 Speaker 8: the slowing in the in the jobs market that we're 464 00:23:05,200 --> 00:23:06,399 Speaker 8: seeing out of today's data. 465 00:23:06,480 --> 00:23:08,960 Speaker 1: If we've seen the hawks throw in their hawkish tilt 466 00:23:09,320 --> 00:23:12,119 Speaker 1: and become more dubbish on the fresher reserve and start 467 00:23:12,160 --> 00:23:15,840 Speaker 1: cutting rates, does data like this, Jeff, make you think 468 00:23:16,119 --> 00:23:19,360 Speaker 1: that maybe you have to price in steeper cuts over 469 00:23:19,359 --> 00:23:21,680 Speaker 1: the remainder of next year, especially with the changing of 470 00:23:21,720 --> 00:23:25,400 Speaker 1: the guard, that maybe this market is underappreciating the risk 471 00:23:25,800 --> 00:23:28,439 Speaker 1: of more significant easing. 472 00:23:29,960 --> 00:23:31,280 Speaker 3: Yeah, it's a really good question. 473 00:23:31,440 --> 00:23:34,280 Speaker 8: I think it's one that will turn our attention increasingly 474 00:23:34,600 --> 00:23:38,320 Speaker 8: towards which is okay to what end Waller, you know, 475 00:23:38,920 --> 00:23:41,560 Speaker 8: gave a little hint in that in his interview earlier 476 00:23:41,600 --> 00:23:43,639 Speaker 8: this week. One hundred to one hundred and fifty basis 477 00:23:43,640 --> 00:23:47,200 Speaker 8: points that seems to be what most consensus use around 478 00:23:47,280 --> 00:23:52,160 Speaker 8: Taylor rule implies. You know, so that amount is kind 479 00:23:52,200 --> 00:23:55,880 Speaker 8: of priced in. I think the uncertainty that you're alluding 480 00:23:55,920 --> 00:23:59,320 Speaker 8: to is, you know, will that be enough and you know, 481 00:23:59,440 --> 00:24:02,280 Speaker 8: d end up pricing in you know more than that, 482 00:24:02,960 --> 00:24:06,000 Speaker 8: you know right now, the kind of standard economic analysis, 483 00:24:06,040 --> 00:24:11,200 Speaker 8: the tailor rules are arguing for a path of cuts, 484 00:24:11,240 --> 00:24:15,760 Speaker 8: but it's a shallow path because policy is only moderately, 485 00:24:15,960 --> 00:24:20,359 Speaker 8: moderately restrictive. And yes, the delta and the change here 486 00:24:20,840 --> 00:24:24,480 Speaker 8: is to the downside, the deceleration on the demand side. 487 00:24:24,280 --> 00:24:26,760 Speaker 3: But its powerless. How highlighted. 488 00:24:26,760 --> 00:24:27,360 Speaker 4: Excuse me? 489 00:24:27,920 --> 00:24:30,959 Speaker 8: You know this is also still a labor market that is, 490 00:24:31,840 --> 00:24:36,720 Speaker 8: you know, not tremendously out of balance. These are small increases, 491 00:24:36,800 --> 00:24:39,119 Speaker 8: yes they're increases in the unemployment rate, but the supply 492 00:24:39,200 --> 00:24:41,919 Speaker 8: side and the demand side are both easing at the 493 00:24:41,960 --> 00:24:45,040 Speaker 8: same time. And you see it in the strength in 494 00:24:45,359 --> 00:24:49,200 Speaker 8: the wages, the persistent you know, one thing that didn't 495 00:24:49,400 --> 00:24:51,440 Speaker 8: happen here is a big slowdown in the work week. 496 00:24:51,720 --> 00:24:55,919 Speaker 3: Something will keep an eye on and and so that 497 00:24:55,960 --> 00:24:59,000 Speaker 3: will hold up. How deep does this path have to get. 498 00:24:59,040 --> 00:25:01,600 Speaker 2: It's quiet end of the curve, Jeff, Just to keep 499 00:25:01,600 --> 00:25:03,040 Speaker 2: you up to speed on things if you haven't got 500 00:25:03,080 --> 00:25:05,000 Speaker 2: the bloomberg in front of you. But