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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: us live on YouTube.

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Speaker 2: We moved to this speech this morning, and of course

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Speaker 2: the international economics personified by Adam Posen. He is leadership

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Speaker 2: at the Peterson Institute, arguably the toughest act to follow

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Speaker 2: in think tanks. He's done Yelman's duty there and we're

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Speaker 2: thrilled he could summarize all the academics at Peter Institute.

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Speaker 2: Doctor Posen joins us this morning, you have the advantage

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Speaker 2: of a shocking set of quality, Adam. In international economics,

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Speaker 2: I see Wai mckibbon and Marcus Nolan, the giant Marcus

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Speaker 2: Nolan writing about tariffs, the Adam Posen summary, If we

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Speaker 2: get a certain magnitude of tariff, what does it mean

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Speaker 2: for our listeners and viewers?

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Speaker 3: Thanks Tom, thanks for monitoring our work. And the new

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Speaker 3: piece by mckibbon and Noland is the latest best thing

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Speaker 3: on what a tariff concentrated on China, Mexico, Canada, would do.

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Speaker 3: I think your viewers, your listeners should think about three

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Speaker 3: sets of magnitudes. First is negotiating tools small and for

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Speaker 3: the most part, limited to a bunch of other countries,

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Speaker 3: a bunch of countries, but not all across the board.

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Speaker 3: That's annoying, a burden on US households, not a huge

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Speaker 3: deal macro economically or market terms. The second level is

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Speaker 3: what they're talking about, which is potentially putting on tariffs

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Speaker 3: across the board at ten or fifteen percent across almost

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Speaker 3: all countries, almost all industries. That's a genuine large tax increase,

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Speaker 3: and it's a particularly just stortionary tax increase. That's going

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Speaker 3: to be meaningful inflation for American households, and it's going

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Speaker 3: to be more like shortages felt in a lot of areas.

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Speaker 3: So it's not just a question of what percentage of

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Speaker 3: what part of the economy. And that's part of what

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Speaker 3: the modeling way of Peterson and others are trying to

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Speaker 3: do is tease that out. That also is a world

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Speaker 3: in which you get retaliation almost certainly from China, Europe, Canada, Mexico, everybody.

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Speaker 3: And that's a world in which everything shrinks. Sorry. Third

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Speaker 3: last version, they overdo it we get a recession.

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Speaker 2: I look at them at the work here, folks. I

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Speaker 2: really want to emphasize the academics here of say William

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Speaker 2: Klein at Peterson was foundational to moving away from President

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Speaker 2: Trump's unilateral and bilateral as Paul would say, transactional discussion,

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Speaker 2: and William Klein said, we don't understand the multilateral ramification

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Speaker 2: of what we do. What would William Klein say, Adam

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Speaker 2: Posen about the multilateral impact of these tariffs.

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Speaker 3: Well, I hope you'll have bill on soon. But the

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Speaker 3: fact is this is reversing ninety plus years of history

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Speaker 3: in which the US has both as enforcer and as

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Speaker 3: exemplar said, you don't get rich by closing your markets,

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Speaker 3: and other countries have cheated, and it's mostly harmed them

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Speaker 3: more than it's harmed the US, certainly, and more than

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Speaker 3: it's hard the rest of the world. But in general,

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Speaker 3: we've gone to a world where, for the last twenty

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Speaker 3: five years, the rest of the world keeps integrating and opening,

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Speaker 3: even China and the US has been standing still in

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Speaker 3: terms of integrating and opening. And so this now tips

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Speaker 3: us backwards. And you know, this is a world where

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Speaker 3: things are going to be more expensive, Innovation is going

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Speaker 3: to be less widely shared, conflict and uncertainty for business,

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Speaker 3: investment is going to be up, and the developing countries

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Speaker 3: of the world will be getting more shut out except

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Speaker 3: for the few very big ones like India and Brazil.

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Speaker 3: And in the end, it's not going to serve any

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Speaker 3: of the goals that President Trump claims he wants. It's

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Speaker 3: not going to close the trade deficit. It's not going

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Speaker 3: to weaken the dollar. It's not going to lead to

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Speaker 3: better US technology, it's not going to lead to more

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Speaker 3: than a few hundred thousand more manufacturing jobs and most

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Speaker 3: and it probably is going to lead to inflation.

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Speaker 4: Adam, giving that backdrop here, what's your view of China

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Speaker 4: these days, and given the challenges they face, and given

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Speaker 4: kind of some of the policies we're starting to see

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Speaker 4: coming out of the Trump administration.

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Speaker 3: You're absolutely right, again in the same spirit of it's

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Speaker 3: a general equilibrium. Other people exist world. China's got deep,

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Speaker 3: deep problems. And you and I started talking about this,

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Speaker 3: you know, eighteen twenty months ago when I was writing

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Speaker 3: in Foreign Affairs that China is economic long COVID, It's

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Speaker 3: not just a real estate problem. It's not just that

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Speaker 3: they're going through a short term downturn. This is fuldamentally

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Speaker 3: about demographics and distrust of the government, and she pushing

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Speaker 3: too far with intervention, leaving a side. What I know

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Speaker 3: you've talked about in this program many times the irony

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Speaker 3: of the US emulate China just as China is blowing

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Speaker 3: itself up. The real issue is does this make them

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Speaker 3: more desperate to dump goods on you borest of the world.

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Speaker 3: If the US shuts them out, does this make them

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Speaker 3: more desperate to pursue self sufficiency, which will be a

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Speaker 3: vicious cycle downwards for them, but also encourage the US

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Speaker 3: and others to shut up their markets. I think the

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Speaker 3: bottom line is China. There's a lot of ruin in China,

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Speaker 3: especially in a communist run state, but they're not going

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Speaker 3: to be growing anything like what they were growing at

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Speaker 3: and their moves towards so called self sufficiency are hurting them.

