1 00:00:02,440 --> 00:00:06,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,080 --> 00:00:09,200 Speaker 2: Let's pivot to the US economy right now and gets 3 00:00:09,200 --> 00:00:12,200 Speaker 2: a perspective there. Wilbert Ross, the former US Commerce secretary 4 00:00:12,240 --> 00:00:15,080 Speaker 2: under Donald Trump, told Bloomberg where he thinks the US 5 00:00:15,160 --> 00:00:15,960 Speaker 2: economy is heading. 6 00:00:17,640 --> 00:00:21,960 Speaker 3: I think the US is heading toward probably a very 7 00:00:22,000 --> 00:00:29,120 Speaker 3: mild recessionary period, and that shouldn't be too surprising. It 8 00:00:29,240 --> 00:00:34,720 Speaker 3: was artificially propped up by all the great situations that 9 00:00:34,880 --> 00:00:39,560 Speaker 3: had prevailed and all the chaos that was pumped into 10 00:00:39,800 --> 00:00:44,919 Speaker 3: the economy in the aftermath of COVID. I think they 11 00:00:45,000 --> 00:00:45,919 Speaker 3: all did that. 12 00:00:48,640 --> 00:00:51,320 Speaker 2: Has Wilbur Ross, former US Secretary of Commerce under Donald 13 00:00:51,320 --> 00:00:55,760 Speaker 2: Trump's first administration. They're talking about a very mild recessionary period. 14 00:00:55,800 --> 00:00:59,520 Speaker 2: That's his expectation. Let's get another perspective on the US 15 00:00:59,520 --> 00:01:02,720 Speaker 2: economy and on markets, on deals and much beyond. We're 16 00:01:02,760 --> 00:01:06,399 Speaker 2: pleased to say we're joined by Ralph Schulstein, Evercore Chairman 17 00:01:06,400 --> 00:01:10,120 Speaker 2: emeritus and black Rock co founder. Ralph, really nice to 18 00:01:10,160 --> 00:01:12,880 Speaker 2: see you this morning. Welcome to the studio. Thanks very 19 00:01:12,959 --> 00:01:14,679 Speaker 2: much for joining us. Let's start with your sort of 20 00:01:14,720 --> 00:01:17,800 Speaker 2: in the moment market expectations. There's a lot of people 21 00:01:17,840 --> 00:01:19,800 Speaker 2: wondering whether we're going to get a cut of twenty 22 00:01:19,800 --> 00:01:22,560 Speaker 2: five fifty basis points from the Fed next week seems 23 00:01:22,560 --> 00:01:25,600 Speaker 2: to matter. I wonder if in the ground scheme of things, 24 00:01:25,600 --> 00:01:27,520 Speaker 2: that's the sort of thing that matters to you because 25 00:01:27,520 --> 00:01:29,880 Speaker 2: of the signaling it might give to markets. What are 26 00:01:29,920 --> 00:01:30,319 Speaker 2: you thinking? 27 00:01:30,800 --> 00:01:33,839 Speaker 4: I do think it does matter, and if I were 28 00:01:33,880 --> 00:01:38,040 Speaker 4: in the room, I would actually be pushing for a 29 00:01:38,040 --> 00:01:41,440 Speaker 4: fifty basis point rather than a twenty five basis point cut. 30 00:01:42,120 --> 00:01:46,200 Speaker 4: Not because I think the economy is on the verge 31 00:01:46,240 --> 00:01:49,680 Speaker 4: of recession, but I think the balance of risks has 32 00:01:49,720 --> 00:01:55,200 Speaker 4: shifted from a risk that inflation doesn't come down as 33 00:01:55,280 --> 00:02:01,360 Speaker 4: we hope to a risk that unemployment and grows up 34 00:02:01,760 --> 00:02:05,080 Speaker 4: faster than we would hope, and employment doesn't grow as 35 00:02:05,120 --> 00:02:09,200 Speaker 4: fast as we would hope. And as a result, I 36 00:02:09,240 --> 00:02:14,799 Speaker 4: think the argument for moving toward neutral is a pretty 37 00:02:14,800 --> 00:02:15,359 Speaker 4: strong one. 38 00:02:15,440 --> 00:02:18,440 Speaker 2: Okay, so you're in the fifty camp. Yes, it would 39 00:02:18,440 --> 00:02:19,320 Speaker 2: that be saying to fifty. 