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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. Errent's with us around

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Speaker 2: the table eron good morning to you, Good morning you send.

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Speaker 2: The bar is a little bit too high. Maybe finnuations

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Speaker 2: are a little bit too stretched straight side around this scene.

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Speaker 3: So I don't think that valuations are actually that stress

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Speaker 3: that stretched at this point, and I think that that

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Speaker 3: might be a little bit of a shock to say.

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Speaker 1: But at the same time, if you look.

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Speaker 3: At we're in the videos trading a couple of years ago,

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Speaker 3: three years ago was treating at about thirty one times

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Speaker 3: I was trading at that same valuation today. That said,

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Speaker 3: there's a lot of attention with the stock up as

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Speaker 3: much as it is year to date, all eyes have

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Speaker 3: been on Navidia, and I actually think that there's opportunities

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Speaker 3: outside of just Navidia to play the AI theme, and

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Speaker 3: so I like looking under the surface more less discovered names.

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Speaker 2: Well, let's get to opportunities in a second. Let's talk

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Speaker 2: about what people have been doing stateside. They've been looking

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Speaker 2: to utilities. They're up eight percent month to day. Yes,

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Speaker 2: when we think about what's at risk a little bit

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Speaker 2: later on this afternoon, is it just the semis, the chips,

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Speaker 2: the whole attack, or is it the whole of this market.

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Speaker 3: Well, so, the utility names that have been really the

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Speaker 3: ones in the firing line for people buying right now

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Speaker 3: have been the ones that are more IPPs, that are

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Speaker 3: more independent producers, that have the ability to really lean

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Speaker 3: into the AI theme, and that's really brought the entire

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Speaker 3: utility market up. I actually think this is one of

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Speaker 3: the sweet spots of the market's utilities have been under

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Speaker 3: owned for a very long time. Throughout most of last year,

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Speaker 3: they've underperformed pretty significantly. I think now with rates starting

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Speaker 3: to peak and with the FED likely starting to cut

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Speaker 3: at least towards a up latter part of this year,

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Speaker 3: utilities will look really attractive. That said, yes, if Navidia

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Speaker 3: goes down today, the whole market's going down, I think

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Speaker 3: that that's probably a short term dip, and you likely

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Speaker 3: buy because right now it's just about playing the expectations

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Speaker 3: of the rollout of the next chip and the GPU

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Speaker 3: for a Navidia versus what we know is going to

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Speaker 3: be a very strong earnings picture over the next couple

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Speaker 3: of years for the company.

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Speaker 4: I'm hoping Jensen Huang actually clarifies how you pronounce the name,

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Speaker 4: because I hear people say Navidia and I hear people

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Speaker 4: say in Nvidia, and it would be very nice for

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Speaker 4: me to decide which one we're actually going to be

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Speaker 4: talking about. You're talking about industrial policy fueling some of

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Speaker 4: these ideas in terms of utilities, in terms of just

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Speaker 4: industrial stocks more generally. Has that trade basically been played

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Speaker 4: in the US, and now it's really outside of this

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Speaker 4: country that you're seeing new industrial policy put into place

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Speaker 4: and not yet fully priced.

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Speaker 3: So the first answer is no, it has not been

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Speaker 3: fully priced in the US yet. With respect to the

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Speaker 3: utility usage, the power usage, the water usage that's going

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Speaker 3: to be needed to fuel the AI revolution that the

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Speaker 3: US is envisioning it's going to acquire a lot more

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Speaker 3: infrastructure and build out into really the picks and the

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Speaker 3: shovels of the AI trade. Who's going to be providing

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Speaker 3: the grid lines, the power lines, the water for the cooling,

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Speaker 3: all of that I think is still very early stages.

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Speaker 3: That said, while the US at least has some focus

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Speaker 3: on this sort of industrial policy going forward, you look

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Speaker 3: at Europe and you look at outside of the US,

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Speaker 3: and we're in very very early stages.

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Speaker 1: So I think we are likely to see a.

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Speaker 3: Lot more investment and a lot more focus from a

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Speaker 3: government side in terms of being able to provide the

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Speaker 3: infrastructure in order to fuel the revolution that AI is coming.

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Speaker 4: Do you have any angst or concern that people are

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Speaker 4: maybe getting a little too excited about infrastructure week on repeat,

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Speaker 4: just this idea. We were talking to Jack Caffrey of

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Speaker 4: JP Morgan earlier this week and he said, it takes

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Speaker 4: years to even get the perm let alone the actual

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Speaker 4: picks in the ground, and people are using this to play.

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Speaker 4: They're using copper as a play, but we're not seeing

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Speaker 4: the economic activity to back it up.

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Speaker 1: It probably won't for a very long time.

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Speaker 4: What's your fear factor with sort of overpricing at this point.

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Speaker 1: So I think that's a huge concern right now.

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Speaker 3: I think that the market in some respects has run

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Speaker 3: ahead of itself on the cyclical impacts that this is

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Speaker 3: going to be, not on the secular so I think

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Speaker 3: they've probably frontloaded a lot of the performance this is

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Speaker 3: likely to play out over not just the next three

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Speaker 3: to five years, but really over the next ten to

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Speaker 3: twenty years. And so yes, I think that there has

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Speaker 3: been a lot of optimism priced in in the short end,

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Speaker 3: but I think that you will see earnings continue to

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Speaker 3: inflect higher. You are starting to see real ramps in

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Speaker 3: some of these new chips which are going to require

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Speaker 3: a lot more power usage over the near term. And

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Speaker 3: the challenges is that there's significant capacity constraints in terms

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Speaker 3: of regulation hurdles in order to build out new power supply,

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Speaker 3: and that's going to create I think prices keep prices

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Speaker 3: elevated over the short term. But certainly there's a lot

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Speaker 3: of sentiment that's positive right now, and so we're being

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Speaker 3: very selective in terms of being dynamic in terms of

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Speaker 3: how we're trading these stocks right now.

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Speaker 5: You like the United States, you're looking at Europe, what

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Speaker 5: about Asia where we see a lot of build out

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Speaker 5: in the semiconductor supply chain and data centers.

