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

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple, Cardplay and Android

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Speaker 2: outo with the Bloomberg Business App. Listen on demand wherever

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Speaker 2: you get your podcasts, or watch us live on YouTube.

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Speaker 3: I'm going to go back to the stock market and

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Speaker 3: look at shares of Broadcom up a whopping nineteen percent.

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Speaker 3: I want to get more with kushon so Bonnie and

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Speaker 3: Bloomberg Intelligence senior semi analyst, so we know the story.

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Speaker 3: The numbers for its AI revenue were super high. Their

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Speaker 3: outlook looked really good. Is it justified in a one

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Speaker 3: trillion dollar valuation right now?

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Speaker 4: Look going into the earnings, the top concerns where how

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Speaker 4: is AI going to do next quarter? What are the

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Speaker 4: numbers looking like for twenty twenty five and sort of

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Speaker 4: no visibility beyond that. So can this rarey sustain those

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Speaker 4: numbers that are driving the stock?

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Speaker 5: Really gives investors three to three to.

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Speaker 4: Four years quantifiable target and milestone to look at and

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Speaker 4: now just track the execution.

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Speaker 5: And those numbers are pretty huge.

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Speaker 4: I mean you're talking about three to four x fold

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Speaker 4: growth in just the Sam just from his three customers,

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Speaker 4: not even including the additional two that they're working on.

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Speaker 6: So Kulj help us think about Broadcom now in comparison

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Speaker 6: to Nvidia and maybe even some of the other players.

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Speaker 6: How's this industry as it relates to AI? How is

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Speaker 6: it shaking out here?

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Speaker 5: Yeah?

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Speaker 4: I mean when you look at Broadcom just barely six

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Speaker 4: months or a year ago, people didn't even think of

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Speaker 4: it as an AI company, right. It was primarily the

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Speaker 4: investor base. It was really loved for his free cash flow,

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Speaker 4: generating ability, highly profitable, sustainable, slow, mid to high, high

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Speaker 4: single digit grower. Now suddenly AI is going to become

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Speaker 4: a huge chunk of its semi connective revenues. And in combination,

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Speaker 4: you still have the software revenues at high margin generating

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Speaker 4: significant amount of cash. So you have this really growing

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Speaker 4: and media type or even growing faster in certain areas

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Speaker 4: going forward than in AI story. Along with all the

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Speaker 4: goodness of what do you want from a large gap

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Speaker 4: which is high profitability, high operating margin, high free cash

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Speaker 4: flow for the.

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Speaker 3: Non AI stuff like the chips that go into like

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Speaker 3: phones and cars and all that kind of stuff, How

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Speaker 3: is that part of the business doing? Because it hasn't

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Speaker 3: been doing very well. We've were waiting for their cycle

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Speaker 3: globe recovery to kind of kick up.

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Speaker 7: Where do Broadcom land on this.

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Speaker 4: Yeah, I mean they are aligned very well to what

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Speaker 4: rest of the cyclical semis are doing. I mean, look,

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Speaker 4: twenty four was the bottom for.

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Speaker 5: Most of its business.

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Speaker 4: We do expect recovery starting early next year, but it's

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Speaker 4: going to be really slow turning corners, so we don't

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Speaker 4: expect any sort of fireworks there. But the good news

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Speaker 4: is the way AI is expected to grow, that portion

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Speaker 4: of the business is going to shrink and become a

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Speaker 4: significantly smaller part of the chip business.

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Speaker 6: All right, So as you step back from the semispace

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Speaker 6: these days, Kunjan, what are the conversations you're having about

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Speaker 6: the space in general? Is it in Vidia all the time?

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Speaker 6: Do I want to own a basket of these things?

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Speaker 6: What are some of the conversations you're having with your

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Speaker 6: investor clients.

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Speaker 4: Yeah, the top question is sort of searching for the

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Speaker 4: next in media, trying to add more and more AI

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Speaker 4: exposed names and who else in the semi sector and

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Speaker 4: the peripheral sectors, whether it's foundries, whether it's memory, whether

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Speaker 4: it's semiconductor equipment providers can benefit from this broadening AI boom.

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Speaker 4: You know, the first beneficiary, almost entire.

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Speaker 5: Beneficiary, was just one name in media. So that's a

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Speaker 5: conversion we have and we have been actually.

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Speaker 4: Calling out Broadcom and Marvell for quite a while now

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Speaker 4: that these are going to be sort of the next

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Speaker 4: set of beneficiaries from the coverage that we cover.

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Speaker 3: When we take a look at Broadcom though, and the

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Speaker 3: stock reaction in the near term, are we borrowing faith

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Speaker 3: from like twenty twenty five or twenty twenty six, or

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Speaker 3: is this like legit comp number rally?

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Speaker 4: I mean, there is definitely a huge weightage given on

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Speaker 4: their ability to execute to that large sam that they

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Speaker 4: have laid out. You know, investors have been who have

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Speaker 4: been following Hawk for many years, don't take what he

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Speaker 4: says lightly.

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Speaker 5: There's a big degree.

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Speaker 4: Of conviction in what Hawks is and can deliver. So

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Speaker 4: there's definitely a huge reliance in what you see in

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Speaker 4: the stock movement that they will be able to sort

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Speaker 4: of meet or execute on those numbers.