40 00:02:19,440 --> 00:02:21,680 Speaker 4: I'm not saying they'll do that. I'm saying that's what 41 00:02:21,720 --> 00:02:22,760 Speaker 4: I think they should do. 42 00:02:22,960 --> 00:02:26,360 Speaker 2: Yes, So if we is there a danger though, that 43 00:02:26,400 --> 00:02:28,720 Speaker 2: if they did fifty, that that swoops the horses. Would 44 00:02:28,720 --> 00:02:30,720 Speaker 2: this be taken as risk on or risk off? 45 00:02:30,760 --> 00:02:31,680 Speaker 5: Do you think by not right? 46 00:02:31,760 --> 00:02:32,359 Speaker 6: I think. 47 00:02:35,720 --> 00:02:38,400 Speaker 4: I believe the right thing to do is fifty for 48 00:02:38,440 --> 00:02:41,760 Speaker 4: two reasons. One, I think the balance of risks are 49 00:02:41,960 --> 00:02:47,160 Speaker 4: more in the slower employment growth, and second, you know 50 00:02:47,200 --> 00:02:51,000 Speaker 4: we're quite a ways away from neutral. The risks, even 51 00:02:51,080 --> 00:02:54,320 Speaker 4: if they are balanced, we should be closer to neutral. 52 00:02:54,400 --> 00:02:58,520 Speaker 4: And I think a path which starts at fifty rather 53 00:02:58,600 --> 00:03:02,680 Speaker 4: than one that goes twenty five and then fifty, actually 54 00:03:03,520 --> 00:03:08,880 Speaker 4: communicates a more relaxed view about how the economy is 55 00:03:08,919 --> 00:03:11,520 Speaker 4: doing right now, whereas if you started at twenty five 56 00:03:12,000 --> 00:03:15,519 Speaker 4: and then in November did fifty, it would actually spook 57 00:03:15,560 --> 00:03:16,480 Speaker 4: the market a little bit. 58 00:03:17,680 --> 00:03:20,960 Speaker 5: Good morning, l So just listenings that you fairly confident 59 00:03:21,000 --> 00:03:22,480 Speaker 5: that a fifty would not signal that we're in a 60 00:03:22,560 --> 00:03:23,200 Speaker 5: hard landing. 61 00:03:23,600 --> 00:03:25,799 Speaker 6: No, I think you know we're so far. 62 00:03:27,560 --> 00:03:30,160 Speaker 4: You know, obviously, when we were at zero, we were 63 00:03:30,200 --> 00:03:33,160 Speaker 4: a long way from neutral. YEP, at five and a 64 00:03:33,240 --> 00:03:35,600 Speaker 4: quarter to five and a half, we're also a long 65 00:03:35,640 --> 00:03:42,200 Speaker 4: way from neutral. And if the risks of slower employment 66 00:03:42,920 --> 00:03:48,480 Speaker 4: and inflation are roughly balanced, we should be closer to neutral. 67 00:03:48,520 --> 00:03:52,560 Speaker 4: And to me, the statement should be we now have 68 00:03:52,760 --> 00:03:56,040 Speaker 4: balanced risks. If anything, we have a little more risk 69 00:03:56,120 --> 00:04:00,000 Speaker 4: that employment is going to grow too slowly and therefore 70 00:04:00,120 --> 00:04:05,200 Speaker 4: or we should be getting on with the pop the 71 00:04:05,240 --> 00:04:07,440 Speaker 4: path getting to neutral. 