down nine basis 501 00:25:05,000 --> 00:25:06,679 Speaker 2: points at the front end of the curve now trading 502 00:25:06,720 --> 00:25:09,640 Speaker 2: at three forty three forty nine, so into the three 503 00:25:09,760 --> 00:25:12,720 Speaker 2: forties now, which is something we haven't seen all year. 504 00:25:13,080 --> 00:25:15,119 Speaker 2: Tens are at about four point zero nine percent, so 505 00:25:15,119 --> 00:25:18,440 Speaker 2: we've broken down through four point one thirty's are way 506 00:25:18,440 --> 00:25:20,880 Speaker 2: off away from five percent of the moment. At about 507 00:25:20,920 --> 00:25:23,640 Speaker 2: four eighty one, we're down four basis points on the session. So, Jeff, 508 00:25:23,680 --> 00:25:25,639 Speaker 2: let's talk about the shape of the curve. There is 509 00:25:25,640 --> 00:25:28,760 Speaker 2: a fear had by some, not all, but some that 510 00:25:28,840 --> 00:25:31,280 Speaker 2: we'd see a repeat of last year, that we'd see 511 00:25:31,280 --> 00:25:32,919 Speaker 2: some week jobs day to the Fed would come out 512 00:25:32,960 --> 00:25:35,040 Speaker 2: of the gates aggressively and what you'd see is the 513 00:25:35,040 --> 00:25:37,800 Speaker 2: frontend come down, with the long end would actually sell off, 514 00:25:38,040 --> 00:25:40,640 Speaker 2: years would rise, and maybe we'd get the same kind 515 00:25:40,640 --> 00:25:41,920 Speaker 2: of move that we saw last year. 516 00:25:42,080 --> 00:25:43,639 Speaker 3: Jeff, do you see things lining. 517 00:25:43,440 --> 00:25:45,679 Speaker 2: Up for a repeat of twenty four or is this 518 00:25:45,720 --> 00:25:46,560 Speaker 2: different this time? 519 00:25:48,440 --> 00:25:50,080 Speaker 3: Well, it's certainly different this time. 520 00:25:50,240 --> 00:25:54,359 Speaker 8: And you know, the day's focus is on the labor 521 00:25:54,440 --> 00:25:58,399 Speaker 8: markets and it's a premiere data point for the growth 522 00:25:58,480 --> 00:26:01,640 Speaker 8: side of the equation. But next week other data will 523 00:26:01,680 --> 00:26:03,880 Speaker 8: come out and we'll focus again on the other side, 524 00:26:03,920 --> 00:26:05,760 Speaker 8: which is the inflationary side. 525 00:26:05,880 --> 00:26:08,880 Speaker 3: And so this is really the tension that you see. 526 00:26:08,720 --> 00:26:11,800 Speaker 8: Within the curve that if the FED is cutting and 527 00:26:11,880 --> 00:26:14,880 Speaker 8: they're telling us, and Powell was pretty clear coming out 528 00:26:14,920 --> 00:26:18,960 Speaker 8: of Jackson Hole, there's a primacy of within the dual mandate, 529 00:26:19,200 --> 00:26:22,880 Speaker 8: the growth side, the maximum employment side of that mandate, 530 00:26:23,240 --> 00:26:25,320 Speaker 8: but it's happening at a time, and this is where 531 00:26:25,320 --> 00:26:27,000 Speaker 8: the hawks have you know, kind of been you know, 532 00:26:27,119 --> 00:26:29,600 Speaker 8: squawking a little bit that, hey, you know, the inflation 533 00:26:29,680 --> 00:26:33,040 Speaker 8: piece hasn't really been solved and the uncertainty of the 534 00:26:33,080 --> 00:26:36,000 Speaker 8: pass through of tariff inflation is still in front of us. 535 00:26:36,840 --> 00:26:39,520 Speaker 8: Plus all the other things that go into the back 536 00:26:39,600 --> 00:26:43,120 Speaker 8: end of the curve, the demands supply, the fiscal the deficits. 