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Speaker 2: University Martin Feldstein the original support of Kenneth Rogoff, Benjamin
Speaker 2: Friedman and others. And it devolves down to their freshman class,
Speaker 2: which is legendary worldwide X ten economic ten. Recently, Greg
Speaker 2: manq the force there and he gave the baton off
Speaker 2: to Jason Furman in the recent years. Mister Furman has
Speaker 2: public policy perspective, typically from a Democratic view, but I'd
Speaker 2: call him on the edge of bipartisan. And he joins
Speaker 2: us now from Harvard. Going to redo your essay, Jason.
Speaker 2: It's a clinic in the New York Times here over
Speaker 2: the weekend. I'm going to get right down to the
Speaker 2: single argument here mister Trump has returned to again and
Speaker 2: again is that other countries are taking advantage of the
Speaker 2: United States. Is the Trump grievance deserved? Absolutely not.
Speaker 3: I mean that essay I had in the New York
Speaker 3: Times was just what I teach in my class to
Speaker 3: my introduction, so it felt like it.
Speaker 2: I felt like that.
Speaker 3: Yeah, And it's the same lesson I got from Marty
Speaker 3: Feldstein when I took the class decades ago. Trade deficits
Speaker 3: are not inherently bad. Imports are a wonderful thing. Trade
Speaker 3: deficits don't happen because of differential tariffs in different countries,
Speaker 3: and changing tariffs doesn't sell trade deficits. Every step of
Speaker 3: the reasoning underlying today's announcement is just completely at all
Speaker 3: with the most basic economics.
Speaker 2: Within this, Professor Furman, his professor Hassett is trying to
Speaker 2: help out the Trump administration. Kevin Hascid with a PhD
Speaker 2: from a Philadelphia school named Pennsylvania. And there's others best
Speaker 2: and the Treasury Secretary. From where you sit, Jason Furman,
Speaker 2: how alone is President Trump?
Speaker 3: You know, I don't know exactly what's going on inside
Speaker 3: the White House, but I know you have the cent
Speaker 3: a year ago basically saying tariffs are a bad thing,
Speaker 3: a loaded gun pointed at the head of the US economy.
Speaker 3: I know Kevin has historically been a free trader. I
Speaker 3: hope they're trying to pull things in a less bad direction.
Speaker 3: But you know, when your opening gambit is twenty percent
Speaker 3: across the board tariffs, you can move in a less
Speaker 3: bad direction and still have things be pretty.
Speaker 4: Bad, Jason, as I understand it, as I understand the
Speaker 4: administration's perspective, they simply cite the fact that the US
Speaker 4: pays a weighted average tariff of two to three times
Speaker 4: the rate that we charge most of the rest of
Speaker 4: the world, and they want that to be leveled up.
Speaker 4: Is that kind of their argument, and if so, that
Speaker 4: seems fair level playing field? Is that a sound economic argument?
Speaker 3: First of all, those other countries are often hurting themselves
Speaker 3: with their teriffs. You look at these Latin American countries
Speaker 3: that have had high tariffs. That wasn't a smart strategy
Speaker 3: to take advantage of the United States. That was a
Speaker 3: dumb strategy to stunt their economic growth. But let's do
Speaker 3: some of the numbers. Let's say you do want reciprocation.
Speaker 3: We have tariffs against most rich countries of around one
Speaker 3: or two percent. Most rich countries have tariffs against US
Speaker 3: of about one or two percent. So we don't need
Speaker 3: any new tariffs against rich countries. Who don't need any
Speaker 3: new tariffs against counta in Mexico. Then when it comes
Speaker 3: to China and India, if we want to even them up,
Speaker 3: we would need to raise ours by two or three
Speaker 3: percentage points, not anything like the ten twenty that we're
Speaker 3: hearing about in today's announcement.
Speaker 4: All right, so that's the math. What are some of
Speaker 4: the potential unintended consequences here? People will say two that
Speaker 4: I can think of one as slower growth. Number two
Speaker 4: is higher inflation. Are those valid?
Speaker 2: Absolutely?
Speaker 3: I think every Wall Street forecaster has downgraded their forecast
Speaker 3: for growth and upgraded their forecast for inflation. The FED
Speaker 3: did the same thing, although the FED wasn't one hundred
Speaker 3: percent explicit about what drove their changes. It's hard to
Speaker 3: imagine there was anything else that was going on there.
Speaker 3: But to that list of two, I'd add a longer
Speaker 3: term one, which is geopolitics. The United States is a
Speaker 3: big important country. It is not infinitely big. It is
Speaker 3: not infinitely important. China is also a really, really big
Speaker 3: player in the world. The only way we can confront
Speaker 3: China is by doing it together with allies, and if
Speaker 3: we alienate our allies. There's a lot more countries that
Speaker 3: trade more with China than with the United States. We're
Speaker 3: just going to push that further and help realign global
Speaker 3: geopolitics away from the US alliance and towards a Chinese entent.
