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Speaker 2: Joining us on the equity market bracket is someone with
Speaker 2: a definitive memo working with heymen at evercore is, says
Speaker 2: Julian Emmanuel, where Sally Good brief ust this morning. How
Speaker 2: does the Hymen Emmanuel world look with a one point
Speaker 2: seven percent growth rate? It's gotta change.
Speaker 3: It definitely does change.
Speaker 4: And there's no question about the fact that when you
Speaker 4: think about what's gone on the last four to six weeks,
Speaker 4: you're at one of these points where if you go
Speaker 4: back before the pandemic, we saw the soft data lead
Speaker 4: the hard data consistently for the decade before the pandemic.
Speaker 4: That has not been the case since twenty twenty consistently.
Speaker 4: But the questions are now open as to whether it is.
Speaker 4: And so you know, whether it's one point seven, one
Speaker 4: point five or.
Speaker 3: Maybe even two if if things.
Speaker 4: Stabilize, the risks are clearly to the downside and you
Speaker 4: have to account that for that in different ways.
Speaker 2: ISI I are the kings of hard data. What's the
Speaker 2: hard data, you guys see?
Speaker 4: So the hard to the hard data is very mixed.
Speaker 4: Our team, the survey's team, led by my esteem colleague
Speaker 4: Oscar Slaughterback, basically, it's it's very mixed. There's seen, and
Speaker 4: it's even more complicated by the fact that, you know,
Speaker 4: we've had a very poor weather winter and actually this
Speaker 4: this has been a very poor cold and flu season,
Speaker 4: so there's also that going on. And then of course
Speaker 4: when you think about the stress and the jobs market,
Speaker 4: it's primarily concentrated in that area in and around sixteen
Speaker 4: hundred Pennsylvania Avenue, So very very conflicting signals.
Speaker 5: How did FED Chairman j pal do yesterday?
Speaker 3: Amazing?
Speaker 4: Why knocking the cover off the ball?
Speaker 3: Because basically, what what.
Speaker 4: He needed to do was project a sense of calm
Speaker 4: in an environment that is anything but calm, and he did,
Speaker 4: and he made the point. You know, you can argue
Speaker 4: whether the word transitory was appropriate for the situation or not,
Speaker 4: but he went out of his way to make sure
Speaker 4: that that got across. And if you look at the
Speaker 4: last trade war in twenty eighteen and twenty nineteen inflation
Speaker 4: was in fact transitory.
Speaker 6: So where do we go from here? If you're an investor,
Speaker 6: I mean you're stepping back. You're saying, hey, I've had
Speaker 6: at the peak to try off at a ten percent
Speaker 6: pullback in the marketplace. If I'm in the if I'm
Speaker 6: in a nastac maybe twelve thirteen percent. Is that a
Speaker 6: healthy pullback in an otherwise okay market or do we
Speaker 6: have something really else to worry about here?
Speaker 4: Well, in our view, this is a pullback, okay, okay,
Speaker 4: But look, this is one of these times where the
Speaker 4: path of policy really is going to set the narrative
Speaker 4: in terms of whether the pullback has more to go,
Speaker 4: or whether we think you're actually starting a bottoming process,
Speaker 4: you know, let alone the fact of something more sinister.
Speaker 4: The market, to be clear, is pricing stagflation right now.
Speaker 2: Julian Emmanuel with a seventh corps ISSI A lengthy conversation
Speaker 2: to get us started this morning. Wendy Schiller on the
Speaker 2: Department of Education will be with us from run University,
Speaker 2: and then on foreign exchange, which was really sophisticated this morning.
Speaker 2: Audrey Child Freeman a strong hour here on YouTube. Subscribe
Speaker 2: to Bloomberg podcasts out on YouTube. Okay, Julian, so, I
Speaker 2: did a nominal GDP math which I learned from ed Heim,
Speaker 2: and while they fed, you know, guidance came out. Mohammad
Speaker 2: Alarian nailed it in a note later in the day
Speaker 2: out of Cambridge where he said, okay, you got a
Speaker 2: growth dynamic, you got an inflation dynamic, and nominal GDP
Speaker 2: came in as a sum total a little bit but
Speaker 2: pretty much level nominal GDP. Do you guys model out it,
Speaker 2: we'll see a reduction and nominal GDP. And if we do,
Speaker 2: does that fold over into reduced revenues at the top line.
Speaker 4: Well, in theory it could. But from our point of view,
Speaker 4: when you think about, you know, the trajectory of both
Speaker 4: sales and earnings in corporate America right now, it's actually
Speaker 4: reasonably strong and it goes back to the psychology of
Speaker 4: the last couple of years. So, in essence, corporate America
Speaker 4: has actually been preparing itself for the conditions we see now.
Speaker 2: Brilliant Let me jump forward. Then, can they cut costs
Speaker 2: fast enough? Can they adapt to maintain margins?
Speaker 4: They have shown it so and there kids don't see
Speaker 4: that and you bet against corporate America at your peril.
