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Speaker 1: as it happens. The Bloomberg Business Week Daily Podcast with
Speaker 1: Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2: We did, though, also kick off today with something that
Speaker 2: just kind of is staying with us, a warning from
Speaker 2: JP Morgan Chase Vice chairman Daniel Pinto. He said and
Speaker 2: kind of gave us all our heads up that valuations
Speaker 2: in the AI industry are due for a reassessment. It's
Speaker 2: something Tim and I've been trying to get into today
Speaker 2: which could reverberate across the stock market.
Speaker 3: Here's what he said.
Speaker 4: It is possible there is probably a correction there, and
Speaker 4: that correction will also create a correct in the rest
Speaker 4: of the segments in the SMPN in the industry, because
Speaker 4: you are probably in order to justify these valuations, you
Speaker 4: are considering a level of productivity that it will happen,
Speaker 4: but it not. It may not happen as fast as
Speaker 4: the market is pricing.
Speaker 5: Y A a JP Morgan Chase's vice chair Daniel Pento
Speaker 5: earlier today, that was at the Bloomberg Africa Business Summit
Speaker 5: in Johannesburg. Curious what buyer sells signals. Our next guest
Speaker 5: is seeing great to have back with us Vince Howard,
Speaker 5: CEO and portfolio manager at Howard Capital Management, about six
Speaker 5: billion dollars in assets under management. He joins us here
Speaker 5: in the Bloomberg Interactive Brokers studio. This is the question
Speaker 5: we've been wanting to ask you since, you know, last
Speaker 5: time we spoke to you. Is the HCM byline model
Speaker 5: telling telling you to buy or sell? Right now?
Speaker 6: It's telling us to buy? The HTM byline's positive. Any
Speaker 6: pullbacks bible till it changes trend and you know, sort
Speaker 6: of discard the noise and just about what's actually happening.
Speaker 6: The market's very very healthy. That six great months, I
Speaker 6: mean not get it. Hey, do you not have a
Speaker 6: pullback after six months?
Speaker 5: Just one step back? Explain the HCM byline model and
Speaker 5: it's a data it takes into account and then what
Speaker 5: it tells you to do.
Speaker 6: It's a non emotional, mechanical, repeatable process. Because I want
Speaker 6: to take as much emotion out of as I possibly can,
Speaker 6: which is incredibly challenging with the amount of things that
Speaker 6: are throwing it at each and every one of us
Speaker 6: every day. But it's a math based tool, and it's
Speaker 6: just a trend indicator, and we think it's a very
Speaker 6: good trend indicator. It's been very well for us. Perfect No,
Speaker 6: but good. Yes.
Speaker 3: Does momentum though the momentum trade mess it up at all? No,
Speaker 3: not at all.
Speaker 6: But I love the momentum trade because I love to
Speaker 6: be in those stocks. I love to be in those sectors.
Speaker 6: You got to trade momentum. You can't sit in dead money.
Speaker 3: Ye, Well what is momentum? Fomo?
Speaker 2: Like you're like just tracing something without really fundamentally thinking
Speaker 2: about it.
Speaker 6: Well, as long as it's a big computer game, it
Speaker 6: doesn't matter. Well it's a big computer. Yeah, it doesn't
Speaker 6: matter anymore. It's a big computer game. I mean, you're
Speaker 6: trading it gets algorithms anymore. It's eighty five percent of
Speaker 6: all the volumes.
Speaker 3: Don't fundamentals matter?
Speaker 6: Well, they're always going to end up mattering in the end.
Speaker 6: But look at what's happening, Carol. When you look at
Speaker 6: what's happening with a look at what's happening with with
Speaker 6: Tesla and that robot there coming out with Optimus. How
Speaker 6: much is that going to make an impact on so
Speaker 6: many companies profitabilities and earnings per shuit'.
Speaker 3: They come out with.
Speaker 6: Indeed, do what that's if they do come out with
Speaker 6: the right I think twenty twenty six, he's going to.
Speaker 3: You think, so, oh, yeah, he's not.
Speaker 5: He doesn't always meet deadlines.
Speaker 6: Well, but when he does, it's usually a big show.
Speaker 6: They've got one of those things walking around Austin, Texas
Speaker 6: right now, the cowboy hat.
Speaker 5: On literally walking down person inside it.
Speaker 6: He stops at every red light, he stops at every
Speaker 6: stop sidne he gets out of people's way. This thing
Speaker 6: is amazing.
Speaker 3: Wait, what do you think it's going to do?
Speaker 4: Though?
Speaker 3: How do you think it's going to impact our life?
Speaker 3: Are you really?
Speaker 7: Come on?
Speaker 6: We like, yeah, here's the thing, here's how it's going
Speaker 6: to impact your life. Let's take a bit and I
Speaker 6: thought about this a lot with our trading team. Let's
Speaker 6: just take Starbucks for instance. What if you got one
Speaker 6: person worse in the cast rest and five people that
Speaker 6: are that are robots that are serving the coffee. This
Speaker 6: only costs fifteen to twenty grand for optimists. The robot
Speaker 6: to make a cup of coffee, you've eliminated four or
Speaker 6: five jobs right there. You don't have to worry about
Speaker 6: somebody complaining, coming in for work, getting sick at.
Speaker 3: The bots go out and buy high heels. Probably not so,
Speaker 3: Like I.