72 00:04:08,040 --> 00:04:09,760 Speaker 5: Just to break it down a little bit, Which bits 73 00:04:09,800 --> 00:04:12,680 Speaker 5: of the US economy do you think need rate cuts 74 00:04:12,760 --> 00:04:13,160 Speaker 5: right now? 75 00:04:13,320 --> 00:04:14,280 Speaker 6: Is it's the private sect? 76 00:04:14,360 --> 00:04:17,560 Speaker 5: I look at company margins, they look fantastic, still really good. 77 00:04:17,880 --> 00:04:20,080 Speaker 5: Is it? Is it the employment story or is it 78 00:04:20,120 --> 00:04:22,360 Speaker 5: the governments that needs a right cut right now? 79 00:04:22,520 --> 00:04:27,480 Speaker 4: Well, the government benefits from a rate cut, But the 80 00:04:27,520 --> 00:04:31,760 Speaker 4: parts that I think need a rate cut are the 81 00:04:31,880 --> 00:04:40,719 Speaker 4: rate sensitive sectors like housing and smaller business where all 82 00:04:40,800 --> 00:04:47,400 Speaker 4: of their borrowing is tied to short rates, prime lines 83 00:04:47,440 --> 00:04:51,560 Speaker 4: of credit, et cetera, and so and and by the 84 00:04:51,640 --> 00:04:56,200 Speaker 4: you know, big business is doing great, margins are high, 85 00:04:56,640 --> 00:05:01,479 Speaker 4: top line growth is decent. So I don't think the 86 00:05:01,560 --> 00:05:04,479 Speaker 4: cases you know in the S and P five hundred 87 00:05:04,640 --> 00:05:07,760 Speaker 4: or the Dow Jones, the cases in the part of 88 00:05:07,800 --> 00:05:11,840 Speaker 4: the economy that actually generates the vast majority of new jobs. 89 00:05:12,320 --> 00:05:14,320 Speaker 1: How much of that strength, though, is that the whim 90 00:05:14,360 --> 00:05:16,760 Speaker 1: of what might happen in the political space in the 91 00:05:16,760 --> 00:05:19,360 Speaker 1: next six months. I'm curious if we're talking about these 92 00:05:19,400 --> 00:05:22,360 Speaker 1: interest rate cuts in this resilience. How much should the 93 00:05:22,360 --> 00:05:25,240 Speaker 1: FED be thinking about the continuity or the potential increase 94 00:05:25,240 --> 00:05:26,120 Speaker 1: of tariffs in the. 95 00:05:26,120 --> 00:05:30,800 Speaker 6: Next six months. Well, the FED would always say that they. 96 00:05:32,120 --> 00:05:36,400 Speaker 4: React to the economy, not to fiscal policy or to 97 00:05:36,520 --> 00:05:41,720 Speaker 4: trade policy, and I think that's basically true. I think 98 00:05:41,800 --> 00:05:46,480 Speaker 4: we are We're in a period right now of significant 99 00:05:46,520 --> 00:05:51,200 Speaker 4: economic uncertainty. We're in this transition period from when inflation 100 00:05:51,520 --> 00:05:53,640 Speaker 4: was too high and it's now coming down. 101 00:05:53,680 --> 00:05:55,960 Speaker 6: It hasn't quite reached the Fed's target. 102 00:05:55,680 --> 00:06:00,000 Speaker 4: Yet, but it's certainly moving in that direction, and unemployment 103 00:06:00,600 --> 00:06:03,440 Speaker 4: is drifting upward, and you know, as you just heard 104 00:06:03,480 --> 00:06:07,480 Speaker 4: from the former Commerce secretary, there certainly is you know, 105 00:06:07,720 --> 00:06:11,200 Speaker 4: some risk that we will have not a soft landing 106 00:06:12,040 --> 00:06:17,240 Speaker 4: but a mild recession. All of that means there's uncertainty. 107 00:06:18,200 --> 00:06:23,480 Speaker 4: The political period adds additional uncertainty, and so that's kind 108 00:06:23,520 --> 00:06:30,719 Speaker 4: of a chilling effect on significant moves by business. 109 00:06:30,960 --> 00:06:34,880 Speaker 1: Well, Well, famously, in twenty nineteen, j. Powell basically announced 110 00:06:34,880 --> 00:06:38,640 Speaker 1: an insurance cut to address the pain from tariffs. Which 111 00:06:38,640 --> 00:06:40,719 Speaker 1: is why I'm wondering if that playbook sees a little 112 00:06:40,720 --> 00:06:42,960 Speaker 1: bit of a repeat, and if terroriffs are even something 113 00:06:43,279 --> 00:06:45,880 Speaker 1: the market, the economy has gotten used to or maybe 114 00:06:46,000 --> 00:06:47,839 Speaker 1: is the budget perhaps the bigger worry. 