Speaker 3: You absolutely do.
Speaker 6: Uh.
Speaker 4: And from from our point of view, the last couple
Speaker 4: of years is the reason that the markets were able
Speaker 4: to survive the shock of you know, the interest rate
Speaker 4: medicine that we got is because we were so prepared.
Speaker 4: And then there's this wonderful little tool that's going to
Speaker 4: backstop productivity. I know we're tired of talking about it,
Speaker 4: but AI is is is.
Speaker 2: They let AI and ed Hymenshow?
Speaker 5: Yeah, I can't believe it?
Speaker 3: Can't help it?
Speaker 2: How do you do AI with a black sharpie?
Speaker 3: All right?
Speaker 6: So, Julian, if the inflation impact from Taryston mayor be
Speaker 6: transitory to some degree, how about the hit the one
Speaker 6: just overall economic growth? Is that a serious issue? That
Speaker 6: economic growth forecast need to be tempered a little bit?
Speaker 4: Well, and and you're seeing it. But again, what's important
Speaker 4: is the psychology around the jobs markets. It is literally
Speaker 4: all about jobs. And we like to say that on balance,
Speaker 4: if you're the retail investing public, you don't necessarily have
Speaker 4: to sell your stocks while you've still got a job.
Speaker 4: And so from our point of view, the way the
Speaker 4: jobs market unfolds is.
Speaker 3: Very very important here. And you know, we're just going
Speaker 3: to have.
Speaker 4: To see what the echo of the DOSEE layoffs is
Speaker 4: in the private sector.
Speaker 5: So what are we doing with US stocks here?
Speaker 6: I had late last year, earlier this year, I had
Speaker 6: everybody outside the US rushing into the US stock market.
Speaker 6: I'm hearing now some of the international buyers are leaving
Speaker 6: the stock market.
Speaker 5: What are we doing with this?
Speaker 4: So and no question, that's probably the biggest question we're getting,
Speaker 4: you know, with international investors selling US stocks. You know,
Speaker 4: our view is that even if you get a prolonged
Speaker 4: period of rest of world outperformance, this is not a
Speaker 4: zero sum game. You look at the last period that happened.
Speaker 4: It's been so long ago we can barely remember it.
Speaker 4: But in the OOS all the boats floated. And frankly, again,
Speaker 4: this is why policy is so important. There could be
Speaker 4: a world where there is you know, very positive outcomes
Speaker 4: globally for policy. There may also be a world where
Speaker 4: that's not the case, which is why the markets and
Speaker 4: the economy and sentiment is on such an edge right now.
Speaker 2: Tell us about the last paragraph of your claim. Note
Speaker 2: you go in and you know, I know it's a
Speaker 2: look back, but you sum up the revenue dynamics, revenue
Speaker 2: misses down the income statement, earnings dynamics, earnings misses. Do
Speaker 2: you believe I don't know when is Jay? Let me.
Speaker 2: I can go to the Bloomberg terminal, folks and look
Speaker 2: up the statistic because Paul Sweeney taught me how to
Speaker 2: do it. There we go, JP Morgan. April eleven is
Speaker 2: when we get JP Morgan?
Speaker 7: What is that?
Speaker 2: That's nine days after the world ends on April second?
Speaker 2: Do you have any certainty about the uncertainty of your
Speaker 2: acclaimed last paragraph looking into the next earning season?
Speaker 4: Well, so this is going to be a season where
Speaker 4: what you're going to want and half starts, as you
Speaker 4: pointed out, nine days after you know, quote unquote liberation
Speaker 4: day for tariffs and so so, how is corporate America
Speaker 4: going to react to those nine days and talk about
Speaker 4: the path forward?
Speaker 2: That?
Speaker 4: The issue here is will we be able to chart
Speaker 4: a somewhat clearer path forward? In terms of the commentary,
Speaker 4: It's less about what this quote looks like, particularly for
Speaker 4: the financial companies, which you know you're gonna have mixed messages,
Speaker 4: great trading, slower banking, But it really is about the
Speaker 4: path forward and what the view is whether this uncertainty
Speaker 4: will in fact begin to dissipate.
Speaker 5: All right, So given that uncertainty, what are we doing
Speaker 5: right now? Am I buying stocks? Am I buying bonds?
Speaker 5: Am I buying alternatives? What are we doing here? I'm
Speaker 5: mind buying protection? Maybe I don't know.
Speaker 4: No, we're not buying protection that that we're that may
Speaker 4: change in front of April. Second, if the market were
Speaker 4: to stabilize and get a little bit complacent here.
Speaker 3: But I think when you look at this morning, you know.
Speaker 4: This is really a process as opposed to and off
Speaker 4: to the races type of environment or where you typically
Speaker 4: see volatility come in. We are gently accumulating. We're rebalancing
Speaker 4: based on the draw down, with the knowledge that the
Speaker 4: preconditions that end bull markets, with the biggest challenge of
Speaker 4: those being an impending recession.