Speaker 5: Do think it's a really good point.
Speaker 2: Do you think about what robots are not going to
Speaker 2: be spending in the economy and what that means.
Speaker 6: Longer Exactually right, I think you're going to see I
Speaker 6: think you're going to see unemployment organically move higher, but
Speaker 6: I think you're going to see corporate profits and a
Speaker 6: lot of these companies move higher. Also, look at what
Speaker 6: happened with Walmart. Walmart's a boring company in my opinion.
Speaker 2: But what happens if there isn't a lot of consumer
Speaker 2: spending going on, which is so much the backbone of
Speaker 2: the economy.
Speaker 3: Doesn't that filter through?
Speaker 2: And do we have lower economic growth? And are people
Speaker 2: out of work? That's not a good thing.
Speaker 6: That's not a good thing. It's a terrible thing. But look,
Speaker 6: I can't change it, and I can't stop it. Neither
Speaker 6: can the three of us in the side of this room.
Speaker 6: But what we do have is the HCM bylines with
Speaker 6: stocks want to sell off.
Speaker 4: We got it.
Speaker 6: We got a mechanical system to say we need to
Speaker 6: unwind some positions.
Speaker 5: Okay, so the last when was the last time I
Speaker 5: told you to sell?
Speaker 6: We had a sell signal in April when we had
Speaker 6: the tariff tantrum and DEVI and then we came back
Speaker 6: in and it was it was a pretty It was
Speaker 6: not a great trade for us because it was so violent,
Speaker 6: so volatile, because it is a trend indicator, and when
Speaker 6: the trend changes all in like forty eight hours, that's
Speaker 6: tough to trade. So okay, so you'll remember before we
Speaker 6: jump onto that. We remember the nasback was down twenty
Speaker 6: eight percent in a member of days.
Speaker 3: Yeah, that's tough trade.
Speaker 5: The S and P five hundred low for the year
Speaker 5: was back on April eighth. Did you what day did
Speaker 5: you sell? And what did did you get back in?
Speaker 5: Do you remember to be quite Canada?
Speaker 6: I don't remember.
Speaker 5: But did you miss did you miss some of the upside?
Speaker 6: We missed some of the upside we did painfully for us.
Speaker 6: But you know when you trade.
Speaker 3: We found some of the downside we did, and.
Speaker 6: We did and it was a painful trade for us.
Speaker 6: I'm going to admit it. It wasn't a great trade for us.
Speaker 6: Remember the biolize everybody. It feels like it's a seventy
Speaker 6: thirty thirty percent of the time. It's not going to work.
Speaker 6: So we're going to get whips and.
Speaker 3: Do you do you go?
Speaker 5: Do you go all in and all out?
Speaker 6: At times?
Speaker 5: No, we scale, you scale, So because we were I mean,
Speaker 5: we were talking with somebody just last week, a manager
Speaker 5: who says that you know, he this was a really
Speaker 5: interesting conversation. He basically said, I'm so tactical that I'm
Speaker 5: willing to go to one hundred percent cash for all
Speaker 5: of my clients at any given moment. Do you ever
Speaker 5: do that?
Speaker 6: We have before in two thousand and eight, we're one hundred percent.
Speaker 6: The only the only way that we'll go one hundred
Speaker 6: percent to cash is if the banks are imploding, and
Speaker 6: that's what was happening in two thousand and eight. So
Speaker 6: if we're thirty percent out or sixty percent out but
Speaker 6: all are none. Game is a tough game to trade,
Speaker 6: it is.
Speaker 5: I mean, the tax implications of that are huge.
Speaker 6: Well, taxing maclations, but catching both sides of the trade
Speaker 6: perfect are really tough.
Speaker 5: So he said, I would rather pay twenty percent taxes
Speaker 5: than have thirty percent declines.
Speaker 1: I forget what that was.
Speaker 3: You're right like that.
Speaker 2: I can't remember us. I did well my the private
Speaker 2: credit market. Oh you're ready to create something? Oh thank you,
Speaker 2: akin to the Great Financial Crisis, because it does feel
Speaker 2: like increasingly we're seeing things every day people are worried.
Speaker 6: Yeah, and I think that what's going to what should
Speaker 6: worry people as our national debt. I think that's a
Speaker 6: tipping point. If that cracks, I think we've got a
Speaker 6: real problem.
Speaker 3: Like real, like the Great Financial criss.
Speaker 6: I think, like a great financial crisis. I think you're
Speaker 6: going to make Yeah, it's to tip. Yeah, it's gona
Speaker 6: affect everything. I mean the banks are going to lock up.
Speaker 6: Credit is going to lock up. People are going to
Speaker 6: be short or long term loans.
Speaker 3: When you say banks, I mean the big banks too.
Speaker 6: I think the big banks, of course. And I think
Speaker 6: it's gonna affect everybody. I mean, what do you got
Speaker 6: X amount of tree? And is the death that we
Speaker 6: currently have And every day it's getting larger and larger
Speaker 6: and larger. It's unsustainable. And if they keep printing money, Carol,
Speaker 6: your dollar, my dollar, all of a sudden's is not
Speaker 6: worth a dollars for a nickel. And so you got it.
Speaker 6: That's the printing of money is going to have to
Speaker 6: stop too.