Speaker 2: And your morning community this morning across Canada, across Mexico,
Speaker 2: in America, Jason Furman with US of Harvard University, we
Speaker 2: said good morning on Android auto Applecar played the new
Speaker 2: Digital Experience, and of course to all of you on YouTube,
Speaker 2: subscribe to Bloomberg Podcast, and I'll get out the Firman
Speaker 2: New York Times essay here in a bit, Jason, I
Speaker 2: want to go to the driver of this, and I
Speaker 2: want to start with Lightheiser, who grew up in the
Speaker 2: crucible of northeastern Ohio, where as a kid he saw
Speaker 2: American steel industrial might disappear. And then we've got Navarro
Speaker 2: of LA of Irvine with his own take here to
Speaker 2: move us away from free trade. The heart of this
Speaker 2: is the Matthew teach, which is a j curve in economics.
Speaker 2: There's going to be short term pain, but out there,
Speaker 2: I sound like a Linda Ronstadt song out there somewhere,
Speaker 2: Jason Furman, there's going to be a better American trade policy.
Speaker 2: What do they get wrong about the midterm and long
Speaker 2: term benefit of what is clearly perceived to be short
Speaker 2: term pain. Right.
Speaker 3: I mean, the thing that a lot of people don't
Speaker 3: understand is when you put a tariff on imports, you're
Speaker 3: effectively putting a tariff on exports too. And that could
Speaker 3: happen because other countries retaliate with their own tariffs. It
Speaker 3: could happen because your tariffs lead to an exchange rate appreciation,
Speaker 3: which make it harder for you to export. What do
Speaker 3: we export in I'd state so well, A lot of
Speaker 3: that is really terrific manufacturing that's made here in America
Speaker 3: sold around the world, and we're going to have less
Speaker 3: of all of that. I don't see this as a
Speaker 3: pro manufacturing plan. You we're going to raise the cost
Speaker 3: of inputs to me, Yeah.
Speaker 2: Does Jason Furman have a strong dollar week dollar outcome
Speaker 2: out of this? Let's go Robert Mundel right now, Jason
Speaker 2: Furman with the dollar.
Speaker 3: I'm with a strong dollar. But you know, we're going
Speaker 3: to see what the announcement is today and how it
Speaker 3: compares the expectations. Also depends a lot on the FED.
Speaker 3: I think the FED is going to be and should be,
Speaker 3: reluctant to cut rates when inflation if it goes above
Speaker 3: three percent. Sure they can say their models say it's transitory,
Speaker 3: but they're going to be pretty nervous and they should
Speaker 3: be to act on that belief, especially with inflation expectations
Speaker 3: so elevated more opeds.
Speaker 2: There are people I know, Jason sending your OpEd to
Speaker 2: their children saying you shut up and read it. Jason Furman,
Speaker 2: thank you so much for Harvard this morning.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: It's giving us day after day. Is Henrietta Trees and
Speaker 2: the politics of the moment. Henrietta. The marketing idea here
Speaker 2: is liberation Day. Will Republicans be liberated today?
Speaker 5: It's amazing. I'm actually about to send an email out
Speaker 5: with a quote from Senator Hoven which is effectively saying,
Speaker 5: let's hope we'll see there is an expectation or understanding
Speaker 5: that free trade doesn't work. It's a novel position for
Speaker 5: the Republican conference, and you know, we have one hundred
Speaker 5: and fifty years worth of data on tariffs to suggest
Speaker 5: they pretty clearly do not. As Jason Farman points out,
Speaker 5: that countries with high tariffs shoot themselves in the foot
Speaker 5: with high tariffs. So that is the course that the
Speaker 5: president is determined to take. What we'll hear about later today.
Speaker 4: Are you surprised that, Henriette, we haven't seen any really
Speaker 4: strategic or coordinated kind of pushback along the lines of
Speaker 4: Professor Furman from members of Congress just simply laying out
Speaker 4: the simple economics here of how tarrifs worked.
Speaker 5: I'm shocked. I feel like it should be so easy
Speaker 5: to message around. You know, the easiest example is you've
Speaker 5: had twenty five percent tariffs on aluminum. What is your
Speaker 5: beer can made out of aluminum? You know, it should
Speaker 5: be a really easy messaging point. All your back to
Speaker 5: school items, your backpacks, umbrellas, rain boots, baseball gloves, all
Speaker 5: of it. Tireff died at twenty percent already, if not
Speaker 5: already in the Section three oh one tariffs that are
Speaker 5: on at twenty five percent, So I think the messaging
Speaker 5: should be much easier. I do think that what Trump
Speaker 5: has done President Trump has done is he's split the
Speaker 5: Democratic Party that necessarily wasn't pro free trade a couple
Speaker 5: of years ago, and he's moved the Republicans into a
Speaker 5: more progressive place or populous place where they maybe are
Speaker 5: no longer free trade pro free trade either. And you've
Speaker 5: kind of bifurcated all of DC, not along party lines,
Speaker 5: but along sort of allegiances. And then you know, maybe
Speaker 5: stale or outdated views from either parties left and right camps.
Speaker 4: So what is the next How do you expect the Democrats,
Speaker 4: if at all, and or the Republicans, if at all,
Speaker 4: to respond to what we may hear, what we're going
Speaker 4: to hear at four o'clock today, Will there be will
Speaker 4: tomorrow will be a day of lots of sound bites
Speaker 4: coming out of both parties.