Speaker 3: And we have to have faith and there is you know, as.
Speaker 4: An investor, you've got to have faith, period, but having
Speaker 4: faith that the course of policy and the resilience of
Speaker 4: the economy is enough for twenty twenty five not to
Speaker 4: be a recessionary or which we believe it to be quickly.
Speaker 2: Here evercore Isi, how do you go through the process
Speaker 2: of the recession.
Speaker 3: Call right now, jobs jobs, jobs, Okay?
Speaker 2: I agree? Four point four percent unemployment, right.
Speaker 4: And so the question is when the unemployment report comes
Speaker 4: out the first week in April, you know, our investors,
Speaker 4: is the psychology around that report going to be such
Speaker 4: that we can take that's below one hundred thousand but
Speaker 4: still positive, okay? And what's the reverberation around that? And
Speaker 4: from our point of view, we think there will be
Speaker 4: a resilience built in at that point.
Speaker 2: Julian Emmanuel, thank you so much. Terrific summation brief there
Speaker 2: and economics of evercore Isi and his equity market at
Speaker 2: work as well.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on
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Speaker 2: Now. On Gold hugely anticipated with the Gabelli Goldfund, Chris
Speaker 2: Mancini with us, the portfolio manager for Gabelli Gold. Where
Speaker 2: do you model gold out? I mean, Chris, if you
Speaker 2: take a vector, you take the price of gold logarithmic
Speaker 2: y access, and you extrapolate out where we are. How
Speaker 2: brave are you to extrapolate out the price of gold.
Speaker 8: That's a great question, you know. I'm I'm not that brave.
Speaker 8: I think that's the answer. After years in this industry,
Speaker 8: it's like it's very you know what, what is it?
Speaker 8: The you know, fortune favors the bold. But I'm not
Speaker 8: so sure it makes sense to be too bold. I mean,
Speaker 8: I think but but I but I do think that
Speaker 8: that it's not so brave to say that I think
Speaker 8: the gold is at least going to stay at this
Speaker 8: price here, It'll be at least where it is now
Speaker 8: by the end of the year. And I think that
Speaker 8: so that, you know, maybe that is being bold because
Speaker 8: I think that that that buy and large. There are
Speaker 8: a lot of people, you know, on the cell side
Speaker 8: who are saying that it's going to be lower by
Speaker 8: the end of the year.
Speaker 2: I love as Our squared. I think they have his
Speaker 2: first of all, as are squared is lower than Mario Gabelli's.
Speaker 2: But I think nobody in the world as an R
Speaker 2: squared is removed from the performance of the S five
Speaker 2: like Chris.
Speaker 5: Yes, hey, Chris, you know skill on my screen.
Speaker 6: What I've got is the price of gold, and I
Speaker 6: look at it every day, and I quote it every
Speaker 6: day for our listeners and viewers here.
Speaker 5: How about the gold mining companies, how do you think
Speaker 5: about them? How do they how did they typically perform
Speaker 5: visa VI the price of gold?
Speaker 8: Yeah, well that's that's the key I think is because
Speaker 8: is because what's happened is that over the past five years,
Speaker 8: what typically happens is that there's a leverage involved in
Speaker 8: the gold miner's relative to the price of gold. And
Speaker 8: that's because there's there's operating leverage. Right, So it costs, say,
Speaker 8: right now, fifteen hundred dollars an ounce to get an
Speaker 8: ounce of gold out of the ground, and when the
Speaker 8: price of gold, yeah, it's right, So it's pretty.
Speaker 5: How has that changed over the years.
Speaker 2: It's changed.
Speaker 8: Yeah, it's changed pretty significantly. So before COVID in twenty nineteen,
Speaker 8: it was around one thousand dollars an ounce. Now it's
Speaker 8: around fifteen hundred dollars an ounce, and that's primarily because
Speaker 8: during COVID it was extremely extremely difficult to mine, Like
Speaker 8: obviously you can't mine from home, and there were right
Speaker 8: there were, so there were lots of restrictions in place
Speaker 8: and things like that are social distancing, quarantine, someone got sick,
Speaker 8: they had to quarantine everybody around them. The state of
Speaker 8: Western Australia essentially had a lockdown of the entire state,
Speaker 8: so you couldn't get people in and out of the state.
Speaker 8: And there is a lot of labor that works in
Speaker 8: the Western Australian as it came from Eastern Australia, stuff
Speaker 8: like that, So the wages in Western Australia went up
Speaker 8: a lot, and all these little idiosyncratic things that happened
Speaker 8: all over. It really caused the price of gold, sorry,
Speaker 8: the cost to mine gold to go up so much,
Speaker 8: and then the cost of kind of stayed there, so
Speaker 8: we're still at this level where like So what happened
Speaker 8: was that the price of gold was too was fifteen hundred,
Speaker 8: the cost was a thousand. The price of gold went
Speaker 8: to two thousand during COVID, the cost of mind went
Speaker 8: up to fifteen hundred, So the miners didn't really do
Speaker 8: that well whereas they normally should. And what's happened now though,
Speaker 8: is that the price of minus fifteen hundred, but the
Speaker 8: cost went from two thousand to three thousand. So we're
Speaker 8: seeing that the leverage now, but it hasn't been reflected
Speaker 8: in the minors.