Speaker 2: What about the AI bubble? I shouldn't called bubble because
Speaker 2: we don't know if it's a bubble. We just know
Speaker 2: it's a big spend right now, which bubble?
Speaker 6: The AI? Yeah, it's not a big spin. This is
Speaker 6: different when we looked at you remember in nineteen ninety
Speaker 6: nine and we had the three year bear market. They
Speaker 6: had all these tech stocks that blew up. They weren't
Speaker 6: making any money. They were not making any money. Were
Speaker 6: going on. They're making money hand over fist. They're making
Speaker 6: money so fast they can't spend it. What happens if
Speaker 6: in five to seven years to ten years, Microsoft is
Speaker 6: so profitable they're paying an eight or ten or twelve
Speaker 6: percent dividend.
Speaker 2: So ten seconds, you're still owning the big mag seven,
Speaker 2: the big tech, the hyperscalers.
Speaker 5: I am here, you're buying them.
Speaker 6: I am hoping that the Vidio comes out with something
Speaker 6: that shocks the market. They drop down so I can
Speaker 6: buy more, because five years from now, in the video
Speaker 6: is going to be a lot higher and is today.
Speaker 3: Shame you're not more bullish.
Speaker 7: I'm just kidding.
Speaker 2: Vance Howard, chief executive officer portfolio manager at Howard Capital Market,
Speaker 2: Thanks so much.
Speaker 5: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 5: up after this.
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Speaker 2: All right, Saudi Crown Prince Mohammed Ben Salmon at the
Speaker 2: White House with President Trump earlier today this evening. By
Speaker 2: the way, there's a black tie dinner, not an official
Speaker 2: state dinner, although at that dinner we did here, Elon
Speaker 2: Musk would be there.
Speaker 5: Tiger Woods reportedly will be there as well.
Speaker 3: Yeah, a lot of officials.
Speaker 7: Right.
Speaker 2: There's also an investment conference plan for tomorrow that executives
Speaker 2: from companies including Chevron Pfizer, they will be attending. So
Speaker 2: we wanted to kind of put this in perspective because
Speaker 2: typically you would see these two kinds of leaders meet
Speaker 2: and you think energy policy would come up.
Speaker 3: Really didn't. Let's get to it with doctor Allen Wall.
Speaker 2: She's president of Transversal Consulting, Senior Fellow at the Atlanta Council,
Speaker 2: author of Saudi Inc. Joining US from Boca Raton, Florida. Ellen,
Speaker 2: so good to have you back here. Feels like Saudi Inc.
Speaker 2: And US Inc. Are kind of merging. Tell me about
Speaker 2: this meeting because it was kind of fascinating. It really
Speaker 2: wasn't about conversations around oil or the energy markets.
Speaker 8: It was absolutely fascinating, especially if you had an opportunity
Speaker 8: to watch the press conference live. I think everything from
Speaker 8: the marble fulloers to the White House, to whether or
Speaker 8: not Sadi Ava is going to join the Abraham Accords
Speaker 8: was covered. What's interesting is the amount of money that
Speaker 8: Mohammed ben Salmon is talking about potentially investing in the
Speaker 8: United States. And I think the big question on everyone's
Speaker 8: mind is where are they getting this money from, given
Speaker 8: that oil prices are pretty low. And I think the
Speaker 8: answer really is you have to look at the Saudi
Speaker 8: Investment Fund, the PIF, because that's really where they have
Speaker 8: a lot of their investment dollars and ready to deploy,
Speaker 8: and that fund is really independent of the price of
Speaker 8: a barrel of oil. So I think the question of
Speaker 8: whether Saudi can deliver this money, the answer is yes,
Speaker 8: But whether they actually will deliver on this is another question.
Speaker 8: And I do think that a lot of that money
Speaker 8: is probably earmarked for defense purchases, and that really depends
Speaker 8: on whether they do go through with this agreement to
Speaker 8: sell Saudi Arabia F thirty five and other defense equipment
Speaker 8: that is somewhat controversial and hasn't necessarily been sold to
Speaker 8: Saudi Arabia.
Speaker 5: Previously, Cherl mentioned that you're the author of saudiank The
Speaker 5: History of Saudi Arabia and a Ramco, and I wonder
Speaker 5: now how successful the Saudi Arabian government has been the
Speaker 5: Kingdom of Saudi Arabia of diversifying its economy away from oil.
Speaker 5: Has it been successful?
Speaker 8: That is a really great question, and I think the
Speaker 8: answer is if you're looking at and you're trying to say,
Speaker 8: have they achieved the goals that they set out to
Speaker 8: achieve when they announced their big plan to diversify, well,
Speaker 8: the answer is no, they have not really achieved those goals.
Speaker 8: I think really a lot of those goals were not
Speaker 8: achievable goals. What they have done is they have introduced
Speaker 8: some very important changes that I think can certainly help
Speaker 8: make the Saudi economy more robust over time. We're talking
Speaker 8: about making it easier for foreigners to visit the country,
Speaker 8: both for tourism but also to work, opening up the
Speaker 8: workspace for women, and important societal changes like that. I
Speaker 8: think in the long run will help diversify their economy.
Speaker 8: But if you're asking whether their economy is still very
Speaker 8: much dependent on the energy industry, the answer is yes.
