Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene
Speaker 1: jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. All
Speaker 1: it took was for Larry Caudlow to remind us, of course,
Speaker 1: to the White House any seat director, thanks the following.
Speaker 1: Remember none of these tarists have been put in place yet.
Speaker 1: These are all proposals. We're putting it out for comment
Speaker 1: there at least two months before any actions are taken. China,
Speaker 1: by the way, did not enact the tariffs. It's not
Speaker 1: a trade war. It's a negotiating position. But since joining
Speaker 1: us in the studio Amherst Peer Point Securities Global strategist, Bob,
Speaker 1: why did we need Larry Cutlow to tell us that?
Speaker 1: Wasn't it obvious this time yesterday morning? I would have
Speaker 1: thought so. But you know it, uh, I think the
Speaker 1: international community probably reacts to these things more than we
Speaker 1: do here in the US. And look, this whole scenario
Speaker 1: of taking extreme position and then and then work it
Speaker 1: back is not unique. I mean, we're at a point
Speaker 1: right now where NAFTA six months ago. Uh, there are
Speaker 1: many people who thought NAFTA was going to be the
Speaker 1: risk of two thousand and eighteen. And now we have
Speaker 1: the President pushing for an agreement, you know, compromising auto
Speaker 1: content and parts content and pushing toward an agreement by
Speaker 1: a you know, an America's conference in mid April. So
Speaker 1: so suddenly we've gone from you know, we're gonna tear
Speaker 1: it up. Uh, this this migration that's coming towards the
Speaker 1: US suddenly towards a compromised position, which looks like maybe
Speaker 1: it will come to fruition. So what should the plant
Speaker 1: book be for an investor? Because clearly investors are having
Speaker 1: a pretty tough time in the equity market, at least
Speaker 1: because the other asset classes yesterday morning seemed to have
Speaker 1: got the picture that this was a proposal and negotiation
Speaker 1: and not the end of the world. What an equity
Speaker 1: investors need to get right next time around fundamentals? Fundamentals, fundamentals.
Speaker 1: I think that that investors really need to look at
Speaker 1: what's happening in terms of individual companies. Um, you know,
Speaker 1: I think if you look at a broader picture, what
Speaker 1: we're seeing as a US economy that's performing quite well
Speaker 1: UM in the early part of two thousand and eighteen.
Speaker 1: I was looking yesterday, you know that we look at
Speaker 1: the manufacturing and the services indexes from the I s M.
Speaker 1: They actually have a blended index, which is an all
Speaker 1: economy p M. I waited uh p M I. The
Speaker 1: three month average UM just hit a twenty year high.
Speaker 1: It's the highest since it was introduced. The series was
Speaker 1: introduced in So the economy is doing very well, and
Speaker 1: I think part of that is a reaction to the
Speaker 1: weaker dollar over the last year. We we normally say
Speaker 1: there's about a twelve to eighteen month lag between movements
Speaker 1: and the dollar and its economic impact, and guests, what
Speaker 1: twelve months out from the peak and the dollar, We're
Speaker 1: seeing US manufacturing start to outperform. We're seeing Eurozone manufacturing
Speaker 1: underperforming during the first quarter. I think the part of
Speaker 1: this UH, this adjustment process to the dollar is now
Speaker 1: taking hold, and I think it actually boilds pretty well
Speaker 1: for the U s economy as we go forward. So
Speaker 1: it raises the question why we're failing to recognize the
Speaker 1: decent fundamentals that you observe, and something that marked our
Speaker 1: fund manager on the West Coast said last year is
Speaker 1: really stuck with me, and I think it continues to
Speaker 1: be something we need to think about this market. A
Speaker 1: lot of people are struggling to divorce their political biases
Speaker 1: from their real analysis, whether it's economic analysis or market analysis.
