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Speaker 2: Claudia Sam, yesterday in front of sixteen hundred people at
Speaker 2: the Marriott Marquis, we had a fantastic panel and they
Speaker 2: mentioned Claudia Sam. She is definitive on rational analysis of
Speaker 2: the American labor market out of Michigan Chief Economists, News
Speaker 2: Centery Advisors joining us.
Speaker 3: Now, Claudia, you write that the.
Speaker 2: Some rule triggers at four and a half percent. How
Speaker 2: distant are we from a four and a half percent
Speaker 2: unemployment rate?
Speaker 4: So I think we're unths away from seeing that unemployment rate.
Speaker 4: It tends to take time for it to build. Unfortunately.
Speaker 4: I think that is where we're headed here, so we
Speaker 4: could see something like that in the second half of
Speaker 4: the year.
Speaker 5: Claudia, the question I think for a lot of folks
Speaker 5: here when we look at this data here today on
Speaker 5: the jobs, and it's not going to give as much
Speaker 5: of a hint to the way employers are thinking about
Speaker 5: the job market today post tariff discussion, But what will
Speaker 5: you be looking at it?
Speaker 4: Today's data, right, So you know today's data matters. This
Speaker 4: employment report matters not because it tells us what's going
Speaker 4: to be the effect of all the administration's policies, particularly
Speaker 4: with the teriff policies that we learned about this week,
Speaker 4: But it is a policy happens in a macroeconomic context.
Speaker 4: We need this labor market to be as resilient and
Speaker 4: strong as possible to help workers and households whether this
Speaker 4: storm is coming. That was absolutely crucial. We in twenty
Speaker 4: twenty two or twenty twenty three, we're economous. Many were
Speaker 4: saying session is coming, recession is coming. We had some
Speaker 4: big policy changes fed raising interest rates, Inflation was high.
Speaker 4: We did not have a recession, and a key to
Speaker 4: that was we had a very strong labor market that
Speaker 4: buffered it. So it's really important this context going in
Speaker 4: even if the policy effects aren't there today.
Speaker 2: Clauda Danny blanche Flower up at Dartmouth's just mentioned your
Speaker 2: name in awe over the Michigan approach to listening to
Speaker 2: non experts to the Michigan conference numbers.
Speaker 3: In all that his.
Speaker 2: President Trump broken the labor and investment confidence of America.
Speaker 4: Well, and I will say Danny's done excellent work using
Speaker 4: those expectations surveys, but Michigan survey the conference board to
Speaker 4: really get a sense of is a recession coming? So
Speaker 4: the song rule was a lot about is one here?
Speaker 4: But he's done a lot of work on what is
Speaker 4: one coming? And take those the sentiment surveys very seriously,
Speaker 4: and it's ugly right now. We had an ugly period
Speaker 4: a few years ago too where people were very downbeats.
Speaker 4: But again we're back in place where people are telling
Speaker 4: us and business is too. The outlook is pretty grim.
Speaker 4: And that's even before I mean that's last month surveys, right,
Speaker 4: that's not even this week's survey. So it's you. It
Speaker 4: can be hard to interpret those data. Sometimes they can
Speaker 4: lead us astray, and yet like there are real policy
Speaker 4: tatas happening. And one thing with this little book Salt Data,
Speaker 4: is you can look into the future and give us
Speaker 4: that cuit.
Speaker 3: You can.
Speaker 2: Claudia, stay with us, please, We're going to go to
Speaker 2: doctor Sam here after the data. Neil Dutta waiting on deck,
Speaker 2: who's been brilliant again. Duta talking with Krugman. Professor Krugman
Speaker 2: will join us next week at some point, Claudia, completely
Speaker 2: unfair for you to go granually here on the jobs report.
Speaker 3: We'll let Neil Dutta do that. But do you take
Speaker 3: us three?
Speaker 2: I mean, Jason Furman's go an ecumenical, honest with seven
Speaker 2: moving averages.
Speaker 3: What does Claudia Sam do?
Speaker 2: Do you look at the two months, the three months
Speaker 2: with revisions, the six month moving average, which matters to
Speaker 2: you on non farm payrolls.
Speaker 4: Right, well, you definitely don't want to focus on just
Speaker 4: one month of data. Three month moving average is a
Speaker 4: good place to start. I will say, though, I'm the
Speaker 4: employment report in general, you just want to breathe it
Speaker 4: all in, right, like, you need to look at this.
Speaker 4: You know, the payrolls, this is good. That was a solid,
Speaker 4: solid red even with the revision unemployment rate. We don't
Speaker 4: like to see it taking up on utilization. So I'd
Speaker 4: say this is kind of a mixed bag. That the
Speaker 4: wage pressures aren't there, so at least we're not, you know,
Speaker 4: pulling in another inflationary impulse here. So I think, you know,
Speaker 4: generally this this looks a lot like what we've been
Speaker 4: seeing from this labor market, which is it's in a
Speaker 4: good place, but it's not it's not the like firing
Speaker 4: on all cylinders that we would need to, you know,
Speaker 4: go up against some of these shoes.
Speaker 3: And Paul, you're going back and forth with jer own Powell.
Speaker 3: I mean, this doesn't move the needle for the fat doesn't.
Speaker 5: I'm not sure we'll see soon though. But Claudia here,
Speaker 5: how do you think, maybe let's just say, how do
Speaker 5: you think the labor market's going to evolve for the
Speaker 5: remainder of the year, giving some of this uncertainty that
Speaker 5: that's number brought into the accon outlook with all these tariffs.
Speaker 4: Well, so I think the labor market is going to
Speaker 4: get on a slowing trajectory. The thing is, it's one
Speaker 4: of the it's one of the last places where this
Speaker 4: shows up. We're going to see prices start to move
Speaker 4: up pretty rapidly, and then you see consumers pull back,
Speaker 4: and then you see you know, employers go from not
Speaker 4: hiring as much to not as many hours, and then
Speaker 4: they start laying off and then you know, it takes
Speaker 4: time for this to move for a shock like this
Speaker 4: like these tariffs, to move their way through the economy,
Speaker 4: and if if you wait until it shows up in
Speaker 4: the higher unemployment rate to do something, they like to said,
Speaker 4: you waited until we're passed. So I think that's you
Speaker 4: don't want to look here first the labor market, but
Speaker 4: the trajectory is not encouraging the policy.
Speaker 2: Changes, Claudia, to the silliness of the sum rule. And
Speaker 2: you've been very good about you know, the people speaking
Speaker 2: with sorted to trying to crystal ball or recession. Nobody knows, Claudia,
Speaker 2: where we are may second the April report June sixth,
Speaker 2: the main report, where would you guess the labor economy?
Speaker 3: Is the fourth of July?
Speaker 4: Oh goodness, you know the answer to that question is
Speaker 4: going to change so much on what the administration says
Speaker 4: the next few weeks. Right, it really can't be underscore
Speaker 4: how like the duration of the tariffs, the bread like
Speaker 4: do we have retaliation. I mean, again, the outlook is
Speaker 4: not good, but it's like that that is going to
Speaker 4: be so important, and that is that's such a wild card.
Speaker 4: So I'll put a direction of imp unemployment rate will
Speaker 4: be higher.
Speaker 6: I don't know that we're four and a half at
Speaker 6: that point, but I think that's that's the direction we're
Speaker 6: headed unless there is a real pivot on the policy
Speaker 6: coming out of the administration.
Speaker 3: Doctor Sam, thank you so much. Claudia Sam.
Speaker 2: We are honored to have you on each and every
Speaker 2: labor David New Century Advisors, of course, definitive at Michigan
Speaker 2: and the Federal Reserve. Neil Dunda with us number of
Speaker 2: days ago. Generous of him to come back on this
Speaker 2: job's day. He's with Renaissance Macro. Neil, let's start with
Speaker 2: how you dovetail your work with Jeff de Graf on
Speaker 2: the markets over at Renaissance Macro. Is the Neil Dutta
Speaker 2: world such a mess that the graph freezes, goes to cash,
Speaker 2: takes a hyper defensive position.