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Speaker 3: Korea we think is a sweet spot for the markets

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Speaker 3: right now. It's under owned, It's been you know, bought

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Speaker 3: in the last couple of months, but broadly underperformed pretty

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Speaker 3: significantly Visavi Taiwan over the last year or so. You're

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Speaker 3: starting to see an inflection now in semiconductor exports that

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Speaker 3: just went positive over the last two months coming out

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Speaker 3: of Korea. We think that's a real sweet spot. China,

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Speaker 3: you know, we're cautious on still. Certainly we're starting to

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Speaker 3: see some signs of the tides turning, but we think

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Speaker 3: that China's stabilizing, not necessarily growing, And so I think

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Speaker 3: that that creates a challenge for investors really meaningfully sizing

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Speaker 3: their positions in China, just because the property marked that

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Speaker 3: we think is going to continue to be a fairly

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Speaker 3: significant overhang on overall GDP growth.

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Speaker 2: Looking at twelve months, as you look across the world,

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Speaker 2: who do you think has the most favorable growth policy

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Speaker 2: mix right now?

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Speaker 6: Who do you think it is?

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Speaker 3: So I think that the US still does just because

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Speaker 3: of the fiscal overhang is going to continue to create

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Speaker 3: divergence and economic growth in the US versus the rest

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Speaker 3: of the world. I think you are starting to see

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Speaker 3: an inflection stabilization in Europe, and so that means given

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Speaker 3: how you know, sort of under owned and cheap Europe

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Speaker 3: is you can start to look back into European.

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Speaker 1: Cyclicals in particular.

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Speaker 3: But I think the US by far is still going

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Speaker 3: to be the outperformer with respective growth.

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Speaker 2: As that improves abroad. Do you want to play that

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Speaker 2: through bonds effects or stocks? You mentioned equities? What do

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Speaker 2: I do with fixed income?

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Speaker 3: So with fixed income, I think we like duration here,

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Speaker 3: but really like European, UK Canadian duration. We think that

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Speaker 3: they're going to be much faster in terms of the

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Speaker 3: cutting cycle, and probably more extended in terms of the

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Speaker 3: cutting cycle. Then what's currently priced into market when you

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Speaker 3: really interesting when you look what's priced into markets right

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Speaker 3: now across fixed income, they're all pretty much pricing in

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Speaker 3: the same interest rate path, and so that to us

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Speaker 3: is probably very mistaked.

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Speaker 6: Think that is.

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Speaker 3: I think historically you see convergence in terms of central

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Speaker 3: bank interest rate policy. The FED them stillselves are still

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Speaker 3: expecting this to be a fairly normal FED cutting cycle.

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Speaker 3: Of two hundred and twenty five basis points between now

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Speaker 3: and the end of twenty twenty six, with about seventy

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Speaker 3: five basis points of cuts each year, that's a pretty

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Speaker 3: normal FED cutting cycle. We expect that's likely going to

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Speaker 3: be more of a mid cycle adjustment, and so you're

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Speaker 3: going to probably see about half of those cuts than

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Speaker 3: what the FED is currently anticipating. And I think you're

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Speaker 3: going to get some hint of that in the Summary

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Speaker 3: of Economic Projections.

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Speaker 2: In June June twelve for the SEPA of the FED decision.

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Speaker 2: Sanctaez the inflation print and it's been too long. We

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Speaker 2: haven't done this in person for years. It's going to

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Speaker 2: see it.

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Speaker 1: Thanks you see too.

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Speaker 6: Aaron Brown, a fincove.

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Speaker 2: To break it down to the very best in places,

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Speaker 2: say joining us now, J Briceon of Wells Fargo alongside

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Speaker 2: Adam Posen of the Peterson Institute.

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Speaker 6: Jay, can I come to you first?

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Speaker 2: I want to get your review of the assessment from

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Speaker 2: Governor Wallach just yesterday. Given that inflation print from the

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Speaker 2: last week or so, a C plus grade, would you

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Speaker 2: give it the same grade?

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Speaker 6: You know, B minus C plus.

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Speaker 1: You know.

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Speaker 7: The good thing is it's coming down right, and I

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Speaker 7: think we're going to continue to see that as we

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Speaker 7: go forward. You know, the big sticky part here has

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Speaker 7: been the service sector sort of inflation and what we

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Speaker 7: know about the leading indicators of housing process. If you

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Speaker 7: look at what's happening in rents in the economy, you're

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Speaker 7: going to continue to see disinflation there. And then when

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Speaker 7: you look at wage growth, and when we saw this

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Speaker 7: in the average hourly earnings print earlier this month, wage

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Speaker 7: growth by measured by average earnings only up zero point

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Speaker 7: two percent. If you look at that and you annualize

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Speaker 7: that over the last three months, we're below three percent

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Speaker 7: right now. So all that's pointing in the direction of

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Speaker 7: inflation continuing to receive as we go forward.

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Speaker 2: Adam, to Jay's point, is the evidence building that things

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Speaker 2: truly a downshifting.

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Speaker 8: Not really.

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Speaker 9: We hosted Governor Waller yesterday for the speech, and I

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Speaker 9: think what was striking John was that he was trying

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Speaker 9: to put a dubvish spin on what was actually a

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Speaker 9: pretty hawkish message. I mean, he basically said, I have

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Speaker 9: to see real slowing in the US economy before I

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Speaker 9: want to cut and he ridiculed the fact I think

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Speaker 9: rightly that you know they're parsing now the second decimal

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Speaker 9: place on the inflation print, which I thought was very

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Speaker 9: well taken from Chris. So I think the message is no,

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Speaker 9: they don't want to admit that there's a possibility they'll

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Speaker 9: have to hike, but they are backing off cutting.

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Speaker 4: I love this feed speak is a Rushock test because

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Speaker 4: earlier we had Andrew Hollenhorse saying that it was really

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Speaker 4: aduvish message under the hood, because several could mean anything.

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Speaker 4: You're saying that it's a hawkish message. Are you getting

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Speaker 4: anything from some of the commentary considering that it really

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Speaker 4: is sort of a choose your own adventure.

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Speaker 8: Adam Well I watched before I came over this morning.

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Speaker 9: Least I saw Andrew, and like me and Andrew, I mean,

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Speaker 9: we've been both on the same side on the FED

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Speaker 9: calling that they were going to hike a lot, and

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Speaker 9: then calling they weren't going to cut a lot. And

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Speaker 9: this is my first divergence with him in a while.

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Speaker 9: I think, you look at Mester, you look at Collins,

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Speaker 9: you look at Bostik, you look at Waller, you look

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Speaker 9: at all this fed speak.