537 00:26:45,080 --> 00:26:47,919 Speaker 8: It raises the potential here and you're seeing it in 538 00:26:47,960 --> 00:26:52,120 Speaker 8: the curve this morning that you just lag the declines 539 00:26:52,240 --> 00:26:54,760 Speaker 8: from what the Fed is doing in policy rates to 540 00:26:54,840 --> 00:26:56,639 Speaker 8: the back end of the curve. And that view is 541 00:26:56,680 --> 00:27:00,480 Speaker 8: you know, pretty consensus in terms of the expectations of deepening, 542 00:27:00,560 --> 00:27:02,320 Speaker 8: and we've had a lot of that put into the 543 00:27:02,359 --> 00:27:04,760 Speaker 8: curve already, so you know, that may get a little 544 00:27:04,760 --> 00:27:05,680 Speaker 8: bit tired. 545 00:27:05,359 --> 00:27:07,040 Speaker 3: And you've got some technical positioning. 546 00:27:07,080 --> 00:27:09,359 Speaker 8: Everybody's on the same side of the boat, so that 547 00:27:09,400 --> 00:27:12,960 Speaker 8: can have an unwind. But the fundamentals behind a steepening 548 00:27:13,040 --> 00:27:16,240 Speaker 8: curve outlook cutting interest rates in the face of still 549 00:27:16,280 --> 00:27:19,720 Speaker 8: sticky inflation on top of all the fiscal concerns, you know, 550 00:27:19,800 --> 00:27:22,800 Speaker 8: do argue that the pass through from policy in the 551 00:27:22,800 --> 00:27:25,679 Speaker 8: short end to the back end won't be as strong 552 00:27:25,840 --> 00:27:29,399 Speaker 8: as we would historically expect. Absent, you know, the big 553 00:27:29,440 --> 00:27:34,320 Speaker 8: shock of an economy that really discelerates and brings back 554 00:27:34,359 --> 00:27:37,159 Speaker 8: a specter of not inflation but deflation. That's how you 555 00:27:37,200 --> 00:27:40,280 Speaker 8: get the back end to really outperform. 556 00:27:40,520 --> 00:27:43,960 Speaker 2: Stay with us, multpleinpex. Savanna's coming up off to this. 557 00:27:53,280 --> 00:27:56,159 Speaker 2: Michael Nathansen of Muffett Nathansen has a by raising a 558 00:27:56,240 --> 00:27:58,960 Speaker 2: two thirty price talk on Alphabet Chas and writes the following, 559 00:27:59,119 --> 00:28:01,360 Speaker 2: this outcome is a home run for the status quo, 560 00:28:01,720 --> 00:28:04,880 Speaker 2: and the status quo has been very favorable to Google. 561 00:28:05,160 --> 00:28:07,720 Speaker 2: Michael joins us. Now for Michael, welks to the programs. 562 00:28:08,080 --> 00:28:10,720 Speaker 2: Just your reflections on what happened early this week, and 563 00:28:10,720 --> 00:28:13,240 Speaker 2: then we can get to whether the runsom competitors that 564 00:28:13,280 --> 00:28:14,920 Speaker 2: can really break up this status quote. 565 00:28:15,920 --> 00:28:21,040 Speaker 9: Yeah, good morning, Jonathan. That was the best outcome, obviously possible. 566 00:28:21,520 --> 00:28:25,679 Speaker 9: The market had been really fearful of what the courts 567 00:28:25,760 --> 00:28:28,520 Speaker 9: could have done here, and it could have hurt Apple 568 00:28:28,600 --> 00:28:32,640 Speaker 9: deeply and Alphabet deeply. And you look at this and say, 569 00:28:32,880 --> 00:28:36,720 Speaker 9: to your point, the court was smart to say change 570 00:28:36,800 --> 00:28:42,360 Speaker 9: is coming anyway, Why are we going to accelerate whatever's happening. 571 00:28:42,760 --> 00:28:46,719 Speaker 9: Let's let the markets decide the future of search. So 572 00:28:47,200 --> 00:28:50,680 Speaker 9: I was really pleased as a Google bull Alphabet bull, 573 00:28:51,040 --> 00:28:53,760 Speaker 9: but I thought it was a really smart decision by 574 00:28:53,920 --> 00:28:57,560 Speaker 9: the judge to step back and say, this is going 575 00:28:57,600 --> 00:28:59,120 Speaker 9: to change anyway. 