Speaker 7: I mean, I think, you know, Jeff is always looking
Speaker 7: for opportunities and you know, trying to look under the
Speaker 7: hood to see what other people aren't seeing. And I
Speaker 7: think he continues to do that, so you know, I
Speaker 7: think it's times like this he's looking for, you know,
Speaker 7: tentative evidence of a bottom the.
Speaker 2: Job's day four point two percent. I guess a vector's
Speaker 2: in place. Claudia Sam speaks of an important four point
Speaker 2: five percent. I asked us yesterday at the game for him,
Speaker 2: Neil Dott I would have asked it of you, do
Speaker 2: you frame out a five percent unemployment rate given the
Speaker 2: festivity in the rose garden.
Speaker 7: I don't know about five percent. But we're going up,
Speaker 7: I think, you know, I think we've been going up
Speaker 7: for a while. Obviously, given the shock to financial conditions
Speaker 7: that we've seen in recent days, that view is just amplified.
Speaker 7: But consumers have been telling us that things are getting
Speaker 7: worse for a while. So I had been largely expecting
Speaker 7: a fairly linear increase in the unemployment rate. I mean
Speaker 7: you basically have you know, ongoing layoffs. I mean they've
Speaker 7: been coming up modestly. The hiring rate has been very
Speaker 7: very sluggish, and rates of job finding are low, and
Speaker 7: so when you that combination, it you know has gotten
Speaker 7: us a fairly linear increase in the unemployment rate. The
Speaker 7: risk now, I think is a more nonlinear increase in
Speaker 7: the unemployment rate because of what's going on. That to
Speaker 7: me is the risk that we need to be concerned about.
Speaker 7: You know, hiring rates are probably be going to weaken,
Speaker 7: and you know, at the margin, I would say layoffs
Speaker 7: are getting worse because you know, I mean just tariffs,
Speaker 7: I mean it's like it's like anything else with trade.
Speaker 7: I mean, the you know, the benefits are widespread with trade,
Speaker 7: the costs are very localized, and tariffs it's the opposite.
Speaker 7: So the costs are spread out, the benefits are localized.
Speaker 7: So you know, my sense is that it's hard to
Speaker 7: argue that the shock to financial conditions won't you know,
Speaker 7: have some spill over into the into the real economy.
Speaker 7: And so you know, I think it makes sense to
Speaker 7: a pencil in a higher unemployment rate forecast.
Speaker 3: Right going forward.
Speaker 5: So Neil, I know the administration labeled their tariff day
Speaker 5: Liberation Day, but I see in your note happy obliteration
Speaker 5: a day here. So walk us through the math here.
Speaker 5: Given the numbers that we do, know, what do you
Speaker 5: kind of run through your model that could be a hit?
Speaker 3: Do GDP as we give a wope?
Speaker 7: You know, well a lot of these models, I mean
Speaker 7: if you game out like I mean, wherever the effective
Speaker 7: tariff rate was before and what these new tariffs imply.
Speaker 7: I mean you're talking about an effective tech tariff rate.
Speaker 7: Basically that's like customs duties revenues as a share of
Speaker 7: our custom you know, as a share of imports. I
Speaker 7: mean you're basically talking about, you know, something close to
Speaker 7: twenty five percent based I mean by our calculations, you know,
Speaker 7: that represents you know, a little over I think a
Speaker 7: one percentage point shock to GDP. So I think that's
Speaker 7: kind of where, you know, how most of these calculations
Speaker 7: are coming about. I would argue, though, that these calculations
Speaker 7: understate conditions, you know, the hit to some extent, because
Speaker 7: you're just looking at a direct cost. You're not You're
Speaker 7: not sort of including like what is their ramification to
Speaker 7: corporate confidence, household up confidence, you know, and sort of
Speaker 7: the l over and not on effects. And I think,
Speaker 7: you know, that's why I think it could be even worse.
Speaker 7: But you know, I mean if these stay on, I mean,
Speaker 7: this is basically a recession like outcome for the US economy.
Speaker 3: Neil dan Ives was in earlier.
Speaker 2: He suggests Big Tech will pull all guidance forward in
Speaker 2: their conference calls. How in God's name do you take
Speaker 2: an Excel spreadsheet and get the Dutta crystal ball out
Speaker 2: past the vicinity of April fifteenth?
Speaker 7: I don't, I mean, you know, to me, we're all
Speaker 7: just guessing at this point. Maybe you should have a
Speaker 7: game theorist, come on with you, Tom, that would probably
Speaker 7: be the best, the best person to interview. I mean,
Speaker 7: we sort of see these things on our international trade courses,
Speaker 7: looking at, you know, the the.
Speaker 8: Dynamics of a trade war. Right.
Speaker 7: This is sort of like the classic prisoner's dilemma, and
Speaker 7: we're kind of going through it, right. I mean, we're
Speaker 7: seeing the part where you know, you see both sides
Speaker 7: retaliate and you're at the worst outcome, and that seems
Speaker 7: to be what we're getting. And you know, I do
Speaker 7: think it's interesting. I mean, this is sort of going
Speaker 7: a little bit beyond my wheelhouse, admittedly, but I found
Speaker 7: it interesting that the administration said it was wise for
Speaker 7: other countries not to retaliate because this would be some
Speaker 7: sort of cap And yet what do we see this morning.
Speaker 7: China retaliating and I think Europe is probably next. And
Speaker 7: if that's the case, you know, I think you have
Speaker 7: to really cross your fingers and hope that the White
Speaker 7: the White House won't also retaliate. But you know, I'm
Speaker 7: not really holding my breath best.
Speaker 2: This is great in man Q, macroeconomics is one one
Speaker 2: of your pages. Alan Blinder, fifteenth edition, fifteenth edition, Chapter fourteenth,
Speaker 2: Paul is cross your fingers.
Speaker 5: So, Neil, one of the things that's I guess concerning
Speaker 5: me in addition to you know, kind of the math
Speaker 5: you ran through about a what a terrafrate of twenty
Speaker 5: five percent? What that would mean for GDP. It's just
Speaker 5: the it seems like noticeable, noticeable decline in confidence, both
Speaker 5: consumer confident and corporate confidence. How do you factor that
Speaker 5: into kind of economic growth and maybe inflation expectations.
Speaker 7: Well, I mean it's it's it's the it's for consumer confidence.
Speaker 7: It's the speed of the decline, right that, That to
Speaker 7: me is the big concern. I mean, consumer confidence has
Speaker 7: been quite sluggish for a while. You know.
Speaker 8: Look, I mean.
Speaker 7: This is a this is a shock to the economy,
Speaker 7: right like, So it's basically growth will slow down and
Speaker 7: reset at a much lower level. I think, what this
Speaker 7: what what you're going to see is basically, uh, the
Speaker 7: high end consumer, which has been the core source of
Speaker 7: support for consumer spending over the last year, they are
Speaker 7: going to jack up their savings rate.
Speaker 8: As a result of this.
Speaker 7: I mean, you're you're in a situation now where stock
Speaker 7: prices are going down, right. The elevated level of stock
Speaker 7: prices is one reason why net worth was rising relative
Speaker 7: to income last year, which is why consumer spending was
Speaker 7: so strong because people drew down their savings as a result.
Speaker 7: You have the opposite situation now, So what do you
Speaker 7: think is gonna happen with the savings rate?
Speaker 8: It's gonna go up As.
Speaker 7: A baseline, consumer spending wasn't gonna be really much stronger
Speaker 7: than one and a half percent right now, because that's
Speaker 7: where real income growth has kind of been tracking net
Speaker 7: of transfer. So we've already seen quite sluggish income.
Speaker 3: So even a.