Speaker 2: Help me with am like one of your major holdings, Agneco.
Speaker 2: I guess it is a Canadian company, Venerable, it's been
Speaker 2: around sixty years. I don't think, I mean, Paul, it's
Speaker 2: not Apple computer return. But I'm sorry you look at
Speaker 2: it versus a major US bank or a major consumer goods.
Speaker 2: I mean, basically, Chris, they're minning money, right, I mean
Speaker 2: the total return is substanting.
Speaker 8: That's very true. No, no, no, that's very true. I
Speaker 8: mean so that's why I said, I mean, it's we
Speaker 8: don't need to be that bold to predict that goal
Speaker 8: is going to stay at three thousand. But that prediction
Speaker 8: would mean that for Agnico Ego, for example, at three
Speaker 8: thousand dollars an ounce, they'd degenerating around an eight percent
Speaker 8: free cash flow yield. So they're generating and you know,
Speaker 8: with some growth, so that free cash flow yield should
Speaker 8: grow over the next couple of years, and so like, yeah,
Speaker 8: these companies compared to bans, compared to tech companies, are
Speaker 8: generating you know, substantial free cash flow, so you know, you.
Speaker 2: Know, and folks off the twenty twenty two bottom Agnico whatever. However,
Speaker 2: Agnago Eagles only up one hundred and eighty seven fifty
Speaker 2: one percent per year, Chris Vancini fifty nine percent of
Speaker 2: your portfolios. Canadian tariffs discussion. I mean, you know, how
Speaker 2: do tariffs play in to move in a bar of
Speaker 2: gold over the Lisa Mateos.
Speaker 8: Account in America. Well, that's a good question. No tariffs
Speaker 8: on gold yet. I mean, but the good thing about
Speaker 8: gold really is that it's, you know, such a large
Speaker 8: amount of value. Isn't such a small amount of space
Speaker 8: because it is so dense, right, and it's so meaning
Speaker 8: that like theoretically, if there were tariffs on Canadian gold
Speaker 8: to come into the United States, the Canadians could send
Speaker 8: their gold to Switzerland on a you know, one planeload.
Speaker 8: Wouldn't be that big of a deal to send it
Speaker 8: to Switzerland, and then the Swiss could do what, you know,
Speaker 8: could sell it in Germany or they or in you know,
Speaker 8: somewhere in Arabia or something like that. So it's not
Speaker 8: it really shouldn't affect the miners too much, thankfully.
Speaker 2: Twenty seconds Is White Fang your favorite movie The Klondike
Speaker 2: Gold Rush?
Speaker 8: Yeah, well, you know, it's it's up there. I do, like,
Speaker 8: what's what's the other one Klondike Strike, the Alaskan gold right,
Speaker 8: So they're all really good.
Speaker 2: Don't be a stranger, Christmas Seon, Thank you so much.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Morgan Stanley. She has the worst job she is to
Speaker 2: tie in US policy. Good luck the cacophony of Washington
Speaker 2: right now, whatever your politics into trying to hang on
Speaker 2: to your capital and maybe put it to work to
Speaker 2: make some form of return. Monica Gerre is incredibly experienced
Speaker 2: with legit budget duties for the City of New York
Speaker 2: and also a lot of good work in the House
Speaker 2: of Representatives. You know, the halls of the House. You
Speaker 2: must be on the phone. What are the Republicans and separately,
Speaker 2: what are the Democrats of the House telling you about
Speaker 2: the madness down there.
Speaker 9: I think that everyone is just trying to get through
Speaker 9: this as quickly and smoothly as possible, at least from
Speaker 9: the budget perspective. You know, they're essentially trying to take
Speaker 9: Doge and Elon Musk recommendations and bake them into this
Speaker 9: new budget bill. One of the things that I try
Speaker 9: to remind folks is that while there's all of this
Speaker 9: market uncertainty around tariffs, cutting and just general geopolitics, that
Speaker 9: by the end of the year, so if you're looking
Speaker 9: August to September, if for thinking about federal fiscal years
Speaker 9: what I'm talking about, there's likely to be some resolution
Speaker 9: and for the political sort of rhetoric to die down
Speaker 9: for a moment, because those tariff piece and the cuts
Speaker 9: are all going to have to be baked in, right,
Speaker 9: They're going to have to actually finalize them to vote
Speaker 9: on that bill.
Speaker 2: I mean, the power of you and Michael Jesus Morgan
Speaker 2: staling together is really a lot of academics. Do you
Speaker 2: see tariffs in any way moving the needle on revenue
Speaker 2: generation for the budget?