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Speaker 6: So is the when we see like a big number

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Speaker 6: coming out of the likes of Broadcom, does that give

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Speaker 6: you pause for the NVIDIAs story that maybe there's a

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Speaker 6: market share shift going along, that maybe the competition is

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Speaker 6: starting to step up here.

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Speaker 5: Not in the near term.

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Speaker 4: Look, the merchant silicon GPU that and media sells versus

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Speaker 4: the custom that Broadcom does right now are being used

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Speaker 4: for two different use cases, and both of those use

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Speaker 4: cases that demand is booming, right, so it's a win

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Speaker 4: win for everyone right now. Eventually, in theory, if this

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Speaker 4: demand rarely does normalize and there is some kind of digestion, Look,

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Speaker 4: there's only so much these hyperscalers will spend, right, So

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Speaker 4: eventually down the road we will come to a point

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Speaker 4: where they will have to decide do they want to

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Speaker 4: spend more in their custom and the GPU and what

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Speaker 4: are people demanding for. At that point there will be

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Speaker 4: wallet share competitiveness, but not at this given point, just

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Speaker 4: because the use cases and applications are very different.

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Speaker 3: They get the majority of their revenue really from Apple

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Speaker 3: and WT Microelectronics. Right then it comes sort to Alphabet

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Speaker 3: and Meta with about six to eight percent of its revenue.

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Speaker 7: Thank you so much. Supply chain analysis function on the terminal.

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Speaker 3: Are they trying to diversify that in a meaningful way

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Speaker 3: or are they comfortable with that sort of waiting.

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Speaker 4: I think it's just organically going to get diversified.

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Speaker 2: Right.

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Speaker 4: The wireless from Apple is not a fast growing business.

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Speaker 4: It's a sort of mid single digit at best. Right, So,

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Speaker 4: and there are some concerns around that it's too mature

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Speaker 4: to talk about it. But even if you assume that

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Speaker 4: business continues, and like the speed at which the AI

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Speaker 4: business is.

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Speaker 5: Going to increase, the speed at which Google.

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Speaker 4: Meta and these other hyperskillers are become going to become

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Speaker 4: a larger portion of broadcom, it is organically going to

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Speaker 4: diversify away from the top two customers that you pointed out.

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Speaker 1: All right, John, thanks so much for joining us.

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Speaker 5: KU.

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Speaker 6: John Sobani, senior analyst on semiconductors. He's over there Bloomberg Intelligence,

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Speaker 6: based in our San Francisco office right there in Silicon Valley,

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Speaker 6: close to all those big tech companies that he covers.

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Speaker 6: So that's a real advantage for us, Sir John Cobani

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Speaker 6: Sobani joining us there.

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Speaker 1: That's a heck of a move for a company, you know, one.

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Speaker 6: Trillion dollar market cap stock to move twenty percent. I've

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Speaker 6: said it when I was seeing some of the moves

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Speaker 6: from Nvidia, when they were moving ten twenty thirty percent

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Speaker 6: a day. This is huge amounts of shareholder wealth being

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Speaker 6: created in this space. It just the absolute dollars are

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Speaker 6: kind of stunning for to take a look at it.

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Speaker 6: So this isn't any penny stock at there.

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Speaker 2: So you you're listening to the Bloomberg Intelligence Podcast. Catch

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Speaker 2: us live weekdays at ten am Eastern on applecar Play

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Speaker 2: and Android Otto with a Bloomberg Business Act. You can

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Speaker 2: also listen live on Amazon Alexa from our flagship New

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Speaker 2: York station, Just say Alexa play Bloomberg eleven thirty.

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Speaker 7: All right, let's get two overseas.

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Speaker 3: We're going to France President Manuel Maulcrant appointing Francois be

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Speaker 3: Roux as France's new prime minister to navigate a fractured

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Speaker 3: I feel like that's a nice way of saying a

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Speaker 3: political landscape and there's a to do list that's very difficult.

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Speaker 3: Alan Katz's Bloomberg Paris bureau chief joins us. Now, Alan,

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Speaker 3: does he have to get like approved or voted for

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Speaker 3: or is he just in power and then he's going

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Speaker 3: to make it work.

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Speaker 8: So the latter, he's just in power and he has

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Speaker 8: to make it work in France. The president gets to

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Speaker 8: nominate where he wants as prime minister. So great, so

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Speaker 8: now you've got corns by who. But he has to

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Speaker 8: get a few things done, most importantly as a twenty

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Speaker 8: twenty five budget, and that's what caused his predecessor got

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Speaker 8: nay Michel Bannier to get booted out in an confidence

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Speaker 8: vote last week.

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Speaker 1: So that's going to be his first order.

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Speaker 8: Well, his first order of business really is getting a

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Speaker 8: cabinet together, getting in government together, and then it's going

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Speaker 8: to be trying to get a twenty twenty five budget passed.

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Speaker 8: So that's really the first things he's got to start

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Speaker 8: to do, and it's not going to be easy.

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Speaker 6: So alan, is there any reason to believe that this

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Speaker 6: new prime minister will have any better luck with the

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Speaker 6: right and the left which caused the demise of the predecessor.