115 00:06:48,160 --> 00:06:51,160 Speaker 4: Well, I think the I think you have to separate 116 00:06:52,680 --> 00:06:58,279 Speaker 4: what I would call trade balancing or tactical or targeted 117 00:06:58,800 --> 00:07:06,320 Speaker 4: tariffs and blanket tariffs. Blanket tariffs I think presage and 118 00:07:06,520 --> 00:07:11,440 Speaker 4: high tariffs presage a period of declining. 119 00:07:12,320 --> 00:07:14,920 Speaker 6: Free trade, which we've already entered. 120 00:07:14,640 --> 00:07:21,400 Speaker 4: Somewhat, and that is inflationary and very bad for markets. 121 00:07:22,040 --> 00:07:25,960 Speaker 4: So if that happened, I think we would we'd certainly 122 00:07:26,000 --> 00:07:28,560 Speaker 4: see an effect in the markets. The impact in the 123 00:07:28,600 --> 00:07:31,720 Speaker 4: economy would be, you know, always uncertain. 124 00:07:31,880 --> 00:07:34,680 Speaker 1: Well, we're already seeing you mentioned the difference in blank 125 00:07:34,720 --> 00:07:36,800 Speaker 1: tariffs and target tarifs, already seeing that kind of a 126 00:07:36,840 --> 00:07:39,640 Speaker 1: continuation of not just the Trump era, but even in 127 00:07:39,680 --> 00:07:42,080 Speaker 1: the Bien era, a continuation of tariffs not just on 128 00:07:42,160 --> 00:07:45,160 Speaker 1: China but on Europe as well. At what point is 129 00:07:45,200 --> 00:07:47,040 Speaker 1: that so damaging to the economy. 130 00:07:47,120 --> 00:07:49,760 Speaker 4: Well, the magnitude of them has not been that great 131 00:07:50,640 --> 00:07:54,200 Speaker 4: so far, and I think as a general matter, the 132 00:07:54,360 --> 00:07:58,920 Speaker 4: Biden administration has tried to balance you know, what they 133 00:07:58,960 --> 00:08:06,640 Speaker 4: would call fair read and you know, a reasonable relationship 134 00:08:07,080 --> 00:08:13,800 Speaker 4: with Europe and our allies in Asia, and not a. 135 00:08:13,240 --> 00:08:17,080 Speaker 6: Whole scale attack on free trade. 136 00:08:17,920 --> 00:08:22,080 Speaker 4: You know, being the special trade representative in the Biden 137 00:08:22,120 --> 00:08:26,120 Speaker 4: administration has probably not been the most exciting job over 138 00:08:26,120 --> 00:08:27,040 Speaker 4: the last four years. 139 00:08:28,120 --> 00:08:31,000 Speaker 2: Yeah yeah, maybe let's talk about areas of the market 140 00:08:31,000 --> 00:08:33,280 Speaker 2: that might be exciting and talk about deals, because that's 141 00:08:33,280 --> 00:08:35,640 Speaker 2: something I'm sure your views on. We just see another 142 00:08:35,679 --> 00:08:40,200 Speaker 2: example this morning, digital Bridge sets away the sale of 143 00:08:38,160 --> 00:08:44,600 Speaker 2: a four billion dollar firm, edge Point, just another example 144 00:08:44,640 --> 00:08:46,880 Speaker 2: of maybe some deals going through. We heard from Berkleay's 145 00:08:46,920 --> 00:08:49,960 Speaker 2: this week, Goldwyn Sachs this week, both saying things are 146 00:08:50,000 --> 00:08:52,880 Speaker 2: nothing to pick up on the deal's front, wishful thinking 147 00:08:53,000 --> 00:08:54,679 Speaker 2: or actually seeing evidence of that. 148 00:08:54,880 --> 00:09:00,760 Speaker 4: Well, there's definitely a some pickup in the nowt activity. 149 00:09:00,800 --> 00:09:02,199 Speaker 6: If you look at the first. 