Speaker 9: The very high end estimates is that they think they
Speaker 9: can get a trillion. Around a trillion one point three
Speaker 9: was the highest estimate I've seen. Realistically, it's seeing closer
Speaker 9: to maybe seven hundred eight hundred billion, But you have
Speaker 9: to take into account that they're also going to be
Speaker 9: tabulating existing tariff revenue, in that they're going to essentially
Speaker 9: be taking all tariff revenue getting it through these external
Speaker 9: Revenue Service, a new sort of quasi a agency that's
Speaker 9: going to funnel the money through the federal government to
Speaker 9: the treasury versus just going straight to the treasury.
Speaker 2: Right.
Speaker 9: It creates a dynamic where now they can count it.
Speaker 4: To the budget.
Speaker 9: So it's already existing revenues that the US Treasury is
Speaker 9: already receiving, plus new So we have to see exactly
Speaker 9: what that's going to be in total. So do the
Speaker 9: new tariffs actually move the needle that much?
Speaker 3: Not much?
Speaker 2: Does the ship with a phrase shell game come to mind?
Speaker 5: Just the federal government in my mind.
Speaker 6: She just lost me their completely, But she knows what
Speaker 6: she's Monica, talk to us about kind of the budget,
Speaker 6: keeping the government running the budget.
Speaker 5: I'm told it. Just give us the timeline.
Speaker 6: What should be aware of here as investors.
Speaker 9: They're going to have to have a final sort of
Speaker 9: blueprint by May. That's what we're expecting May. Now, ok,
Speaker 9: right now we're March. That you'll have you'll have an
Speaker 9: understanding of what are the top priorities. It doesn't mean
Speaker 9: that they're not going to change. They can change, as
Speaker 9: we all know, right until midnight before the bill is passed,
Speaker 9: So you have we're likely to get those final priorities
Speaker 9: in May, and then the Senate is really going to
Speaker 9: have to hammer out what they want this tax bill
Speaker 9: to look like for us. When we're thinking through the cuts,
Speaker 9: the biggest risk to the economy is do they go
Speaker 9: too far, especially on the labor piece. And we're already
Speaker 9: seeing some softening with the you know, the the jobs
Speaker 9: numbers and you know with consumer data, and so how
Speaker 9: far does the federal government go? How does that impact
Speaker 9: not just federal labor, because federal labor only counts for
Speaker 9: one point nine percent of the labor force. It's how
Speaker 9: to the second derivative, the contractors, right get impact.
Speaker 2: Contractors.
Speaker 9: I'm not sure exactly that because if you're thinking about
Speaker 9: the it's not just contractors, it's also your grant recipients, nonprofits, universities,
Speaker 9: so it's a broader ecosystem. And so I don't have
Speaker 9: a direct estimate on that today, but when we're thinking
Speaker 9: through this, it's how how deep do they go? And
Speaker 9: then do they actually you know, I guess make good
Speaker 9: on the bet that then they can you know, spur
Speaker 9: growth in the second half of this Congress, meaning twenty
Speaker 9: twenty six, because Trump really has these two years to
Speaker 9: do business.
Speaker 2: But at the Northern Illinois University, you were hunkered down
Speaker 2: there waiting to do your public policy career. Is there
Speaker 2: any history in the United States of America that budget
Speaker 2: cuts create growth.
Speaker 9: That budget cuts create growth? I don't think so that's
Speaker 9: from my understanding. Budget cuts do not create growth. Fiscal
Speaker 9: stimulus right creates that multiplier effect right for.
Speaker 2: The edge I saw with one two and that the
Speaker 2: Biden stimulus.
Speaker 9: Well, one of the things that you're that you're trying
Speaker 9: to sort of balance here is that part one of
Speaker 9: this administration is that restructuring, downsizing, cutting, and part two
Speaker 9: of his of his his legacy setting for Trump. So
Speaker 9: we're looking at the growth piece on the back end
Speaker 9: of this. So if you're looking at Trump one point zero,
Speaker 9: in the first time he was in office, he started
Speaker 9: with a stimulus piece and then followed with austerity. So
Speaker 9: we're in the reverse scenario now and we just have
Speaker 9: to see if it's going to work out.
Speaker 6: So when you're talking to your clients and they ask
Speaker 6: you about the Trump strategy of near term pain in
Speaker 6: the economy for longer term gain. Do you tell your
Speaker 6: clients that's something you can bank on or are you
Speaker 6: kind of dubious as to whether that can take place?
Speaker 9: I would just say I would say more the latter category,
Speaker 9: right of making sure that we're being prudent about how
Speaker 9: we're positioning and the sectors and industries that we're looking at.
Speaker 9: So one of the things I've found interesting through not
Speaker 9: just assessing which sectors and industries are buffered from tariffs,
Speaker 9: is that they actually also align with many of the
Speaker 9: pro growth deregulatory policies of Trump. So things like financials
Speaker 9: are likely to do well. You could see some activity
Speaker 9: on alternative energy in the United States, so not traditional energy,
Speaker 9: but alternative energy utilities. Other defensive sectors are have that
Speaker 9: buffer from tariffs. But when we're thinking about pro growth,
Speaker 9: its healthcare, financials, energy, and that alt section.