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Speaker 8: So that's a good question. I guess the best answer

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Speaker 8: is maybe he is. He's a centrist, right, so he

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Speaker 8: he has been known to do. I mean, originally sort

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Speaker 8: of his party was more aligned with the sort of

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Speaker 8: the center right back in the in the eighties and

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Speaker 8: the and the nineties, but then he famously voted for

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Speaker 8: a socialist for president in two thousand and seven rather

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Speaker 8: than the conservative guy, so he sort of he's reached

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Speaker 8: out to both sides over time. He also was very

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Speaker 8: famous for having supported malheinm le Penn's right to run

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Speaker 8: for president in two thousand and two and Francis to

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Speaker 8: get five hundred signatures and local officials to be able

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Speaker 8: to run for presidents, and he said, well, she's very popular.

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Speaker 8: We can't not have her run. That would be really

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Speaker 8: bad for democracy. I don't support her personally, but I

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Speaker 8: supported right to run, and the far right remembers that.

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Speaker 8: So he's got sort of possibilities. But then really getting

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Speaker 8: people onside is going to be much more difficult. Michelle

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Speaker 8: Baarnier the guy again who just got ousted. He sort

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Speaker 8: of had the far right on side for a while

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Speaker 8: also until they weren't. So far everyone today has been giving,

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Speaker 8: I guess, sort of mildly positive comments. They're going to

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Speaker 8: say we'll wait and see or what depends on what

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Speaker 8: he presents, but it's really not clear that he's necessarily

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Speaker 8: going to have any better luck than Michelle Banier did.

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Speaker 3: What does The far right and the far left want.

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Speaker 8: Very different things, but mostly what they want is someone

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Speaker 8: who's going to allow them to look good to their

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Speaker 8: voters as they get toward the twenty twenty seven presidential election.

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Speaker 8: That's one of the problems that we have in France

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Speaker 8: right now, which is that you have this big block

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Speaker 8: on the left and a big block on the right.

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Speaker 8: On the right is led by a woman in Marine

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Speaker 8: Le penn and there's the most popular politician in many

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Speaker 8: polls in France, and certainly the person who leads polls

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Speaker 8: if the next presidential election was to happen today, the

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Speaker 8: person who's frequently number two, or if not number two,

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Speaker 8: number three is the guy on the far left, Nam

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Speaker 8: Jean Luke Bentent Chanp and the two of them are

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Speaker 8: definitely looking to the next presidential election. So all of

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Speaker 8: their decisions in the short term, in terms of what

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Speaker 8: happens in parliament, passing a budget or any other laws,

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Speaker 8: is all about what does this mean for how voters

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Speaker 8: are going to perceive me in twenty twenty seven, And

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Speaker 8: that makes for a very difficult relationship because sometimes there

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Speaker 8: are things that you might say, well, that's obvious, sure

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Speaker 8: they should like this, but then they don't. In the

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Speaker 8: case of Michaud Valgniert, he basically gave in to most

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Speaker 8: of the far rights demands, basically three out of four

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Speaker 8: main ones that they had, and they voted, you know,

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Speaker 8: they voted for emotion of no confidence anyway, because they

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Speaker 8: decided it was in their interest, in their longer term

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Speaker 8: interest to do so. So that makes it really quite difficult.

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Speaker 6: Alan, thank you so much, appreciate your reporting. Alan Katz,

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Speaker 6: Paris bureau chief for Bloombergers. How cool is it that

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Speaker 6: we get people on the ground, really smart voices pretty

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Speaker 6: much everywhere around the world, and they come on the

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Speaker 6: air with us.

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Speaker 7: Very cool.

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Speaker 6: That is such a great and they really know what

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Speaker 6: they're doing advantage and they know exactly what they're talking.

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Speaker 6: I want to ask that next next time we talk

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Speaker 6: to Alan, how big of a story is it in

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Speaker 6: Paris and France the reopening of the Notre Dame, Because

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Speaker 6: I when you saw the damage from that fire five

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Speaker 6: years I'm like, they're never going to fix that stuff.

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Speaker 1: I mean, how do you fix that?

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Speaker 3: I mean we went to Paris last summer and it

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Speaker 3: was like, that's it's never gonna You're gonna be so behind,

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Speaker 3: And then they did it. I would think the culturally, yeah,

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Speaker 3: and the message it sounds is pretty It's pretty spectacular.

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Speaker 6: I mean I give my Corona pat on the back

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Speaker 6: and the French people pat on the back because that

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Speaker 6: was awesome.

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Speaker 1: I want to go prices and fuel prices, prices and

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Speaker 1: fuel prices. I get it. So we'll have more on

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Speaker 1: that coming up.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple, card playing and

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Speaker 2: out with the Bloomberg Business app. Listen on demand wherever

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Speaker 2: you get your podcasts, or watch us live on YouTube.

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Speaker 3: All right, so we get the Fed on Wednesday, highly

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Speaker 3: expect to cut rates in December. The question then becomes

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Speaker 3: what happens in twenty twenty five if that neutral rays

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Speaker 3: moving up, as Bill Dudley, a former FED governor, was

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Speaker 3: talking about on surveillance, If he thinks the neutral rate

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Speaker 3: is three point five are a little bit higher, what

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Speaker 3: does that mean then for the trajectory of cuts, And

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Speaker 3: then what does it mean for sectors that are really

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Speaker 3: waiting for those cuts to kick in, like real estate,

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Speaker 3: maybe private markets, private equity. We want to deb a

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Speaker 3: little bit deeper into this with Miguel Sosa, head of

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Speaker 3: market research and strategy over Blue Rock. He joins us

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Speaker 3: now from Dallas, Texas. Before we get to the nitty

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Speaker 3: gritty of say, private credit and real estate, just give

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Speaker 3: us your broad views on twenty twenty five.