Speaker 1: Why are we still struggling to do that? Quite clearly yesterday,
Speaker 1: people's views about what is happening with trade or what
Speaker 1: isn't happening with trade is shaped by almost exclusively their
Speaker 1: distaste of the President of the United States, and that
Speaker 1: is actually really sort of warping their view of what
Speaker 1: is actually happening in terms of the negotiations of a
Speaker 1: trite and the fundamentals of the U. S. Economy. You know,
Speaker 1: I can't disagree the way I've described it is we
Speaker 1: need to listen to the message and not the messenger,
Speaker 1: right and so, Um, you know, as we know that
Speaker 1: the president is not experienced in politics, UM, I think
Speaker 1: he probably doesn't want to become experienced in politics. He
Speaker 1: he wants to take his own road. Um. He put
Speaker 1: stakes out what he thinks are rational, somewhat extreme positions
Speaker 1: and then gets brought back within the construct of how
Speaker 1: the government operates, how the Post Office operates how trade
Speaker 1: negotiations operate, but in general he is pushing in a
Speaker 1: direction um that I think, you know, makes some sense
Speaker 1: for the economy. And I you know, having having worked
Speaker 1: with Larry Cutlow for forty years, UM, I still believe
Speaker 1: Larry is very much a free trader UM and I
Speaker 1: think he believes that the way this hopefully works out
Speaker 1: is we expand US markets into China, that that trade
Speaker 1: and tariff and non tariff barriers come down, and then
Speaker 1: in fact we expand the pie not contracted by you
Speaker 1: are a cross asset. I wanted to take you away
Speaker 1: from your hyper detailed notes at the embers Pierrepont, your
Speaker 1: elegant charts, and I just want you to speak to
Speaker 1: the listener whose whipsode by this every day. The only
Speaker 1: solution is to expand your X axis, and that the
Speaker 1: person that was investing for seven weeks has to start
Speaker 1: thinking seven months, and the person that was investing for
Speaker 1: eighteen months has to really start with a three or
Speaker 1: four year view. That's the only solution, isn't it. I
Speaker 1: think it is, and I think that you know, as
Speaker 1: I've described, this has been a bit of a in
Speaker 1: the last couple of months, a bit of a Shakespearean
Speaker 1: market full of sound and fury signifying nothing. You know,
Speaker 1: you look at the year to date. You know, you
Speaker 1: can put up w E I what's the year to
Speaker 1: day performance of the S and P. I think it's
Speaker 1: down one percent year to date. So you kind of
Speaker 1: look at the first quarter you say, what are we
Speaker 1: getting so excited about? But in fact, we've had daily
Speaker 1: movements that dwarf the year to date movements, which is
Speaker 1: exactly the opposite of what we had last year. So
Speaker 1: we're going through an adjustment process. I think the things
Speaker 1: that we would focus on, our earnings momentum is still
Speaker 1: good in the US. We'll see how much of a
Speaker 1: response we get in terms of capital formation as a
Speaker 1: result of the tax adjustments, and deal with the fact
Speaker 1: that interest rates are probably going higher, both at the
Speaker 1: short and the long end of the yield curve. But
Speaker 1: I think it's really important to point out that this
Speaker 1: isn't abnormal. What this is is it's goetting back to normal.
Speaker 1: Last year was abnormal. This is kind of normal. And
Speaker 1: the idea that the trait that worked, which was just
Speaker 1: short vol and long momentum, is broken down over the
Speaker 1: last couple of months. That's what we're seeing. And I
Speaker 1: guess I assume, Bob, and you can correct me if
Speaker 1: I'm wrong. That's why we're seeing it isolated to one region,
Speaker 1: the United States, and one class US equities. Would that
Speaker 1: be right? Yes, I think so, and I think that that. UM.
Speaker 1: You know, part this is to a global liquidity environment
Speaker 1: which has been extremely accommodative. Remember the beginning of the year,
Speaker 1: the ECB cut their rate of asset purchases in half,
Speaker 1: from sixty billion euros to thirty billion euros a month.
Speaker 1: The b o J has shifted their target. It looks
Speaker 1: like they're buying fewer assets as they go forward. UM.
Speaker 1: The Fed is beginning to normalize interest rates, though UM,
Speaker 1: I would argue that they still have a long way
Speaker 1: to go. At the front end of the yelkerve, the
Speaker 1: real FED funds rate is just barely creeping into positive territory.
Speaker 1: So UM, Yes, you have uncertainty about the global growth
Speaker 1: environment UM coming through. And I think again, particularly in Europe,
Speaker 1: and you have a less aggressive liquidity environment UM. And
Speaker 1: the two of those create a new level of volatility,
Speaker 1: which which many people talked about being a characteristic of
Speaker 1: two thousand eighteen. So, Bob, coming forward from here, I
Speaker 1: assume there's going to be more days like yesterday, and
Speaker 1: they're going to present a lot of opportunities for our listeners.
Speaker 1: And can you give us a sense an idea of
Speaker 1: how you should best take advantage of those opportunities on
Speaker 1: days like yesterday if we want to see more as
Speaker 1: the year progresses. You know, it's hard to to uh.
Speaker 1: You know, I think about what I'm doing myself right
Speaker 1: as an investor, and I think this is a year
Speaker 1: where equity returns probably are going to be somewhere in
Speaker 1: the five to eight percent range um. You know, if
Speaker 1: you're up five percent year to date, it's probably time
Speaker 1: to take some some risk off the table. Conversely, if
Speaker 1: you get to be down five percent year to day,
Speaker 1: that probably gives you a pretty good opportunity to increase
Speaker 1: some risk exposure. So I think it's it's leaning against
Speaker 1: this extreme volatility. You know, there are times where you
Speaker 1: can take advantage of of of volatility, but I think
Speaker 1: you have to be very disciplined about it and and
Speaker 1: and react to the volatility in a disciplined way as
Speaker 1: opposed to being frightened by it. Thank you so much
Speaker 1: with the amorous Pierpine greatly shoot that uh this morning,
Speaker 1: Richard Greenfield with us. Now you could talk for two hours.