Speaker 2: Can you see pro growth if your own powers modeling
Speaker 2: one point seven percent? I mean, we're in a legit
Speaker 2: stagflation concern. I don't understand. I get Washington doesn't understand
Speaker 2: economics and finance. We all know that, but can they
Speaker 2: really establish a quote unquote pro growth strategy.
Speaker 9: I think they can in twenty twenty six. So for us,
Speaker 9: you have to account for the tax cuts and deregulation
Speaker 9: coming to really fruition in that second year.
Speaker 2: This year.
Speaker 9: No, So from a tactical perspective, it's trying to find
Speaker 9: when I'm highlighting those sectors, it's where we see an
Speaker 9: overlap with tariff's and growth policy, right, tariff tariff insulation
Speaker 9: and the growth policy. So I think that that's an
Speaker 9: interesting place to look and try and essentially hedge on
Speaker 9: both of those issues.
Speaker 2: Thank you so much, Monica gre Morgan Stanley on policy
Speaker 2: this morning.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
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Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2: Daniel Kurtz Fhalen had to take over the iconic Foreign
Speaker 2: Affairs and everybody said, right, and he's hit the ball.
Speaker 2: I mean, if you're up in Boston, it's at Homer
Speaker 2: over the turnpike, onto the roof of the cask and flagon.
Speaker 2: He is hit the ball out of the park. The
Speaker 2: latest issue is on fire. It sits on my thing
Speaker 2: next all of his folks. It's like one or two
Speaker 2: expensive Martinis to get the absolute best in international relations.
Speaker 2: For example, on their website Foreign Affairs website, you can
Speaker 2: read Robert Litheiser, who establish Trump Trade one. You could
Speaker 2: read Gordon Hanson of Harvard definitive on trade policy and
Speaker 2: right next to it, and they both appeared in the
Speaker 2: show recently, Doug err when a Dartmouth was with us
Speaker 2: the Incoherent Case for tariffs. Daniel kurtz Phalen joins us
Speaker 2: now with his magnificent magazine. Daniel, you guys must be
Speaker 2: going twenty four to seven as well. What to bone
Speaker 2: In Irwin say about what we're witnessing in Washington.
Speaker 7: Well, thanks, Tom. I always appreciate the.
Speaker 3: Marketing.
Speaker 7: We should probably be integrating that Martini line into some
Speaker 7: of our marketing copies. So I'll suggest that our business side.
Speaker 7: It's a wild time in international politics and American politics.
Speaker 7: As as you all know extremely well. You know the
Speaker 7: bone Irwin piece what we asked them to do. These
Speaker 7: are two great economists. Doug Erwin probably one of the
Speaker 7: greatest authorities on trade in the United States at this point,
Speaker 7: we ask them to really look at the different arguments
Speaker 7: and take them seriously. Different arguments for tariffs. Bob Leithheuser,
Speaker 7: as you noted, has has made you know, sophisticated cases
Speaker 7: for the use of tariffs and rethinking the trading system.
Speaker 7: You saw the Biden administration frankly take up, take up
Speaker 7: some elements of that and run with it in ways
Speaker 7: that would have seemed surprising not very long ago. But
Speaker 7: what Bonerer would do is look at the different arguments
Speaker 7: you can make. Trump has of course talked about tariffs
Speaker 7: for a long time. He says it's the most beautiful
Speaker 7: word in the English language. This has been one of
Speaker 7: his his fixations for decades at this point. And what
Speaker 7: they say is that, look, tariffs can work for various ends.
Speaker 7: If you really want to foster domestic industry, if you
Speaker 7: want to use it for leverage over other countries, as
Speaker 7: we've seen in the last few weeks, all of that works.
Speaker 7: If you want to raise some revenue with it, that works.
Speaker 7: The problem is that Trump thinks you can do all
Speaker 7: of these things at the same time, and each one
Speaker 7: of them in some ways undercuts the other. So if
Speaker 7: you want to use you know, to take the example
Speaker 7: that we've seen recently, tariffs for leverage to get other
Speaker 7: other countries to change their behavior, whether that's you know,
Speaker 7: Mexico sending troops to the border or you know, Canada
Speaker 7: making at least sort of performative moves on fent and
Speaker 7: although I'm not sure there's any real substance of that,
Speaker 7: then you're going to end up taking the tariffs off
Speaker 7: relatively quickly and they don't have the other effects. If
Speaker 7: you leave them in place, despite that, then other countries
Speaker 7: aren't going to see them as you know, reasonable incentives
Speaker 7: to change behavior. So you could you kind of target
Speaker 7: them here, but trying to have them do all these
Speaker 7: things just becomes this incoherent mess with all the uncertainty
Speaker 7: for business and everything else.
