WEBVTT - Equities Face Best Rally since 2023 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.560 --> 0:00:30.600 This is well timed and we could easily have him 0:00:30.600 --> 0:00:33.160 mine once a week. John Writing was definitive at bear 0:00:33.240 --> 0:00:38.720 Stearn's for writing brilliant international US economics with a trenchant 0:00:38.880 --> 0:00:43.279 view towards a world of higher interest rates. He has 0:00:43.520 --> 0:00:48.000 absolutely nailed this call of higher yields with Breen. We're 0:00:48.040 --> 0:00:50.760 thrilled that John Writing could join us this morning. John Writing, 0:00:50.840 --> 0:00:56.080 I see the thirty year inflation adjusted yield truly back 0:00:56.160 --> 0:01:00.000 up to near record highs. What does that signal to you? 0:01:01.880 --> 0:01:04.800 Well, it signals to me that the said is going 0:01:04.880 --> 0:01:08.520 to have to do more work than the last set 0:01:08.560 --> 0:01:11.520 of SEP's suggestion, which still had a rate cut in 0:01:11.560 --> 0:01:14.440 for twenty twenty six, which I just don't see happening. 0:01:15.760 --> 0:01:19.400 That neutral is knocked down at one point one percent 0:01:19.440 --> 0:01:24.600 in real terms, but it's significantly higher, and it you know, 0:01:25.240 --> 0:01:27.560 I mean not not to pick on any bad member, 0:01:27.560 --> 0:01:33.600 but bigal Fed President Polson's speech earlier this week, and 0:01:34.000 --> 0:01:37.000 she asserted at a couple of points speached, which is 0:01:37.160 --> 0:01:41.920 generally a good speech with policy. I think it was 0:01:42.080 --> 0:01:45.600 modestate restriction and restricted. There is no defense. It's an 0:01:45.680 --> 0:01:50.200 assertion that policy is restricted and the inflation data are 0:01:50.240 --> 0:01:55.040 going higher, which argues against Chair Palse. I think relatively 0:01:55.760 --> 0:01:59.160 famous expression now that they're no neutral by its works, Well, 0:01:59.200 --> 0:02:03.600 we're seeing iron so we wouldn't appear to be neutral, 0:02:04.920 --> 0:02:07.720 and the markets have a much higher real yield than 0:02:07.600 --> 0:02:11.440 the Fed asserting, and I think this is a good 0:02:11.560 --> 0:02:16.280 area for when Kevin comes in and take shobers FED 0:02:16.400 --> 0:02:19.720 chair to look at what is the point of guiding 0:02:19.880 --> 0:02:22.800 markets to a number that you have no idea? 0:02:22.919 --> 0:02:23.560 What right? 0:02:25.400 --> 0:02:26.639 So to me it's sickly high. 0:02:27.680 --> 0:02:31.440 High was your service to your Bank of England and 0:02:31.520 --> 0:02:34.320 your service and knowing that Arsenal would win with your 0:02:34.320 --> 0:02:37.480 service to the federal Reserve system as well. When you 0:02:37.520 --> 0:02:42.000 were back at Cambridge, the inflation had a wage spiral 0:02:42.120 --> 0:02:45.800 feel to it. Does this inflation feel like a redux 0:02:45.880 --> 0:02:47.480 of your years at Cambridge? 0:02:49.560 --> 0:02:52.239 Not at all, Not at all. Fact, I still have 0:02:52.360 --> 0:02:54.600 many of I have all of my books back then, 0:02:55.000 --> 0:02:57.919 and you're right that the one of the main policy 0:02:57.960 --> 0:03:03.440 tools that was tried very ineffectively in the UK tried 0:03:03.560 --> 0:03:07.160 somewhat in the US under President Nixon, but was wage controls, 0:03:08.400 --> 0:03:13.600 and they had no real influence other than to distort markets. 0:03:15.120 --> 0:03:18.320 This is very different. This is not a wage driven 0:03:19.480 --> 0:03:26.480 inflation event. Wages are lacking, and moreover, productivity is very strong. 0:03:26.919 --> 0:03:29.240 So what wage gains are seeing, much of those are 0:03:29.280 --> 0:03:33.200 being absorbed. So corporations in this inflation are experiencing wider 0:03:33.240 --> 0:03:37.080 profit margins and we're seeing part of that in the 0:03:37.120 --> 0:03:40.520 equity market. It's the strangest inflation, but it is not 0:03:40.680 --> 0:03:46.080 a wage cost puts a factor absolutely, Oil now a factor, absolutely, 0:03:46.080 --> 0:03:46.760 but not wages. 