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Speaker 8: It's all back to Phillip's curve.

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Speaker 9: It's all back, even Chris who was the one who

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Speaker 9: said you could have disinflation with vacancy dropping no unemployment rising,

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Speaker 9: and yesterday he made very clear that at this point

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Speaker 9: we're back on the flat part of the beverage curve

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Speaker 9: and you would have to see unemployment rise. So I

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Speaker 9: don't view it as dubbush at all.

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Speaker 4: Jay, Why do you sort of, I don't know, maybe disagree,

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Speaker 4: or would you push back at all saying that actually

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Speaker 4: there still is room especially if you get weakness maybe

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Speaker 4: in the labor market.

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Speaker 7: Yeah, I certainly think that's true. I mean, things can

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Speaker 7: fall apart really quickly. I'm not suggesting that's going to happen,

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Speaker 7: but you were mentioning just earlier, you know, with when

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Speaker 7: to look at Walmart and some of those other retailers.

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Speaker 7: You're starting to see cracks in terms of the consumer.

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Speaker 7: You know, delinquencies are going up. You know, monetary policy

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Speaker 7: right now, measured by conventional sort of measures, real monetary policy,

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Speaker 7: real rate still remains restrictive. And so I think you

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Speaker 7: will see continued slowing as we go forward. Now certainly

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Speaker 7: not looking for a rate cut anytime soon. I think

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Speaker 7: the Fed is going to hold the line on that

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Speaker 7: and make sure that we're coming back to two percent

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Speaker 7: on a sustained sort of basis. But things can you know,

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Speaker 7: things can downshift here pretty quickly as we go forward,

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Speaker 7: and particularly is what we're seeing in terms of the

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Speaker 7: consumer right now.

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Speaker 8: Adam, Yeah, I think.

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Speaker 9: I mean, Jay, I know well, and he's made a

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Speaker 9: legitimate point, but I think downshifting in the consumer after

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Speaker 9: the run of the consumer, the Nvidia like run of

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Speaker 9: the consumer for the last couple of years, is not

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Speaker 9: necessarily for tending. In fact, is very unlikely before attending

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Speaker 9: a massive down shift. But more importantly, what the Fed's

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Speaker 9: not allowed to talk about, but you hear in surveillance

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Speaker 9: and I and Jay and everybody can talk about is

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Speaker 9: what happens after the election. Right you were talking a

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Speaker 9: minute ago, Lisa about whack them all and targeted policies. Right,

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Speaker 9: So what happens after the election is probably we get

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Speaker 9: fiscal boom, particularly under Biden, and if it's under Trump,

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Speaker 9: we get a huge energy shift towards go go go

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Speaker 9: drills or baby drill and internal combustion engines. Either way,

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Speaker 9: you're gonna get probably an unsustainable boom in twenty twenty five.

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Speaker 9: And I think the Fed's gonna have to start raising You.

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Speaker 6: Think they're gonna be hiking interest rights again next year?

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Speaker 9: Yeah, really, very reluctantly quickly.

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Speaker 2: And what's the lesson, say, of twenty sixteen, twenty seventeen,

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Speaker 2: when we're all waiting for those tax cuts. The FED

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Speaker 2: knew that we were coming, but they couldn't change their

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Speaker 2: plans until they actually saw them.

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Speaker 6: It's that decent experience.

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Speaker 8: I think, John, that's a relevant example.

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Speaker 9: I mean, because they supposedly the tax is from twenty

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Speaker 9: seventeen are going to expire by the end of twenty

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Speaker 9: twenty five, and depending on who's in Congress and who's

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Speaker 9: in the White House, there'll be a very protracted messing negotiation.

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Speaker 9: But if you're Biden, you have to spend more on defense,

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Speaker 9: you have to spend more on energy, you have to

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Speaker 9: keep spending on the industrial policy. If you're Trump, you're

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Speaker 9: busy pushing out deregulation, tax cuts, whatever it is. Both

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Speaker 9: of them are pushing towards a very big fiscal swing.

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Speaker 8: And whatever result.

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Speaker 9: We get on the taxes, it's by the end of

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Speaker 9: twenty twenty five. It's not going to be tax rates

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Speaker 9: jumping up.

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Speaker 2: I'm so pleased you've brought this up because I do

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Speaker 2: think we're flying blind into twenty twenty five. I get

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Speaker 2: the same finning, and you're the first person when he's

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Speaker 2: come on this probagram and actually sort of la out

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Speaker 2: where your thing's going to happen. Why you're finish Federal

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Speaker 2: serve that's going to have to hike interest rights. So

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Speaker 2: they said, I've not heard that before on this show.

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Speaker 8: I got something to talk about.

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Speaker 4: Well, yeah, I mean I'm sitting here thinking to myself,

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Speaker 4: if you have a boom on top of what we've

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Speaker 4: already had, that's a real boom for stocks and a

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Speaker 4: real negative for bonds. Jay, what's your reaction to that?

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Speaker 7: Well, so what I would say is, you know, we're

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Speaker 7: talking about President Biden, we're talking about potential President Trump.

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Speaker 7: It's really going to depend on what the congressional makeup

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Speaker 7: looks like as well. And so in order to get

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Speaker 7: those big fiscal swings, you pretty much need to have

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Speaker 7: Congress and the White House kind of aligned. And if

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Speaker 7: we have a split decision come November, and nobody knows

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Speaker 7: what's obviously going to happen, but you know, we'll see

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Speaker 7: what happens there.

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Speaker 8: In terms of fiscal policy.

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Speaker 7: But between now and the end of the year, I

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Speaker 7: mean we start looking at five months way of that,

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Speaker 7: and I could potentially see a lot of downshifting here

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Speaker 7: in terms of the economy. And you know, if you

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Speaker 7: potentially you could see some FED rate cuts at the

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Speaker 7: end of the year, but a lot of it's going

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Speaker 7: to hinge, as Adam points out, a lot of it's

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Speaker 7: going to hinge on what happens in the election and

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Speaker 7: again what the election outcome is in terms of not

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Speaker 7: only the president, but in terms of what the congressional

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Speaker 7: makeup looks like as well.

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Speaker 6: And jay is.