576 00:28:59,360 --> 00:29:01,520 Speaker 3: Let's see where technology moves us. 577 00:29:01,600 --> 00:29:01,760 Speaker 4: Right. 578 00:29:02,160 --> 00:29:04,600 Speaker 2: So, Michael, how do you think it's going to change? 579 00:29:04,800 --> 00:29:06,840 Speaker 2: And why stay constructive on this name? 580 00:29:07,800 --> 00:29:08,840 Speaker 4: Okay, good question. 581 00:29:09,280 --> 00:29:11,640 Speaker 9: So what's going to happen is search as we know 582 00:29:11,680 --> 00:29:15,680 Speaker 9: it has changed already, right, Search is moving from links 583 00:29:15,920 --> 00:29:19,600 Speaker 9: to answers. Do you use open AI, Chat, Chipetia or 584 00:29:19,600 --> 00:29:22,760 Speaker 9: even the new AI mode at Google. You're seeing a 585 00:29:22,800 --> 00:29:27,840 Speaker 9: different type of search that is mostly happening in informational queries, 586 00:29:28,160 --> 00:29:31,400 Speaker 9: not commercial queries. Right, So our view is it's going 587 00:29:31,440 --> 00:29:34,240 Speaker 9: to take a long time for commercial queries. You'll find 588 00:29:34,280 --> 00:29:38,520 Speaker 9: me the best hotel in Boston, find me, you know, 589 00:29:38,760 --> 00:29:42,000 Speaker 9: a new dog food for my dog. Those searches are 590 00:29:42,040 --> 00:29:44,880 Speaker 9: still happening more traditionally, and I think what's going to 591 00:29:44,920 --> 00:29:49,440 Speaker 9: happen is as less queries, you know, basically, more queries 592 00:29:49,480 --> 00:29:52,320 Speaker 9: will stop at the you know, the head end of 593 00:29:52,680 --> 00:29:56,200 Speaker 9: an AI mode. The queries that remain questions that remain 594 00:29:56,240 --> 00:29:59,880 Speaker 9: will be more valuable the people who are selling answers. 595 00:30:00,240 --> 00:30:01,280 Speaker 4: Does that make sense to you, Johnathan? 596 00:30:01,400 --> 00:30:06,640 Speaker 9: So our view is that the price of the traffic 597 00:30:06,720 --> 00:30:09,720 Speaker 9: to people's websites will only go up because they'll be 598 00:30:09,800 --> 00:30:13,520 Speaker 9: less graphic one of people's websites as more answers are 599 00:30:13,840 --> 00:30:17,160 Speaker 9: headed off at people like an open ai or AI 600 00:30:17,280 --> 00:30:18,040 Speaker 9: mode at Google. 601 00:30:18,160 --> 00:30:21,480 Speaker 1: So it's consolidating all of the attention on a smaller 602 00:30:21,480 --> 00:30:24,880 Speaker 1: group of names. So it's a more valuable proposition. Do 603 00:30:24,920 --> 00:30:27,880 Speaker 1: you think that Google needs to really now ramp up 604 00:30:28,040 --> 00:30:31,120 Speaker 1: any type of open ai competitor, any kind of chatbot, 605 00:30:31,480 --> 00:30:34,840 Speaker 1: artificial intelligence induced search result in the next two to 606 00:30:34,920 --> 00:30:37,320 Speaker 1: three months. They have a time on them, a clock 607 00:30:37,360 --> 00:30:40,440 Speaker 1: on them to sort of show their metal in their 608 00:30:40,440 --> 00:30:41,720 Speaker 1: competition with open Ai. 609 00:30:42,600 --> 00:30:44,240 Speaker 9: So it's interesting. I would say to you if you 610 00:30:44,280 --> 00:30:46,840 Speaker 9: had me on two years ago, a year ago, I'd 611 00:30:46,840 --> 00:30:50,200 Speaker 9: be very nervous about their speed to market and their 612 00:30:50,200 --> 00:30:53,600 Speaker 9: ability to change. They've been changing the past couple months 613 00:30:53,600 --> 00:30:56,880 Speaker 9: pretty aggressively. They had an event called io back in May. 614 00:30:57,320 --> 00:30:59,120 Speaker 9: They launched a bunch of new products. If you look, 615 00:30:59,240 --> 00:31:01,920 Speaker 9: if you look at what's happening in real time at 616 00:31:02,080 --> 00:31:05,479 Speaker 9: you know, AI mode on Google Search, you're seeing tremendous change, 617 00:31:05,680 --> 00:31:10,200 Speaker 9: So I think the ramping is happening in the current timeframe. 