Speaker 1: There's so much going on in the world of media,
Speaker 1: but let us start with I guess John Chryl Sandberg
Speaker 1: to speak to Bloomberg today in the three o'clock hour
Speaker 1: three pm Eastern time. Looking forward to that conversation. The
Speaker 1: good news, the good news for investors at least, is
Speaker 1: that Facebook is saying the recent data crisis over the
Speaker 1: last couple of weeks hasn't hurt the business. The bad
Speaker 1: news is that dates from most of its two bid
Speaker 1: in news as could have been accessing properly. I want
Speaker 1: to bring in rich Greenfeld boot t i G Media
Speaker 1: and technology analyst. It's the good and the bad. Um,
Speaker 1: what do you take more notice of? Rich? I mean, look,
Speaker 1: at the end of the day, there's no doubt that
Speaker 1: Facebook didn't have the proper controls in place, and certainly
Speaker 1: didn't didn't give consumers probably all the information that they
Speaker 1: clearly needed to have, or even the controls they needed
Speaker 1: to have to manage their privacy. That being said, I
Speaker 1: don't see users abandoning Facebook or Instagram or What's App
Speaker 1: and I think that's the key point, right is users
Speaker 1: aren't abandoning, advertisers aren't abandoning. Facebook's gotta gotta fix things.
Speaker 1: I mean, look, Google head its own issues. Remember, you know,
Speaker 1: isis videos being next to you know, you know, kind
Speaker 1: of professional content in the US like a lot of
Speaker 1: the Internet. I mean, the Internet is a pretty scary place.
Speaker 1: There's a lot that these companies have to quote unquote
Speaker 1: grow up and you know better deal with their platforms
Speaker 1: and how they interact with consumers. But I think the
Speaker 1: key for your listeners is these are the two dominant platforms.
Speaker 1: If you're an advertiser, first of if you're a consumer,
Speaker 1: what's your alternative in terms of a service. It's not
Speaker 1: like there's an alternative to Instagram that's sitting out there
Speaker 1: that you're switching to and from an advertising their standpoint,
Speaker 1: and I think Facebook did twelve billion dollars of advertising
Speaker 1: last quarter. It's not like you can take twelve billion
Speaker 1: dollars of advertising and just move it someplace else. The
Speaker 1: world is moving to mobile. These are the two dominant platforms.
Speaker 1: They are certainly committing to getting better and improving and
Speaker 1: fixing their mistakes, But I just don't. I think at
Speaker 1: the end of the day, the pressure on the stock
Speaker 1: is overdone because at the end of the day, these
Speaker 1: are the platforms people want to use. These are the
Speaker 1: platforms advertisers want to advertise on, and that's going to
Speaker 1: make for a good stock. So in a material way
Speaker 1: rich so far, the consumer hasn't voted with their feet
Speaker 1: by moving away from the platform. To your point, there
Speaker 1: is an optimistic view about the advertising base not having
Speaker 1: anywhere to go. But Congress and the government is still
Speaker 1: going to go after Mark Zuckerberg and grill him hard
Speaker 1: next week. What is the area of weakness that you
Speaker 1: see in the CEO of Facebook that leaves him quite
Speaker 1: vulnerable as he goes in front of Congress next week.
Speaker 1: You know, Look, I think if you listen to you know,
Speaker 1: I listened to market an interview on Vox the other day,
Speaker 1: and I think he was pretty pragmatic about being honest
Speaker 1: and open about the mistakes made and how difficult it
Speaker 1: is to fix some of the challenges. You know, talk
Speaker 1: about fake news and the impact on elections, and these
Speaker 1: are not easy things to handle for any company. Um. Look,
Speaker 1: I'm sure they're gonna grill him. There's no doubt about it.
Speaker 1: I think that is a given. I think the reality
Speaker 1: is the threat and the pressure you're seeing on the
Speaker 1: stock has been fear of regulation, and the question is,
Speaker 1: I mean, look, we can't get anything done in this country.