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Speaker 4: So, Adam, is globalism dead or is it just kind

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Speaker 4: of on pause here?

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Speaker 3: I think it was on pause. I think we're going

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Speaker 3: through a setback, but it's not one of the most

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Speaker 3: important things about globalization, meaning the not just trade, but

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Speaker 3: the crossing of people, ideas, goods, investment, capital across borders

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Speaker 3: is it's always been with us. You go back thousands

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Speaker 3: of years in ancient China and ancient Rome, they were trading.

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Speaker 2: With each other.

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Speaker 3: You go back hundreds of years, and even in the

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Speaker 3: Middle Ages, even in the times of backwardness, there were

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Speaker 3: great amount of trade and interaction because the gains are

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Speaker 3: so large, because people want variety, they want new ideas,

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Speaker 3: they want entrepreneurship and possibility. I don't mean to get

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Speaker 3: teary eyed, but this is the reality. So nobody's going

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Speaker 3: to kill globalization. What they are going to do is

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Speaker 3: make things bad for.

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Speaker 2: One Adam City. I actually traveled with this. I think

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Speaker 2: I read a couple chapters at Jackson Hole Doug Irwin

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Speaker 2: and Maurice Obsfield floating exchange rates at fifty. I got

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Speaker 2: way too much peace, love and dope on the show.

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Speaker 2: Right now. Nobody's looking for Ecuador, nobody's looking for Mexico.

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Speaker 2: To you and the team at Peterson Field, not to

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Speaker 2: harp on nineteen ninety eight, but are we set out

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Speaker 2: there for the headaches that Stanley Fisher faced in the nineties.

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Speaker 3: I think Tom, it's good to be looking at these

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Speaker 3: historical analogies, but I think we're set out there for

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Speaker 3: the headaches that we're faced in the eighties, that the

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Speaker 3: US gets so caught up in this mismatch macro policy

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Speaker 3: of loose fiscal tiding belatedly type money and a huge

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Speaker 3: upscore dollar cycle that just continues and that leads to debt.

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Speaker 3: Gracis around the world now again India, Brazil, possibly Mexico

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Speaker 3: depending on how badly Trump treats them, Indonesia, Turkey now

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Speaker 3: that it's getting attacked together, the largest dm are actually

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Speaker 3: going to do okay, especially in a world of geopolitics.

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Speaker 2: But the rest of.

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Speaker 3: The developing world, almost all of Africa, South Asia outside

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Speaker 3: of India, Central America, large parts of South America, outside

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Speaker 3: of Brazil, these are going to be suffering. As the

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Speaker 3: IMF and the World Bank keep talking about that, there's

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Speaker 3: huge amounts of debt that just keeps accumulating because there's

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Speaker 3: not the growth, not the options and goes in. The

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Speaker 3: AB keeps talking about open trade is the way to

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Speaker 3: development for these countries, and the world's shutting down.

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Speaker 2: Adam. One final question, speaking of trade, do the Red

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Speaker 2: Sox have a prayer? I mean, did they participate in

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Speaker 2: the off season.

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Speaker 3: It's amazing, Tom. I know you keep track of the

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Speaker 3: Bruins and everything, watching the Celtics, watching the New England

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Speaker 3: Patriots actually have a revival of hope, and seeing the

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Speaker 3: Red Sox just sort of go eh, I don't get it.

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Speaker 3: I don't get it.

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Speaker 2: Did you buy any Walker Bueler Merch yet? No. Adam

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Speaker 2: and I are on the same pigeon, Doctor Posen, Thank

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Speaker 2: you so much, the gentlemen from Brookline Manchuse. It's Adam

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Speaker 2: pos and of course what a job at the Peterson Institute.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 2: Ted pic just brilliant in Davos. Why was he brilliant

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Speaker 2: because he reads Sarah Wolf. That's why Sarah Wolf joins

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Speaker 2: us now. Mister Pick starts every morning listening and reading

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Speaker 2: his thematic and macro investing team at Morgan Stanley as well.

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Speaker 2: You're sitting and having a beverage of your choice with

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Speaker 2: mister Pick. What do you say about tariffs? Am I right,

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Speaker 2: that this is a study of magnitude more than anything

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Speaker 2: else to.

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Speaker 5: Study of magnitude, and it's a study of timing. If

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Speaker 5: we look back to the x axis. The x axis,

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Speaker 5: of course, if we look back to the twenty eighteen,

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Speaker 5: twenty nineteen tariffs, and you read the transcripts among the

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Speaker 5: FMC participants, they were brought looking through the tariffs right

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Speaker 5: that it was a one off price effect, that it

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Speaker 5: wasn't going to be inflationary for the longer run, and

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Speaker 5: they were more worried about the following hit to growth

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Speaker 5: after the tariffs. Can we do the same thing this time?

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Speaker 5: Not necessarily, it's a little bit more complicated. If we're

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Speaker 5: phasing in tariffs over the course of this year, it's

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Speaker 5: going to be a lot more difficult to discern the

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Speaker 5: effects of tariffs versus the effects of, you know, just

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Speaker 5: real inflation. It's also going to be a price level

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Speaker 5: increase that's occurring over a longer period of time than normal.

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Speaker 5: So it's going to be more inflationary than what we

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Speaker 5: saw back in twenty eighteen twenty nineteen, and so the

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Speaker 5: FED might be in a position where they're going to

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Speaker 5: have to take cuts off. If that's the case or

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Speaker 5: not cut at all and kind of be on hold

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Speaker 5: until they see all the tariffs play out and what

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Speaker 5: it means for economic activity.