618 00:31:10,880 --> 00:31:12,760 Speaker 9: I am less worried than I was a year ago 619 00:31:12,800 --> 00:31:16,080 Speaker 9: about their ability to change. I think they've realized our 620 00:31:16,200 --> 00:31:19,600 Speaker 9: job is to deliver consumer satisfaction. Our job is not 621 00:31:19,680 --> 00:31:21,960 Speaker 9: to hold onto business models that have been great to us. 622 00:31:22,200 --> 00:31:24,800 Speaker 9: We need to basically look at what consumers want and 623 00:31:24,840 --> 00:31:27,760 Speaker 9: give it to them. And if you dig into what 624 00:31:27,840 --> 00:31:31,360 Speaker 9: Google is now providing, it's really massively changed. So I 625 00:31:31,440 --> 00:31:33,760 Speaker 9: think you will see in the next six months or a 626 00:31:33,800 --> 00:31:37,160 Speaker 9: year even more change, and it's going to be multimodive. 627 00:31:37,240 --> 00:31:39,840 Speaker 9: You'll see change when it comes to video search and 628 00:31:39,960 --> 00:31:43,280 Speaker 9: you know, an image search. They're really moving quickly to 629 00:31:43,400 --> 00:31:45,920 Speaker 9: create you know, a three sixty view of search that's 630 00:31:45,960 --> 00:31:48,800 Speaker 9: just more than texts. So I'm pretty bullish on their 631 00:31:49,200 --> 00:31:51,600 Speaker 9: product roadmap and what we've seen so far. I think 632 00:31:51,600 --> 00:31:53,840 Speaker 9: that's the big change that the market has woken up 633 00:31:53,840 --> 00:31:55,440 Speaker 9: and said they're not dead. 634 00:31:55,760 --> 00:31:57,560 Speaker 4: They're not sleeping at you at the wheel. 635 00:31:58,040 --> 00:32:01,560 Speaker 9: They see the challenge from Catch and then taking it 636 00:32:01,640 --> 00:32:02,680 Speaker 9: on pretty aggressively. 637 00:32:02,880 --> 00:32:05,560 Speaker 1: You mentioned Apple and that they also benefited from that, 638 00:32:05,760 --> 00:32:07,600 Speaker 1: and I wonder a lot of people waking up to 639 00:32:07,600 --> 00:32:09,240 Speaker 1: the fact that Apple's not dead as well in the 640 00:32:09,280 --> 00:32:11,520 Speaker 1: past couple of days at least by virtue of their 641 00:32:11,520 --> 00:32:13,560 Speaker 1: share price. Were you comforted by the fact that Tim 642 00:32:13,600 --> 00:32:15,840 Speaker 1: Cook was at that meeting yesterday and it seemed like 643 00:32:15,880 --> 00:32:18,640 Speaker 1: the president seemed a lot more amenable to him, calling 644 00:32:18,680 --> 00:32:20,680 Speaker 1: out some of the investments and even giving him a 645 00:32:20,720 --> 00:32:22,440 Speaker 1: nod with their India presence. 