Speaker 1: I think you know, the real view that there's gonna
Speaker 1: be some heavy handed internet regulation I find very hard
Speaker 1: to believe. But but even so, even if you believe
Speaker 1: that there's gonna be even greater walls that go up
Speaker 1: around data and privacy, that's probably far more negative for
Speaker 1: all of Netflix, sorry, all of Facebook and Google's competitors
Speaker 1: than it is for Facebook and Google. The two companies
Speaker 1: that are the strongest are actually probably gonna get stronger
Speaker 1: if you put up high walls around data. Rich You
Speaker 1: were courageous advantage years ago it was a busted I
Speaker 1: p O. You lead with responsible coverage of the disaster
Speaker 1: known advantage. Your note on Spotify was brilliant. How hard
Speaker 1: was it to value Spotify? And what should the street
Speaker 1: learn from this unique transaction? You know, look, I think
Speaker 1: we're still trying to figure out. You know, there's been
Speaker 1: a lot of trading volatility out of the out of
Speaker 1: the box around Spotify. Um, you know, no one's ever
Speaker 1: done a direct listing before. But I think what is
Speaker 1: fascinating about Spotify is that there really aren't a lot
Speaker 1: of global scaled platforms. Mobile platforms, I think is the
Speaker 1: critical piece here. You know, if you if you were
Speaker 1: to draw a circle around things that are on people's
Speaker 1: home screen, meaning on mobile views, on mobile home screen,
Speaker 1: worthy that you love using, that have a credit card
Speaker 1: billing relationship on a monthly basis that you like paying for,
Speaker 1: that list of companies would be an incredibly small list.
Speaker 1: But Spotify is one of them. They hit all of
Speaker 1: or check all of those boxes. And I think the
Speaker 1: question that investors are struggling with is is music in
Speaker 1: and of itself enough? Like can they really get scale
Speaker 1: in music? You know, Netflix has proven that exclusive content
Speaker 1: that they can differentiate themselves from HBO from network television.
Speaker 1: If you want to watch Stranger Things, the only place
Speaker 1: to do it on Netflix. Okay, Rich Greenfield, we gotta
Speaker 1: leave it there, Sorry to to short today, Rich Greenfield
Speaker 1: would b T. I G we didn't even get a
Speaker 1: chance to get the Disney and what's going on with
Speaker 1: Sky and of course Time Warner A T and T.
Speaker 1: Let's talk about China, The White Houses National Economic Council
Speaker 1: Director Larry Cudlow saying on Bloomberg having to do with
Speaker 1: the China's response to US proposed tariffs and the sell
Speaker 1: off in the stock market yesterday. Remember, none of the
Speaker 1: tariffs have been put in place yet, he said. He
Speaker 1: emphasized that it would take at least two months before
Speaker 1: any action is taken on what are still only proposals. Well,
Speaker 1: maybe this is the way Mr Cutlo sees it, it
Speaker 1: may not be the way that the Chinese see it.
Speaker 1: Here to tell us more, is Miranda car High Tongue Securities,
Speaker 1: head of China Thematic Research, joining us from London. Miranda,
Speaker 1: thank you very much for being with us. So is
Speaker 1: this really just part of a negotiating tactic that is
Speaker 1: really leading to a confrontation over intellectual property? Or is
Speaker 1: it really a trade war? Um? I think this is
Speaker 1: the starting um, starting round in a much wider negotiation. Um.
Speaker 1: You've obviously had the US coming out, but then the
Speaker 1: China came out very quickly afterwards, Um, and and quite
Speaker 1: aggressively in order to set a sort of fairly hard
Speaker 1: tone for the seat your negotiations. Will you say, come
Speaker 1: out very aggressively? What do you mean by that, well,
Speaker 1: it came out straight away with immediate tariffs, um, you know,
Speaker 1: saying that it wouldn't go into negotiating on America's terms,
Speaker 1: but it wanted to impose immediately its own tasks in response.
Speaker 1: So so this means that, you know, if you compare
Speaker 1: to how the US tackled Japan back in the es UM,
Speaker 1: then China's arguably trying to play a stronger position here
Speaker 1: um and not give so much ground. I I look
Speaker 1: at this and I want to know how all the
Speaker 1: festivities of the last forty eight hours plays in Shanghai
Speaker 1: and in China. You're in London, But what does your
Speaker 1: take on how this place? I mean, I understand the
Speaker 1: government angle and that if Pim and I were having
Speaker 1: a beverage of our choice at the jazz bar of
Speaker 1: the Fair Amount Peace Hotel on the Bond, what would
Speaker 1: the people next to us say? Well, they obviously they're
Speaker 1: concerned about what the the US. It's going to hit
Speaker 1: their markets um pretty badly. Um. But the thing is
Speaker 1: it's it's about It's not just about dominance in the
Speaker 1: trade um or or just about the surplus. This is
Speaker 1: about sort of the Chinese competing on a global basis
Speaker 1: with US manufacturers. And this is why we call it
Speaker 1: sort of more of an intellectual property war. It's it's
Speaker 1: about who's going to dominate the next five to twenty
Speaker 1: years in terms of things like you know, telecommunications, five
Speaker 1: g AI and the future sort of technology race UM.