0:03:47.240 --> 0:03:50.760 I can't say enough, folks about how gen writing handles 0:03:50.880 --> 0:03:54.040 the ambiguous dynamics of all this. He's been doing it 0:03:54.080 --> 0:03:57.440 for decades. A timeless back with David Malpass and Genre 0:03:57.440 --> 0:04:01.240 writing a bare years ago. Got a treat for you today, 0:04:01.720 --> 0:04:03.200 Damian Sasaur. 0:04:03.000 --> 0:04:04.680 Well, John, I mean the leak reach of me can 0:04:04.760 --> 0:04:06.400 I mean, you know, we got to focus on what 0:04:06.440 --> 0:04:08.360 he'd be focused on, which is who is buying the paper? 0:04:08.400 --> 0:04:10.400 Here is who is buying us treasuries? In this market. 0:04:10.480 --> 0:04:13.280 I've seen China shed four hundred and twenty billion dollars 0:04:13.320 --> 0:04:15.760 of their US treasury exposure since twenty twenty. Talk to 0:04:15.840 --> 0:04:20.000 us about who is the incremental buyer of US treasuries 0:04:20.000 --> 0:04:20.560 in this market. 0:04:22.240 --> 0:04:25.080 Well, it's a very good question, because a few days 0:04:25.080 --> 0:04:28.440 ago we were set at the highest yield level since 0:04:28.520 --> 0:04:31.120 July two thousand and seven. I'm looking at a long bond. 0:04:32.320 --> 0:04:35.159 I think, you know, our yield is like five eight percent. 0:04:35.240 --> 0:04:36.599 We've had a rally since then. 0:04:38.200 --> 0:04:38.880 We don't know. 0:04:39.000 --> 0:04:43.279 It could just simply be shortcovering. It could be that 0:04:44.560 --> 0:04:48.719 there is interest from real money buyers because that kind 0:04:48.720 --> 0:04:52.520 of yield level ought to be attractive to companies with 0:04:52.680 --> 0:04:57.120 long duration liabilities like insurance companies, and perhaps that is 0:04:57.839 --> 0:05:01.599 pulled something in. But we're talking here about the ten 0:05:01.680 --> 0:05:06.320 basis point move amidst the sell off since September of 0:05:06.520 --> 0:05:11.880 twenty twenty four. Right, the net has been one hundred 0:05:12.080 --> 0:05:14.920 and twenty two basis points in the long bomb, but 0:05:15.040 --> 0:05:18.840 meanwhile the Fed has cut one hundred and seventy five 0:05:18.920 --> 0:05:21.520 basis points are the front end. So for me, the 0:05:21.600 --> 0:05:26.080 question isn't who's the marginal buyer? The question is where 0:05:26.080 --> 0:05:29.640 have the buyers been in total. As the FED has 0:05:29.680 --> 0:05:32.960 cut interest rates over the last year and a half, 0:05:33.360 --> 0:05:34.320 they haven't been there. 0:05:34.400 --> 0:05:35.920 Well, John, you rately point out that a lot of 0:05:35.960 --> 0:05:37.720 hikes are now pires. They're not just in the US, 0:05:37.760 --> 0:05:40.040 but the ECB, the BOE, the BOJA, you name it, 0:05:40.040 --> 0:05:42.480 certainly in emerging markets. Talk to us about the seventy 0:05:42.480 --> 0:05:44.920 five percent probability of a FED hike a twenty five 0:05:44.960 --> 0:05:47.200 bit pike now and the end of the year. Do 0:05:47.200 --> 0:05:49.360 you think that Sharewash delivers. 0:05:52.480 --> 0:05:55.880 It's going to depend on the data. I think that 0:05:56.760 --> 0:06:04.520 cabin is absolutely committed to price stability. I don't think 0:06:04.560 --> 0:06:13.320 he's going to simply deliver on rate cuts because that's 0:06:13.360 --> 0:06:18.360 what sixteen hundred Pennsylvania Avenue wants. I think that he's 0:06:18.400 --> 0:06:20.240 going to look at the data, and that's going to 0:06:20.279 --> 0:06:26.560 depend on the conflict. Because behind all of these financial 0:06:26.640 --> 0:06:32.680 moves that we are talking about here, those are real 0:06:32.680 --> 0:06:36.279 physical shortage of oils that continues. You're extremely useful function 0:06:36.720 --> 0:06:39.080 