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Speaker 4: Juma's pointing out it's very hard to have any visibility

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Speaker 4: whatsoever and what's going to happen. And it makes a

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Speaker 4: very compelling case for why either way you'd get a

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Speaker 4: fiscal boom. Either way, though, why would the Federal Reserve

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Speaker 4: want to cut rates ahead of that, knowing that there

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Speaker 4: could be some upside that could force them to reverse course.

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Speaker 7: Well, again, I'm not looking for them to cut rates

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Speaker 7: anytime soon. I mean, I think the earliest, the potential

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Speaker 7: early as you would see a rate cut, it depends

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Speaker 7: on what was happening with the data between now and

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Speaker 7: then would be in September. The election obviously complicates that

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Speaker 7: a little bit as well. There's another fom seating meeting

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Speaker 7: right after the election, two days after the election.

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Speaker 6: Do they cut rates there?

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Speaker 7: I mean, that's going to complicate things as well at

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Speaker 7: that point, but they're really going to have to see

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Speaker 7: how the smoke clears. And again, just because you're going

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Speaker 7: to potentially get a fiscal boom, it's not going to

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Speaker 7: happen right away. I mean, and so this is going

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Speaker 7: to be legislated sometime in twenty twenty five. We're still

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Speaker 7: at least a year out from things being legislated, and

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Speaker 7: the federal will be responding to where the economy is

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Speaker 7: at that point in time.

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Speaker 5: Jay, I'm glad you brought up Congress Adam, this kind

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Speaker 5: of idea you have about the feed having to hike

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Speaker 5: because of this fiscal spending is dependent on the makeup

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Speaker 5: of Congress.

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Speaker 10: Biden, if he was going to.

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Speaker 5: Spend like that, would need a democratic House and a

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Speaker 5: Democratic Senate.

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Speaker 9: Correct, Yes, and no, Emery, You're absolutely right, but I

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Speaker 9: think less so than in the past because remember two things.

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Speaker 9: First is that the bills already passed in IRA and CHIPS,

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Speaker 9: they're mostly open ended subsidies. They do not require reauthorization

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Speaker 9: from Congress. They can be interfered with if Trump comes in,

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Speaker 9: but that spending goes second that the defense spending generally

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Speaker 9: gets taken out and voted on separately and often bipartisan

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Speaker 9: or at least more bipartisan.

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Speaker 8: So I think two of the big places.

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Speaker 9: Where you're going to get spending are not going to

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Speaker 9: be subject to withholding by even a Republican Senate the

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Speaker 9: way it might have been in the past.

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Speaker 2: Interesting, just when it comes back to you on this

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Speaker 2: down shift that you're looking for, I'll ask you the

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Speaker 2: question asked Andrew, can you put some numbers on it.

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Speaker 2: With a three month roll in average on payrolls north

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Speaker 2: of two hundred k, what are you expecting to see

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Speaker 2: to this summer? What does that come down to? Andrew said,

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Speaker 2: support fifty. What are you looking for?

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Speaker 7: Yeah, we're looking for roughly the same. I mean, if

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Speaker 7: you look at our average for the third quarter, I

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Speaker 7: think we're looking at one fifty and then slowing to

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Speaker 7: roughly one hundred and twenty or so by the fourth

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Speaker 7: quarter of the year. And we're also looking for the

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Speaker 7: unemployment rate by the end of the year to be

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Speaker 7: up to four point one percent, you know, and if

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Speaker 7: you believe in the sal rule, if you get up

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Speaker 7: to four point one percent, then the economy should be

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Speaker 7: tipping into recession. Now we're not looking for that, but

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Speaker 7: we are looking for subtrend economic growth later this year.

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Speaker 7: Prints of you know, less than two percent, not being

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Speaker 7: dragged down by inventories, not being dragged down by a

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Speaker 7: big import surge, being dragged down by downshift, and consumer

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Speaker 7: spending it as well as investment spending that is lackluster

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Speaker 7: at best.

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Speaker 2: Jay, this was great, super thoughtful, Ja Bryce in there

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Speaker 2: of Wells Fargo, Adam Posen, they Institute for International Economic

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Speaker 2: still with us around the table, Adam, I wanted to

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Speaker 2: save sometimes talk about trade. Yeah, We've got some really

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Speaker 2: strong thoughts on this, and I think it's going to

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Speaker 2: be a valuable portion of this program this morning. Do

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Speaker 2: you think we're turning on back on economic liberalization at

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Speaker 2: a time when global challenges actually could benefit from it.

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Speaker 9: That's a great big picture question, John, and I appreciate

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Speaker 9: the fact that you and Lisa and Marie keep coming

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Speaker 9: back to this. It is a huge shift, whether it's

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Speaker 9: Biden or Trump. Biden I think is drawing the line

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Speaker 9: at some of the most crazy Trump tariff policies that

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Speaker 9: are proposed, but he's done nothing to reverse and now

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Speaker 9: added on some there's an anti China element which has

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Speaker 9: national security over hyped. But there is more about what

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Speaker 9: this does to US relationships, business relationships, technology, market opportunities,

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Speaker 9: investment flows throughout the world, and we've been writing on

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Speaker 9: this at Peterson Institute. We just published two days ago

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Speaker 9: a great new piece by Kimberly Classing and Mary Lovely

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Speaker 9: on how the proposed Trump tariffs would be a huge

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Speaker 9: hit to middle class and work especially working class family.

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Speaker 9: So what they did was they looked at the proposals

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Speaker 9: through the lens of being taxes. So you had David

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Speaker 9: malpes On talking about tariffs's taxes, which they are, and

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Speaker 9: so they use the same apparatus people look at to

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Speaker 9: look at tax increases for what's the incidents, meaning which

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Speaker 9: parts of the income distribution get what and lose what

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Speaker 9: on net, And the average American household would lose seventeen

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Speaker 9: hundred dollars a year if the Trump tax cuts went through,

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Speaker 9: excuse me, if the Trump tariffs went through. And the

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Speaker 9: distribution is highly regressive, so even if you continued the

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Speaker 9: tax cuts from twenty seventeen, you would still on net

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Speaker 9: be hurting the lower ten twenty percent of the income

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Speaker 9: distribution even more.

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Speaker 8: And this just goes to what you were saying, Emory about.

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Speaker 9: How purchasing power of households, feelings of inflation, feeling of

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Speaker 9: high prices, which sometimes gets muddled, but anyway is really core.