Speaker 1: And now China wants to be a leading part of
Speaker 1: that is you know, hence why the US targets are
Speaker 1: made in China twenty five sectors and not things like
Speaker 1: widgets and some of the sort of lower end textiles
Speaker 1: and the lower and goods. China manufacturers and are also
Speaker 1: a key part of them the China's trade surplus. So
Speaker 1: China knows it's in a it's in a long term
Speaker 1: war um in terms of mobal dominance. It's not just
Speaker 1: it's not just a little bit of arguments about you know,
Speaker 1: soybeans and and and textiles anymore. This is a much
Speaker 1: bigger picture, Miranda car based on your conversations with people
Speaker 1: in China over the last several months, do you sense
Speaker 1: a difference in the way they perceive President Donald Trump
Speaker 1: versus former President Barack Obama. Is there a level of
Speaker 1: response and perspective that is different now than it was
Speaker 1: two three years ago. Well, most definitely. I mean, the
Speaker 1: the way that Trump is dealing with China is very,
Speaker 1: very different, and it's it's a much more adversary adversarial
Speaker 1: to the Chinese respect hardball and what they do. But
Speaker 1: they also in some ways taking it slightly cynically because
Speaker 1: if you think of where instead of sort of hitting
Speaker 1: directly back at some of the um UM the key
Speaker 1: imports that would would affect the US, they're going after
Speaker 1: the places where they know that the voters, the Trump voters,
Speaker 1: will be particularly badly hit, so particularly sort of the
Speaker 1: agricultural UM sector and the sort of the sect in
Speaker 1: the rural area. So it's it's a it's a fairly
Speaker 1: cynical um negotiating tactic because, to be honest, UM is
Speaker 1: they limit um imports of soybeans. It's going to badly
Speaker 1: affect China more than it does the US. They can't
Speaker 1: get soybeans from anywhere else. It raises food prices UM
Speaker 1: and and it's something they lack. So this is a
Speaker 1: fairly sort of cynical negotiating tactic. It's not a it's
Speaker 1: not a real a real threat, but obviously that they
Speaker 1: don't see UM you know, we're now into a stage
Speaker 1: where it's much more umu competitive and in terms of
Speaker 1: because what's changed, it's not just the Trump administration's change,
Speaker 1: but obviously she's vision for China has changed significantly as well,
Speaker 1: and saying that China is going to reclaim it some
Speaker 1: you know, rightful state in the global affairs means that
Speaker 1: they're taking a much more aggressive stunt as well. So
Speaker 1: it's changes on both sides. You have to leave with
Speaker 1: their Miranda car thank you so much. With high Ton
Speaker 1: Securities in London. The strength of Bloomberg Surveillance is our
Speaker 1: effort to go out across this nation and actually find
Speaker 1: people that know what they're talking about other than what
Speaker 1: Pim Fox and I put up with seven and three
Speaker 1: zip codes in New York City, and maybe we can
Speaker 1: drag l A or San Francisco into it. Here's what
Speaker 1: you need to know about Ames Iowa. The world ended
Speaker 1: on February when Iowa claboard Iowa State in wrestling. That's
Speaker 1: all that matters out in Iowa. Is Iowa crushed Iowa
Speaker 1: State in wrestling thirty five six except for soybeans. That's
Speaker 1: actually worse right now in wrestling, joining US truly one
Speaker 1: of the nation's experts on the dynamics of Iowa agriculture
Speaker 1: and soybeans. Chat Heart is at Iowa State University. Chad,
Speaker 1: wonderful to have you with us. What will a given
Speaker 1: farmer do eighties seven miles south of Ames, Iowa? What
Speaker 1: would have given farmer do eighty seven miles south of me?
Speaker 1: And aims here? Well, you're talking about their south of
Speaker 1: Des Moines as well, and so what they're probably doing
Speaker 1: right now is trying to figure out when is it
Speaker 1: going to get warm enough to plant well within the
Speaker 1: weather and the dynamic of planning. I read the Des
Speaker 1: Moines Register. I believe it was yesterday, I can't remember exactly.
Speaker 1: Which is the China tariff angle takes seven dollars a
Speaker 1: pig off that pig Can you do that marginal math
Speaker 1: to know what the various threats will cost the nation
Speaker 1: or that farmer eighty seven miles south of Domine names Well,
Speaker 1: what we've been working on here is we've already seen
Speaker 1: within the lean hag futures market that with the announcement
Speaker 1: of the Chinese tariffs there we saw those markets back
Speaker 1: off by about six dollars per hundredweight or per hundred pounds.
Speaker 1: They recovered about a dollar and a half that so
Speaker 1: they're still down four dollars and fifty cents per hundred pounds.