Speaker 7: Stable savings rate gets you that if the savings rates
Speaker 7: going up, you're gonna have something weaker than that. So
Speaker 7: you can see already how it's very challenging to get
Speaker 7: to a anything better than really the best I can
Speaker 7: come up with is like a below potential growth environment.
Speaker 2: Still, so maybe this job's day wasn't what's to come
Speaker 2: in May and June and on forward. In some of
Speaker 2: the gloom again, a four point two percent unemployment rate,
Speaker 2: But Neil dudda on April ten, when the red sacks
Speaker 2: are in first place on April ten, I'm looking at
Speaker 2: as CPI report, is.
Speaker 3: That move is lagged?
Speaker 2: Is the unemployment rate. Are we going to see stagflation
Speaker 2: CPI here in six days?
Speaker 7: I mean, I think there's I mean, there may be
Speaker 7: some possibility that the inflation number surprises to the downside,
Speaker 7: in my opinion. I mean, you do have some you know,
Speaker 7: some improvement in some of these areas like eggs and
Speaker 7: so forth. I mean, you probably haven't yet seen the
Speaker 7: upward movement in car prices just yet. Write what we
Speaker 7: know about auction prices suggest that maybe car prices come
Speaker 7: in a little bit, so, you know, March might be
Speaker 7: an okay month for inflation, and normally I think that
Speaker 7: would probably give the Fed, you know, some rope to
Speaker 7: cut or think about it. But it's all about the
Speaker 7: outlook now, and you know so so the data doesn't
Speaker 7: really take on that much.
Speaker 3: What are you going to write about this weekend?
Speaker 2: Paul Krugman just email being says, ask Donna what he's
Speaker 2: going to write about.
Speaker 3: What are you going to write about this weekend?
Speaker 7: Neil, I'm going to write about how I think the
Speaker 7: economy was slowing, you know, going into all this trade
Speaker 7: war stuff, and that means that the administration doesn't have
Speaker 7: as much buffer as they thought they might have earlier.
Speaker 7: I mean, you know, we talk about two twenty eight
Speaker 7: on non farm perils today. I mean the revisions, I
Speaker 7: think are what's important, right, That's where you have the
Speaker 7: most confidence. Right. So the fact that the revisions were
Speaker 7: down fifty thousand tells me that they didn't get as
Speaker 7: strong of a hand as they thought they were dealt.
Speaker 7: And you know, arguably, you know, this March number was
Speaker 7: just a payback from weather right in January and February.
Speaker 8: So the underlying trend is actually somewhat weaker.
Speaker 2: So if they if they are, even Paul's been brilliant,
Speaker 2: and as Jerry Morian Senator Mariana Kansas was just out
Speaker 2: on CNN, people are basically saying, where are the Republicans?
Speaker 3: Paul? You mentioned this this morning, Neil Dadda.
Speaker 2: If this goes away, do you sense that our trust,
Speaker 2: our confidence in our American exceptionalism is damaged?
Speaker 8: If what goes away?
Speaker 3: I mean yeah, if the tariffs go away.
Speaker 7: If Trump tariffs go away, that means that I mean
Speaker 7: that basically means that the president isn't as politically, I
Speaker 7: mean that basically it's a it's a political nightmare for him, right.
Speaker 7: I mean, if you're if you're betting on on that.
Speaker 7: I mean, I don't know, Tom. I mean, I think
Speaker 7: to me, I wrote about this quickly this morning. I
Speaker 7: think he believes he was spared an assassin's bullet to
Speaker 7: do what he's doing. So why does anybody think he's
Speaker 7: going to be backing off anytime soon?
Speaker 3: This is what he believes.
Speaker 2: It's a part.
Speaker 7: Of his political identity if he if he backs off now,
Speaker 7: that's an uncontal surrender, which makes him basically impotent politically
Speaker 7: going forward. I mean, it's too soon for that to
Speaker 7: happen in my opinion.
Speaker 2: Neil, thank you so much, and as thank you President
Speaker 2: Trump for listening to surveillance this morning.
Speaker 3: Paul and I got to take a break. Paul's going
Speaker 3: to bring her in.
Speaker 2: Jamie Patton is out of TCW and Los Angeles. Every
Speaker 2: time she speaks, I learned something, of course, maybe in
Speaker 2: this crisis will learn something.
Speaker 5: I want to learn what her when.
Speaker 3: Do the Dodgers lose exactly?
Speaker 5: I want to learn what her favorite sandwich was at
Speaker 5: Hogie Haven in for instance, she spent some time there.
Speaker 5: Jamie Patten, co head of Global Rates at TCW, joins us, Jamie,
Speaker 5: what do you make of kind of what we're seeing
Speaker 5: out there in your market, the treasury.
Speaker 9: Bond market, it's been busy. I think obviously risk markets
Speaker 9: are very disappointed by all the tariffs, but treasuries are
Speaker 9: great again, so.
Speaker 7: We love this move. We were much.
Speaker 9: More confused by the initial reaction to a Trump presidency
Speaker 9: and tariffs and anti immigration and all of that. That's
Speaker 9: there's nothing surprising about this. Tariffs are bad for growth,
Speaker 9: they're bad for the consumer, they're bad for the economy.
Speaker 4: They're bad.
Speaker 9: So this is the right market reaction. I'm a little
Speaker 9: confused why it took so long. It's like the market
Speaker 9: didn't believe what Trump was saying until not even Tuesday.
Speaker 9: Even when he said it Tuesday, it was really like
Speaker 9: Wednesday that market participants for like, oh this is serious,
Speaker 9: this is bad. But his whole campaign and all up
Speaker 9: until now, he's been telling us what he's going to do.
Speaker 9: So I think, unfortunately we need to believe him, which
Speaker 9: is great for bonds and great for TCW. You know,
Speaker 9: we've been long duration in the front end.
Speaker 2: What should mom and pop do here? Would their fixed
Speaker 2: income take us away from geniosity? Jamie Patten and Princeton
Speaker 2: and derivatives and mathewness.
Speaker 3: And all that.
Speaker 2: What do mom and pop do in fixed income over
Speaker 2: the weekend?
Speaker 9: I'll tell you what I tell my parents to do,
Speaker 9: because please get Allocating into fixed income is a great
Speaker 9: idea right now, but you have to be really careful.
Speaker 9: So how we're positioned at TCW, we're long duration. We
Speaker 9: love that we're lightening up just because we don't call
Speaker 9: tops and bottoms and we dollar cost average in and
Speaker 9: out just to be prudent risk managers. But we're also
Speaker 9: still very underweak credit. So you can be long fixed
Speaker 9: income but also in an extra defensive position, but you
Speaker 9: don't want to bleed out on carry. So at the
Speaker 9: same time, you can be underweight credit, long duration and treasuries,
Speaker 9: and then we're also long. We like agency mortgages. They're
Speaker 9: basically government guaranteed. They should do well regardless of risk
Speaker 9: on risk off. Maybe you have a little bit of
Speaker 9: pain in the beginning of a risk off, but overall
Speaker 9: their money good. So we like allocations to fixed income,
Speaker 9: but you have to be careful. Don't just go all
Speaker 9: into credit to pick up a few extra basis points.
Speaker 9: This is not the environment to just pick up carry.
Speaker 5: So in terms of just kind of the market here,
Speaker 5: talk to us about where you think. I'm looking at
Speaker 5: the tenure here three point nine to two percent. Where
Speaker 5: do we go here?
Speaker 9: I think we still go a little bit lower. The
Speaker 9: ten yere is a good question because we still have
Speaker 9: this dynamic of nothing has been done to improve the deficit.
Speaker 9: We still have increasing term premiums and a lot of
Speaker 9: treasury issuing, so the curve could easily go a lot steeper.
Speaker 9: So if you're choosing your long duration position, we still
Speaker 9: like concentrating that more towards the belly and the front end.
Speaker 9: And what I mean better is choose and fives. But overall,
Speaker 9: this is a bad situation. The Fed's in a terrible situation.