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Speaker 9: Yes, thank you, Alex. So we're excited about twenty twenty five.

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Speaker 9: We think that the markets are poised to perform well.

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Speaker 9: We've seen strong performance for twenty twenty four with a

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Speaker 9: change in administration. We think that the administration is very

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Speaker 9: business friendly, so that should provide an additional tailwind in

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Speaker 9: addition to having the high interest rate environment behind us.

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Speaker 9: And so what we're seeing is gradually moderating interest rates,

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Speaker 9: a predictable and shallow decrease in that interest rate curve

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Speaker 9: on the short end, stable in the ten year side

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Speaker 9: of the interest rate curve of the yield curve. And

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Speaker 9: so we think that twenty twenty five will be a

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Speaker 9: positive year for all asset classes.

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Speaker 1: All right, let's talk real estate here.

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Speaker 6: Where do you see opportunities in real estate?

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Speaker 1: Here?

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Speaker 6: We've got the Fed cutting rates. I would think that's

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Speaker 6: good for that asset class. Where are you guys seeing

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Speaker 6: the most opportunities?

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Speaker 10: Yes, sess correct.

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Speaker 9: So reducing the short end of the curve, the Fed

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Speaker 9: funds rate is beneficial indirectly for real estate because naturally

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Speaker 9: it moderates the cost of capital. We're seeing opportunities in

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Speaker 9: the indust space, in the multifamily space, and really in

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Speaker 9: the specialty space as well, and so these are all

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Speaker 9: sectors that are seeing low vacancy rates, and so that

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Speaker 9: helps to drive lease rates up because there is much

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Speaker 9: more demand relative to the supply that's available. And if

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Speaker 9: lease rates go up, the net operating income goes up.

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Speaker 9: ANDI for short, is a key driver of value. So

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Speaker 9: what we've seen recently in the last two years is

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Speaker 9: the capital values have come down significantly, but NI has

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Speaker 9: gone up significantly. So in other words, you can buy

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Speaker 9: more real estate at a discount, and that real estate

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Speaker 9: is generating more income and so that will hopefully drive

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Speaker 9: returns in the future.

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Speaker 3: How much of this is predicated on rates being cut

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Speaker 3: from the FED and how much of it is just

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Speaker 3: sort of the economic cycle.

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Speaker 9: I would say the majority is driven by the economic cycle.

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Speaker 9: The change in interest rate environment really inflated cap rates,

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Speaker 9: which was the main driver why prices were down. But

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Speaker 9: unlike the global financial crisis, which was the last big

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Speaker 9: drawdown for real estate, there's very strong fundamentals that are

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Speaker 9: driving real estate. Currently, like I said, vacancy rates are low,

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Speaker 9: and it's much harder to construct new developments new property

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Speaker 9: developments today versus fifteen years ago because of inflation, construction

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Speaker 9: costs are up. The other factor, for example, specifically for

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Speaker 9: the industrial space, is that we're all buying more products

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Speaker 9: online and we want them shipped to our houses faster,

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Speaker 9: and so that causes demand for warehouses that are closer

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Speaker 9: to city centers so they can get to our homes faster.

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Speaker 9: But nobody wants warehouses in city centers or close to cities,

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Speaker 9: and there's no vacant plots available for those warehouses. So

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Speaker 9: there's that inbound as well. And we have examples across

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Speaker 9: the board. Data centers for example, another great example, because

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Speaker 9: everybody is consuming more and more information constantly every year,

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Speaker 9: so that drives significant demand for data centers.

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Speaker 6: And tay all those warehouses for servicing New York City

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Speaker 6: and Philadelphia. The right in my backyard, in John Tucker's

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Speaker 6: backyard in Central Jersey, access to the New Jersey Turnpike, Garden,

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Speaker 6: State Parkway, all that kind of stuff to eighty seven.

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Speaker 6: You can serve both Philadelphia and New York.

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Speaker 7: Maybe that's why the UFOs are there. Maybe, yeah, exactly,

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Speaker 7: I mean we can make that length exactly.

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Speaker 6: Hey, hey, Miguel, let's say I want to go out

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Speaker 6: and buy some commercial real estate. Is my bank going

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Speaker 6: to lend me money? Where do we get the debt

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Speaker 6: financing these days?

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Speaker 2: Yes?

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Speaker 9: So typically commercial developers will go to specialty lenders, and

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Speaker 9: depending on what type of property one is buying. If

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Speaker 9: it's a fully developed and occupied building it's stabilized, as

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Speaker 9: they say, because the occupancy rate is high, then lenders

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Speaker 9: are much more willing to provide capital for that and

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Speaker 9: increase the loan to value on that property. But if

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Speaker 9: it's a empty plot of land and it's a development project,

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Speaker 9: then those are typically construction loans, and so there's a

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Speaker 9: wide variety of sources for capital. Banks have typically been reluctant,

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Speaker 9: especially recently, to provide capital for sectors that are struggling

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Speaker 9: from the office space, but there's certainly a broad variety

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Speaker 9: of sources of capital, starting from banks all the way

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Speaker 9: to individual investors who are happy to provide some of

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Speaker 9: those short term construction loans.

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Speaker 3: Before I let you go for say, private credit. Where

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Speaker 3: are the opportunities they are going into twenty twenty five.