Speaker 1: We've also seen the soybean market react to the announced
Speaker 1: you know, potential tariffs there. They backed off about twenty
Speaker 1: cents from where they were pre announcement there. So we're
Speaker 1: already watching these impacts hitting the various crops and livestock
Speaker 1: markets where the tariffs are being announced, and it's translating
Speaker 1: directly into the prices that producers are receiving for their products. Today,
Speaker 1: Chad hart I was looking at the Des Moines Register
Speaker 1: and there's a quote from the president of the American
Speaker 1: Soybean Association and he says Mr Historfers. Dorfers says, farmers
Speaker 1: are feeling a real pin. If we can't get these
Speaker 1: commodity prices up, we are going to start losing farmers
Speaker 1: and there's no way of getting around it. Is that accurate?
Speaker 1: That is accurate. Actually what we've seen over the past
Speaker 1: five years, and we've seen a dramatic decline in net
Speaker 1: farm income for our nation's farmers. The pinch has been
Speaker 1: on for some time. If you will this most recent
Speaker 1: news just adds to the pressure that some of our
Speaker 1: farmers facing. And I would describe, you know, the farming
Speaker 1: community in this way. It's sort of like a double
Speaker 1: humped camel, if you will. In the first hump, we've
Speaker 1: got our very successful farmers. They're doing still rather well
Speaker 1: even with relatively low prices because they've been able to
Speaker 1: control their cost structure. But we do have a significant
Speaker 1: segment of farmers that have struggled over the last few years,
Speaker 1: and these low prices are beginning to drag down their
Speaker 1: net worth and basically reduce their cash flow to next
Speaker 1: to nothing. Do the farmers and the people that you
Speaker 1: speak with, do they believe that the Agricultural Secretary Sonny
Speaker 1: Perdue is doing an They believe he's trying. And when
Speaker 1: we're looking here, everything that's coming out of Secretary Purdue
Speaker 1: and the higher ups at U S d A says
Speaker 1: that they're they're talking up at least. But you know,
Speaker 1: I would say both the positive and negative aspects for
Speaker 1: agricultural trade. But when we're looking here, for the most part,
Speaker 1: US agriculture definitely is export dependent. When you look roughly
Speaker 1: of our production across the entire agricultural complex is exported
Speaker 1: out of the US. I look chead heard all of this,
Speaker 1: and I go back to a wonderful The Atlantic article
Speaker 1: which was on Iowa, and it was on the dynamic
Speaker 1: twenty and thirty years ago and President g is a
Speaker 1: minor Chinese official, visited Musketine. I believe it is slept
Speaker 1: in a in a house in Musketine to bond with
Speaker 1: Iowa from where you sit in the agricultural capital of
Speaker 1: the Midwest, aims Iowa, what's that linkage of China to
Speaker 1: your state. Well, there's a very strong linkage. As you mentioned, President,
Speaker 1: she was here thirty some years ago, came back to
Speaker 1: visit this just just a couple of years ago. Since then,
Speaker 1: what he found on both trips was, you know, he
Speaker 1: went to, if you will, the same farmhouse, found the
Speaker 1: same farm family, and found that also Iowa had the
Speaker 1: same governor, who is now, of course the ambassador to China.
Speaker 1: And so when you look here, there is a very
Speaker 1: strong linkage there. But that linkage does not prevent or
Speaker 1: you know, preserve necessarily any relationship. This continues to evolve.
Speaker 1: An Ambassador brand Stead advised the President on a best
Speaker 1: practice for Midwest agriculture arguably he already is. And so
Speaker 1: when we look at, you know, the President Trump's moves here,
Speaker 1: I assume that he's listening to not only his agricultural advisors,
Speaker 1: but across the entire spectrum when we look at our
Speaker 1: general economy. And so that's got to be part of
Speaker 1: the conversation. We're speaking with Chad Hart. He is Associate
Speaker 1: professor of economics crop market specialist at the Iowa State University.