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Speaker 4: So the Fed's really really going to be looking at

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Speaker 4: this tariff news coming out of the next several months.

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Speaker 5: Yeah, I mean right now, we were thinking that tariffs

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Speaker 5: were going to be more of a back half of

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Speaker 5: twenty twenty five story and start to phase in. But

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Speaker 5: as we heard from Trump in the last couple of

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Speaker 5: days February first, we could already be seeing tariffs on China,

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Speaker 5: tariffs on Mexico and Canada. Mexico and Canada we're watching

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Speaker 5: very closely. That could be pretty detrimental to US manufacturing.

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Speaker 5: Our auto supply chains are incredibly interlinked with Canada up

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Speaker 5: in the North computers, electronics, all the type of manufacturing,

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Speaker 5: and so not only is eighty percent of Mexico and

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Speaker 5: Canadian trade with the US, but twenty percent of our

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Speaker 5: trade is with them as well. So this is a

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Speaker 5: bigger deal on.

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Speaker 2: A game theory basis. Down at Laredo, I've actually been there,

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Speaker 2: folks at the border at the Windsor Bridge over to

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Speaker 2: Detroit's where the hoard comes over from Ontario to watch

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Speaker 2: the Detroit Lions and the Detroit Tigers on a game

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Speaker 2: theory basis, they're going to respawd, then what do we do?

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Speaker 5: So I think this is all going to be a

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Speaker 5: game leading up to the renegotiation of the USMCA right,

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Speaker 5: which is in twenty twenty six. And so if we

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Speaker 5: put tariffs on Canada and Mexico, they retaliate and put

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Speaker 5: tariffs on the US and that's going to hurt US

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Speaker 5: economic activity. And then I think probably within six months

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Speaker 5: to a year, we pull back the tariffs and that

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Speaker 5: helps the US get some of the things that they

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Speaker 5: want out of Canada in Mexico as we go into

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Speaker 5: twenty twenty six negotiations. So what does the US want?

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Speaker 2: Right?

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Speaker 5: They want Canada Mexico to be stricter on immigration from

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Speaker 5: their side of the border. They want the countries to

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Speaker 5: be stricter on fentanyl, so drugs entering the US. And

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Speaker 5: they want to be stricter on Chinese foreign direct investment

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Speaker 5: that's filtering through Mexico and then back into the US.

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Speaker 4: So has all of this from the Trump administration from

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Speaker 4: the election, has it changed your view of kind of

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Speaker 4: the economy, how to invest, where to invest? Has it changed.

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Speaker 5: Yeah, it definitely has. I mean, we're looking for more diversification.

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Speaker 5: We think that valuations are a little bit bloated right

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Speaker 5: now for the US and there's some downside risk economic activity.

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Speaker 5: We should be looking to diversify, possibly in Europe. There's

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Speaker 5: some big policy changes happening in France, Germany in the

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Speaker 5: UK this year. We also are looking to emerging markets

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Speaker 5: for opportunity, and so we do think that even though

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Speaker 5: there is the story of US exceptionalism, that things are

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Speaker 5: a little bit too expensive here. The other thing we're

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Speaker 5: looking at within US stocks is to be selective. So

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Speaker 5: the consumer for example, which we talk a lot about

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Speaker 5: on the show, Internationally sourced consumer goods are going to

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Speaker 5: have a tough year between a strong dollar, between tariffs,

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Speaker 5: and so consumer services might be a nice place to

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Speaker 5: hide again for twenty twenty five.

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Speaker 2: But Sarah, we're nowhere near job banks or and your

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Speaker 2: team Subercarpenter, Ellen, Zenner, Keeping and Alle until the job

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Speaker 2: market breaks. It's a solid.

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Speaker 5: Economy, right, Yeah, there's nothing really concerning here in the

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Speaker 5: claims data right initial claims are basically low moving sideways,

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Speaker 5: which is reflecting that we're not seeing layoffs continue claims

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Speaker 5: are trending higher, and we saw that in the report

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Speaker 5: this morning, but that's just because we're not hiring as much.

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Speaker 5: And so if I look at the totality of the data,

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Speaker 5: labor demand seems to be solid and actually stabilizing. Into

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Speaker 5: the fourth quarter, there was actually a reacceleration in labor income,

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Speaker 5: and so that's really benefiting consumers and consumer spending, and

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Speaker 5: that momentum is carrying through into twenty twenty five. I

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Speaker 5: think the bigger question for this year, right is labor supply,

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Speaker 5: not labor demand. And that's the immigration story that we're

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Speaker 5: watching very closely. Immigration was adding over one hundred thousand

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Speaker 5: to payrolls the last two years, and so what does

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Speaker 5: that mean for this year? If we close down the border,

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Speaker 5: if we have deportations, we're likely going to see a

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Speaker 5: pretty sharp slow down in payrolls because of losing that

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Speaker 5: labor supply. What can that mean for wages? What can

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Speaker 5: that mean for inflation? And then, as we all care

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Speaker 5: about most, what does that mean for the Fed?

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Speaker 4: So given that backdrop, how do you expect the FED

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Speaker 4: to proceed this year? I mean, you know there's been

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Speaker 4: if you look at the work function on the Bloomberg journel.

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Speaker 4: It's been all over the place in the past six

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Speaker 4: to nine months. Now, I think we're out of pricing

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Speaker 4: maybe a couple of rate cuts this year.

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Speaker 2: But yeah, again, people.

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Speaker 4: Seem to be all over the place. How do you

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Speaker 4: guys think that's going to play out?