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Speaker 9: Yes, private credit is one of our favorite sectors specifically because,

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Speaker 9: as I mentioned, the interest rate is in this goldilocks

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Speaker 9: phase where we aren't in twenty three year twenty four,

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Speaker 9: where we don't have that visibility or uncertainty of how

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Speaker 9: long and how far interest rates will climb. And so

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Speaker 9: interest rates are at a point where the peak is

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Speaker 9: behind us, but they're not at zero either, and so

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Speaker 9: that favors the lenders versus the borrowers. Now you can,

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Speaker 9: especially in private credit and alternative private credit, you can

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Speaker 9: receive nine percent, ten percent even interest rate on loans

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Speaker 9: to corporations that are established, they're mature, they're cash flowing,

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Speaker 9: and that are going to pay through that debt until maturity.

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Speaker 1: Begail, thanks so much for joining us.

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Speaker 6: Migel Sosa, head of market research and Strategy at Blue Rock,

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Speaker 6: joining Ustart talking about the commercial real estate business, and

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Speaker 6: of course a commercial real estate business, as is residential

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Speaker 6: real estate really dependent upon interest rates.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on applecar Play and royd

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Speaker 2: Otto with a Bloomberg Business. You can also listen live

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Speaker 2: on Amazon Alexa from our flagship New York station just

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Speaker 2: say Alexa play Bloomberg eleven thirty.

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Speaker 3: Here was a headline that was interesting. Well, I mean,

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Speaker 3: I think for anyone listening it was interesting. Is the

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Speaker 3: Trump advisors are considering raising salt right off limit from

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Speaker 3: ten thousand to twenty thousand.

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Speaker 7: Why not forty thousands?

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Speaker 1: Exactly?

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Speaker 7: Why justinate it twenty just you know, move it up there.

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Speaker 1: I'm sure your property taxes.

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Speaker 7: It's a good question. If can you multiply third fourteen thousand?

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Speaker 7: I think, well, okay, is that about?

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Speaker 1: That's about around these parts?

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Speaker 7: Is it a wow?

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Speaker 5: Nothing?

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Speaker 7: Is it a wow?

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Speaker 10: That's pans.

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Speaker 1: You go north of New York City into Westchester and

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Speaker 1: that's really low. It's like in the twenties for just

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Speaker 1: a regular house.

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Speaker 3: I live in an apartment building. Yeah, like a fourteen

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Speaker 3: hundred square put apartment building. And every year I feel

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Speaker 3: like the property taxes goes up. That's when I knew

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Speaker 3: I was an adult.

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Speaker 1: But you're here in Brooklyn.

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Speaker 3: I'm in park Slow Parks is like the non post

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Speaker 3: places where people go to head babies and dogs.

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Speaker 7: Anyway.

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Speaker 3: Henry Andaturs is managing partner and director of Economic Policy

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Speaker 3: of Beta Partners. And she joins us, how real can

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Speaker 3: we take this salt tease?

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Speaker 11: Very seriously? So good news for you, for sure. I

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Speaker 11: commiserate with folks who want it larger. This is the

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Speaker 11: minimum I think they have to have for a tax

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Speaker 11: bill to pass next year the salt caucus. And indeed,

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Speaker 11: a lot of the Republican gains in the House of

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Speaker 11: Representatives have come from new voters that they're finding in

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Speaker 11: New York, Connecticut, New Jersey, California, states where these salt

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Speaker 11: caps are extraordinarily painful, and the members are being very

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Speaker 11: clear and vocal.

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Speaker 10: They've gotten more and more.

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Speaker 11: Adamant and united over the last seven years since this

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Speaker 11: tack built passed that they have to see a change

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Speaker 11: to salt if there is any tax title in any

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Speaker 11: legislation going forward. So they'll try to get it in

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Speaker 11: the first reconciliation bill. If there's a second, they'll try

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Speaker 11: to get it into that, and they will threaten their votes,

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Speaker 11: which with the zero of a margin in the House,

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Speaker 11: means that you have to cater to their requests.

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Speaker 6: Henrietta, can you give us the latest on the expectations

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Speaker 6: for confirmations of some of President Elect Trump's more contentious

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Speaker 6: nominees for cabinet positions.

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Speaker 1: Have we seen any movement one way or the other.

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Speaker 11: I think we have a long way to go here,

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Speaker 11: and you can see the various factions coming out behind

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Speaker 11: the scenes trying to sink or lift various candidates. One

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Speaker 11: of the things that would make me expect those stories

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Speaker 11: to continue negatively, for example his nominee hexas or for

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Speaker 11: Tulsi Gabbard, is that there are other folks waiting in

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Speaker 11: the wings who know that in the event that their

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Speaker 11: nominations fail, they could be the ones to gain.

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Speaker 10: So there's a lot of.

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Speaker 11: Negativity that you see sort of in the behind the

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Speaker 11: scenes work, specifically on Tulsi Gabbard.

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Speaker 10: I would say that.

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Speaker 11: Is going to continue to eat into the next month

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Speaker 11: of the conversation, until the negotiations really start in the

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Speaker 11: confirmation hearing start and they get these folks up for

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Speaker 11: a vote in late January.

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00:22:02,119 --> 00:22:03,440
Speaker 10: So there's a long way to go.

445
00:22:04,040 --> 00:22:07,359
Speaker 11: I think Chelsea Gabert in particular is pretty empowerlled right now.