Speaker 1: And it's had one other point about what's going on
Speaker 1: with US farmers. If they're being hit by this level
Speaker 1: of uncertainty and declining income, what does that mean about
Speaker 1: unneeded equipment on the farm restructuring debt. It's got to
Speaker 1: have a knock on effect, doesn't it. It does have
Speaker 1: a knock on effect, and we have been seeing that
Speaker 1: build over the past couple of years. As you mentioned,
Speaker 1: the idea is that you know, news machinery, that that
Speaker 1: market took a hit. We did see land values back
Speaker 1: off a couple of years ago as the incomes declined,
Speaker 1: and so we have seeing the agricultural economy shrinking even
Speaker 1: though the general economy has been growing over the past
Speaker 1: couple of years. Biggest issue right now politically for Iowa
Speaker 1: is what these tariffs. These tariffs would be a front
Speaker 1: and center as we look here, just because they hit
Speaker 1: so hard and so fast in terms of the pricing
Speaker 1: for the commodity today. For example, with soybeans. You even
Speaker 1: though you know it's an announced tariff has not come
Speaker 1: into place yet, it already is having market impacts for
Speaker 1: our producers, not only in what they're selling today, but
Speaker 1: if you will, what they're planning to sell over the
Speaker 1: next year to two years. Professor, Before we let you go,
Speaker 1: we have a we have a global audience at coast
Speaker 1: to coast audience. We mentioned they'll pass our Texas earlier
Speaker 1: this morning, but the fact is the large portion of
Speaker 1: our audience is in saran wrap stores, buying perfectly agriculture
Speaker 1: worldwide and taking advantage of it every day. If you
Speaker 1: had one message from the trenches for Americans about our
Speaker 1: agricultural product and our food product, what would it be. Well,
Speaker 1: it's in this case when you think about agriculture, as
Speaker 1: you mentioned, we are used to being able to go
Speaker 1: to the grocery store, find whatever we want, you know,
Speaker 1: on proper packaging, and be able to carry it home
Speaker 1: and do what What's what we want, But the idea
Speaker 1: is that hasn't been that way for that long, and
Speaker 1: we don't pay that much for our food. When you
Speaker 1: think about that dollar you spend at the grocery store,
Speaker 1: roughly fifteen cents of it goes back to the farmer
Speaker 1: to pay for the product that acts. If you will
Speaker 1: create professor out of time Chad Hart, Iowa State aims Iowa.
Speaker 1: Always with Douglas Cass of Seabreeze Partners, you rip up
Speaker 1: the script and you really go to the news flow.
Speaker 1: There are two items we need to talk about, and
Speaker 1: one is the sheer excitement for our global audience in
Speaker 1: the American sport of baseball, and that would be a
Speaker 1: Red Sox team. It seems to be pretty good. But
Speaker 1: the absolute unique characteristics Doug cast of your New York Yankees.
Speaker 1: I had goose bumps yesterday. You you and I did
Speaker 1: not live. But what's going on with the Yankees this
Speaker 1: year is goose bump worthy for everybody that loves baseball.
Speaker 1: They're jut I your producer asked me if I could
Speaker 1: get Sandy on the phone um in the next interview,
Speaker 1: and I told him yes. He says, do you mind
Speaker 1: if you step off the phone. Well, we we would
Speaker 1: be honored Mr Kofax, as you brought us Jim Palmer
Speaker 1: last year, who was shockingly pressing on the Houston Astros.
Speaker 1: As we look at the things to talk about, Doug,
Speaker 1: I want to have a cogent and constructive conversation about
Speaker 1: the humility in the business and of course with the
Speaker 1: end or funds leaving Pershing UH Square Capital are Scott
Speaker 1: Duvau publishing that on the year end note Blackstone, JP, Morgan,
Speaker 1: Chase and others exited millions of dollars? Was was Mr
Speaker 1: Ackman Bill Ackman with herbal life and all was he
Speaker 1: was the undiversified where the bets too big UM. He
Speaker 1: ran an extraordinarily concentrated portfolio and book UM, something that
Speaker 1: Warren Buffett has um consistently cautioned about UM that coupled
Speaker 1: with his public persona and unfortunately a large share of
Speaker 1: EU briss have contributed to his disappointing results. But I
Speaker 1: would also add unrelatedly that market conditions also contributed UM,
Speaker 1: not only to Persian Squares poor results. Mr General, the
Speaker 1: fun community and you know some brilliant people like David
Speaker 1: Einhorn or I consider a friend, has done disappointingly poorly
Speaker 1: as well. Um, you know, we we have this, We've
Speaker 1: entered something I've discussed with you repeatedly, and I think
Speaker 1: you used it as a promo. Um, we're in this
Speaker 1: new volatility regime. We're in a market with which virtually
Speaker 1: has no memory from day to day. So the construction
Speaker 1: of permanent or buy and hold long term portfolios grow
Speaker 1: increasingly more difficult in the environment. I mean, let's just
Speaker 1: look at yesterday, um, which is a constant reminder that
Speaker 1: either I'm an idiot or that there's an endless supply
Speaker 1: of idiots out there. Well, maybe the two are mutually exclusive. Um.
Speaker 1: The SMP is now rallied by a hundred SMP points,
Speaker 1: the Dow Jones by eight hundred points from the pre
Speaker 1: market lows yesterday. And you know, we all try to
Speaker 1: search for reasons. Managing money in that sort of voluable
Speaker 1: environment is really dangerous, problematic. So I like to say
Speaker 1: that we're all traders now. I like that idea. Let
Speaker 1: me bring the boat earlier, but let me just challenge
Speaker 1: a little bit Doug cast because he used the word
Speaker 1: brilliant people. And you know, when the stock market continues
Speaker 1: to move higher and there's no volatility, everybody looks like
Speaker 1: a hero. How come now that we have volatility, and
Speaker 1: now that everybody has to prove their chops, you end
Speaker 1: up with a situation where no one can explain accurately
Speaker 1: why other investors have been dumping stocks because you never
Speaker 1: hear anybody telling you that they're selling their own stocks.