Speaker 9: They have high inflation, but not the good inflation, not
Speaker 9: the demand driven inflation, and they need to cool economy,
Speaker 9: and then they have a terrible growth situation. They should
Speaker 9: be a neutral, They should have been a neutral a
Speaker 9: while ago. So we're watching a policy mistake happen. But
Speaker 9: they're too scared to lower rates when they see scary
Speaker 9: inflation numbers.
Speaker 2: As partly, it's off your remit, but I know you're
Speaker 2: done at Michael's and Santa Monica doing this. I mean
Speaker 2: at TCW, are you modeling in an aggressive FED of
Speaker 2: three and four rate cuts this year? I mean, I
Speaker 2: know it's not your game, but con you're talking about it, Jamie,
Speaker 2: are you doing that?
Speaker 9: It is my game. I love telling people what to do,
Speaker 9: whether it's my job or not.
Speaker 3: So I'm shocked me.
Speaker 9: So we think these FED cuts it makes sense that
Speaker 9: they're priced or they're pushed out the curve, but we don't.
Speaker 9: They'll be priced out. So as the FED cuts get
Speaker 9: pushed a little bit further away, they're going to have
Speaker 9: to cut more and faster. So if they had been
Speaker 9: a little bit more conservative and kind of gotten back
Speaker 9: to neutral when we think they probably should have, which
Speaker 9: was over the past few months, then they wouldn't have
Speaker 9: had to cut as much. But they're going to wait.
Speaker 9: They're going to be too high for too long, and
Speaker 9: then it's going to be a larger than expected problem
Speaker 9: and they'll have to cut more. That's why we keep
Speaker 9: a little bit of our long even though we are
Speaker 9: lightning up.
Speaker 2: Jamie Patton, TCW, thank you so much from the West
Speaker 2: Coast early in our morning.
Speaker 3: Really really appreciate that.
Speaker 1: You're listening to the Bloomberg surveillance podcast. Catch us live
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Speaker 3: We're thrilled that Dan Ives could be with us today.
Speaker 2: Is not on a plane, not in a hotel room somewhere,
Speaker 2: not watching Penn State in the Frozen four. He's here everyone, Dan,
Speaker 2: I'm gonna cut to the chase. You and I have
Speaker 2: been here before. Is the opportunity still there in mag
Speaker 2: seven for the brave to acquire shares this morning?
Speaker 10: Look, I'd say yes and no. I mean, like tom
Speaker 10: My view is like twenty five years doing this, and
Speaker 10: we've told about this for decades. Here these are his opportunities.
Speaker 10: In my long term view of tech, Trump tariff is
Speaker 10: an economic armageddon if it stays in its current form.
Speaker 10: In my view, it changes the whole tech paradigm from
Speaker 10: a supply chain and from a growth perspective. And I
Speaker 10: think that right now is the scary thing for the
Speaker 10: long term. Of course, I continue to be bullish in
Speaker 10: terms of these, but look, this is a black swan
Speaker 10: event what he single handedly has done on a self
Speaker 10: inflicted way.
Speaker 5: Dan, I mean, what do you hear from the folks
Speaker 5: in Silicon Valley these days, because I mean made more
Speaker 5: of a pilgrimage to support this president than Silicon Valley
Speaker 5: going against you know, decades of history. They're not getting
Speaker 5: much payback, are they?
Speaker 10: And I think that's to me like talking to tech
Speaker 10: executives the last four to eight hours, that's just got
Speaker 10: me more concerned because when you talk to them, if
Speaker 10: there's some sort of broader plan and instead like they're
Speaker 10: asking you what you think and they look, I come.
Speaker 10: I don't think companies are gonna I don't think Apple's
Speaker 10: gonna give guidance on it his call. I don't think
Speaker 10: a lot of these techicoms are going to give guidance
Speaker 10: because it is that uncertain, because the reality is, like god,
Speaker 10: fifty four percent increase that would destruct ten percent of demand.
Speaker 2: Stillantis is out there with layoffs and windsor Ontario. I
Speaker 2: think two three days ago, I got Microsoft at two
Speaker 2: hundred and twenty eight thousand employees. Are you looking where
Speaker 2: Nadella and his team? Look, these are the cards this
Speaker 2: president delld us We're laying off six percent of our people,
Speaker 2: thirteen thousand people.
Speaker 10: You have to assume and the assumption is it. It
Speaker 10: starts with this is some form of negotiation.
Speaker 3: Okay, conversation.
Speaker 10: Again, if you if you take these tariff at there,
Speaker 10: the way that they're laid out in that chart that
Speaker 10: is really viewed as a comedy show, then it's an
Speaker 10: economic arm Again. If the tariff's staining, it's coming forward,
Speaker 10: and to some extent, I you're essentially including Silicon Valley
Speaker 10: based on from a from a cost and supply chain perspective.
Speaker 10: The reason layoffs won't happen is these tech companies gonna Okay,
Speaker 10: let's see the next few months. Let's ultimately see how
Speaker 10: the games played if this actually holds. And then but
Speaker 10: if we're if we have these tariffs in place by
Speaker 10: the summer, it's all bets off.
Speaker 5: So I think about some of these tech investments, says
Speaker 5: A big ticket items, long term investments. I guess one
Speaker 5: of the concerns is, boy, if I'm just an executive
Speaker 5: in general and I'm thinking about making a multi million
Speaker 5: dollars one hundred million dollar investment in some tech hardware software,
Speaker 5: I'm going to sit back here.
Speaker 3: The stuff, the stuffhob ibo is delayed.
Speaker 5: Yeah, I mean, just as one, I'm just gonna step
Speaker 5: back and self fulfilling profits.
Speaker 10: Yeah, and that and that's the word. And Tom I
Speaker 10: would say, for every month that these tariffs are in place,
Speaker 10: you take off another ten percent of demand in the year.
Speaker 10: So right now you already have ten percent in terms
Speaker 10: of what's already gonna be baked in. Ten percent number
Speaker 10: cuts across the board.
Speaker 2: Mark from Los Angeles femails and Susstan ives about Apple.
Speaker 2: We'll do that, Mark German right now. Okay, let's double
Speaker 2: barrel it. They they're addicted to share buybacks. They cleared
Speaker 2: out with this plunge. They come out, they release a
Speaker 2: new announcement of share buybacks and they got as I
Speaker 2: mentioned to Kathy Jones, they have to come out and
Speaker 2: issue that now.
Speaker 3: Well, I.
Speaker 10: Do agree on that front that they'll they'll definitely go
Speaker 10: down that route. My thing is that it would take
Speaker 10: them three years to take ten percent of the supply
Speaker 10: chain move it to the U and now it costs
Speaker 10: sort happen. So the point is it's it's right now
Speaker 10: about the supply chain and what this is ultimately doing.
Speaker 10: But that's why for Apple, if you're a long term
Speaker 10: shareholder and a long term investor, you own it if
Speaker 10: you're a trader right now, it's a cleer to go low.
Speaker 2: Paul and I are expert analyzing Chinese supply chain dynamics
Speaker 2: from where the Barrett michaels, So I think that's where
Speaker 2: we do it. You actually go to China. What will
Speaker 2: Tim Cook do in the tip for tap between US
Speaker 2: and China? Does he increase labor in China?
Speaker 3: Does he pull away? Do they push Apple out?
Speaker 10: So first, a pushing Apple out is basically impossible. Remember
Speaker 10: Apple at peak's second biggest employer in China when it
Speaker 10: comes to iPhone demand. Look, the reality is that for
Speaker 10: Cook and ironqicly the everything they moved to Vietnam, it's
Speaker 10: actually hired tariff than China. So clearly this is where
Speaker 10: that ten percent politician Cooke, nine percent CEO maybe goes
Speaker 10: to fifty percent politics fifty percent. You know what types
Speaker 10: of ultimately exemptions do they get in terms of what
Speaker 10: they did in the US From an investment perspective. Munusian
Speaker 10: talked about that as well. Do they get some sort
Speaker 10: of breaks? And I think for Apple it just comes
Speaker 10: down that they are not. Cook is not gonna change
Speaker 10: the long term structural footprint of Apple because of these
Speaker 10: head scratching tariffs the way they were laid out, and
Speaker 10: ultimately to see how they play out.