Speaker 6: So, Dan, we think about the discussion in tariffs, which
Speaker 6: is obviously ratchet up dramatically over the last several months.
Speaker 6: Is globalism, which is a theme many of us grew
Speaker 6: up with in business, Is globalism dead?
Speaker 7: Well, it's certainly dead in the United States. I think
Speaker 7: what's really interesting right now is that you see much
Speaker 7: of the rest of the world continuing with something that looks,
Speaker 7: you know, fairly familiar to those of US who would
Speaker 7: have been looking at some of these dynamics a decade
Speaker 7: or two ago. So you see, you know, Europeans, for example,
Speaker 7: continuing to look at new kinds of trade relationships with
Speaker 7: with each other and beyond. I think you'll see interesting
Speaker 7: dynamics between between Europe and China. For example. Europe and
Speaker 7: made a pretty hard turn against China and sees real
Speaker 7: economic threat, but at a moment when that doesn't have
Speaker 7: a lot of options, I think you'll see more more
Speaker 7: activity between between Europe and the Chinese, or Europe and
Speaker 7: parts of the global South, and certainly in Asia. They're
Speaker 7: still very, very committed to something that looks a lot
Speaker 7: like you know, old school globalism. So I think what
Speaker 7: could happen is that it'll become, you know, in some
Speaker 7: ways more fractured. You won't have this sense of a
Speaker 7: true kind of global trading system, but you'll have lots
Speaker 7: of regional systems, and then you'll have parts of the
Speaker 7: world without the US that will continue to move forward.
Speaker 7: I think the administration thinks that we can we have
Speaker 7: the economic leverage, the economic might to avoid paying real
Speaker 7: cost for that. I think we'll see in time, whether
Speaker 7: you know, the US feels left out of something that
Speaker 7: is bringing benefits and bringing power to other countries, especially
Speaker 7: China and Dan.
Speaker 6: Another hallmark of the Trump administration has been a greater
Speaker 6: sense of nationalism and maybe at the expense of globalism,
Speaker 6: and pulling back from some of the traditional relationships, whether
Speaker 6: it be NATO or just our support and how we
Speaker 6: view your much less our trading partners kinda in Mexico.
Speaker 5: Do you believe that that would outlast.
Speaker 6: The Trump administration in the sense that let's just focus
Speaker 6: on ourselves.
Speaker 5: Here, Well, you do see it.
Speaker 7: It's not so much a turn inward but a real
Speaker 7: interest in making deals with other strongmen. So you see
Speaker 7: Trump much more interested in this kind of great power
Speaker 7: diplomacy with Putin or with shi Jinpang or with you know,
Speaker 7: Nearendromodi or other kind of strong leaders that he sees
Speaker 7: is able to really really do business with him, really
Speaker 7: make deals while he's beating up on allies and really
Speaker 7: using leverage on allies. So that's I think a pretty
Speaker 7: different vision of the global system than we've seen in.
Speaker 3: A long time.
Speaker 7: There are a couple great pieces in the issue that
Speaker 7: Tom mentioned that that try to make sense of this.
Speaker 2: Daniel I could go all about Foreign Affairs magazine, but
Speaker 2: because of your expertise in China, I've got to ask folks,
Speaker 2: the book is a China mission. It won every award
Speaker 2: of twenty eighteen. Daniel kurtz Falen on George Marshall dragged
Speaker 2: out a retirement General Marshall just shut up and go
Speaker 2: to China and fix it for us, which, of course
Speaker 2: George Marshall attempted to do. How do we repair a
Speaker 2: China US relationship or is it forever on a bipartisan
Speaker 2: basis fractured.
Speaker 7: It's a great question, and it's been one of the
Speaker 7: really fascinating things to watch in the first couple months
Speaker 7: of the Trump administration. Was really during Trump one that
Speaker 7: you saw that bipartisan consensus, that hardline on China start
Speaker 7: to form, and Trump was, of course one of the
Speaker 7: big drivers of that. What we've seen in the past
Speaker 7: couple of months is signals that he may take a
Speaker 7: very very different approach at this time, and I think
Speaker 7: the Chinese government is really kind of waiting to see
Speaker 7: what that looks like, starting to develop options for what
Speaker 7: a kind of a real deal might look like. I'm
Speaker 7: skeptical that you could really get a kind of grand
Speaker 7: bargain between the US and China that would wipe away
Speaker 7: all the really complicated issues, not just about trade and
Speaker 7: technology and fentanyl, but also about Taiwan and the South
Speaker 7: Chennessee and all the potential crises in the relationship. So
Speaker 7: I think you saw in the last part of the
Speaker 7: Biden administration an attempt to at least create some stability
Speaker 7: in the relationship. It's not a return anything that we
Speaker 7: would have seen a while ago, but to at least
Speaker 7: prevent it from really going off the rails in ways
Speaker 7: that it seemed like it might for portions of the
Speaker 7: last few years.