Speaker 5: I expect so. And in fact, we'll have a vote
Speaker 5: that they'll be able to talk about later today. The
Speaker 5: negative for President Trump on the AIPA tariff's worth regards
Speaker 5: to Canada is that there is some congressional oversight here.
Speaker 5: So the Senators have put a joint resolution on the
Speaker 5: floor condemning the President's decision to label Canada our closest
Speaker 5: ally as an international economic emergency that needs to be
Speaker 5: retaliated against with tariffs. So they're going to put that
Speaker 5: bill on the floor today. And I understand at least
Speaker 5: four Senators and I know as many as at least
Speaker 5: ten want to vote with the Democrats on this, and
Speaker 5: that would include Rand Paul of Kentucky, Mitch McConnell of Kentucky.
Speaker 5: We've seen, you know, bourbon from Kentucky and tariff see
Speaker 5: talking point, and a couple of others who are going
Speaker 5: to side with Democrats to pass this resolution later on.
Speaker 5: The benefit for President Trump is that the House will
Speaker 5: not take up this legislation impasset or that's his expectation,
Speaker 5: and so it won't do anything, but it will give
Speaker 5: Democrats at least an opportunity to get members on the record.
Speaker 2: And now, folks a delicate question in case Senator Grassley's
Speaker 2: watching this, and Senator Grassley's old enough to remember David Ricardo,
Speaker 2: he was probably on the boat with Churchill and Roosevelt
Speaker 2: at the Atlantic Charter, Henrietta. Tre's what we're going to
Speaker 2: get here is some form of liberation announcement, and in
Speaker 2: the announcement or as Paul mentioned one day, two days later,
Speaker 2: we're going to get a battle out for American farmers
Speaker 2: off of Canadian fertilizer and six other things you understand
Speaker 2: that I don't get is the check from President Trump
Speaker 2: to the farmers Republicans. Is it going to somebody eighty
Speaker 2: seven miles west of Des Moines helping Senator Grassley or
Speaker 2: is it going to corporate America.
Speaker 5: It's going to be a combination of both. It's through
Speaker 5: a very technical program at USDA. The benefit here is
Speaker 5: that this is a well trodden road. The USDA Secretary
Speaker 5: under Trump's first term deployed this exact same strategy three
Speaker 5: times to whether the trade war with China. But the
Speaker 5: real beneficiary here is Brazil. As you were talking about before,
Speaker 5: they have new rose to hoe on soybeans and all
Speaker 5: kinds of trade with China. Argentina's in the same boat,
Speaker 5: and that's what farmers are going to lose permanently on
Speaker 5: a go forward basis. So you can bail out the
Speaker 5: farmers now, but you're losing market share and eventually that's
Speaker 5: going to be something that the United States cannot bail
Speaker 5: farmers out of.
Speaker 4: Henriette, what did you make of yesterday's political action? The
Speaker 4: two races down in Florida and the Supreme Court race.
Speaker 4: What did you make of that?
Speaker 5: I think the biggest tell is on average, Democrats have
Speaker 5: been winning special elections by nine or ten points, and
Speaker 5: they exceeded that by almost double in some of those
Speaker 5: races last night. And the margin of victory for Republicans
Speaker 5: in Florida six in Florida's first district was an equal
Speaker 5: fifteen percentage points. And that's down from a plus thirty
Speaker 5: and plus forty position place for Republicans during the November election.
Speaker 5: So just in five or six months, the hemorrhage support.
Speaker 5: It's pretty normal for Democrats to be highly engaged in
Speaker 5: these special elections, but this puts as many as sixty
Speaker 5: House Republican seats in play for the Democratic Party, according
Speaker 5: to the lead Jeffries going into the twenty twenty sixth
Speaker 5: mid terms.
Speaker 2: Just because of radio clarity, they're in the quality of
Speaker 2: our microphones. Sixty six zero District zero.
Speaker 5: Yeah. And you know, to put this in perspective, when
Speaker 5: we had President Trump's first term and the twenty eighteen midterms,
Speaker 5: Democrats were able to pick up forty one seats, and
Speaker 5: in Obama's first term in the twenty ten mid terms,
Speaker 5: Republicans picked up sixty three, so it's it's a very
Speaker 5: appropriate number to have in mind, somewhere between four in
Speaker 5: sixty seats.
Speaker 2: She amazes me. She's a machine every time. It's amazing.
Speaker 2: I'm here a trace Fada partners. Thank you, Thank you.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: Overnew This is like an audible like we did the
Speaker 2: Wisconsin and the Florida elections. Today on a day of trade,
Speaker 2: We're gonna go trade free with Nisha Patel with Paramatic
Speaker 2: hugely popular when she comes on municipal bonds. Okay, David
Speaker 2: Gerr and Janet Lauren. Janet will be with us later. Girl.
Speaker 2: Do we have GUR today?
Speaker 4: I hope we maybe do. Maybe we're talking to those people.