Speaker 8: A Ramco, on the other hand, has over the past
Speaker 8: fifty years, I would say, significantly diversified itself from simply
Speaker 8: an upstream come that sold a lot of crude oil
Speaker 8: to a very diverse energy company that has multiple revenue streams.
Speaker 8: So they're not just dependent on what the price of
Speaker 8: a barrel of oil is. They make a lot of
Speaker 8: oil products, they're getting into natural gas, they make money
Speaker 8: off of trading oil in the financial sense, and so
Speaker 8: they're making a lot of money that is not dependent
Speaker 8: on whether the price of a barrel of oil is
Speaker 8: sixty dollars or eighty dollars.
Speaker 3: So I guess what.
Speaker 2: This relationship that we are seeing between the United States
Speaker 2: and Saudi Arabia. I feel like it's always been a
Speaker 2: bit of a frenemy kind of relationship between the two nations.
Speaker 2: Having said that, there's been times where it's been stronger
Speaker 2: at times when it has not.
Speaker 3: Is this the relationship going forward in your view?
Speaker 8: What's so interesting about the relationship between the US and
Speaker 8: Saudi Arabia is that Saudi Arabia has a very different
Speaker 8: view of the relationship than the United States does. In
Speaker 8: the Saudi mind, the US is a best friend that
Speaker 8: they've They've always been so close, and they've cultivated an
Speaker 8: entire kind of aura, an idea about this friendship. They
Speaker 8: think the US is a huge ally. If you look
Speaker 8: at it from the US perspective, satur Arabia is at
Speaker 8: least it can be a strategic partner. But satur Arabia
Speaker 8: would not be considered an ally to the United States
Speaker 8: the same way Great Britain or Canada.
Speaker 3: Might be considered an ally.
Speaker 8: And so I think that that leads to very different
Speaker 8: opinions about what exactly is going to go on. So
Speaker 8: you know whether or not you know Sadi Arabi has
Speaker 8: a defense agreement, Yes, traditionally we have had defense agreements,
Speaker 8: but from the US perspective that's not always so guaranteed.
Speaker 8: If it's beneficial to the US, then it will happen.
Speaker 8: But you know, it's not necessarily a guarantee. It's not
Speaker 8: necessarily this ally ship that the Saudis often perceived the
Speaker 8: relationship to be.
Speaker 2: Well, it's interesting when you say Canada and the UK,
Speaker 2: and in particular Canada, I feel like, you know, it
Speaker 2: looks almost a friendly relationship between the US and Saudi
Speaker 2: Arabia than it certainly does between US and Canada.
Speaker 9: Right now.
Speaker 2: I guess my question really, you know, Ellen, is are
Speaker 2: we laying the ground for whoever is in the White
Speaker 2: House next, be it Democrat or Republican, that this is
Speaker 2: the relationship or could it change and get different depending again,
Speaker 2: who is in the White House.
Speaker 8: I think that there's always kind of a baseline, and
Speaker 8: you could see that when Trump was kind of fishing
Speaker 8: for a compliment from NBS as you know, oh, well,
Speaker 8: he's the best president. You know, they've had the best
Speaker 8: relationship with Trump, and NBS kind of answered that with, well,
Speaker 8: we've always had, you know, Democrat or Republican, we've always
Speaker 8: had good relations with president of the United States, and
Speaker 8: then he mentions Reagan as a particularly good one. So
Speaker 8: I think that NBS is certainly looking at this as
Speaker 8: he's got to lay the groundwork for his good relationships
Speaker 8: with presidents that are going to come after Trump, whereas
Speaker 8: Trump is seeing it as the hero and.
Speaker 5: Now the military balance of power in the Middle East,
Speaker 5: the potential F thirty fives that Saudi Arabia could get
Speaker 5: as a result of making a deal with the UNI States.
Speaker 5: President Trump said he would approve selling the F thirty
Speaker 5: five fighter jet to Saudi Arabia. I'm just wondering how
Speaker 5: that changes the balance of power when it comes to
Speaker 5: the militaries in the region, especially with regard to Israel,
Speaker 5: which for years has been a US ally, And also
Speaker 5: what US interest the US would have an interest in
Speaker 5: selling F thirty five's apart from getting the revenue to
Speaker 5: a US company.
Speaker 3: Exactly.
Speaker 8: I do think from Trump's perspective, he thinks that the
Speaker 8: F thirty fives are the greatest airplane ever to be made,
Speaker 8: and so he loves that everybody wants them, and so
Speaker 8: it's more of an economic issue. I think from the
Speaker 8: Pentagon's perspective, they're looking at it as more of a
Speaker 8: strategic issue. Now. The UAE apparently got assurances they would
Speaker 8: be able to purchase these when they signed the Abraham Accords,
Speaker 8: and it was believed that this would also be a
Speaker 8: condition for Saudi Arabia. I think it's very very clear
Speaker 8: now that Saudi Arabia is not going to join the
Speaker 8: Abraham Accords. They're not recognizing Israel unless they get unless
Speaker 8: there's an absolutely there's an assured pathword to Palestinian state.
Speaker 8: I don't see that happening anytime in the near future.
Speaker 8: So I think we're kind of going to be at
Speaker 8: a standstill here, and if the Pentagon has severe concerns
Speaker 8: about it, I think it may not actually go through
Speaker 8: as much as Trump wants it to go through.
Speaker 2: Is that more tricky or is it the AI chips
Speaker 2: that are more tricky and Saudi Arabia need both.