decanhold moves that I look at every day. That tracks 0:06:39.120 --> 0:06:42.440 will try to track tankers going through the golf basically 0:06:42.480 --> 0:06:45.360 not there, and that is one thing of the world's oil. 0:06:46.120 --> 0:06:49.240 Now we can substitute part of that. But there's still 0:06:49.240 --> 0:06:53.760 about thirteen percent of the world daily oil consumption is 0:06:53.800 --> 0:06:55.680 not being moved. Now we just go back to basic 0:06:55.720 --> 0:06:59.200 economics and the pricing lispice to give demand for crude 0:06:59.200 --> 0:07:02.720 oil or russy speaking, he can played on said research. 0:07:02.800 --> 0:07:05.760 You've got a ten times moving twice for a long 0:07:05.800 --> 0:07:10.760 time moving volume. So you know, tell me when a 0:07:10.920 --> 0:07:13.240 Middle East clears up, tell me when the straight up 0:07:13.240 --> 0:07:16.080 home moves is open. Probably when we've replenished the inventories, 0:07:16.120 --> 0:07:18.480 which leads at a rapid rate, and then we'll know. 0:07:18.840 --> 0:07:21.600 But right now I think we should be thinking more 0:07:21.640 --> 0:07:25.160 about a rate increase than a rate time. That's what 0:07:25.200 --> 0:07:25.880 I was talking about. 0:07:25.880 --> 0:07:29.160 Impultant speech got to run just a huge schedule this morning, 0:07:29.240 --> 0:07:31.240 John writing, Thank you, thank you, thank you. Can't wait 0:07:31.280 --> 0:07:33.800 to get you back in the studio again with Breen. 0:07:34.080 --> 0:07:38.720 John writing, Stay with us. More from Bloomberg Surveillance coming 0:07:38.800 --> 0:07:39.800 up after this. 0:07:47.040 --> 0:07:50.600 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:07:50.680 --> 0:07:53.880 weekday afternoons from seven to ten am Eastern Listen on 0:07:53.920 --> 0:07:57.600 Applecarplay and Android Otto with the Bloomberg Business app, or 0:07:57.760 --> 0:07:59.320 watch us live on YouTube. 0:07:59.440 --> 0:08:01.800 What a treat year on a Friday parachuting in after 0:08:01.880 --> 0:08:05.040 World Travels, dan Ives joins us are Dan, I'm supposed 0:08:05.040 --> 0:08:08.280 to talk about Apple and Nvidia. Forget about it. Here's 0:08:08.320 --> 0:08:12.000 the zeitgeist this morning, folks and Duckcash. Thank you for 0:08:12.040 --> 0:08:15.320 sending this on Trumany. Jeff Curri's out on the Twitter 0:08:15.640 --> 0:08:19.680 on this as well. Guess what tokens costs money? OMG, 0:08:20.080 --> 0:08:23.960 look at the cfo's bill for doing AI in your company, 0:08:24.120 --> 0:08:28.560 dan Ives. Deloitte wrote this up in January, like eighty pages. OMG, 0:08:28.680 --> 0:08:32.120 this is going to be expensive. You see Microsoft limiting 0:08:32.480 --> 0:08:35.640 use of cloud because it's too expensive. How is this 0:08:35.720 --> 0:08:37.480 going to play out? Dan Ives? 0:08:37.880 --> 0:08:41.640 I mean, look, it just speaks to we're still in 0:08:41.720 --> 0:08:45.520 the early stage. Agreed, there's more data centers being built. 0:08:45.559 --> 0:08:49.600 In active data centers, costs over time will come down, 0:08:50.160 --> 0:08:53.400 but right now in this arms raise, no company, whether 0:08:53.480 --> 0:08:59.000 it's large cap TAC, small cap international, could basically not 0:08:59.200 --> 0:09:02.160 go down this out because eventually what's going to happen 0:09:02.280 --> 0:09:05.920 is the cost and the monizition they'll flip flop over 0:09:05.960 --> 0:09:09.080 the next few years, and that's why companies are spending 0:09:09.080 --> 0:09:09.520 at this peace. 0:09:09.640 --> 0:09:11.880 I agree on that, but on a macro basis in 0:09:11.920 --> 0:09:15.040 your world famous on this Does that mean we see 0:09:15.080 --> 0:09:18.920 a consolidation within the industry? And is that in the 0:09:19.040 --> 0:09:21.559 second inning? Year? Is a Red Sox try to get 0:09:21.559 --> 0:09:23.800 to fourth of July? Or is it in the eighth 0:09:23.880 --> 0:09:25.679 inning and the Yankees are ready to lose to the 0:09:25.720 --> 0:09:29.440 Blue Jays again? Which is it? It's second and third inning? 