Speaker 2: We're talking to us people. They were in Princeton yesterday. Yes, Harvard, Princeton,
Speaker 2: Columbia and forty eight other Flavor schools are having trouble
Speaker 2: with the federal government of out their budgets. You can't
Speaker 2: buy a Harvard UNI bond. They're all sold to alumni.
Speaker 2: What are they doing when these headlines are there? So
Speaker 2: college education bonds price down, yield.
Speaker 6: Up, not necessarily. You have to remember private schools like Harvard,
Speaker 6: like Princeton, from a balance sheet perspective, are incredibly strong.
Speaker 6: So these are some issuers and deals that will go
Speaker 6: very quickly to some in state issuers. But from a
Speaker 6: quality perspective, you know, generally speaking, you don't see any
Speaker 6: kind of spread widening. Now, the one topic you did
Speaker 6: bring up, impact of maybe any federal aid reduction to
Speaker 6: any municipal issuers. I think that starts affecting more states,
Speaker 6: more local credits. Right, So if you think about states,
Speaker 6: you look at the Medicaid aid that they're receiving on
Speaker 6: an annual basis, Each state is going to have to
Speaker 6: handle this differently, right, depending on the severity of the
Speaker 6: cuts how that impacts each state. But again my main
Speaker 6: point here will be this is no different than any
Speaker 6: state managing their budgets during any sort of an economic
Speaker 6: you know, let's say slow down. Every state has to
Speaker 6: reconcile their budgets. You come up with costs, you come
Speaker 6: up with remny raising measures. But from a credit perspective,
Speaker 6: this is what we're all trying to parse through.
Speaker 4: So, Nisha, I know, one of the interesting issues and
Speaker 4: challenges potentially for the mean US with bond market is
Speaker 4: with the tax legislation and the tax deductibility of interest.
Speaker 4: Where do we stand there?
Speaker 6: Yes, yes, So the administration obviously is a daunting task
Speaker 6: to come up with, roughly let's say fourtullion dollars a
Speaker 6: counteract to the tax cut extension which you're looking to do.
Speaker 6: So the tax exemption of munis has been put on
Speaker 6: the table. This is something that has come up historically before,
Speaker 6: during Prison Obama's administration in twenty fourteen during a budget reform.
Speaker 6: I'm going to simply put it as we put a
Speaker 6: low risk on this happening to where the tax exemption
Speaker 6: of municipal bonds is taken away entirely, and in that
Speaker 6: for that matter, for a majority of the market, we
Speaker 6: just don't see that happening. Why you look at what
Speaker 6: the actual revenue would come from that, let's call it
Speaker 6: twenty five billion a year, two hundred and fifty over
Speaker 6: the next ten years. How do all the infrastructure projects
Speaker 6: get funded in our country right, seventy five to eighty
Speaker 6: percent is through the municipal bond market. Every state, every
Speaker 6: local municipality, building schools, fixing bridges, it's all through the
Speaker 6: MENI market. You would be tripling the cost of financing
Speaker 6: these types of projects if you were to do that
Speaker 6: at a time when this administration is backing right infrastructure
Speaker 6: type projects economic expansion. So this counter acts I think,
Speaker 6: just from a high level perspective that so, I do
Speaker 6: think you could see more noise around this, especially in
Speaker 6: a market like Munis. You know, we have seen some
Speaker 6: weakness in Munis that has been more supply driven in
Speaker 6: market dynamics. But I think this is starting to create
Speaker 6: a little bit more noise. But we put low risk
Speaker 6: on this.
Speaker 2: Is parametric funded the municipal bonds that allowed for the
Speaker 2: paving of fifty ninth Street Park Avenue.
Speaker 6: It's quite possible.
Speaker 3: It was impossible.
Speaker 6: See, don't we need more roads to be paved?
Speaker 2: No, we can't increase the Bentley And it's like I
Speaker 2: need an suv to get through the potholes. Yes, all
Speaker 2: of a sudden, the Bentley was smooth today. Tell me
Speaker 2: about duration. What's the retail trap? Now? Is it to
Speaker 2: buy two short munis or should I be looking at
Speaker 2: what perpetuity or twenty or well, listen, this is.
Speaker 6: A great question. We've seen a pretty tremendous underperformance in
Speaker 6: the municipal bond market. You look at your Broad Bloomberg
Speaker 6: Treasury INEX Corporate indext Q one anywhere up from two
Speaker 6: and a half to three percent. Munis are maybe up
Speaker 6: about seventy five business points. Why, we've seen a lot
Speaker 6: of issuance in the market. This has been the second
Speaker 6: largest quarter in issuance since two thousand and seve Just
Speaker 6: an incredible amount of money and issuance coming to the market.
Speaker 6: A lot of this is a function of issuers wanted
Speaker 6: to get ahead of any volatility that may be coming
Speaker 6: about later this year, just necessary infrastructure projects. So my
Speaker 6: short answer to you is the curve is incredibly steeper.