Speaker 3: The AI chips are very tricky. I do think.
Speaker 8: That that's really what's going to be the focus of
Speaker 8: this investment meeting and this dinner, is that the PIF
Speaker 8: wants to make these investments in these firms because that's
Speaker 8: their way of kind of getting their hands on this technology.
Speaker 8: I think from the US national security perspective, they don't
Speaker 8: want their chips to be in any connection with Chinese
Speaker 8: technology equipment. And so there are serious concerns cybersecurity concerns
Speaker 8: there that are going to have to be dealt with.
Speaker 8: But I do see the PIF potentially make investments in
Speaker 8: these firms. I don't see necessarily US producing semiconductors and
Speaker 8: chips in Saudi Arabia, but I do think the Saudis
Speaker 8: can make a case to try to get data centers
Speaker 8: in the kingdom, particularly if they can assure the security
Speaker 8: the equipment in their country, and also if they offer
Speaker 8: you know, basically free land and free energy. I could
Speaker 8: see I could see that being a very powerful draw.
Speaker 2: All right, great stuff, Ellen, Thank you so much, doctor
Speaker 2: Ellen Wall, President of Transversal Consulting, Senior Fellow at the
Speaker 2: Atlantic Council.
Speaker 5: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 5: up after this.
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Speaker 2: All right, we're going to stay on global relationships the
Speaker 2: economies that drive them. And turn on over to doctor
Speaker 2: Adam Posen. He's president of the Peterson Institute for International Economics.
Speaker 2: He joins us from I believe the nation's capital on
Speaker 2: this Tuesday, Yes, Washington, DC, Doctor Posen, good to have
Speaker 2: you back here on Bloomberg.
Speaker 3: And on Bloomberg BusinessWeek Daily.
Speaker 2: These relationships, I first got to ask you, you know,
Speaker 2: watching the relationship, what seems to be a very close
Speaker 2: relationship between the United States and Saudi Arabia, and I
Speaker 2: think about their economies.
Speaker 3: How do you see it? What's significant for you here
Speaker 3: in watching this?
Speaker 7: Thank you Carol for having me back on Bloomberg BusinessWeek Daily.
Speaker 7: I want to pick up on some things you discussed
Speaker 7: with your previous guests, which is there is a huge
Speaker 7: economic leaving aside the national security incentive for Saudi to
Speaker 7: behave in this way in that MBS, the Crown Prince
Speaker 7: has very definitely been seeing part of his agenda to
Speaker 7: try to transition Saudi away from over dependence on export
Speaker 7: of fossil fuelds. And it's the right thing for them
Speaker 7: to do from the economic perspective. And obviously Saudi for
Speaker 7: many decades has been accumulating surpluses of cash and trying
Speaker 7: to invest them. They've been trying to diversify. I wouldn't
Speaker 7: go quite as far as your previous guests did in
Speaker 7: extolling how much a RAM cost Pirst five, but they've
Speaker 7: been trying. I think the deeper integration with the US
Speaker 7: is a path towards that, and it is a credible
Speaker 7: path towards that. That's not to say they haven't been
Speaker 7: doing a lot of good things in terms of domestic
Speaker 7: investment and on the economic front on liberalization. They have,
Speaker 7: and I know a lot of very serious money investors
Speaker 7: who are very excited by this, but just to say
Speaker 7: this puts them on the path. For the US, however,
Speaker 7: I think it's less important economically. It is more about
Speaker 7: the security relationship, or at least it should be. There's
Speaker 7: never been a shortage of people willing to invest in
Speaker 7: the US, or at least except with the exception of
Speaker 7: a few years in the late seventies and early eighties,
Speaker 7: not since nineteen hundred, and that remains the case, even
Speaker 7: though things are happening to make the US a little
Speaker 7: less attractive. So for the US, I think there has
Speaker 7: to be more of the security diplomatic conditionality just simply
Speaker 7: getting Saudi investment in the US is not that big
Speaker 7: a game.
Speaker 5: What type of conditionality, especially in exchange for after thirty
Speaker 5: five state of the r jets?
Speaker 7: Well, Tim, I think that's the right question, and I
Speaker 7: would not say it necessarily needs to be tied to
Speaker 7: Israel recognition in the abraham Ac courts, but it needs
Speaker 7: to be tied to something of that caliber. So maybe
Speaker 7: it's something about how they're relating to Iran, or something
Speaker 7: about the Saudi mutual guarantees with Pakistan, some sort of
Speaker 7: agreement on how the Saudis influenced Pakistan, or maybe it's
Speaker 7: about the investment which the Saudis have indicated they're willing
Speaker 7: to do in rebuilding Gaza and dealing with what will
Speaker 7: be refugee issues there. All I'm saying is that it
Speaker 7: has to be something substantial, But I also think you
Speaker 7: want the f thirty fives of course are a big carrot,
Speaker 7: but you also want to think of it in terms
Speaker 7: of the relationship. And this is what is key, whether
Speaker 7: it's UK or Saudi or Japan.
Speaker 2: Adam, Adam, you talk about relationships, And I think about
Speaker 2: something that came up questioning by reporters of the President
Speaker 2: and MBS while at the White House, and that is
Speaker 2: about kind of the relationships that the Trump organization has
Speaker 2: with Saudi Arabia on business deals. And we have a
Speaker 2: story in the Bloomberg about the Trump organization planning a
Speaker 2: luxury resort in the Maldives with a Saudi Arabian partner.