446
00:22:08,240 --> 00:22:10,440
Speaker 3: Other news that struck me overnight was the Wall Street

447
00:22:10,480 --> 00:22:12,919
Speaker 3: Journal reporting that potentially Trump could get rid of the

448
00:22:12,920 --> 00:22:16,240
Speaker 3: FDIC and put deposit insurance in hands of Treasury now,

449
00:22:16,440 --> 00:22:19,320
Speaker 3: abolishing a whole unit of the government like that would

450
00:22:19,320 --> 00:22:20,000
Speaker 3: be very rare.

451
00:22:20,119 --> 00:22:21,960
Speaker 7: Can you walk me through it? You think of that potential.

452
00:22:23,080 --> 00:22:26,600
Speaker 11: I don't take those claims particularly seriously. One of the

453
00:22:26,600 --> 00:22:28,600
Speaker 11: things that we should just keep is our base case

454
00:22:28,640 --> 00:22:31,560
Speaker 11: is understanding that Congress has the power of verse, and

455
00:22:31,600 --> 00:22:34,080
Speaker 11: that is something that the Supreme Court has stress tested.

456
00:22:34,119 --> 00:22:37,520
Speaker 11: In nineteen seventy four and in other iterations. Bill Clinton

457
00:22:37,600 --> 00:22:39,680
Speaker 11: famously tried a line at him Vito where he tried

458
00:22:39,680 --> 00:22:43,520
Speaker 11: to just cancel out entire lines of funding that the federal.

459
00:22:43,240 --> 00:22:46,280
Speaker 10: Government or Congress had authorized. It's just not legal.

460
00:22:46,400 --> 00:22:49,560
Speaker 11: It is unconstitutional and runs a foul of so many

461
00:22:49,560 --> 00:22:50,040
Speaker 11: different things.

462
00:22:50,080 --> 00:22:51,960
Speaker 10: Plus you have a lot of members who.

463
00:22:51,800 --> 00:22:56,360
Speaker 11: Get really uncomfortable moving agencies into other auspices. Another example

464
00:22:56,600 --> 00:22:59,320
Speaker 11: to pile on the FDIC thing would be the USTR.

465
00:23:00,359 --> 00:23:02,480
Speaker 11: Electron has said that he's going to put US Trade

466
00:23:02,480 --> 00:23:06,159
Speaker 11: Representative and that office underneath the Department of Commerce, and

467
00:23:06,240 --> 00:23:08,640
Speaker 11: immediately you see members come out of the woodwork and say, Hey,

468
00:23:08,640 --> 00:23:09,960
Speaker 11: that's not what we're into, that's not.

469
00:23:10,000 --> 00:23:12,520
Speaker 10: What it's supposed to be. Keep these two things separate.

470
00:23:12,720 --> 00:23:15,280
Speaker 11: That was very similar to what we saw on Trump's

471
00:23:15,280 --> 00:23:17,600
Speaker 11: first term and Ultimately those did not come to pass.

472
00:23:18,240 --> 00:23:20,200
Speaker 1: Elon Musk DOGE.

473
00:23:21,480 --> 00:23:24,119
Speaker 6: It's been a week or so of I guess no

474
00:23:24,240 --> 00:23:27,639
Speaker 6: news on kind of that front. Is that whole cost

475
00:23:27,720 --> 00:23:30,480
Speaker 6: cutting aspect, How should we think about that and how

476
00:23:30,720 --> 00:23:32,720
Speaker 6: might that play out in the first one hundred days.

477
00:23:33,640 --> 00:23:36,000
Speaker 11: Yeah, I mean we can talk about DOJ, they can

478
00:23:36,040 --> 00:23:39,040
Speaker 11: have committee hearings, they can form caucuses in the House

479
00:23:39,080 --> 00:23:41,560
Speaker 11: and the Senate y'or even bipartisan now in the House.

480
00:23:42,480 --> 00:23:43,880
Speaker 10: But let's look at what's really happening.

481
00:23:44,119 --> 00:23:46,959
Speaker 11: They just voted on in the House a National Defense

482
00:23:47,000 --> 00:23:51,399
Speaker 11: Authorization Act that increases defense spending by one percent. Next week,

483
00:23:51,520 --> 00:23:53,560
Speaker 11: starting on Sunday, they will roll all out a continuing

484
00:23:53,600 --> 00:23:57,320
Speaker 11: resolution that provides one hundred billion dollars in additional funding

485
00:23:57,400 --> 00:24:01,680
Speaker 11: for hurricanes and typhoons. There is additional a to Ukraine,

486
00:24:01,960 --> 00:24:04,439
Speaker 11: there's additional aid to of all host of factors, and

487
00:24:04,640 --> 00:24:07,200
Speaker 11: federal spending next year will continue to rise.

488
00:24:07,480 --> 00:24:08,880
Speaker 10: Whether DOGE exists.

489
00:24:08,520 --> 00:24:10,800
Speaker 11: In holds meetings or not, federal spending is.

490
00:24:10,720 --> 00:24:12,080
Speaker 10: Going to rise into next year.

491
00:24:12,080 --> 00:24:14,320
Speaker 11: They'll vote on it as soon as Thursday of next week,

492
00:24:14,760 --> 00:24:15,960
Speaker 11: and you can take that to the bank.

493
00:24:16,720 --> 00:24:18,000
Speaker 7: What else are you paying attention to?