Speaker 3: Dan Ies with Wedbush Kathy Jones.
Speaker 2: Earlier from Charles shap we welcome all of you on
Speaker 2: your community across the nation, particular, good morning to ninety
Speaker 2: nine and one FM and Washington heads spinning down there.
Speaker 2: So sender Grassley of Iowa really fired up yesterday over
Speaker 2: what are we gonna.
Speaker 3: Do about this? What we're gonna do is bring you
Speaker 3: the conversation on this job day.
Speaker 2: Claudia Samnil Dutta with this later Kate Moore in the
Speaker 2: nine o'clock hour, Paul swhen he continues with ives of webbush.
Speaker 5: Dan it realistically, when you talk to the folks in
Speaker 5: Silicon Valley, what if any can production and the tech
Speaker 5: supply chain can be brought back to the US in reality.
Speaker 10: In the next two to three years basically two percent.
Speaker 10: Now I'm saying what you talk right, It would take
Speaker 10: four to five years to build a factory from a
Speaker 10: cost structure. iPhones if you built them in the US
Speaker 10: would cost thirty five hundred dollars.
Speaker 3: Okay, you know what I'm saying.
Speaker 10: So the point is like every time, Like you know,
Speaker 10: investors are when I'm in DC a few weeks so
Speaker 10: that we get we need to buy them here, I'm like, well, look,
Speaker 10: the reality is is that that basically burnt, like that
Speaker 10: would basically be imploding Silicon Valley the way that it's
Speaker 10: built to the core of the last forty years.
Speaker 2: Okay, over the weekend, they're gonna ca then the market
Speaker 2: right now, future soaks down one thousand, make the Dow
Speaker 2: futures down two thousand points.
Speaker 3: We're under forty thousand.
Speaker 2: Wow on Dow futures, the vics thirty nine point one seven,
Speaker 2: the ten year yield we mentioned with Kathy comes in.
Speaker 2: Where are we My eyes are failing me on a Friday.
Speaker 2: It's Friday, right, yeah, three point eight seven, said Dan,
Speaker 2: And I swear this this is going to get.
Speaker 3: Fixed over the weekend.
Speaker 2: Where is the ives' greatest conviction single stock? Where are
Speaker 2: you buying an odlock for DNA eight thousand?
Speaker 10: It's it's Apple and the media. I mean the two needs,
Speaker 10: Like if you have a horizon over three to six months,
Speaker 10: Apple and the media. Because the view is here is
Speaker 10: that what's being baked into these stocks is already a recession.
Speaker 10: And already ten to fifteen percent numbers cuts. So if
Speaker 10: you get any deal, those are the names right here.
Speaker 2: What's the elasticity or revenue for Apple? I mean it's
Speaker 2: been single digit. The Apple haters, the people that you know,
Speaker 2: there's people that hate Dana ives can't imagine.
Speaker 3: It's uncas, there's complete Twitter's wardrobe.
Speaker 5: I'm a net camm, it's.
Speaker 2: You know, I gotta get this in before we get
Speaker 2: to Penn State hockey. Okay, damn, this is critical. They
Speaker 2: don't have revenue growth. That's almost to their advantage now
Speaker 2: that they're managing for cash flow.
Speaker 10: And then more and more everything you've is talked about.
Speaker 10: Now more of that cash flow, because remember that's gonna
Speaker 10: dramatically change now that valuation that that gives it a
Speaker 10: beast case in what I believe, Afloor. I mean, I
Speaker 10: think where Apple's trading here, we start to be begging
Speaker 10: in almost a massive number cut relative to where the
Speaker 10: stock's gonna open.
Speaker 2: Apple done five percent, Video down four percent. I don't care, Dan,
Speaker 2: I is the only reason you're here. Penn State hockey
Speaker 2: frozen four How they get there so quickly?
Speaker 10: I mean, look, guy Gadowski and that team you know,
Speaker 10: Aiden Fink. I mean, if you look at it, I mean,
Speaker 10: Penn State hockey, if I've been one of the best stories,
Speaker 10: not just now Canadian. I mean there's a lot of
Speaker 10: Canadian but but but but you do have a lot
Speaker 10: of us as well. And I think I think they're
Speaker 10: gonna They're gonna make some noise.
Speaker 5: And the wrestling team won yet again.
Speaker 3: It's an epic.
Speaker 10: Look, it's an epic year for Penn's across the board
Speaker 10: when it comes to sports.
Speaker 2: But the football, the basketball they killed win the Big Game,
Speaker 2: just Frozen four at the same disease.
Speaker 10: But it's the start of ultimately, first I think I think,
Speaker 10: I think we're gonna coming back. We know, I think
Speaker 10: we ultimately, I think we can win this Frozen four.
Speaker 10: And I think Keen when we talked, Once the tariffs
Speaker 10: get lifted, and then we're gonna be talking about Penzi
Speaker 10: twenty twenty five national champ.
Speaker 2: Can you imagine the elasticity if there's somehow this tariff
Speaker 2: madness is listed.
Speaker 3: I mean, but if we've never seen.
Speaker 10: This, it will be I mean historical, but you know,
Speaker 10: right now continues to be a science experiment.
Speaker 3: Did you see when the market craters.
Speaker 5: He tones down the color exactly so real quick you
Speaker 5: say this tech party. This ends at four am. It
Speaker 5: feels like the parents came in and broke up the party.
Speaker 10: Year look, Trump basically came broke up the party. Cops
Speaker 10: came and Louise for now, the party is off because
Speaker 10: Trump broke it up.
Speaker 3: Dan, I thank you so much for coming in dinnis Web.
Speaker 1: But this is the Bloomberg Surveillance Podcast. Listen live each
Speaker 1: weekday starting at seven am Eastern on Apple Corplay and
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Speaker 1: listen live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa, Play Bloomberg eleven thirty.
Speaker 3: Many talk, some do.
Speaker 2: David Blanchflower changed Atlantic economics out of England decades ago
Speaker 2: with a thin book out of Mit Press called The
Speaker 2: Wage Curve. Everybody had to stop and read it. And
Speaker 2: it was about the dynamics of labor, the dynamics of
Speaker 2: our wage, our inflation adjusted wage. The thing about Blancheflower
Speaker 2: that's great is up in the sunny climbs of Hanover.
Speaker 2: He could have retired like fifteen years ago. Instead we're
Speaker 2: inflicted with Blancheflower. Bryson, which is him continuing his granular
Speaker 2: research forward on the American labor economy. Professor Blanchflower, thank
Speaker 2: you for joining us as we get out to the
Speaker 2: jobs report with Claudia sam and Neil Dada.
Speaker 3: David Blanchflower, how bad is it?
Speaker 11: Well, it's pretty bad. Take my role as well as
Speaker 11: the central banker. I think that the central bankers will
Speaker 11: be sitting there with unbelievable amounts of uncertainty thinking, you know,
Speaker 11: this is catching a falling knife. It does look like chaos,
Speaker 11: and it's unclear where this is going. Certainly we're going
Speaker 11: to see some stuff in the labor market, and I
Speaker 11: suspect this will be the you.
Speaker 8: Know, the tip at the top of the cliff.
Speaker 11: Probably, I think, you know, think about if you were
Speaker 11: a central banker. On the one hand, you're worried about
Speaker 11: inflation coming, so you think, oh, with that, I have
Speaker 11: to raise rates. You're also sitting there seeing the probability
Speaker 11: of a global recession coming and you think, well, if
Speaker 11: that's the case, I have to cut rates. So we're
Speaker 11: really sitting here sitting waiting, watching seeing how far this goes,
Speaker 11: and the and the and the stop for as you
Speaker 11: were just talking about don't look good. So I think
Speaker 11: this is chaos. I think it's there's no sense in
Speaker 11: which this makes any sense, and why you would want
Speaker 11: to impose an enormous taxing.