Speaker 3: It's just one case. I'm just curious.
Speaker 2: You've watched, You've talked about, You've analyzed different administrations, this
Speaker 2: kind of what seems to be a mixing melding. I
Speaker 2: know the President answered the question, he said, I have
Speaker 2: nothing to do with family business, But how do you
Speaker 2: see this?
Speaker 7: No, I appreciate your asking that, Carol, and I don't
Speaker 7: want to be mean, but it doesn't matter whether the
Speaker 7: president literally in the narrow sense, has nothing to do
Speaker 7: with it or not. We had laws, and more importantly,
Speaker 7: we had norms, and we had expectations from the press,
Speaker 7: from the public, from the markets that the US did
Speaker 7: not deal in family enrichment when you're in public office,
Speaker 7: let alone when you're the president. Some of your viewers
Speaker 7: might remember the old John Adams miniseries in which John
Speaker 7: Adams alienated both his daughter and his son in law
Speaker 7: or one of his sons and his son in law
Speaker 7: because he wouldn't advance them while he was in the
Speaker 7: White House. And what matters is this very strong perception
Speaker 7: which is obvious and cutter in the United arabin where
Speaker 7: in Saudi, but even with the gold that was offered
Speaker 7: just the other day to the President, that there is
Speaker 7: this perception that you link things. Now, I don't want
Speaker 7: to overdramatize this. There are a lot of countries in
Speaker 7: the world, including Saudi, including Turkey, including China, where this
Speaker 7: kind of ties go on between the leaders, families and
Speaker 7: chosen friends and foreign policy and other governments. It's not good,
Speaker 7: it's not fair, it's wasteful and distortionary, but it's also
Speaker 7: not the end of the world. Businesses and investors can proceed.
Speaker 7: But for the US, this is going back to your
Speaker 7: original question, this is a huge step change. We've not
Speaker 7: seen anything like this the least since Teddy Roosevelt, meaning
Speaker 7: one hundred and twenty years.
Speaker 2: So just to be fair, because we certainly get feedback
Speaker 2: from our audience and to say that the President says
Speaker 2: I'm not involved though, you know, and we've had any
Speaker 2: president that walks into the White House, Republican or democrat
Speaker 2: you know, certainly has allegiances to industries or so on.
Speaker 7: I agree. I agree, it's never going to be absolute.
Speaker 7: And we all know the stories of people going back
Speaker 7: to Jimmy Carter's brother selling beer, that there's always relatives
Speaker 7: who try to profit on these things. But the so again,
Speaker 7: this isn't about ascribing the levolent intent. But you want
Speaker 7: to have a system in place where people expect and feel,
Speaker 7: particularly investors but also average citizens expect and feel that
Speaker 7: this is an exception, not the rule that you occasionally
Speaker 7: have the rogue family member, but that on the one hand,
Speaker 7: policy choices are not being driven and being perceived as
Speaker 7: driven by these things, and on the other hand, that
Speaker 7: economic choices are being made on a commercial basis. And
Speaker 7: that's why, no matter how many times people of different
Speaker 7: parties and different administrations or appointments fail on this front,
Speaker 7: you want to have a system of scrutiny and rules
Speaker 7: and presumptions that it discourages our elected officials from being
Speaker 7: so overt about it. I think, to be fair, you know,
Speaker 7: the Trump administration and the sons of President Trump and
Speaker 7: Secretary Ludnik and the Middle East negotiator guy and all
Speaker 7: these people. You know, they're being very open, and I
Speaker 7: think that in one sense does matter, like they are
Speaker 7: with crypto, But in another sense that doesn't solve the
Speaker 7: problem because then the perception is still people are being favored,
Speaker 7: decisions are being made on a bad basis. You have
Speaker 7: to offer gold crowns or hotel deals to make things happen.
Speaker 2: And transparency doesn't necessarily gain actions, right.
Speaker 5: Yeah, doctor Wilson, Doctor Posen, you said it's not the
Speaker 5: end of the world if we're in a situation such
Speaker 5: as this or in a society such asist.
Speaker 7: But it's not the end of the world.
Speaker 5: But I'm wondering if there are potentially long term economic
Speaker 5: repercussions that happen in societies that don't necessarily have the
Speaker 5: same rules in place, if we can look to history
Speaker 5: or modern history to get an understanding of what the
Speaker 5: implications of that could be in the US.
Speaker 3: In your view, oh, I think they're enormous.
Speaker 7: I think then, because it's the US, which, as I've
Speaker 7: argued tim has been the lynchpin of the rules based,
Speaker 7: law based system of economy since World War Two. It
Speaker 7: has repercussions around the world because it means the US
Speaker 7: is not only enforcing the norms against this kind of
Speaker 7: corruption or perceived corruption or tied political choice making. It
Speaker 7: means that the US is setting an example that you
Speaker 7: can get away with it and other people should get
Speaker 7: away with it, and it breaks down the regimes and
Speaker 7: the operating principles we have to attorney thinks. So when
Speaker 7: I say it's not the end of the world, I
Speaker 7: don't mean to suggest it's not very harmful. It will
Speaker 7: reduce the returns on capital, it will reduce the ability
Speaker 7: of average people on normal businesses to get access to opportunities.