494
00:24:18,400 --> 00:24:20,880
Speaker 3: As we head out of twenty twenty four into twenty

495
00:24:20,960 --> 00:24:23,960
Speaker 3: twenty five as well, not only from President like Trump

496
00:24:24,000 --> 00:24:25,159
Speaker 3: but also President Biden.

497
00:24:26,200 --> 00:24:28,800
Speaker 11: The most important thing for me is watching the Senate

498
00:24:28,840 --> 00:24:31,159
Speaker 11: and the House budget committees. I know it sounds fluky,

499
00:24:31,200 --> 00:24:33,280
Speaker 11: but this is the single most important thing to watch

500
00:24:33,320 --> 00:24:36,800
Speaker 11: going into next year. What we've already seen from Senate

501
00:24:36,800 --> 00:24:40,480
Speaker 11: Republican leadership and new leader Fune is that they are

502
00:24:40,840 --> 00:24:44,040
Speaker 11: appreciating and expecting for the tax bill to take all

503
00:24:44,119 --> 00:24:46,680
Speaker 11: year to write. We started off with the Salt Caucus conversation.

504
00:24:46,800 --> 00:24:49,760
Speaker 11: It's because of that one point two trillion dollars revenue

505
00:24:49,840 --> 00:24:53,280
Speaker 11: raiser being completely unpalatable to eighteen members of the House

506
00:24:53,480 --> 00:24:55,199
Speaker 11: that they're going to have to negotiate all year on

507
00:24:55,240 --> 00:24:57,720
Speaker 11: a tax bill. So what that first tells me is

508
00:24:57,760 --> 00:25:00,119
Speaker 11: that the deficit appetite for the tax bill is going

509
00:25:00,160 --> 00:25:03,000
Speaker 11: to be very controversial. It's very problematic, and they want

510
00:25:03,040 --> 00:25:04,960
Speaker 11: to take that voat much later in the year. They'd

511
00:25:04,960 --> 00:25:08,879
Speaker 11: like to score some smaller sort of red meat wins

512
00:25:08,960 --> 00:25:13,399
Speaker 11: on immigration, increasing border spending, increasing energy and oil and

513
00:25:13,440 --> 00:25:17,320
Speaker 11: gas permitting that kind of legislation, and that strategy is

514
00:25:17,359 --> 00:25:20,840
Speaker 11: going to come out on January fourth, when House Republican

515
00:25:20,920 --> 00:25:24,560
Speaker 11: leadership has a meeting with the full Republican Conference to

516
00:25:24,600 --> 00:25:27,680
Speaker 11: see if they can tolerate a two reconciliation bill strategy

517
00:25:27,760 --> 00:25:28,359
Speaker 11: or just one.

518
00:25:28,720 --> 00:25:30,200
Speaker 10: So the conversations behind.

519
00:25:29,960 --> 00:25:32,440
Speaker 11: The scenes are already taking place there. Invessors should be

520
00:25:32,560 --> 00:25:34,240
Speaker 11: very much following that right now.

521
00:25:34,240 --> 00:25:35,040
Speaker 10: It has huge.

522
00:25:34,880 --> 00:25:40,120
Speaker 11: Implications for tax policy, for immigration, defense spending, deficit spending, bonds,

523
00:25:40,240 --> 00:25:43,320
Speaker 11: everything happening now Henrietta.

524
00:25:43,359 --> 00:25:46,760
Speaker 6: To what extent, if at all, the folks really the

525
00:25:46,760 --> 00:25:49,560
Speaker 6: folks inside the beltwagh that people that are there year

526
00:25:49,600 --> 00:25:52,639
Speaker 6: in year out, do they view President Electrump as a

527
00:25:52,760 --> 00:25:54,240
Speaker 6: lame duck president.

528
00:25:56,000 --> 00:25:58,680
Speaker 11: I think there's two ways of looking at that. One

529
00:25:59,040 --> 00:26:02,680
Speaker 11: that you have and impetus to actmediately, So that's really

530
00:26:02,680 --> 00:26:05,320
Speaker 11: relevant for them. On the trade front, it takes forever

531
00:26:05,400 --> 00:26:08,680
Speaker 11: to negotiate with foreign nations. We've seen that from twenty seventeen.

532
00:26:08,720 --> 00:26:10,960
Speaker 11: In twenty eighteen, we still do not have a trade

533
00:26:10,960 --> 00:26:12,560
Speaker 11: agreement with the EU, We do not have a trade

534
00:26:12,560 --> 00:26:16,600
Speaker 11: agreement with Canada, with China. So I think the trade

535
00:26:16,680 --> 00:26:20,639
Speaker 11: agencies are going to kick off much earlier in the

536
00:26:20,720 --> 00:26:23,679
Speaker 11: second truck term than they did in twenty seventeen. That

537
00:26:23,800 --> 00:26:25,280
Speaker 11: year we had to wait the full year for the

538
00:26:25,280 --> 00:26:27,040
Speaker 11: tax builder you're written, and then we could get into

539
00:26:27,080 --> 00:26:30,360
Speaker 11: the trade universe. This time, I expect the tax agency,

540
00:26:30,480 --> 00:26:34,240
Speaker 11: excuse me, the tariff agencies USTR, Commerce BIS to come

541
00:26:34,240 --> 00:26:38,120
Speaker 11: out guns blazing immediately. So that's acknowledgment that you only

542
00:26:38,160 --> 00:26:41,040
Speaker 11: have four years to operate, and it takes forever just

543
00:26:41,080 --> 00:26:43,840
Speaker 11: to hold a meeting with China to pick out what

544
00:26:43,960 --> 00:26:46,160
Speaker 11: location you're going to be meeting in, if they'll even

545
00:26:46,160 --> 00:26:47,600
Speaker 11: come to the table and negotiate with you in the

546
00:26:47,640 --> 00:26:50,240
Speaker 11: first place. So I think Lame Duck has a sense

547
00:26:50,240 --> 00:26:52,240
Speaker 11: of nothing will happen on the trade front. I think

548
00:26:52,240 --> 00:26:55,040
Speaker 11: it means everything needs to happen immediately so that you

549
00:26:55,119 --> 00:26:58,000
Speaker 11: have and are taking advantage of the limited four years

550
00:26:58,000 --> 00:26:58,760
Speaker 11: that you do have.