Speaker 2: I can't say now, folks about Foreign Affairs, A blistering
Speaker 2: essay by Marianna Masakadu and where are we going with
Speaker 2: the globalization? Paul Sweeney just spoke of Daniel Kurtz fail
Speaker 2: and driving the ship for Foreign Affairs Magazine as our
Speaker 2: lead editor. I just can't say enough again about the
Speaker 2: need for subscription.
Speaker 1: This is the Bloomberg Surveillance podcast in live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: The newspaper's huge number of really interesting story last night, Lisa,
Speaker 2: how'd you find three of them? What do you have here?
Speaker 5: All right? So here we go.
Speaker 10: Right, we were talking about filling out the bracket.
Speaker 9: I did it.
Speaker 10: I have Michigan winning.
Speaker 4: Okay.
Speaker 5: David Western got to you because I see what happened, and.
Speaker 4: He said, I heard you talking about it.
Speaker 10: You have to go with Michigan.
Speaker 5: It's not a bad call. It's not a bad call.
Speaker 4: Okay.
Speaker 10: So if I win, I will take David weston after
Speaker 10: breakfast anyway, So.
Speaker 4: We have some fun with it, right.
Speaker 10: But the Wall Street Journal has this story out today. Yeah,
Speaker 10: over the past two seasons, at least seven Division one
Speaker 10: teams have been involved in unusual betting activity. So it's
Speaker 10: kind of like this other side. So it says some
Speaker 10: of the wagers involved people that are connected to that
Speaker 10: actual ongoing investing gation into that gambling ring. Remember NBA's
Speaker 10: Johntay Porter, right, he got in.
Speaker 8: A lot of trouble for that.
Speaker 10: So that investigators started with this look into Temple University
Speaker 10: that started last month and it's really spread into a
Speaker 10: lot of these other teams. But what it gets into
Speaker 10: is that the real problem behind it too are prop
Speaker 10: bets because it allows better storager on the individual players performance.
Speaker 4: And so that's what sparked the reason.
Speaker 2: In the middle of the game, you can look at
Speaker 2: somebody and bet on your three point ability.
Speaker 6: Yep, it's yeah, it's just amazing. And so I don't
Speaker 6: know how you police it. I can't imagine even thinking
Speaker 6: about policing that kind of stuff. But that's where we
Speaker 6: are because it's right on your phone, Tom, and kids
Speaker 6: are doing it too.
Speaker 5: I've told you the story.
Speaker 6: I over heard a bunch of you know, high school
Speaker 6: boys talking about betting in a not just betting like
Speaker 6: at a basic level, but like serious detailed strategies for betting.
Speaker 5: I'm like, where do they learn.
Speaker 10: To puts pressure on the player too? Because the article
Speaker 10: is saying how the coaches are starting to hear from
Speaker 10: their players, like even like some of their family members
Speaker 10: are pressuring them like hey, maybe miss a couple shots
Speaker 10: or maybe do this.
Speaker 5: This is frightening and yes, right, yes.
Speaker 2: Through march Man.
Speaker 10: Next, Okay, Tom, I have a new choice for you
Speaker 10: on your next trip to Paris. Okay, Nice Air France
Speaker 10: is launching a new first class Okay, they're trying to
Speaker 10: target those, you know, wealthy tourists because the declining business customers. Right,
Speaker 10: So these are customers who are willing to pay about
Speaker 10: twelve thousand dollars for a flight from Paris to New
Speaker 10: York trip. Okay, So it's investing big time, more than
Speaker 10: a billion dollars a year for the next five years
Speaker 10: for these suites. They're known as La Premiere Okay, fancy champagne,
Speaker 10: caviare star chefs. It's a suite, it has more space.
Speaker 10: That's what tom six and a half feet long. Yep, Okay,
Speaker 10: you get the fancy sleep wear, the skincare produs. Absolutely,
Speaker 10: you have to flight start this spring, so now you
Speaker 10: can start book for the next trip.
Speaker 4: Okay.
Speaker 2: And what's interesting about this and full disclosure, folks, I
Speaker 2: do fly in France. I love them to death. But
Speaker 2: but what's interesting about this is it's not business travel.
Speaker 2: This is people out there and my father used to
Speaker 2: call it cattle car because we're not we're not taking
Speaker 2: cattle car. And people will sacrifice to go business class,
Speaker 2: which is not twelve thousand europes. I mean, it's shocked.
Speaker 2: I don't know how they do it. It's like thirty
Speaker 2: three hundred dollars round trip JFK to CDG business class
Speaker 2: and that's a lot of money. I can I'm not
Speaker 2: downplaying it, but.
Speaker 5: It's worth it.
Speaker 6: But you know, especially it's a big fellow like Tomky. No,
Speaker 6: I'm not going in some economy seek you know, missus.
Speaker 2: Kean and missus Kean and the kid's flying the back. No,
Speaker 2: I don't, at least I think thing.
Speaker 3: Thank you for that.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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