Speaker 7: It will divide the world. It will increase in stability
Speaker 7: and investment markets. It will waste public money. It's bad
Speaker 7: in a lot of ways. I just merely want to
Speaker 7: be very clear that though it's unusual for the US
Speaker 7: in the last one hundred plus years to behave this way,
Speaker 7: in our long ago history and in other countries around
Speaker 7: the world, this has taken place, and that there have
Speaker 7: been much small or much less overt examples of this
Speaker 7: by you a previous US administration.
Speaker 2: Well, and you know, just thinking about all you've just said,
Speaker 2: doctor Posen, and then kind of squaring that with the
Speaker 2: recent government shut down and the domestic issues that kind
Speaker 2: of came to the forefront. You know, the one in
Speaker 2: eight Americans who are on some kind of food assistance
Speaker 2: or food stamps.
Speaker 4: You know the.
Speaker 2: Amount of Americans that are just struggling to put food
Speaker 2: on their table, a roof over their head.
Speaker 3: I want to bring it down.
Speaker 2: Then, with so much focus on global issues, and so
Speaker 2: leould say, when you're president, you have to look beyond
Speaker 2: the US borders as well as within the US borders.
Speaker 2: But having said that, what is it that you know
Speaker 2: is being maybe being ignored in your view domestically, that's
Speaker 2: really got to be.
Speaker 3: Addressed.
Speaker 7: Again, you're asking very profound questions. I'll just say that
Speaker 7: in an enlightened administration, the reason you get involved in
Speaker 7: the rest of the world is because it ultimately is
Speaker 7: to if you set up a rest of the world
Speaker 7: that feels safer and less corrupt and more stable unless
Speaker 7: subject to disease and refugee flows and wars, that's ultimately
Speaker 7: to the benefit of the average American. And if you
Speaker 7: have open and free commerce on a rules based basis
Speaker 7: that raises American opportunities and American citizens purchasing power. So
Speaker 7: I agree with you, there's a question of how you prioritize.
Speaker 7: And this goes to the point with Saudi, I'm not
Speaker 7: sure that that should be the biggest priority of an
Speaker 7: American administration right now. It's fine, you can walk into gum.
Speaker 7: It can be one of the things. So when you
Speaker 7: say what's in the domestic front, I think the removal
Speaker 7: of health care support subsidies and access to Medicaid and
Speaker 7: to all these Obamacare related things is going to materially
Speaker 7: affect the health and well being of millions of human
Speaker 7: beings in the US. And that is bad economically, but
Speaker 7: it's bad in human terms. I think the reduction of
Speaker 7: options through the anti migration policies, through other policies that
Speaker 7: make it so more people, mostly women in late middle age,
Speaker 7: have to stay home to be caregivers to elders and
Speaker 7: to children and to disabled people, is materially bad for
Speaker 7: humans and is a huge pressure on people. And I
Speaker 7: think the combination of anti migration policy, attacks on the
Speaker 7: FED tariffs deal making, some of which looks corrupt, all
Speaker 7: adds to a more inflationary environment, which reduces real incomes
Speaker 7: for people. So there's a whole bunch of things on
Speaker 7: the domestic front. But I just want to say that
Speaker 7: it's not about choosing the global versus domestic. It's about
Speaker 7: choosing the self interested versus the public welfare.
Speaker 3: I think we need to leave it there that I
Speaker 3: got to say.
Speaker 2: Sometimes I'm in awe of our guests, and I certainly
Speaker 2: am on this Tuesday, Doctor Posen, thank you so much,
Speaker 2: Really appreciate okay for having me same here. Thank you
Speaker 2: for joining us, Doctor Adam Posen, president of the Peterson
Speaker 2: Institute for International Economics.
Speaker 5: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 5: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 3: A lot to talk about with our next guest.
Speaker 2: It is our weekly discussion on women, Money and Power,
Speaker 2: where we explore the economic implications of the wealth shift
Speaker 2: of money to women and really how to navigate them.
Speaker 2: We welcome Stephanie gil She's chief investment officer at robin
Speaker 2: Hood Market. She's here in studio. Stephanie, good to have
Speaker 2: you here. There's a lot going on. I kind of
Speaker 2: say that Tim and I say that it feels like
Speaker 2: almost every day. Let's start broadly with the market environment.
Speaker 2: We've seen quite a pullback and a lot of risk
Speaker 2: on assets, whether it's the mag seven, whether it's Nvidia,
Speaker 2: whether it's semiconductors, whether it's bitcoin. Is this a market reset,
Speaker 2: a sellof or market crush that we're kind of getting
Speaker 2: near or neither.
Speaker 3: I think, or none of the But of the above,
Speaker 3: I think it's correction.
Speaker 10: So I don't know if one of those was part
Speaker 10: of that, but I think it's a healthy correction. You
Speaker 10: get them every once two years. Sometimes we forget that,
Speaker 10: and we just got off of a period of no data.
Speaker 10: Valuations had gotten really high, and there is a legitimate
Speaker 10: question around how much companies are spending versus how much
Speaker 10: they're making in terms of cash flow, and in the
Speaker 10: largest company, so that's going to affect the broader.
Speaker 3: Mar about big tech, and I'm talking about big tech.