551
00:26:58,880 --> 00:27:00,600
Speaker 3: Which I love how you brought that up, because then

552
00:27:00,640 --> 00:27:03,199
Speaker 3: it's a sequencing conversation, right, If you have taxes, you

553
00:27:03,200 --> 00:27:06,720
Speaker 3: have immigration, and you have tariffs, and you what's the

554
00:27:06,760 --> 00:27:08,000
Speaker 3: sequencing of all of that.

555
00:27:08,800 --> 00:27:11,280
Speaker 11: Yeah, this sequencing is critical. So the tax bill is

556
00:27:11,320 --> 00:27:12,680
Speaker 11: not going to be written until the end of the year.

557
00:27:12,720 --> 00:27:14,800
Speaker 10: The deadline is not till the summer thirty first, They.

558
00:27:14,680 --> 00:27:17,560
Speaker 11: Will not do it until your end Immediately, then you're

559
00:27:17,560 --> 00:27:20,399
Speaker 11: going to have tariffs, and the tariffs are a massive

560
00:27:20,480 --> 00:27:24,720
Speaker 11: hit on American consumers one point four billion dollars in

561
00:27:24,800 --> 00:27:28,560
Speaker 11: real income per month hit from just the existing tariffs.

562
00:27:28,720 --> 00:27:30,040
Speaker 10: So when we double them.

563
00:27:29,880 --> 00:27:34,280
Speaker 11: And put them at thirty five percent or higher sixty percent,

564
00:27:34,320 --> 00:27:36,840
Speaker 11: as President life Trump has advocated, that's going to be

565
00:27:36,880 --> 00:27:39,520
Speaker 11: a substantial hit to the US consumer in advance of

566
00:27:39,600 --> 00:27:42,400
Speaker 11: any certainty about tax policy that will come.

567
00:27:42,240 --> 00:27:43,240
Speaker 10: At the end of the year.

568
00:27:43,480 --> 00:27:46,800
Speaker 11: The immigration component also will happen immediately. You're seeing that

569
00:27:46,840 --> 00:27:49,480
Speaker 11: in both Canada and Mexico now as those two nations

570
00:27:49,480 --> 00:27:52,320
Speaker 11: try to accommodate Trump before he comes into office uses

571
00:27:52,359 --> 00:27:55,000
Speaker 11: the IEPA authority to impose tariffs.

572
00:27:54,520 --> 00:27:56,200
Speaker 10: And limits immigration that way.

573
00:27:56,440 --> 00:27:58,920
Speaker 11: So you're going to see the hit to immigration and

574
00:27:58,960 --> 00:28:01,760
Speaker 11: the tariffs earlier than you're going to see any certainty

575
00:28:02,119 --> 00:28:05,439
Speaker 11: around the straight line extension of the existing tax rates.

576
00:28:05,640 --> 00:28:07,399
Speaker 11: I think it's important to note that we're not talking

577
00:28:07,440 --> 00:28:10,960
Speaker 11: about additional tax cuts to offset maybe the negatives of

578
00:28:11,000 --> 00:28:13,520
Speaker 11: these tariffs. You're talking about a four point six trillion

579
00:28:13,560 --> 00:28:16,000
Speaker 11: dollar cost of just keeping tax cuts.

580
00:28:15,680 --> 00:28:17,920
Speaker 10: At their current rate, tax rates at their current rate.

581
00:28:18,000 --> 00:28:19,520
Speaker 1: All right, this one we're doing, Alex.

582
00:28:19,600 --> 00:28:22,520
Speaker 6: We're sending Henriette to Washington to just fix things, just

583
00:28:22,560 --> 00:28:23,720
Speaker 6: get stuff done.

584
00:28:23,880 --> 00:28:24,760
Speaker 1: That's how good she is.

585
00:28:24,800 --> 00:28:27,600
Speaker 6: Henrietta Tres, Manager partner and director of Economic Policy at

586
00:28:27,640 --> 00:28:28,199
Speaker 6: Vita Partners.

587
00:28:28,240 --> 00:28:31,120
Speaker 1: I'd send her at Washington tomorrow to get stuff done.

588
00:28:31,200 --> 00:28:32,600
Speaker 1: She knows what she's talking about there.

589
00:28:32,840 --> 00:28:37,359
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,

590
00:28:37,560 --> 00:28:40,480
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591
00:28:40,560 --> 00:28:44,160
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592
00:28:44,280 --> 00:28:47,680
Speaker 2: Bhart Radio app, tune In, and the Bloomberg Business app.

593
00:28:47,800 --> 00:28:50,959
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594
00:28:51,000 --> 00:28:52,840
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