Speaker 6: You're two to twenty year and the unique curve is
Speaker 6: about one hundred and thirty basis points. You are getting
Speaker 6: paid to extend out in terms of duration right now,
Speaker 6: most municipal bond investors, retail investors are a little scared
Speaker 6: to add duration. This is when you want to be
Speaker 6: looking at that part of the curve. So look at
Speaker 6: you know, ten plus years, particularly fifteen to twenty years,
Speaker 6: you're locking in tax equivalent yields of anywhere from seven
Speaker 6: to eight percent. Think about that, right for high piastics, Yes, large,
Speaker 6: So this I think we're seeing as a pretty tremendous
Speaker 6: buying opportunity.
Speaker 4: Are funds flowing like that? Are funds coming into the
Speaker 4: musicipal bond market?
Speaker 6: That's a great question. So supply has been very high.
Speaker 6: On the demand side. We have been seeing outflows out
Speaker 6: of the municipal bond market and even ets we're seeing
Speaker 6: outflows now this week. We're starting to see that turn.
Speaker 6: But we know in this market when things turn and
Speaker 6: come back in the other direction, they can come in
Speaker 6: a flood. This is when you want to you know,
Speaker 6: at least leg in and start locking in these heels.
Speaker 6: Before you could see heels compressed, were going to count My.
Speaker 2: Response when you're on and let me go back to
Speaker 2: a question I've asked you before, but I think it
Speaker 2: needs to be revisited. Can our listeners and viewers on YouTube,
Speaker 2: can they acquire individual bonds or are they locked out
Speaker 2: by Fidelity, black Rock, Pimco and the rest.
Speaker 6: It depends on how you're accessing these bonds or brokerage,
Speaker 6: you know, platforms that allow you to do this, we
Speaker 6: would advocate, Look, professional management is probably the better route
Speaker 6: to go, right for all the reasons that we talked
Speaker 6: about better positioning credit management. So Tom, I'm still waiting
Speaker 6: for you to open up your account with us, but.
Speaker 2: I'm looking at the TWU wishes it's out somewhere. Yes,
Speaker 2: help me with how many beeps you pick up by
Speaker 2: dealing with adults like you versus sitting on the phone
Speaker 2: trying to get I'll take fifty or I'll take ten
Speaker 2: of the the mateo education, geo of you know whatever.
Speaker 6: Right off the bat, there could be you know, two
Speaker 6: to three percent savings on just the execution two hundred
Speaker 6: beeps on that individual whole, not two hundred beeps a
Speaker 6: two percent of price. So let's say in a ten
Speaker 6: year bond, roughly twenty thirty basis points at least. But
Speaker 6: that's just on the execution, right, Because we're buying as
Speaker 6: professional institutional buyers, we're accessing new issue deals which as
Speaker 6: an individual on the other side, you simply would not
Speaker 6: have access to. You you can only buy it in the
Speaker 6: secondary market exactly. So there's a markup associated with that
Speaker 6: credit management? What is that worth in this environment? I
Speaker 6: would say that is worth a considerable amount.
Speaker 2: What's the pick up on new issues? We've got to
Speaker 2: go here, but what's the basis point pick up? I'm
Speaker 2: buying a new issue for something out there.
Speaker 6: So right now in the ten to fifteen year part
Speaker 6: of the curve, you could easily pick up anywhere from
Speaker 6: twenty to forty basis points depending on just because right
Speaker 6: now you're seeing a lot of issuance. Things are getting
Speaker 6: a little sloppy, as I like to call it.
Speaker 2: Are you taking this is.
Speaker 6: When you want a professional manager to be accessing the
Speaker 6: new issue market. So parametric is a way to do it.
Speaker 4: Tom I A ladder, dimunitionible portfolio is what I have,
Speaker 4: light duration half for thirty years.
Speaker 2: That's how you play it.
Speaker 4: Yeah, yeah, clip and coupon the high steing Jersey triple tax.
Speaker 2: Yes, I have a ladder, a laddered tuition polio.
Speaker 6: All right, we need to talk about that after this
Speaker 6: we do.
Speaker 2: This is great. We got a huge response when we're
Speaker 2: having me she is with parametric, we don't take enough
Speaker 2: advantage of a discussion of the simple rond score.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: Peter Sheer goes to the heart of the matter on
Speaker 2: this event at four pm this afternoon of the President
Speaker 2: of the United States, and he takes it right back
Speaker 2: to the Codahammarabi and of course on the Hebrew law
Speaker 2: as well in Exodus. And that is his concept of
Speaker 2: grievance and retribution. And I for an eye Peter Shaer
Speaker 2: with this brilliant note from Academy Securities. How I for
Speaker 2: an eye is America this morning?
Speaker 7: It feels very much so. And I think that's part
Speaker 7: of the problem. Right, It's where did this first I start? Right,
Speaker 7: it's you know, we're now complaining about Tara stup. We're
Speaker 7: put on us. But I think it's a wrong attitude,
Speaker 7: and I think we're pushing people away. And although we're
Speaker 7: really focused today on tariffs, I think we have to
Speaker 7: take one step back and say everything else is going
Speaker 7: on geopolitically, is also pushing our friends and allies away
Speaker 7: from us. How we're handling NATO, how we're having Russia, Ukraine,
Speaker 7: the language in and around Greenland, the language in and
Speaker 7: around Canada. I think there's this real concern that's going away,
Speaker 7: and you're starting to see it occur geopolitically, where all
Speaker 7: of a sudden, Japan, China, and South Korea are talking,
Speaker 7: Canada and Mexico are talking directly. I think we've overstated,
Speaker 7: you know, quote unquote our hands or what our cards
Speaker 7: we hold. And I think, no matter what happens today
Speaker 7: two three weeks later, our stock markets are gonna be
Speaker 7: lower as we realize that we are kind of destroying
Speaker 7: the American brand.