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Speaker 5: I mean, we still think that the Fed's going to

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Speaker 5: be able to deliver about two cuts. Of course, we're

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Speaker 5: a little bit more focused on the risk of tariffs

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Speaker 5: coming earlier and curbing that. So we're a bit more

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Speaker 5: long duration than perhaps what markets are pricing in right now.

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Speaker 5: Right now, right there's a fifty percent chance for a

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Speaker 5: second cut. We think that that can move high or

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Speaker 5: to fully price in two cuts. Yeah, because you know,

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Speaker 5: we're a little bit more optimistic that the inflationary effect

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Speaker 5: is not going to be as aggressive and that there's

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Speaker 5: going to be that negative growth effect from immigration and

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Speaker 5: higher tariffs, because right now we're seeing that consumers can't

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Speaker 5: really take that much price.

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Speaker 2: I got to get this in January flies By. We're

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Speaker 2: getting near a February jobs report. Yesterday I saw a

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Speaker 2: nice study of potential revisions. Yeah By BLS model it

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Speaker 2: in for us. How much does it bring it down.

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Speaker 5: Yeah, this is a huge catalyst. So probably it's going

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Speaker 5: to revise down twenty twenty four payrolls by about eighty

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Speaker 5: six thousand a month, So bringing that number down to

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Speaker 5: closer to a one hundred and ten to one hundred

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Speaker 5: and twenty thousand jobs a month.

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Speaker 2: Wow, what's okay to me? That's a wild number, Am

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Speaker 2: I wrong?

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Speaker 5: No, it's going to be significant. I think that More

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Speaker 5: important is probably what we see on the household survey, though,

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Speaker 5: because the payroll survey, the establishment survey, is being pretty

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Speaker 5: muddied by this immigration story. What you're seeing in the

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Speaker 5: revisions is that they're really they're benchmarking to the QCW report,

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Speaker 5: which tracks initial jobless names.

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Speaker 2: Okay, I got I got thirty seconds left. I got

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Speaker 2: to make some news. When do we get five percent unemployment?

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Speaker 5: Not in our base case? And I think unemployment rate

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Speaker 5: can actually not in our base case, not even in

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Speaker 5: the barecase. No, listen, if we lose labor supply from immigration,

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Speaker 5: that's down on the unemployment rate.

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Speaker 4: Yeah, that's right.

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Speaker 2: So how do we think that I so flunk that

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Speaker 2: on the example.

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Speaker 3: I know exactly, I mean, I don't know.

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Speaker 4: It's interesting. So I have to see how that plays

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Speaker 4: through time with the labor market because people me telling

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Speaker 4: us it's been in the immigration okay, Park, So are

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Speaker 4: you going to.

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Speaker 2: Give me a three to nine out unemployment if we

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Speaker 2: get major revisions.

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Speaker 5: Which you know, yeah, I think for February, what we're

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Speaker 5: going to want to be watching is what happens the

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Speaker 5: unemployment rate. We're going to get changes to the number

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Speaker 5: of people unemployed, changes to the labor force because it's

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Speaker 5: rebunchmarking to new immigration numbers. We just want to know

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Speaker 5: how tight the labor market is, so we want the

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Speaker 5: unemployment sare well.

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Speaker 2: Thank you so much with MORGANA. Shelly. That was brilliant, folks.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business app. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station, Just

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Speaker 1: say Alexa play Bloomberg eleven thirty.

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Speaker 2: Greg Peters, with his leadership in fixed income, leads the way. Greg,

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Speaker 2: am I clipping a coupon? Or can I dream of

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Speaker 2: total return?

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Speaker 6: Thanks?

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Speaker 7: Tom, I think it's a little bit of both. But

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Speaker 7: you talked about before I joined back to normal. This

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Speaker 7: is what normal looks like. So I think what the

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Speaker 7: expectation should be is clip the coupon, earn the yield,

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Speaker 7: and this is what fixed income was ultimately designed for.

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Speaker 6: Right.

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Speaker 7: The era of zero interest rates and hoping for toal

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Speaker 7: return is the abnormality.

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Speaker 6: This is normal.

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Speaker 2: Bronze, that exactly, Paul, and I was equity guys were

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Speaker 2: just saying, bronze what he just.

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Speaker 4: Said exactly, So Greg in the fixed income market, now

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Speaker 4: it feels like I got some options here. I mean,

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Speaker 4: I can send it to your treasury with the US

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Speaker 4: government four point three percent, or I can think about

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Speaker 4: taking some credit risk. Where are you guys these days?

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Speaker 6: Yeah, so you know, credit risk is a little more tricky.

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Speaker 7: So the way I think about credit is that it's

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Speaker 7: an affirmation of the growth story, meaning that credit spreads

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Speaker 7: are quite quite tight. You know, the richest decile that

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Speaker 7: we've seen over the past you know, thirty years, and

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Speaker 7: that basically reaffirms the strong macro. Right, so the underlying

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Speaker 7: economy is quite good, the corporate fundamentals equally as good,

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Speaker 7: and so credit spreads reflect that from an investing perspective.

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Speaker 7: From our perspective, at PGM is are you really getting

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Speaker 7: paid for the risk and the uncertainty and if things

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Speaker 7: do go awry, And the answer is not really, So

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Speaker 7: we're quite cautious on the credit side. And it's not

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Speaker 7: a statement of fundamentals, it's a statement around valuations.

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Speaker 4: So Greg, for you guys at did you change your outlook,

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Speaker 4: your philosophy, your return expectations after the election? Did anything

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Speaker 4: change for your one way or the other now with

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Speaker 4: a new administration.