Speaker 8: He's on the American public. I don't know.
Speaker 2: What's so important here, folks. And again this formula is
Speaker 2: trotting out thanks to Steve Ratner over with Joe and Mika,
Speaker 2: who had did a really nice explanation of the absolute
Speaker 2: idiocy of this formula. The one who figured out that
Speaker 2: idiocy was James Siriricki of The New Yorker magazine and
Speaker 2: now at the Atlantic.
Speaker 3: Here's what Siri Ricky says about David blanche Flower.
Speaker 2: This is akin to the quote the wisdom of crowds,
Speaker 2: whereby the aggregate predictions of non experts often produce more
Speaker 2: accurate assessments.
Speaker 3: David blanche Flower, what.
Speaker 2: Did the plain and simple non economist Americans say right now?
Speaker 11: Well, if you so, I've spent on Claudias, I'm gonna
Speaker 11: have on in a while.
Speaker 8: She's been really good at this stuff too.
Speaker 11: But if you try and think about predicting downturns, and
Speaker 11: for the technically minded, I look at what did the
Speaker 11: NBR business Cycle Dating Committee, CORP recession. So the question is,
Speaker 11: at the moment you're sitting at, what is the predictor?
Speaker 8: And we'll go with two. The best predictors actually.
Speaker 11: Are the essentially consumer expectations in disease.
Speaker 8: Are they below eighty?
Speaker 11: And the answer is both the Conference Board and Michigan
Speaker 11: surveys are looking.
Speaker 8: In horrendous space. Seven of the eighth states.
Speaker 11: That they report for a forecast in recession, and if
Speaker 11: you look back to twenty this was exactly what you
Speaker 11: would see. But the second one, actually Tom that I'm
Speaker 11: really looking at, is are there success two successive months
Speaker 11: of employment declines either on the household account or on
Speaker 11: the establishment account. So we saw a positive last month
Speaker 11: on the establishment account, but we saw minus five eight
Speaker 11: eight on the household account, So are be watching that
Speaker 11: very hard? Does that come in today negative? If it does,
Speaker 11: that's a big predictor of recession. So I think the
Speaker 11: likelihood is probably that the NBR will perhaps date a
Speaker 11: starting recession in April twenty twenty five, perhaps may, but
Speaker 11: I think we'll see that now if the data comes
Speaker 11: into day anything like that, the consumer confidence dat has collapsed.
Speaker 8: I mean, that's where we are I think.
Speaker 3: And we'll have that for you in twenty one minutes.
Speaker 3: Paul Professor.
Speaker 5: I know when we spoke to you last in November,
Speaker 5: we're talking about tariffs. You said, the big questions are
Speaker 5: what do other countries? What are they going to do?
Speaker 5: It appears that people aren't going to take this lying down.
Speaker 5: There's gonna be some retaliatory tariffs here of substance. What
Speaker 5: does that mean?
Speaker 3: Right?
Speaker 11: Well, that's yeah, that's right. Obviously we've just seen China responding.
Speaker 11: And actually I had a conversation with a guest you
Speaker 11: had on yesterday. We chatted last night, which is my
Speaker 11: colleague Doug Owin, and his view was actually that two
Speaker 11: weeks ago, his view was that everywhere would have actually
Speaker 11: responded like for like, and his view is this is
Speaker 11: also chaotic.
Speaker 8: That maybe what you'll see.
Speaker 11: I mean, obviously China's responded, but maybe some countries will
Speaker 11: actually sit.
Speaker 8: And wait and watch look rather than.
Speaker 11: Immediately respond, perhaps because Trump will step back. Perhaps we'll
Speaker 11: see more evidence coming. So I think the answer is
Speaker 11: potentially you'll see many more places responding, but maybe for
Speaker 11: now all the sensible thing. You go back to our
Speaker 11: conversation a minute ago, abouts you know what's coming. Where
Speaker 11: are we? It might be that other place. I think
Speaker 11: the UK's example, Japan's an example. They're going to sit
Speaker 11: and take a breath and think in the sense that, Okay,
Speaker 11: if you did it, you don't have to do it
Speaker 11: this week. China's done it, and that's a really big deal.
Speaker 11: But you know, this is really huge amounts of uncertainty,
Speaker 11: and think about what the consequences of that are. Firms
Speaker 11: aren't going to invest us top building plans in the
Speaker 11: United States because of the chaos. Central banks don't know
Speaker 11: what to do because there's great uncertainty. So I think
Speaker 11: we'll see a little bit of let's sit back and
Speaker 11: wait and decide what's the most appropriate. But that's Doug
Speaker 11: Owen's view, and I think it's mine.
Speaker 8: Too, Professor.
Speaker 5: I think we're starting to hear and this coming earning
Speaker 5: cycle is going to be very interesting to see which
Speaker 5: companies provide guidance in which companies withhold right guidance here,
Speaker 5: because it feels like not just consumers, but companies are
Speaker 5: also sitting on their hands and waiting.
Speaker 11: Well they are, I mean, I was, I was actually
Speaker 11: just the thing came across my terminal, just a minute
Speaker 11: ago from the UK Institute of Directors, and they quite interesting.
Speaker 8: They immediately did a survey of six hundred odd members
Speaker 8: of the.
Speaker 11: Institute of Directors and seventy percent of them say that
Speaker 11: they expect their profits are going to fall as a result.
Speaker 11: So obviously you know firms are going to give a
Speaker 11: different vidy. I mean, if seventy percent of them, I
Speaker 11: think this is going to have a profit effect on them,
Speaker 11: They're going to sit and wait and watch. But you
Speaker 11: might imagine they're going to impact employment, it's going to
Speaker 11: impact investment. And I'm just going a couple of quick
Speaker 11: things just so listeners understand. Think are the basic I
Speaker 11: mean blandram Erwin teach intro macro, what do we teach?
Speaker 8: National income is.
Speaker 11: Decided by C plus I plus G right consumption plus
Speaker 11: investment plus government. Well, the situation we're in now, consumer
Speaker 11: spending's falling and sentiments declining, investment intentions of declining, and
Speaker 11: the government's cutting spending. So how do we get anything
Speaker 11: other declines in GDP? The only issue I think is
Speaker 11: how big of those declines going to be. Are they
Speaker 11: just going to reduce the expected to grow from to
Speaker 11: one or is it going to go negative, and I
Speaker 11: think that's where we are. Hard to predict anything, but
Speaker 11: it all looks like the wrists of to the downside, right,
Speaker 11: and this government has to calm nerves.
Speaker 2: Okay, well, the folks of Vignette here, so Blancheflower calls
Speaker 2: me up. I'm lecturing the intro Macro at Dartmouth. There's
Speaker 2: a bunch of marketing marks going.
Speaker 3: Who's the cloud the bowtie?
Speaker 2: And I look down in the aisle and Dug Irwin
Speaker 2: staring at me, sitting on the floor of the isles,
Speaker 2: and I've got an ex philosophical Okay, David, you've.
Speaker 3: Been through this with the Bank of England. It's about
Speaker 3: confidence and trust. I mentioned this yesterday.
Speaker 2: How close are we to I'm going to call as
Speaker 2: a generalization a clement aptly disinflationary United Kingdom analog.
Speaker 8: Well, I don't know the answer to that.