150 00:09:03,200 --> 00:09:07,360 Speaker 4: Eight months or so of this year, the dollar volume 151 00:09:07,679 --> 00:09:12,840 Speaker 4: of announced transactions is up. Interestingly enough, the number of 152 00:09:12,880 --> 00:09:19,480 Speaker 4: transactions is still down this year. There's you know, if 153 00:09:19,520 --> 00:09:24,559 Speaker 4: I look at Evercor's business, we track a number of indicators. 154 00:09:25,280 --> 00:09:30,959 Speaker 4: The least forward looking is our backlog, which is you know, tangible. 155 00:09:32,160 --> 00:09:40,120 Speaker 4: The other measurable ones are new engagement letters signed earlier 156 00:09:40,160 --> 00:09:43,280 Speaker 4: than that is, new conflicts clearance. When a client calls 157 00:09:43,360 --> 00:09:45,840 Speaker 4: us up and says, hey, we're thinking of this will 158 00:09:45,880 --> 00:09:49,720 Speaker 4: you help us? And even earlier than that, which is 159 00:09:49,760 --> 00:09:56,520 Speaker 4: not quantifiable is active dialogue with our clients. The active 160 00:09:56,559 --> 00:10:01,880 Speaker 4: dialogue with clients is way up, new engagement letters is up, 161 00:10:04,400 --> 00:10:07,920 Speaker 4: and conflicts clearances are up somewhere in between those two. 162 00:10:08,320 --> 00:10:14,000 Speaker 4: So there's definitely a significant amount of pent up activity. 163 00:10:15,160 --> 00:10:18,640 Speaker 4: As we talked earlier, we're in a period of economic uncertainty. 164 00:10:18,760 --> 00:10:25,400 Speaker 4: Economic uncertainty is the enemy of announced activity, So it's 165 00:10:25,440 --> 00:10:28,240 Speaker 4: going to happen. It's a question of when it really starts. 166 00:10:29,400 --> 00:10:32,760 Speaker 5: Do you think the Harris camp is generating economic uncertaincy? 167 00:10:33,280 --> 00:10:35,400 Speaker 5: We don't know yet what the Horras camp is going 168 00:10:35,440 --> 00:10:38,320 Speaker 5: to deliver in terms of its economic agenda. We seem 169 00:10:38,320 --> 00:10:39,480 Speaker 5: to be light on detail. 170 00:10:40,160 --> 00:10:41,160 Speaker 6: What is your sense of that? 171 00:10:42,000 --> 00:10:45,320 Speaker 4: Well, I'm not sure if I had a scale here, 172 00:10:45,360 --> 00:10:48,320 Speaker 4: and I watched the debate on Tuesday night, which I 173 00:10:48,360 --> 00:10:55,440 Speaker 4: did at two am, that if going down was on 174 00:10:55,520 --> 00:11:01,880 Speaker 4: the one side, was how specific was the candidate in 175 00:11:02,000 --> 00:11:05,920 Speaker 4: terms of their economic policy. I'm not sure that the 176 00:11:06,080 --> 00:11:10,760 Speaker 4: Trump side would go down more than the harriside. So 177 00:11:12,280 --> 00:11:15,199 Speaker 4: I think that you know, both of them are trying 178 00:11:15,640 --> 00:11:22,080 Speaker 4: to say, is little specifically that so that they don't 179 00:11:22,080 --> 00:11:28,079 Speaker 4: offend anyone. I actually think she's been more specific than 180 00:11:28,120 --> 00:11:31,600 Speaker 4: he has, at least in the last you know, since 181 00:11:31,600 --> 00:11:34,440 Speaker 4: she's entered the race, and. 182 00:11:36,120 --> 00:11:38,680 Speaker 6: You know, so, I don't think. 183 00:11:38,960 --> 00:11:41,960 Speaker 4: I think the fact that these are two very different 184 00:11:42,040 --> 00:11:47,760 Speaker 4: visions for America, definitely, and it's a you know, it's 185 00:11:47,760 --> 00:11:52,880 Speaker 4: a toss up, definitely injects uncertainty. But I wouldn't put 186 00:11:53,040 --> 00:11:56,840 Speaker 4: her policy as being. 