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Speaker 9: And so Biden could make that better by cutting t

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Speaker 9: arras that were left to him by Trump that are

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Speaker 9: not national security, not China. He could do it through

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Speaker 9: executive order boom increase people's purchasing power. But the worst

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Speaker 9: thing is if they go crazy as convicted felon. Peter

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Speaker 9: Navarro said in an interview that this is the policy

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Speaker 9: that Trump's going to do. If they actually do the

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Speaker 9: policy they say they're going to do, they're going to

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Speaker 9: cost American households.

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Speaker 4: We had David Malpas and you referenced that conversation. He

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Speaker 4: was saying that lower taxes and targeted tariffs could be

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Speaker 4: a growth policy that will actually get the US to

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Speaker 4: a place that could allow the deficit to be manageable.

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Speaker 1: Do you agree, No.

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Speaker 9: That's essentially what the right wing populist governments tried in

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Speaker 9: Latin America in the seventies, eighties, and nineties, and it

440
00:20:45,119 --> 00:20:45,480
Speaker 9: was a.

441
00:20:45,480 --> 00:20:46,920
Speaker 8: Huge anti growth policy.

442
00:20:48,280 --> 00:20:51,040
Speaker 9: There's a reason the World Bank, which David used to run,

443
00:20:51,119 --> 00:20:54,680
Speaker 9: has recommended against that for development for millions of people

444
00:20:54,720 --> 00:20:57,879
Speaker 9: around the world. It's taking the US into Banana Republic territory.

445
00:20:57,960 --> 00:21:00,840
Speaker 9: It is revenue positive for the treasure. I mean that

446
00:21:01,040 --> 00:21:03,920
Speaker 9: is true, but when you're choosing how you're going to

447
00:21:04,000 --> 00:21:07,480
Speaker 9: raise revenue, it's one of the most distortionary ways to

448
00:21:07,600 --> 00:21:10,920
Speaker 9: raise revenue with the most negative impact and the most

449
00:21:10,920 --> 00:21:12,160
Speaker 9: intrusiveness of government.

450
00:21:12,200 --> 00:21:14,320
Speaker 8: And mostly when people like David Malpass and.

451
00:21:14,280 --> 00:21:17,000
Speaker 9: Others talk about the Vangist task cuts, it's about getting

452
00:21:17,000 --> 00:21:19,800
Speaker 9: government out of business this way. Tariffs are the most

453
00:21:19,840 --> 00:21:22,400
Speaker 9: intrusive way you get government the people's.

454
00:21:21,960 --> 00:21:25,720
Speaker 5: Decisions, unlike concerns that you have about a fiscal boom

455
00:21:25,760 --> 00:21:28,080
Speaker 5: next year, which is reliance to get a lot of

456
00:21:28,080 --> 00:21:30,760
Speaker 5: those things you're talking about the makeup of Congress. Trump

457
00:21:30,760 --> 00:21:34,440
Speaker 5: could come in and edit tariffs yep. Immediately, Yes, So

458
00:21:34,480 --> 00:21:37,920
Speaker 5: how inflationary can those be that the Fed needs to

459
00:21:37,920 --> 00:21:41,280
Speaker 5: start thinking about within days of a potentially Trump two

460
00:21:41,280 --> 00:21:41,760
Speaker 5: point zero.

461
00:21:41,880 --> 00:21:43,800
Speaker 9: You're right to raise an emory and I think that's

462
00:21:43,840 --> 00:21:47,040
Speaker 9: a key point that both Biden and Trump, but especially Trump,

463
00:21:47,640 --> 00:21:49,960
Speaker 9: is able to do a lot of stuff through executive order.

464
00:21:50,040 --> 00:21:52,800
Speaker 9: So he can change migration policy through executive order. He

465
00:21:52,840 --> 00:21:55,879
Speaker 9: can raise terrorists through executive order. He can bar foreign

466
00:21:55,880 --> 00:21:59,919
Speaker 9: direct investment through executive order. He can change energy regulations

467
00:22:00,080 --> 00:22:03,560
Speaker 9: executive or all of which is boom and the levels

468
00:22:03,600 --> 00:22:06,240
Speaker 9: of inflation we're talking about if he does that. We're

469
00:22:06,280 --> 00:22:08,639
Speaker 9: about to release some studies of this later in a

470
00:22:08,640 --> 00:22:11,600
Speaker 9: few weeks, I hope, But you know, order of magnitude,

471
00:22:11,680 --> 00:22:14,159
Speaker 9: you see a jump in inflation one to two percent

472
00:22:14,359 --> 00:22:17,000
Speaker 9: immediately just on the tariffs alone. If you do the

473
00:22:17,080 --> 00:22:22,119
Speaker 9: kind of crazy and humane migration deportation policy they're talking about,

474
00:22:22,320 --> 00:22:25,679
Speaker 9: we're seeing much bigger numbers because you're completely disrupting labor

475
00:22:25,720 --> 00:22:29,280
Speaker 9: markets and causing shortages of certain types of labor beyond

476
00:22:29,280 --> 00:22:33,200
Speaker 9: the human cost, and creating huge uncertainty for small business.

477
00:22:33,600 --> 00:22:37,439
Speaker 9: So you're looking at very large jumps in inflation, and

478
00:22:37,480 --> 00:22:40,080
Speaker 9: the Fed may not want to explicitly address that because

479
00:22:40,080 --> 00:22:43,320
Speaker 9: it's seen as political, but I would put the odds

480
00:22:43,320 --> 00:22:46,520
Speaker 9: of them being able to do the cuts in twenty

481
00:22:46,560 --> 00:22:47,680
Speaker 9: twenty five is very low.

482
00:22:47,880 --> 00:22:49,760
Speaker 2: Wow, we're gonna have a lot to talk about this year.

483
00:22:49,960 --> 00:22:51,720
Speaker 2: Look forward to covenant with you, Adam Pous and that

484
00:22:51,960 --> 00:23:05,479
Speaker 2: at they paid uson Institute for International Economics. President Joe

485
00:23:05,520 --> 00:23:07,840
Speaker 2: Biden narrows the gap. The two are separated by no

486
00:23:07,920 --> 00:23:11,520
Speaker 2: more than two percentage points in Michigan, Pennsylvania, and Wisconsin,

487
00:23:11,600 --> 00:23:14,800
Speaker 2: according to the latest Bloomberg Morning Consolet poll. Jennifer Flitton

488
00:23:14,840 --> 00:23:18,399
Speaker 2: of Investigo righting this like twenty twenty, this presidential election

489
00:23:18,480 --> 00:23:20,720
Speaker 2: will likely be decided by less than ten percent of

490
00:23:20,800 --> 00:23:26,560
Speaker 2: voters in the battleground states of Arizona, Georgia, Michigan, Nevada, Pennsylvania.