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Speaker 6: Come in not decidedly.

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Speaker 7: I think the story that gets lost in here is

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Speaker 7: that you know, before the election the economy was pretty strong,

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Speaker 7: so this is a very different macro environment than Trump

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Speaker 7: two point zero versus one point zero, at least from

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Speaker 7: the starting place.

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Speaker 6: So no, not a lot has changed.

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Speaker 7: What has changed, though, is the move way from the

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Speaker 7: focus around central banks and the FED and that policy

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Speaker 7: and more around the uncertainty of government policy, and if

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Speaker 7: you put it all together, I do think it has

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Speaker 7: had an effect on the markets clearly, but from a

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Speaker 7: bond market perspective, I think it has on the margin

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Speaker 7: pushed up yields because of the concern around inflationary effects

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Speaker 7: and then growth effects too, So you know, the big

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Speaker 7: move in the bond market hasn't been around inflation. It's

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Speaker 7: been around real yields. I know you love that measure, Tom,

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Speaker 7: and real yields are up, you know, almost seventy five

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Speaker 7: basis points.

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Speaker 6: From the you know, end of the third quarter.

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Speaker 7: So it's been a real yield move which comports really

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Speaker 7: well to the equity story. So it's the rerating of

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Speaker 7: growth that you're seeing across the bond market and the equity.

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Speaker 2: You can come on anytime, Greg Peters with us, with Peach,

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Speaker 2: and we will continue here. We welcome all of you

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Speaker 2: on your commute. Huge response College Station, Texas. Just men

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Speaker 2: were the fans started say good morning to all of

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Speaker 2: you in Texas and of course on YouTube across the nation.

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Speaker 2: After your commute in your office at home YouTube subscribe

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Speaker 2: to Bloomberg Podcast. Greg and my ute, A guy named

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Speaker 2: John Templeton took me by myself. I was so honored,

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Speaker 2: and he said in a Tennessee accent, Tom, there will

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Speaker 2: be a shortage of bonds. I saw the French oat

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Speaker 2: auction the other day and was flabbergasted at the interest,

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Speaker 2: Greg Peters, is there a shortage of bills, notes and bonds?

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Speaker 7: There is what we call the opposite of a shortage,

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Speaker 7: So there's just a deluge and that's what you're seeing

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Speaker 7: across the globe, honestly, is that you're seeing this on

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Speaker 7: lenting supply of sovereign debt hitting the market. There's lots

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Speaker 7: of chatter within the bond market around this notion of

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Speaker 7: term premium, which is really, if you distill it, it is.

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Speaker 6: Supply and demand.

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Speaker 7: How much additional premium do investors require? And you know

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Speaker 7: that's on the rise, and the reason why it's on

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Speaker 7: the rise is because there is this legitimate and growing

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Speaker 7: concern around the debt and deficit and quite frankly, there's

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Speaker 7: just so much supply hitting the global bond market that

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Speaker 7: there has to be a repricing in term premium. So no,

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Speaker 7: sir John, you know, we kind of have the opposite issue.

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Speaker 7: The real question that you know we're pondering and it

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Speaker 7: doesn't seem to have any effect, is this potential crowding

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Speaker 7: out effect. Right, So the theory is there's just so

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Speaker 7: much sovereign paper hitting the market that crowds out of

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Speaker 7: corporate paper. But we haven't seen that either. So there's

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Speaker 7: such a demand for fixed income securities globally that we

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Speaker 7: haven't seen any sense of crowding out.

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Speaker 2: Greg.

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Speaker 4: We hear a lot about US exceptionalism as it relates

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Speaker 4: to economic matters. How do you guys think about fixed

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Speaker 4: income opportunities outside the United States.

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Speaker 7: Yeah, so I'm definitely been on this US exceptionalism story.

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Speaker 7: The opportunities this year are actually pretty broad, and so

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Speaker 7: what's different about this year versus the previous few years,

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Speaker 7: I think is the dispersion, the disparity and the various dislocations.

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Speaker 7: So we're in a different macro than we were, So

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Speaker 7: you're seeing different inflation regimes, you're seeing different growth regimes,

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Speaker 7: and of course as a response, different kind of central

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Speaker 7: bank actions. So there's actually better opportunities to go global

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Speaker 7: today than.

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Speaker 6: It's been in some time.

437
00:24:09,480 --> 00:24:13,919
Speaker 7: Right, So you know the curves are priced differently, they

438
00:24:13,960 --> 00:24:15,120
Speaker 7: should be priced differently.

439
00:24:15,320 --> 00:24:16,960
Speaker 6: So you know, the opportunities in.

440
00:24:16,920 --> 00:24:20,760
Speaker 7: The UK relative to the US, relative to parts of

441
00:24:20,800 --> 00:24:25,600
Speaker 7: the Eurozone at all, is quite robust. It's just not

442
00:24:26,200 --> 00:24:31,159
Speaker 7: one single market. It is truly a global market, and

443
00:24:31,200 --> 00:24:33,400
Speaker 7: I think there's alpha to be sourced there.

444
00:24:33,800 --> 00:24:36,880
Speaker 2: Greg. Maybe a Robert Tripper tem Percelly question, but I'll

445
00:24:36,880 --> 00:24:38,639
Speaker 2: go to you on it. Do you stay up at night,

446
00:24:38,720 --> 00:24:41,040
Speaker 2: worried about the debt and the deficit or do we

447
00:24:41,080 --> 00:24:43,600
Speaker 2: have a growth rate that can sustain this madness?

448
00:24:45,200 --> 00:24:46,280
Speaker 6: I do worry about it.