Speaker 4: Are you surprised that there hasn't been any more pushback
Speaker 4: against this president in this administration from Congress broadly defined
Speaker 4: is to some of these bigger issues, you.
Speaker 7: Know, I think it's so early in his administration. He
Speaker 7: won with a pretty clear mandate, so I think everyone
Speaker 7: was going to let it play out. And I think
Speaker 7: this time around, the one thing he did, clearly from
Speaker 7: his perspective, is he filled up his posts much quicker
Speaker 7: than last time.
Speaker 2: YEP.
Speaker 7: But he picked people who are really on board with him,
Speaker 7: particularly on tariffs. Almost every single person in his cabinet
Speaker 7: believes tariff's work, and so I'm not we're not seeing pushback.
Speaker 7: Maybe some of the voting last night, maybe that would
Speaker 7: be the first wave that people should raise their hands
Speaker 7: and say, hey, maybe we need to change this a
Speaker 7: little bit.
Speaker 2: The advantage you have in folks, Academy securities has a
Speaker 2: huge military tenor of excellence of admirals and generals on
Speaker 2: their board as well. The heart of the matter is
Speaker 2: he's tearing asunder the Atlantic Charter off of Newfoundland nineteen
Speaker 2: forty one. I mean, and George Bood Senior, who was
Speaker 2: hauled out of the Pacific Ocean, you know, on a
Speaker 2: down airplane onto a suburb at midway. We're going on
Speaker 2: beyond that. Do your people in Academy's security say we're
Speaker 2: staggering into a new era or is this a moment
Speaker 2: than where we'd pull back.
Speaker 7: I think everyone's torn, and you know, like everyone else,
Speaker 7: I'm sure there's varying degrees, but I would say, you know,
Speaker 7: one thing that comes up in conversations right all of
Speaker 7: a sudden, this talk about Greenland, the polar ice cap Well,
Speaker 7: Canada has I believe it's twenty summut ice breakers, rush
Speaker 7: ass forty something. The US is about five. So if
Speaker 7: we are that worried, why don't we have icebreakers? Why
Speaker 7: aren't we more prepared for this? Greenland seems like a
Speaker 7: weird way to do it. I think there's a lot
Speaker 7: of questions about the messaging. We used to have three,
Speaker 7: you know, bases in Greenland. Why not just talk to
Speaker 7: Greenland and try and re established two if we think
Speaker 7: it's that important. So I think it's the messaging and
Speaker 7: how we're going about it, maybe necessarily than the what
Speaker 7: that is causing a lot of consternation.
Speaker 2: Paul jump in here because I'm just going to talk
Speaker 2: submarines in the data story a turn off the show,
Speaker 2: Save me, Paul, Peter.
Speaker 4: So, given all those that level of uncertainty, just whether
Speaker 4: it's economic uncertainty, political uncertainty, military uncertainty that seems to
Speaker 4: have been engendered over the past several months, what do
Speaker 4: you tell your clients about investing these days?
Speaker 7: Well, one, I actually think there's a high degree of certainty,
Speaker 7: and the certainty is not good right. The certainty is
Speaker 7: one other countries are now playing US very differently. If
Speaker 7: you go back to g G made a trip to
Speaker 7: Marrow Lago very early in Trump one point zero. Every
Speaker 7: time Trump mentioned tariffs, China had some sort of trade delegation.
Speaker 7: This time China's sitting there and saying, oh, yes, sir,
Speaker 7: may I have another, Yes, sir, may have another. They're
Speaker 7: moving along. I think we have bitten off way more
Speaker 7: than we can choose. So again, at thirty trillion dollar
Speaker 7: GDP or the largest economy, why we've chosen to fight
Speaker 7: with the eighty trillion rest of the world is a
Speaker 7: little bit unclear. And one thing that I think about
Speaker 7: a lot. I think this is really representive what's going
Speaker 7: to happen going down the road. Is three months ago,
Speaker 7: if you told me Germany was going to spend hundreds
Speaker 7: of billion dollars on military equipments, US defense stocks would
Speaker 7: have skyrocketed. They are not because Germany doesn't want to
Speaker 7: buy American equipment. And I think this ending of the
Speaker 7: American brand is my biggest concern, and.
Speaker 2: Bring it over to the market. Let's bring it over
Speaker 2: to the world of Peter sheheer from this geopolitical moment again,
Speaker 2: Coverage this afternoon, really coverage all day folks and into
Speaker 2: tomorrow Douglas, Heroin and Dartmouth, where this tomorrow owns the
Speaker 2: high ground on this debate. Bring it over to the
Speaker 2: markets then, So is there a sheer opportunity here?