0:09:30.000 --> 0:09:33.280 Because this is look it speaks to like the bears 0:09:33.320 --> 0:09:36.480 in their caves hibernation mood that have missed every transmissional 0:09:36.480 --> 0:09:39.680 in techtoc the last twenty years. They'll continue to miss 0:09:39.720 --> 0:09:43.400 the AI trade underestimating the scale and scope of what 0:09:43.480 --> 0:09:46.160 the spending looks like. And I've seen it, you know, 0:09:46.280 --> 0:09:49.000 just even a few weeks ago in Taiwan. In Asia, 0:09:49.160 --> 0:09:52.760 demand of spy is what twelve to one, and that 0:09:52.880 --> 0:09:56.440 is going to continue to drive this massive cap backs 0:09:56.559 --> 0:09:59.320 and the ripple effects across tech, energy and everything else. 0:09:59.480 --> 0:10:02.880 Damien Torsten Slock, publishing moments ago for a pull of 0:10:02.920 --> 0:10:06.720 global management it capex now accounts for more than one 0:10:06.840 --> 0:10:10.160 third of S and P five hundred capex spending. 0:10:10.280 --> 0:10:12.080 Well, I mean I have to, I mean wow, I mean, 0:10:12.120 --> 0:10:13.880 but I have to, you know, let's just ship the 0:10:13.920 --> 0:10:16.080 way here we have the world's largest I mean, on 0:10:16.200 --> 0:10:18.520 record IPO coming out in SpaceX here, and I just 0:10:18.520 --> 0:10:20.040 got to ask you, Dan, I mean, what are your 0:10:20.040 --> 0:10:24.480 thoughts here on Musk and shareholder rights and minority rights 0:10:24.480 --> 0:10:26.400 and control? I mean, is this unusual the type of 0:10:26.400 --> 0:10:27.319 structure we're seeing here. 0:10:28.640 --> 0:10:32.439 Bomba is betting against Musque. It's been the historically wrong 0:10:32.520 --> 0:10:34.560 move for investors, right, and I think many were in 0:10:34.600 --> 0:10:35.840 that betting against Tesla. 0:10:36.360 --> 0:10:37.600 You're betting on Musk. 0:10:37.679 --> 0:10:39.800 And I get some of the in terms of voting 0:10:39.880 --> 0:10:42.439 rights and things like that. Book Space actually talking about 0:10:42.440 --> 0:10:45.800 one of one relative to what's going to really create 0:10:45.840 --> 0:10:49.160 a whole new category of investing. And as you've seen 0:10:49.160 --> 0:10:51.920 in the private markets, you know, as more stock has 0:10:51.960 --> 0:10:54.200 come veb over the last you know, call it three 0:10:54.240 --> 0:10:57.880 or six months. And we're talking about a watershed moment, 0:10:58.240 --> 0:11:01.199 not just for Musque, not just for SpaceX, but as 0:11:01.280 --> 0:11:04.080 we've talked that we think a year from now over 0:11:04.120 --> 0:11:07.000 an eighty percent chance SpaceX and Tessa merge. 0:11:07.080 --> 0:11:07.360 Wow. 0:11:07.400 --> 0:11:09.640 So if that happens, I mean, we're how do investor's position, 0:11:09.640 --> 0:11:11.280 how do you take advantage of that? Let's put our 0:11:11.280 --> 0:11:12.319 merger armat on. 0:11:13.120 --> 0:11:15.880 Well, you buy Tasa. I mean to some extent because 0:11:16.000 --> 0:11:20.240 from evaluation respective, I think, Tessa, we've talked about it 0:11:20.480 --> 0:11:23.280 is almost a double from here relative to the pure 0:11:23.400 --> 0:11:28.520 opportunities became autonomous robotics and where this is all going 0:11:28.559 --> 0:11:30.839 in terms of the next level of AA. And that's 0:11:30.840 --> 0:11:34.760 why Musk is doing this to bring this all under onehood. 