646 00:32:23,200 --> 00:32:26,280 Speaker 9: Yeah, so, Craig, my partner Carver's Apple. We had to 647 00:32:26,360 --> 00:32:30,320 Speaker 9: sell on Apple heading into the court. You know the 648 00:32:30,400 --> 00:32:34,000 Speaker 9: court findings. We're really worried that they would lose twenty 649 00:32:34,040 --> 00:32:36,960 Speaker 9: billion plus of payments from Alphabet, which was pretty much 650 00:32:36,960 --> 00:32:41,680 Speaker 9: all profit. John Hint's point that the status quo remaining, 651 00:32:42,240 --> 00:32:44,760 Speaker 9: it is incredibly positive for Apple that they can work 652 00:32:44,800 --> 00:32:48,080 Speaker 9: with Google, maybe they build a new seri product that's 653 00:32:48,120 --> 00:32:51,400 Speaker 9: been rumored. They don't have to lose twenty billion plus 654 00:32:51,400 --> 00:32:54,400 Speaker 9: the payments. And then to your point on this administration, 655 00:32:54,840 --> 00:32:57,560 Speaker 9: the administration had been very, very positive and they could 656 00:32:57,560 --> 00:33:01,960 Speaker 9: have been a lot more aggressive pushing Apple to move 657 00:33:02,040 --> 00:33:04,720 Speaker 9: production to more expensive markets. So I think it's a 658 00:33:04,760 --> 00:33:06,800 Speaker 9: massive win win for Apple. Tomb Cook has played his 659 00:33:06,840 --> 00:33:09,800 Speaker 9: cards perfectly here and then he got the benefit of 660 00:33:09,840 --> 00:33:12,920 Speaker 9: Judge Meta allowing him to kind of maintain that relationship 661 00:33:12,960 --> 00:33:16,200 Speaker 9: with Alphabet. So you had in a matter of week 662 00:33:16,440 --> 00:33:21,920 Speaker 9: two stocks Google, Alphabet and Apple that were really underweighted 663 00:33:22,000 --> 00:33:24,760 Speaker 9: by a lot of investors come back to the forefront. 664 00:33:24,800 --> 00:33:26,800 Speaker 9: And that's why the market's been so strong. It's been 665 00:33:26,800 --> 00:33:27,800 Speaker 9: a great outcome for these guys. 666 00:33:27,880 --> 00:33:29,640 Speaker 2: Michael, just before you go, do you pay much attention 667 00:33:29,680 --> 00:33:31,600 Speaker 2: to seating plans and who gets to seat next to 668 00:33:31,600 --> 00:33:33,840 Speaker 2: the president? Do you read anything between the lines? 669 00:33:37,200 --> 00:33:37,720 Speaker 4: Probably? 670 00:33:37,800 --> 00:33:39,800 Speaker 9: I probably do, right, John, I did not see the 671 00:33:39,800 --> 00:33:42,720 Speaker 9: seating plans last night. I apologize too, bitch of Washing 672 00:33:42,840 --> 00:33:43,600 Speaker 9: two bite Washington. 673 00:33:43,600 --> 00:33:45,680 Speaker 1: Mark Zuckerberg was the first person next to him. 674 00:33:45,800 --> 00:33:48,280 Speaker 3: I'll give you that cheat sheet, thank you so much. 675 00:33:48,680 --> 00:33:51,960 Speaker 9: Well, look how much marks we're spending right now out 676 00:33:52,000 --> 00:33:55,920 Speaker 9: of nowhere and Capex right they've just massively ramped up 677 00:33:56,560 --> 00:33:58,920 Speaker 9: their investment in the US on data centers right in 678 00:33:58,960 --> 00:34:03,880 Speaker 9: Ohio and Louisiana. So he's spending spending is Dana White 679 00:34:03,880 --> 00:34:06,640 Speaker 9: on his board? Now he's done more than anyone. I 680 00:34:06,640 --> 00:34:08,640 Speaker 9: can think I can get back into the good races 681 00:34:08,680 --> 00:34:09,480 Speaker 9: of this administration. 682 00:34:10,400 --> 00:34:13,960 Speaker 2: This is the Bloomberg surveillance podcast, bringing you the best 683 00:34:13,960 --> 00:34:17,279 Speaker 2: in markets, economics, and geopolitics. You can watch the show 684 00:34:17,360 --> 00:34:20,319 Speaker 2: live on Bloomberg TV weekday mornings from six am to 685 00:34:20,440 --> 00:34:24,200 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 686 00:34:24,320 --> 00:34:26,560 Speaker 2: or anywhere else you listen, and as always, on the 687 00:34:26,560 --> 00:34:29,000 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.