Speaker 11: I mean, think about I think a good analogy I
Speaker 11: thought you would ask something like that, And a good
Speaker 11: analogy I think now is actually to look back at
Speaker 11: what Ben Bernanke just did. Yankee Ben Bernanke went to
Speaker 11: the UK to the Bank of Being in the said
Speaker 11: let's think about how you modeled it and actually today
Speaker 11: these models essentially are thrown out of the window. And
Speaker 11: what you're going to have to do, and firms are
Speaker 11: going to do it, and central banks are going to
Speaker 11: do it. They're going to set up scenarios tom They're
Speaker 11: going to have scenario one, everyone retaliates, scenario two, Trump
Speaker 11: backs off, and you're going to sit and try and
Speaker 11: map out those scenarios and then try and think which
Speaker 11: of them is the most like Because you can't run
Speaker 11: a forecasting model, we have no prior data to look
Speaker 11: at this. So I think I do think the advice
Speaker 11: that I would give people is, you know, wait what,
Speaker 11: let's see where we Let's see when this thing bottoms out.
Speaker 11: Think about if people say you're going to buy on,
Speaker 11: buy on the decline, buy at the bottom, Well, we
Speaker 11: don't know where the bottom is. So I think I
Speaker 11: think that's the logic, and I think we're seeing that.
Speaker 11: I mean, you know, you guys are great at tracking
Speaker 11: what's going on. You know, a falling night, you just
Speaker 11: wait for it the fall, And I think that's where
Speaker 11: we are.
Speaker 2: David Blanchelard, thank you so much for joining us the
Speaker 2: honor evading Irwin and Black Blanche back to Bath in
Speaker 2: this crisis really helps. He is at Dartmouth College.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple, Corplay and Android
Speaker 1: Otto with the Bloomberg Business app. You can also watch
Speaker 1: us live every weekday on YouTube and always on the
Speaker 1: Bloomberg terminal.
Speaker 2: Gouda mccunne joins us now with Yale with all of
Speaker 2: his work is wonderful book picking presidents and this weekend
Speaker 2: we need an applelogue or I need a chapter seven
Speaker 2: year where do we go from here? As the conclusion professor,
Speaker 2: where do we go from here? After Rose Garden festivities
Speaker 2: in the last forty eight hours.
Speaker 12: This is probably the single largest self inflicted economic foreign
Speaker 12: economic policy failure of any of our lifetimes. Just no
Speaker 12: matter how far back you go, so we're in uncharted territory.
Speaker 12: The thing that really strikes me is to an extent
Speaker 12: that we have not seen before with Trump, even in
Speaker 12: the first Trump administration, he just seems to be immune.
Speaker 12: He's not listening to other people, right, He's not listening
Speaker 12: to the feedback from the markets. He just seems to
Speaker 12: be immune to that. We can speculate as to what
Speaker 12: the reasons for that might be, but my guess is
Speaker 12: it's going to take him longer to back off the
Speaker 12: tariffs than people expect, and people who are anticipating the
Speaker 12: same sort of like we're doing this, we're not doing
Speaker 12: this back and forth. I wouldn't want to take that bet.
Speaker 5: Even before the tariffs, we've had this market kind of
Speaker 5: reflect on some of the economic policies here. If you
Speaker 5: just look at the stock market performance here to date
Speaker 5: in the US in the first quarter was dramatically blow
Speaker 5: the rest of the world, and that rarely, if ever, happens.
Speaker 5: Are you surprised so the market has spoken, Are you
Speaker 5: surprised that members of Congress have not spoken about tariffs
Speaker 5: or perhaps some other policies.
Speaker 12: So I'm not surprised yet. I will be surprised if
Speaker 12: this keeps going for a few months. Right now, the
Speaker 12: Republican Party is still completely unified behind Trump, and Republican
Speaker 12: representatives in the House and Senate care most about that.
Speaker 12: But this is going to start to hit and I
Speaker 12: would think the biggest way in which the pressure will
Speaker 12: start to ramp up is they're working on these tax cuts.
Speaker 12: They want to do massive tax cuts again, despite you know,
Speaker 12: obviously the deficit consequences of that, and those tax cuts
Speaker 12: are focused again disproportionately on the wealthy. I think Democrats
Speaker 12: are kind of going around saying, hey, if you guys
Speaker 12: want to erase, do the largest tax increase in human
Speaker 12: history targeted primarily on the poor and middle class in
Speaker 12: order to pay for tax cuts for the wealthy. The
Speaker 12: politics of that look pretty bad to me, even if
Speaker 12: you're a Democrat, a Republican in a red state.
Speaker 2: Up the script. We can do this with god. A mccundam.
Speaker 2: Now you're coming from Boston. For those of you on radio,
Speaker 2: we've got the gorgeous backdrop. It looks like a Spielberg movie.
Speaker 2: Said of Beacon Hill, the Charles River over to two
Speaker 2: universities of suspectability, Professor mccundac, I mean, as simple as
Speaker 2: I can, President Trump is against the people dining at
Speaker 2: Number nine Park on Beacon Hill. They're against the fancy
Speaker 2: people of Boston and coast to coast as well. You
Speaker 2: say the Republicans are going to stay with him, John
Speaker 2: Burn Murdoch in the Ft says they're already walking away.
Speaker 2: Do you anticipate or is there a historical analog where
Speaker 2: the Republicans walk away from Donald Trump.
Speaker 12: So there's a possibility. So what you saw Andrew Johnson
Speaker 12: and the eighteen sixties where the Republican Party turned completely
Speaker 12: on him and it was the Democrats who were his
Speaker 12: base of support. But for Trump, it is impossible to
Speaker 12: overstate the charismatic hole that Donald Trump has on the
Speaker 12: Republican base.
Speaker 3: Right.
Speaker 12: For whatever criticisms you might make of Trump, his skill
Speaker 12: at crafting that is just unparalleled in American history. And
Speaker 12: if you're a Republican Conasonan whose basic concern is getting reelected,
Speaker 12: that's going to get really hard.
Speaker 8: That being said, maybe.
Speaker 12: I'm being optimistic here, but I think there is a
Speaker 12: core of Republicans who are looking at the damage, and
Speaker 12: as much in the economic damage, they're looking at the
Speaker 12: catastrophic collapse in our physician in the world where essentially
Speaker 12: all of our allies are saying you know, I mean
Speaker 12: not behind the scenes, right, they're saying on the record.
Speaker 12: They're saying things like you're better off allying with China
Speaker 12: than the United States because at least the Chinese are predictable.
Speaker 10: Right.
Speaker 12: That is also got a bit pressure on at least
Speaker 12: those Republicans who care a lot about foreign policy, and
Speaker 12: that's just something that we've never seen before, and the
Speaker 12: consequences of it are going to keep rippling out for
Speaker 12: years and decades. If Trump vanished tomorrow, we would still
Speaker 12: be dealing with this for a generation.
Speaker 2: That's one of the most amazing statements of the week.
Speaker 2: You're saying, Profet sir, if President, if we had President Advance, whatever,
Speaker 2: if President Trump removed tomorrow, this continues.
Speaker 12: So I mean, I'm not saying the economic policy might change,
Speaker 12: but the foreign policy effects will continue. So let's put
Speaker 12: this differently. Right, So, I used to advise the Chief
Speaker 12: of Naval Operations and you know, the senior military, and
Speaker 12: so right now there is the Polish or the Japanese
Speaker 12: version of me who's going and advising their Ministry Defense
Speaker 12: and saying, we have wagered the existence of our country
Speaker 12: on the American nuclear umbrella for you know, quite a
Speaker 12: long in the Japanese cases, nineteen forty five in the
Speaker 12: poll since the end of the Cold War. And clearly
Speaker 12: that is not possible because even if Trump weren't here,
Speaker 12: the Americans clearly like to elect people like this. So
Speaker 12: we need the nuclear weapons of our own because it
Speaker 12: would be irresponsible not to have them, and that's not speculation.
Speaker 12: The President of Poland just said Poland should probably look
Speaker 12: at acquiring nuclear weapons because the Americans are no longer reliable.
Speaker 12: The consequence of that are going to be kept failing forever.
Speaker 12: Because if I were Japanese advising the Japanese Ministry Defense,
Speaker 12: I'd say it is irresponsible not to do this.