0:11:34.920 --> 0:11:37.080 On a Friday of Memorial Day, did could you see 0:11:37.160 --> 0:11:40.320 Dan Ives out in the backyard with a grill? I 0:11:40.400 --> 0:11:43.520 mean not Michael Barr. Do you think he's doing like 0:11:43.559 --> 0:11:46.760 the whole thing, the grilled chicken, the long time it's 0:11:46.920 --> 0:11:49.760 got a long time one at the grill. I could see. 0:11:49.800 --> 0:11:52.280 I could just see him, you know, you know, with 0:11:52.320 --> 0:11:55.000 the Milwaukee Best in his hand and the whole thing 0:11:55.240 --> 0:11:59.280 Dan give me. Microsoft is just you know, a stock idea. 0:12:00.200 --> 0:12:03.480 You're on it, Acpans on it. I get it. What's 0:12:03.559 --> 0:12:10.400 the why the distinction? The differential of Microsoft look. 0:12:10.280 --> 0:12:13.280 Kind of right now because of Google and the success 0:12:13.640 --> 0:12:17.160 massive that they've had in Amazon, there's a view, especially 0:12:17.200 --> 0:12:20.720 with open Ai, that sort of competition and Microsoft's starting 0:12:20.720 --> 0:12:23.680 to lose in the game. I just strongly disagree because 0:12:24.120 --> 0:12:27.000 as enterprises move to Azure and they move on the 0:12:27.080 --> 0:12:30.599 AI stack. They're going to move in Microsoft. Look, Microsoft 0:12:30.640 --> 0:12:34.400 and Apple are the two most I viewed table pound 0:12:34.480 --> 0:12:37.240 their large cap names relative to where their trade. We've 0:12:37.240 --> 0:12:40.480 talked about one hundred and fifty dollars upside of Microsoft here. 0:12:41.120 --> 0:12:44.760 They will prove themselves over the next six to twelve months. 0:12:45.000 --> 0:12:48.280 They will be the Google of twenty twenty five. That's 0:12:48.280 --> 0:12:50.920 where I view Microsoft in terms of that. You know 0:12:51.000 --> 0:12:52.640 that prove it moment generous. 0:12:52.640 --> 0:12:54.040 If you have to be with us on this Friday, 0:12:54.080 --> 0:12:56.839 dain I is with web Bush Securities. Thank you, stay 0:12:56.880 --> 0:13:00.719 with us. More from Bloomberg Surveillance coming up after this. 0:13:08.000 --> 0:13:11.560 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:13:11.640 --> 0:13:14.800 weekday afternoons from seven to ten am Eastern Listen on 0:13:14.880 --> 0:13:18.520 Applecarplay and Android Auto with the Bloomberg Business app, or 0:13:18.679 --> 0:13:20.160 watch us live on YouTube. 0:13:20.400 --> 0:13:23.719 Tush Saren's at the Budget Lab at Yell. They were 0:13:23.760 --> 0:13:26.040 my think tank of the year last year. They were 0:13:26.240 --> 0:13:30.640 exquisite on tariffs, but they do much more and they 0:13:30.679 --> 0:13:34.880 have just set off a firestorm of study on your 0:13:35.000 --> 0:13:39.840 infernal revenue service and also on carried interest. Natasha, why 0:13:39.920 --> 0:13:43.480 are people screaming about the Budget Lab at Yelle's work. 0:13:45.160 --> 0:13:47.400 Well, I hope Tom that we managed to be your 0:13:47.480 --> 0:13:50.160 think tank of the Year this year too, and we're 0:13:50.240 --> 0:13:52.800 very grateful to get to spend time with you always. 0:13:53.160 --> 0:13:56.600 The sort of interesting thing about carried interest is it 0:13:56.760 --> 0:14:01.360 does have this massively beneficial tax tree. So if you 0:14:01.520 --> 0:14:04.880 are a wage your salary earner in this country, you 0:14:05.040 --> 0:14:08.160 on your income are paying ordinary income rates. If you 0:14:08.320 --> 0:14:11.120 happen to be a fund manager who classifies some of 0:14:11.160 --> 0:14:15.280 your wage income really as carried interest, you get this 0:14:15.400 --> 0:14:19.680 preferential capital gains treatment. And for a long time that 0:14:19.960 --> 0:14:22.520 sort of loophole has been existed in the code, been 0:14:22.560 --> 0:14:27.560 well understood that it exists, but it wasn't really clear 0:14:27.680 --> 0:14:29.880 that there was all that much money there. So as 0:14:29.920 --> 0:14:32.880 you're thinking about the trade off with respect to what 0:14:33.000 --> 0:14:36.280 types of legislation you draft, you don't focus on it. 0:14:36.360 --> 0:14:38.680 But it turns out our report shows that there really 0:14:38.720 --> 0:14:40.720 is a lot of revenue here and it should sort 0:14:40.720 --> 0:14:42.440 of make policymakers pay attention. 