449
00:24:46,840 --> 00:24:49,800
Speaker 7: The scary part about the debt and deficit is that

450
00:24:50,200 --> 00:24:54,760
Speaker 7: there's no magical number. There's there's no you know, one

451
00:24:54,800 --> 00:24:57,480
Speaker 7: hundred and fifty percent debt to DP whatever you want

452
00:24:57,520 --> 00:24:59,560
Speaker 7: to call, and the markets wake up and say this

453
00:24:59,600 --> 00:25:03,159
Speaker 7: is a p problem. And you're getting a whiff of

454
00:25:03,200 --> 00:25:06,720
Speaker 7: it globally, right. You clearly got it from the Minji

455
00:25:07,119 --> 00:25:11,679
Speaker 7: mini budget crisis in the UK. You got it again

456
00:25:11,840 --> 00:25:15,920
Speaker 7: in the UK in the fall. You're seeing it in France.

457
00:25:16,520 --> 00:25:22,320
Speaker 7: So when you're in such an indebted society, these things matter,

458
00:25:22,840 --> 00:25:26,919
Speaker 7: you just don't know when it matters. So I do

459
00:25:27,040 --> 00:25:30,960
Speaker 7: believe that the risk on the table for the global markets,

460
00:25:31,040 --> 00:25:34,280
Speaker 7: the US market is a debt and deficit, and so

461
00:25:34,480 --> 00:25:40,119
Speaker 7: it's really important for policy makers to not ignore it.

462
00:25:40,160 --> 00:25:41,560
Speaker 6: I know that's a double negative, but.

463
00:25:41,560 --> 00:25:44,439
Speaker 7: To focus on it, to say, hey, this does matter,

464
00:25:44,920 --> 00:25:47,920
Speaker 7: because I do worry about, you know, the.

465
00:25:47,800 --> 00:25:49,320
Speaker 6: Bond market taking over here.

466
00:25:49,440 --> 00:25:52,359
Speaker 7: So I think this is the number one issue on

467
00:25:52,440 --> 00:25:55,480
Speaker 7: the table going forward, and it just cannot be ignored.

468
00:25:56,760 --> 00:25:59,480
Speaker 4: So what are the right now where do you see

469
00:25:59,600 --> 00:26:02,399
Speaker 4: just the best value in the marketplace? Great, because I

470
00:26:02,440 --> 00:26:05,040
Speaker 4: know we've talked that. You mentioned credit spreads are so

471
00:26:05,359 --> 00:26:07,520
Speaker 4: tight here, where's value if anywhere?

472
00:26:08,600 --> 00:26:11,880
Speaker 7: Yeah, So, I mean I do think it's back to normal,

473
00:26:11,960 --> 00:26:15,359
Speaker 7: which is a carry market. So we're not looking for

474
00:26:15,400 --> 00:26:19,959
Speaker 7: this fantastic full return type of marketplace. So it's about carry,

475
00:26:19,960 --> 00:26:23,720
Speaker 7: and so we're building portfolios based on carry. And so

476
00:26:24,720 --> 00:26:27,320
Speaker 7: we want to just own what we call kind of

477
00:26:27,440 --> 00:26:31,480
Speaker 7: safe credit that just rolls down the curve, flip the coupon,

478
00:26:32,560 --> 00:26:36,600
Speaker 7: and not take a tremendous amount of credit risk just

479
00:26:36,600 --> 00:26:39,480
Speaker 7: because we don't think we're getting paid for it. Structured

480
00:26:39,520 --> 00:26:43,040
Speaker 7: products is an area that really fits that bill well.

481
00:26:43,800 --> 00:26:44,280
Speaker 4: And then.

482
00:26:45,640 --> 00:26:47,760
Speaker 7: You know, even though we're tactical, but if you kind

483
00:26:47,760 --> 00:26:50,320
Speaker 7: of zoom out and think about what fixed income does

484
00:26:50,359 --> 00:26:55,680
Speaker 7: in an overall acid alloication scheme, it is the protective measures, right,

485
00:26:56,240 --> 00:26:59,800
Speaker 7: and so if the world does, you know, go pair shaped,

486
00:27:00,080 --> 00:27:03,720
Speaker 7: things don't play out fundamentally as we think, having duration

487
00:27:03,960 --> 00:27:07,920
Speaker 7: in a balance portfolio is critically important and really helpful.

488
00:27:08,000 --> 00:27:10,760
Speaker 7: So we really think there's scope for that in.

489
00:27:10,680 --> 00:27:14,160
Speaker 6: A balance way. And so that's that's where we see

490
00:27:14,200 --> 00:27:14,639
Speaker 6: the value.

491
00:27:14,800 --> 00:27:16,800
Speaker 2: Very cool, Greg we're going to zoom in and know

492
00:27:16,920 --> 00:27:20,240
Speaker 2: we see this on YouTube, folks, Gregor and Peters with

493
00:27:20,560 --> 00:27:24,080
Speaker 2: arsenal Merch in the office. I mean, Greg, do they

494
00:27:24,080 --> 00:27:26,399
Speaker 2: have a chance of catching Liverpool here? What do you think?

495
00:27:27,200 --> 00:27:29,560
Speaker 7: I don't think so, Tom, but I think they're a

496
00:27:29,560 --> 00:27:32,560
Speaker 7: better position than the Tots the.