491
00:23:25,720 --> 00:23:26,439
Speaker 6: And Wisconsin.

492
00:23:26,480 --> 00:23:29,720
Speaker 2: Jennifer joins us now for more Jennifer, going into year end,

493
00:23:29,800 --> 00:23:32,359
Speaker 2: going into November, what are the policy options in the

494
00:23:32,359 --> 00:23:36,159
Speaker 2: White House? Has left? What levers can they pull?

495
00:23:36,240 --> 00:23:39,040
Speaker 11: Well, I think they just did one this past week

496
00:23:39,080 --> 00:23:42,720
Speaker 11: in announcing the release of oil reserves.

497
00:23:43,240 --> 00:23:45,280
Speaker 5: They're going to have to try to find some way

498
00:23:45,520 --> 00:23:48,200
Speaker 5: of affecting those prices.

499
00:23:47,840 --> 00:23:50,439
Speaker 11: That people are feeling when they go to the gas, thing,

500
00:23:50,560 --> 00:23:53,480
Speaker 11: when they pay for the food, when they're looking at

501
00:23:53,480 --> 00:23:57,520
Speaker 11: their mortgage rates. Right now, the Fed isn't very hopeful,

502
00:23:58,000 --> 00:24:00,840
Speaker 11: and so this administration is going to have to do

503
00:24:00,920 --> 00:24:03,800
Speaker 11: things that at least allow for the feeling of the

504
00:24:03,880 --> 00:24:07,280
Speaker 11: economy loosening right, for folks to feel like more is

505
00:24:07,280 --> 00:24:11,240
Speaker 11: in their pocket because right now, compared to three years ago,

506
00:24:11,640 --> 00:24:12,800
Speaker 11: everything just costs more.

507
00:24:13,400 --> 00:24:14,920
Speaker 10: Jennifer one policy lever.

508
00:24:15,040 --> 00:24:17,880
Speaker 5: Potentially the White House may pull again they did this morning,

509
00:24:17,920 --> 00:24:19,280
Speaker 5: and this has to do its student day.

510
00:24:19,640 --> 00:24:21,120
Speaker 10: Does that resonate with the electorate?

511
00:24:22,160 --> 00:24:27,240
Speaker 11: I think it depends on who is affected, and sometimes

512
00:24:27,320 --> 00:24:31,720
Speaker 11: it actually sort of alienates those who don't go to college.

513
00:24:31,760 --> 00:24:34,399
Speaker 10: We sometimes forget that there's a huge segment.

514
00:24:34,400 --> 00:24:38,479
Speaker 11: Of the population of people who don't go on and

515
00:24:38,680 --> 00:24:43,040
Speaker 11: further educate themselves post high school, and those blue collar

516
00:24:43,080 --> 00:24:49,000
Speaker 11: workers or small businesses, entrepreneurs. Sometimes those folks aren't affected

517
00:24:49,040 --> 00:24:52,879
Speaker 11: by that, And sometimes there's a disconnect between those who

518
00:24:52,960 --> 00:24:55,840
Speaker 11: feel like they're paying for those student payoffs and those

519
00:24:55,880 --> 00:24:57,320
Speaker 11: who are actually receiving them.

520
00:24:57,760 --> 00:25:01,200
Speaker 5: Looking at Michigan, Pennsylvania, Wisconsin, it is very very tight

521
00:25:01,240 --> 00:25:03,840
Speaker 5: in our latest polling data shows that amongst a slew

522
00:25:03,840 --> 00:25:05,080
Speaker 5: of other polls have comeing out in.

523
00:25:05,000 --> 00:25:05,959
Speaker 10: The past few weeks.

524
00:25:06,440 --> 00:25:09,760
Speaker 5: How critical are these three states to Joe Biden? I mean,

525
00:25:09,800 --> 00:25:12,280
Speaker 5: can he even win without holding the Blue Wall?

526
00:25:13,040 --> 00:25:16,320
Speaker 10: Yeah? That's an excellent point. That is exactly what he

527
00:25:16,400 --> 00:25:17,720
Speaker 10: has to do. I mean, his.

528
00:25:17,640 --> 00:25:25,440
Speaker 11: Pathway to a second term is through the states of Pennsylvania, Wisconsin, Michigan,

529
00:25:26,520 --> 00:25:29,240
Speaker 11: and then biting off one of those sun belt states.

530
00:25:29,520 --> 00:25:31,960
Speaker 10: And it's sort of the reverse for Trumps.

531
00:25:32,000 --> 00:25:34,720
Speaker 11: We're looking at these polls that his best route is

532
00:25:34,800 --> 00:25:37,960
Speaker 11: probably through Nevada, Arizona, and Georgia and then biting off

533
00:25:38,000 --> 00:25:43,320
Speaker 11: one of the Steel belt the northern states.

534
00:25:43,640 --> 00:25:47,240
Speaker 10: So this is where their focus is going to be.

535
00:25:47,600 --> 00:25:50,119
Speaker 12: And we're one hundred and sixty sixties away from the election,

536
00:25:50,320 --> 00:25:53,159
Speaker 12: we know it's going to tighten, and it's going to

537
00:25:53,160 --> 00:25:55,840
Speaker 12: tighten further once folks really start.

538
00:25:55,600 --> 00:25:57,560
Speaker 11: Focusing, which is when the kids go back to school

539
00:25:57,600 --> 00:25:58,280
Speaker 11: in September.

540
00:25:58,520 --> 00:26:00,760
Speaker 4: Jennifer, A lot of people have been talking about not

541
00:26:00,880 --> 00:26:03,000
Speaker 4: voting at all because of Israel policy.

542
00:26:03,000 --> 00:26:03,360
Speaker 6: At least.

543
00:26:03,359 --> 00:26:04,520
Speaker 10: We hear a lot of articles about that.

544
00:26:04,560 --> 00:26:05,240
Speaker 6: We hear a lot of.