0:14:42.760 --> 0:14:47.040 Is the question here the emotion democrats Republicans of getting 0:14:47.120 --> 0:14:51.040 rid of it, or is the question an amendment to 0:14:51.200 --> 0:14:52.200 a common ground? 0:14:52.720 --> 0:14:56.600 Yeah, I think that the sort of I guess my 0:14:56.680 --> 0:14:59.840 answer is like anything would be better than status quo. 0:15:00.920 --> 0:15:04.520 There ever, in lots of industries in your industry, and 0:15:04.600 --> 0:15:07.800 journalism in my industry, and the academy and in every 0:15:07.880 --> 0:15:10.760 other one too, if you get paid a sort of 0:15:10.800 --> 0:15:16.520 performance bonus, that income is taxed just like their salary 0:15:16.600 --> 0:15:19.240 is taxed. So it is hard for me from a 0:15:19.280 --> 0:15:23.480 policy perspective to come up with a rationale where you 0:15:23.680 --> 0:15:28.880 have some classes of industries that happen to be highly 0:15:28.920 --> 0:15:33.160 wealthy fund managers who are operating in them, or that 0:15:33.240 --> 0:15:36.160 type of tax treatment just doesn't operate. And so I 0:15:36.200 --> 0:15:38.640 think that there's a lot of different ways in which 0:15:38.680 --> 0:15:41.120 you could try to think about exactly how to structure 0:15:41.160 --> 0:15:44.400 the provision, But in general, I find it hard to 0:15:44.480 --> 0:15:45.880 defend on its status quo. 0:15:46.400 --> 0:15:48.200 Natasha, just for our audience, I wonder if he could 0:15:48.200 --> 0:15:49.720 just help us out. I mean, what does President Trump? 0:15:49.720 --> 0:15:51.920 Where's the administration stand on carried interest? I think my 0:15:52.000 --> 0:15:55.720 interpretation is that they want to actually change the law, right, 0:15:55.720 --> 0:15:57.800 They want to basically start tax and carry it interest 0:15:57.840 --> 0:15:58.280 as income. 0:15:58.360 --> 0:15:59.200 Is that is that correct? 0:16:00.080 --> 0:16:00.240 Well? 0:16:00.520 --> 0:16:03.239 You know what's so interesting is that President Trump campaigned 0:16:03.400 --> 0:16:06.400 on ending the carried interest loophole, and so this has 0:16:06.440 --> 0:16:08.960 been an area of deep interest for him. This has 0:16:09.000 --> 0:16:12.360 been an area of frankly bipartisan interest for a long time, 0:16:12.880 --> 0:16:15.920 but it's and I kind of experienced it as we 0:16:16.000 --> 0:16:18.800 put out this report for Budget Lab. Every time you 0:16:18.920 --> 0:16:23.080 get somewhat close to a policy conversation around carried there 0:16:23.160 --> 0:16:26.320 are and you both can well appreciate why that is 0:16:27.000 --> 0:16:32.680 really significant lobbying efforts that push against exactly the types 0:16:32.720 --> 0:16:35.800 of changes that would equalize this tax treatment. And so 0:16:36.120 --> 0:16:38.800 something that I worry about and will continue to watch 0:16:38.800 --> 0:16:41.800 as we watch these policy debates evolve, is the ways 0:16:41.800 --> 0:16:43.960 in which industry is going to try to shape these 0:16:44.000 --> 0:16:47.200 provisions in order to preserve this tax benefit, and the 0:16:47.240 --> 0:16:49.360 ways in which policy needs to be well informed to 0:16:49.360 --> 0:16:50.240 push back against that. 0:16:50.480 --> 0:16:52.760 So, Natasha, then here's my question, right, because it's all 0:16:52.800 --> 0:16:54.080 fun and games, you know, I think some of the 0:16:54.080 --> 0:16:57.080 projections that if they if they close the carried interest loophole, 0:16:57.120 --> 0:16:59.840 it's something like ninety billion dollars can be generated over 0:16:59.880 --> 0:17:03.720 the next ten years, you know, Collecting that revenue is 0:17:03.720 --> 0:17:06.600 the question I have. How easy will it be for 0:17:06.760 --> 0:17:08.920 tax authorities here in the US to actually get their 0:17:08.920 --> 0:17:12.359 hands on those dollars, on those carried interest dollars if indeed, 0:17:12.440 --> 0:17:14.760 you know, the rule changes totally. 