497
00:27:34,880 --> 00:27:39,200
Speaker 2: Edge of relegation. I mean, get out they called do

498
00:27:39,240 --> 00:27:41,520
Speaker 2: you know, Paul, they call the standings of tables the

499
00:27:41,560 --> 00:27:44,480
Speaker 2: tables the tables if you're informed you look at the

500
00:27:44,560 --> 00:27:47,000
Speaker 2: NFL tables, or that the Tots are on the edge

501
00:27:47,000 --> 00:27:49,920
Speaker 2: of relegation. I mean, it's like an outrage to say,

502
00:27:50,200 --> 00:27:52,680
Speaker 2: at least Greg Peters, thank you with I learned a

503
00:27:52,720 --> 00:27:54,480
Speaker 2: lot there that was really wonderful.

504
00:27:59,440 --> 00:28:03,320
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

505
00:28:03,359 --> 00:28:06,359
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

506
00:28:06,400 --> 00:28:09,440
Speaker 1: Auto with the Bloomberg Business app. You can also watch

507
00:28:09,480 --> 00:28:12,439
Speaker 1: us live every weekday on YouTube and always on the

508
00:28:12,480 --> 00:28:14,000
Speaker 1: Bloomberg terminal.

509
00:28:13,840 --> 00:28:15,200
Speaker 2: Or say good morning to you, and of course the

510
00:28:15,240 --> 00:28:18,560
Speaker 2: front pages. It's a Lisa Matteo Hour. Lisa, what do

511
00:28:18,560 --> 00:28:19,160
Speaker 2: you have this morning?

512
00:28:19,160 --> 00:28:19,479
Speaker 3: All right?

513
00:28:19,520 --> 00:28:21,000
Speaker 8: This one actually is some good news. So a new

514
00:28:21,000 --> 00:28:25,080
Speaker 8: study says college enrollment rebounded since the pandemic. This was

515
00:28:25,080 --> 00:28:28,320
Speaker 8: a study the National Student Clearinghouse Research Center, so the

516
00:28:28,400 --> 00:28:31,720
Speaker 8: data says undergraduate enrollment neared sixteen million in the fall

517
00:28:31,760 --> 00:28:34,320
Speaker 8: of twenty twenty four. But this really stood out. Freshman

518
00:28:34,359 --> 00:28:37,040
Speaker 8: headcounts grew five point five percent. A big part of

519
00:28:37,040 --> 00:28:39,959
Speaker 8: that enrollment of students over the age of twenty one,

520
00:28:40,000 --> 00:28:41,600
Speaker 8: so I'm not sure if those who were putting it

521
00:28:41,640 --> 00:28:45,200
Speaker 8: off are now going back. And then the traditional freshmen

522
00:28:45,240 --> 00:28:47,160
Speaker 8: that come right out of high school a lot of them,

523
00:28:47,160 --> 00:28:49,719
Speaker 8: the biggest rate were from students from low income neighborhoods,

524
00:28:49,760 --> 00:28:53,000
Speaker 8: particularly community colleges. But what really stands out to me

525
00:28:53,040 --> 00:28:56,760
Speaker 8: is this is the time where the fast form was

526
00:28:57,160 --> 00:28:59,560
Speaker 8: such a headache. It was a nightmare for parents, and

527
00:28:59,680 --> 00:29:02,880
Speaker 8: despite ile that, the college enrollment is still going up.

528
00:29:03,080 --> 00:29:04,920
Speaker 4: And because it comes at a time when people really

529
00:29:05,000 --> 00:29:08,160
Speaker 4: are questioning the value of a college education, given the

530
00:29:08,200 --> 00:29:11,240
Speaker 4: cost is a worshiper the debt that a lot of

531
00:29:11,280 --> 00:29:13,640
Speaker 4: kids have to take on to get that degree. Is

532
00:29:13,680 --> 00:29:15,719
Speaker 4: it better to go to a trade school or to

533
00:29:15,760 --> 00:29:18,200
Speaker 4: do some on the path or the community college community

534
00:29:18,240 --> 00:29:18,960
Speaker 4: country exactly.

535
00:29:19,040 --> 00:29:21,200
Speaker 2: I don't look at Reddit too much, but a little

536
00:29:21,200 --> 00:29:23,560
Speaker 2: bit of the Reddit feed that comes in to my

537
00:29:24,040 --> 00:29:28,080
Speaker 2: my email feed. The angst of kids having to pay

538
00:29:28,120 --> 00:29:35,600
Speaker 2: these tuitions sixty seventy ninety thousand years. Yep. Sometimes it's

539
00:29:35,880 --> 00:29:36,640
Speaker 2: out of control.

540
00:29:36,800 --> 00:29:37,040
Speaker 3: It is.

541
00:29:37,120 --> 00:29:39,520
Speaker 8: And there's actually there's an article in the terminal too

542
00:29:39,520 --> 00:29:42,719
Speaker 8: if you look it up, that says financial aid is increasing,

543
00:29:43,280 --> 00:29:45,320
Speaker 8: so hopefully that's going to help. But I've been my

544
00:29:45,400 --> 00:29:47,280
Speaker 8: daughter's on the college and we've been to open houses

545
00:29:47,280 --> 00:29:51,080
Speaker 8: and they are packed, like official the administries are saying

546
00:29:51,160 --> 00:29:53,760
Speaker 8: this is like some of the highest rates.

547
00:29:53,760 --> 00:29:55,240
Speaker 2: COVID thing is it.