545
00:26:05,160 --> 00:26:09,560
Speaker 4: People saying that vocally, are we overstating just how significant

546
00:26:09,560 --> 00:26:12,040
Speaker 4: this issue will be to getting voters out or keeping

547
00:26:12,040 --> 00:26:14,199
Speaker 4: them home in some of those blue state in some

548
00:26:14,280 --> 00:26:15,560
Speaker 4: of those swing states.

549
00:26:16,320 --> 00:26:19,719
Speaker 11: Yeah, yes, I think once you do the cross tabs,

550
00:26:19,760 --> 00:26:21,879
Speaker 11: I mean, you're going to find demographics, you're going to

551
00:26:21,920 --> 00:26:26,239
Speaker 11: find people, you know, swing voters sometimes or those who

552
00:26:26,280 --> 00:26:27,640
Speaker 11: are willing to swing.

553
00:26:28,160 --> 00:26:30,439
Speaker 10: Progressives, young people.

554
00:26:31,560 --> 00:26:33,879
Speaker 11: These are folks who aren't necessarily going to go and

555
00:26:33,920 --> 00:26:37,240
Speaker 11: vote for Trump, but they may stay home, they may

556
00:26:37,359 --> 00:26:41,480
Speaker 11: have their vote depressed. And that really matters when you're

557
00:26:41,480 --> 00:26:45,440
Speaker 11: in a state like Michigan and you know you're ten

558
00:26:45,920 --> 00:26:50,000
Speaker 11: twenty thousand voters that you're really pining for. But I

559
00:26:50,040 --> 00:26:53,360
Speaker 11: think the fundamentals of this election are still staying true

560
00:26:53,400 --> 00:26:56,199
Speaker 11: when we're seeing this and pulling. It comes down to

561
00:26:57,320 --> 00:27:01,719
Speaker 11: the issues of inflation and immigration, crime, and then on

562
00:27:01,760 --> 00:27:06,439
Speaker 11: the other side, abortion and sort of that democracy chaos

563
00:27:06,560 --> 00:27:08,760
Speaker 11: sort of issue on the democratic side.

564
00:27:08,480 --> 00:27:10,679
Speaker 4: Is there anything the Biden administration could do around inflation

565
00:27:10,800 --> 00:27:14,119
Speaker 4: given the fact that it might be actually decelerating, but

566
00:27:14,200 --> 00:27:17,000
Speaker 4: the inflation that's baked in isn't going to change between

567
00:27:17,000 --> 00:27:17,760
Speaker 4: now and the election.

568
00:27:18,920 --> 00:27:22,240
Speaker 11: You know, Some suggest that it may be about messaging

569
00:27:22,480 --> 00:27:26,160
Speaker 11: and having a better message and looking forward to the future.

570
00:27:27,080 --> 00:27:30,160
Speaker 11: But I think you've you've hit on the question, and

571
00:27:30,200 --> 00:27:33,760
Speaker 11: that's the question that the Biden campaign are wrestling wrestling with,

572
00:27:34,000 --> 00:27:36,520
Speaker 11: you know, sort of constantly, and they probably will up

573
00:27:36,560 --> 00:27:40,800
Speaker 11: to election day, especially if our economic circumstances and the

574
00:27:40,840 --> 00:27:43,720
Speaker 11: way that people are feeling the economy stay the.

575
00:27:43,680 --> 00:27:45,960
Speaker 2: Same, Jennifer, forgive me for the hunk bus, but I

576
00:27:45,960 --> 00:27:48,080
Speaker 2: want to talk about financial regulation and the future of

577
00:27:48,200 --> 00:27:50,639
Speaker 2: it as well. The head of the FDI, say is

578
00:27:50,680 --> 00:27:52,880
Speaker 2: stepping down. We can talk about the why the bank

579
00:27:52,920 --> 00:27:55,480
Speaker 2: lobby or the common sense lobby seems to have won

580
00:27:55,520 --> 00:27:59,080
Speaker 2: out over capital requirements potentially being unfound over the next

581
00:27:59,119 --> 00:28:00,840
Speaker 2: several months as well. What do you think the future

582
00:28:00,920 --> 00:28:03,720
Speaker 2: financial regulation is going to be regardless of who wins

583
00:28:03,720 --> 00:28:05,000
Speaker 2: the White House come November.

584
00:28:06,040 --> 00:28:11,080
Speaker 11: Well, and I'll first say that mister Gruenberg has announced.

585
00:28:10,600 --> 00:28:14,320
Speaker 10: That he will resign, but only he'll step down only.

586
00:28:14,040 --> 00:28:18,560
Speaker 11: When his seat is filled by a confirmed new director,

587
00:28:18,680 --> 00:28:23,040
Speaker 11: so our chairman. So I do think that we may

588
00:28:23,080 --> 00:28:24,840
Speaker 11: have a little more time with him.

589
00:28:25,920 --> 00:28:28,479
Speaker 10: And then, of course, you know the bank lobby.

590
00:28:28,520 --> 00:28:31,520
Speaker 12: To your point, there is a real push to get

591
00:28:31,520 --> 00:28:34,960
Speaker 12: a reproposal, and I think the FDI C and o

592
00:28:35,040 --> 00:28:38,040
Speaker 12: c C would potentially just like to make some minor

593
00:28:38,120 --> 00:28:41,920
Speaker 12: changes on the Basel three issue, but the Fed seems

594
00:28:42,000 --> 00:28:45,960
Speaker 12: to be a little more open to reproposal and you're

595
00:28:46,000 --> 00:28:49,440
Speaker 12: going to see Congress continue to push on this issue.

596
00:28:49,880 --> 00:28:52,440
Speaker 10: There have been some really interesting hearings where you've seen.

597
00:28:52,240 --> 00:28:57,520
Speaker 11: Some bipartisan concern with the proposal and the request for reproposal.

598
00:28:58,280 --> 00:28:59,920
Speaker 10: So I think this is going to continue to play

599
00:29:00,160 --> 00:29:01,080
Speaker 10: throughout the rest of the year.

600
00:29:01,360 --> 00:29:04,040
Speaker 5: Do you think we'll see anything substantial when it comes

601
00:29:04,160 --> 00:29:05,640
Speaker 5: to this ahead of the election?

602
00:29:07,840 --> 00:29:11,880
Speaker 12: Well, if I had to sort of armshore armchair, sort

603
00:29:11,880 --> 00:29:16,920
Speaker 12: of look at this issue as the likelihood of the.