Speaker 5: So again, I guess the question is, this is kind
Speaker 5: of where we are again. Do you expect it at
Speaker 5: any point pushback from some members of Congress, because it
Speaker 5: does not appear that there's anything within the administration to check, if.
Speaker 12: You will, No, And I think the thing that might
Speaker 12: have started to break it was the Tuesday elections where
Speaker 12: the Republicans you know, loost in Wisconsin and we're closer
Speaker 12: than they should have been in Florida, despite the massive
Speaker 12: intervention of Elon Muskin Wisconsin, I mean sort of. The
Speaker 12: joke I was hearing was that the inflation has gotten
Speaker 12: so bad that the wealthiest man in America can't buy
Speaker 12: some a state Supreme Court seat anymore. And a lot
Speaker 12: of Republicans were being held in check by the fear
Speaker 12: essentially that Musk in particular would pay for primaries against them.
Speaker 12: If he is no longer able or willing to do that,
Speaker 12: or if his effectiveness is just decreased, that might free
Speaker 12: up some space to maneuver. But I wouldn't expect it
Speaker 12: to happen fast. The bond here is really tight.
Speaker 2: I mean, I look forward here and let's just simplistically
Speaker 2: say this, and I said this this morning post, I'm
Speaker 2: repeating myself at the Rose Garden. Did President Trump lose
Speaker 2: the House?
Speaker 12: So my guess is that just simple regression to the
Speaker 12: mean And the fact that the two bases of the
Speaker 12: parties have switched so Democrats now have high propensity to
Speaker 12: vote voters and Republicans have low propensity to vote probably
Speaker 12: meant that Trump lost the House the day he won
Speaker 12: the November election. The question now is is this going
Speaker 12: to be so bad that the Democrats will be able
Speaker 12: to keep the House for multiple cycles. The last time that,
Speaker 12: as you know, you're hearing Republicans say this, you know,
Speaker 12: not for attribution but on the record, but where they're
Speaker 12: actually quoted. The last time we saw tariffs like this,
Speaker 12: Republicans lost the House for sixty years. I don't anticipate
Speaker 12: that happening. But the politics of this, like it's particular,
Speaker 12: it will be striking right. The people who will suffer most,
Speaker 12: both from the tariffs themselves and from the responses to
Speaker 12: the tariffs by other countries, are Republican voters.
Speaker 2: Professor Dinner tonight at Number nine Park, Thank you so much.
Speaker 2: Look for Lakanda with us from Boston.
Speaker 3: Of course's affiliation Modio.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: We need to break the newspapers.
Speaker 13: Okay, well I'm not going to give it to you
Speaker 13: because we're talking tariffs. I know, just when you wanted.
Speaker 13: This one's in the journal. So it's an interesting look
Speaker 13: because it's talking about how President Trump's tariffs on China
Speaker 13: threatened to create this new problem for global economy. They
Speaker 13: talked about this four hundred billion dollar surge of Chinese
Speaker 13: goods that are now going to be looking for new markets.
Speaker 13: And the problem is that the global markets already filled
Speaker 13: with these China made goods. So then you have the
Speaker 13: domino effect, and that's what it talks about about other
Speaker 13: major exporters like Vietnam, South Korea, Japan, they could see
Speaker 13: those similar issues. And economics are saying how the trade
Speaker 13: wars could escalate because of this, and one of them
Speaker 13: actually saying that the real fireworks are yet to come.
Speaker 13: So they're saying that this whole domino effect could start coming.
Speaker 13: Chinese imports slap with that thirty four percent duty. But
Speaker 13: this morning we heard also that China is hitting back
Speaker 13: saying it's going to impose a thirty percent imports from
Speaker 13: the US soybets among.
Speaker 5: Yeah, so farmers, Okay, I get from mister Trump. Then
Speaker 5: look at the direct.
Speaker 3: A check for mister Trump. I don't get it. I
Speaker 3: don't get it.
Speaker 2: Anybody in the control room get it. Can you get
Speaker 2: the soybetan dynamics?
Speaker 13: It does not ken.
Speaker 3: Doesn't need to doesn't tofu.
Speaker 13: Next, Okay, so we're sticking with towers. Were going to
Speaker 13: the grocery aisle right.
Speaker 8: Here we go.
Speaker 13: What's going to cost you more at the grocery store? Okay?
Speaker 13: Because of this all right, parts of the store where
Speaker 13: the infant has to move fast, that's what's going to
Speaker 13: hit the hardest. Like the prototyle. You have bananas coming
Speaker 13: from Gus, right, grapes coming from Peru. Okay, those are
Speaker 13: going to cost you more. Sugar coffee too. On top
Speaker 13: of it, seafood, you know you can't get the nice
Speaker 13: fresh seafood is going to cost you a little bit more.
Speaker 13: Now they're saying that tariffs are going to drive up
Speaker 13: the cost even for Paul's favorite, those private label products,
Speaker 13: those cheaper ones are even going to start to come up.
Speaker 13: And the opportunity for price gouging they also talked about,
Speaker 13: which was interesting, is that they think that's going to
Speaker 13: start to get higher too as people start to take
Speaker 13: advantage of it a little bit.
Speaker 3: Are they going to eat the tariff in their margin?
Speaker 5: That's of course I don't see, And I remembers companies maybe, yeah,
Speaker 5: I just I remember back from the pandemic. I mean,
Speaker 5: we heard most of these companies, consumer packaging good companies
Speaker 5: said that they were able to pass along most of
Speaker 5: the pricing creases to consumer and we certainly felt that
Speaker 5: out that supermarket as consumers. So whether they can do
Speaker 5: it again, I don't know, but boy, it's I don't
Speaker 5: know this.
Speaker 2: You're going to go from three shopping cards to seven
Speaker 2: shopping cards this week in at cost.
Speaker 3: I'm gonna start to purge.
Speaker 13: I'm gonna have to click my cart and like I've
Speaker 13: been holding onto the card, I got it empty it
Speaker 13: now one more?
Speaker 3: What do you have?
Speaker 7: Okay?
Speaker 13: This was from the Boston Globe. It's about the cost
Speaker 13: of education getting more expensive, grocerries getting expensive, course of
Speaker 13: education getting expensive. New England, right, you know it has
Speaker 13: some of the most prestigious universities, also the most expective
Speaker 13: you have Wellesley College. It's overall annual costs for undergraduates
Speaker 13: are passing one hundred thousand dollars in September. Crazy, just
Speaker 13: over sixty nine thousand of that is tuition, so you
Speaker 13: have like Roome and Board in their textbooks, transportation, things
Speaker 13: like that. But it sounds like other private schools they're
Speaker 13: really not far behind, because if you look at Harvard,
Speaker 13: Boston College, Tufts University, they're going to be well above
Speaker 13: ninety thousand next year. So it's just this thought of
Speaker 13: the prices of colleges keep on going from most schools
Speaker 13: in New England to actually total cost rose anywhere from
Speaker 13: three to five percent last year.
Speaker 3: That's one can afford.
Speaker 2: It is the picture for the Red Sox. I just
Speaker 2: signed for a million zillion dollars. What's interesting is a
Speaker 2: single sentence in that Boston Globe article that they see
Speaker 2: no lessening of their cale.
Speaker 13: The incoming class is going to be the largest ever.
Speaker 13: So people are still enrolling.
Speaker 5: Despite again having been at the board level of a
Speaker 5: couple of places. The cost structure for higher education is
Speaker 5: simply broken.
Speaker 1: It is.
Speaker 5: It is totally does not work. You have to cut
Speaker 5: it in f which you can't do because but that's
Speaker 5: what has to happen.
Speaker 2: We'll have to see and we'll have a much more
Speaker 2: on this thanks to our education team, David Gura doing
Speaker 2: some good work there with Janet Lauren recently Lisa Mateo
Speaker 2: with the newspapers.
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