548
00:29:55,240 --> 00:29:59,320
Speaker 8: Is exactly okay, this is also post COVID thing. The

549
00:29:59,400 --> 00:30:01,440
Speaker 8: wall streets are has this article here. Their screens are

550
00:30:01,440 --> 00:30:04,760
Speaker 8: taken over classrooms right kindergarten through high school. But educators

551
00:30:04,760 --> 00:30:07,600
Speaker 8: are starting to wonder and question if this is really

552
00:30:07,760 --> 00:30:11,840
Speaker 8: helping or hurting kids learning. So there's a debate, right

553
00:30:11,880 --> 00:30:14,800
Speaker 8: the teachers saying that they help create more engaging lessons,

554
00:30:14,840 --> 00:30:17,120
Speaker 8: but then you have others are saying it's distracting, it's

555
00:30:17,120 --> 00:30:19,640
Speaker 8: burning out teachers because now teachers have to find a

556
00:30:19,640 --> 00:30:22,160
Speaker 8: way from stopping students playing the online games and watching

557
00:30:22,240 --> 00:30:25,280
Speaker 8: videos in between when they're in the classroom. So they're

558
00:30:25,280 --> 00:30:28,240
Speaker 8: saying it's distraction. Parents are trying to take their kids

559
00:30:28,240 --> 00:30:31,000
Speaker 8: opt out of technology. Some students are just tired of

560
00:30:31,040 --> 00:30:32,600
Speaker 8: it in general.

561
00:30:32,680 --> 00:30:33,840
Speaker 4: So it justs this debate.

562
00:30:34,080 --> 00:30:37,440
Speaker 2: Yeah, same, do you think like I have trouble taking

563
00:30:37,480 --> 00:30:41,360
Speaker 2: an exam on the screen. I flunk the last thirty

564
00:30:41,400 --> 00:30:45,840
Speaker 2: Bloomberg exams. But but do you think you retain us

565
00:30:45,920 --> 00:30:47,560
Speaker 2: much off an iPad? I don't think so.

566
00:30:47,880 --> 00:30:50,600
Speaker 8: I think no. I think when I write, I retain it.

567
00:30:51,160 --> 00:30:51,640
Speaker 2: That's mine.

568
00:30:51,760 --> 00:30:54,080
Speaker 8: Yes, I totally agree with that, and I keep trying to,

569
00:30:54,120 --> 00:30:55,480
Speaker 8: you know, tell my doy like you're still doing the

570
00:30:55,520 --> 00:30:57,840
Speaker 8: flash cards and writing it out, and you know, because

571
00:30:57,880 --> 00:30:59,960
Speaker 8: I feel like it helps you remember it a lot better.

572
00:31:00,280 --> 00:31:02,280
Speaker 4: For each company I covered on Wall Street for thirty years,

573
00:31:02,280 --> 00:31:04,320
Speaker 4: I had a notebook for each company for all my notes,

574
00:31:04,360 --> 00:31:07,560
Speaker 4: for all the earnings releases. I had like fifty notebooks

575
00:31:07,560 --> 00:31:10,280
Speaker 4: for Disney, fifteen notebooks for and all my notes were done,

576
00:31:10,320 --> 00:31:13,040
Speaker 4: I felt like when you wrote it down, but that's

577
00:31:13,040 --> 00:31:13,240
Speaker 4: just me.

578
00:31:13,360 --> 00:31:15,680
Speaker 2: Maybe can we have five second audible?

579
00:31:15,760 --> 00:31:16,160
Speaker 4: Yes?

580
00:31:16,360 --> 00:31:23,280
Speaker 2: Afterthought, just got our best report card. Oh goodness, there

581
00:31:23,320 --> 00:31:23,640
Speaker 2: you go.

582
00:31:24,000 --> 00:31:28,840
Speaker 8: No chromebook in his home. Continue And this one I

583
00:31:28,880 --> 00:31:31,360
Speaker 8: found interesting because remember Tuesday when Larry Ellison you know,

584
00:31:31,400 --> 00:31:33,720
Speaker 8: co founder of Oracle shared the stage of White House

585
00:31:33,720 --> 00:31:37,120
Speaker 8: President Trump. They announced that Stargate deal. Well now sources

586
00:31:37,160 --> 00:31:40,120
Speaker 8: telling New York pos that that backing it could save

587
00:31:40,240 --> 00:31:44,360
Speaker 8: his son David Skydance Media to gain that approval that

588
00:31:44,400 --> 00:31:47,840
Speaker 8: it needs to merge with Paramount. They're saying, maybe that's

589
00:31:47,880 --> 00:31:52,200
Speaker 8: some of the reason behind it. Paramount also considering settling

590
00:31:52,240 --> 00:31:55,200
Speaker 8: a ten billion dollar lawsuit President Trump filed against the

591
00:31:55,240 --> 00:31:58,200
Speaker 8: company over bias ahead of the merger, so that kind

592
00:31:58,200 --> 00:31:59,320
Speaker 8: of stood out when he.

593
00:31:59,360 --> 00:31:59,960
Speaker 2: Sat up there.

594
00:32:00,080 --> 00:32:04,400
Speaker 4: There's no regulatory problem for Skydance buying Paramount, but to

595
00:32:04,440 --> 00:32:07,200
Speaker 4: the extent that there's any litigation out there, maybe currying

596
00:32:07,240 --> 00:32:08,960
Speaker 4: favorite with the president's not the worst thing we've seen

597
00:32:09,000 --> 00:32:09,560
Speaker 4: it time and again.

598
00:32:09,640 --> 00:32:11,800
Speaker 2: Thank you so much too, Thank you so much on

599
00:32:11,840 --> 00:32:12,920
Speaker 2: the newspapers. Thank you.

600
00:32:13,520 --> 00:32:18,360
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

601
00:32:18,480 --> 00:32:22,760
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

602
00:32:22,880 --> 00:32:26,360
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

603
00:32:26,440 --> 00:32:30,480
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

604
00:32:30,520 --> 00:32:33,880
Speaker 1: can also watch us live every weekday on YouTube and

605
00:32:34,080 --> 00:32:35,800
Speaker 1: always on the Bloomberg terminal