187 00:11:57,040 --> 00:11:59,600 Speaker 6: A principal contributor to that uncertainty. 188 00:12:00,120 --> 00:12:02,920 Speaker 1: You talk about her specifics, her campaign is certainly outlined 189 00:12:02,920 --> 00:12:04,840 Speaker 1: as she has as well in terms of continuation of 190 00:12:04,840 --> 00:12:08,439 Speaker 1: the Biden policy, which is tackling drug pricing. She's talked 191 00:12:08,480 --> 00:12:12,640 Speaker 1: about grocery prices, housing affordability. Economists and investors would listen 192 00:12:12,679 --> 00:12:15,839 Speaker 1: to that and hear that and be concerned about that 193 00:12:15,920 --> 00:12:18,559 Speaker 1: being a recipe for stagflation. Do you agree? 194 00:12:18,960 --> 00:12:19,560 Speaker 6: No, I don't. 195 00:12:19,720 --> 00:12:23,600 Speaker 4: I think that there are two elements to her policy. 196 00:12:24,720 --> 00:12:27,040 Speaker 4: And by the way, I am a Democrat, so take 197 00:12:27,080 --> 00:12:29,839 Speaker 4: this all with a grain of salt. I think there 198 00:12:29,880 --> 00:12:37,200 Speaker 4: are two elements to her policy. One, it's a torque 199 00:12:37,280 --> 00:12:42,160 Speaker 4: the benefits of our society a little bit toward the 200 00:12:42,200 --> 00:12:45,600 Speaker 4: middle class and those less privileged. And I think her 201 00:12:45,640 --> 00:12:54,120 Speaker 4: policies on housing, affordability, drug prices, childcare, and the child 202 00:12:54,240 --> 00:12:58,720 Speaker 4: tax credit all are geared there. And you know there's 203 00:12:58,760 --> 00:13:02,560 Speaker 4: going to be a massive debate next year about the 204 00:13:02,600 --> 00:13:07,960 Speaker 4: extension of the Trump tax cuts. And I think the 205 00:13:08,000 --> 00:13:13,520 Speaker 4: biggest difference between these two is the position that they 206 00:13:13,559 --> 00:13:17,160 Speaker 4: will take on that. Whereas Trump is for extending all 207 00:13:17,200 --> 00:13:21,240 Speaker 4: of them and for in fact expanding some of them 208 00:13:21,280 --> 00:13:26,040 Speaker 4: on the corporate side, and She is clearly for expanding 209 00:13:26,120 --> 00:13:29,000 Speaker 4: all of them for those below four hundred thousand dollars 210 00:13:29,000 --> 00:13:34,240 Speaker 4: in income and cutting back on the corporate side. She's 211 00:13:34,280 --> 00:13:38,000 Speaker 4: proposed twenty eight percent rather than twenty one percent, and 212 00:13:38,640 --> 00:13:43,280 Speaker 4: probably eliminating some of the cuts that are beneficial to 213 00:13:43,320 --> 00:13:47,280 Speaker 4: the most wealthy in our society. I don't think I 214 00:13:47,320 --> 00:13:51,920 Speaker 4: think it's a policy focused on a little bit of 215 00:13:52,040 --> 00:13:56,720 Speaker 4: retorking toward the middle class and below and a growth agenda. 216 00:13:58,320 --> 00:14:02,199 Speaker 1: The counter argument that's would be that the Trump taskts 217 00:14:02,200 --> 00:14:04,120 Speaker 1: did great for the economy. JB. Diamond has made that 218 00:14:04,120 --> 00:14:06,439 Speaker 1: point a conversation for another time. Ralph Lasson, we have 219 00:14:06,440 --> 00:14:08,920 Speaker 1: to leave it there, ever, Core Chairman emeritus and Blackrock 220 00:14:08,960 --> 00:14:11,320 Speaker 1: co founder, we thank you so much for joining the program.