Speaker 1: And having said that, doesn't that call into question the
Speaker 1: very quote brilliance that you describe and does It's a
Speaker 1: great question, and it would probably take four hours of conversation,
Speaker 1: but I would say to you then that, um, the
Speaker 1: market has changed dramatically in the last decades. I mean
Speaker 1: investors have changed the dominant investor group. You know, when
Speaker 1: I graduate a business school Warden, in the early seventies,
Speaker 1: it was bank trust departments that were the dominant factors
Speaker 1: in the market. Then we had the proliferation of mutual funds,
Speaker 1: and then tenactin years later we had the proliferation of
Speaker 1: hedge funds. Now machines and algies dominique trading these days
Speaker 1: and there, as you saw yesterday, they were triggered off
Speaker 1: the fifth I can't count successful retest, So I'm sorry.
Speaker 1: You know what I've talked about this before, and this
Speaker 1: is the heart of the matter. For Global Wall Street
Speaker 1: hedge funds are structured on two and twenty two fee
Speaker 1: plus of the take, and that worked in a high yield,
Speaker 1: high nomenal, high real yield environment where you had some
Speaker 1: wiggle room. You have some squishiness that's gone. How can
Speaker 1: you garner that fee structure in make the gain given
Speaker 1: where we are in terms of rates and total return potential.
Speaker 1: The math's not the same as it was ten years ago.
Speaker 1: It's really difficult in a low as you said, structurally,
Speaker 1: in a low interest rate in environment, and in the
Speaker 1: low maybe even substandard return environment too in twenty simply
Speaker 1: doesn't work the vague as we would say in a
Speaker 1: baseball exactly. I mean, Pim Fox, this is something you understand.
Speaker 1: Doug cass and I having an overpriced cup of coffee
Speaker 1: at the Four Seasons over on fifty ninth Street, the
Speaker 1: math worked. I see, I'm still buying my coffee on
Speaker 1: the on the corner with the guy at the cart,
Speaker 1: and I'm trying to understand, you know. And I think
Speaker 1: you said something interesting, Dug there about the dominant forces
Speaker 1: in the market. The traders now are machines. Does this
Speaker 1: then offer an opportunity to human beings to find companies
Speaker 1: that they believe have value and to stick with their
Speaker 1: opinions and their perceptions in a way that machines cannot.
Speaker 1: Great question again, if you have it's to me, it's
Speaker 1: a function of time frames and the patients of your
Speaker 1: investor base. If your invest investor base is impatient and
Speaker 1: once returns quickly, you're screwed, stated simply right. But don't
Speaker 1: you you want a long term investor base. I mean,
Speaker 1: aren't those the ideal clients because traders, they're going to leave?
Speaker 1: You know when what's happening to Persian square? Persian square
Speaker 1: in the article I forwarded to Tom, he's losing a
Speaker 1: large portion of his investors through redemptions. So it's easier
Speaker 1: said than getting a large investor base. And a lot
Speaker 1: of the hedge funds have moved from being active investors
Speaker 1: to passive investors. Machine derives strategies and products. So you know,
Speaker 1: we see what happens when everyone gets on the same
Speaker 1: side of the boat in early February, and that's going
Speaker 1: to occur with greater frequency, and the market will be
Speaker 1: we'll have greater unpredictability on top of the fact that
Speaker 1: we have more uncertainty today in the economy, in the markets,
Speaker 1: and the political of political backdrops. So what are you
Speaker 1: doing right We got one minute left, Doug cast tell us, please,
Speaker 1: what you're doing right now? Given this historic volatility? Um I.
Speaker 1: I believe that the real influence in the last half
Speaker 1: of this year will be the administration. And I think
Speaker 1: that Trump, with a healthy dose of the machines and
Speaker 1: the out goals we describe, is going to make market
Speaker 1: volatility and economic uncertainty great again. So I am fearful
Speaker 1: that his policy will result in mistakes. Basically, we have
Speaker 1: an untethered president who is conflating politics with economic policy,
Speaker 1: and you can't have hastily crafted economic policy without deep analysis,
Speaker 1: um in in a flat, networked and interconnected world which
Speaker 1: just doesn't worry you. Gotta leave it there, Duck Cass,
Speaker 1: thank you so much. Show up next time as you
Speaker 1: can with the giant of the game. Mr Kofax of
Speaker 1: Los Angeles Duck Cass Partners. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane. Before the podcast, you can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.