0:17:14.800 --> 0:17:16.959 And that's exactly our estimate, which is that you can 0:17:17.040 --> 0:17:20.159 raise around ninety billion dollars over a decade from a 0:17:20.240 --> 0:17:23.119 closing and carried interest loopole. But I'll say to your point, 0:17:23.160 --> 0:17:25.520 one of the pieces of doing that estimate that's pretty 0:17:25.600 --> 0:17:28.840 challenging is there's no like line item on the tax 0:17:28.920 --> 0:17:31.960 return that is how much carry you have, And so 0:17:32.200 --> 0:17:35.439 it's actually kind of challenging from the perspective of the 0:17:35.560 --> 0:17:39.040 IRS to be able to say what is your tax 0:17:39.119 --> 0:17:42.760 liability because this isn't an area where they have perfect visibility. 0:17:42.960 --> 0:17:46.000 They get some information from the K one partnership return, 0:17:46.359 --> 0:17:48.320 and the hope is that that's going to enable them 0:17:48.320 --> 0:17:50.760 to do better with respect to collectingness if we change 0:17:50.760 --> 0:17:54.120 the tax treatment. But two things, we need an IRS 0:17:54.160 --> 0:17:57.160 that's actually able to be functional, and second, it would 0:17:57.160 --> 0:17:58.520 help to have much more information. 0:17:58.680 --> 0:18:00.720 Natasha, let me get out front of work. What's the 0:18:00.800 --> 0:18:04.240 tariff update? Are we living a double digit tariff right now? 0:18:04.600 --> 0:18:06.199 Ten eleven twelve percent? 0:18:07.160 --> 0:18:09.919 We are. Our effective tariff rate is nearly ten percent 0:18:10.000 --> 0:18:12.320 at the moment, But we're in a situation, by the way, 0:18:12.400 --> 0:18:15.320 where there's a ton of legal uncertainty with respect to 0:18:15.359 --> 0:18:17.359 what's going to happen to the tariffs over the course 0:18:17.600 --> 0:18:20.400 of the next many months, because we just had an 0:18:20.440 --> 0:18:22.879 adverse court ruling with respect to some of the Section 0:18:22.960 --> 0:18:25.800 one twenty two tariffs that the administration is trying to 0:18:25.840 --> 0:18:26.720 deploy presently. 0:18:26.920 --> 0:18:30.520 I mean, I was up in Montreal watching the Canadians' 0:18:30.560 --> 0:18:34.919 folks is they took another victory a number of months ago, Natasha, 0:18:34.960 --> 0:18:38.720 and all the talk in Quebec was over their tariff 0:18:38.800 --> 0:18:42.119 system with America. There was frankly no other issue, including 0:18:42.560 --> 0:18:47.840 the Montreal Canadians Natasha in Canada, how is our discussions going? 0:18:48.880 --> 0:18:52.360 Yeah, But so part of the thing that I am 0:18:52.480 --> 0:18:55.720 grappling with as I wonder about what the future of 0:18:55.720 --> 0:18:59.119 tariffs really holds, is we're in a situation right now where, 0:18:59.280 --> 0:19:01.600 because of tariff and also frankly because of the war, 0:19:02.160 --> 0:19:05.679 inflation is outpacing wage growth, and so now in a 0:19:05.720 --> 0:19:09.680 moment where people are looking and not being able to 0:19:09.880 --> 0:19:12.720 afford what they could last month three months ago on 0:19:12.760 --> 0:19:16.439 their salaries as a result of this inflationary moment. And 0:19:16.520 --> 0:19:19.440 so I have to wonder, and I wonder this with Canada. 0:19:19.480 --> 0:19:21.439 I wonder this with Europe. I wonder this with all 0:19:21.480 --> 0:19:25.000 of our allies. Whether there are no magic buttons. The 0:19:25.040 --> 0:19:29.840 administration can press to lower prices tomorrow, but one thing 0:19:29.880 --> 0:19:33.240 that they could do is start to roll back these 0:19:33.400 --> 0:19:37.359 adverse trade policies, particularly with respect to our allies, in 0:19:37.440 --> 0:19:40.560 ways that will immediately benefit the American consumer. And so 0:19:40.920 --> 0:19:42.840 I hope that that is what is on the horizon 0:19:43.440 --> 0:19:45.159 with respect to many of our trading partners. 