Speaker 7: I think you maybe sit through. It feels like the
Speaker 7: market wants to rally no matter almost what has said.
Speaker 7: Then I think you want to fade this. I think
Speaker 7: we're going to be down another ten twenty percent in
Speaker 7: the s and P five hundred in the coming weeks
Speaker 7: and months. Has the reality of what we've done right everything?
Speaker 2: So you're talking negative thirty five percent drawdown?
Speaker 7: Yeah, negative twenty five to thirty five percent. I think
Speaker 7: this is going to be a severe problem. I keep
Speaker 7: thinking back to Japan nineteen eighty nine, ninety ninety. Was
Speaker 7: anyone sitting there at the Nike wondering, oh, yeah, we're
Speaker 7: gonna be down sixty percent in a year and not
Speaker 7: recover for thirty years. No, And I feel like some
Speaker 7: of what's going on puts us in that sort of position.
Speaker 7: The world is moving away from us. We don't have
Speaker 7: the cards that we think we have, and on top
Speaker 7: of that, the supply chains aren't ready even if we
Speaker 7: are successful. And I don't think we're going to be
Speaker 7: successful in getting companies. It's a two to seven year
Speaker 7: project to build manufacturing facilities here to get the robots
Speaker 7: in place. I think we've misplayed very badly here.
Speaker 4: So we've seen a movement just in a stock market.
Speaker 4: Rest of world dramatically outperforming the US S and P
Speaker 4: five hundred year to date in the first quarter. Is
Speaker 4: that a short term trade? Is that something more? Are
Speaker 4: you telling clients you think about Europe, think about Japan.
Speaker 7: I continue to like China, probably better than the other places.
Speaker 7: I think China's gonna be the big beneficiary. I think
Speaker 7: right now every market come down a little bit. But
Speaker 7: the one thing again, I think we really missed how
Speaker 7: many intangibles the US benefited from its position as this
Speaker 7: kind of benevolent superpower. One. We really benefit from capital flows.
Speaker 7: Capital flooded into the US. Everyone wanted to be in
Speaker 7: the US from an investment standpoint. That is now turning.
Speaker 7: People don't want planing equipment here necessarily. They're trying to
Speaker 7: figure this out. So I think capital outflows continue.
Speaker 2: I gotta bring this was this like, can't we do it?
Speaker 2: Like eight hour show today? Rich?
Speaker 5: Rich?
Speaker 2: Can you find out talk to management see if we
Speaker 2: can extend this out. I Peter, this is fascinating, And
Speaker 2: to me, the heart of the matter is, I'm going
Speaker 2: to assume Academy Securities has somewhere there's a token Democrat
Speaker 2: in the step. But this is the president's Republican party
Speaker 2: versus George Bush Senior's Republican Party. You're talking like there's
Speaker 2: a permanence to Trump trade policy.
Speaker 7: I think we You know, if you're in a relationship
Speaker 7: and you say that one thing that you know you
Speaker 7: should not have said, because you can't.
Speaker 2: Go back to doing it, listen.
Speaker 7: And I'm not very good at relationships, but it does
Speaker 7: strike me that we've gone past that moment where we've
Speaker 7: done enough that people don't trust us, that we're trying
Speaker 7: to retrade everything again. U smca, Oh wow, Yeah, maybe
Speaker 7: we should exempt autos. And you've seen mistake after mistake made.
Speaker 2: Right.
Speaker 7: Why are we now having to bail out farmers for
Speaker 7: their input costs? Well, their input costs are largely fertilizer podash,
Speaker 7: things coming from Canada that we just slapped tariffs on.
Speaker 7: So tarifs are supposed to be a revenue generator, but
Speaker 7: now we're having to spend the money. I think this
Speaker 7: has been done very poorly, very haphazardly. I think if
Speaker 7: Bessentt was truly in charge, this would have been played
Speaker 7: out over six months, it would have been organized, it
Speaker 7: would have been timely. I think it's been very random,
Speaker 7: and I think we have actually broken relationships that I
Speaker 7: don't think are repaired easily.
Speaker 2: You got a gold call, Lisa wants to know you.
Speaker 2: You're talking gold four thousand.
Speaker 7: No, no gold call. I do think crypto is actually
Speaker 7: going to fall down a little bit. I think Crypto's
Speaker 7: going to bear the brunt of a lot of this.
Speaker 7: I think people are going to be disappointed.
Speaker 2: By a lot ten am and that's the.
Speaker 7: Other reason to me, crypto has become much more part
Speaker 7: of the US dock market, whether it's MSTR being in
Speaker 7: the Nasdaq one hundred, the Bitcoin ETFs, it's in people's
Speaker 7: equity portfolios. I think this whole thing kind of comes
Speaker 7: down together. And to me, I want to see Crypto
Speaker 7: come down significantly from here, maybe to fifty sixty thousand,
Speaker 7: and I want to see the NASDAK come down. I
Speaker 7: also keep looking at TQQQ, which is a weird triple
Speaker 7: leverage GTF, but it represents about sixty billion dollars keeps
Speaker 7: getting inflows. I need to see capitulation on that to
Speaker 7: be bullish.