Speaker 10: And AI and obviously Amazon's borrowing outsizing it to fifteen
Speaker 10: billion doesn't.
Speaker 3: Necessarily help that narrative.
Speaker 10: So I think you just need to start seeing proof
Speaker 10: that there's a return on invested capital. There are other
Speaker 10: things that are working though in the market.
Speaker 5: We'll get to some of the things that are working,
Speaker 5: but I want to know what the proof would look
Speaker 5: like in your view, what do you need to see
Speaker 5: from some of these companies to show, Okay, the money
Speaker 5: that we're spending is actually paying off.
Speaker 10: I think you need to start seeing money from the
Speaker 10: actual investments that they're making in terms of like AI investments,
Speaker 10: how it actually reaches the consumer, how it reaches enterprise.
Speaker 3: Like we know in the private area.
Speaker 10: Anthropic is doing a little bit more revenue right because
Speaker 10: there enterprise focus versus like an open AI that's more
Speaker 10: consumer focused. So I think if people are investing money
Speaker 10: in places that are going to prove out that revenue comes.
Speaker 10: I think the other thing is that you're the change
Speaker 10: in the one big beautiful bill right gave that one
Speaker 10: hundred percent expensing, And that's kind of something that I'm
Speaker 10: looking forward to in the future as well, which is
Speaker 10: like that's not just AI investing, but also in other
Speaker 10: tech and infrastructure and like that can start to lift
Speaker 10: the market too.
Speaker 3: One of the things I want to ask you about.
Speaker 2: You shared some notes with our producer Arielagami, and you
Speaker 2: said or you noted global markets are fundamentally changed. Individual
Speaker 2: investors are now a corporate part of the financial ecosystem,
Speaker 2: reshaping how capital markets function. What was once the domain
Speaker 2: of institutions is now open and accessible to millions of
Speaker 2: individuals worldwide. I understand where you're coming from, but I
Speaker 2: was thinking about what doctor Adam Posen, president the Peterson
Speaker 2: Institute for International Economics, said coming off of the meeting
Speaker 2: between President Trump and Mohammed bin Saman of Saudi Arabia,
Speaker 2: that this idea that capital flows actually are being controlled
Speaker 2: to some extent by moves out of the White House,
Speaker 2: whether it's taking stakes in companies, or it's the AI
Speaker 2: spend that is controlling so much, or it's what some
Speaker 2: say is a transactional White House where invest here and
Speaker 2: you get this, it's very different in some regard in
Speaker 2: a lot of ways from what we've had in the past.
Speaker 10: I've personally never watched so many political shows in my
Speaker 10: career of over twenty years.
Speaker 3: Like that is part of what you have to know
Speaker 3: as an investment.
Speaker 2: Makes me question, like do individual investors really still have
Speaker 2: a lot to say here?
Speaker 10: I think they do, but not necessarily in the biggest
Speaker 10: companies like I, you know, I think there's they actually
Speaker 10: are seeing some of the individual investors, I think are
Speaker 10: seeing things before the institutional investors, and that they many
Speaker 10: are so aligned with the White House and what they're
Speaker 10: doing that they're like, this is what I think the
Speaker 10: future is. I also think that it's not necessarily showing
Speaker 10: up in the largest companies. There are other companies, smaller
Speaker 10: ones that they kind of gather together and sort of
Speaker 10: community invest and those aren't the biggest companies, but they
Speaker 10: are ones that are more volatile, but they have a
Speaker 10: longer time horizon. And most of the people on our
Speaker 10: platform are average age of thirty five. You know, more
Speaker 10: than two thirds of our company is one Nails and
Speaker 10: gen Z, So that's what you know. I think it's
Speaker 10: the same as thing as Sorry, the thing is being
Speaker 10: on a trading desk and kind of talking about investment
Speaker 10: ideas together.
Speaker 3: Now they're in X doing the same thing and stuff.
Speaker 5: They're probably watching crypto closely too. Bitcoin down twenty five
Speaker 5: to thirty percent, depending on when you look at it
Speaker 5: from those all time highs just last month. Yeah, what
Speaker 5: does that do not for your customer and not for
Speaker 5: the robinhood user, but what does that do for sentiment
Speaker 5: or does it give any indication of sentiment.
Speaker 10: I think it does because you have seen actually some
Speaker 10: really big institutions sell some large positions too recently, not
Speaker 10: just in bitcoin, but obviously in video and other names.
Speaker 3: I think.
Speaker 10: But then there is buyers too from Berkshire Hathaway.
Speaker 9: I think.
Speaker 10: I think those that play in the crypto space are
Speaker 10: very used to large swings and they're you know, I
Speaker 10: think there's kind of a meme out there that says
Speaker 10: if you're invest like when stock investors have a big
Speaker 10: drag down, they're like, you know, the crypto investors are like,
Speaker 10: welcome to the way it feels. So I actually think
Speaker 10: they're kind of used to it. We haven't really seen
Speaker 10: a huge shift of anything. Most of our customers when
Speaker 10: they're investing, they play the volatility in that when it
Speaker 10: goes up a lot, they'll trim their positions.
Speaker 3: When it gets down a lot, they do add we.
Speaker 2: Have to jump so much going on, come back soon
Speaker 2: because we would like to continue that. Stephanie Guild, chief
Speaker 2: investment Officer at robin Hood Markets.
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