0:19:45.200 --> 0:19:49.080 Natasha, thank you so much the Budget lab. Stay with us. 0:19:49.320 --> 0:19:52.600 More from Bloomberg Surveillance coming up after this. 0:20:00.119 --> 0:20:03.840 Listening to the Bloomberg Surveillance podcast. Catch us live weekday 0:20:03.840 --> 0:20:07.440 afternoons from seven to ten am Eastern. Listen on Applecarplay 0:20:07.480 --> 0:20:10.760 and Android Auto with the Bloomberg Business app, or watch 0:20:10.840 --> 0:20:12.159 us live on YouTube. 0:20:12.520 --> 0:20:14.359 This is a joy. One of the gut people that 0:20:14.440 --> 0:20:17.160 have really really supported me in this lark that I'm 0:20:17.200 --> 0:20:20.720 on is Michael Spence. He is a Nobel Prize winner 0:20:20.720 --> 0:20:26.160 and before that revolutionized, and I mean revolutionized how we 0:20:26.280 --> 0:20:31.160 teach graduate school. This is at Stanford in their GSB program. 0:20:31.200 --> 0:20:34.800 The predecessor was our J. Miller Ford Motor and we 0:20:34.840 --> 0:20:37.679 have with Thiss Rick Stein my right now from LPL 0:20:37.800 --> 0:20:42.520 Financial you lived it. You lived the Stanford GSB of 0:20:42.560 --> 0:20:46.240 Michael Spence and all that. What was it like because 0:20:46.320 --> 0:20:51.119 nobody It's like Dylan Plane, Electricaitar at Newport. Nobody did 0:20:51.160 --> 0:20:55.080 what Stanford GSB did before Stanford GSB did it. 0:20:55.080 --> 0:20:58.320 It's a very special place. So yeah, I think what 0:20:58.359 --> 0:21:01.520 you got is a community thatallenged how to become great leaders. 0:21:01.560 --> 0:21:04.040 And I think for me that was I had gone 0:21:04.040 --> 0:21:07.280 to Wharton undergrad and so I learned the discipline of 0:21:07.320 --> 0:21:10.520 how to evaluate companies, how to build strategies, but getting 0:21:10.520 --> 0:21:14.240 there was about how to lead people, how to create followership, 0:21:14.520 --> 0:21:17.280 how to look at interpersonal dynamics in the context of 0:21:17.359 --> 0:21:20.600 business in a place where the professors were off the 0:21:20.680 --> 0:21:23.400 charts exceptional talented, as were the students. 0:21:23.440 --> 0:21:26.440 But then, I mean, now everybody's talking just what you talk. 0:21:26.560 --> 0:21:30.719 It's like in the concern entire global industry is well, 0:21:31.119 --> 0:21:34.239 how do you take that at LPL and do that 0:21:34.560 --> 0:21:38.960 every day? How do you delegate authority at LPL Financial? Yeah? 0:21:39.480 --> 0:21:42.399 Largely for me, delegating authority is about having a shared vision. 0:21:42.560 --> 0:21:45.320 You actually have to work really hard upfront to craft 0:21:45.359 --> 0:21:48.760 a vision that people can collectively align to so that 0:21:49.119 --> 0:21:52.560 when you delegate. You're delegating against knowing you're headed to 0:21:52.600 --> 0:21:56.199 the same direction, and so the decision making upfront is 0:21:56.240 --> 0:21:57.200 probably more important. 0:21:57.280 --> 0:22:00.439 What's the biggest myth of wealth management right now? With 0:22:00.520 --> 0:22:03.480 financial advisors? What's the thing that most gets wrong? 0:22:03.600 --> 0:22:05.960 I think the misnomer in the marketplace right now is this. 0:22:06.520 --> 0:22:10.000 The overarching story is that AI is going to displace 0:22:10.080 --> 0:22:13.040 financial advisors and it's going to deliver you know, AI 0:22:13.160 --> 0:22:15.240 driven advice, and I think you're going to see more 0:22:15.280 --> 0:22:19.480 decisions being made by humans but enabled through technology. 0:22:19.520 --> 0:22:22.800 We welcome you on YouTube today to understand that this 0:22:22.840 --> 0:22:26.280 is not Paul Sweeney with us. Is Damien SaaS hours 0:22:26.359 --> 0:22:29.400 with this ruffled and this is great? How can you, Damian? 0:22:29.920 --> 0:22:31.359 Have your people come in. 0:22:31.359 --> 0:22:36.520 Yes with your rice Chrispy trising. 0:22:36.960 --> 0:22:38.480