Speaker 2: Peer's here. Come back when you get more negative. Pierce
Speaker 2: share here, Academy Securities.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
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Speaker 2: Get right to it. I know it is newspaper Day
Speaker 2: with Lisa Mateo and she'd like twelve, are you torpedo
Speaker 2: bat free this morning?
Speaker 8: Yes I am, but well you're swinging some home runs.
Speaker 4: Okay, So here we go.
Speaker 8: We have a lot of stories about the price of
Speaker 8: so many things going higher, right we've been talking about.
Speaker 8: Now we add to this. This is this interesting story
Speaker 8: about medical care affordability. This was study from West Health
Speaker 8: and Gallup and found it eleven percent of Americans said
Speaker 8: they could not pay for medication medical treatments within the
Speaker 8: past three months. So this is of lately things paying
Speaker 8: like a doctor's visit, prescription drugs, things like that. More
Speaker 8: than a third said that if they were to need
Speaker 8: medical care, they wouldn't be able to afford it. And
Speaker 8: it's also an interesting thing because it showed that this
Speaker 8: widing disparity among black and Hispanic adults also those making
Speaker 8: the least amount of money to the reason why they're
Speaker 8: saying is higher premiums, things like the added cost of
Speaker 8: going to the doctor, recent rollbacks and Medicaid coverage on
Speaker 8: top of it. So with this really interesting look at
Speaker 8: here's yet another thing that people are having trouble affording.
Speaker 4: It's kind of important too.
Speaker 8: Yeah, most definitely. No, definitely medical care, definitely. I want
Speaker 8: to equipmentical go to weight loss drugs. We talk a
Speaker 8: lot about it, right the f Yeah, the FTA because
Speaker 8: Tom loves it. They're about here's the overall factor. The
Speaker 8: FDA is about to take away Telehealth Company's license to
Speaker 8: sell these knockoff weight loss drugs.
Speaker 4: Right.
Speaker 8: They gave them the green light when the drugs run
Speaker 8: short supply, So now it's time the supply is back,
Speaker 8: so they have to take away this license. So now
Speaker 8: things are changing. It's causing this workplace battle, like who's
Speaker 8: going to pay for the GLP ones like ozembic now
Speaker 8: that they're a little.
Speaker 2: Bit more expensive expensive, right, did I write nine hundred
Speaker 2: dollars something?
Speaker 3: So?
Speaker 8: But yeah, because you can get them before from MI
Speaker 8: these knockoffs for about two hundred, and now you have
Speaker 8: to pay like five hundred. So there's there's a big
Speaker 8: difference in price. So who's going to pay for it?
Speaker 8: Will the company pay for the employees weight loss drugs?
Speaker 8: Or will they not? I mean some stopped and they
Speaker 8: said we're not doing it. Others said, you know what,
Speaker 8: we're going to keep this because it's going to help
Speaker 8: us a train and attract talent and and attract talent too.
Speaker 4: So I want to look back there. Do we know
Speaker 4: what percentage of people are using these things these days?
Speaker 2: A lot?
Speaker 8: It definitely does seem like a lot, and a lot
Speaker 8: of people are staying on it. I don't like people
Speaker 8: who've gone on it. I've known some people who have
Speaker 8: gotten off of it and kind of maintain but then
Speaker 8: they have to kind of jump back on again. Yep,
Speaker 8: when they start to fall back. But it's this idea
Speaker 8: of who is going to pay for it? Well, the
Speaker 8: company kind of pony over the money for it in insurance.
Speaker 8: And the last thing we've been talking about, President Trump's
Speaker 8: tariff announcement right later today, here's an interesting take. The
Speaker 8: Wall Street Journal is saying that Brazil could be this
Speaker 8: big winner in the trade war. So they're saying they
Speaker 8: have these certain advantages. For example, Brazilian suppliers everything from
Speaker 8: cotton to chicken, they're looking to hire demand from China,
Speaker 8: so that's the main point. So they're saying that that
Speaker 8: trade relationship has expanded. Chinese buyers stockpiling Brazilian soybeans. So
Speaker 8: at the same time, Brazil has opportunities to boost exports
Speaker 8: to the US and other countries because it's the biggest producer,
Speaker 8: for example, of footwear outside of Asia, so they're hoping
Speaker 8: they can send more shoes to the US in place
Speaker 8: of Chinese products. So they're putting what.
Speaker 2: You're talking about is the complexity of these discussions with
Speaker 2: Jason Furman in five minutes versus the simplicity the theory
Speaker 2: of simplicity that we're getting picked by tick here.
Speaker 4: Ye, yes, really from every Yeah, and the devil's in
Speaker 4: the details.
Speaker 5: We'll see how this.
Speaker 2: Will there be details today though I don't know, I
Speaker 2: don't know. I have no idea, Lisa, do you have
Speaker 2: an angle here? If you talk to the White House
Speaker 2: on the.
Speaker 8: Last time yet not yet. It's on my agenda, Lisa.
Speaker 2: Mateo, the newspapers this morning. Thank you, there's so much.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
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Speaker 1: weekday seven to ten am Easter and on Bloomberg dot com,
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