604
00:29:16,960 --> 00:29:20,200
Speaker 11: Time that we really have here in Washington prior to

605
00:29:20,240 --> 00:29:23,040
Speaker 11: the election, I think it's unlikely. But I do think

606
00:29:23,520 --> 00:29:26,800
Speaker 11: it's very possible that we see a reproposal.

607
00:29:27,520 --> 00:29:30,480
Speaker 10: I know that many folks downtown and.

608
00:29:30,560 --> 00:29:34,400
Speaker 11: Those who are on the hill are constantly working to.

609
00:29:34,400 --> 00:29:35,120
Speaker 10: See that happen.

610
00:29:35,520 --> 00:29:37,400
Speaker 5: Jennifer, I know you focus on policy, and one of

611
00:29:37,440 --> 00:29:39,880
Speaker 5: the biggest policy fights next year is going to be

612
00:29:40,200 --> 00:29:45,520
Speaker 5: taxes as well in terms of the financial umbrella. What

613
00:29:45,560 --> 00:29:49,240
Speaker 5: are you expecting in terms of the extension of the

614
00:29:49,280 --> 00:29:51,880
Speaker 5: Trump error tax cuts? At what level do you think

615
00:29:51,920 --> 00:29:52,800
Speaker 5: they get extended?

616
00:29:53,520 --> 00:29:56,520
Speaker 11: Well, And no matter who is president next year, You're right,

617
00:29:56,640 --> 00:29:58,080
Speaker 11: at twenty twenty five, we have a.

618
00:29:58,120 --> 00:30:01,360
Speaker 12: Number of provisions that are expiring from the TCGA was

619
00:30:01,400 --> 00:30:05,560
Speaker 12: passed in twenty seventeen. It's going to look very different

620
00:30:05,640 --> 00:30:08,600
Speaker 12: depending on the makeup of Congress and the presidency so

621
00:30:08,680 --> 00:30:11,400
Speaker 12: much as writing on this election as it relates to

622
00:30:11,520 --> 00:30:15,120
Speaker 12: tax and so if you do have a say it's

623
00:30:15,120 --> 00:30:20,000
Speaker 12: a Trump presidency with a majority in the House for

624
00:30:20,120 --> 00:30:23,920
Speaker 12: a Republican and Senate, then you could have a much

625
00:30:24,080 --> 00:30:30,440
Speaker 12: larger reconciliation package on taxes, something similar to twenty seventeen,

626
00:30:30,680 --> 00:30:34,920
Speaker 12: and it's broad, right, But if it is a Biden

627
00:30:35,000 --> 00:30:37,400
Speaker 12: presidency and you have a split Congress, it's really going

628
00:30:37,440 --> 00:30:40,240
Speaker 12: to have to be a negotiated package because you have

629
00:30:40,280 --> 00:30:44,080
Speaker 12: a number of different provisions from salt to the individual

630
00:30:44,160 --> 00:30:48,240
Speaker 12: tax rates and tax child tax credits. Those are all

631
00:30:48,280 --> 00:30:50,640
Speaker 12: going to be part of the negotiation. So it's going

632
00:30:50,680 --> 00:30:52,320
Speaker 12: to have to be a bipartisan package.

633
00:30:52,440 --> 00:30:55,440
Speaker 4: Jennifer, We're about eight minutes away from the expected release

634
00:30:55,440 --> 00:30:57,800
Speaker 4: of target earnings, and this comes at a time when,

635
00:30:57,920 --> 00:30:59,800
Speaker 4: just to go back to your point earlier, it's going

636
00:30:59,840 --> 00:31:01,440
Speaker 4: to be really key at this White House to see

637
00:31:01,480 --> 00:31:03,640
Speaker 4: what kind of messaging they can do to make people

638
00:31:03,680 --> 00:31:05,440
Speaker 4: feel better about the thing of the fact that things

639
00:31:05,440 --> 00:31:07,920
Speaker 4: are more expensive than they were four years ago, three

640
00:31:08,000 --> 00:31:10,560
Speaker 4: years ago. The White House came out with this on Monday,

641
00:31:11,200 --> 00:31:14,760
Speaker 4: basically calling on grocery chains to lower their prices, welcoming

642
00:31:14,760 --> 00:31:18,160
Speaker 4: the fact that Target had lowered prices, saying they are delivering.

643
00:31:18,600 --> 00:31:21,240
Speaker 4: Is this what will win when it comes to messaging.

644
00:31:22,440 --> 00:31:24,280
Speaker 10: Yeah, that's a great question.

645
00:31:25,440 --> 00:31:28,000
Speaker 11: I think we saw this in the State of the Union,

646
00:31:28,120 --> 00:31:32,640
Speaker 11: this whole idea of translation and sort of forcing the

647
00:31:32,720 --> 00:31:37,040
Speaker 11: issue onto corporations, onto those who deliver services, onto those

648
00:31:37,080 --> 00:31:41,760
Speaker 11: who deliver goods. I don't see that that is where

649
00:31:43,080 --> 00:31:49,160
Speaker 11: Americans are focusing their concern and I do know that

650
00:31:49,320 --> 00:31:52,640
Speaker 11: you know, as far as institutions go, grocery stores are

651
00:31:52,760 --> 00:31:57,000
Speaker 11: pretty high in the support of the American people.

652
00:31:57,640 --> 00:31:59,520
Speaker 10: Institutions in Washington.

653
00:31:59,320 --> 00:32:01,760
Speaker 11: Much lower, So I think that might be a difficult

654
00:32:01,760 --> 00:32:02,600
Speaker 11: one to selling.

655
00:32:02,320 --> 00:32:03,080
Speaker 10: The American people.

656
00:32:03,320 --> 00:32:05,800
Speaker 6: Jennifer, thank you Fearing for this morning. Jennifer Flytten there

657
00:32:05,920 --> 00:32:06,560
Speaker 6: of Investco.

658
00:32:07,520 --> 00:32:11,080
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659
00:32:11,080 --> 00:32:14,400
Speaker 2: in markets, economics, and geopolitics. You can watch the show

660
00:32:14,480 --> 00:32:17,400
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661
00:32:17,560 --> 00:32:21,280
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662
00:32:21,440 --> 00:32:23,680
Speaker 2: or anywhere else you listen, and as always on the

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00:32:23,680 --> 00:32:26,120
Speaker 2: Bloomberg Terminal and the Bloomberg Business app,